PIAGGIO S.p.A. Politecnico Student Research ICFAS Investment Research Challenge 2011 Automobiles & Parts.

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Presentation transcript:

PIAGGIO S.p.A. Politecnico Student Research ICFAS Investment Research Challenge 2011 Automobiles & Parts

COMPANY OVERVIEW Company Overview Initiation Coverage Why Invest in Piaggio Financial Analysis Valuation Risk Analysis

Largest European producer of 2w and LCVs Wide brand portfolio Successful turnaround Ability to manage business in hard times Internationalization strategy Company Overview Initiation Coverage Why Invest in Piaggio Financial Analysis Valuation Risk Analysis Company Overview Revenue Breakdown (Q3 2010)

As of : Historical Price: € 2.40 Target Price: € 2.65 Upside potential: 10.42% Rating: Accumulate Initiation Coverage Initiation Coverage Why Invest in Piaggio Financial Analysis Valuation Risk Analysis Company Overview

WHY INVEST IN PIAGGIO Initiation Coverage Why Invest in Piaggio Financial Analysis Valuation Risk Analysis Company Overview

1. Launch of new products in India 2. Expansion in South-Eastern Asia 3. Efficiency gains in Europe Why invest in Piaggio Initiation Coverage Why Invest in Piaggio Financial Analysis Valuation Risk Analysis Company Overview

Why invest in Piaggio: new products in India 3w 4w Initiation Coverage Why Invest in Piaggio Financial Analysis Valuation Risk Analysis Company Overview

Why invest in Piaggio: expansion in Asia Vietnam Malaysia Indonesia Thailand Taiwan Initiation Coverage Why Invest in Piaggio Financial Analysis Valuation Risk Analysis Company Overview

Initiation Coverage Why Invest in Piaggio Financial Analysis Valuation Risk Analysis Why invest in Piaggio: Consolidation in Europe EBITDA Margin Company Overview

FINANCIAL ANALYSIS Initiation Coverage Why Invest in Piaggio Financial Analysis Valuation Risk Analysis Company Overview

~ €40M ~ €100M ~ €60M ~ €300M ~€500M 11.6% OCF CAGR OCF Capex ∆NWC ∆NFP Div. 19.2% From EMs2.6% From DMs 7.8% Revenue CAGR % EBITDA CAGR % EPS CAGR Financial Analysis bps EBITDA margin Limited D&A and Financial Charges CAGR In line with EBITDA CAGR Initiation Coverage Why Invest in Piaggio Financial Analysis Valuation Risk Analysis Company Overview Source: Politecnico Estimates

VALUATION Initiation Coverage Why Invest in Piaggio Financial Analysis Valuation Risk Analysis Company Overview

Sum-of-the-part approach Two-Stage modelThree-Stage model Analytical Period + Perpetuity Analytical Period + Convergence Stage + Perpetuity Valuation: Discounted Cash Flow Initiation Coverage Why Invest in Piaggio Financial Analysis Valuation Risk Analysis Company Overview Source: Politecnico Estimates

FCFF 2010E FCFF CAGR WACC Tax Rate EBITDA margin 2010E PRICE Valuation: Discounted Cash Flow €22M 11.3% 7.63% 30% 10.15% €0.93 €13M 26.2% 9.31% 42% 21.05% €1.08 €3.6M 49.1% 10.72% 7.5% 22.75% €0.72 Source: Politecnico Estimates Initiation Coverage Why Invest in Piaggio Financial Analysis Valuation Risk Analysis Company Overview

Piaggio’s Indian and Vietnamese businesses compared to the Indian peers… …with the EV/EBITDA multiple: EV Piaggio Asia € 1,014.5 M MedianHeroMahindraBajajTata 2011 E9.67 x12.19 x8.89 x10.45 x5.55 x DCF EV € 895.6M 11.7% discount Valuation: Multiple Analysis Initiation Coverage Why Invest in Piaggio Financial Analysis Valuation Risk Analysis Company Overview

Target Price: € 2.48 EMs multiple - for the Asian Business: DMs multiple - for the non-Asian Business: 9.7 x 3.8 x Valuation: Multiple Analysis As regards the whole Piaggio Group (EV/EBITDA multiple): Initiation Coverage Why Invest in Piaggio Financial Analysis Valuation Risk Analysis Company Overview

DCF Analysis: Multiple Analysis: Year-end Target Price: (upside: 10.42%) € 2.48 € 2.73 € % weight 30% weight Valuation: Target Price Initiation Coverage Why Invest in Piaggio Financial Analysis Valuation Risk Analysis Company Overview

RISK ANALYSIS Initiation Coverage Why Invest in Piaggio Financial Analysis Valuation Risk Analysis Company Overview

Unsuccessful product launches Stronger competition Exchange rate risk Risk analysis: Risks coming from Asia Initiation Coverage Why Invest in Piaggio Financial Analysis Valuation Company Overview Risk Analysis

GDP growth rates Increase in energy, raw materials and component costs Tighter regulations Risk analysis: Global risks Initiation Coverage Why Invest in Piaggio Financial Analysis Valuation Company Overview Risk Analysis

Price Confidence Interval: € € % of risk comes from Asia Risk analysis: Montecarlo Simulation Initiation Coverage Why Invest in Piaggio Financial Analysis Valuation Risk Analysis Company Overview

Questions Company Overview Initiation Coverage Why Invest in Piaggio Financial Analysis Valuation Risk Analysis

PIAGGIO S.p.A. Politecnico Student Research ICFAS Investment Research Challenge 2011 Automobiles & Parts

Data and Charts Balance Sheet Income Statement Cash Flow Statement India Cash Flow Statement Europe Cash Flow Statement South Eastern Asia Volatility Analysis WACC Adj. Tax Rates Ratios Comparable Companies 1 Corporate Governance SWOT analysis Product Launches Terminal Value Company Overview Initiation Coverage Why Invest in Piaggio Financial Analysis Valuation Risk Analysis Comparable Companies 2

Terminal Value Data and Charts HighMediumLow Strongly developing3-5%2-3%0-1% Moderately developing %1-2%0% Stable0-1%0% Decadent0% Industry Cash flow growth capability of the company Source: Guatri (1998) Long term growth rate = long term population growth + long term productivity growth

Balance Sheet Data and Charts Source: Company Data, Politecnico Estimates

Data and Charts Source: Company data, Politecnico Estimates

Cash Flow Statement India Data and Charts Source: Politecnico Estimates

Cash Flow Statement Europe and US Data and Charts Source: Politecnico Estimates

Cash Flow Statement South Eastern Asia Data and Charts Source: Politecnico Estimates

Ratios Data and Charts Source: Company data, Politecnico Estimates

Comparable Companies Data and Charts

Comparable Companies Data and Charts Basic Assumptions: EBITDA margin is 50% higher in EMs Markets’ exposure is equal to the percentage of Sales in EMs EV/EBITDA multiple for the whole Company:  EMs multiple: Equal to the Indian peers’ multiple = 9.7 x  DMs multiple: Mkt_Multiple = (EBITDA_DMs x Multiple_DMs) + (EBITDA_EMs x Multiple_EMs) known estimated 9.7 x 3.8 x

Volatility Analysis Data and Charts Source: Politecnico Estimates

WACC Data and Charts Source: Politecnico Estimates

Adjusted Tax Rates Data and Charts Source: Politecnico Estimates

SWOT Analysis Data and Charts

Product Launches Data and Charts

Corporate Governcance Data and Charts

PIAGGIO S.p.A. Politecnico Student Research ICFAS Investment Research Challenge 2011 Automobiles & Parts