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PIAGGIO S.p.A.

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. Largest European producer of 2w and LCVs by revenues.

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PIAGGIO S.p.A.

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  1. RiskAnalysis Valuation Financial Analysis Company Overview WhyInvest in Piaggio Automobiles & Parts PIAGGIO S.p.A. Politecnico Student Research Global Investment Research Challenge 2011

  2. Company Overview • Largest European producer of 2w and LCVs by revenues • Wide brand portfolio Style Business Mobility Sport Young Wht invest in Piaggio Financial Analysis Company Overview Risk Analysis Data and Charts Valuation

  3. Company Overview • Premiumisation strategy • Design • Safety • Performance • Reliability • Environment • Internationalization strategy Revenues Breakdown Production Facilities Distribution Network Joint Venture Wht invest in Piaggio Financial Analysis Company Overview Risk Analysis Data and Charts Valuation

  4. Company Overview • Latest Results Slightlybelowguidelines … … but positive underlyingtrends. • Growth in EmergingMarketsstrongerthanexpected ActualGuidelines • DevelopedMarkets at theirbottom • Efficiency Improvements Revenues €1,485M €1,500M 1 Europe India Vietnam • Financial Savings EbitdaMargin13.3% 13.3% Unit Sold Vs Management Guidelines: From Revenues to Earnings: 335,000 2Ws EPS €0.115 €0.118 • Higher Materials Costs 220,000 LCVs • One-off Fiscal Items 60,000 2Ws +11.7% +25% -7.5% Wht invest in Piaggio Financial Analysis Company Overview Risk Analysis Data and Charts Valuation

  5. Company Overview • Our Rating 2010 financial results Indian sales report • HOLD • BUY Price (03/31/11): €2.41 12 M Target Price: €2.8 Upside: 16.2% Rating: BUY Wht invest in Piaggio Financial Analysis Company Overview Risk Analysis Data and Charts Valuation

  6. Why invest in Piaggio 1. Launch of new products in India 2. Expansion in South-Eastern Asia 3. Consolidation in Europe - Entry in the 2 wheel market with the launchof Vespa - Expansionof the 4 wheelproductline - Expansionof the Hanoi plant (200k vehicles per year) - Entry in other ASEAN countries - Leadership Consolidation - EfficiencyImprovements Initiation Coverage Financial Analysis Company Overview Why Invest in Piaggio Risk Analysis Valuation

  7. Why invest in Piaggio: New products in India 2 Wheel Segment LCV Segment Trend: shift from 3 wheelers to 4 wheelers Launch of Vespa in India Expected sales: 75,000 units by 2013 10% 25% 18% 24% 23% Initiation Coverage Financial Analysis Company Overview Why Invest in Piaggio Risk Analysis Valuation

  8. Why invest in Piaggio: Expansion in Asia Indonesia Malaysia From Vietnam to new markets Vietnam Thailand Taiwan Potential market: 3M vehicles per year Potential Market: 11M vehicles per year Initiation Coverage Financial Analysis Company Overview Why Invest in Piaggio Risk Analysis Valuation

  9. Why invest in Piaggio: Consolidation in Europe • 155bps European EBITDA margin increase by 2013 due to: • - Improvement of global sourcing position • - Production plants rationalization • - Synergies in the distribution network • Main trends in the European market: • entering of new low cost competitors, such as Kymco (in the right chart) • the introduction of anti pollution laws (bottom chart). Initiation Coverage Financial Analysis Company Overview Why Invest in Piaggio Risk Analysis Valuation

  10. Financial Analysis Income Statement 2010 E 2011 E 2012 E 2013 E 7.6% Revenue CAGR 10-13 €1485M €1615M €1745M €1850M + 160bps EBITDA margin 11.9% EBITDA CAGR 10-13 €197M €218M €249M €276M LowerD&A and Financial Charges CAGR 24.3% EPS CAGR 10-13 €0.11 €0.14 €0.18 €0.22 HigherthanRevenue CAGR Cash Flow Statement 8.8% OCF CAGR 10-13 €153M €155M €181M €197M Wht invest in Piaggio Financial Analysis Company Overview Risk Analysis Data and Charts Valuation

  11. Financial Analysis 8.8% OCF CAGR 10-13 Div. & Buy Back OCF Capex ∆NFP ∆NWC ~ €310M ~€530M 2010 2013 ~ €15M ~ €65M ~ €140M Wht invest in Piaggio Financial Analysis Company Overview Risk Analysis Data and Charts Valuation

  12. Financial Analysis Balance Sheet 2010 2011 E 2012 E 2013 E Debt €528M €500M €470M €440M Cash&other €155M €148M €147M €147M NFP €350M €342M €318M €288M Equity €443M €467M €499M €537M Abilitytomeet short and long termobligations Deleveraging and improving ROE Wht invest in Piaggio Financial Analysis Company Overview Risk Analysis Data and Charts Valuation

  13. Valuation: Discounted Cash Flow • Sum-of-the-part approach Three-Stage model Two-Stage model Analytical Period + Convergence Stage + Perpetuity Analytical Period + Perpetuity Source: Politecnico Estimates Wht invest in Piaggio Financial Analysis Company Overview Risk Analysis Data and Charts Valuation

  14. Valuation: Discounted Cash Flow €133M 13.5% 20.5% 7.5% €10M 10.72% €389M 12.9% 19.5% 42% €13M 9.31% Sales 2010 Sales CAGR 10-15 EBITDA margin 2010 Tax Rate FCFF 2010 WACC €963M 2.5% 9.75% 30% €33M 7.63% Source: Politecnico Estimates Wht invest in Piaggio Financial Analysis Company Overview Risk Analysis Data and Charts Valuation

  15. Valuation: Discounted Cash Flow TP DCF EU + US India Vietnam €2.90 €0.95 €1.30 €0.65 Source: Politecnico Estimates Wht invest in Piaggio Financial Analysis Company Overview Risk Analysis Data and Charts Valuation

  16. 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 Wht invest in Piaggio Financial Analysis Financial Analysis Company Overview Company Overview Why Invest in Piaggio Risk Analysis Risk Analysis Data and Charts Valuation Valuation

  17. Valuation: Multiple Analysis As regards the whole Piaggio Group (EV/EBITDA multiple): Wht invest in Piaggio Financial Analysis Company Overview Risk Analysis Data and Charts Valuation

  18. Valuation: Multiple Analysis 30% weight As regards the whole Piaggio Group (EV/EBITDA multiple): EMs multiple - for the Asian Business: DMs multiple - for the non-Asian Business: 9.3 x 4.4 x 70% weight Multiple Target Price: € 2.62 Year end TP: € 2.80 DCF Target Price: € 2.90 Wht invest in Piaggio Financial Analysis Company Overview Risk Analysis Data and Charts Valuation

  19. Risk analysis: Risk matrix Risk analysis: Risks from Asia • Stronger competition • Exchange rate risk • Unsuccessful • product launches • GDP growth rates • Increase in energy, • raw materials and • components costs Likelihood Impact Source: Politecnico Estimates Wht invest in Piaggio Financial Analysis Company Overview Risk Analysis Data and Charts Valuation

  20. Risk analysis: Risk matrix Risk analysis: Risks from Asia • Unsuccessful • product launches • Unsuccessful • product launches • Stronger competition • Exchange rate risk Wht invest in Piaggio Financial Analysis Company Overview Risk Analysis Data and Charts Valuation

  21. Risk analysis: Risk matrix Risk analysis: Global risks • GDP growth rates • Increase in energy, • raw materials and • components costs Wht invest in Piaggio Financial Analysis Company Overview Risk Analysis Data and Charts Valuation

  22. Risk analysis: Montecarlo Simulation P = 80% Price Confidence Interval: (€ 2.70, € 2.90) Frequency €2.65 €2.70 €2.77 €2.82 €2.90 €2.62 €2.67 €2.72 €2.75 €2.80 €2.85 €2.87 €2.92 €2.95 €2.97 74% of volatility comes from Asia Target Price Source: Politecnico Estimates 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 Wht invest in Piaggio Financial Analysis Company Overview Risk Analysis Data and Charts Valuation

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

  24. Income Statement Source: Company data, Politecnico Estimates Data and Charts

  25. Cash Flow Statement India Source: Politecnico Estimates Data and Charts Data and Charts

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

  27. Cash Flow Statement ASEAN Source: Politecnico Estimates Data and Charts Data and Charts

  28. Ratios Source: Company data, Politecnico Estimates Data and Charts

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