Overall, German industrial sector Q1 2008 results surprised more on the up- than the
downside. We believe that record order backlogs mean 2008 guidance looks safe and,
so far, there are no signs of a severe cyclical downturn.
Analysis of the industrial stocks we cover for sensitivity to cyclical swings and materials
prices indicates that these two factors should be seen as serious risks to operating
performance. In contrast, in terms of the USD/EUR exchange-rate sensitivity of our
industrials universe, we believe operating risks are generally limited, even though
investor sentiment towards the sector is quite strongly influenced by this factor.
We have lowered our rating for Gildemeister to Underweight (V) from Neutral (V), with
a price target or EUR19, and raised our rating on Wincor Nixdorf to Overweight from
Neutral, with a price target of EUR62. The Overweight stocks with the greatest total
potential return in our universe are Pfleiderer (V) (56%), Klöckner & Co (V) (53%),
technotrans (46%), Washtec (45%) and RATIONAL (43%).

Q1 results with no signs of a
severe downswing 7
Q1 results generally stronger than we expected 7
Upward movements in 2008 guidance remain exceptions 7
Little 2009 guidance available 8
HSBC EPS 2008-2010e up 1% on average 8
Average target prices unchanged, but mixed picture at
company level 9
New ratings 10
HSBC industrials in light of
major risk factors 12
Cyclical earnings risks looming in the background 12
Material prices still an issue 14
USD poses more risks for sentiment than earnings 15
Overview of risk assessments 18
Changes in forecasts, target
prices and ratings 19
General remarks 19
Demag Cranes (D9CGn.DE, Neutral (V), TP EUR41) 21
Deutz (DEZG.DE, Overweight (V), TP EUR9) 23
Dürr (DUEG.DE, Overweight, TP EUR39) 25
elexis (EEXG.DE, Overweight, TP EUR25) 27
GEA Group (G1AG.DE, Underweight (V), TP EUR23) 29
Gildemeister (GILG.DE, down from Neutral (V) to
Underweight (V), TP EUR19) 31
Heidelberger Druckmaschinen (HDDG.DE, Neutral (V), TP
EUR19) 33
Jungheinrich (JUNG_p.DE, Neutral, TP EUR25) 35
Klöckner & Co (KCOGn.DE, Overweight (V), TP EUR57)37
Klöckner-Werke (KLKG.DE, Underweight, TP EUR14.7) 39
Koenig & Bauer (SKBG.DE, Neutral, TP EUR22.5) 41
KRONES (KRNG.DE, from Neutral to Neutral (V), TP
EUR60) 43
KUKA (IWKG.DE, Overweight (V), TP EUR26) 45
Masterflex (MZXG.DE, Overweight, TP EUR22) 47
MTU Aero Engines (MTXGn.DE, from Overweight to
Overweight (V), TP EUR34) 49
OHB Technology (OHBG.DE, Overweight, TP EUR14.6) 51
Pfleiderer (PFDGn.DE, Overweight (V), TP EUR20) 53
R.Stahl (RSLG.DE, Overweight, TP EUR38.5) 55
RATIONAL (RAAG.DE, Overweight (V), TP EUR193) 57
Rheinmetall (RHMG.DE, Overweight, TP EUR62) 59
Salzgitter (SZGG.DE, Overweight (V), TP EUR155) 61
SGL Group (SGCG.DE, Neutral (V), TP EUR47) 63
technotrans (TTRG.DE, Overweight, TP EUR19) 65
Vossloh (VOSG.DE, Overweight (V), TP EUR108) 67
WashTec (WSUG.DE, Overweight, TP EUR16) 69
Wincor Nixdorf (WING.DE, to Overweight from Neutral,
TP EUR62) 71
Events calendar 2008 73
Appendix 73
HSBC EPS versus consensus EPS 2008-10e 74
Contents