1. The document recommends buying Sun Hydraulics Inc. (SNHY) and selling Air Products and Chemicals Inc. (APD). 2. SNHY specializes in manufacturing custom fluid valves and has the broadest product range in the industry. It has a strong balance sheet with no debt. 3. APD supplies industrial gases but has a number of environmental regulatory issues and recent management changes.

1. Buy: Sun Hydraulics Inc. (SNHY)
Sell: Air Products and Chemicals Inc. (APD)

2. ! Hydraulics are mechanical system used to
produce power and motion.
Control
Produce
Sustain

3. ! Specializes in the manufacturing of custom fluid valves
! Direct sales to distributors and customers
! Has the most range and depth of fluid valves of any
manufacturer
Directs and regulates flow of
fluid within a hydraulic system
Screw-in cartridge
valves
Manifolds/Integrated
solutions
Functions like a electronic
switch board
Electronics
Digital controllers use to
digitally regulate valves

4. INDUSTRY SIZE
! The Global Power fluid industry is
$20 Billion
! Valves grows at 2x industry rates
! Cartridge valves grows at 4x GDP
• Cartridges valves are replacing
traditional hydraulic valves:
! Flexibility
! Durable
! Cost effective
Industry
Valves
Cartridges
100%
0.46%
Sales % VS. Peers
Other Sun
30%
60%
10%
Industrial
Mobile
Other
Industrial: 30%
• Machine
Tools
• Automation
• Testing
• Packaging
Mobile: 60%
• Aerial
• Construction
• Mining
• Energy
Other: 10%
• Wind
• Animation
• Solar
• Stage
Shows
$4B
$20B
$1.5B
$205 Mil
MARKETS SERVED

5. 49%
30%
21%
Global Sales break down
Americas
Europe, Africa, Middle East
Asia/Pacific Region
Sales breakdown
• Total sales (2013) = 205 Mil
! Americas = 100 Mil
! Europe = 62 Mil
! Asia/Pacific = 43 Mil
Regional EBITDA breakdown
• EBITDA (2013) = 63 Mil
" The United States = 26 Mil
" Germany = 6.2 Mil
" Scandinavia = 4.1 mil
" Korea, South = 6 Mil
" China = 3.8 Mil
# Grade: A (9)
• Global and domestic trends
are favorable across all
markets
# PMI shows confidence
in all markets

6. ! Conservative capital allocation
• Uses debt only when necessary: D/E =0
• Has paid dividends since public and been profitable
since 1972
! Strategic acquisition
• Acquired White Oak and integrated it into High Country
Tek, Inc. to add digital capability to control cartridge
valves
! The only known company to offer digitally controlled valves
! “Horizontal” style of management and culture
• Lean process focused organization
! Shortest Inventory on Hand 39.30 VS 92.73 days among peers
! Sun’s COSG/Sales ratio: 60% VS 75% average amongst peers
! Quality distributor and supplier relationships

7. ! MANY ORIGINAL
DISTRIBUTORS FROM 1980S
ARE STILL WITH SUN TODAY
! LIVE INVENTORY UPDATES WITH
SUPPLIERS TO BALANCE
DEMAND
# Grade: A (9)

8. ! Market Capitalization 1.1B
! Cash & Equivalents: 93.6 Mil
! Key Metrics
" P/E: 28.27
" ROA: 19.5%
" ROC: 21.9%
" ROE: 21.9%
" ROIC: 20.62%
" D/E: 0
" Price/Book: 5.6
! Growth: 12% per annum for
the next 5 years
! Revenue
• Industrials: 30%
• Mobile: 60%
! Profitability
• Operating Margins: X>20%
COSG/Sales: 60% VS 75%
(Peers)
• Inventory turnover: 9.26 VS
4.76 (Peers)
# Grade: A (9.5)
Balance sheet

9. Growth
rate:
8.00%
10.00%
12.00%
14.00%
16.00%
P/E = 24
$51.49
$56.43
$61.75
$67.47
$73.60
Upside
27.19%
39.41%
52.55%
66.67%
81.81%
Expectations and current records
! Price = $40.48
! Sun is projected to grow at 12% for the next 5 year per annum
! Current P/E = 28
Conservative assumptions
! Sun grows at 10% for the next 5 year per annum
! P/E = 24 (Avg = 27; Median = 24)
! Price = $56.43
! Upside = 39.41%
! EPS = $2.35, Return on EPS = 61% ((2.35-1.46)/1.46)
# Grade: A (9)

10. ! Industry standard on fluid valves
• Sun’s niche market advantage will diminish
! Shareholder control
• Brown Capital Management owns 15%
• The Koski family owns 10%
! Natural disaster
• Majority of Sun’s operation is in Sarasota, FL
! Acquisition
• Sun is a small player in the Power fluid industry:
! EV = 1.1Bllion VS. 18.7Billion Parker-Hannifin Corporation
(PH)

11. ! Business: A (9)
• Favorable economic conditions
• Offers the broadest and most in depth products in the fluid-power
valve industry
• Digital control system has high potential in mobile applications
! Management: A (9.5)
• Conservative capital allocation
• Horizontal style of management
" Continuous process improvement
! Balance Sheet: A(9)
• Strong balance sheet: no debt and plenty of cash
• Strong metrics: P/E = 28, ROE = 21.9%, ROA = 19.5%, ROIC = 20.6%
! Price: A(9)
• Stock is on the pricy side, but Sun is a quality company
• Upside/Margin of safety is 39.41% at conservative estimates of 10%
per annum

12. ! Air Products and Chemicals, Inc. (APD)

13. ! Supplier of Chemical for industrial applications
! Sells directly to large customers directly on-site
with APD’s own facility
" Large capital requirement
! Sells to customers through either customer picks or
direct delivery
40%
31%
26%
3%
Revenue by product segment
Merchant Gases
Tonnage Gases
Electronics and Perf.
Materials
Equipment & Energy
46%
3%
27%
24%
Reveunes by region
US & Canada
Latin America
Europe
Asia
24%
28%
12%
36%
Market Share by revenue
APD
PX
ARG
LNAGF
70% of the world market

14. ! Business segments
• Merchant gases (40%)
" Atmospheric gases: oxygen, nitrogen, and argon
" Used in wide variety of industrial applications
• Tonnage gases (31%)
" Provides hydrogen, carbon monoxide, nitrogen, oxygen,
and syngas for energy production and refining
• Electronics and Performance Materials (26%)
" Applications technology to provide integrated solutions
• Equipment and Energy (3%)
" Cryogenic equipment for air separation, hydrocarbon
recovery and purification, natural gas liquefaction, helium
distribution, and variety of services

15. ! Business: A (9.5)
• Oligarchy type of market
• Recession resilient
• Profit margin could be greater if facilities are regionally
concentrated
! Balance Sheet: A (9)
• Okay use of debt:
! Current debt = 3227.6 Mil VS. Cash & Equivalents = 450 Mil
! Current ratio = 1.1; Quick ratio = 0.6; Interest coverage = 10.52
• A/R Turnover = 6.55 VS 8.07 (peers)
! Management: B+ (85%)
• Management shake up - Pershing Square
! Corporate restructuring; cost cutting
• Repurchase of 5.7 million shares at $416 million
• APD is currently under 33 environmental regulatory Settlements

16. Expectations and current records
! Price = $118.47
! APD is projected to grow at 9% for the next 5 year per annum
! P/E = 21
Conservative assumptions
! APD grows at 8% for the next 5 year per annum
! P/E = 16 (Both the mean and average = 17)
! Price = $135.88
! Upside = 14.70%
! EPS = $8.49, Return on EPS = 47% ((8.49-5.78)/5.78)
# Grade: A (90%)
Growth
rate:
7.00%
8.00%
9.00%
10.00%
11.00%
P/E = 16
$129.71
$135.88
$142.29
$148.94
$155.83
upside
9.49%
14.70%
20.11%
25.72%
31.54%

17. Sun Hydraulics (SNHY)
Air
Products
and
Chemicals,
Inc.
(APD)
1.
Niche
market
in
the
fluid-­‐power
valve
industry
Defensible
moat
2.
Strong
balance
sheet
with
no
debt
Balanced
balance
sheet
3.
Stable management with a clear
profit driven focus
Current management changes
4.
Has
margin
of
safety
with
conservaVve
esVmates
Has
margin
of
safety
with
conservaVve
esVmates
5.
PotenVal
moat:
Digitally
controlled
fluid
valves
In constant threat of regulations and
litigation

18. SNHY APD
Business A (9) A(9.5)
Management A (9) B (8.5)
Balance sheet A (9.5) A (9)
Price A (9) A (9)
Total A (9.1) A (9)
Buy Sell

19. SNHY APD
! Key Metrics
• Market Cap = 1.1B
• Pretax Margin = 27.9%
• ROA = 19.5%
• ROE = 21.9%
• ROC = 21.9%
• ROIC = 20.62%
• D/E = 0
• R&D/Sales = 0
• Retention ratio = 68.9%
• 5Yr. CAGR – EPS% = 61%
! Key Metrics
• Market Cap = 35B
• Pretax Margin = 13.3%
• ROA = 5.7%
• ROE = 14.5%
• ROC = 8.5%
• ROIC = 9.63%
• D/E = 89%
• R&D/Sales = 1.3%
• Retention ratio = 42.2%
• 5Yr. CAGR – EPS% = 47%
Bottom line: Sun still has much room to grow and Sun grows
on pure equity

21. 0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
2012 2013 2014 2015 2016 2017 2018 2019
%Change
Years
GDP % Change: Americas
United States Canada Mexico
-2
-1.5
-1
-0.5
0
0.5
1
1.5
2
2.5
3
3.5
2012 2013 2014 2015 2016 2017 2018 2019
%Change
Years
GDP % Change: Europe/ Africa/ME
Germany Finland Norway
Sweden United Kingdom

22. 0
1
2
3
4
5
6
7
8
9
2012 2013 2014 2015 2016 2017 2018 2019
%Change
Years
GDP % Change: Asia/Pacific
Australia France Japan Korea China
In summary:
• Global and domestic business
trends are favorable for growth
• Sun’s customers are expected
to experience favorable
growth
• Sun grows well with the
economy: X>20% EBTIDA YoY
margin

23. Name
Mkt Cap
(USD) P/E D/E ROIC
Gross Profit
(millions) EV/EBITDA Revenue COSG
COSG/
Sales
Average 3.75B 22.296859 41.10129175 14.383107 182395001.6 12.487924 594494411.9444.61M 75%
SUN HYDRAULICS CORP 1.06B 27.657536 0 20.615738 19442000 15.590652 4905000029.61M 60%
PARKER HANNIFIN CORP 17.77B 16.616457 43.254799 12.872805 686035008 11.446257 31060060162.42B 78%
DANFOSS POWER SOLUTIONS INC 0 25.663996 29.02021 121923000 6.973162 413007008291.08M 70%
CIRCOR INTERNATIONAL INC 1.25B 25.283865 10.408755 12.590307 67507000 13.208073 214035008146.53M 68%
SPX CORP 4.28B 20.698988 77.145485 397600000 11.815258 1319000064921.4M 70%
FLOWSERVE CORP 10.34B 21.810791 63.943508 17.572884 470472000 13.256067 1389440000918.97M 66%
MUELLER WATER PRODUCTS INC-A 1.44B 38.442566 186.668732 8.939021 67100000 12.066719 257400000190.3M 74%
RTI INTERNATIONAL METALS INC 831.61M 24.253677 55.596184 5.36216 45684000 9.509752 200011008154.33M 77%
GORMAN-RUPP CO 782.60M 24.842344 3.407284 21465000 15.40765 9160700070.14M 77%
FRANKLIN ELECTRIC CO INC 1.89B 23.048388 31.410852 12.124647 76011000 14.064094 229651008153.64M 67%
ITT CORP 3.86B 6.886014 0 208600000 11.374283 645500032436.9M 68%
GRAHAM CORP 321.53M 26.82353 0.145507 6090000 15.456705 2338500017.3M 74%
INGERSOLL-RAND INDIA LTD 232.12M 17.974518 0 4.061966 14.372974 106905423.1 0%
CRANE CO 4.02B 16.409613 72.035522 15.035235 226851008 11.242914 681449024454.6M 67%
GRACO INC 4.37B 21.407738 65.885414 20.188869 147199008 14.895597 271923008124.72M 46%
GARDNER DENVER INC #NAME? 22.05463 14.213444 173946000 9.126627 513540992339.6M 66%

24. 0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
COSG/Sales
COSG/Sales
Avg. = 75%

25. 0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
90.00%
100.00%
2002 2003 2005 2006 2007 2008
Percentage(%)
Years
YoY growth
EBITDA
Profit Margin
EPS
2002 2003 2004 2005 2006 2007 2008 Average
EBITDA 13.81% 3.70% 101.01% 39.56% 24.68% 29.37% 8.75% 19.98%
Profit Margin 88.43% 11.58% 169.57% 32.40% 3.94% 15.97% 9.17% 26.92%
EPS 86.67% 17.86% 245.45% 55.26% 26.27% 35.91% 14.81% 39.46%
*Data excludes yr. 2004

27. ! Current ratio: 9.2
! D/E: 0
! EV/EBITDA: 16
! Gross Margin 23.20%
! ROA: 19.5%
! ROC: 21.9%
! ROE: 21.9%
! ROI: 19.3
! ROIC: 20.62%
! Quick ratio: 8.2
! Oper Margin: 23.2%
! P/B: 5.6
! P/E : 28
! P/FCF: 54.77
! P/S: 5.18
! PEG: 2.32

28. 8.00% 10.00% 12.00% 14.00% 16.00%
14 $30.03 $32.92 $36.02 $39.36 $42.93
16 $34.32 $37.62 $41.17 $44.98 $49.06
18 $38.61 $42.32 $46.31 $50.60 $55.20
20 $42.90 $47.03 $51.46 $56.22 $61.33
22 $47.19 $51.73 $56.61 $61.84 $67.46
23 $49.34 $54.08 $59.18 $64.66 $70.53
24 $51.49 $56.43 $61.75 $67.47 $73.60
28 $60.07 $65.84 $72.04 $78.71 $85.86
27 $57.92 $63.49 $69.47 $75.90 $82.80
31 $66.50 $72.89 $79.76 $87.14 $95.06

29. 8.00% 10.00% 12.00% 14.00% 16.00%
14 $2.15 $2.35 $2.57 $2.81 $3.07
16 $2.15 $2.35 $2.57 $2.81 $3.07
18 $2.15 $2.35 $2.57 $2.81 $3.07
20 $2.15 $2.35 $2.57 $2.81 $3.07
22 $2.15 $2.35 $2.57 $2.81 $3.07
23 $2.15 $2.35 $2.57 $2.81 $3.07
24 $2.15 $2.35 $2.57 $2.81 $3.07
28 $2.15 $2.35 $2.57 $2.81 $3.07
27 $2.15 $2.35 $2.57 $2.81 $3.07
31 $2.15 $2.35 $2.57 $2.81 $3.07

30. 8.00% 10.00% 12.00% 14.00% 16.00%
14 46.93% 61.05% 76.23% 92.54% 110.03%
16 46.93% 61.05% 76.23% 92.54% 110.03%
18 46.93% 61.05% 76.23% 92.54% 110.03%
20 46.93% 61.05% 76.23% 92.54% 110.03%
22 46.93% 61.05% 76.23% 92.54% 110.03%
23 46.93% 61.05% 76.23% 92.54% 110.03%
24 46.93% 61.05% 76.23% 92.54% 110.03%
28 46.93% 61.05% 76.23% 92.54% 110.03%
27 46.93% 61.05% 76.23% 92.54% 110.03%
31 46.93% 61.05% 76.23% 92.54% 110.03%

31. ! Current ratio: 1.10
! Gross Margin 26.80%
! D/E: 0.85
! EV/EBITDA: 12.4
! Oper Margin: 15.6%
! P/B: 3.45
! P/C: 64.69
! P/E : 21.3
! PEG: 2.71
! P/S: 2.47
! ROA: 5.7%
! ROC 8.6%
! ROE: 14.8%
! ROI: 7.6
! Quick ratio: 0.8

32. 7.00% 8.00% 9.00% 10.00% 11.00%
14 $113.49 $118.90 $124.51 $130.32 $136.35
15 $121.60 $127.39 $133.40 $139.63 $146.09
16 $129.71 $135.88 $142.29 $148.94 $155.83
17 $137.81 $144.38 $151.19 $158.25 $165.57
20 $162.13 $169.85 $177.86 $186.17 $194.79
22 $178.35 $186.84 $195.65 $204.79 $214.27
24 $194.56 $203.83 $213.44 $223.41 $233.75
26 $210.78 $220.81 $231.22 $242.03 $253.23
28 $226.99 $237.80 $249.01 $260.64 $272.71
30 $243.20 $254.78 $266.80 $279.26 $292.19

33. 7.00% 8.00% 9.00% 10.00% 11.00%
14 $8.11 $8.49 $8.89 $9.31 $9.74
16 $8.11 $8.49 $8.89 $9.31 $9.74
18 $8.11 $8.49 $8.89 $9.31 $9.74
20 $8.11 $8.49 $8.89 $9.31 $9.74
22 $8.11 $8.49 $8.89 $9.31 $9.74
23 $8.11 $8.49 $8.89 $9.31 $9.74
24 $8.11 $8.49 $8.89 $9.31 $9.74
28 $8.11 $8.49 $8.89 $9.31 $9.74
30 $8.11 $8.49 $8.89 $9.31 $9.74

34. 7.00% 8.00% 9.00% 10.00% 11.00%
14 40.26% 46.93% 53.86% 61.05% 68.51%
16 40.26% 46.93% 53.86% 61.05% 68.51%
18 40.26% 46.93% 53.86% 61.05% 68.51%
20 40.26% 46.93% 53.86% 61.05% 68.51%
22 40.26% 46.93% 53.86% 61.05% 68.51%
23 40.26% 46.93% 53.86% 61.05% 68.51%
24 40.26% 46.93% 53.86% 61.05% 68.51%
28 40.26% 46.93% 53.86% 61.05% 68.51%
30 40.26% 46.93% 53.86% 61.05% 68.51%