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Risk Analysis. Valuation. Financial Analysis. Company Overview. Why Invest in Piaggio. Automobiles & Parts. PIAGGIO S.p.A. Politecnico Student Research Global Investment Research Challenge 2011. COMPANY OVERVIEW. Why invest in Piaggio. Financial Analysis. Company Overview.

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slide1

RiskAnalysis

Valuation

Financial Analysis

Company Overview

WhyInvest in Piaggio

Automobiles & Parts

PIAGGIO S.p.A.

Politecnico Student Research

Global Investment Research Challenge 2011

slide2

COMPANY OVERVIEW

Whyinvest in Piaggio

Financial Analysis

Company

Overview

RiskAnalysis

Data and Charts

Valuation

slide3

Company Overview

Wide brand portfolio

Wide brand portfolio

Premiumisation strategy

Largest European producer of 2w and LCVs by revenues

Style

Business

Design

Reliability

Mobility

Sport

Safety

Performance

Environment

Young

Whyinvest in Piaggio

Financial Analysis

Company

Overview

RiskAnalysis

Data and Charts

Valuation

slide4

Company Overview

Internationalization strategy

Production Facilities

Distribution Network

Joint Venture

Whyinvest in Piaggio

Financial Analysis

Company

Overview

RiskAnalysis

Data and Charts

Valuation

slide5

Company Overview

Latest results

From Revenues to Earnings:

Unit Sold Vs Management Guidelines:

ActualGuidelines Delta

Revenues €1,485M €1,500M -1%

1

Revenues Breakdown

European Revenues (€’000)

Europe

India

Vietnam

EbitdaMargin 13.3% 13.3% 0%

360,000

2Ws

EPS €0.115 €0.118 -2.5%

335,000

2Ws

220,000

LCVs

197,000

LCVs

48,000

2Ws

60,000

2Ws

+11.7%

+25%

-7.5%

Source: Company Data

Source: Company Data, Politecnico Estimates

Whyinvest in Piaggio

Financial Analysis

Company

Overview

RiskAnalysis

Data and Charts

Valuation

slide6

Company Overview

Latest results

From Revenues to Earnings:

  • Efficiency Improvements
  • Financial Savings
  • One-off Fiscal Items
  • Higher Materials Costs

Whyinvest in Piaggio

Financial Analysis

Company

Overview

RiskAnalysis

Data and Charts

Valuation

slide7

Company Overview

Our Rating

2010 financialresults

Indiansales report

  • HOLD
  • BUY

Price (03/31/11): €2.41

12 M Target Price: €2.8

Upside: 16.2%

Rating: BUY

Whyinvest in Piaggio

Financial Analysis

Company

Overview

RiskAnalysis

Data and Charts

Valuation

slide8

WHY INVEST IN PIAGGIO

Whyinvest in Piaggio

Financial Analysis

Company

Overview

RiskAnalysis

Data and Charts

Valuation

slide9

Whyinvest in Piaggio

1. Launch of new products in India

2. Expansion in South-Eastern Asia

3. Consolidation in Europe

Whyinvest in Piaggio

Financial Analysis

Company

Overview

RiskAnalysis

Data and Charts

Valuation

slide10

Whyinvest in Piaggio: New products in India

3w

Market volumes : 1M u (2010)

Market growth: 8% (2011E)

Piaggio volumes: 220,000 u (2010)

Piaggio growth: 13.5% (2011E)

10%

25%

Launchof Vespa: 2012E

Piaggio volumes: 75,000 u (2013E)

18%

24%

23%

4w

Whyinvest in Piaggio

Financial Analysis

Company

Overview

RiskAnalysis

Data and Charts

Valuation

slide11

Whyinvest in Piaggio: Expansion in Asia

Vietnam

Indonesia

Malaysia

Potential Market: 3M vehicles

Potential Market: 11M vehicles

Thailand

Taiwan

Whyinvest in Piaggio

Financial Analysis

Company

Overview

RiskAnalysis

Data and Charts

Valuation

slide12

Whyinvest in Piaggio: Consolidation in Europe

Eco Friendly Solutions:

European

EBITDA Margin

+155bps

by 2013

Piaggio Market Share: 20%

Piaggio Volumes: 335,000 units (2010)

  • Improvementof global sourcing position
  • Production plantsrationalisation
  • Synergies in the distribution network

Whyinvest in Piaggio

Financial Analysis

Company

Overview

RiskAnalysis

Data and Charts

Valuation

slide13

FINANCIAL ANALYSIS

Whyinvest in Piaggio

Financial Analysis

Company

Overview

RiskAnalysis

Data and Charts

Valuation

slide14

Financial Analysis

Income Statement

2010 E 2011 E 2012 E 2013 E

BalanceSheet

7.6% Revenue CAGR 10-13

2010 2011 E 2012 E 2013 E

€1485M €1615M €1745M €1850M

Debt €528M €500M €470M €440M

Div. &

Buy Back

Capex

∆NFP

∆NWC

OCF

+ 160bps EBITDA margin

Cash&other €155M €148M €147M €147M

3.3% From DMs

14.8% From EMs

~ €310M

~€530M

NFP €350M €342M €318M €288M

11.9% EBITDA CAGR 10-13

€197M €218M €249M €276M

Equity €443M €467M €499M €537M

LowerD&A and Financial Charges CAGR

Abilitytomeet short and long termobligations

DeleveragingwhileImproving ROE

2010

2013

24.3% EPS CAGR 10-13

€0.11 €0.14 €0.18 €0.22

~ €15M

HigherthanRevenue CAGR

~ €65M

Cash Flow Statement

~ €140M

8.8% OCF CAGR 10-13

€153M €155M €181M €197M

Source: Politecnico Estimates

Whyinvest in Piaggio

Financial Analysis

Company

Overview

RiskAnalysis

Data and Charts

Valuation

slide15

VALUATION

Whyinvest in Piaggio

Financial Analysis

Company

Overview

RiskAnalysis

Data and Charts

Valuation

slide16

Valuation: DiscountedCash Flow

Sum-of-the-part approach

Two-Stage model

Three-Stage model

Analytical Period + Perpetuity

Analytical Period + Convergence Stage + Perpetuity

Source: Politecnico Estimates

Whyinvest in Piaggio

Financial Analysis

Company

Overview

RiskAnalysis

Data and Charts

Valuation

slide17

Valuation: DiscountedCash Flow

TP DCF

EU + US

India

Vietnam

€2.90

€0.95

€133M

13.5%

20.5%

7.5%

€10M

10.72%

€389M

12.9%

19.5%

42%

€13M

9.31%

€133M

13.5%

20.5%

7.5%

€10M

10.72%

Sales 2010

Sales CAGR 10-15

EBITDA margin 2010

Tax Rate

FCFF 2010

WACC

€963M

2.5%

9.75%

30%

€33M

7.63%

€963M

2.5%

9.75%

30%

€33M

7.63%

€1.30

€0.65

Source: Politecnico Estimates

Whyinvest in Piaggio

Financial Analysis

Company

Overview

RiskAnalysis

Data and Charts

Valuation

slide18

Valuation: Multiple Analysis

Piaggio’s Indian and Vietnamese businesses are comparable to its Indian peers

Using the median EV/EBITDA multiple

13% discount

Initiation

Coverage

Whyinvest in Piaggio

Financial Analysis

Financial Analysis

Company

Overview

Company

Overview

WhyInvest in Piaggio

RiskAnalysis

RiskAnalysis

Data and Charts

Valuation

Valuation

slide19

Valuation: Multiple Analysis

As regards the whole Piaggio Group (EV/EBITDA multiple):

EMs multiple

- for the Asian Business:

DMs multiple

- for the non-Asian Business:

9.3x

4.4x

Target Price: € 2.62

Whyinvest in Piaggio

Financial Analysis

Company

Overview

RiskAnalysis

Data and Charts

Valuation

slide20

Valuation: Target Price

70% weight

€ 2.90

DCFAnalysis:

MultipleAnalysis:

Year-end Target Price:

(upside> 15%)

30% weight

€ 2.62

€ 2.80

Whyinvest in Piaggio

Financial Analysis

Company

Overview

RiskAnalysis

Data and Charts

Valuation

slide21

RISK ANALYSIS

Whyinvest in Piaggio

Financial Analysis

Company

Overview

RiskAnalysis

Data and Charts

Valuation

slide22

Riskanalysis: Riskmatrix

Riskanalysis: Risksfrom Asia

  • Unsuccessful
  • product launches
  • Stronger competition
  • Exchange rate risk
  • Unsuccessful
  • product launches
  • GDP growth rates
  • Increase in energy,
  • rawmaterials and
  • components costs
  • Stronger competition

Likelihood

  • Exchange rate risk

Impact

Source: Politecnico Estimates

Whyinvest in Piaggio

Financial Analysis

Company

Overview

RiskAnalysis

Data and Charts

Valuation

slide23

Riskanalysis: Riskmatrix

Riskanalysis: Risksfrom Asia

  • Unsuccessful
  • product launches
  • Unsuccessful
  • product launches
  • Stronger competition
  • Stronger competition
  • Exchange rate risk
  • Exchange rate risk

Source: Politecnico Estimates

Source:Pacific Exchange Rate Service

Whyinvest in Piaggio

Financial Analysis

Company

Overview

RiskAnalysis

Data and Charts

Valuation

slide24

Riskanalysis: Riskmatrix

Riskanalysis: Global risks

  • Stronger competition
  • GDP growth rates
  • Exchange rate risk
  • Unsuccessful
  • product launches
  • GDP growth rates
  • Increase in energy,
  • rawmaterials and
  • components costs

Likelihood

  • Increase in energy,
  • rawmaterials and
  • components costs

Impact

Source: Politecnico Estimates

Whyinvest in Piaggio

Financial Analysis

Company

Overview

RiskAnalysis

Data and Charts

Valuation

slide25

Riskanalysis: Riskmatrix

Riskanalysis: Global risks

  • GDP growth rates
  • GDP growth rates
  • Increase in energy,
  • rawmaterials and
  • components costs
  • Increase in energy,
  • rawmaterials and
  • component costs

Source: Company data

Source: International MonetaryFund, World Economic Outlook Database

Whyinvest in Piaggio

Financial Analysis

Company

Overview

RiskAnalysis

Data and Charts

Valuation

slide26

Riskanalysis: Montecarlo Simulation

P = 80%

€2.97

€2.62

€2.65

€2.75

€2.80

€2.82

€2.87

€2.67

€2.70

€2.72

€2.77

€2.90

€2.92

€2.95

€2.85

Source: Politecnico Estimates

Price Confidence Interval: (€ 2.70 ; € 2.90)

Whyinvest in Piaggio

Financial Analysis

Company

Overview

RiskAnalysis

Data and Charts

Valuation

slide27

Riskanalysis: Montecarlo Simulation

1.35

1.34

1.32

1.33

1.31

1.30

0.86

1.29

0.79

0.84

0.85

0.88

0.64

1.20

1.26

0.64

0.70

0.76

0.87

0.89

0.90

0.63

0.66

0.67

1.18

1.19

1.22

1.23

1.24

1.25

1.28

0.61

0.62

0.63

0.66

0.67

0.68

0.69

0.72

0.73

0.74

0.75

0.78

0.65

1.21

1.27

0.65

0.71

0.77

Source: Politecnico Estimates

74% of volatility comes from Asia

Whyinvest in Piaggio

Financial Analysis

Company

Overview

RiskAnalysis

Data and Charts

Valuation

slide28

Questions

Questions

Whyinvest in Piaggio

Financial Analysis

Company

Overview

RiskAnalysis

Data and Charts

Valuation

slide29

RiskAnalysis

Valuation

Financial Analysis

Company Overview

WhyInvest in Piaggio

Automobiles & Parts

PIAGGIO S.p.A.

Politecnico Student Research

ICFAS Investment Research Challenge 2011

slide30

Data and Elaborations

Competitive Scenario:

Financial Statements:

Risks:

Company:

  • MainCompetitors
  • EU Scenario
  • India Scenario
  • US Scenario
  • Vietnam Scenario
  • On The Stock Market
  • 2010 Results
  • OWC
  • Stock OptionsPlan
  • Tax Rate
  • Sales’ Seasonality
  • SpareParts
  • Aprilia and Moto Guzzi
  • BalanceSheet
  • Income Statement
  • Cash Flow Statement India
  • Cash Flow Statement EU
  • Cash Flow Statement ASEAN
  • Ratios
  • ROE
  • Hedging Policy
  • CostsBreakdown
  • Corr. Oil , Rub, All.
  • Sensitivity on Oil Price
  • Sensitivity India
  • Sensitivity ASEAN
  • SensitivityEurope
  • Politicalrisk – India 1
  • Politicalrisk – India 2
  • Japan’s earthquake
  • Interest RatesRisk
  • MS: Assumptions
  • MS: Impact
  • MS: Results
  • Sensitivity on steel

Macro Scenario:

  • India
  • Vietnam
  • Indonesia
  • Malaysia
  • Thailand
  • Summary
  • GDP growth rates

Debt:

  • DebtStructure
  • Altman Z-Score

Strategy:

  • StrategicLevers
  • Premiumisation
  • BrandDiversification
  • Launchof Vespa
  • New UrbanVehicles

DCF Model:

  • Assumpt. Macro Scenario
  • Assumpt. CostInflation
  • Terminal Value
  • WACC

Market:

  • From 3w to 4w
  • Electric and Hybrid
  • Indian 4w
  • Margins in 2w
  • MotorcycleIndustry
  • Outlook

Acquisitions:

CG and CSR:

Multiples:

  • CG Snapshot
  • BoardofDirectors
  • CG and CSR Valuation
  • Piaggio as a Prey
  • PotentialBuyers
  • Piaggio’s Acquisitions
  • EMs and DMsMultiples
  • Piaggio Peers
  • Historical P/E
  • P/E Future Evolution

Whyinvest in Piaggio

Financial Analysis

Company

Overview

RiskAnalysis

Data and Charts

Data and Charts

Valuation

slide31

Piaggio on the stock market

FTSE Italia MidCap

MARKET CAP:

€ 923.98 M

  • TTM Daily Average:
  • 1.18 millions shares
  • (equal to 2.5-3 €M)

Source:Bloomberg, Politecnico Estimates

Data and Charts

Data and Charts

slide32

2010 Results

Slightlybelowconsensus, but positive underlyingtrends.

  • Volumes:

European 2Ws:

IndianLCVs:

ASEAN 2Ws:

335kActualVs

355kExpected

220kActualVs

195kExpected

60k ActualVs

48kExpected

  • EbitMargin:

7.5%. In linewithconsensus (+50bps from 2009)

  • Interests:

€27.3M. In linewithconsensus (- €3M from 2009)

  • Tax Rate:

48.9%.Higherthanconsensun (+12.9% from 2009)

  • EPS:

€0.115. In linewithconsensus (substantially in linewith 2009)

Data and Charts

slide33

Operating WorkingCapital:

Millions

Millions

XXX

Data and Charts

Source: Bloomberg, Politecnico Estimates

slide34

Piaggio’s Stock OptionPlan

  • Stock Option Plan approved on 07 May 2007 and updated on 25 January 2010
  • The Board of Directors is responsible of the Stock Option Plan
  • Max 10,000,000 of granted Stock Options equal to 2.52% of the share capital
  • The Stock Options are European style options

EXERCISE PERIOD

0

3

5

Grant Date/Commencement Date

Vesting Date

Expiration Date

Data and Charts

Data and Charts

slide35

TaxRates

Piaggio’s taxratesbyregion:

Piaggio’s taxesnotbased on taxableincome:

Source: Politecnico Estimates

Piaggio’s aggregate tax rate:

44%

Data and Charts

slide36

Seasonality in Piaggio’s sales

Peak in the Europeanspringtime.

  • Seasonal fixed-term contracts.
  • Peaks’ impact on OWC is:

Data and Charts

Data and Charts

slide37

Spare parts segment

10% of Total Revenues in 2010

  • Highermarginality
  • StrategicforLCVs in India
  • New logistics center in Pontendera (Italy)

Data and Charts

Data and Charts

slide38

Aprilia and Moto Guzzi

  • Two significant brands for Piaggio linked to:
  • increasing importance of motorbikes in the European market: a trend that has begun since the early ‘90

Substitution trend in Europe (‘000 units)

Source: Acem

  • needtoenrich and complete Piaggio’s branddiversification
  • Piaggio’s largeinvestments in 2010 forthem
  • synergieswith Piaggio distribution network

Data and Charts

Data and Charts

slide39

Piaggio StrategicLevers

Internationalization

Premiumization

  • New markets
  • New products
  • New plants
  • Design
  • Environment
  • Safety
  • Innovation
  • Robustness

CostEfficiency

Outsourcing and SCM

  • Improvementof global sourcing position
  • Production PlantsRationalization
  • Sinergies in Distribution Network
  • Production ofengines
  • Centralizedlogistic center for the spareparts business

Data and Charts

slide40

Premiumisation strategy

Piaggio’s prices are higherthanitscompetitors:

customersrecognizehigherquality and uniquesolutions.

Data and Charts

Data and Charts

slide41

Branddiversification

Wide Brand Portfolio

Wide RangeofCustomers

Data and Charts

Data and Charts

slide42

Launch of Vespa: India vs Vietnam

Distribution network already present…

…but for LCVs distribution

Larger organizational structure (Piaggio India has its own CEO)

Piaggio’s R&D department improved Vespa to better target the Indian’s customers

Vespa gained a successful commercial presence in India:

..in 1960, Rahul Bajaj obtained the license to produce the Vespa in India, till 1970 when the Indian government revoked the license. Now Piaggio has better fundamentals to compete in India

in respect to the ‘80s and ‘90s.

XXX

Data and Charts

Source:Indian news, Politecnico Estimates

slide43

New types of vehicles: urbanmobility

  • Scooter MP3:
      • launched in October 2007
      • 72,000 units sold so far
      • hybrid models since 2009
  • Car prototype NT3:
      • November 2010 (Milan Motor Show)
      • launch expected in 2012-13
      • three-seat city car

XXX

Data and Charts

Source: News, Politecnico Estimates

slide44

Piaggio as a Prey

  • WHAT DOES A PREDATOR GET?
  • Business: 2W and LCV in Europe.
      • 2W, 3W and 4W in India.
      • 2W in ASEAN.
  • Market Share: 20% in 2W Europe
  • 40% in 3W, 4% in 4W India Niche player in 2W ASEAN
  • Revenues: €1,485M in 2010 (~$2,065M)
  • Leverage: 1.2x
  • AT WHAT PRICE?
  • Market Cap: ~€895M (~ $1,245M)
  • Ownership:ImmsiS.p.a. (53% share)
  • Fees

~€20M

  • Premium topayfor the deal (+25%)

~€220M

~€420M

  • PubblicOffertoMinorityShareholders
  • (compulsory in the Italianorder in case of
  • acquisitionof the controlstake)

~€470M

  • Market Valueof the ControlStake

Best Case: €600M

Worst Case: €1,130M

Data and Charts

slide45

PotentialBuyers

INDIAN CONGLOMERATE COMPANIES:

Automotive Business: Commercial Vehicles and Personal Vehicles.

Market Share: 1% in Indian 3W LCVs and 31% in 4W.

Revenues: Rs184,520 M (~$4,095M)

Market Cap: $7,740M

Leverage: 0.14x

Recentacquisitions: SsangyongMotors (Korean Premium SUV manufacturer )

Automotive Business: Commercial Vehicles and Personal Vehicles.

Market Share: 57% in indian 4W LCVs.

Revenues: Rs918,934 M (~$20,390M)

Market Cap: $14,803M

Leverage: 1.0x

Recentacquisitions: Jaguar and Land Rover (2008)

BENEFITS FROM ACQUIRING PIAGGIO:

  • Premium Brands + Technology Transfer
  • Entry in 2W
  • Entry in Western Markets
  • Consolidation in Indian Market

Data and Charts

slide46

Piaggio’s acquisitions

Piaggio’s pastacquisitions:

  • Leader in motorbikes
  • Largebrand portfolio
  • In the future Piaggio willnotmakeacquisitions:
  • accordingtoitsstrategy;
  • there are notpotentialtakeovertargets. Forexample:

Data and Charts

Data and Charts

slide47

Piaggio’s maincompetitors

EUROPEAN COMPETITORS

INDIAN COMPETITORS

Data and Charts

Data and Charts

slide48

Competitive scenarios: EU

Data and Charts

Data and Charts

slide49

Competitive scenarios: India

Data and Charts

Data and Charts

slide50

Competitive scenarios: the US

Strong impact of the economiccrisis. 60% reduction in volumes

Piaggio’s market share in scooter market: 30% (6,700 vehicles)

Scooter segment: 5% of total in 2010, down from 12% in 2007

March 8°, 2011, Piaggio US changedits CEO: Paolo Timoni > Miguel Martinez

Market withverypeculiarrequirements and customerneeds.

Data and Charts

Data and Charts

slide51

Competitive scenarios: Vietnam

Vietnamese market accounts 2,800,000 vehicles sold in 2010

90% of total vehicles in Vietnam are scooters (motorbikesegment: absent)

Source:IMF

Source:IMF

Data and Charts

Data and Charts

slide52

Macro scenario: India

Data and Charts

slide58

Shiftfrom 3 to 4 wheelLCVs

Piaggio’s Productlaunches (4W)

Quargo

Ape Truck

Data and Charts

slide59

Electric and hybridmarkets

MP3 Hybrid

Porter

5,000 electric Porter sold in 10 years, leader in the niche “Green” Market

Data and Charts

slide60

Indian4w market

  • Indian market of 4w LCV’s: growing 10% YoY
    • Price competition is not a rational strategy
  • Piaggio’s strategic positioning: quality leadership vs. cost leadership
    • Piaggio’s products have a higher fuel efficiency in respect to competitors’ products
  • GM and Nissan start from scratch,
  • while Piaggio is operating in India since 1999
  • with 560 dealers across the country

We do not believe margins will suffer in the next years

XXX

Data and Charts

Source:Company’sfinancialstatements, Politecnico Estimates

slide61

Margins in the 2w market

  • Europe and U.S.
    • Low margins, but on the way to increase, due to:
    • - plant rationalization (elimination
    • of the factories in Spain)
    • - the market will slowly recover
  • Vietnam and ASEAN:
    • Higher margins, slightly decreasing (conservative forecasting)
    • - lower cost of labor;
    • - advanced know-how in respect to emerging markets’ based companies

XXX

Data and Charts

Source: Bloomberg, Politecnico Estimates

slide62

Motorcycleindustry: world outlook

Scooters

Motorcycles

Data and Charts

Data and Charts

slide63

BalanceSheet

Source: Company Data, Politecnico Estimates

Data and Charts

Data and Charts

slide64

Income Statement

Source: Company data, Politecnico Estimates

Data and Charts

slide65

Cash Flow Statement India

Source: Politecnico Estimates

Data and Charts

Data and Charts

slide66

Cash Flow Statement Europe and US

Source: Politecnico Estimates

Data and Charts

Data and Charts

slide67

Cash Flow Statement ASEAN

Source: Politecnico Estimates

Data and Charts

Data and Charts

slide68

Ratios

Source: Company data, Politecnico Estimates

Data and Charts

slide69

ROE

Piaggio and itscompetitors

Source:Starmine Smart IncomeStatements, Politecnico Estimates

Expectations and DuPontanalysis

Tax

Burden

Interest Burden

EbitMargin

Asset Turnover

Leverage (Proxy)

Source: Politecnico Estimates

Data and Charts

slide70

DebtStructure

Maturity

Data and Charts

slide71

Altman Z-Score

Competitors’ Z-score (2010)

TimeseriesofPiaggio’s Z-Score

Automotiveplayers

IndianPlayers

Expectation

Source: Bloomberg

Data and Charts

slide72

Assumptions on Macro Scenario

Global recoverystronger in EMsthan in DMs IncreasingrevenuesfromEMs

Raisingcommodities’prices RaisingCostofMaterials

Raising interest rates RaisingCostofDebt

∆=4.5%

∆=5.5%

Source: Politecnico Estimates, www.economywatch.com

Source:Bank or America Estimates , Politecnico Estimates

Data and Charts

slide73

Assumptions on CostInflation

  • Coststructure:
  • Increasingcostofmaterials
  • Decreasingcostoflabour
  • IncreasingEbitdaMargin:
  • DecreasingG&ACosts

Data and Charts

slide74

Terminal Value

  • Sum-of-the-PartsApproach:

+

Two-Stage model

Three-Stage model

Analytical Period + Perpetuity

Analytical Period + Convergence Stage + Perpetuity

  • Perpetuity:
  • Long Term FCFF Growth Rate = 0.5%
  • Convergence Stage:
  • ExponentialDecayof FCFF GrowthRates

Ability of the company to generate cash flow

Industry

Source: Politecnico Estimates

Source:Guatri (1998)

Data and Charts

slide75

WACC

  • NWC Historical evolution
  • Source:Company’sfinancialstatements, Bloomberg, (1) Damodaran, Politecnico Estimates

XXX

Data and Charts

slide76

EMs and DMs Multiples.

EV/EBITDA multiple for the whole Company:

  • Basic Assumptions:
    • EBITDA margin is 50% higher in EMs
    • Markets’ exposure is equal to the percentage of Sales in EMs
  • EMs multiple:
    • Equal to the Indian peers’ multiple = 9.3 x
  • DMs multiple:
    • Mkt_Multiple = (EBITDA_DMs x Multiple_DMs) + (EBITDA_EMs x Multiple_EMs)

4.4 x

known

estimated

estimated

9.3 x

Data and Charts

slide77

Piaggio and its peers (CY 2011E):

Indian based players

Global players

Data and Charts

Data and Charts

Source:Bloomberg, Politecnico Estimates (03.25.2011)

slide78

HistoricalP/E:

Average: 15.7

Data and Charts

Source:Bloomberg, Politecnico Estimates (03.25.2011)

slide79

P/E future evolution:

(1) FTM P/E ratio

XXX

Data and Charts

Source:Bloomberg, Politecnico Estimates (03.25.2011)

slide80

Piaggio’s Hedging Policy

Source: Company annual report

Data and Charts

slide81

Costsbreakdown

Source: Company data, Politecnico estimates

Data and Charts

Data and Charts

slide82

Oil price impact on Rubber and Alluminium

Rubber

Crude oil

Crude oil

Aluminium

USD/bbl

USD/kg

USD/bbl

USD/ton

Crude oil and Rubber price

4000

3500

3000

2500

2000

1500

Crude oil and Aluminium price

Source: World Bank Community price data

Data and Charts

Data and Charts

slide83

Sensitivity on Oil Price

RESULTS:

KEY DRIVERS TO PROTECT EPS:

Bargaining power: Improving Global Sourcing

Pricing power:

Premiumization

CUSTOMERS

SUPPLIERS

Oil , Rubber,

Alluminium

Oil

Source: Politecnico estimates

Data and Charts

slide84

Sensitivity on Indian Business

Accordingtoour DCF, Indian business isworth €1.3

Indian 2015 EbitdaMargin

Indian LCV

Volume CAGR 10-15

Data and Charts

slide85

Sensitivity on ASEAN Business

Accordingtoour DCF, ASEAN business isworth €0.65

ASEAN 2015 EbitdaMargin

ASEAN 2W

Volume CAGR 10-15

Data and Charts

Data and Charts

slide86

Sensitivity on European Business

Accordingtoour DCF, European business isworth €0.95

European 2015 EbitdaMargin

European 2W

Volume CAGR 10-15

Data and Charts

Data and Charts

slide87

Politicalrisk - India

  • Independence: 15 August 1947
  • Republic: 26 January 1950
  • World’s most populous democracy
  • Federal parliamentary democratic republic:
    • INC (India National Congress),
    • center left: liberal
    • BJP (BhartiyaJanata Party),
    • center right: conservative
  • Current Government: the INC party won the general elections both in 2004 and 2009, forming the government with the UPA coalition and Manmohan Singh as prime minister.
  • Key Political Risks:
    • Inflation
    • Corruption

Not a major threat for Piaggio’s business

XXX

Data and Charts

Data and Charts

Source: Reuters, Politecnico Estimates

slide88

Politicalrisk - India

  • Euromoney Country Risk Score (March 2011):

XXX

Data and Charts

Data and Charts

Source: Reuters, Politecnico Estimates

slide89

The Japan’searthquake:

Earthquake

Middle East turmoil

4Q 2010 data release

Source:Bloomberg, Politecnico Estimates

Data and Charts

Data and Charts

slide90

How risinginterestratesaffect share prices:

“If fears of default were driving rates, a rise in interest rates should be associated with a fall in stock prices. If, on the other hand, rates rise because people think the US will emerge from the liquidity trap sooner, stocks and rates should move in the same direction. And here’s what it looks like: It’s all about economic optimism.”

XXX

Data and Charts

Data and Charts

Source:krugman.blogs.nytimes.com

slide91

Montecarlo Simulation

ASSUMPTIONS:

Legend:

UpsideriskLognormal

DownsideriskInvertedLognormal

Data and Charts

Data and Charts

slide92

Montecarlo Simulation

IMPACT ON CASH FLOW STATEMENT:

  • RISKS:
  • Success ofnewmodels
  • GDP / Industrygrowth rate
  • Strongercompetition
  • Exchange rate volatility

Data and Charts

Data and Charts

slide93

Montecarlo Simulation

RESULTS:

  • Target price volatility:
  • Geographicalbreakdown:

ASEAN

EUROPE + US

INDIA

Data and Charts

Data and Charts

slide94

Corporate GovernanceSnapshot

Source: Politecnico Estimates

Data and Charts

Data and Charts

slide95

Compositionof the BoardofDirectors

Source:Piaggio’s 2009 CG Report

Data and Charts

Data and Charts

slide96

CG and CSR Valuation

Piaggio’s CG and CSR

are under control,

withimprovementmargins

Data and Charts

Data and Charts

slide97

Steel impact on EPS

Worst case scenario:

-0.3% EBITDA margin

1.2

1.0

0.8

0.6

0.4

0.2

Steel price chart (USD/kg)

Source: World Bank Community price data

Source: Company’s data

Data and Charts

Data and Charts

slide98

GDP growth rates in EMs

India and Vietnam

nominal GDP growth rates

*Source: Politecnico estimates

Source: IMF, World Economic Outlook Database

Data and Charts

Data and Charts