Deutsche Börse Student
Research
Piaggio & C. Spa
Università degli Studi di Padova
Facoltà di Economia
OUR ANALYSIS IN BRIEF
Current price: € 2,37
Fair Value: € 2,59 - 2,85
(twelve months)
Target Price: € 2,6
Upside: 9%
Rating: HOLD
Market Cap (EurM)
877
Shares Outstanding (M)
372
Main Shareholder
IMMSI Spa (53,6%)
2nd Shareholder
Diego Della Valle (5%)
Free float
39%
52 weeks price change
1,77 - 2,71
Beta vs FTSE MIB
0,7
2
COMPANY DESCRIPTION
• Biggest European motorcycle manufacturer.
• Two Business Units: 2W and LCV.
• Seven well-differentiated brands.
• Strong presence in developed countries.
• Growing focus on emerging countries (Asia).
3
INDUSTRY OVERVIEW: 2W
DEVELOPED COUNTRIES
•Scooters used for fast urban transportation.
•Motorcycles as recreational vehicles.
•Preference for power and design (premium
vehicles).
•Flat registrations.
•The Japanese manufacturers (Yamaha and
Honda) dominate the market in the EU and
US.
EMERGING COUNTRIES
•2W serve family and work transportation
purposes.
•Small size, low cost are paramount.
•Premium products have10% market share.
•Growing registrations.
•New Asian manufacturers are emerging.
4
INDUSTRY OVERVIEW: LCV
EUROPE
•LCV are used for cargo transportation in city centers.
•Key feature is small-size/high capacity ratio.
•Piaggio focuses on <2,5 tons.
•Market is declining, but Piaggio performed better than industry
(-18% vs -20%) in 2009.
INDIA
•LCV to overcome lack of infrastructure.
•Affordable and versatile vehicles.
•Piaggio is leader for 3W (+14 YoY in ’09).
•Growth expectations are 15-18% YoY.
•Piaggio’s share is 41% in 3W and 5% in 4W. Key competitor: Bajaj
5
COMPETITIVE POSITIONING
•Piaggio focuses on 2W and LCV.
•In general, the market is dominated by Japanese manufacturers.
•Piaggio has 7 different brands, some are icons (Vespa).
•The strategy consists in premiumisation.
Piaggio focuses on a well-defined
niche, and is therefore relatively
small if compared to the Japanese
manufacturers
6
FINANCIAL ANALYSIS:
Link to European market is still strong
7
FINANCIAL ANALYSIS
REGISTRATIONS:
Flat 2W and LCV in developed countries
 strategy: maintain the market share.
Growth is expected in emerging countries,
especially thanks to:
•introduction of 2W in India in mid-2012
•launch of new 2W designed for the Asian market
•development in the LCV (new engines, focus on
4W)
PROFITABILITY:
Improvement thanks to a larger share of units
made in the Asian plants.
8
DCF VALUATION
PV of Free Cash Flow
308
PV of Terminal Value
1001
Estimated Enterprise Value
1309
Net Financial Position
346
Estimated Equity Value
963
Nr. of shares (M)
372
FAIR VALUE (EUR)
2,59
9
MULTIPLE VALUATION
P/E
EV/Sales
EV/EBITDA
2010
2011E
2012E
2010
2011E
2012E
2010
2011E
2012E
Honda Motor
16,9
12,75
11,2
2,2
1,3
1,15
12,4
9,2
8,1
Mahindra &
Mahindra
19,6
13,35
11,75
0,4
0,95
0,8
4,6
7,05
5,65
Yamaha Motor
19,2
13,35
11,2
1,7
0,9
0,75
10,4
6,9
5,85
Bajaj Auto
23,6
12,8
8,1
0,4
0,4
0,3
9
6,8
5
Harley Davidson
21,8
15,7
13,2
3,2
2,35
1,85
15,5
10,9
8,35
19,6
13,35
11,2
1,7
0,95
0,8
10,4
7,05
5,85
38
55
66
1496
1661
1770
191
219
238
740
730
734
2543
1578
1416
1989
1547
1390
-346
-338
-323
-346
-338
-323
Median
Piaggio
Median EV
NFP
Median Equity
740
730
734
2198
1241
1092
1644
1209
1067
Number of shares
372
372
372
372
372
372
372
372
372
Target Price
AVERAGE
TARGET PRICE
1,96
3,34
2,85
10
3,25
RISK ANALYSIS AND RATING
WHY SLOW AND STEADY (DOES NOT) WIN THE RACE...
•Piaggio is still heavy focused on the flat European market.
•Asian countries are expected to grow, but Piaggio concentrates on a premium niche with little numbers
(market share will remain approx. 2,5% in 2W in India and Vietnam).
•New 2W vehicles in Asia will be introduced only in 2011 (2012 in India).
MAIN RISKS TO OUR ANALYSIS
•Negative impact on operating leverage as revenues slow down (-2% in revenues may impact up to -22%
on EPS in 2013).
•Cyclicality of demand. Performance will be disappointing in the event of an economic setback.
•Regulations, especially in developed countries, may push the industry players towards eco-sustainable
solutions.
•Exposure to emerging countries: weak enforcement of industrial property regulations may encourage
product imitation by competitors.
•Food inflation in Asia may reduce the income share dedicated to transportation.
For all these reasons, considered the fair value range between Eur 2,59 and Eur 2,85, we
considered appropriate a 12-months target price of Eur 2,6 and a HOLD recommendation.
11
Thank You For Your Attention!
12
UNITS SOLD FORECAST
13
SWOT ANALYSIS
14
INCOME STATEMENT
2009A
2010E
2011E
2012E
2013E
2014E
2015E
Net Sales
1452
1458
1623
1731
1833
1882
1946
Other Sales
37,2
37,6
38,0
38,4
38,9
39,4
39,9
Total
Revenues
1487
1496
1661
1770
1872
1921
1986
Operating Costs
-1284
-1305
-1442
-1532
-1614
-1654
-1707
EBITDA
203
191
219
238
258
267
279
D&A
-96
-97
-98
-99
-100
-101
-102
EBIT
106
94
121
138
158
166
177
Net Fianancial
income
(Charges)
-30
-33
-33
-33
-32
-32
-32
Pre-Tax
76
61
88
106
126
134
145
Tax
-27
-23
-34
-40
-48
-51
-55
Net Income
49
38
55
65
78
83
90
15
BALANCE SHEET
2009A
2010E
2011E
2012E
2013E
2014E
2015E
Fixed Assets
892
902
912
922
932
962
972
NWC
17
26
41
56
71
86
101
Total Risk
Funds
-134
-134
-134
-134
-134
-134
-134
NET CAPITAL
EMPLOYED
776
794
819
844
869
914
939
GROSS
CAPITAL
EMPLOYED
909
920
953
978
1003
1048
1073
Shareholder’s
Equity
422
446
479
518
565
615
669
Net Financial
Debt
352
346
338
323
302
297
268
16
WACC
17
SENSITIVITY ANALYSIS
15,5%
15,0%
14,5%
EBITDA 14,0%
margin 13,5%
13,0%
12,5%
12,0%
0,5%
2,71
2,54
2,38
2,22
2,05
1,89
1,72
1,56
Growth Rate
1,0%
1,5%
2,0%
2,92
3,16
3,45
2,74
2,97
3,24
2,57
2,78
3,03
2,39
2,59
2,82
2,21
2,40
2,62
2,04
2,21
2,41
1,86
2,02
2,20
1,68
1,83
1,99
18
2,5%
3,78
3,55
3,32
3,10
2,87
2,64
2,42
2,19
SENSITIVITY ANALYSIS
Normalized
WACC
8,00%
8,05%
8,15%
8,20%
8,25%
8,30%
8,35%
12,0%
Normalized Growth Rate
0,5% 1,0% 1,5% 2,0% 2,5%
2,26 2,44 2,62 2,90 3,19
2,25 2,43 2,63 2,87 3,16
2,23 2,41 2,61 2,85 3,13
2,22 2,39 2,59 2,82 3,10
2,20 2,37 2,57 2,80 3,07
2,19 2,36 2,55 2,78 3,04
2,17 2,34 2,53 2,75 3,02
2,16 2,32 2,51 2,73 2,99
19
3,0%
2,10
2,09
2,08
2,06
2,05
2,04
2,02
2,01