2013.01 CHG Other FY12 Research

7/30/2019 2013.01 CHG Other FY12 Research

1/13

Table of Contents

These reports were compiled using a product of Thomson Reuters www.thomsonreuters.com

Rpt. 21351104 CHEMRING GROUP PLC 2 - 4

24-Jan-2013 LIBERUM CAPITAL

- BOURNE, BEN, ET AL

Rpt. 21352211 CHEMRING GROUP PLC-INITIATING COVERAGE 5 - 8

24-Jan-2013 FINNCAP

- BUXTON, DAVID, ET AL

Rpt. 21313298 CHEMRING GROUP PLC 9 - 13

18-Jan-2013 CREDIT SUISSE - EUROPE

- ARNOLD, DAVID, ET AL


2/13

HOLD

24 J anuary 2013

Chemring

Early stages of recovery but st rong headwinds

FY results are in line with operational and market issues already reported. Adj EPS down 43% to 28.5p,

marginally below our estimate. Net debt of 245m is in line. Cash conversion has improved. Management

have identified 5 key priorities following their initial review, which all look sensible. 2013 expectations

unchanged. The rating has already recovered to a CY13 EV/EBIT of 9.5x, in line with the long term average.

Troop withdrawal in 2014 and ongoing US budget pressure are significant headwinds - we are in line with

consensus EPS this year but remain 15% below in 2014.

FY earnings in line - Revenue grew by 2% to 740m. Adj PBT fell by 42% to 70m and EPS to 28.5p, which is

2% below our estimate. DPS, reduced by 36% to 9.5p, in line with our estimate. The underlying ROCE was 11%

from 16% in 2011.

Improved cash conversion Net debt of 245m, representing 2.1x underlying EBITDA. Underlying operating

cash flow represents a conversion rate of 103% (2011: 76%). There was a w/c inflow of 20m.

New management The new CEO (ex Wood Group) and FD (ex Umeco) have an opportunity to rebuild the

Chemring story. Better expectation management is the first step. Following an initial review they have identified

the following key priorities, which seem sensible 1) Strengthen and simplify the management structure, 2)

Integration of operating units, 3) Operational performance improvement, 4) Focussed business development

and 5) Prioritisation of cash and cost management.

Arduous road ahead With full troop withdrawal from Afghanistan in 2014 and ongoing US budget pressure

(CHG is a short cycle business), we fear significant headwinds. The Group's order book closed down 13% on

2011.

M&A angle - While Carlyle walked away, others such as Rheinmetall or ATK could still be interested once there

is clarity on US defence spending cuts.

Conflict catalyst While headlines on Iran have dissipated, the likelihood of (more) assets being sent to North

Africa and / or Syria has increased. Given the number of portable surface-to-air missiles that became loose

during the Libyan conflict, we would expect a rise in countermeasure demand with any escalation. Although, we

suspect it would be too politically unsavoury to commit to more kinetic involvement.

Valuation assumes successful restructuring The shares have performed well ahead of results as the

market discounts an improved management team and restructuring plan. Given the market headwinds we doubt

the fix will be quick and the estimate bar may need to be further lowered (we are 15% below consensus eps in

2014). A CY13 EV/EBIT of 9.5x is in line with its long term average and reflects market headwinds with

restructuring potential from new management.


3/13

Ben Bourne +44 (0)20 3100 2275 [email protected]

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(212) 596 4800.


4/13

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This message may not be forwarded without the express permission of Liberum Capital. It is based on current public information and/or proprietary data which

Liberum Capital considers reliable, but we accept no responsibility or liability for, the accuracy or completeness of the information included herein, including any third

party information, and it should not be relied upon as such. Any information or opinions contained are subject to change.

Unless stated otherwise, this material is not investment research or a research recommendation for the purpose of FSA rules or a research report under U.S. law. It

is provided on the understanding that Liberum Capital is not acting in a fiduciary capacity and it is not a personal recommendation to you. The securities referred to

may not be suitable for you and this material should not be relied upon in substitution for the exercise of independent judgement.

Liberum Capital and/or its officers, directors and employees may have or take positions in securities of companies mentioned in this communication (or in any

related investment) and may from time to time dispose of any such positions. Liberum Capital may act as a market maker in the securities of companies discussed

in this communication (or in any related investments), may sell them or buy them from customers on a principal basis, and may also provide corporate finance or

underwriting services for or relating to those companies, for which it is remunerated.

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or effect transactions in any security mentioned herein should contact Liberum Capital Inc at 441 Lexington Avenue (15th Floor) New York NY10017. Telephone:

(212) 596 4800.


5/13

finnCap.60 New Broad StLondon

Chemring: Full-year results (U/R)FY results appear poor on a year-on-year basis, with significantly reduced market expectations following severaldowngrades. However, with new management and a refocusing on core manufacturing driving margins there is somescope for operational recovery. On a wider view, the ongoing pressure on NATO budgets continues to give a negativebackdrop. The shares post their de-rating appear cheap, but management still has to prove itself and the scale of defencecuts, especially in the US, remains unclear.Analyst: David Buxton

Edenville*: Initiation of coverage (CORP)

Edenville offers a focused exposure to coal in Tanzania. We initiate coverage with a target price of 0.49p, some 48%above the current price. We see the potential for further uplift in the near future, with the release of the scoping study forthe Namwele project and new resource studies for the other projects.Analyst: Martin Potts

Morning Note

24 January 2013


6/13

Full-year results U/R

FY results appear poor on a year-on-year basis, with significantly reduced

market expectations following several downgrades. However, with new

management and a refocusing on core manufacturing driving margins there

is some scope for operational recovery. On a wider view, the ongoing

pressure on NATO budgets continues to give a negative backdrop. The

shares post their de-rating appear cheap, but management still has to

prove itself and the scale of defence cuts, especially in the US, is remains

unclear.

Results. Full-year results illustrate the year-on-year decline in trading, with

turnover up just 2% to 740.3m, adjusted PTP down 42% to 70.1m giving

EPS of 28.5p, down 43%. This results in the operating margin dropping from

19% to 12%. The dividend has also been cut by 36% to 9.5p for the full year.

The order book is down by 13% to 760.9m. These results appear to be in line

with market forecasts and management signals unchanged expectations. New

management will refocus and integrate operations and drive forward factory

efficiencies to deliver internal recovery, but outside of the companys control is

the continuing decline in NATO budgets coupled with the withdrawal from

Afghanistan, issues with the US sequestration etc: order placement is therefore

still expected to be subject to delays and cuts.

Forecasts. We will re-introduce forecasts shortly, with the re-existing market

range for PTP between 58m to 64m, giving EPS of around 24p.

Summary. The group has had a difficult year, with several profit warnings and

a change in management. New management has good scope to turnaround

both the groups performance and also its rating. However, the ongoing

reductions in NATO defence budgets as well as the withdrawal from

Afghanistan will mean demand for countermeasures and land mine detection

systems will continue to see declines. The shares have seen some small

upside post settlement of the fiscal cliff, but remain at low levels, trading on a

P/E of 8.1x in 2012. With many issues continuing, a cautious view would rate

the shares a Hold, albeit some will see scope for recovery providing some

upside. Our forecasts and recommendation remain under review.

Chemring

24 January 2013

Ticker CHG

Price 282.5p

Target Price 420.0p

Upside 49.0%

Market Cap 546.1m

Index FTSE All Share

Sector Aerospace & Defence

Net Debt 244.8m

Shares in Issue 193.3m

Next Results FY - Jan

What's changed From To

Adj. EPS (FD) 47.2p n/c

Recommendation U/R n/c

Target Price 420.0p n/c

Share Price Performance

Source: Thomson Reuters

% 1M 3M 12M

Actual +16.7 -20.0 -30.2

Relative +12.2 -24.0 -37.3

Company Description

Energetics and countermeasure devicesfor defence industry

Analyst:

David Buxton 020 7220 [email protected]

Sales:

Simon Johnson 020 7220 [email protected] Jeffrey 020 7220 [email protected] Williams 020 7220 [email protected] Quirke 020 7220 [email protected]

Sales Traders: 020 7220 0531

STX 73240

Year ending October (m) 2010A 2011A 2012 2013E

Data

Sales (m) 597.1 724.1 740.3 -

Adj EBITDA (m) 164.2 176.7 112.0 -

Adj PBT (m) 116.8 118.8 70.1 -

Tax rate (%) 19 23 22 -

Adj EPS (FD) (p) 48.7 49.5 28.5 -

DPS (p) 11.8 14.2 9.5 -

Ratios

EV/Sales (x) 1.4 1.1 1.1 -EV/EBITDA (x) 4.9 4.6 6.1 -

P/E (x) 5.8 5.7 8.1 -


7/13

Initiation of coverage CORP

Edenville offers a focused exposure to coal in Tanzania. We initiate

coverage with a target price of 0.49p, some 48% above the current price.

We see the potential for further uplift in the near future, with the release of

the scoping study for the Namwele project and new resource studies for

the other projects.

We have derived a valuation for Edenville based on a deeply discounted

DCF analysis of Namwele and nominal values for the other projects. We

calculate an unrisked value for the company of 40.2m, equivalent to 0.91p.

After applying a risk discount, we arrive at the 0.49p price target.

Results from the scoping study at Namwele and updated resource

statements for all three projects are expected in the near future. These

results should considerably strengthen our valuation of the company.

The stock has reacted positively to the improved sector sentiment in

recent months. However, it is still well below our target price and substantially

below the high of 2.48p reached two years ago.

Summary of valuation of Edenvilles assets (unrisked basis)

m p/share

Namwele 26.6 0.60Mkomolo 7.8 0.18Muze 5.0 0.11Balance sheet 0.8 0.02

Total 40.2 0.91

Source: finnCap

Edenville Energy*

24 January 2013

Ticker EDL

Price 0.3p

Target Price 0.5p

Upside 48.0%

Market Cap 15.1m

Index FTSE AIM All Share

Sector Mining

Net Cash 2.4m

Shares in Issue 4,571.2m

Next Results Final results May 2013

What's changed From To

Adj. EPS (FD) 0.0p

Recommendation

Target Price 0.5p

Share Price Performance

Source: Thomson Reuters

% 1M 3M 12M

Actual +3.1 +22.2 -13.2

Relative -0.9 +16.2 -21.9

Company DescriptionExploring for coal in Tanzania

Analyst:

Martin Potts 020 7220 [email protected]

Sales:

Simon Johnson 020 7220 [email protected] Jeffrey 020 7220 [email protected] Williams 020 7220 [email protected] Quirke 020 7220 [email protected]

Sales Traders: 020 7220 0531STX 73240

Year ending December (m) 2010A 2011A 2012E 2013E

Data

Sales (m) 0.0 0.0 0.0 0.0

Adj EBITDA (m) -0.3 -1.2 -0.9 -1.0

Adj PBT (m) -0.3 -1.2 -0.9 -1.0

Tax rate (%) 0 0 0 0

Adj EPS (FD) (p) 0.0 0.0 0.0 0.0

DPS (p) 0.0 0.0 0.0 0.0

Ratios

EV/Sales (x) n/a n/a n/a n/aEV/EBITDA (x) n/a n/a n/a n/a

P/E (x) n/a n/a n/a n/a


8/13

60 New Broad St

London EC2M 1JJ

Tel 020 7220 0500Fax 020 7220 0597

Email [email protected]

Research ContactsDavid Buxton 020 7220 0542 [email protected] Paddon 020 7220 0541 [email protected]

Duncan Hall 020 7220 0546 [email protected] Keith Redpath 020 7220 0550 [email protected]

Andrew Darley 020 7220 0547 [email protected] Arnstein 020 7220 0543 [email protected] Daniel 020 7220 0545 [email protected] Potts 020 7220 0544 [email protected]

Corporate Broking ContactsSimon Johnson 020 7220 0525 [email protected] Norcross 020 7220 0513 [email protected] Weaving 020 7220 0514 [email protected] Starr 020 7220 0516 [email protected] Patient 020 7220 0515 [email protected] Gardner 020 7220 0512 [email protected] Bates 020 7220 0518 [email protected] Johnson 020 7220 0523 [email protected]

Corporate Sales ContactsTony Quirke 020 7220 0517 [email protected]

Sales ContactsSimon Johnson 020 7220 0525 [email protected] Jeffrey 020 7220 0524 [email protected] Williams 020 7220 0522 [email protected]

Sales Trading ContactsMick McNamara 020 7220 0521 [email protected] Nally 020 7220 0534 [email protected] Smith 020 7220 0536 [email protected] Tonnison 020 7220 0535 [email protected] Smith 020 7220 0533 [email protected] Brown 020 7220 0537 [email protected]

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N thi i thi d t h ld b t d ff li it ti t i di


9/13

DISCLOSURE APPENDIX CONTAINS ANALYST CERTIFICATIONS AND THE STATUS OF NON US ANALYSTS. USDisclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result,investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investorsshould consider this report as only a single factor in making their investment decision.

CREDIT SUISSE SECURITIES RESEARCH & ANALYTICS BEYOND INFORMATION

Client-Driven Solutions, Insights, and Access

18 January 2013

Europe/United Kingdom

Equity Research

Aerospace & Defense (Aerospace and Defence (Europe))

Chemring (CHG.L)SMALL & MID CAP RESEARCH

Managing expectations

Chemring will release 2012 full year results on 24th January at 7am. Theresults presentation is at 9.30am, with a webcast at www.chemring.co.uk

Important to be realistic. We think investors expecting a full strategicroadmap and turnaround plan from new CEO Mark Papworth may comeaway disappointed next week. We believe the focus will be on operationalimprovements to address the immediate business performance, with longerterm strategy (including attitude towards disposals) likely to becommunicated at the half year. Factoring in a deteriorating core-end market,

and visibility still very poor given sequester deferral, we think the challengefacing Chemrings new management team is a formidable one. We think it isimportant for investors to be realistic in their expectations, given a new CEOwho has been in place for just two months, and a new FD for two weeks.

Full year expectations. The 27th November trading update provided anapproximate full year revenue number of 740m. We forecast underlyingEBIT of 87.7m, and EPS of 28.9p, which is roughly in line with consensus(28.7p). For 2013, our (conservative) forecasts assume a top line decline of9%, and flat margins, with earnings recovery from 2014. We expectsignificant cash improvements through 2013, especially working capital.

Valuation: On our estimates, Chemring is trading on 10.5x 2013E P/E,which is more expensive than defence peers, however, reflecting a

distressed earnings number. We remain Neutral and await the presentation.

Chemring is a global defence company

specialising in the manufacture of energetic

material products and advanced

countermeasures. US defence spending

makes up 43% of the Group's revenues, with

a further 17% from the UK and 11% in the

rest of Europe. In 2011, Chemring recorded

sales of 745m on adjusted operating

margin of 19%.

The Group is divided into a

Countermeasures division and threeenergetics segments: Pyrotechnics,

Counter-IED and Munitions. Chemring has

51% global market share in niche, high-

margin Countermeasures. The Energetics

markets are more fragmented.

Rating NEUTRAL*Price (17 Jan 13, p) 275.20Target price (p) 210.00Market cap. ( m) 531.94Enterprise value ( m) 832.7*Stock ratings are relative to the coverage universe in each analyst's or each team's respective sector.

Target price is for 12 months.

Financial and valuation metrics

ear 10/11A 10/12E 10/13E 10/14ERevenue ( m) 745.3 740.0 673.9 686.9EBITDA ( m) 151.10 102.42 104.50 117.14Pre-tax Profit Adjusted ( m) 90.8 32.7 39.7 54.7CS adj. EPS (p) 52.15 28.86 26.11 30.85Prev. EPS (p) 29.74 27.20 27.79ROIC (%) 11.77 5.45 6.32 7.90

P/E (adj., x) 5.28 9.54 10.54 8.92P/E rel. (%) 48.4 81.2 96.0 89.2EV/EBITDA 5.3 8.1 7.8 6.9

Dividend (10/12E, p) 9.62 IC (10/12E, m) 766.72Dividend yield (%) 3.5 EV/IC 1.1Net debt (10/12E, m) 300.7 Current WACC 10.0Net debt/equity (10/12E, %) 64.5 Free float (%) 95.0BV/share (10/12E, ) 2.4 Number of shares (m) 193.29Source: Company data, Credit Suisse estimates

Research Analysts

Oliver Sleath

44 20 7888 0275

[email protected]

Specialist Sales: David Arnold

44 20 7883 3549

[email protected]


10/13

18 January 2013

Chemring (CHG.L) 2

Chemring CHG.LPrice (17 Jan 13): 275.20p, Rating: NEUTRAL, Target Price: 210.00p

Income statement ( m) 10/11A 10/12E 10/13E 10/14E

Sales revenue 745 740 674 687EBITDA 151 102 105 117Depr. & amort. (44) (52) (47) (44)EBIT (CS) 107 51 58 73Net interest exp. (16) (18) (18) (18)

Associates 0.10 0.10 0.10 0.10Other adj, PBT (CS) 91 33 40 55Income taxes (17) (6) (7) (10)Profit after tax 74 27 33 45Minorities Preferred dividends Associates & other 23 29 18 15Net profit (CS) 97 56 50 60Other NPAT adjustments (23) (27) (18) (15)Reported net income 74 28 33 45

Cash flow () 10/11A 10/12E 10/13E 10/14E

EBIT 107 51 58 73Net interest (16) (18) (18) (18)Cash taxes paid (17) (15) (14) (17)Change in working capital (37) (57) 15 (3)Other cash & non-cash items 58 76 65 62Cash flow from operations 94 37 105 97

CAPEX (48) (40) (37) (38)Free cash flow to the firm 46 (3) 68 60Acquisitions (58) Divestments 32 Other investment/(outflows) (13) (10) (9) (9)Cash flow from investments (119) (18) (46) (47)Net share issue/(repurchase) 109 (4) (5) (5)Dividends paid (23) (31) (18) (18)Issuance (retirement) of debt (5) (1) (1) (1)Other (10) (18) (19) (19)Cash flow from financing 71 (54) (42) (42)Effect of exchange rates (0) (1) Changes in Net Cash/Debt 45 (36) 17 9.Net debt at start 310 265 301 284Change in net debt (45) 36 (17) (9)Net debt at end 265 301 284 275

Balance sheet ( m) 10/11A 10/12E 10/13E 10/14E

AssetsCash and cash equivalents 92 51 68 77Accounts receivable 191 224 204 208Inventory 147 118 108 110Other current assets 2 2 2 2Total current assets 431 396 382 397Total fixed assets 231 251 267 283Intangible assets and goodwill 459 431 413 400Investment securities Other assets 23 23 23 23Total assets 1,144 1,100 1,086 1,103LiabilitiesAccounts payable 212 176 161 164Short-term debt 86 86 86 86Other short term liabilities 12 15 15 15Total current liabilities 310 277 262 265Long-term debt 262 260 260 260Other liabilities 97 97 97 97Total liabilities 669 634 619 622

Shareholders' equity 475 466 467 481Minority interest Total equity & liabilities 1,144 1,100 1,086 1,103Net debt ( m) 265 301 284 275

Per share data 10/11A 10/12E 10/13E 10/14E

No. of shares (wtd avg) 186 193 193 193CS adj. EPS (p) 52.15 28.86 26.11 30.85Prev. EPS (p) 29.74 27.20 27.79Dividend (p) 14.80 9.62 8.70 10.28Dividend payout ratio 28.38 33.33 33.33 33.33

Free cash flow per share 24.62 (1.64) 35.21 30.83

Key ratios andvaluation

10/11A 10/12E 10/13E 10/14E

Growth(%)Sales 24.8 (0.7) (8.9) 1.9EBIT (0.8) (52.4) 13.6 26.0Net profit 10.0 (42.4) (9.5) 18.2EPS 4.6 (44.7) (9.5) 18.2Margins (%)EBITDA margin 20.3 13.8 15.5 17.1EBIT margin 14.4 6.9 8.6 10.6Pretax margin 12.2 4.4 5.9 8.0Net margin 13.0 7.5 7.5 8.7Valuation metrics (x)EV/sales 1.1 1.1 1.2 1.2EV/EBITDA 5.3 8.1 7.8 6.9EV/EBIT 7.4 16.4 14.1 11.1P/E 5.3 9.5 10.5 8.9

P/B 1.1 1.1 1.1 1.1Asset turnover 0.65 0.67 0.62 0.62ROE analysis (%)ROE stated-return on 18.5 6.0 7.0 9.5ROIC 11.8 5.4 6.3 7.9Interest burden 0.85 0.64 0.69 0.75Tax rate 18.6 18.0 18.0 18.0Financial leverage 0.75 0.75 0.75 0.73Credit ratios (%)Net debt/equity 55.7 64.5 60.7 57.1Net debt/EBITDA 1.8 2.9 2.7 2.3Interest coverage ratio 6.6 2.8 3.2 4.0

Source: FTI, Company data, Thomson Reuters, Credit Suisse Securities(EUROPE) LTD. Estimates.

218

418

618

Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12

Price Price relative

The price relative chart measures performance against the FTSE ALL SHARE

INDEX which closed at 3216.23 on 17/01/13

On 17/01/13 the spot exchange rate was .83/Eu 1. - Eu .75/US$1


11/13

18 January 2013

Chemring (CHG.L) 3

Companies Mentioned (Price as of 17-Jan-2013)

Chemring (CHG.L, 275.2p, NEUTRAL, TP 210.0p)

Disclosure Appendix

Important Global Disclosures

I, Oliver Sleath, certify that (1) the views expressed in this report accurately reflect my personal views about all of the subject companies andsecurities and (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed inthis report.

Price and Rating History for Chemring (CHG.L)

CHG.L Closing Price Target Price

Date (p) (p) Rating

20-Jan-10 615.00 680.00 O

14-Sep-10 595.20 690.00

31-Mar-11 691.50 *

05-Sep-11 532.50 630.00 O

12-Sep-11 533.00 *

18-Nov-11 421.60 460.00 O

26-Jan-12 378.80 420.00 N02-Jul-12 274.10 330.00

14-Nov-12 222.20 210.00

* Asterisk signifies initiation or assumption of coverage. OUTPERFORMNEUTRAL

The analyst(s) responsible for preparing this research report received Compensation that is based upon various factors including Credit Suisse'stotal revenues, a portion of which are generated by Credit Suisse's investment banking activities

As of December 10, 2012 Analysts stock rating are defined as follows:

Outperform (O) : The stocks total return is expected to outperform the relevant benchmark*over the next 12 months.

Neutral (N) : The stocks total return is expected to be in line with the relevant benchmark* over the next 12 months.

Underperform (U) : The stocks total return is expected to underperform the relevant benchmark* over the next 12 months.

*Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stocks total return relative to the analyst's coverage universe which

consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, andUnderperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as European ra tings are based on a stocks totalreturn relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing themost attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin American and non-Japan Asia stocks, ratingsare based on a stocks total return relative to the average total return of the relevant country or regional benchmark; Australia, New Zealand are, and prior to 2ndOctober 2012 U.S. and Canadian ratings were based on (1) a stocks absolute total return potential to its current share price and (2) the relative attractiveness of astocks total return potential within an analysts coverage universe. For Australian and New Zealand stocks, 12-month rolling yield is incorporated in the absolute totalreturn calculation and a 15% and a 7.5% threshold replace the 10-15% level in the Outperform and Underperform stock rating definitions, respectively. The 15% and7.5% thresholds replace the +10-15% and -10-15% levels in the Neutral stock rating definition, respectively. Prior to 10th December 2012, Japanese ratings werebased on a stocks total return relative to the average total return of the relevant country or regional benchmark.

Restricted (R) : In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications,including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain othercircumstances.

Volatility Indicator [V] :A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24

months or the analyst expects significant volatility going forward.Analysts sector weightings are distinct from analysts stock ratings and are based on the analysts expectations for the fundamenta ls and/orvaluation of the sector* relative to the groups historic fundamentals and/or valuation:

Overweight : The analysts expectation for the sectors fundamentals and/or valuation is favorable over the next 12 months.

Market Weight : The analysts expectation for the sectors fundamentals and/or valuation is neutral over the next 12 months.

Underweight : The analysts expectationfor the sectors fundamentals and/or valuation is cautious over the next 12 months.

*An analysts coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cover multiple sectors.


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Chemring (CHG.L) 4

Credit Suisse's distribution of stock ratings (and banking clients) is:

Global Ratings Distribution

Rating Versus universe (%) Of which banking clients (%)

Outperform/Buy* 43% (53% banking clients)Neutral/Hold* 38% (47% banking clients)Underperform/Sell* 16% (41% banking clients)Restricted 3%*For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, and Underperform most closelycorrespond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer todefinitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdings, and other individual factors.

Credit Suisses policy is to update research reports as it deems appropriate, based on developments with the subject company, the sector o r themarket that may have a material impact on the research views or opinions stated herein.

Credit Suisse's policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail please referto Credit Suisse's Policies for Managing Conflicts of Interest in connection with Investment Research: http://www.csfb.com/research andanalytics/disclaimer/managing_conflicts_disclaimer.html

Credit Suisse does not provide any tax advice. Any statement herein regarding any US federal tax is not intended or written to be used, and cannotbe used, by any taxpayer for the purposes of avoiding any penalties.

Price Target: (12 months) for Chemring (CHG.L)

Method: Our 210p target price for Chemring is derived using a 7.6x forward earnings multiple on our12-month forward EPS forecasts.

Risk: US$ is the key risk to our Chemring forecasts. Other potential risks are change in demand from current assumptions.

Please refer to the firm's disclosure website at www.credit-suisse.com/researchdisclosures for the definitions of abbreviations typically used in thetarget price method and risk sections.

See the Companies Mentioned section for full company names

Important Regional Disclosures

Singapore recipients should contact Credit Suisse AG, Singapore Branch for any matters arising from this research report.

The analyst(s) involved in the preparation of this report have not visited the material operations of the subject company (CHG.L) within the past 12months

Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted Voting Shares;SVS--Subordinate Voting Shares.

Individuals receiving this report from a Canadian investment dealer that is not affiliated with Credit Suisse should be advised that this report may notcontain regulatory disclosures the non-affiliated Canadian investment dealer would be required to make if this were its own report.

For Credit Suisse Securities (Canada), Inc.'s policies and procedures regarding the dissemination of equity research, please visithttp://www.csfb.com/legal_terms/canada_research_policy.shtml.

The following disclosed European company/ies have estimates that comply with IFRS: (CHG.L).

As of the date of this report, Credit Suisse acts as a market maker or liquidity provider in the equities securities that are the subject of this report.

Principal is not guaranteed in the case of equities because equity prices are variable.

Commission is the commission rate or the amount agreed with a customer when setting up an account or at any time after that.

To the extent this is a report authored in whole or in part by a non-U.S. analyst and is made available in the U.S., the following are importantdisclosures regarding any non-U.S. analyst contributors: The non-U.S. research analysts listed below (if any) are not registered/qualified as researchanalysts with FINRA. The non-U.S. research analysts listed below may not be associated persons of CSSU and therefore may not be subject to theNASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by aresearch analyst account.

Credit Suisse Securities (Europe) Limited........................................................................................................................................... Oliver Sleath

For Credit Suisse disclosure information on other companies mentioned in this report, please visit the website at www.credit-suisse.com/researchdisclosures or call +1 (877) 291-2683.


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2013.01 CHG Other FY12 Research

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