Monthly Report

2/2019/MR (12) February 4, 2019

Polish Equities Monthly: February 2019

4Q18E earnings: A tipping point?

Analysts: Sobiesław Pająk, CFA, Sylwia Jaśkiewicz, CFA, Maciej Wewiórski, Michał Sobolewski, CFA, FRM, Jakub Viscardi, Łukasz Prokopiuk, CFA, Tomasz Rodak, CFA, Wojciech Romanowski Monthly Report

2/2019/MR (12) February 4, 2019

Analysts: Sobiesław Pająk, CFA, Sylwia Jaśkiewicz, CFA, Maciej Wewiórski, Michał Sobolewski, CFA, FRM, Jakub Viscardi, Łukasz Prokopiuk, CFA, Polish Equities Monthly: Tomasz Rodak, CFA, Wojciech Romanowski Next month’s top potential outperformers 11 bit studios, AB, Asbis, Asseco Poland, Asseco SEE, CD Projekt, Ciech, Dino, Dom Development, Erbud, GTC, February 2019 Inter Cars, LPP, Lotos, Marvipol Development, Mercator, Mercor, Pekao, PKO BP, Ten Square Games, Unimot, VRG Next month’s top potential underperformers 4Q18E earnings: CI Games, Elektrobudowa, Farm 51, KGHM, Lena Lighting, mBank, Millennium, Vivid Games Market scenario & key parameters A tipping point? 1. FY18E/ FY19E/ FY20E sum of reported (unadjusted) net earnings of companies in our coverage at PLN 37.3 billion (-7% down yoy)/ PLN 42.8 billion (15% up yoy)/ PLN 46.8 billion (10% up yoy). 2. FY18E/ FY19E/ FY20E sum of recurring (adjusted) net earnings of companies in our coverage at PLN 36.1 billion With the 4Q18 earnings season on the WSE already started (-6% down yoy)/ PLN 41.7 billion (15% up yoy)/ PLN 46.7 billion (12% up yoy). 3. 2018E/ 2019E/ 2020E average (index-weights-weighted) P/E for WIG index (based on recurring earnings): – with in-line (final or selected preliminary) figures at 15.1x/ 12.9x/ 11.6x. PKN Orlen, LPP, Forte and Budimex, yet disappointments 4. 2018E/ 2019E/ 2020E median P/E for WIG20 companies in our coverage (recurring-earnings-based): 13x/ 12x/ 11x. 5. 2018E/ 2019E/ 2020E median P/E for non-WIG20 companies in our coverage (recurring-earnings-based): delivered by preliminary selected numbers of Santander BP 12x/ 9x/ 8x. and Bogdanka – it is high time to delve into the composite 6. 2019E eop WIG index fundamental value assessment: 65.0 ths. points. earnings forecast numbers for our coverage universe in order to assess the current state of the companies’ earnings power and strive to draw some inferences for the Fig. 1 1Q18A-4Q18E pooled financial results for DM BOŚ’s universe future (traditionally our analysis is based on the recurring yoy yoy yoy yoy (i.e., one-offs-adjusted) profit figures). In a nutshell, we PLN billion 4Q18E chg 3Q18A chg 2Q18A chg 1Q18A chg believe that the last quarter of 2018 will mark the onset of a Entire universe change in the tendency that had prevailed in the preceding Sales 128.7 8% 122.2 16% 115.7 12% 113.2 7% three quarters of the year, with the composite recurring EBITDA 21.5 1% 21.1 -3% 22.4 13% 21.6 -1% corporate earnings yoy momentum (negative for 1-3Q18) Adj EBITDA 22.4 3% 20.5 -2% 20.6 -1% 20.6 -3% turning positive (albeit, by only a narrow margin). EBIT 15.5 8% 15.1 -7% 16.0 12% 15.8 -4% Adj EBIT 16.4 4% 14.5 -4% 14.6 -5% 14.8 -6% aaTo provide some background, we remind that the momentum Net profit 8.9 -2% 9.5 -11% 8.9 -3% 9.8 -10% of recurring (one-offs-adjusted) corporate earnings over the Adj net profit 9.6 4% 9.0 -7% 8.6 -14% 9.0 -10% course of first three quarters of last year was feeble, coming WIG20 companies out (on composite for our coverage universe) in yoy perspective Sales 92.4 8% 89.2 16% 83.6 12% 83.3 7% lower by c. -5% on the operating level and approx. -10% on EBITDA 16.8 7% 16.8 -3% 18.1 16% 17.3 -2% the net level. From the standpoint of our expectations from Adj EBITDA 17.8 6% 16.2 -1% 16.4 0% 16.2 -4% late 2017 such dynamics of recurring earnings constituted a EBIT 12.0 18% 12.0 -6% 12.9 15% 12.6 -5% negative surprise (especially for 1Q18 and 3Q18). Adj EBIT 12.8 9% 11.3 -3% 11.4 -4% 11.6 -7% Net profit 6.9 6% 7.7 -7% 7.1 -2% 7.9 -13% Additionally, the yoy weakness of corporate recurring profits Adj net profit 7.5 8% 7.0 -3% 6.8 -12% 7.0 -12% during past three quarters was quite broad-based; this was Non-WIG20 companies especially the case during the first half of the year (when less Sales 36.3 7% 33.0 15% 32.0 12% 29.8 8% than half of the companies in our coverage universe managed EBITDA 4.7 -16% 4.3 -3% 4.3 3% 4.4 2% to improve their recurring profits in yoy perspective), with Adj EBITDA 4.7 -7% 4.3 -4% 4.3 -5% 4.3 -1% some improvement visible in 3Q18, yet still of an unimpressive EBIT 3.5 -18% 3.1 -8% 3.1 0% 3.2 -2% magnitude (broadly 50-50 split between companies growing their Adj EBIT 3.6 -9% 3.2 -8% 3.2 -8% 3.3 -4% recurring profits and those seeing them sinking further in yoy Net profit 2.1 -23% 1.8 -24% 1.8 -9% 2.0 5% perspective). Adj net profit 2.2 -9% 1.9 -18% 1.8 -23% 1.9 -1% Source: Companies, DM BOŚ SA estimates aaComing into 4Q18E, on the composite basis (see Figure 1 regarding the details), built bottom-up from our projections for particular companies in our coverage, we expect the profits in the large-cap sub-universe (positive one) than in companies in our universe to generate approx. 4%/ 4% yoy the mid- & small-cap sub-universe (negative one). We expect increase of normalized operating/ net earnings for the last the strongest positive yoy dynamics to be delivered by quarter of 2018 (marking finally a positive dynamics in yoy the consumer staples (recurring NI up by c. 50%), oil & gas perspective, albeit only a tepid one). (recurring profits up yoy at a mid-teens’ per cent pace) and banking sectors (recurring NI up by c. 10%), with the weakest aaIn terms of large cap and mid- & small-cap comparison, we dynamics (recurring profits almost halving in yoy perspective) expect 4Q18 to show better yoy dynamics of normalized at chemicals, construction and real estate. Polish Equities Monthly: February 2019

aaFinally, we expect the breadth of envisaged yoy growth of Portfolio performance. Last month our portfolio outperformed corporate recurring profits to stay neutral for 4Q18, with the market by 2.1 pp, rising by 4.5% (compared to 2.4% increase broadly 50-50 split between companies growing their recurring of the WIG index). From the ytd perspective our top potential out- profits and those seeing them declining in yoy perspective. and underperformers portfolio yielded absolute positive rate of Such a figure, while still unexciting, would be comparable to return of 8.9% (versus 5.1% rise of the WIG benchmark) translating the preceding quarter of 3Q18, yet would mark improvement into 3.7 pp market-relative outperformance. Finally, the cumulative compared to the 1H18 levels. (i.e., since the inception at the end of March 2008) market-relative performance of our top potential out- and underperformers aaWe expect the 4Q18-originated tendency (i.e., improvement of portfolio remains robust, the way we see it, with absolute positive composite recurring profits for our coverage universe in yoy rate of return of 10,594.9% (compared to 26.3% increase of the perspective) to extend into the subsequent quarters of 2019. WIG benchmark) translating into 10,568.6 pp market-relative outperformance over the course of past 130 months. Changes in ratings. The LT fundamental ratings for the companies in our coverage universe stay intact. We upgrade our Positioning for next month. Our portfolio for the coming month is ST market-relative bias for the equities of Erbud to Overweight subject to moderate turnover. Specifically, as far as longs are concerned, (from Neutral), as there is a chance that the financial results of (i) we add Erbud, Pekao, Ciech and Unimot with (ii) Famur and the Company will bounce back soon given the short-term nature PKN Orlen being removed from the next month’s list. There are four of the Company’s contracts. Regarding the complete list of new additions to our potential laggards list (Vivid Games, Farm 51, ratings for the companies in our coverage universe (as well as mBank and Millennium), with INGBSK removed from the potential assessments of their 12M EFVs), please refer to the Appendix 2 to laggards list; please see the right-column figures on page 2 regarding this research report. the complete list of our bets for the next month.

3 Appendix

DM BOŚ’s coverage universe valuation table

Multiples priced as of the close of February 1, 2019 Polish Equities Monthly: February 2019

DM BOŚ’s WSE coverage universe valuation table (continued on the next page) Sector Company LT ST market Current 12M EFV Upside P/E EV/EBITDA, fundamental relative price (PLN) (downside) (P/BV for financials, rating bias (PLN) to EFV P/NAV for real estate) 2018E 2019E 2020E 2018E 2019E 2020E Chemicals CIECH Buy Overweight 52.85 63.40 20% 9.9 8.9 7.5 6.3 6.0 5.3 GRUPAAZOTY Sell Underweight 37.14 24.20 -35% 68.5 18.9 11.7 6.9 5.1 4.1 PCCROKITA Buy Overweight 88.00 122.10 39% 8.8 8.4 7.3 7.1 6.9 6.0 POLICE Sell Underweight 14.05 11.00 -22% neg. 49.2 10.6 11.0 9.3 5.4 PULAWY Buy Neutral 88.00 127.90 45% 18.8 11.0 8.1 4.1 3.3 2.6 Construction BUDIMEX Hold Neutral 109.80 131.40 20% 9.4 16.2 15.6 3.5 5.4 4.8 ELBUDOWA Hold Underweight 30.10 58.70 95% neg. 6.0 5.5 neg. 3.3 3.1 ERBUD Hold Overweight 11.80 13.90 18% neg. 9.1 8.6 neg. 3.5 3.3 RAFAKO Hold Neutral 1.74 2.80 61% 8.5 3.3 12.7 4.5 1.9 3.2 TRAKCJA Hold Neutral 3.88 4.40 13% neg. 19.2 13.6 16.4 6.8 6.4 UNIBEP Hold Neutral 5.76 6.90 20% 7.3 10.8 7.4 3.2 4.5 3.3 Construction DECORA Hold Overweight 15.45 14.10 -9% 9.8 10.4 9.5 7.8 7.7 7.2 materials KETY Hold Overweight 331.00 349.70 6% 12.6 12.2 11.2 8.6 8.6 8.1 LENA Hold Underweight 2.86 2.60 -9% 9.7 8.7 7.9 5.8 5.2 4.7 MERCOR Buy Overweight 8.88 12.60 42% 10.9 9.2 6.6 7.9 6.6 5.2 Consumer ARCTIC Hold Neutral 3.29 4.30 31% 5.1 5.3 5.5 2.1 2.2 2.9 discretionary BAH Suspended Suspended 1.83 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. BSCDRUK Buy Neutral 28.40 38.00 34% 11.8 9.8 7.4 6.2 5.3 4.1 CCC Hold Neutral 178.80 191.00 7% 75.1 20.9 16.6 12.5 8.8 7.7 EUROTEL Buy Overweight 19.60 25.60 31% 7.3 5.9 5.8 4.4 3.3 3.1 ERGIS Hold Neutral 2.56 3.80 48% 5.9 5.7 4.8 4.5 4.1 3.6 FORTE Sell Underweight 23.95 23.30 -3% 16.2 9.2 7.9 10.0 7.2 6.5 INTERCARS Buy Overweight 217.00 254.00 17% 13.7 11.2 9.7 10.8 9.1 7.9 KGL Hold Neutral 13.50 17.00 26% 16.3 7.1 8.3 6.4 4.1 4.4 LPP Buy Overweight 8,350.00 9,172.00 10% 28.3 23.1 20.4 13.1 11.6 10.0 MERCATOR Buy Overweight 13.25 22.90 73% 14.2 6.4 5.6 9.2 6.2 5.6 OEX Buy Neutral 18.00 19.10 6% 8.4 7.1 5.9 5.8 5.3 4.5 SANOK Hold Neutral 25.90 31.80 23% 11.4 10.7 9.2 6.7 6.4 5.7 VRG Buy Overweight 3.93 4.70 20% 18.1 13.3 11.6 8.5 8.6 7.5 Consumer staples DINOPL Buy Overweight 101.90 118.00 16% 32.4 24.4 18.8 19.8 15.2 11.9 EUROCASH Hold Neutral 19.80 22.20 12% 37.1 31.5 17.7 9.0 8.4 6.7 Financials – banks ALIOR Buy Neutral 58.55 62.50 7% 10.9 10.2 9.8 1.1 1.0 1.0 GETIN Suspended Suspended 1.21 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. GETINOBLE Suspended Suspended 0.48 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. HANDLOWY Hold Neutral 70.30 74.30 6% 14.0 13.4 12.3 1.3 1.3 1.3 IDEABANK Suspended Suspended 3.75 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. INGBSK Sell Neutral 191.00 154.90 -19% 16.8 15.4 13.4 2.0 1.8 1.6 MBANK Sell Neutral 453.00 389.00 -14% 17.1 13.6 12.0 1.3 1.2 1.1 MILLENNIUM Hold Neutral 8.92 9.39 5% 14.4 13.7 10.3 1.3 1.2 1.1 PEKAO Hold Overweight 111.80 119.60 7% 13.6 11.8 10.9 1.3 1.3 1.2 PKOBP Hold Overweight 39.78 41.10 3% 13.3 11.5 10.7 1.3 1.2 1.2 SANPL Hold Neutral 378.20 369.10 -2% 18.1 14.7 13.2 1.6 1.5 1.4 Financials – VINDEXUS Hold Neutral 6.68 9.10 36% 4.7 4.0 4.1 0.5 0.5 0.5 specialty finance Health care CLNPHARMA Buy Overweight 35.00 35.90 3% 50.7 36.7 29.7 27.2 19.7 15.8 ENELMED Buy Overweight 10.00 11.60 16% neg. 90.0 43.9 11.8 9.7 8.3 MEDICALG Suspended Suspended 32.40 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. NEUCA Hold Neutral 257.00 273.30 6% 12.8 11.6 10.3 9.1 8.3 7.3 IT – hardware ABPL Buy Neutral 19.45 29.20 50% 5.2 5.2 5.0 5.6 5.6 5.5 distributors ACTION Suspended Suspended 2.85 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. ASBIS Buy Overweight 2.41 5.90 145% 3.0 2.8 2.8 3.7 4.0 3.9 Prices as of close of February 1, 2019. Note: Multiples based on adjusted profits. Source: DM BOŚ estimates.

5 Polish Equities Monthly: February 2019

DM BOŚ's WSE coverage universe valuation table (continued) Sector Company LT ST market Current 12M EFV Upside P/E EV/EBITDA, fundamental relative price (PLN) (downside) (P/BV for financials, rating bias (PLN) to EFV P/NAV for real estate) 2018E 2019E 2020E 2018E 2019E 2020E TMT – IT software ASSECOBS Hold Neutral 29.50 29.90 1% 16.1 15.4 14.7 10.6 10.1 9.7 & services ASSECOPOL Hold Overweight 48.00 49.50 3% 11.0 13.0 12.7 6.1 6.6 6.4 ASSECOSEE Buy Overweight 13.35 17.90 34% 11.0 10.8 10.3 4.9 4.2 3.7 COMARCH Hold Neutral 155.50 175.00 13% 23.0 14.9 14.1 7.7 6.5 5.8 COMP Hold Neutral 48.60 62.30 28% 9.1 3.0 2.8 5.3 3.8 2.9 LIVECHAT Buy Neutral 27.70 33.70 22% 12.3 11.7 10.9 8.9 8.1 7.4 LSISOFT Buy Overweight 12.05 17.00 41% 6.5 6.4 6.3 3.3 2.8 2.3 TMT – media 11BIT Buy Overweight 279.50 400.00 43% 14.5 16.5 10.1 10.2 10.4 5.6 & entertainment AGORA Hold Neutral 10.70 12.70 19% neg. n.m. n.m. 5.5 4.7 4.6 CDPROJEKT Buy Overweight 190.00 205.20 8% n.m. 19.9 17.7 n.m. 13.3 11.5 CIGAMES Hold Neutral 1.12 0.74 -34% neg. 33.0 5.7 53.2 10.0 2.2 PLAYWAY Hold Overweight 160.00 172.00 8% 29.6 21.4 16.9 19.7 14.4 11.6 TMT – CYFRPLSAT Hold Neutral 23.72 24.50 3% 15.0 13.4 12.3 6.9 6.4 6.1 telecomunications services and media TMT – NETIA Sell Neutral 5.20 4.20 -19% 30.0 27.9 18.1 5.9 6.3 5.3 telecommunications ORANGEPL Hold Neutral 5.65 5.10 -10% n.m. n.m. 49.7 4.8 4.4 4.5 services PLAY Hold Neutral 22.46 20.70 -8% 7.8 7.2 6.9 5.7 5.5 5.8 Mining BOGDANKA Buy Overweight 55.60 78.00 40% 18.5 6.3 6.3 3.1 1.7 1.4 JSW Buy Overweight 69.60 100.00 44% 4.8 5.1 5.5 1.7 1.6 1.5 KGHM Sell Underweight 95.90 75.00 -22% 9.2 8.1 7.5 5.3 4.8 4.6 Mining – machinery FAMUR Buy Overweight 4.99 7.10 42% 13.0 11.0 9.5 6.1 5.2 4.7 Oil & Gas LOTOS Buy Overweight 93.56 105.40 13% 11.1 10.5 9.3 6.0 5.7 4.7 PGNIG Buy Overweight 7.55 7.80 3% 12.8 12.5 11.9 5.8 5.4 5.0 PKNORLEN Buy Overweight 105.00 129.00 23% 10.3 9.6 7.5 5.8 5.1 4.2 UNIMOT Buy Overweight 9.20 13.80 50% 6.2 5.3 3.9 10.2 7.1 5.5 Real estate ECHO Hold Neutral 3.44 3.95 15% 7.5 7.3 6.8 1.0 0.9 0.9 GTC Buy Neutral 9.32 11.10 19% 11.5 8.5 7.5 0.9 0.8 0.7 RANKPROGR Suspended Suspended 1.51 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. TOWERINV Buy Neutral 25.00 57.50 130% 2.1 2.1 2.0 1.2 1.5 1.8 Residential DOMDEV Hold Overweight 75.00 85.90 15% 8.4 8.2 7.6 6.6 6.8 6.1 construction JWCONSTR Buy Neutral 2.23 4.50 102% 4.9 5.2 6.4 7.4 6.2 8.0 MARVIPOL Buy Overweight 3.68 7.20 96% 3.8 3.5 3.9 11.1 4.5 5.6 DEVELOPMENT POLNORD Hold Overweight 8.49 9.50 12% neg. 46.2 15.8 neg. 43.2 21.5 RONSON Hold Neutral 0.86 1.10 28% 6.8 6.8 5.3 8.0 8.2 6.5 Utilities PGE Hold Neutral 12.07 14.10 17% 9.6 8.3 7.4 4.9 4.5 4.2 TAURONPE Hold Neutral 2.37 2.56 8% 4.0 4.2 3.8 4.0 4.3 3.8 Prices as of close of February 1, 2019. Note: Multiples based on adjusted profits. Source: DM BOŚ estimates.

6 BASIC DEFINITIONS Banks A/R turnover (in days) = 365/(sales/average A/R)) Net Interest Margin (NIM) = net interest income/average assets Inventory turnover (in days) = 365/(COGS/average inventory)) NIM Adjusted = (net interest income adjusted for SWAPs)/average assets A/P turnover (in days) = 365/(COGS/average A/P)) Non interest income = fees&commissions + result on financial operations (trading gains) + FX gains Current ratio = ((current assets – ST deferred assets)/current liabilities) Interest Spread = (interest income/average interest earning assets)/ (interest cost/average interest bearing liabilities) Quick ratio = ((current assets – ST deferred assets – inventory)/current liabilities) Cost/Income = (general costs + depreciation + other operating costs)/ (profit on banking activity + other Interest coverage = (pre-tax profit before extraordinary items + interest payable/interest payable) operating income) Gross margin = gross profit on sales/sales ROE = net profit/average equity EBITDA margin = EBITDA/sales ROA = net income/average assets EBIT margin = EBIT/sales Non performing loans (NPL) = loans in ‘substandard’, ‘doubtful’ and ‘lost’ categories Pre-tax margin = pre-tax profit/sales NPL coverrage ratio = loan loss provisions/NPL Net margin = net profit/sales Net provision charge = provisions created – provisions released ROE = net profit/average equity ROA = (net income + interest payable)/average assets DM BOŚ S.A. generally values the covered banks via two methods: comparative method and fundamental target fair EV = market capitalization + interest bearing debt – cash and equivalents P/E and target fair P/BV multiples method. The advantage of the former is the fact that it incorporates the current market EPS = net profit/ no. of shares outstanding assessment of the value of the company’s peers. The weakness of the comparative method is the risk that the valuation CE = net profit + depreciation benchmark may be mispriced. The advantage of the fundamental target fair P/E and target fair P/BV multiples method is Dividend yield (gross) = pre-tax DPS/stock market price its independence of the current market valuation of the comparable companies. The weakness of this method is its high Cash sales = accrual sales corrected for the change in A/R sensitivity to undertaken assumptions, especially those Cash operating expenses = accrual operating expenses corrected for the changes in inventories and A/P, related to the residual value calculation. Assumptions used in valuation can change, influencing thereby the level of the depreciation, cash taxes and changes in the deferred taxes valuation. Among the most important assumptions are: GDP growth, forecasted level of inflation, changes in interest DM BOŚ S.A. generally values the covered non bank companies via two methods: comparative method and DCF rates and currency prices, employment level and change in wages, demand on the analysed company products, raw method (discounted cash flows). The advantage of the former is the fact that it incorporates the current market material prices, competition, standing of the main customers and suppliers, legislation changes, etc. Changes in the assessment of the value of the company’s peers. The weakness of the comparative method is the risk that the environment of the analysed company are monitored by analysts involved in the preparation of the recommendation, valuation benchmark may be mispriced. The advantage of the DCF method is its independence from the current estimated, incorporated in valuation and published in the recommendation whenever needed. market valuation of the comparable companies. The weakness of this method is its high sensitivity to undertaken assumptions, especially those related to the residual value calculation. Please note that we also resort to other valuation techniques (e.g. NAV-, DDM- or SOTP-based), should it prove appropriate in a given case.

KEY TO INVESTMENT RANKINGS This is a guide to expected price performance in absolute terms over the next 12 months: Buy – fundamentally undervalued (upside to 12M EFV in excess of the cost of equity) + catalysts which should close the valuation gap identified; Hold – either (i) fairly priced, or (ii) fundamentally undervalued/overvalued but lacks catalysts which could close the valuation gap; Sell – fundamentally overvalued (12M EFV < current share price + 1-year cost of equity) + catalysts which should close the valuation gap identified. This is a guide to expected relative price performance: Overweight – expected to perform better than the benchmark (WIG) over the next quarter in relative terms Neutral – expected to perform in line with the benchmark (WIG) over the next quarter in relative terms Underweight – expected to perform worse than the benchmark (WIG) over the next quarter in relative terms

The recommendation tracker presents the performance of DM BOŚ S.A.’s recommendations. A recommendation expires on the day it is altered or on the day 12 months after its issuance, whichever comes first. Relative performance compares the rate of return on a given recommended stock in the period of the recommendation’s validity (i.e. from the date of issuance to the date of alteration or – in case of maintained recommendations – from the date of issuance to the current date) in a relation to the rate of return on the benchmark in this time period. The WIG index constitutes the benchmark. For recommendations that expire by an alteration or are maintained, the ending values used to calculate their absolute and relative performance are: the stock closing price on the day the recommendation expires/ is maintained and the closing value of the benchmark on that date. For recommendations that expire via a passage of time, the ending values used to calculate their absolute and relative performance are: the average of the stock closing prices for the day the recommendation elapses and four directly preceding sessions and the average of the benchmark’s closing values for the day the recommendation expires and four directly preceding sessions.

Distribution of DM BOŚ’s current recommendations for the companies which DM BOŚ has supplied Distribution of DM BOŚ's current recommendations with material investment services within the last 12 months Buy Hold Sell Suspended Under revision Buy Hold Sell Suspended Under revision Numbers 33 38 7 7 0 Numbers 2 0 0 0 0 Percentage 39% 45% 8% 8% 0% Percentage 100% 0% 0% 0% 0%

Distribution of DM BOŚ’s current market relative recommended weightings for the companies which Distribution of DM BOŚ's current market relative recommended weightings DM BOŚ has supplied with material investment services within the last 12 months Overweight Neutral Underweight Suspended Under revision Overweight Neutral Underweight Suspended Under revision Numbers 33 39 6 7 0 Numbers 1 1 0 0 0 Percentage 39% 46% 7% 8% 0% Percentage 50% 50% 0% 0% 0% LT fundamental recommendation tracker Relative Price at issue/ EFV Analyst Recommendation Report date Reiteration date Distribution date Expiry date Performance performance reiteration* (12 months) Erbud - Buy - 20.06.2013 - - 12.12.2013 79% 58% 18.60 26.70 - - - → - 25.07.2013 - - - - 20.34 26.70 → - - → - 01.09.2013 - - - - 20.33 26.70 → - - → - 09.10.2013 - - - - 25.50 32.60 ↑ - - → - 20.10.2013 - - - - 28.20 32.60 → - - → - 14.11.2013 - - - - 34.01 32.60 → - Sell ↓ 12.12.2013 - - 09.09.2014 -25% -29% 33.25 32.60 → - - → - 21.01.2014 - - - - 32.00 32.60 → - - → - 06.02.2014 - - - - 34.20 29.70 ↓ - - → - 17.02.2014 - - - - 32.45 29.70 → - - → - 23.03.2014 - - - - 27.70 29.70 → - - → - 13.04.2014 - - - - 29.19 29.70 → - - → - 15.05.2014 - - - - 23.60 29.70 → - - → - 16.06.2014 - - - - 25.25 29.70 → - - → - 16.07.2014 - - - - 25.37 29.00 ↓ - - → - 20.07.2014 - - - - 24.67 29.00 → - - → - 01.09.2014 - - - - 23.90 29.00 → - Buy ↑ 09.09.2014 - - 14.12.2014 -2% 2% 24.22 34.00 ↑ - - → - 14.10.2014 - - - - 26.01 34.00 → - - → - 16.11.2014 - - - - 26.11 34.00 → Andrzej Bernatowicz Hold ↓ 14.12.2014 - 15.12.2014 13.12.2015 12% 33% 23.68 26.00 ↓ Andrzej Bernatowicz - → - 18.01.2015 19.01.2015 - - - 24.40 26.00 → Andrzej Bernatowicz - → - 10.02.2015 11.02.2015 - - - 27.60 26.00 → Michał Stalmach - → - 02.03.2015 03.03.2015 - - - 31.80 26.00 → Michał Stalmach - → - 23.03.2015 24.03.2015 - - - 34.45 26.00 → Michał Stalmach - → - 19.04.2015 20.04.2015 - - - 33.30 26.00 → Michał Stalmach - → - 17.05.2015 18.05.2015 - - - 33.84 26.00 → Michał Stalmach - → - 21.06.2015 22.06.2015 - - - 30.00 26.00 → Michał Stalmach - → - 14.07.2015 14.07.2015 - - - 33.50 25.50 ↓ Michał Stalmach - → - 16.07.2015 17.07.2015 - - - 33.20 25.50 → Michał Stalmach - → - 31.08.2015 01.09.2015 - - - 32.40 25.50 → Michał Stalmach - → - 15.10.2015 16.10.2015 - - - 33.20 25.50 → Michał Stalmach - → - 16.11.2015 17.11.2015 - - - 29.89 25.50 → Michał Stalmach Hold → 13.12.2015 - 14.12.2015 04.12.2016 7% -2% 26.05 29.00 ↑ Michał Stalmach - → - 17.01.2016 18.01.2016 - - - 23.80 29.00 → Michał Stalmach - → - 15.02.2016 16.02.2016 - - - 27.50 29.00 → Michał Stalmach - → - 20.03.2016 21.03.2016 - - - 28.47 29.00 → Michał Stalmach - → - 21.03.2016 22.03.2016 - - - 28.28 29.00 → Michał Stalmach - → - 13.04.2016 14.04.2016 - - - 30.00 29.00 → Michał Stalmach - → - 11.05.2016 12.05.2016 - - - 28.34 29.00 → Michał Stalmach - → - 16.05.2016 16.05.2016 - - - 28.20 27.80 ↓ Michał Stalmach - → - 27.06.2016 28.06.2016 - - - 25.10 27.80 → Michał Stalmach - → - 24.07.2016 25.07.2016 - - - 26.70 27.80 → Maciej Wewiórski - → - 31.08.2016 01.09.2016 - - - 29.40 27.80 → Maciej Wewiórski - → - 12.10.2016 13.10.2016 - - - 28.50 27.80 → Maciej Wewiórski - → - 02.11.2016 03.11.2016 - - - 29.00 27.80 → Maciej Wewiórski Hold → 04.12.2016 - 05.12.2016 15.11.2017 -8% -28% 26.70 28.40 ↑ Maciej Wewiórski - → - 04.01.2017 05.01.2017 - - - 29.69 27.20 ↓ Maciej Wewiórski - → - 12.01.2017 13.01.2017 - - - 30.08 27.20 → Maciej Wewiórski - → - 08.02.2017 09.02.2017 - - - 29.39 27.20 → Maciej Wewiórski - → - 07.03.2017 08.03.2017 - - - 33.00 27.20 → Maciej Wewiórski - → - 11.04.2017 12.04.2017 - - - 33.55 27.20 → Maciej Wewiórski - → - 30.05.2017 31.05.2017 - - - 31.28 27.20 → Maciej Wewiórski - → - 12.07.2017 13.07.2017 - - - 29.01 27.20 → Maciej Wewiórski - → - 03.09.2017 04.09.2017 - - - 26.39 27.20 → Maciej Wewiórski - → - 15.10.2017 16.10.2017 - - - 26.88 27.20 → Maciej Wewiórski Hold → 15.11.2017 - 16.11.2017 14.11.2018 -51% -46% 23.40 27.20 → Maciej Wewiórski - → - 10.12.2017 11.12.2017 - - - 21.30 24.20 ↓ Maciej Wewiórski - → - 10.01.2018 11.01.2018 - - - 23.00 24.20 → Maciej Wewiórski - → - 13.02.2018 14.02.2018 - - - 20.70 24.20 → Maciej Wewiórski - → - 12.03.2018 13.03.2018 - - - 21.90 24.20 → Maciej Wewiórski - → - 16.04.2018 17.04.2018 - - - 21.50 24.20 → Maciej Wewiórski - → - 29.05.2018 30.05.2018 - - - 18.40 24.20 → Maciej Wewiórski - → - 03.06.2018 04.06.2018 - - - 15.70 23.10 ↓ Maciej Wewiórski - → - 16.07.2018 17.07.2018 - - - 14.40 23.10 → Maciej Wewiórski - → - 02.08.2018 03.08.2018 - - - 14.40 13.90 ↓ Maciej Wewiórski - → - 02.08.2018 03.08.2018 - - - 14.40 13.90 → Maciej Wewiórski - → - 30.08.2018 31.08.2018 - - - 9.46 13.90 → Maciej Wewiórski - → - 11.10.2018 12.10.2018 - - - 11.00 13.90 → Maciej Wewiórski - → - 23.10.2018 24.10.2018 - - - 11.20 13.90 → Maciej Wewiórski Hold → 14.11.2018 - 15.11.2018 Not later than 19% 11% 10.45 13.90 → 14.11.2019 Maciej Wewiórski - → - 09.12.2018 10.12.2018 - - - 10.40 13.90 → Maciej Wewiórski - → - 10.01.2019 11.01.2019 - - - 10.00 13.90 → Maciej Wewiórski - → - 04.02.2019 05.02.2019 - - - 12.40 13.90 → * prices at issue/reiteration are the closing prices at the report or reiteration date pre-June 2014 recommendations issued at DM IDMSA Market-relative recommendation tracker Relative Price at issue/ Relative Analyst Report date Reiteration date Distribution date Expiry date Recommendation reiteration* performance Erbud - Overweight - 20.06.2013 - - 12.12.2013 18.60 58% - - → - 25.07.2013 - - 20.34 - - - → - 01.09.2013 - - 20.33 - - - → - 09.10.2013 - - 25.50 - - - → - 20.10.2013 - - 28.20 - - - → - 14.11.2013 - - 34.01 - - Underweight ↓ 12.12.2013 - - 09.09.2014 33.25 -31% - - → - 21.01.2014 - - 32.00 - - - → - 06.02.2014 - - 34.20 - - - → - 17.02.2014 - - 32.45 - - - → - 23.03.2014 - - 27.70 - - - → - 13.04.2014 - - 29.19 - - - → - 15.05.2014 - - 23.60 - - - → - 16.06.2014 - - 25.25 - - - → - 16.07.2014 - - 25.37 - - - → - 20.07.2014 - - 24.67 - - - → - 01.09.2014 - - 23.90 - - Overweight ↑ 09.09.2014 - - 14.12.2014 24.22 2% - - → - 14.10.2014 - - 26.01 - - - → - 16.11.2014 - - 26.11 - Andrzej Bernatowicz Neutral ↓ 14.12.2014 - 15.12.2014 02.03.2015 23.68 32% Andrzej Bernatowicz - → - 18.01.2015 19.01.2015 - 24.40 - Andrzej Bernatowicz - → - 10.02.2015 11.02.2015 - 27.60 - Michał Stalmach Overweight ↑ 02.03.2015 - 03.03.2015 23.03.2015 31.80 6% Michał Stalmach Neutral ↓ 23.03.2015 - 24.03.2015 20.03.2016 34.45 -5% Michał Stalmach - → - 19.04.2015 20.04.2015 - 33.30 - Michał Stalmach - → - 17.05.2015 18.05.2015 - 33.84 - Michał Stalmach - → - 21.06.2015 22.06.2015 - 30.00 - Michał Stalmach - → - 14.07.2015 14.07.2015 - 33.50 - Michał Stalmach - → - 16.07.2015 17.07.2015 - 33.20 - Michał Stalmach - → - 31.08.2015 01.09.2015 - 32.40 - Michał Stalmach - → - 15.10.2015 16.10.2015 - 33.20 - Michał Stalmach - → - 16.11.2015 17.11.2015 - 29.89 - Michał Stalmach - → - 13.12.2015 14.12.2015 - 26.05 - Michał Stalmach - → - 17.01.2016 18.01.2016 - 23.80 - Michał Stalmach - → - 15.02.2016 16.02.2016 - 27.50 - Michał Stalmach Underweight ↓ 20.03.2016 - 21.03.2016 11.05.2016 28.47 4% Michał Stalmach - → - 21.03.2016 22.03.2016 - 28.28 - Michał Stalmach - → - 13.04.2016 14.04.2016 - 30.00 - Michał Stalmach Neutral ↑ 11.05.2016 - 12.05.2016 30.05.2017 28.34 -9% Michał Stalmach - → - 16.05.2016 16.05.2016 - 28.20 - Michał Stalmach - → - 27.06.2016 28.06.2016 - 25.10 - Michał Stalmach - → - 24.07.2016 25.07.2016 - 26.70 - Maciej Wewiórski - → - 31.08.2016 01.09.2016 - 29.40 - Maciej Wewiórski - → - 12.10.2016 13.10.2016 - 28.50 - Maciej Wewiórski - → - 02.11.2016 03.11.2016 - 29.00 - Maciej Wewiórski - → - 04.12.2016 05.12.2016 - 26.70 - Maciej Wewiórski - → - 04.01.2017 05.01.2017 - 29.69 - Maciej Wewiórski - → - 12.01.2017 13.01.2017 - 30.08 - Maciej Wewiórski - → - 08.02.2017 09.02.2017 - 29.39 - Maciej Wewiórski - → - 07.03.2017 08.03.2017 - 33.00 - Maciej Wewiórski - → - 11.04.2017 12.04.2017 - 33.55 - Maciej Wewiórski Neutral → 30.05.2017 - 31.05.2017 10.12.2017 31.28 -34% Maciej Wewiórski - → - 12.07.2017 13.07.2017 - 29.01 - Maciej Wewiórski - → - 03.09.2017 04.09.2017 - 26.39 - Maciej Wewiórski - → - 15.10.2017 16.10.2017 - 26.88 - Maciej Wewiórski - → - 15.11.2017 16.11.2017 - 23.40 - Maciej Wewiórski Underweight ↓ 10.12.2017 - 11.12.2017 02.08.2018 21.30 -19% Maciej Wewiórski - → - 10.01.2018 11.01.2018 - 23.00 - Maciej Wewiórski - → - 13.02.2018 14.02.2018 - 20.70 - Maciej Wewiórski - → - 12.03.2018 13.03.2018 - 21.90 - Maciej Wewiórski - → - 16.04.2018 17.04.2018 - 21.50 - Maciej Wewiórski - → - 29.05.2018 30.05.2018 - 18.40 - Maciej Wewiórski - → - 03.06.2018 04.06.2018 - 15.70 - Maciej Wewiórski - → - 16.07.2018 17.07.2018 - 14.40 - Maciej Wewiórski Neutral ↑ 02.08.2018 - 03.08.2018 04.02.2019 14.40 -16% Maciej Wewiórski - → - 02.08.2018 03.08.2018 - 14.40 - Maciej Wewiórski - → - 30.08.2018 31.08.2018 - 9.46 - Maciej Wewiórski - → - 11.10.2018 12.10.2018 - 11.00 - Maciej Wewiórski - → - 23.10.2018 24.10.2018 - 11.20 - Maciej Wewiórski - → - 14.11.2018 15.11.2018 - 10.45 - Maciej Wewiórski - → - 09.12.2018 10.12.2018 - 10.40 - Maciej Wewiórski - → - 10.01.2019 11.01.2019 - 10.00 - Maciej Wewiórski Overweight ↑ 04.02.2019 - 05.02.2019 Not later than 04.02.2020 12.40 - * prices at issue/reiteration are the closing prices at the report or reiteration date pre-June 2014 recommendations issued at DM IDMSA This material was produced by DM BOŚ based in Warsaw.

The production of the recommendation report was completed on February 5, 2019 at 7.30 a.m. The recommendation was distributed on February 5, 2019 at 7.40 a.m.

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DM BOŚ S.A. is the market maker for the stock and the futures contracts of Ciech. During the last 12 months DM BOŚ S.A. rendered for Police brokerage services at Polish Power Exchange (TGE) and received a fee by virtue of this. During the last 12 months DM BOŚ S.A. rendered for Puławy brokerage services at Polish Power Exchange (TGE) and received a fee by virtue of this. DM BOŚ SA provides brokerage services on behalf of Unibep and receives a remuneration by virtue of this. During the last 12 months DM BOŚ S.A rendered brokerage services on behalf of CCC pursuant to the agreement signed and received a remuneration by virtue of this. DM BOŚ S.A. is the market maker for the stock and the futures contracts of CCC. DM BOŚ S.A. is the market maker for the stock of LPP. DM BOŚ SA provides brokerage services on behalf of BAH and receives a remuneration by virtue of this. DM BOŚ S.A. is the market maker and liquidity provider with respect to financial instruments for the stock of OEX. DM BOŚ SA provides brokerage services on behalf of VRG and receives a remuneration by virtue of this. During the last 12 months DM BOŚ S.A. rendered for VRG brokerage services at Polish Power Exchange (TGE) and received a fee by virtue of this. Institutional sales

Bartosz Janczy tel.: +48 (22) 504 32 46 [email protected]

Tomasz Grabowski tel.: +48 (22) 504 32 47 [email protected]

Marcin Kozerski tel.: +48 (22) 504 33 35 [email protected]

Grzegorz Kołodziejczyk tel.: +48 (22) 504 33 34 [email protected]

Marcin Stosio tel.: +48 (22) 504 33 37 [email protected]

Michał Zawada tel.: +48 (22) 504 33 36 [email protected]

Andrzej Kowalczyk tel.: +48 (22) 504 33 78 During the last 12 months DM BOŚ S.A. rendered for Eurocash brokerage services at Polish Power Exchange (TGE) and [email protected] received a fee by virtue of this. DM BOŚ S.A. is the market maker for the stock of Eurocash. Research DM BOŚ S.A. is the market maker for the stock and the futures contracts of Alior Bank. DM BOŚ S.A. is the market maker for the stock of Santander BP. Sobiesław Pająk, CFA DM BOŚ S.A. is the market maker for the stock of mBank. (Equity strategy, TMT) DM BOŚ S.A. is the market maker for the stock and the futures contracts of Pekao. tel.: +48 (22) 504 32 72 DM BOŚ S.A. is the market maker for the stock and the futures contracts of PKO BP. [email protected] DM BOŚ SA provides brokerage services on behalf of PKO BP and receives a remuneration by virtue of this. Sylwia Jaśkiewicz, CFA DM BOŚ S.A. is the market maker and liquidity provider with respect to financial instruments for shares and bonds of Vindexus. (Construction materials, Consumer staples DM BOŚ SA provides brokerage services on behalf of Vindexus and receives a remuneration by virtue of this. & discretionary, Health care) During the last 12 months DM BOŚ S.A rendered brokerage services on behalf of Vindexus pursuant to the agreement signed tel.: +48 (22) 504 33 75 and received a remuneration by virtue of this. [email protected] DM BOŚ S.A. is the market maker and liquidity provider with respect to financial instruments for the stock of Enel-Med. Maciej Wewiórski DM BOŚ SA provides brokerage services on behalf of Medicalgorithmics and receives a remuneration by virtue of this. (Residential construction, During the last 12 months DM BOŚ S.A. rendered for JSW brokerage services at Polish Power Exchange (TGE) and received a Construction, Real estate) fee by virtue of this. tel.: +48 (22) 504 33 07 DM BOŚ S.A. is the market maker for the stock and the futures contracts of JSW. [email protected] During the last 12 months DM BOŚ S.A. rendered for KGHM brokerage services at Polish Power Exchange (TGE) and received Michał Sobolewski, CFA, FRM a fee by virtue of this. (Financials) DM BOŚ S.A. is the market maker for the stock and the futures contracts of KGHM. tel.: +48 (22) 504 33 06 DM BOŚ S.A. is the market maker for the stock and the futures contracts of Lotos. [email protected] DM BOŚ S.A. is the market maker for the stock and the futures contracts of PGNiG. DM BOŚ SA provides brokerage services on behalf of PGNiG and receives a remuneration by virtue of this. Jakub Viscardi (Telco, Consumer staples & discretionary, During the last 12 months DM BOŚ S.A. rendered for PKN Orlen brokerage services at Polish Power Exchange (TGE) and IT – hardware distribution, Utilities) received a fee by virtue of this. tel.: +48 (22) 504 32 58 DM BOŚ S.A. is the market maker for the stock and the futures contracts of PKN Orlen. [email protected] DM BOŚ S.A. is the market maker and liquidity provider with respect to financial instruments for the stock of Unimot. During the last 12 months DM BOŚ S.A. rendered for Unimot brokerage services at Polish Power Exchange (TGE) and received Łukasz Prokopiuk, CFA a fee by virtue of this. (Chemicals, Mining, Mining – machinery, Oil & gas) DM BOŚ S.A. is the market maker and liquidity provider with respect to financial instruments for the stock of Tower Investments. tel.: +48 (22) 504 32 59 DM BOŚ S.A. is the market maker and liquidity provider with respect to financial instruments for the stock of Polnord. [email protected] DM BOŚ S.A. is the market maker and liquidity provider with respect to financial instruments for the stock of Comp. DM BOŚ SA provides brokerage services on behalf of LiveChat and receives a remuneration by virtue of this. Tomasz Rodak, CFA DM BOŚ S.A. is the market maker and liquidity provider with respect to financial instruments for the stock of LSI Software. (Consumer discretionary, Video games) tel.: +48 22 504 33 23 DM BOŚ S.A. is the market maker and liquidity provider with respect to financial instruments for the stock of Cherrypick Games. [email protected] During the last 12 months DM BOŚ S.A rendered brokerage services on behalf of Cherrypick Games pursuant to the agreement signed and received a remuneration by virtue of this Wojciech Romanowski DM BOŚ S.A. is the market maker for the stock and the futures contracts of CD Projekt. Junior Analyst DM BOŚ S.A. is the market maker for the stock of Cyfrowy Polsat. tel.: +48 22 504 33 88 During the last 12 months DM BOŚ S.A. rendered for Orange PL brokerage services at Polish Power Exchange (TGE) and [email protected] received a fee by virtue of this. Marcin Sielicki DM BOŚ S.A. is the market maker for the stock of Orange PL. 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