Ejemplo Politecnico Di Milano

Automobiles & Parts

Politecnico di Milano Student Research
This report is published for educational purposes only by students competing in the CFA Institute Research Challenge.

Piaggio S.p.A.
Recommendation: ● Accumulate Price Target: ● € 2.65

Date 01.21.2011

Ticker: ●Bloomberg (Reuters)-PIA IM (PIA.MI) Price: ● € 2.40

Source: Company’s financial statements, PdM estimates

Source: Company’sfinancial statements, Bloomberg, PdM estimates

Highlights
 We initiate coverage of Piaggio with an accumulate rating and an end-of-the year target price of € 2.65, that offers a 10.42% upside from current stock price. Piaggio is the largest European manufacturer of two wheel motor vehicles and one of the leading players in the Indian Light Commercial Vehicles market. After the successfulturnaround of its business, and the recent downturn of the European and the American economies, Piaggio‘s main growth driver has become product line expansion in the Emerging Markets of India and South-Eastern Asia. Piaggio will grow revenues and expand margins on the wake of the increasing exposure to Emerging Markets. Entry into new ASEAN countries and launch of new products in India and Vietnam willfuel 6.8% consolidated top line growth in 2011 and 7.8% CAGR from 2010 to 2013. EBITDA margin will expand by 45bps in 2011 and by 165bps in 2013, also because of efficiency improvements in European operations. Net financial position is expected to improve. Supported by top line growth and margin expansion, Operating Cash Flow is expected to increase and OCF to sales ratio to rise from 8.86% in 2010to 9.82% in 2013. Based on our estimates, Piaggio‘s net financial position will fall from €342.9M in 2010 to €337.4M in 2011, and to €305.1M by 2013. This will leave Piaggio with ample financial flexibility to expand the production capacity and gain market share. Valuation. Our valuation methods lead to a target price of €2.65 by the end of 2011. We think Piaggio may offer long term upside incase it succeeds in executing its 2010-13 business plan. This year will be crucial for Piaggio to prove its ability to succeed in its internationalization strategy. We evaluated Piaggio applying two techniques: Discounted Cash Flow and Multiple Analysis. Main risks to our target price are: failure to expand into new markets due to unsuccessful product launches and the increase in the level ofcompetition in current markets. Other risks come from lower than expected growth in Emerging Markets, volatility in exchange rates, and a stronger than expected increase in energy, raw materials, and component costs.






Source: Bloomberg, PdM estimates



CFA Institute Research Challenge

1.21.2011

Figure 1. Sales and Ebitda Margin (€'000) 1,500,000 1,000,000 500,000 2005 2006 2007 2008 2009Sales EBITDA margin 14.00% 13.50% 13.00% 12.50% 12.00% 11.50% 11.00%

Source: Bloomberg

Business Description
Piaggio&C. SpA is a historical Italian company, founded in 1884 and based in Pontedera (Pisa, Italy). It is famous worldwide for its brands, such as Vespa and Ape. Acquired in 2003 by Immsi SpA Holding, and headed by R. Colaninno, the company experienced a successful turnaround, followed bythe listing on the Milan Stock Exchange in 200. Nowadays Piaggio is the largest European manufacturer of two-wheel motor vehicles and one of the leading players in the Indian commercial vehicles’ market. The company has about 7,300 employees. The main strengths of the Group are its brands and product portfolio, its production sites and specialized R&D centres in Europe and Asia, and itsrelationship with a vast network of about 14,000 independent dealers. In 2009 Piaggio outperformed the market, with limited net sales‘ decrease to €1,486.8M (-5.3% YoY) and an improvement both in EBITDA and EBITDA margin (the latter +12.1% YoY, up to 13.5%), while in the first nine months of 2010 sales were up 0.3% compared to the same period of the previous year, largely driven by the growth in Asia...