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A nalyst: Alok Sanghvi Jiayue Li Yuhao Qi Presented April 4, 2017

This report provides a comprehensive financial and business analysis of Advanced Energy, including valuation, financial projections, macroeconomy and industry analysis, and a recommendation.

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A nalyst: Alok Sanghvi Jiayue Li Yuhao Qi Presented April 4, 2017

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  1. Analyst: Alok Sanghvi Jiayue Li YuhaoQi Presented April 4, 2017

  2. Introduction Financial Analysis Business Analysis Valuation Financial Projection Macroeconomy and Industry Analysis Technical Analysis Recommendation 8 4 2 6 7 5 3 1 Agenda

  3. Introduction 1

  4. Corporate Overview Provides highly- engineered, mission- critical, precision power conversion, measurement and control solutions to their global customers. 1981 Fort Collins, CO USA 1,489 • Founded: • Headquarters: • Employees: Selling Supporting Designing Manufacturing Germany United Kingdom 12.9% United States Canada 67.7% Mainland China, Taiwan, Japan, South Korea, India, Singapore 19.4% Source: 10k-2017 https://www.sec.gov/Archives/edgar/data/927003/000092700317000010/aeis10k2016.htm

  5. Advanced Energy went public on NASDAQ on November 17, 1995 offering price of $10.00. Performance compared to market and industry Source: 10k-2017 https://www.sec.gov/Archives/edgar/data/927003/000092700317000010/aeis10k2016.htm

  6. Current Market Prospects & Ownership Source: Capital IQ https://www.capitaliq.com/CIQDotNet/Ownership/CompanyDetailed.aspx?companyId=343596&stateKey=47be278b50c54e15bd462224cefa203a

  7. Macroeconomy and Industry Analysis 2

  8. Macro and Industry Analysis-Semiconductor CONSUMER ELECTRONIC PRODUCTS SEMICONDUCTORS EQUIPMENT MANUFACTURERS SUB-SYSTEM MANUFACTURERS Source: Analysts meeting 2017 http://ir.advanced-energy.com/phoenix.zhtml?p=irol-eventDetails&c=105985&eventID=5250900

  9. Macro and Industry Analysis-Semiconductor Source: Yahoo Finance https://finance.yahoo.com/quote/%5ESOX/history?period1=1333342800&period2=1491109200&interval=1d&filter=history&frequency=1d Source: Capital IQ https://www.capitaliq.com/CIQDotNet/Lists/KeyStats.aspx?listObjectId=100887232

  10. Macro and Industry Analysis Well positioned to ride the “New Wave” paradigm in Semiconductor Source: Analysts meeting 2017 http://ir.advanced-energy.com/phoenix.zhtml?p=irol-eventDetails&c=105985&eventID=5250900

  11. Competitors Highly competitive; No dominator; Increase in global competition • Power Conversion Products for Thin Film Processing Thermal Instrumentation Products High Voltage Products Power Control Modules • MKS Instruments, Inc. • COMET Holding AG. • Daihen Corp. • TRUMPF • Hüttinger • GmbH + Co. KG. LumaSense Technologies, Inc. CI Systems Ltd Spellman High Voltage Electronics Corp. Crane Co. Eurotherm Control Concepts Inc. Source: 10k-2017 https://www.sec.gov/Archives/edgar/data/927003/000092700317000010/aeis10k2016.htm

  12. Business Analysis 3

  13. Products Portfolio Direct Current Application: Semiconductors, FPDs, solar panels, data storage and advanced thin-film applications Low- and Mid- Frequency Application: Semiconductors, solar panels and advanced thin-film applications Radio Frequency Applications: Semiconductors, FPDs, solar panels, data storage, advanced thin-film applications etch and deposition RF Instrumentation Applications: Semiconductors, FPDs, solar panels, data storage and advanced thin-film applications Thermal Measurement Applications: Semiconductors, solar panels and advanced packaging application Thyristor Power Control Applications: Heating, melting, forming, drying Process Power Thermal Products High Voltage Power Global Service Global Coverage, Local Resources Comprehensive repair, enhancement and used equipment programs for the complete lifecycle of your products Applications: Semiconductors implantation and inspection, X-ray, mass spectrometry, scientific, industrial and medical Source: AEIS Fact Sheet http://www.advanced-energy.com/upload/File/CurrentFactSheet.PDF

  14. Revenue Breakdown • Semiconductor capital equipment Market • Customers incorporate AE’s products into equipment that make integrated circuits • Power conversion system • Thermal instrument products • Remote plasma sources • Industrial capital equipment • Customers incorporate AE’s industrial process power and specialty power products into a wide variety of equipment. • Thermal specialty power • High voltage specialty power • Global support • Local repair and field service • Upgrades and refurbishment service Source: 10k-2017 https://www.sec.gov/Archives/edgar/data/927003/000092700317000010/aeis10k2016.htm

  15. Management Team Source: Analysts meeting 2017 http://ir.advanced-energy.com/phoenix.zhtml?p=irol-eventDetails&c=105985&eventID=5250900

  16. Factors of Moat Cost Advantage Switching Costs Intangible Assets Network Effects Efficient Scale • AEIS currently holds 185 patents and many other in pipeline • The customers have low switching costs and no long term contracts with AEIS. • Have strong sales & distribution network with emphasis on customer service and technical support • No major cost advantages over competitors due to vertical integration • Can capture efficiencies of scale being the larger player in the industry

  17. SWOT Analysis • Semiconductor core expertise • #1 global leader in thin film industrial markets • Strong cash flows • Focused management strategy • Cyclical industry • Unpredictable cycle phases • Highly competitive industry with low switching costs of customers • No long term contracts with customers W S • Proposal on possible tariffs on imported goods • Change in tax laws and rates in US and other jurisdictions • Leveraging semi strengths for growth in specialty power • Diversification through M&A • Capturing the new paradigm in semi T O Source: 10k-2017 https://www.sec.gov/Archives/edgar/data/927003/000092700317000010/aeis10k2016.htm

  18. Risk Factors Cyclical Customer Concentration Foreign Exchange Technology Development • Must continually design and introduce new products to retain customers • Due to sudden changes in customers manufacturing capacity requirements and spending • Applied Materials, Inc 35.2% • Lam Research20.7% • Purchasing and sales activities are primarily denominated in USD, JPY, CNY, and EUR • Manufacturing in China, New York, United Kingdom

  19. Financial Analysis 4

  20. Liquidity Analysis Source: Capital IQ, accessed through Market Information Lab Source: Capital IQ, accessed through Market Information Lab Source: Capital IQ, accessed through Market Information Lab Source: Capital IQ, accessed through Market Information Lab Source: Capital IQ, accessed through Market Information Lab Source: Capital IQ, accessed through Market Information Lab Source: Capital IQ, accessed through Market Information Lab

  21. Profitability Analysis Source: Capital IQ, accessed through Market Information Lab

  22. DuPont Analysis Assets Turnover ROE Profit Margin Tax Burden Leverage Ratio Interest Burden 2014 2015 2016 Source: Capital IQ, accessed through Market Information Lab

  23. Greenblatt Ratio Source: Capital IQ, accessed through Market Information Lab

  24. Financial Projection 5

  25. Key Assumptions

  26. Cost of Capital

  27. Valuation 6

  28. DCF Method DCF Perpetuity Growth DCF Exit Multiples

  29. Multiple Method Multiples Source: Analysts meeting 2017 http://ir.advanced-energy.com/phoenix.zhtml?p=irol-eventDetails&c=105985&eventID=5250900

  30. Sensitivity Analysis

  31. Technical Analysis 7

  32. Technical Analysis Source: Bigcharts.com http://bigcharts.marketwatch.com/

  33. Recommendation 8

  34. Recommendation Add to Watch list Fact No. 1 Well positioned to capture the current upward phase of the industry Fact No. 2 Strong and stable financial position Fact No. 3 Good relationship with customers to predict future demand Fact No. 4 Difficult to predict business cycles

  35. Thank you

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