Deutsche Bank
Markets Research
Rating
Company
Hold
Pirelli & C
Date
3 April 2014
Forecast Change
Europe
Italy
Autos
Tires
Reuters
PECI.MI
Bloomberg
PC IM
ADR Ticker
PPASY
ISIN
US7242562012
Price at 2 Apr 2014 (EUR)
Exchange Ticker
MIL
PECI
11.32
Price Target (EUR)
12.00
52-week range (EUR)
Over exposed to EM
12.93 - 7.11
Gaetan Toulemonde
Research Analyst
(+33) 1 4495-6668
gaetan.toulemonde@db.com
Over exposed to Emerging Markets
Pirelli remains a mix driven story. Premium tires are currently growing at a high
rate, +15% p.a., significantly in excess of the growth rate of the premium
sector (+8% p.a.) and significantly more than peer groups last year (Michelin
+12%, Continental +7%). Risks remain on the sustainability of such a superior
growth. Furthermore, the group is over-exposed to emerging markets such as
Latin America (36% of revenues and 45% of EBIT) and Russia (4% of revenues,
losses) where the arbitrage prices increase versus volume growth will be
particularly challenging this year. Hold maintained on valuation.
2013 results in line
Even if in line, stable EBIT is a disappointing performance when i) volumes are
positive (+6%), especially in high margin premium tires (+15%), ii) Price/Mix is
also positive (+2.9%) and iii) raw material prices provided a significant tailwind
(Euro +140m).
Outlook 2014: emerging markets will be challenging
Mgt maintains its EBIT of Euro 850m (after restructuring charges), +8% YoY, in
line with consensus. This growth is mostly driven by premium tire growth
(+14%) and by a positive Price/Mix of +4/5% (of which prices +1%). However,
2014 will be a challenging year for Pirelli due to their over-exposure to
emerging markets (Latin America and Russia represent 40% of group’s
revenues). To offset raw material price inflation in these countries (notably
Argentina, Venezuela…), Pirelli and the industry will have to significantly
increase their selling prices. And it could weigh on demand. As such, we
modestly cut our FY EBIT from Euro 850m to Euro 800m, a 1% increase on
2013.
Key changes
11.00 to 12.00 ↑
Target Price
9.1%
Source: Deutsche Bank
Price/price relative
14
12
10
8
6
4
4/11
10/11
4/12
10/12
4/13
10/13
Pirelli & C
DJ (.STOXXE) (Rebased)
Performance (%)
Absolute
DJ (.STOXXE)
1m
3m
12m
-10.2
-9.2
36.8
1.2
5.1
20.5
Source: Deutsche Bank
Valuation/Risk
We upgrade our TP from Euro 11.0 to Euro 12.0. Our TP is now based on
2015e (versus 2014 previously). Our TP is based on the average of 2015E P/E
of 12x and EV/EBITDA of 6x, in line with what we use for other tire Cos. Tire
Cos enjoy a valuation premium versus auto part Cos as they are more involved
in the less cyclical aftermarket business. Key downsiderisks: i) surge of raw
material price increases (mostly natural rubber) ii) an aggressive price war
initiated at the entry-level segment, leading Pirelli to give back to customers a
high percentage of savings, limiting margin improvement. Upside risk:
stronger growth in premium tires where the group generates very high
margins.
Forecasts And Ratios
Year End Dec 31
DB EPS (EUR)
P/E (DB EPS) (x)
DPS (EUR)
Yield (%)
2012A
0.80
10.5
0.32
3.8
2013A
0.62
15.1
0.32
3.4
2014E
0.82
13.8
0.36
3.2
2015E
0.91
12.4
0.40
3.5
Source: Deutsche Bank estimates, company data
________________________________________________________________________________________________________________
Deutsche Bank AG/London
Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should
be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should
consider this report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST
CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MICA(P) 054/04/2013.
3 April 2014
Tires
Pirelli & C
Fiscal year end 31-Dec
Model updated:01 April 2014
Running the numbers
2010
2011
2012
2013
2014E
2015E
0.50
0.04
0.17
4.0
0.62
0.90
0.27
4.3
0.80
0.80
0.32
4.8
0.62
0.62
0.32
6.6
0.82
0.82
0.36
6.6
0.91
0.91
0.40
6.6
562
1,383
1,839
500
3,083
3,821
494
4,077
5,282
488
4,573
5,896
488
5,524
6,566
488
5,524
6,407
P/E (DB) (x)
P/E (Reported) (x)
P/BV (x)
5.7
64.6
1.52
10.1
7.0
1.52
10.5
10.5
1.81
15.1
15.1
1.90
13.8
13.8
1.71
12.4
12.4
1.71
FCF Yield (%)
Dividend Yield (%)
13.2
5.8
nm
4.3
1.5
3.8
nm
3.4
4.7
3.2
6.2
3.5
0.4
2.8
4.3
0.7
4.6
6.3
0.9
4.8
6.4
1.0
5.3
7.2
1.1
5.6
7.7
1.0
5.0
6.9
4,848
654
654
222
0
433
-66
23
-25
0
365
137
-17
-224
21
5,655
835
835
225
0
610
-90
-17
-27
0
476
163
-11
128
453
6,072
1,091
1,091
271
0
820
-130
-52
-39
0
599
201
4
0
394
6,146
1,105
1,105
289
0
817
-196
-78
-26
0
517
210
3
0
304
6,250
1,174
1,174
323
0
851
-178
-30
-20
0
623
219
4
0
400
6,680
1,285
1,285
355
0
930
-169
-30
-20
0
711
261
5
0
445
223
244
-140
312
0
394
0
304
0
400
0
445
628
-418
210
0
-85
-422
-95
-392
69
589
-620
-31
0
-84
594
-162
317
19
514
-451
63
0
-135
598
-381
145
-310
291
-413
-123
0
-160
138
-215
-360
-504
662
-400
262
0
-156
0
0
106
-115
740
-400
340
0
-176
0
0
164
-115
455
1,977
849
373
1,965
5,618
910
2,681
3,591
1,991
37
2,028
456
718
2,357
934
337
2,368
6,714
1,455
3,068
4,523
2,146
45
2,192
737
905
2,623
1,022
279
2,763
7,593
2,110
3,094
5,203
2,337
52
2,389
1,205
211
2,741
1,048
491
2,569
7,060
1,533
1,981
3,514
3,236
310
3,546
1,322
211
2,741
1,048
1,014
2,460
7,474
1,252
2,676
3,928
3,236
310
3,546
1,042
211
2,741
1,048
1,014
2,460
7,474
1,093
2,835
3,928
3,236
310
3,546
882
8.7
11,903.9
13.5
8.9
432.9
1.0
9.1
2.0
22.5
6.6
16.6
24.9
14.8
10.8
29.8
21.9
11.1
2.8
33.6
6.8
7.4
27.7
18.0
13.5
40.2
17.6
7.8
1.7
50.4
6.3
1.2
-21.9
18.0
13.3
51.4
10.9
6.7
1.4
37.3
4.2
1.7
31.8
18.8
13.6
43.9
12.4
6.4
1.2
29.4
4.8
6.9
11.2
19.2
13.9
43.9
13.8
6.0
1.1
24.9
5.5
Financial Summary
DB EPS (EUR)
Reported EPS (EUR)
DPS (EUR)
BVPS (EUR)
Europe
Italy
Tires
Pirelli & C
Reuters: PECI.MI
Bloomberg: PC IM
Weighted average shares (m)
Average market cap (EURm)
Enterprise value (EURm)
Valuation Metrics
Hold
Price (2 Apr 14)
EUR 11.32
Target Price
EUR 12.00
52 Week range
EUR 7.11 - 12.93
Market Cap (m)
EURm 5,524
USDm 7,605
EV/Sales (x)
EV/EBITDA (x)
EV/EBIT (x)
Income Statement (EURm)
Company Profile
The Pirelli Group has a long industrial tradition and a
position of leadership in all sectors in which it is active.
With 135 years of experience, Pirelli is a multinational,
deeply rooted in all countries in which it operates. The
group has focused its activities on a selected number of
high profit margin businesses, with segmentation towards
high-range products. In the tyres business, which
represents the group's core business, Pirelli is the leader in
the top market segment in terms of technologies,
improved earnings and quality of management, and it is
the world's fifth largest tyre manufacturer in term of sales
Price Performance
14
12
10
Sales revenue
Gross profit
EBITDA
Depreciation
Amortisation
EBIT
Net interest income(expense)
Associates/affiliates
Exceptionals/extraordinaries
Other pre-tax income/(expense)
Profit before tax
Income tax expense
Minorities
Other post-tax income/(expense)
Net profit
DB adjustments (including dilution)
DB Net profit
8
6
Cash Flow (EURm)
4
Apr 11
Oct 11
Apr 12
Oct 12
Pirelli & C
Apr 13
Cash flow from operations
Net Capex
Free cash flow
Equity raised/(bought back)
Dividends paid
Net inc/(dec) in borrowings
Other investing/financing cash flows
Net cash flow
Change in working capital
Oct 13
DJ (.STOXXE) (Rebased)
Margin Trends
20
16
Balance Sheet (EURm)
12
8
10
11
12
13
EBITDA Margin
14E
15E
EBIT Margin
Growth & Profitability
20
25
15
20
15
10
10
5
5
0
Cash and other liquid assets
Tangible fixed assets
Goodwill/intangible assets
Associates/investments
Other assets
Total assets
Interest bearing debt
Other liabilities
Total liabilities
Shareholders' equity
Minorities
Total shareholders' equity
Net debt
0
10
11
12
13
14E
Sales growth (LHS)
Key Company Metrics
15E
ROE (RHS)
Solvency
60
50
40
30
20
10
0
8
6
4
2
0
10
11
12
Net debt/equity (LHS)
13
14E
15E
Sales growth (%)
DB EPS growth (%)
EBITDA Margin (%)
EBIT Margin (%)
Payout ratio (%)
ROE (%)
Capex/sales (%)
Capex/depreciation (x)
Net debt/equity (%)
Net interest cover (x)
Source: Company data, Deutsche Bank estimates
Net interest cover (RHS)
Gaetan Toulemonde
+33 1 4495-6668
Page 2
gaetan.toulemonde@db.com
Deutsche Bank AG/London
3 April 2014
Tires
Pirelli & C
Pirelli on a page
Figure 1: Revenues by segment (2013)
Figure 2: EBIT by segment (2013)
Steel cord, 2%
Industrial
business, 27%
Truck tires, 25%
Passenger tires,
67%
Motorbike
tires, 6%
Consumer
business, 73%
Source: Pirelli
Source: Pirelli
Figure 3: Revenues by region (2013)
Figure 4: EBIT by region (2013)
MEA, 8%
MEA, 10%
Asia Pacific,
10%
Asia Pacific, 8%
Europe, 27%
Europe, 33%
Nafta, 11%
Nafta, 9%
Russia, -2%
Russia, 4%
South America,
36%
South America,
45%
Source: Pirelli
Source: Pirelli
Figure 5: Raw materials (37% of sales)
Figure 6: Shareholders
Steel cord, 7%
Natural rubber,
24%
Textile, 11%
Camfin, 26%
Chemicals, 16%
Other, 58%
Carbon
black,
13%
Source: Pirelli
Deutsche Bank AG/London
Malacalza, 7%
Synthetic
rubber, 29%
Edizione, 5%
Mediobanca,
4%
Source: Pirelli
Page 3
3 April 2014
Tires
Pirelli & C
Earnings estimates
Summary of our estimates
Figure 7: Summary of our estimates
(Euro m)
H1 13
H2 13
2013
H1 14e
H2 14e
2014e
2015e
2016e
Revenues
3,131
3,016
6,146
3,190
3,060
6,250
6,680
7,130
+4%
-1%
+1%
+2%
+1%
+2%
+7%
+7%
381
410
791
397
404
801
910
990
% Sales 12.2%
13.6%
12.9%
12.4%
13.2%
12.8%
13.6%
13.9%
YoY variation (%)
EBIT after restructuring
Net Profit
151
152
304
182
218
400
445
500
EPS
0.31
0.31
0.62
0.37
0.45
0.82
0.91
1.02
1,322
1,610
1,040
880
640
Net debt
1,733
Source: Deutsche Bank, Company data
2013: Revenues (Euro 6,150m, +1% YoY), EBIT (Euro 791m, stable YoY) and
net debt (Euro 1.3bn) are all in line with Mgt guidance (Capital Market Day 5th
Nov) and estimates (both DB and consensus). And if net profit of Euro 304m
(or Euro 0.62/share), -21% YoY, is 15% below estimates, it’s only attributable
to equity participation losses (mostly to Prelios). Overall, even if in line, we
believe stable EBIT is a disappointing performance when i) volumes are
positive (+6%), especially in high margin premium tires (+15%), ii) Price/Mix is
positive as well (+2.9%) and iii) raw material prices were a significant tailwind
(Euro +140m).
2014: Mgt is maintaining its EBIT of Euro 850m (after restructuring charges),
+8% YoY, in line with consensus. This growth is mostly driven by premium tire
growth, +14%+, and by a positive Price/Mix of +4/5% (of which prices +1%).
However, 2014 will likely be a challenging year for Pirelli, due to their overexposure to emerging markets (South America and Russia represent 36% and
4% of group’s revenues) where the group generates over proportional profits
(South America generates 45% of group’s EBIT). To offset raw material price
inflation in these countries (notably Argentina, Venezuela…), Pirelli and the
industry will have to significantly increase their selling prices (by double digit).
And it could weigh on demand. This is why Mgt guidance looks challenging.
We are cutting our FY EBIT from Euro 850m to Euro 800m, a modest 1%
increase on 2013. Thus, we expect EBIT to be stable for the second
consecutive year.
2015 & 2016. Our estimates are based on revenues growth of +7% p.a.
(equally spread between volume and mix) and on EBIT growth of +9/10% p.a.
(before restructuring charges). Our 2016 EBIT estimate is 10% below Mgt
target.
Page 4
Deutsche Bank AG/London
3 April 2014
Tires
Pirelli & C
Wrap up of 2013
Main points of P&L:
„
A strong volume increase of +6% of which +9% was in trucks and +5% in
pass tires. In pass tires, volume of premium tires increased by a high +15%.
Volume growth of Pirelli was stronger than at European peers.
Figure 8: Volume growth
(YoY %)
Continental
Michelin
Nokian Tyres
Pirelli
Industry
Volume growth
+2%
0%
-1%
+6%
+3%
o/w pass tires
+2%
+1%
-1%
+5%
+3%
o/w truck tires
+6%
+1%
NS
+9%
+5%
Source: Deutsche Bank, Company data
Volume growth was stronger in emerging markets (+10%) where EBIT
margin is probably lower than in mature markets (+2%). This explains the
low operating leverage of the volume effect, 18% (when slowdown is
included).
„
Price/Mix effect of +3% of which +3.5% was in mix and -0.5% in prices. In
pass tires, the negative prices (-1.5%) were significantly better than at peer
groups (-4% at Continental, -3% at Michelin).
„
Raw mat tailwind of Euro 246m (before the negative Forex effect), stronger
than at peer group. Thus, Pirelli benefitted from a less negative price effect
and from a stronger positive raw mat effect.
Figure 9: Net impact of raw mat net of selling prices in 2013
(Euro m)
Continental
Michelin
Nokian Tyres
Pirelli
400
619
50
246(1)
(390)
(550)
(15)
(30)
10
+69
+35
+216
Raw material tailwind
Selling price
Net impact
Source: Deutsche Bank, Company data
(1)
Before a negative Forex effect of Euro 110m
„
Significant negative Forex effect of Euro 173m on EBIT (including Euro
110m on raw materials). This is a translation exposure of 40% (mostly
South America where EBIT margin of 17% is above the group’s average)
and 60% the higher price of raw materials in emerging countries.
„
EBIT was stable YoY despite the strong growth of premium tires which, in
theory, enjoy a much higher EBIT margin. The only explanation we could
find is that premium tires in emerging markets record a much lower EBIT
margin than in mature markets.
„
Below the EBIT line, the contribution of associates was negative by a high
Euro 78m, of which Euro 57m from Prelios (fair value adjustment of the
convertible and consolidation of losses). Losses from equity participation
should decline significantly in 2014.
Net debt:
„
Positive free CF of Euro 285m thanks to a neutral WCR (a strong positive in
Q4).
„
Net debt increased by Euro 110m to Euro 1.3bn, mostly due to the
dividend payment (Euro 160m) and to Prelios capital increase (Euro 190m).
Deutsche Bank AG/London
Page 5
3 April 2014
Tires
Pirelli & C
2014 Outlook
Mgt is guiding for revenues of Euro 6.2bn, +1% YoY, is maintaining EBIT target
of Euro 850m (after Euro 50m of restructuring charges) and is maintaining a
net debt target of Euro 1.2bn (before the disposal of the steel cord business).
Main points should be:
Revenues of Euro 6.2bn
„
Revenues should increase by +1% of which volumes +5%, Price/Mix +5%
and Forex -9%. Mgt is still ambitious on volume growth which should be
higher than European peer groups, like in 2013, (in average +4%, DBe) and
higher than the industry (+4% as well). This supposes that volumes stay
strong in emerging markets when economies are slowing down and when
customers will have to digest strong price increase (to offset inflation
costs).
„
Similar to 2013, volume growth should be driven by premium tires
(+15%e), with a recovery in Europe (better mix, higher margins).
„
Price & Mix of +5% of which +4% in Mix and +1% in Prices. To offset raw
mat inflation in emerging markets (mostly South America and Russia for
Pirelli or 40% of revenues), the group needs to significantly increase selling
prices. Thus, the +1% price increase is probably a mixture between a high
single digit increase in emerging markets and -3% in Europe which would
be in line with peer groups (both Continental and Michelin are guiding for
negative prices of around -3%).
EBIT of Euro 800m (after Euro 50m of restructuring charges), +1% YoY, below
Mgt target of Euro 850m
Negatives:
„
Inflation costs (wages increase…) net of efficiencies gains, start up costs,
depreciation increase… should represent a cumulative headwind of Euro
120m (comparable to 2013).
„
Forex should be significantly more negative than last year, Euro 285m
(including Euro 175m on raw materials), versus Euro -173m last year
(including Euro 110m on raw materials). Similar to 2013, 40% of the
negative impact should come from a translation effect and 60% from raw
material inflation costs in emerging markets.
Positives:
„
Raw materials prices (before negative Forex effect) should
significantly positive this year, Euro+100m, like for other tire Cos.
stay
Figure 10: Net impact of raw mat net of selling prices in 2014e
(Euro m)
Continental
Michelin
Nokian Tyres
Pirelli
100
400
30
100(1)
Selling price
(300)
(240)
20
60
Net impact
(200)
160
+50
160
Raw material tailwind
Source: Deutsche Bank, Company data
(1)
Before a negative Forex effect of Euro 175m
Lower raw material prices are mostly attributable to natural rubber price as
shown in the table below (there is a 4 months lag effect before the raw
material prices impact the P&L).
Page 6
Deutsche Bank AG/London
3 April 2014
Tires
Pirelli & C
Figure 11: Raw materials (37% of sales)
5.5
Steel cord, 7%
Natural rubber,
24%
Textile, 11%
Figure 12: Natural & Synthetic rubber prices (USD/kg)
5.3
5.0
4.7
4.5
4.3
4.6
4.0
3.5
Chemicals, 16%
3.1
3.0
Carbon
black,
13%
3.1
3.3
3.0
3.9
3.6 3.7
3.6
2.8
2.5
2.3 2.5
2.6
3.2
2.8
3.0 2.9
2.7
2.9
2.4
2.4
2.4
2.3
2.0
Synthetic
rubber, 29%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
10 10 10 10 11 11 11 11 12 12 12 12 13 13 13 13 14e 14e
Natural rubber price (USD/kg)
Source: Deutsche Bank
„
3.3
Synthetic rubber price (USD/kg)
Source: IRSG, Deutsche Bank estimates
Volume effect (+5%) and positive Price & Mix (+5%)
To achieve an EBIT target of Euro 850m, the volume and the Price & Mix
effects should have a significant impact on EBIT (Euro +350m). This is 3x more
than last year when volume growth should be comparable (+5% versus +6%)
and the Price& Mix effect (+5% versus +3%) slightly better. This underlines
that 60% of their impact on revenues fall to the bottom line.
Even if mix is stronger thanks to a recovery in Europe (when premium tires
generate higher margins than in emerging markets) and even if Russia
recovers (an EBIT improvement of Euro 20/30m), such a high 60% OP leverage
looks very ambitious. As a result, we cut our FY EBIT estimates to Euro 800m,
+1% YoY, versus Euro 850m previously and guided by Mgt. Our estimate still
corresponds to a fall through of a high 50%.
By quarter, Q1 should record the strongest growth, EBIT +12% YoY (before
restructuring charges) due to a low base effect.
Net Profit of Euro 400m, +32% YoY
Net profit should benefit from a sharp reduction of losses from associates
(approx 60% less) and from the capital gain (Euro+30m in Q4 14e) on the
disposal of the steel-cord business to Bekaert (if approved by antitrust
organizations as expected by Mgt).
Net debt of Euro 1.0bn
„
Free CF should be quite comparable to last year, or Euro 285m
„
Dividend payment should be stable at Euro 160m
„
Debt reduction of Euro 200m from the sale of the steel cord business to
Bekaert. This business was sold for Euro 255m (including Euro 40m of
debt) for revenues of Euro 300m (of which 40% sold to third parties) and
an EBIT margin of 10%.
Deutsche Bank AG/London
Page 7
3 April 2014
Tires
Pirelli & C
DB versus consensus
Figure 13: DB estimates versus consensus (source Pirelli)
2013
Revenues
2014e
DBe
Consensus
2015e
DBe Consensus
e
2016e
DBe
Consensus
e
6,146
6,250
6,239
6,680
6,650
7,130
7,105
EBIT after restruct
791
801
846
910
961
990
1,063
Net Income
304
400
439
445
523
500
606
EPS
0.62
0.82
0.90
0.91
1.07
1.02
1.24
1,322
1,000
1,070
870
843
640
541
Net debt
Source: Deutsche Bank, Company data
Page 8
Deutsche Bank AG/London
3 April 2014
Tires
Pirelli & C
Valuation
Historical valuation
We upgrade our TP from Euro 11.0 to Euro 12.0. Our TP is now based on
2015e (versus 2014 previously). Our TP is based on the average of 2015E P/E
of 12x and EV/EBITDA of 6x, in line with what we use for other tire Cos.
Today, Pirelli has an EV of Euro 7.0bn: market cap of Euro 5.5bn (488m shares
x Euro 11.2), a net debt of Euro 1.0bn (end of 2014e) and pension liabilities of
Euro 0.5bn
Figure 14: P/E contours of 9.0x, 11.0x and 13.0x
Figure 15: EV/EBITDA contours of 3.5x, 5.0x and 6.5x
PE contours of 9.0x, 12.0x and 13.0x
9.0x
14
EV/EBITDA contours of 3.5x, 5.0x and 6.5x
12.0x
13.0x
3.5x
9,000
5.0x
6.5x
8,000
12
7,000
10
6,000
8
5,000
6
4,000
3,000
4
Source: Deutsche Bank
Jan-14
Mar-14
Nov-13
Jul-13
Sep-13
May-13
Jan-13
Mar-13
Nov-12
Jul-12
Sep-12
May-12
Jan-12
Mar-12
Nov-11
Jul-11
Sep-11
May-11
Jan-11
Mar-11
Sep-10
Jan-14
Mar-14
Nov-13
Jul-13
Sep-13
May-13
Jan-13
Mar-13
Nov-12
Jul-12
Sep-12
May-12
Jan-12
Mar-12
Nov-11
Jul-11
Sep-11
May-11
Jan-11
Mar-11
Sep-10
0
Nov-10
1,000
0
Nov-10
2,000
2
Source: Deutsche Bank
Pirelli versus European peers
Figure 16: Valuation of Pirelli versus European peers
(27 March 2014)
Continental (Buy)
Price
TP
P/E
2014e
2015e
Yield
P/Book
EV/ EBITDA
2014e 2015e
172
195
13.1
11.7
2.0%
2.7
6.8
5.8
Michelin (Buy)
91
110
11.4
9.7
3.0%
1.6
5.8
5.1
Nokian Tyres (Hold)
29
35
11.3
10.3
5.3%
2.5
6.9
6.1
11.2
12.0
14.0
12.5
3.3%
1.8
5.6
5.0
Pirelli (Hold)
Source: Deutsche Bank, Bloomberg Finance LP
Deutsche Bank AG/London
Page 9
3 April 2014
Tires
Pirelli & C
Appendix 1
Important Disclosures
Additional information available upon request
Disclosure checklist
Company
Ticker
Recent price*
Disclosure
Pirelli & C
PECI.MI
11.32 (EUR) 2 Apr 14
14
*Prices are sourced from local exchanges via Reuters, Bloomberg and other vendors. Data is sourced from Deutsche Bank and subject companies
Important Disclosures Required by U.S. Regulators
Disclosures marked with an asterisk may also be required by at least one jurisdiction in addition to the United States.
See Important Disclosures Required by Non-US Regulators and Explanatory Notes.
14. Deutsche Bank and/or its affiliate(s) has received non-investment banking related compensation from this company
within the past year.
For disclosures pertaining to recommendations or estimates made on securities other than the primary subject of this
research, please see the most recently published company report or visit our global disclosure look-up page on our
website at http://gm.db.com/ger/disclosure/Disclosure.eqsr?ricCode=PECI.MI
Analyst Certification
The views expressed in this report accurately reflect the personal views of the undersigned lead analyst(s) about the
subject issuer and the securities of the issuer. In addition, the undersigned lead analyst(s) has not and will not receive
any compensation for providing a specific recommendation or view in this report. Gaetan Toulemonde
Historical recommendations and target price: Pirelli & C (PECI.MI)
(as of 4/2/2014)
14.00
Previous Recommendations
12.00
Strong Buy
Buy
Market Perform
Underperform
Not Rated
Suspended Rating
6
4
3
Security Price
10.00
5
8.00
1
Current Recommendations
2
Buy
Hold
Sell
Not Rated
Suspended Rating
6.00
4.00
*New Recommendation Structure
as of September 9,2002
2.00
0.00
Apr 11
Jul 11
Oct 11
Jan 12
Apr 12
Jul 12
Oct 12
Date
Jan 13 Apr 13
Jul 13
Oct 13
Jan 14
1.
16/05/2011:
Buy, Target Price Change EUR8.00
4.
24/01/2013:
Downgrade to Hold, EUR10.50
2.
24/11/2011:
Buy, Target Price Change EUR9.00
5.
08/05/2013:
Hold, Target Price Change EUR9.50
3.
15/03/2012:
Buy, Target Price Change EUR10.50
6.
13/11/2013:
Hold, Target Price Change EUR11.00
Page 10
Deutsche Bank AG/London
3 April 2014
Tires
Pirelli & C
Equity rating key
Buy: Based on a current 12- month view of total
share-holder return (TSR = percentage change in
share price from current price to projected target price
plus pro-jected dividend yield ) , we recommend that
investors buy the stock.
Sell: Based on a current 12-month view of total shareholder return, we recommend that investors sell the
stock
Hold: We take a neutral view on the stock 12-months
out and, based on this time horizon, do not
recommend either a Buy or Sell.
Notes:
1. Newly issued research recommendations and
target prices always supersede previously published
research.
2. Ratings definitions prior to 27 January, 2007 were:
Equity rating dispersion and banking relationships
400
350
300
250
200
150
100
50
0
56 %
36 %
53 %
37 %
8%
Buy
Hold
Companies Covered
30 %
Sell
Cos. w/ Banking Relationship
European Universe
Buy: Expected total return (including dividends)
of 10% or more over a 12-month period
Hold:
Expected
total
return
(including
dividends) between -10% and 10% over a 12month period
Sell: Expected total return (including dividends)
of -10% or worse over a 12-month period
Deutsche Bank AG/London
Page 11
3 April 2014
Tires
Pirelli & C
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