general electric equity research...

DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS. US Disclosure: 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. Investors should consider this report as only a single factor in making their investment decision.

11 October 2016Americas/United States

Equity ResearchElectrical Equipment

General Electric (GE)

COMPANY UPDATE Rating OUTPERFORMPrice (10-Oct-16,US$) 28.86Target price (US$) 34.0052-week price range 32.93 - 27.45Market cap (US$ m) 258,621.18*Stock ratings are relative to the coverage universe in each analyst's or each team's respective sector.¹Target price is for 12 months.

Research AnalystsJulian Mitchell

212 325 [email protected]

Ronnie Weiss212 538 6404

[email protected]

Lee Sandquist212 325 2245

[email protected]

Jason Makishi212 538 8125

[email protected]

Acquisition of LM Wind; Further in-sourcing at a reasonable multiple GE announced its intent to purchase LM Wind, a leading wind turbine blade producer, for $1.65bn (or 8.3x 2016 EBITDA). We view this transaction as in-line with GE’s financial and strategic priorities for M&A, in light of: (i) The acquisition is consistent with the company’s trend towards more in-sourcing / higher vertical integration (Avio, Doosan HRSG, Arcam, SLM et al. acquisitions); (ii) Valuation multiples look fairly reasonable (similar to the Doosan HRSG deal); (iii) The business further fills out the Power / Renewable product offering (consistent with the Doosan and Alstom Power acquisitions), and offers decent sales growth; (iv) The acquisition is expected to be (modestly) EPS accretive (~$0.01), with a high teens ROIC within 5 years (although we would expect synergies to be small). Our one concern would be that GE appears to be spending its M&A capital on numerous smaller acquisitions, which implies reasonable integration risk and it is not clear how accretive all these deals may be in the end (compared with a large acquisition in Aviation or O&G for example). ■ Background on LM Wind – technology rationale: While GE designs its

wind turbine blades, their manufacturing has been outsourced to date; purchasing LM will bring this in-house (LM produced 9,747 blades in 2015 up from 7,173 in 2013). LM Wind Power was founded in Denmark in the 1940s as a wooden furniture manufacturer, which transitioned to a glass fiber manufacturer in the 1950s and began manufacturing wind turbine blades in 1978. The company is now one of the largest independent suppliers of wind rotor blades with over 185,000 produced since the late 1970s. In 2015, LM generated €750m in revenue (13% organic sales growth) and grew EBITDA by 10% organically to €103m (13.8% EBITDA margin). 2016 EBITDA is expected to be ~€180m (vs. 1H’16 EBITDA of €87.3m). LM Wind’s sales are worth ~10% of GE Renewables annual sales, or 1% of overall GE Industrial sales.

Share price performance

GE.N S& P 5 0 0 IN D EX

Jan - 1 6 A p r - 1 6 Ju l - 1 6 O ct - 1 62 5

2 7

2 9

3 1

3 3

On 10-Oct-2016 the S&P 500 INDEX closed at 2163.66Daily Oct12, 2015 - Oct10, 2016, 10/12/15 = US$28.09

Quarterly EPS Q1 Q2 Q3 Q42015A 0.20 0.31 0.29 0.522016E 0.21 0.51 0.29 0.472017E 0.29 0.37 0.41 0.62

Financial and valuation metricsYear 12/15A 12/16E 12/17E 12/18EEPS (CS adj.) (US$) 1.31 1.48 1.69 1.90Prev. EPS (US$) - - - -P/E (x) 22.1 19.5 17.1 15.2P/E rel. (%) 120.0 106.7 105.3 105.1Revenue (US$ m) 115,540.0 122,949.9 123,076.7 126,816.9EBITDA (US$ m) 19,370.0 21,271.5 22,793.2 24,291.0OCFPS (US$) 0.74 2.96 1.99 2.16P/OCF (x) 41.9 9.8 14.5 13.4EV/EBITDA (current) 19.8 17.0 16.7 15.9Net debt (US$ m) 124,678 102,690 122,104 127,145ROIC (%) 5.63 7.28 7.60 8.06

Number of shares (m) 8,961.23 IC (current, US$ m) 227,788.00BV/share (Next Qtr., US$) - EV/IC (x) -Net debt (Next Qtr., US$ m) - Dividend (current, US$) -Net debt/tot eq (Next Qtr.,%) - Dividend yield (%) -Source: Company data, Thomson Reuters, Credit Suisse estimates

11 October 2016

General Electric (GE) 2

General Electric (GE)Price (10 Oct 2016): US$28.86; Rating: OUTPERFORM; Target Price: US$34.00; Analyst: Julian MitchellIncome Statement 12/15A 12/16E 12/17E 12/18ERevenue (US$ m) 115,540.0 122,949.9 123,076.7 126,816.9EBITDA 19,370 21,272 22,793 24,291Depr. & amort. (4,847) (5,149) (5,276) (5,249)EBIT (US$) 14,523 16,123 17,518 19,042Net interest exp (1,706) (2,107) (2,100) (2,100)Associates - - - -Other adj. 0 0 0 0PBT (US$) 12,817 14,016 15,418 16,942Income taxes (1,506) (1,909) (2,195) (2,439)Profit after tax 11,311 12,107 13,223 14,503Minorities - - - -Preferred dividends - - - -Associates & other 1,797 1,300 1,300 1,300Net profit (US$) 13,108 13,407 14,523 15,803Other NPAT adjustments 0 0 0 0Reported net income 13,108 13,407 14,523 15,803Cash Flow 12/15A 12/16E 12/17E 12/18EEBIT 14,523 16,123 17,518 19,042Net interest (3,463) (3,463) (3,463) (3,463)Cash taxes paid (6,485) 0 0 0Change in working capital (6,126) 9,860 (1,409) (1,838)Other cash & non-cash items 9,006 4,288 4,444 4,174Cash flow from operations 7,455 26,808 17,090 17,915CAPEX 40,974 (14,996) (2,757) (1,871)Free cashflow to the firm 48,429 11,812 14,332 16,044Aquisitions - - - -Divestments - - - -Other investment/(outflows) 104,726 28,297 (3,799) (1,312)Cash flow from investments 97,417 21,583 (10,433) (7,906)Net share issue(/repurchase) - - - -Dividends paid (9,295) (8,396) (8,071) (8,050)Issuance (retirement) of debt - - - -Other (33,259) (18,006) (18,000) (7,000)Cashflow from financing activities (42,554) (26,402) (26,071) (15,050)Effect of exchange rates - - - -Changes in Net Cash/Debt 62,318 21,988 (19,414) (5,041)Net debt at start 186,996 124,678 102,690 122,104Change in net debt (62,318) (21,988) 19,414 5,041Net debt at end 124,678 102,690 122,104 127,145Balance Sheet (US$) 12/15A 12/16E 12/17E 12/18EAssetsCash & cash equivalents 70,483 110,411 90,997 85,956Account receivables 27,022 15,072 15,321 16,174Inventory 22,515 19,776 20,378 21,033Other current assets 50,807 63,763 63,763 63,763Total current assets 170,827 209,023 190,459 186,926Total fixed assets 54,095 55,569 57,164 58,746Intangible assets and goodwill 82,270 83,328 83,328 83,328Investment securities - - - -Other assets 185,501 178,258 178,258 178,258Total assets 492,693 526,177 509,209 507,258LiabilitiesAccounts payables 13,680 21,803 21,245 20,914Short-term debt 49,860 49,792 49,792 49,792Other short term liabilities 41,540 38,886 38,825 39,250Total current liabilities 105,080 110,481 109,861 109,956Long-term debt 145,301 163,309 163,309 163,309Other liabilities 139,202 163,881 160,381 158,881Total liabilities 389,583 437,671 433,551 432,146Shareholder equity 98,274 83,671 70,822 70,276Minority interests 4,836 4,836 4,836 4,836Total liabilities and equity 492,693 526,177 509,209 507,258Net debt 124,678 102,690 122,104 127,145

Per share 12/15A 12/16E 12/17E 12/18ENo. of shares (wtd avg) 10,016 9,067 8,580 8,298CS adj. EPS 1.31 1.48 1.69 1.90Prev. EPS (US$) - - - -Dividend (US$) 0.93 0.93 0.95 0.98Dividend payout ratio 71.42 63.21 56.12 51.46Free cash flow per share 4.84 1.30 1.67 1.93Earnings 12/15A 12/16E 12/17E 12/18ESales growth (%) (22.2) 6.4 0.1 3.0EBIT growth (%) (21.8) 11.0 8.7 8.7Net profit growth (%) (21.6) 2.3 8.3 8.8EPS growth (%) (20.8) 13.0 14.5 12.5EBITDA margin (%) 16.8 17.3 18.5 19.2EBIT margin (%) 12.6 13.1 14.2 15.0Pretax margin (%) 11.1 11.4 12.5 13.4Net margin (%) 11.3 10.9 11.8 12.5Valuation 12/15A 12/16E 12/17E 12/18EEV/Sales (x) 3.32 2.94 3.09 3.04EV/EBITDA (x) 19.8 17.0 16.7 15.9EV/EBIT (x) 26.4 22.4 21.7 20.3P/E (x) 22.1 19.5 17.1 15.2Price to book (x) 2.9 3.1 3.5 3.4Asset turnover 0.2 0.2 0.2 0.3Returns 12/15A 12/16E 12/17E 12/18EROE stated-return on (%) 11.6 14.7 18.8 22.4ROIC (%) 0.1 0.1 0.1 0.1Interest burden (%) 0.88 0.87 0.88 0.89Tax rate (%) 11.8 13.6 14.2 14.4Financial leverage (%) 1.99 2.55 3.01 3.03Gearing 12/15A 12/16E 12/17E 12/18ENet debt/equity (%) 120.9 116.0 161.4 169.3Net Debt to EBITDA (x) 6.4 4.8 5.4 5.2Interest coverage ratio (X) 8.5 7.7 8.3 9.1Quarterly EPS Q1 Q2 Q3 Q42015A 0.20 0.31 0.29 0.522016E 0.21 0.51 0.29 0.472017E 0.29 0.37 0.41 0.62

Share price performance

GE.N S& P 5 0 0 IN D EX

Jan - 1 6 A p r - 1 6 Ju l - 1 6 O ct - 1 62 5

2 7

2 9

3 1

3 3

On 10-Oct-2016 the S&P 500 INDEX closed at 2163.66Daily Oct12, 2015 - Oct10, 2016, 10/12/15 = US$28.09

Source: Company data, Thomson Reuters, Credit Suisse estimates

11 October 2016


■ Strategic rationale - cost out through vertical integration: GE accounts for ~45% of LM sales, and LM accounts for 35-40% of GE’s global wind turbine blade procurement. Over the past few years, GE has made a number of moves to increase the degree of its manufacturing vertical integration. In 2012 for instance the company acquired Avio Aero (itself a customer of Arcam) for $4.3bn (GE Aviation accounted for ~50% of its sales), and earlier this year it paid $250m for Doosan's HRSG business (25% of its volumes went to GE Power). Other examples of this 'Backward Integration' (as described in Mr. Immelt's December 2015 presentation) include the Woodward Fuel Systems JV and the CMC Coatings JV. Recently, the company announced it plans to spend $1.4bn on two public metal based additive manufacturing companies, Arcam and SLM Solutions.

■ Valuation looks reasonable: GE is paying 8.3X 2016 EV/EBITDA, which looks reasonable in light of peer multiples. Siemens recently paid $1bn for a 59% stake in wind turbine OEM Gamesa, while other listed OEMs trade at 8.1x-17.2x (see inside). There are relatively few pure play wind turbine component suppliers; TPI Composites (the largest US-based independent manufacturer of composite wind blades, with $586m in 2015 sales; it has delivered 26,000 blades since 2001) trades at 12.4x 2016 EV/EBITDA.

11 October 2016


Key Exhibits We show below a list of peer multiples for 2016 EV/EBITDA.

Figure 1: 2016 EV/EBITDA

8.3x 9.9x

0.0x

5.0x

10.0x

15.0x

20.0x

Suzlo

n

TPI

Goldw

ind

Nord

ex

Game

sa

LM W

indPo

wer

Vesta

s

Media

n

EV/E

BITD

A 20

16

Source: Company data, Credit Suisse estimates

We show LM’s historic P&L on the next page

11 October 2016


Figure 2: LM Wind Income StatementEUR in millions, unless otherwise stated

LM Wind Income Statement (EUR m) 2011 2012 2013 2014 2015Sales 707 687 488 588 750change -2.8% -29.0% 20.5% 27.6%

Operating Income (Exc. Special Items + Goodwill Impairment)

3 7 14 21 52

Margin 0.4% 1.0% 2.9% 3.6% 6.9%Change 133.3% 100.0% 50.0% 147.6%

EBITDA (Exc. Special Items + Goodwill impairment)

74 69 66 77 103

Margin 10.5% 10.0% 13.5% 13.1% 13.7%Change -6.8% -4.3% 16.7% 33.8%

Operating Income (Inc. Special Items + Goodwill Impairment)

-32 4 11 19 46

Margin -5% 1% 2% 3% 6%Change 112.5% 175.0% 72.7% 142.1%

EBITDA (Inc. Special Items + Goodwill impairment)

39 66 63 75 98

Margin 6% 10% 13% 13% 13%Change 69.2% -4.5% 19.0% 30.7%

PTP -41 -14 -32 6 22Margin -6% -2% -7% 1% 3%Change 65.9% -128.6% 118.8% 266.7%

Net Income - Continuing Operations -109 -38 -46 -10 6Margin -15% -6% -9% -2% 1%Change 65.1% -21.1% 78.3% 160.0%

Net Income (Inc. Disc. Ops.) -109 -36 -80 -9 6Margin -15% -5% -16% -2% 1%Change 67.0% -122.2% 88.8% 166.7%

ROIC (Inc. Goodwill) -5.70% 0.60% 2.20% 4.50% 10.90%ROIC (exc. Goodwill) -11.30% 1.40% 4.90% 10.40% 28.50%Source: Company data

11 October 2016


Summary Financials Figure 3: Income StatementUS$ in millions, unless otherwise stated

Income statement 2014 2015 2016E 2017E 2018ESales 148,497 115,540 122,950 123,077 126,817 change 2% -22% 6% 0% 3%

Operating Income 18,561 14,523 16,123 17,518 19,042 Margin 12.5% 12.6% 13.1% 14.2% 15.0%

Interest & Other/Elims Charges (1,579) (1,706) (2,107) (2,100) (2,100)PTP 16,982 12,817 14,016 15,418 16,942 Margin 11.4% 11.1% 11.4% 12.5% 13.4%

Industrial tax charge (1,634) (1,506) (1,909) (2,195) (2,439)Tax rate 9.6% 11.8% 13.6% 14.2% 14.4%

Net income from cont. ops 15,348 11,311 12,107 13,223 14,503 Non-operating pension adjustment

1,378 1,797 1,300 1,300 1,300

GE Operating Earnings (Cont Ops)

16,726 13,108 13,407 14,523 15,803

margin 11.3% 11.3% 10.9% 11.8% 12.5%

Diluted EPS - continuing operations

$1.65 $1.31 $1.48 $1.69 $1.90

change 1% -21% 13% 14% 13%Source: Company data, Credit Suisse estimates

11 October 2016


Figure 4: Balance SheetUS$ in millions, unless otherwise stated

Balance sheet 2014 2015 2016E 2017E 2018ECash 70,025 70,483 105,094 85,680 80,639 Other/Elims current assets 96,137 100,344 98,612 99,462 100,970 Current assets 166,162 170,827 203,706 185,142 181,609

PP&E 48,070 54,095 55,569 57,164 58,746 Goodwill 66,389 82,270 83,328 83,328 83,328 Other/Elims LT assets 374,334 185,501 178,258 178,258 178,258 Total LT assets 488,793 321,866 317,155 318,750 320,332 Total assets 654,955 492,693 520,860 503,892 501,941

ST debt 70,425 49,860 44,475 44,475 44,475 Other/Elims current liabilities 41,244 55,220 60,689 60,069 60,164 Current liabilities 111,669 105,080 105,164 104,544 104,639

LT debt 186,596 145,301 163,309 163,309 163,309 Other/Elims LT liabilities 219,760 139,202 163,881 160,381 158,881 LT liabilities 406,356 284,503 327,190 323,690 322,190 Total liabilities 518,025 389,583 432,354 428,234 426,829

Shareholders' Equity 136,930 103,110 88,507 75,658 75,112

Total liabilities and Shareholders' Equity

654,955 492,693 520,860 503,892 501,941


Figure 5: Cash FlowUS$ in millions, unless otherwise stated

Cash flow 2014 2015 2016E 2017E 2018ENet income 15,236 8,734 11,799 13,223 14,503 D&A 4,953 4,847 5,149 5,276 5,249 Change in working capital 224,731 (6,126) 9,860 (1,409) (1,838)Cash flow from operations 244,920 7,455 26,808 17,090 17,915

Capex (7,134) (7,309) (6,715) (6,634) (6,593)Other/Elims cash flow from investments

(198,693) 104,726 28,297 (3,799) (1,312)

Cash flow from investments (205,827) 97,417 21,583 (10,433) (7,906)

Cash flow from financing (57,623) (107,386) (13,779) (26,071) (15,050)

Total cash flow (18,530) (2,514) 34,611 (19,414) (5,041)Source: Company data, Credit Suisse estimates

11 October 2016


Figure 6: Divisional SummaryUS$ in millions, unless otherwise stated

Divisional 2014 2015 2016E 2017E 2018ESalesAviation 23,990 24,661 26,136 27,309 28,289 Healthcare 18,299 17,640 18,493 19,146 19,735 Transportation 5,650 5,933 4,934 4,293 4,191 Power 20,580 21,490 29,085 30,108 31,006 Renewables 6,399 6,273 8,169 8,736 9,272 Energy Connections 7,319 7,601 10,867 11,215 11,513 Oil & Gas 19,085 16,451 13,340 12,934 13,451 GE Capital 42,725 10,449 10,608 10,608 10,608 A&L 8,404 8,751 4,918 2,327 2,351 Segment revenues 152,451 119,249 126,550 126,677 130,417 Corporate (3,954) (3,709) (3,600) (3,600) (3,600)Consolidated revenues 148,497 115,540 122,950 123,077 126,817

Reported Sales Change YoY%Aviation 9% 3% 6% 4% 4%Healthcare 1% -4% 5% 4% 3%Transportation -4% 5% -17% -13% -2%Power 7% 4% 35% 4% 3%Renewables 33% -2% 30% 7% 6%Energy Connections -3% 4% 43% 3% 3%Oil & Gas 10% -14% -19% -3% 4%GE Capital -3% -76% 2% 0% 0%A&L 1% 4% -44% -53% 1%Segment revenue change 3% -22% 6% 0% 3%Corporate 181% -6% -3% 0% 0%Total Industrial 16.2% 16.5% 15.6% 16.9% 17.6%

Organic Sales Change YoY%Aviation 7% 3% 6% 4% 4%Healthcare 2% 2% 6% 3% 3%Transportation -4% 7% -10% -13% -2%Power 7% 4% 6% 3% 3%Renewables 36% 7% 16% 6% 6%Energy Connections -3% -2% 0% 2% 3%Oil & Gas 11% -5% -17% -4% 4%A&L 0% 6% 6% 1% 1%Total Industrial 7% 3% 2% 2% 3%Source: Company data, Credit Suisse estimates

11 October 2016

General Electric (G

E)9

Figure 7: GE One PagerUS$ in millions, unless otherwise stated

2015 POWER RENEWABLES AVIATION HEALTHCARE OIL & GAS A&L ENERGY CONNECTIONS TRANSPORTATION CAPITAL SEGMENT TOTALSales ($B) 21.5 6.3 24.7 17.6 16.5 8.8 7.6 5.9 10.4 119.2% of Industrial sales 20% 6% 23% 16% 15% 8% 7% 5% 100%Operating profit ($B) 4.5 0.4 5.5 2.9 2.4 0.7 0.6 1.3 1.7 19.9Operating margin 20.9% 6.9% 22.3% 16.3% 14.8% 7.7% 7.2% 21.5% 16.7%% of Industrial profit 25% 2% 30% 16% 13% 4% 3% 7%% of GE Total profit 23% 2% 28% 14% 12% 3% 3% 6% 8% 100%Customers / end-market split Gas Power Systems (36%),

Power Services (51%), Steam Power (1%),

Distributed Power (5%), Other (7%)

Onshore Wind (99%), Hydro (1%), Offshore Wind

(0%)

Commercial Engines & Services (73%), Military

(15%), Systems & Others (12%)

Healthcare Systems (71%), Life Sciences (23%), Healthcare IT (6%)

Turbomachinery Solutions (30%), Surface (26%), Digital Solution (20%),

Subsea Systems (14%), Downstream Technology

Solutions (10%)

Appliances (72%), Lighting (28%)

Industrial Solutions (49%), Digital Energy (25%), Power Conversion

(26%)

Locomotives (46%), Locomotive Services

(37%), Mining (7%), Other (10%)

GECAS (50%), CLL (10%), Insurance and Other (31%),

Energy Finance (9%)

see chart

Products sold Equipment (aero derivative gas turbines, heavy duty and combined cycle gas turbines, hydropower and

water control, nuclear solar power, steam turbines, wind turbines); Services (AM including equipment

upgrades, LT maintenance service agreements, etc)

Siemens, Goldwind, MHI, Mapna, Vestas, Hitachi,

Voith

Equipment (jet engines, avionics, display systems,

electronic components, flight management

systems, fuel gauging in military and commercial aircraft); Services (MRO,

material and asset management)

Diagnostic & clinical eqp (Diagnostic imaging,

clinical products, molecular imaging), Information tech and services (clinical and

administrative, departmentals, connectivity & knowledge solutions, eqp

service solutions) Molecular medicine(bio-process, protein and cell

sciences, contrast media/PET tracers, molecular pathology

Equipment (air-cooled heat exchangers, compressors,

drilling & production systems, gas turbines, pipeline inspection &

integrity services, reactors & steam condensers, reducing & metering

systems, steam turbines, turbo expanders, valves);

Services (machine upgrades ), Software

Dehumidifiers, dishwashers, microwaves, refrigerators, washers and

dryers, water systems, Commercial and consumer

lighting products (automotive, ballasts,

florescent, halogen, LED, outdoor, track and

recessed), home and security products

Grid automation, distribution & protection, power conversion,

critical power

Equipment (locomotives, traffic control & dispatch

systems); Services (offerings designed to

improve fleet efficiency, reduce operating

expenses, repair services, locomotive enhancements,

modernizations), Mining equipment

Industrial Finance (capital and services to industrials

served by GE), Energy Financial Services (equity, debt, leasing, partnership

financing for capital energy projects), Aviation Services

(aircraft financing)

Division Head Steve Bolze Jerome Pecresse David Joyce John Flannery Lorenzo Simonelli Chip Blankenship and Maryrose Sylvester

Russell Stokes Jamie Miller Keith Sherin

Major Brands GE GE, Haliade GE, Genx, LEAP, CFM GE Conmec, Gemini, Hydril, Nuovo Pignone, Odessa,

Rotoflow, Thermodyn, VetcoGray

GE Monogram, GE Profile, GE Edison

Jenbacher GE GECC, GECS, EFS, GECAS, GE Capital

Competitors Siemens, Caterpillar, Rolls Royce, Suzlon, Vestas

Siemens, Goldwind, MHI, Mapna, Vestas, Hitachi,

Voith

Rolls Royce, United Technologies, Honeywell,

Rockwell Collins

Siemens, Epic, Roche, Philips, AGFA, Thermo

Scientific, Toshiba, Aramark, Lilly

Siemens, Emerson, Dresser-Rand, Cameron

International, FMC Technology

Haier, Whirlpool, Electrolux, LG Electronics, Acuity, Cooper, Hubbell,

Philips, Siemens

Siemens, Rockwell, ABB, Eaton, Schneider

EMD, Siemens, Alstom, Bombardier, China

Southern Rail, China Northern Rail, Invensys,

Caterpillar, Ansaldo STS, CSR

BB&T, Comerica, Fifth Third, Keycorp, Suntrust, Citi, BAC, US Bancorp, JPM, Wells Fargo, CIT,

ILFC/AIG, RBS

Equipment (% of Sales) 63% 92% 48% 56% 54% 80% 74% 54% 56%Aftermarket (% of Sales) 37% 8% 52% 44% 46% 20% 26% 46% 44%Geographic Sales Estimate

United States 32.0% 56.0% 39.0% 48.0% 27.0% 88.0% 45.0% 70.0% 56.0% 45.0%Europe 13.0% 17.0% 16.0% 20.0% 18.0% 3.0% 17.0% 4.0% 13.0% 14.0%Asia 16.0% 7.0% 22.0% 22.0% 17.0% 3.0% 17.0% 7.0% 13.0% 17.0%Americas 11.0% 17.0% 8.0% 6.0% 15.0% 5.0% 15.0% 12.0% 10.0% 10.0%Middle East & Africa 28.0% 3.0% 15.0% 4.0% 23.0% 1.0% 6.0% 7.0% 8.0% 14.0%

GENERAL ELECTRICTOTAL COMPANY

SEGMENT

Power 23%

Aviation28%

Healthcare15%

Oil & Gas12%

A&L3%

Energy3%

Transportation7%

Capital9%

Total GE Profit Split

Power Gen28%

Appliances6%

Civil Aero AM7%

Civil Aero OE8%

Defense6%

Healthcare19%

Lighting3%

Low Voltage1%

Oil & Gas Equipment16%

Rail Loco's + Signalling6%

End Market Split

United States45%

Europe14%

Asia17%

Americas10%

Middle East & Africa14%

Geographic Sales Split

Power 21%

Aviation24%

Healthcare17%

Oil & Gas16%

A&L9%

Energy7%

Transportation6%

Industrial Revenue Split


11 October 2016


Companies Mentioned (Price as of 10-Oct-2016)Doosan E&C (011160.KS, W4,180)Gamesa (GCTAY.PK, $2.29)General Electric (GE.N, $28.86, OUTPERFORM, TP $34.0)Goldwind (2208.BE, €1.405)Siemens (SIEGn.DE, €105.85)Suzlon Energy (SUZL.NS, Rs14.8)TPI Composites (TPIC.OQ, $22.44)Vestas (VWS.CO, Dkr551.0)Woodward Inc (WWD.OQ, $60.9)

Disclosure AppendixImportant Global Disclosures Julian Mitchell and Ronnie Weiss each certify, with respect to the companies or securities that the individual analyzes, that (1) the views expressed in this report accurately reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.

3-Year Price and Rating History for General Electric (GE.N)

GE.N Closing Price Target Price Date (US$) (US$) Rating 28-Oct-13 26.09 29.00 O 06-Jan-14 27.26 30.00 13-Mar-14 25.34 R 18-Aug-14 26.07 30.00 O 26-Jan-15 24.59 29.00 12-Apr-15 28.51 31.00 23-Nov-15 30.59 34.00 * Asterisk signifies initiation or assumption of coverage.

Target Price Closing Price GE.N

01- Jan- 2014 01- Jan- 2015 01- Jan- 201620

25

30

35

O U T PERFO RMREST RIC T ED

3-Year Price and Rating History for Siemens (SIEGn.DE)

SIEGn.DE Closing Price Target Price Date (€) (€) Rating 25-Oct-13 93.85 105.00 O 28-Jan-14 98.94 112.00 28-Apr-14 93.59 R 09-Jun-14 99.56 112.00 O 14-Aug-14 91.63 115.00 22-Apr-15 99.70 NR 07-Sep-15 86.25 91.00 N * 17-Nov-15 94.77 96.00 25-Jan-16 83.41 90.00 01-Feb-16 87.45 R 22-Jul-16 94.82 NR 16-Sep-16 103.75 110.00 N * Asterisk signifies initiation or assumption of coverage.

Target Price Closing Price SIEGn.DE

01- Jan- 2014 01- Jan- 2015 01- Jan- 201670

80

90

100

110

120

O U T PERFO RMREST RIC T EDN O T RA T ED

N EU T RA L

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3-Year Price and Rating History for Vestas (VWS.CO)

VWS.CO Closing Price Target Price Date (Dkr) (Dkr) Rating 24-Jan-14 178.50 130.00 U 10-Jun-14 294.20 175.00 15-Oct-14 175.20 185.00 N 07-May-15 326.70 250.00 20-Aug-15 355.40 290.00 U 10-Feb-16 430.80 310.00 24-Aug-16 556.50 370.00 * Asterisk signifies initiation or assumption of coverage.

Target Price Closing Price VWS.CO

01- Jan- 2015 01- Jan- 2016100

200

300

400

500

600

U N D ERPERFO RMN EU T RA L

3-Year Price and Rating History for Woodward Inc (WWD.OQ)

WWD.OQ Closing Price Target Price Date (US$) (US$) Rating 12-Nov-13 39.25 38.00 N 14-Jan-14 46.28 43.00 21-Jul-14 48.14 53.00 12-Dec-14 48.04 53.00 * 20-Jan-15 42.50 51.00 20-Apr-15 48.58 52.00 21-May-15 53.79 55.00 21-Jul-15 49.05 53.00 10-Nov-15 48.04 49.00 20-Jul-16 59.42 58.00 * Asterisk signifies initiation or assumption of coverage.

Target Price Closing Price WWD.OQ

01- Jan- 2014 01- Jan- 2015 01- Jan- 201630

40

50

60

70

N EU T RA L

The analyst(s) responsible for preparing this research report received Compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activitiesAs of December 10, 2012 Analysts’ stock rating are defined as follows:Outperform (O) : The stock’s total return is expected to outperform the relevant benchmark* over the next 12 months.Neutral (N) : The stock’s total return is expected to be in line with the relevant benchmark* over the next 12 months.Underperform (U) : The stock’s 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 stock’s 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, and Underperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as European ratings are based on a stock’s 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, and Underperforms the least attractive investment opportunities. For Latin American and non-Japan Asia stocks, ratings are based on a stock’s total return relative to the average total return of the relevant country or regional benchmark; prior to 2nd October 2012 U.S. and Canadian ratings were based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiveness of a stock’s total return potential within an analyst’s coverage universe. For Australian and New Zealand stocks, the expected total return (ETR) calculation includes 12-month rolling dividend yield. An Outperform rating is assigned where an ETR is greater than or equal to 7.5%; Underperform where an ETR less than or equal to 5%. A Neutral may be assigned where the ETR is between -5% and 15%. The overlapping rating range allows analysts to assign a rating that puts ETR in the context of associated risks. Prior to 18 May 2015, ETR ranges for Outperform and Underperform ratings did not overlap with Neutral thresholds between 15% and 7.5%, which was in operation from 7 July 2011.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 other circumstances.Not Rated (NR) : Credit Suisse Equity Research does not have an investment rating or view on the stock or any other securities related to the company at this time.Not Covered (NC) : Credit Suisse Equity Research does not provide ongoing coverage of the company or offer an investment rating or investment view on the equity security of the company or related products.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 analyst’s expectations for the fundamentals and/or valuation of the sector* relative to the group’s historic fundamentals and/or valuation:Overweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is favorable over the next 12 months.Market Weight : The analyst’s expectation for the sector’s fundamentals and/or valuation is neutral over the next 12 months.Underweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is cautious over the next 12 months.

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

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Global Ratings DistributionRating Versus universe (%) Of which banking clients (%)Outperform/Buy* 53% (55% banking clients)Neutral/Hold* 29% (24% banking clients)Underperform/Sell* 18% (44% banking clients)Restricted 0%*For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, and Underperform most closely correspond 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 to definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdings, and other individual factors.

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Target Price and RatingValuation Methodology and Risks: (12 months) for General Electric (GE.N)

Method: Our $34 target price for GE is a blend of a DCF and a P/E multiple method. On a DCF basis, we estimate GE is worth $35. On a P/E multiple basis (19x 2017E EPS), we estimate GE is worth $32. We rate GE Outperform as its expected upside is consistent with our top performers.

Risk: Risks to our $34 target price and Outperform rating for GE are (1) a slower than expected recovery for its Industrial businesses, which could pressure earnings; (2) overpaying for deals in the Medical segment, which was a problem in the last upcycle; (3) additional losses in GE Capital, including the potential for additional claims associated with its sale of GE Money Japan through GE's loss sharing agreement; (4) lack of cost control in its Industrial businesses could reduce incremental margins; (5) a prolonged downturn in the thermal power generation market; and (6) corporate costs volatility.

Please refer to the firm's disclosure website at https://rave.credit-suisse.com/disclosures for the definitions of abbreviations typically used in the target price method and risk sections. See the Companies Mentioned section for full company names The subject company (GE.N, SIEGn.DE, WWD.OQ) currently is, or was during the 12-month period preceding the date of distribution of this report, a client of Credit Suisse.Credit Suisse provided investment banking services to the subject company (GE.N) within the past 12 months.Credit Suisse provided non-investment banking services to the subject company (GE.N, SIEGn.DE) within the past 12 monthsCredit Suisse has managed or co-managed a public offering of securities for the subject company (GE.N) within the past 12 months.Credit Suisse has received investment banking related compensation from the subject company (GE.N) within the past 12 monthsCredit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (GE.N, SIEGn.DE, WWD.OQ) within the next 3 months.Credit Suisse has received compensation for products and services other than investment banking services from the subject company (GE.N, SIEGn.DE) within the past 12 monthsAs of the date of this report, Credit Suisse makes a market in the following subject companies (GE.N).Please visit https://credit-suisse.com/in/researchdisclosure for additional disclosures mandated vide Securities And Exchange Board of India (Research Analysts) Regulations, 2014Credit Suisse may have interest in (SUZL.NS)Credit Suisse beneficially holds >0.5% long position of the total issued share capital of the subject company (SIEGn.DE).Credit Suisse has a material conflict of interest with the subject company (GE.N) . Credit Suisse is acting as financial advisor to General Electric Company (GE) in connection with the announced proposed acquisition of certain assets from Alstom S.A. Credit Suisse is acting as exclusive financial advisors to Capital One Financial in relation to their potential acquisition of General Electric's U.S. Healthcare Finance Unit. Credit Suisse is acting as a financial advisor to General Electric Co. (GE) in relation to their potential sale of GE Capital’s Commercial Distribution Finance, North American Vendor Finance and Corporate Finance platforms to Wells Fargo & Co. (WFC). Credit Suisse is acting as as financial advisor General Electric Co. (GE) in relation to their potential sale of GE Capital, Transportation Finance business in the U.S. and Canada to BMO Financial Group (BMO).For date and time of production, dissemination and history of recommendation for the subject company(ies) featured in this report, disseminated within the past 12 months, please refer to the link: https://rave.credit-suisse.com/disclosures/view/report?i=261999&v=1r2s96iofiddnd4fyydz1mih5 . 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 may participate in events hosted by the subject company, including site visits. Credit Suisse does not accept or permit analysts to accept payment or reimbursement for travel expenses associated with these events.

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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 not contain 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 visit https://www.credit-suisse.com/sites/disclaimers-ib/en/canada-research-policy.html.The following disclosed European company/ies have estimates that comply with IFRS: (SIEGn.DE).Credit Suisse has acted as lead manager or syndicate member in a public offering of securities for the subject company (GE.N) within the past 3 years.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.This research report is authored by:Credit Suisse Securities (USA) LLC.......................................................................Julian Mitchell ; Ronnie Weiss ; Lee Sandquist ; Jason MakishiFor Credit Suisse disclosure information on other companies mentioned in this report, please visit the website at https://rave.credit-suisse.com/disclosures or call +1 (877) 291-2683.

11 October 2016


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