Friday, May 31, 2019 | update Cyfrowy : reduce (downgraded) CPS PW; CPS.WA | TMT,

Undeserved premium to peer group Current Price PLN 26.00 Target Price PLN 24.60 Over the last 5 months the shares of climbed by more than 15%, outpacing the market by nearly 19 percentage MCap PLN 16.6bn points. At the same time, the company announced a dividend payout, Free Float PLN 7.0bn which is positive news (in fact, we had been expecting it for a long ADTV (3M) PLN 19.5m time). On the other hand, (1) its current DivYield at 3.6% is low in comparison with the peer group (DivYield’19 median for peer group Ownership stands at 5.4%) and with the rival PLY PW (DivYield’19 = 5.8%). (2) Moreover, of the impact of ’s consolidation and IFRS 16, Zygmunt Solorz-Żak 57.34% EBITDA shrank by 6.0% YoY, which came as a disappointment. Despite the above, the company is trading on EV/EBITDA’19 = 6.6x Others 42.66% at an over 10% premium to the peer group, which we find undeserved. We estimate EBITDA to stand at PLN 3.75 billion under Business Profile IAS 17, down by 2.4% compared with the 2018 pro forma figure. Cyfrowy Polsat is a leading Polish media group This makes Cyfrowy Polsat the only of the three major Polish consisting of a platform, which is telecoms to see its earnings drop (vs PLY +7.1%, OPL +2.4%). The the largest in Poland and the fourth largest in Europe (3.9m users) and the commercial TV decline is attributable not only to Netia but also to the sluggish broadcaster Polsat which in Q3 2018 had an advertising market (in Q1 2019, spending on TV advertising and audience share of 24.4%. In 2014 Cyfrowy took sponsorship in Poland fell by 3.1%). Consequently, we updated our over the mobile telecom Polkomtel, one of the forecasts (among others, with the impact of IFRS 16) to arrive at a leaders in Poland with coverage reaching 96% of revised target price of PLN 24.60, which implies that the share price Polish households (the company has >7.2 RGUs may potentially slide by more than 5%. In our opinion, Play is a from mobile). more attractive choice in the sector. CPS vs. WIG Q1 2019 performance 30.00 The Q1 2019 results reported by Cyfrowy Polsat match expectations. Our CPS interpretation of KPIs is positive. The strong growth in the number of mobile PLN subscribers continued (+107 thousand in Q1 2019) with ARPU up by 1.2% WIG YoY. Churn rate hit a record low at 7.2%, while RGU per customer was on 27.50 the rise (2.53 in Q1 2019 compared with 2.40 a year earlier). Excluding the impact of Netia’s consolidation, revenues under IAS 17 rose by more than 5%. On the other hand, however, higher operating costs and unfavourable 25.00 situation on the bad debt market (affecting all MVNOs in Poland) pushed EBITDA down to PLN 836 million, i.e. by 5.7% YoY (under IAS 17, excluding Netia). The result is hardly optimistic, especially when compared with the adjusted EBITDA growth rate reported by Play in Q1 2019 (over 11.0%) and 22.50 the stable EBITDaL generated by (net of profit from real estate sale). 20.00 Sluggish advertising market

In Q1 2019, the TV advertising market shrank by more than 3% YoY.

Feb-19

Aug-18

Nov-18 May-19 Against this background, Cyfrowy Polsat performed quite well with revenues May-18 from advertising and sponsorship up by 0.5% YoY. EBITDA in the TV segment grew by 4.0% YoY in Q1 2019 (excluding the impact of IFRS 16), Target Price Rating which in our opinion resulted largely from the sale of rights to Company UEFA Champions League matches to the individual and business clients new old new old segment. Without an evident improvement in its market environment, Cyfrowy Polsat 24.60 23.20 reduce hold Cyfrowy Polsat will keep struggling to boost its profit from TV advertising, Current Target Upside/ Company which may dampen investor sentiment towards the company. In the base- Price Price Downside case scenario, we assume the TV ads market to bounce back in H2 2019. Cyfrowy Polsat 26.00 24.60 -5.4%

Forecast revision (PLN m) 2017 2018 2019E* 2020E* 2021E* 2019E 2020E 2021E since last update Revenue 9,829 10,686 11,394 11,548 11,759 Revenue -0.6% -0.6% -0.3% EBITDA 3,617 3,698 4,179 4,255 4,356 EBITDA* +9.7% +8.8% +9.5% EBITDA margin 36.8% 34.6% 36.7% 36.9% 37.0% Net profit +10.2% +7.0% +7.3% EBIT 1,834 1,727 1,966 2,127 2,317 *EBITDA estimates revision excluding IFRS16 effect: -1.6%/ Net income 981 834 1,224 1,431 1,595 -2.2%/-1.3% in FY2019-21 P/E 17.0 19.9 13.6 11.6 10.4 P/CE 6.0 5.9 5.5 5.3 5.2 P/BV 1.4 1.3 1.2 1.1 1.0 Analyst: EV/EBITDA 7.5 7.2 6.6 6.4 6.0 DPS 0.32 0.00 0.93 0.93 0.93 Paweł Szpigiel +48 22 438 24 06 DYield 1.2% 0.0% 3.6% 3.6% 3.6% pawel.szpigiel@.pl * from FY2019 estimates under IFRS16

Valuation

Using DCF analysis and relative valuation, we set our new (PLN) weight price 9-month price target for CPS stock at PLN 24.60 per share. Relative Valuation 50% 21.70 DCF Analysis 50% 24.56

price 23.13

9M target price 24.60

DCF Valuation

Assumptions: IFRS 16 (without leasing), we do not take into . The forecast period extends from FY2019 to FY2028. account depreciation of rights of use . The risk- rate in the forecast period is 3.50%. . The model accounts for minority interests (mostly . We assume FCF after the forecast period will grow at the remaining 34% stake in Netia, worth a rate of 0.0%. PLN 755m). . Net debt is as at 31 December 2018, i.e. PLN 10.3bn, . We assume PLN 590m CAPEX for 50 MHz band in 5G without taking into account the debt resulting from auction in 2020.

DCF Model (PLN m) 2019P 2020P 2021P 2022P 2023P 2024P 2025P 2026P 2027P 2028P 2028+ Revenue 11,394 11,548 11,759 11,946 12,132 12,301 12,473 12,649 12,832 13,013 pct. change 1.3% 1.8% 1.6% 1.6% 1.4% 1.4% 1.4% 1.4% 1.4% EBITDA* 3,749 3,825 3,926 3,981 4,030 4,061 4,091 4,119 4,145 4,168 margin 32.9% 33.1% 33.4% 33.3% 33.2% 33.0% 32.8% 32.6% 32.3% 32.0% EBIT 1,966 2,127 2,317 2,458 2,577 2,650 2,709 2,765 2,696 2,710 EBIT margin 17.3% 18.4% 19.7% 20.6% 21.2% 21.5% 21.7% 21.9% 21.0% 20.8% Tax on EBIT 373 404 440 467 490 504 515 525 512 515 Effective tax rate 19.0% 19.0% 19.0% 19.0% 19.0% 19.0% 19.0% 19.0% 19.0% 19.0% NOPLAT 1,592 1,723 1,877 1,991 2,087 2,147 2,195 2,240 2,184 2,195

D&A 1,783 1,699 1,609 1,523 1,453 1,411 1,382 1,353 1,449 1,458 CAPEX -1,380 -1,984 -1,306 -2,325 -2,670 -1,674 -1,396 -1,983 -1,440 -1,458 Working capital -267 -158 -94 -84 -85 -85 -83 -92 -103 -116

FCF 1,728 1,279 2,086 1,105 785 1,799 2,097 1,518 2,090 2,080 2,080 WACC 6.8% 6.8% 6.9% 7.0% 6.9% 7.0% 7.1% 7.1% 7.2% 7.3% 7.3% Discount factor 100.0% 96.2% 90.0% 84.2% 78.7% 73.6% 68.8% 64.3% 60.0% 56.0% 52.2% PV FCF 1,662 1,152 1,756 870 578 1,239 1,348 912 1,170 1,085 1,085

WACC 6.8% 6.8% 6.9% 7.0% 6.9% 7.0% 7.1% 7.1% 7.2% 7.3% 7.3% Cost of debt 4.5% 4.5% 4.5% 4.5% 4.5% 4.5% 4.5% 4.5% 4.5% 4.5% 4.5% Risk-free rate 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% Risk premium 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% Effective tax rate 19.0% 19.0% 19.0% 19.0% 19.0% 19.0% 19.0% 19.0% 19.0% 19.0% 19.0% Net debt / EV 36.0% 35.0% 32.1% 31.9% 33.1% 31.7% 29.4% 28.9% 26.6% 24.3% 24.3%

Cost of equity 8.5% 8.5% 8.5% 8.5% 8.5% 8.5% 8.5% 8.5% 8.5% 8.5% 8.5% Risk premium 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% Beta 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0

FCF growth after the forecast period 0.0% Sensitivity Analysis Terminal value 28,408 FCF growth in perpetuity Present value of terminal value 14,824 -1.0% -0.5% 0.0% 0.5% 1.0% Present value of FCF in the forecast period 11,772 WACC +1.0 p.p. 18.5 19.6 20.9 22.3 23.9 Enterprise value 26,596 WACC +0.5 p.p. 20.6 21.9 23.3 25.0 26.9 Net debt (eop 2018) 10,092 WACC 22.9 24.4 26.1 28.1 30.3 Other noncore assets 0 WACC -0.5 p.p. 25.6 27.3 29.3 31.6 34.3 Minority interests 797.4 WACC -1.0 p.p. 28.5 30.6 32.9 35.7 39.0 Equity value 15,707 Number of shares (millions) 639.5 Equity value per share (PLN) 24.6 9M cost of equity 6.4% 9M target price (PLN) 26.1 EV/EBITDA ('19) at target price 7.1 P/E ('19) at target price 12.8 TV / EV 56% *EBITDA under IAS17

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Relative Valuation

For the following reasons, we decided to use only the Each of the forecast years 2019, 2020, and 2021, is EV/EBITDA multiple in our relative valuation model for CPS: assigned an equal weight. We constructed EV/EBITDA by (1) Cyfrowy's net earnings are depressed by depreciation weighing the median multiples of peers by EBITDA (under and amortization expenses related to the acquisition by IFRS16) generated by the relevant operating segments (the the telecom subsidiary, Polkomtel, of its parent median for telecoms is based on Western European and CEE company, Spartan. telecoms at 50% each). The earnings multiples for Cyfrowy (2) EV/EBITDA is the most accurate value indicator for are based on pro-forma earnings and debt projected after companies that incur high capital expenditures, including the acquisition of a 66% stake in Netia at 5.77 per share. telecoms, because it allows for the significant variations Net debt calculations also include minority interests in Netia in the levels of D&A expenses incurred by these at PLN 5.77 per share. companies.

Multiples Comparison EV/EBITDA P/E 2019P 2020P 2021P 2019P 2020P 2021P Western European Telecoms BT GROUP PLC 4.2 4.3 4.3 7.5 7.9 7.7 AG-REG 6.4 6.1 5.8 14.5 13.0 11.6 ILIAD SA 5.6 5.1 5.0 17.3 14.8 12.4 KONINKLIJKE KPN NV 5.1 5.0 4.7 23.6 19.8 17.0 ORANGE 5.3 5.1 5.1 13.3 12.3 11.5 TALKTALK TELECOM GROUP 8.7 8.1 7.7 29.8 20.5 17.8 AB-B SHS 12.6 12.0 11.4 21.8 20.0 17.7 TELECOM ITALIA SPA 5.6 5.5 5.5 7.0 6.9 6.8 TELEFONICA SA 6.3 6.2 6.1 10.2 9.1 8.6 TELEKOM AUSTRIA AG 5.7 5.5 5.3 11.0 10.2 9.7 ASA 7.5 7.2 7.0 17.3 16.0 15.3 VODAFONE GROUP PLC 4.7 4.7 4.6 16.7 16.2 13.6 (1) Median 5.6 5.5 5.4 15.6 13.9 12.0 ORANGE POLSKA SA 5.1 4.9 4.8 73.9 31.3 24.5 TURK TELEKOMUNIKASYON AS 3.3 2.9 2.6 8.1 4.9 3.7 TURKCELL ILETISIM HIZMET AS 3.9 3.4 3.1 7.4 6.1 5.3 O2 CZECH REPUBLIC AS 8.2 8.2 8.3 14.9 15.0 15.3 TELECOMMUNICA 4.4 4.4 4.4 8.9 8.7 8.2 PLAY COMMUNICATIONS SA 5.6 5.5 5.3 7.5 7.2 7.0 NETIA SA 6.2 5.8 5.8 33.5 22.1 17.4 HELLENIC TELECOMMUN ORGANIZA 5.3 5.2 5.1 17.2 15.0 13.4 (2) Median 5.2 5.0 5.0 11.9 11.8 10.8 Average of (1) and (2) 5.4 5.3 5.2 13.7 12.9 11.4

DTH Operators COMCAST CORP-CLASS A 8.7 8.2 7.9 13.9 12.5 11.5 SHAW COMMUNICATIONS INC-B 8.3 7.9 7.6 21.4 19.1 17.0 COGECO CABLE INC 7.9 7.7 7.6 14.2 12.6 13.0 PLC-A 9.3 9.2 9.4 ,-, 108.8 32.2 DISH NETWORK CORP-A 12.9 14.7 17.3 14.6 20.0 25.7 Median 8.7 8.2 7.9 14.4 19.1 17.0

TV Broadcasters M6-METROPOLE TELEVISION 5.2 5.1 4.9 11.6 11.2 12.2 ITV PLC 7.5 7.3 6.9 8.3 8.0 7.7 RTL GROUP 6.4 6.3 6.2 10.7 10.6 10.5 MEDIASET SPA 4.4 4.3 4.1 11.6 10.4 9.7 PROSIEBEN SAT.1 MEDIA AG-PRF 6.7 6.5 6.1 7.4 7.1 6.7 ATRESMEDIA CORP DE MEDIOS DE 6.3 6.5 6.7 7.8 8.1 8.3 MODERN TIMES GROUP-B SHS 30.7 18.1 13.5 - - 168.2 TELEVISION FRANCAISE (T.F.1) 3.8 3.8 3.5 10.0 9.4 8.4 Median 6.3 6.4 6.2 10.0 9.4 9.1 Weighted average ratio 6.0 5.8 5.7 13.1 13.0 11.6 Cyfrowy Polsat 6.6 6.4 6.0 16.6 13.6 11.6 premium / discount 10.1% 9.1% 4.9% 26.3% 4.9% 0.1%

Implied Valuation Value per share (PLN) 20.9 21.3 22.9 20.6 24.8 26.0 Multiple weight 33.3% 33.3% 33.3% 0.0% 0.0% 0.0%

Value per share (PLN) 21.7

3

Income Statement* (mln PLN) 2017 2018 2019P 2020P 2021P 2022P 2023P Revenue 9,829 10,686 11,394 11,548 11,759 11,946 12,132 change 8.7% 6.6% 1.3% 1.8% 1.6% 1.6%

EBIT 1,834 1,727 1,966 2,127 2,317 2,458 2,577 margin 18.7% 16.2% 17.3% 18.4% 19.7% 20.6% 21.2%

EBITDA 3,617 3,698 4,179 4,255 4,356 4,411 4,460 margin 36.8% 34.6% 36.7% 36.9% 37.0% 36.9% 36.8%

Financing costs -509 -387 -379 -342 -323 -323 -323 Other 10 -34 0 0 0 0 0

Pre-tax income 1,335 1,306 1,587 1,785 1,994 2,135 2,253 margin 13.6% 12.2% 13.9% 15.5% 17.0% 17.9% 18.6%

Tax -390 -490 -347 -339 -379 -406 -428 Minority interests -35 -18 15 15 20 24 29

Net income 981 834 1,224 1,431 1,595 1,705 1,796 margin 10.0% 7.8% 10.7% 12.4% 13.6% 14.3% 14.8%

Shares outstanding (eop, millions) 639.5 639.5 639.5 639.5 639.5 639.5 639.5 EPS 1.53 1.30 1.91 2.24 2.49 2.67 2.81 CEPS 4.32 4.38 4.70 4.89 5.01 5.05 5.08

ROAE 8.1% 6.3% 8.7% 9.6% 10.0% 10.0% 9.9% ROAA 3.5% 2.7% 4.2% 5.1% 5.6% 5.7% 5.8% *from FY2019 financials under IFRS16

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Balance Sheet (PLN m) 2017 2018* 2019P 2020P 2021P 2022P 2017 ASSETS 27,756 30,697 30,350 29,731 30,194 31,230 31,802 Fixed assets 23,825 25,274 26,247 26,534 26,370 27,313 28,275

Current assets 3,932 5,423 4,104 3,197 3,824 3,918 3,527 Current programming assets 252 543 404 446 448 449 450 Inventory 284 394 323 325 326 327 328 Trade and other receivables 1,983 2,370 2,225 2,286 2,321 2,346 2,372 Other 251 948 697 697 697 697 697 Cash 1,162 1,167 455 -558 32 98 -320

(PLN m) 2017 2018* 2019P 2020P 2021P 2022P 2023P EQUITY & LIABILITIES 27,756 30,697 30,350 29,731 30,194 31,230 31,802 Equity 12,074 13,227 14,128 14,963 15,963 17,030 17,630 Non-controlling interests 43 648 792 808 828 852 880

Noncurrent liabilities 11,724 11,803 10,947 9,527 9,027 9,027 9,027 Debt 10,286 9,597 9,488 8,068 7,568 7,568 7,568 Other liabilities 1,438 2,206 1,460 1,460 1,460 1,460 1,460

Current liabilities 3,916 5,019 4,483 4,433 4,377 4,321 4,263 Debt 1,394 1,662 1,806 1,806 1,806 1,806 1,806 Trade payables 1,727 2,382 1,773 1,639 1,498 1,356 1,211 Other 794 974 904 988 1,073 1,159 1,246

Debt 11,680 11,259 9,812 8,392 7,892 7,892 7,892 Net debt IAS17 10,518 10,092 9,357 8,949 7,860 7,794 8,212 Net debt IFRS16 11,574 10,839 10,431 9,342 9,276 9,694 (Net debt/ Equity) 0.9 0.8 0.7 0.6 0.5 0.5 0.5 (Net debt / EBITDA IAS17) 2.91 2.73 2.50 2.34 2.00 1.96 2.04 (Net debt / EBITDA IFRS16) 2.59 2.45 2.14 2.10 2.17

BVPS 18.9 20.7 22.1 23.4 25.0 26.6 27.6 *FY2018 under IFRS16

5

Cash Flow (PLN m) 2017 2018 2019P 2020P 2021P 2022P 2023P Cash flow from operating activities 2,941 2,915 3,134 3,329 3,453 3,491 3,517 Net income 945 816 1,239 1,446 1,615 1,729 1,825 D&A 1,783 1,971 1,783 1,699 1,609 1,523 1,453 Interest 432 402 379 342 323 323 323 Change in working capital and other -219 -304 -267 -158 -94 -84 -85

Cash flow from investing activities -1,573 -1,836 -1,380 -1,984 -1,306 -2,325 -2,670 CAPEX -739 -928 -1,380 -1,984 -1,306 -2,325 -2,670 Other -834 -907 0 0 0 0 0

Cash flow from financing activities -1,528 -1,074 -2,466 -2,357 -1,558 -1,101 -1,265 Change in debt -849 -647 -1,593 -1,420 -500 0 0 Share issue 0 0 0 0 0 0 0 Dividend/buyback -205 0 -595 -595 -595 -777 -941 Other -474 -427 -266 -342 -463 -323 -323

Change in cash -160 5 -712 -1,013 590 66 -418 Cash at period-end 1,162 1,167 455 -558 32 98 -320

DPS (PLN) 0.32 0.00 0.93 0.93 0.93 1.22 1.47 FCF 1,770 1,585 1,375 1,002* 1,824 843 523 (CAPEX/Sales) 7.5% 8.7% 12.1% 17.2% 11.1% 19.5% 22.0% *PLN 1,592m excluding outflows for frequencies from 3.7 GHz spectrum

Trading Multiples 2017 2018 2019P 2020P 2021P 2022P 2023P P/E 17.0 19.9 13.6 11.6 10.4 9.8 9.3 P/CE 6.0 5.9 5.5 5.3 5.2 5.2 5.1 P/BV 1.4 1.3 1.2 1.1 1.0 1.0 0.9 P/S 1.7 1.6 1.5 1.4 1.4 1.4 1.4

FCFE Yield 10.6% 9.5% 8.3% 6.0% 11.0% 5.1% 3.1% EV/EBITDA 7.5 7.2 6.6 6.4 6.0 6.1 6.2 EV/EBIT 14.8 15.5 14.0 12.7 11.2 9.9 9.6 EV/S 2.8 2.5 2.4 2.3 2.2 2.0 2.0

DYield 1.2% 0.0% 3.6% 3.6% 3.6% 4.7% 5.7%

Price (PLN) 26.00 26.00 26.00 26.00 26.00 26.00 26.00 Shares at year-end (millions) 639.5 639.5 639.5 639.5 639.5 639.5 639.5 MC (PLN m) 16,628 16,628 16,628 16,628 16,628 16,628 16,628 EV (PLN m) 27,146 26,720 27,467 27,060 25,970 24,422 24,840

6

List of abbreviations and ratios contained in the report: EV – net debt + market value EBIT – Earnings Before Interest and Taxes EBITDA – EBIT + Depreciation and Amortisation P/CE – price to earnings with amortisation MC/S – market capitalisation to sales EBIT/EV – operating profit to economic value P/E – (Price/Earnings) – price divided by annual net profit per share ROE – (Return on Equity) – annual net profit divided by average equity P/BV – (Price/Book Value) – price divided by book value per share Net debt – credits + debt papers + interest bearing loans – cash and cash equivalents EBITDA margin – EBITDA/Sales

OVERWEIGHT (OW) – a rating which indicates that we expect a stock to outperform the broad market NEUTRAL () – a rating which indicates that we expect the stock to perform in line with the broad market UNDERWEIGHT (UW) – a rating which indicates that we expect the stock to underperform the broad market

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The compensation of the research analysts responsible for preparing investment research is determined independently of and without regard to the compensation of or revenue generated by any other employee of the Bank, including but not limited to any employee whose business interests may reasonably be considered to conflict with the interests of the persons to whom the investment research prepared by the Research Department of Dom Maklerski mBanku is disseminated. With that being said, since one of the factors taken into consideration when determining the compensation of research analysts is the degree of fulfillment of annual financial targets by customer service functions, there is a risk that the adequacy of compensation offered to persons preparing investment research will be questioned by a competent oversight body.

For U.S. persons only: This research report is a product of mBank SA which is the employer of the research analyst(s) who has prepared the research report. The research analyst(s) preparing the research report is/are resident outside the United States (U.S.) and are not associated persons of any U.S. regulated broker-dealer and therefore the analyst(s) is/are not subject to supervision by a U.S. broker-dealer, and is/are not required to satisfy the regulatory licensing requirements of FINRA or required to otherwise comply with U.S. rules or regulations regarding, among other things, communications with a subject company, public appearances and trading securities held by a research analyst account. This report is intended for distribution by mBank SA only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the U.S. Securities and Exchange Act, 1934 (the Exchange Act) and interpretations thereof by U.S. Securities and Exchange Commission (SEC) in reliance on Rule 15a 6(a)(2). If the recipient of this report is not a Major Institutional Investor as specified above, then it should not act upon this report and return the same to the sender. Further, this report may not be copied, duplicated and/or transmitted onward to any U.S. person, which is not the Major Institutional Investor. In reliance on the exemption from registration provided by Rule 15a-6 of the Exchange Act and interpretations thereof by the SEC in order to conduct certain business with Major Institutional Investors, mBank SA has entered into an agreement with a U.S. registered broker-dealer, Cabrera Capital Markets. ("Cabrera"). Transactions in securities discussed in this research report should be effected through Cabrera or another U.S. registered broker dealer.

Strong and weak points of valuation methods used in recommendations: DCF – acknowledged as the most methodologically correct method of valuation; it consists in discounting financial flows generated by a company; its weak point is the significant susceptibility to a change of forecast assumptions in the model. Relative – based on a comparison of valuation multipliers of companies from a given sector; simple in construction, reflects the current state of the market better than DCF; weak points include substantial variability (fluctuations together with market indices) as well as difficulty in the selection of the group of comparable companies. Economic profits – discounting of future economic profits; the weak point is high sensitivity to changes in the assumptions made in the valuation model. Discounted Dividends (DDM) – discounting of future dividends; the weak point is high sensitivity to changes in the assumptions as to future dividends made in the valuation model. NAV - valuation based on equity value, one of the most frequently used method in case of developing companies; the weak point of the method is that it does not factor in future changes in revenue/profits of a company. mBank issued the following investment recommendations for Company in the 12 months prior to this publication Rating hold accumulate Rating date 2018-11-26 2018-06-15 Target price (PLN) 23.20 24.90 Price on rating day 22.50 22.76

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Dom Maklerski mBanku Senatorska 18 00-082 Warszawa http://www.mbank.pl/

Research Department

Kamil Kliszcz Michał Marczak Michał Konarski director +48 22 438 24 01 +48 22 438 24 05 +48 22 438 24 02 [email protected] [email protected] [email protected] strategy banks, financials energy, power generation

Jakub Szkopek Paweł Szpigiel Piotr Bogusz +48 22 438 24 03 +48 22 438 24 06 +48 22 438 24 08 [email protected] [email protected] [email protected] industrials, chemicals, metals media, IT, telco retail

Aleksandra Szklarczyk Piotr Poniatowski Mikołaj Lemańczyk +48 22 438 24 04 +48 22 438 24 09 +48 22 438 24 07 [email protected] [email protected] [email protected] construction, real-estate development industrials financials

Sales and Trading

Traders

Piotr Gawron Krzysztof Bodek Tomasz Jakubiec director +48 22 697 48 89 +48 22 697 47 31 +48 22 697 48 95 [email protected] [email protected] [email protected]

Jędrzej Łukomski Adam Prokop Andrzej Sychowski +48 22 697 49 85 +48 22 697 47 90 +48 22 697 48 46 [email protected] [email protected] [email protected]

Tomasz Galanciak Magdalena Bernacik +48 22 697 49 68 +48 22 697 47 35 [email protected] [email protected]

Sales, Foreign Markets

Marzena Łempicka-Wilim Bartosz Orzechowski deputy director +48 22 697 48 47 +48 22 697 48 82 [email protected] [email protected]

Private Client Sales

Kamil Szymański Jarosław Banasiak director deputy director +48 22 697 47 06 +48 22 697 48 70 [email protected] [email protected]

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