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

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Presentation on theme: "PIAGGIO S.p.A. Politecnico Student Research Global Investment Research Challenge 2011 Automobiles & Parts."— Presentation transcript:

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

2 COMPANY OVERVIEW Company Overview Why invest in Piaggio Financial Analysis Valuation Risk Analysis Data and Charts

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

4 Company Overview Production Facilities Distribution Network Joint Venture Internationalization strategy Company Overview Financial Analysis Valuation Risk Analysis Data and Charts Why invest in Piaggio

5 Company Overview Latest results Company Overview Financial Analysis Valuation Risk Analysis Data and Charts Europe IndiaVietnam 335,000 2Ws 220,000 LCVs 60,000 2Ws 360,000 2Ws 197,000 LCVs 48,000 2Ws -7.5% +11.7%+25% Unit Sold Vs Management Guidelines: European Revenues (000) Revenues Breakdown Source: Company Data, Politecnico Estimates Source: Company Data Actual Guidelines Delta Revenues 1,485M 1,500M -1% 1 Ebitda Margin 13.3% 13.3% 0% EPS % From Revenues to Earnings: Why invest in Piaggio

6 Company Overview Latest results Company Overview Financial Analysis Valuation Risk Analysis Data and Charts Efficiency Improvements Financial Savings Higher Materials Costs One-off Fiscal Items From Revenues to Earnings: Why invest in Piaggio

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

8 WHY INVEST IN PIAGGIO Company Overview Why invest in Piaggio Financial Analysis Valuation Risk Analysis Data and Charts

9 1. Launch of new products in India 2. Expansion in South-Eastern Asia 3. Consolidation in Europe Why invest in Piaggio Company Overview Financial Analysis Valuation Risk Analysis Data and Charts Why invest in Piaggio

10 Market volumes : 1M u (2010) Market growth: 8% (2011E) Piaggio volumes: 220,000 u (2010) Piaggio growth: 13.5% (2011E) Why invest in Piaggio: New products in India 3w 4w Launch of Vespa: 2012E Piaggio volumes: 75,000 u (2013E) Company Overview Financial Analysis Valuation Risk Analysis Data and Charts 25% 24% 23% 18% 10% Why invest in Piaggio

11 Why invest in Piaggio: Expansion in Asia Vietnam Malaysia Indonesia Thailand Taiwan Potential Market: 3M vehicles Potential Market: 11M vehicles Company Overview Financial Analysis Valuation Risk Analysis Data and Charts Why invest in Piaggio

12 Why invest in Piaggio: Consolidation in Europe European EBITDA Margin +155bps by 2013 Improvement of global sourcing position Production plants rationalisation Synergies in the distribution network Company Overview Financial Analysis Valuation Risk Analysis Data and Charts Eco Friendly Solutions: Piaggio Market Share: 20% Piaggio Volumes: 335,000 units (2010) Why invest in Piaggio

13 FINANCIAL ANALYSIS Company Overview Financial Analysis Valuation Risk Analysis Data and Charts Why invest in Piaggio

14 1485M 1615M 1745M 1850M 7.6% Revenue CAGR Balance Sheet Income Statement Cash Flow Statement + 160bps EBITDA margin % OCF CAGR % From EMs 11.9% EBITDA CAGR Lower D&A and Financial Charges CAGR 24.3% EPS CAGR ~ 65M ~ 140M OCF Capex NWC NFP Div. & Buy Back 3.3% From DMs Financial Analysis Higher than Revenue CAGR Source: Politecnico Estimates 2010 E 2011 E 2012 E 2013 E 197M 218M 249M 276M 153M 155M 181M 197M E 2012 E 2013 E NFP 350M 342M 318M 288M Debt 528M 500M 470M 440M Cash&other 155M 148M 147M 147M Equity 443M 467M 499M 537M Ability to meet short and long term obligations ~ 15M ~ 310M ~530M Deleveraging while Improving ROE Company Overview Why invest in Piaggio Financial Analysis Valuation Risk Analysis Data and Charts

15 VALUATION Company Overview Why invest in Piaggio Financial Analysis Valuation Risk Analysis Data and Charts

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

17 963M 2.5% 9.75% 30% 33M 7.63% Sales 2010 Sales CAGR EBITDA margin 2010 Tax Rate FCFF 2010 WACC Valuation: Discounted Cash Flow 389M 12.9% 19.5% 42% 13M 9.31% 133M 13.5% 20.5% 7.5% 10M 10.72% Source: Politecnico Estimates 963M 2.5% 9.75% 30% 33M 7.63% 133M 13.5% 20.5% 7.5% 10M 10.72% TP DCFEU + USIndiaVietnam Company Overview Why invest in Piaggio Financial Analysis Valuation Risk Analysis Data and Charts

18 MedianHeroMahindraBajajTata 2011 E9.35 x10.60 x8.10 x11.12 x5.46 x Piaggios Indian and Vietnamese businesses are comparable to its Indian peers Using the median EV/EBITDA multiple EV Piaggio Asia 1,114M DCF EV 970.5M 13% discount Valuation: Multiple Analysis Initiation Coverage Why Invest in Piaggio Financial Analysis Valuation Risk Analysis Company Overview Company Overview Why invest in Piaggio Financial Analysis Valuation Risk Analysis Data and Charts

19 Valuation: Multiple Analysis As regards the whole Piaggio Group (EV/EBITDA multiple): EMs multiple - for the Asian Business: DMs multiple - for the non-Asian Business: 9.3x 4.4x Target Price: 2.62 Company Overview Why invest in Piaggio Financial Analysis Valuation Risk Analysis Data and Charts

20 DCF Analysis: Multiple Analysis: Year-end Target Price: (upside > 15%) % weight 30% weight Valuation: Target Price Company Overview Why invest in Piaggio Financial Analysis Valuation Risk Analysis Data and Charts

21 RISK ANALYSIS Company Overview Why invest in Piaggio Financial Analysis Valuation Risk Analysis Data and Charts

22 Probable Possible Instable Vietnam Labour market Supply Chain risk Tighter regulations Credit risk Increase in interest rates Unlikely Strikes Intellectual Property Liquidity risk De-premiumisation Rare Machinary failure Vehicles defects MarginalMinorIntermediateMajor Risk analysis: Risk matrix Impact Likelihood Source: Politecnico Estimates Unsuccessful product launches Stronger competition Exchange rate risk Increase in energy, raw materials and components costs GDP growth rates Risk analysis: Risks from Asia Stronger competition Exchange rate risk Unsuccessful product launches Company Overview Why invest in Piaggio Financial Analysis Valuation Risk Analysis Data and Charts

23 Exchange rate risk Stronger competition Unsuccessful product launches Exchange rate risk Stronger competition Unsuccessful product launches Source: Politecnico Estimates Risk analysis: Risk matrix Risk analysis: Risks from Asia Source: Pacific Exchange Rate Service Company Overview Why invest in Piaggio Financial Analysis Valuation Risk Analysis Data and Charts

24 Probable Possible Instable Vietnam Labour market Supply Chain risk Tighter regulations Credit risk Increase in interest rates Unlikely Strikes Intellectual Property Liquidity risk De-premiumisation Rare Machinary failure Vehicles defects MarginalMinorIntermediateMajor Risk analysis: Risk matrix Impact Likelihood Source: Politecnico Estimates Unsuccessful product launches Stronger competition Exchange rate risk GDP growth rates Risk analysis: Global risks GDP growth rates Increase in energy, raw materials and components costs Increase in energy, raw materials and components costs Company Overview Why invest in Piaggio Financial Analysis Valuation Risk Analysis Data and Charts

25 Increase in energy, raw materials and components costs GDP growth rates Increase in energy, raw materials and component costs GDP growth rates Source: International Monetary Fund, World Economic Outlook Database Risk analysis: Risk matrix Risk analysis: Global risks Source: Company data Company Overview Why invest in Piaggio Financial Analysis Valuation Risk Analysis Data and Charts

26 Price Confidence Interval: ( 2.70 ; 2.90) Risk analysis: Montecarlo Simulation Source: Politecnico Estimates Company Overview Why invest in Piaggio Financial Analysis Valuation Risk Analysis Data and Charts P = 80%

27 74% of volatility comes from Asia Risk analysis: Montecarlo Simulation Source: Politecnico Estimates Company Overview Why invest in Piaggio Financial Analysis Valuation Risk Analysis Data and Charts

28 Questions Company Overview Why invest in Piaggio Financial Analysis Valuation Risk Analysis Data and Charts Questions

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

30 Hedging Policy Costs Breakdown Corr. Oil, Rub, All. Sensitivity on Oil Price Sensitivity India Sensitivity ASEAN Sensitivity Europe Political risk – India 1 Political risk – India 2 Japans earthquake Interest Rates Risk MS: Assumptions MS: Impact MS: Results Sensitivity on steel India Vietnam Indonesia Malaysia Thailand Summary GDP growth rates On The Stock Market 2010 Results OWC Stock Options Plan Tax Rate Sales Seasonality Spare Parts Aprilia and Moto Guzzi Main Competitors EU Scenario India Scenario US Scenario Vietnam Scenario CG Snapshot Board of Directors CG and CSR Valuation EMs and DMs Multiples Piaggio Peers Historical P/E P/E Future Evolution Assumpt. Macro Scenario Assumpt. Cost Inflation Terminal Value WACC Debt Structure Altman Z-Score Balance Sheet Income Statement Cash Flow Statement India Cash Flow Statement EU Cash Flow Statement ASEAN Ratios ROE Data and Charts Data and Elaborations Financial Statements: Strategy: Company: Competitive Scenario: Strategic Levers Premiumisation Brand Diversification Launch of Vespa New Urban Vehicles Macro Scenario: Market: From 3w to 4w Electric and Hybrid Indian 4w Margins in 2w Motorcycle Industry Outlook Debt: Acquisitions: Piaggio as a Prey Potential Buyers Piaggios Acquisitions DCF Model: Multiples: Risks: CG and CSR: Company Overview Why invest in Piaggio Financial Analysis Valuation Risk Analysis Data and Charts

31 Piaggio on the stock market Source: Bloomberg, Politecnico Estimates TTM Daily Average: 1.18 millions shares (equal to M) MARKET CAP: M FTSE Italia Mid Cap

32 2010 Results Slightly below consensus, but positive underlying trends. Volumes: Ebit Margin: Interests: Tax Rate: EPS: 335k Actual Vs 355k Expected 220k Actual Vs 195k Expected 60k Actual Vs 48k Expected 7.5%. In line with consensus (+50bps from 2009) 48.9%. Higher than consensun (+12.9% from 2009) 27.3M. In line with consensus (- 3M from 2009) In line with consensus (substantially in line with 2009) European 2Ws:Indian LCVs: ASEAN 2Ws: Data and Charts

33 XXX Operating Working Capital: Source: Bloomberg, Politecnico Estimates Millions Data and Charts

34 Piaggios Stock Option Plan Stock Option Plan approved on 07 May 2007 and updated on 25 January 2010 The Board of Directors is responsible of the Stock Option Plan Max 10,000,000 of granted Stock Options equal to 2.52% of the share capital The Stock Options are European style options Grant Date/Commencement Date 0 5 Expiration Date 3 Vesting Date EXERCISE PERIOD Grant Date (GD)Beneficiaries Stock Options Number Expected Liabiliy Stock market price at GD Strike Price 31 July Directors and 16 Executives 2,435,0001,600, October Executive300,000186, January Director390,000220, May Executives250,000125, December Directors and 29 Executives 4,720,0003,000, January Executive500,000350, Data and Charts

35 Source: Politecnico Estimates Tax Rates Piaggios tax rates by region: Piaggios aggregate tax rate: CountryTax rate Italy27.5% Europe~30% US35% India43% Vietnam7.5% ASEAN~25% 44% Piaggios taxes not based on taxable income: IRAP Indian Dividend Distribution Tax Data and Charts

36 Seasonality in Piaggios sales Seasonal fixed-term contracts. Peaks impact on OWC is: Peak in the European springtime. Payables BEFORE the peak Receivables AFTER the peak Inventories BEFORE the peak Data and Charts

37 Spare parts segment Higher marginality PIAGGIOS Business Units 2Ws Scooters Motorcycles Spare Parts LCVs Spare Parts 10% of Total Revenues in 2010 Strategic for LCVs in India New logistics center in Pontendera (Italy) Data and Charts

38 Aprilia and Moto Guzzi Source: Acem Substitution trend in Europe (000 units) Two significant brands for Piaggio linked to: increasing importance of motorbikes in the European market: a trend that has begun since the early 90 need to enrich and complete Piaggios brand diversification Piaggios large investments in 2010 for them synergies with Piaggio distribution network Data and Charts

39 Piaggio Strategic Levers InternationalizationPremiumization Design Environment Safety Innovation Robustness New markets New products New plants Cost Efficiency Improvement of global sourcing position Production Plants Rationalization Sinergies in Distribution Network Outsourcing and SCM Production of engines Centralized logistic center for the spare parts business Data and Charts

40 Premiumisation strategy Piaggios prices are higher than its competitors: customers recognize higher quality and unique solutions. Data and Charts

41 Brand diversification Wide Brand Portfolio Wide Range of Customers Data and Charts

42 Distribution network already present… …but for LCVs distribution Larger organizational structure (Piaggio India has its own CEO) Piaggios R&D department improved Vespa to better target the Indians customers Vespa gained a successful commercial presence in India:..in 1960, Rahul Bajaj obtained the license to produce the Vespa in India, till 1970 when the Indian government revoked the license. Now Piaggio has better fundamentals to compete in India in respect to the 80s and 90s. XXX Launch of Vespa: India vs Vietnam Source: Indian news, Politecnico Estimates Data and Charts

43 Scooter MP3: -launched in October ,000 units sold so far -hybrid models since 2009 Car prototype NT3: -November 2010 (Milan Motor Show) -launch expected in three-seat city car XXX New types of vehicles: urban mobility Source: News, Politecnico Estimates Data and Charts

44 Piaggio as a Prey WHAT DOES A PREDATOR GET? Business: 2W and LCV in Europe. 2W, 3W and 4W in India. 2W in ASEAN. Market Share: 20% in 2W Europe 40% in 3W, 4% in 4W India Niche player in 2W ASEAN Revenues: 1,485M in 2010 (~$2,065M) Leverage: 1.2x AT WHAT PRICE? Market Cap: ~895M (~ $1,245M) Ownership: Immsi S.p.a. (53% share) ~470M ~220M Premium to pay for the deal (+25%) Best Case: 600M Worst Case: 1,130M Market Value of the Control Stake ~420M Pubblic Offer to Minority Shareholders (compulsory in the Italian order in case of acquisition of the control stake) ~20M Fees Data and Charts

45 Potential Buyers INDIAN CONGLOMERATE COMPANIES: Automotive Business: Commercial Vehicles and Personal Vehicles. Market Share: 1% in Indian 3W LCVs and 31% in 4W. Revenues: Rs184,520 M (~$4,095M) Market Cap: $7,740M Leverage: 0.14x Automotive Business: Commercial Vehicles and Personal Vehicles. Market Share: 57% in indian 4W LCVs. Revenues: Rs918,934 M (~$20,390M) Market Cap: $14,803M Leverage: 1.0x Recent acquisitions: Ssangyong Motors (Korean Premium SUV manufacturer ) Recent acquisitions: Jaguar and Land Rover (2008) BENEFITS FROM ACQUIRING PIAGGIO: Entry in Western Markets Consolidation in Indian Market Premium Brands + Technology Transfer Entry in 2W Data and Charts

46 Leader in motorbikes Large brand portfolio Piaggios acquisitions Piaggios past acquisitions: In the future Piaggio will not make acquisitions: according to its strategy; there are not potential takeover targets. For example: CompanyPositiveNegative Ducati High margin (18%) Strong distribution network Insignificant share in emerging markets Scooters India High annual capacity Highly cost effective product It hasnt a strong brand position in 3W as Ape Data and Charts

47 Piaggios main competitors EUROPEAN COMPETITORSINDIAN COMPETITORS Data and Charts

48 Competitive scenarios: EU SegmentTotal market sales (2010) Piaggios Market share (2010) Motorcycles total1,548,00020% Scooters970,00027% Motorbikes578,0007% LCVs1,500, % Data and Charts

49 Competitive scenarios: India Data and Charts

50 Competitive scenarios: the US March 8°, 2011, Piaggio US changed its CEO: Paolo Timoni > Miguel Martinez Market with very peculiar requirements and customer needs. Data and Charts Strong impact of the economic crisis. 60% reduction in volumes Scooter segment: 5% of total in 2010, down from 12% in 2007 Piaggios market share in scooter market: 30% (6,700 vehicles)

51 Data and Charts Competitive scenarios: Vietnam 90% of total vehicles in Vietnam are scooters (motorbike segment: absent) Vietnamese market accounts 2,800,000 vehicles sold in 2010 Source: IMF Data and Charts

52 Macroeconomic data Real GDP growth (%) GDP per capita (US $) 1, , , , , Inflation CPI (%) Population (Millions) 1, , , , , Industry data w total sales 7,437,6199,371,23110,148,60010,990,00013,959,500 3w total sales 349,727440,368468,500498,000600,500 4w LCVs total sales 384,194531,395584,500642,000855,800 Macro scenario: India Data and Charts

53 Macroeconomic data Real GDP growth (%) GDP per capita (US $) 1, , , , , Inflation CPI (%) Unemployment rate (%) Population (Millions) Macro scenario: Vietnam Data and Charts

54 Macroeconomic data Real GDP growth (%) GDP per capita (US $) 2, , , , , Inflation CPI (%) Unemployment rate (%) Population (Millions) Macro scenario: Indonesia Data and Charts

55 Macroeconomic data Real GDP growth (%) GDP per capita (US $) 6, , , , , Inflation CPI (%) Unemployment rate (%) Population (Millions) Macro scenario: Malaysia Data and Charts

56 Macroeconomic data Real GDP growth (%) GDP per capita (US $) 3, , , , , Inflation CPI (%) Unemployment rate (%) 1.39 Population (Millions) Macro scenario: Thailand Data and Charts

57 PopulationCAGR India1.33% Indonesia1.30% Malaysia1.70% Thailand1.00% Vietnam1.20% Macro scenario: Summary Data and Charts

58 Shift from 3 to 4 wheel LCVs Market segment CAGR 2010 Volumes Piaggios market share (2010) 3W3W6.46%500,00040% 4W10.74%350,0004% Piaggios Product launches (4W) QuargoApe Truck Data and Charts

59 Electric and hybrid markets MP3 HybridElectric PorterBifuel Porter Max speed62 miles/h34 miles/h80 miles/h GHGs reduction60%100%20% Range (electric)12 miles66 miles - Full-charge time3 hours8 hours - Cost11,000 $30,000 $16,500 $ IndiaEuropeUSA Presence of Piaggios Eco line NoYes CompetitorsTVS, Hero Electric Yamaha (2011E), Honda (2011E) KTM (2011E), EVTAmerica, ZEV, etc. 5,000 electric Porter sold in 10 years, leader in the niche Green Market MP3 Hybrid Porter Data and Charts

60 XXX We do not believe margins will suffer in the next years Source: Companys financial statements, Politecnico Estimates Indian market of 4w LCVs: growing 10% YoY Price competition is not a rational strategy Piaggios strategic positioning: quality leadership vs. cost leadership Piaggios products have a higher fuel efficiency in respect to competitors products GM and Nissan start from scratch, while Piaggio is operating in India since 1999 with 560 dealers across the country Indian 4w market Data and Charts

61 Europe and U.S. Low margins, but on the way to increase, due to: - plant rationalization (elimination of the factories in Spain) - the market will slowly recover Vietnam and ASEAN: Higher margins, slightly decreasing (conservative forecasting) - lower cost of labor; - advanced know-how in respect to emerging markets based companies XXX Margins in the 2w market Source: Bloomberg, Politecnico Estimates Data and Charts

62 Motorcycle industry: world outlook Country Growth Italy294,000389, % France210,000226, % Spain106,000106, % Germany89,000113, % UK29,00031, % USA27,00030, % Brasil375,000277, % India2,600,0002,460, % Indonesia6,700,0005,321, % Vietnam2,700,0002,263, % Thailandia1,500,0001,247, % Malesia428,000407, % Philippine402,000328, % Country Growth India11,300,0009,300, % China16,000,00017,391, % Indonesia7,600,0005,801, % Vietnam2,750,0002,305, % Thailandia1,850,0001,537, % Philippine768,000619, % Malesia451,000429, % Taiwan541,000477, % USA496,000520, % Brasil1,800,0001,563, % Italy393,000504, % France343,000370, % Spain167,000174, % Germany181,000213, % UK96,000111, % Motorcycles Scooters Country Growth Italy99,000115, % France133,000144, % Spain61,00067, % Germany92,000100, % UK67,00079, % USA412,000489, % Brasil1,400,0001,262, % India8,700,0006,839, % Indonesia648,000514, % Vietnam Thailandia366,000290, % Malesia73,00060, % Philippine22,00020, % Data and Charts

63 Source: Company Data, Politecnico Estimates Data and Charts Balance Sheet E2012 E2013 E FIXED ASSETS 899, , , , , ,412 Intangible assets 648, , , , , ,271 Tangible assets 250, , , , , ,559 Financial assets NET WORKING CAPITAL(3,726)17,212 30,553 52,103 72,844 92,798 Current trade receivables 90, ,164 90, , , ,597 Other current receivables 21,380 24,198 23,300 25,823 27,893 29,622 Other non-current receivables 12,587 12,914 12,655 13,718 14,818 15,737 Inventories 257, , , , , ,182 Trade payables (362,224) (345,987) (352,627) (377,660) (402,699) (425,820) Short term Tax receivables 27,772 23,979 44,200 40,200 39,400 37,000 Long term Tax receivables 8,166 4, ,708 Deferred tax assets 36,227 46,462 46,294 42,994 Short term Tax payables (19,065) (18,952) (19,290) (19,102) Long term Tax payables (166) - (3,361) Other short term payables (70,677) (79,567) (69,503) (75,855) (87,164) (92,569) Other long term payables (5,965) (6,485) (5,961) (6,294) (6,799) (7,220) PROVISIONS (137,531) (133,685) (131,100) (124,680) (123,807) (122,733) NET CAPITAL EMPLOYED 757, , , , , ,808 NET FINANCIAL POSITION 359, , , , , ,535 Short term debt 140, , , , ,000 90,000 Long term debt 264, , , , ,000 Other liquid assets 5,787 4,127 23,051 10,000 5,000 Cash 39, , , , , ,465 TOTAL SHAREHOLDERS EQUITY 398, , , , , ,273 SOURCES OF FUNDS 757, , , , , ,808 Data and Charts

64 Source: Company data, Politecnico Estimates E2012 E2013 E Net Sales 1,570,0601,486,882 1,485,304 1,613,932 1,743,286 1,851,390 Reported Growth -7.2%-5.3%-0.1%8.7%8.0%6.2% Business Units Two Wheeler Vehicles 1,180,666 1,065, ,015 1,063,383 1,154,554 1,224,789 Reported Growth -8.8%-9.8%-7.3%7.6%8.6%6.1% Commercial Vehicles 389, , , , , ,600 Reported Growth 2.4%8.2%18.0%10.7%6.9%6.4% Geographical Area Europe and America 1,280,9321,116,191963,2531,008,1871,038,3621,060,882 Reported Growth -8.6%-12.9%-13.7%4.7%3.0%2.2% India 243,972286,753388,890448,934527,477590,348 Reported Growth 2.5%17.5%35.6%15.4%17.5%11.9% ASEAN 45,15683,938133,161156,810177,447188,000 Reported Growth -13.2%85.9%58.6%17.8%13.2%5.9% Other operating income 133, ,938121,128130,728134,233140,706 Cost for materials (936,603) (871,653)(881,075)(963,517)(1,040,742)(1,107,131) Cost for services (292,920) (272,065)(258,358)(279,210)(294,615)(307,331) Employee costs (250,967) (242,916)(240,115)(251,773)(256,263)(262,897) Other operating costs (33,993) (35,387)(29,821)(32,279)(36,609)(38,879) EBITDA 189, , , , , ,857 EBITDA margin 12.04%13.50%13.27%13.50%14.30%14.90% D&A94,54096,37886,00694,560101,459103,261 % Capex 91.85%102.76%89.50%93.00%97.00% EBIT 94, , , , , ,596 EBIT margin 6.02%7.02%7.48%7.64%8.48%9.32% Financial charges (41,288) (33,275) (33,905) (32,725) (32,548) (31,570) % Tot Financial Liabilities 10.18%5.98%6.42%6.55%6.93%7.18% Other Financials 6,410 2,947 6,625 3,000 Earnings before tax 59,633 74,093 83,777 93, , ,026 Taxation for the period 16,302 26,674 40,983 41,182 50,862 61,931 Actual tax rate (%) 27.34%36.00%48.92%44.00%43.00% Consolidated net income 43,331 47,419 42,794 52,413 67,421 82,095 Profit margin 2.76%3.19%2.88%3.25%3.87%4.43% Minority Shareholders 330 1, Earnings per share () Avg. number of Ordinary Shares 396, ,793 Dividend per share () Earnings paid as dividends 22,120 25,795 26,000 28,303 35,733 43,510 Payout Ratio 51%56%61%54%53% Income Statement Data and Charts

65 Source: Politecnico Estimates Data and Charts Cash Flow Statement India INDIA2011 E2012 E2013 E2014 E2015 E LCV volumes (units) 243,756258,381271,817285,408299,393 LCV ARPU () 1,8421,9101,9772,0362,097 2w volumes (units) 50,00075,00095,000110,000 2w ARPU () Sales from India 448,934527,477590,348650,970712,000 % tot sales 27.82%30.26%31.89%33.38%34.71% % growth 15.44%17.50%11.92%10.27%9.38% EBITDA from India 87,542102,331114,528124,986134,568 EBITDA margin India 19.50%19.40% 19.20%18.90% D&A India 22,87724,58025,01725,20625,309 % Capex India 90.00%94.00% EBIT from India 64,66577,75089,51199,780109,259 EBIT margin India 14.40%14.74%15.16%15.33%15.35% Tax Rate India 42.00% Op. Tax India 27,15932,65537,59441,90845,889 Adj. Op. Tax India 34,71340,72547,06952,58257,556 Adj. Tax Rate India 53.68%52.38%52.58%52.70%52.68% D&A India 22,87724,58025,01725,20625,309 Change in NWC India (4,363)(2,262)(2,265)(1,005)(84) Cash Flow From Indian Operations 48,46659,34365,19471,39976,928 Capex India 25,41926,14926,61426,81526,924 % Capex 25.00% FCFF India 23,04633,19438,58044,58550,004 % growth 44.03%16.23%15.56%12.15% Data and Charts

66 Source: Politecnico Estimates Data and Charts Cash Flow Statement Europe and US EUROPE and US2011 E2012 E2013 E2014 E2015 E 2W volumes (units) 352,275362,843370,100373,801377,539 2W ARPU () 2,5732,5992,6252,6512,678 LCV volumes (units) 13,16512,56011,98211,43110,905 LCV ARPU () 7,7187,5847,4527,3237,195 Sales from Europe and US 1,008,1871,038,3621,060,8821,074,8221,089,504 % tot sales 62.47%59.56%57.30%55.11%53.11% % growth 4.66%2.99%2.17%1.31%1.37% EBITDA from Europe and US 98,802110,066119,880121,455123,114 EBITDA margin Europe and US 9.80%10.60%11.30% D&A Europe and US 61,00763,38664,51264,99965,264 % Capex Europe and US %101.00% EBIT from Europe and US 37,79646,68055,36856,45657,850 EBIT margin Europe and US 3.75%4.50%5.22%5.25%5.31% Tax Rate Europe and US 30.00% Op. Tax Europe and US 11,33914,00416,61016,93717,355 Adj. Op. Tax Europe and US 15,75418,84922,47122,97623,532 Adj. Tax Rate Europe and US 41.68%40.38%40.58%40.70%40.68% D&A Europe and US 61,00763,38664,51264,99965,264 Change in NWC Europe and US (3,265)(869)(811)(231)(20) Cash Flow From EU Operations 79,78390,34896,59798,24899,562 Capex Europe 61,00762,75863,87364,35664,618 % Capex 60.00% FCFF Europe 18,77727,59032,72533,89234,943 % growth 17.54%12.71%5.53%1.42% Data and Charts

67 Source: Politecnico Estimates Data and Charts Cash Flow Statement ASEAN ASEAN2011 E2012 E2013 E2014 E2015 E 2W volumes (units) 76,16093,677112,412132,646153,870 2W ARPU () 2,0591,8941,7811,6921,624 Sales from ASEAN 156,810177,447200,160224,379249,869 % tot sales 9.72%10.18%10.81%11.51%12.18% % growth 17.76%13.16%12.80%12.10%11.36% EBITDA from ASEAN 31,67635,66740,23244,65149,224 EBITDA margin ASEAN 20.20%20.10% 19.90%19.70% D&A ASEAN 11,89613,33614,37114,48014,539 % Capex ASEAN 78.00%85.00%90.00% EBIT from ASEAN 19,77922,33125,86130,17134,685 EBIT margin ASEAN 12.61%12.58%12.92%13.45%13.88% Tax Rate ASEAN 7.50% Op. Tax ASEAN 1,4831,6751,9402,2632,601 Adj. Op. Tax ASEAN 3,7943,9934,6775,4906,305 Adj. Tax Rate ASEAN 19.18%17.88%18.08%18.20%18.18% D&A ASEAN 11,89613,33614,37114,48014,539 Change in NWC ASEAN (1,211)(504)(675)(335)(29) Cash Flow From ASEAN Operations 26,67131,17034,88038,82642,890 Capex ASEAN 15,25215,69015,96816,08916,155 % Capex 15.00% FCFF ASEAN 11,41915,48018,91222,73726,735 % growth 35.56%22.17%20.22%17.59% Data and Charts

68 Source: Company data, Politecnico Estimates Ratios Key Financial Ratios E2012E2013E E2012E2013E Profitability ratios EBITDA margin 13.50%13.27%13.50%14.30%14.90% ROI 6.67%7.18%7.85%9.19%10.49% EBIT margin 7.02%7.48%7.64%8.48%9.32% ROA 3.03%2.77%3.34%4.19%4.99% EBT margin 4.98%5.64%5.80%6.79%7.78% ROE 11.19%9.66%11.22%13.52%15.28% Cost structureDu Pont Analysis Labor Cost / Sales 16.34%16.17%15.60%14.70%14.20% Profit Margin 3.19%2.88%3.25%3.87%4.43% Materials Cost / Sales 58.62%59.32%59.70% 59.80% Asset Turnover 0.95x0.96x1.03x1.08x1.13x Services Cost / Sales 18.30%17.39%17.30%16.90%16.60% Total Assets/Equity 3.69x3.49x3.36x3.22x3.06x Gearing ratios Debt ratios Net Debt to Equity 0.83x0.79x0.73x0.64x0.54x Interest coverage ratio 3.44x4.07x4.15x5.00x6.04x Total Debt to Equity 1.31x1.19x1.07x0.94x0.82x Net Debt / EBITDA 0.57x0.56x0.64x0.78x0.96x Liquidity ratiosCash flow ratios Current ratio 1.05x0.93x0.94x0.99x1.02x OCF / Sales 10.93%10.28%9.60%10.37%10.62% Solvency ratio 0.26x0.24x0.29x0.36x0.42x OCF / Earnings 3.43x 3.57x 2.96x 2.68x 2.40x Market Ratios Capex EPS Capex / Sales 6.31%6.30%6.00%5.85%5.75% DPS D&A / Capex 6.48%5.79%5.86%5.82%5.58% Data and Charts

69 Source: Starmine Smart Income Statements, Politecnico Estimates ROE Piaggio and its competitors Expectations and Du Pont analysis YamahaSuzukiHondaPiaggioHarleyMahindraTataBajajHero 2010(2.0%)3.6%6.4%9.7%12%31.9%35.6%N.A.61.4% 2011E2.4%5.4%12.1%11.2%22.9%28.2%57.2%66.8%48.8% ROEEarnings / EBTEBT / EBITEBIT / SalesSales / AssetsAssets/ Equity % E11.22% E13.52% E15.28% Source: Politecnico Estimates Tax Burden Interest Burden Ebit Margin Asset Turnover Leverage (Proxy) Data and Charts

70 Debt Structure Maturity Data and Charts

71 Altman Z-Score Time series of Piaggios Z-Score Competitors Z-score (2010) Source: Bloomberg Automotive playersIndian Players Expectation Data and Charts

72 Assumptions on Macro Scenario Raising interest rates Raising Cost of DebtRaising commoditiesprices Raising Cost of Materials Global recovery stronger in EMs than in DMs Increasing revenues from EMs =5.5% =4.5% Source: Politecnico Estimates, Bank or America Estimates, Politecnico Estimates Data and Charts

73 Assumptions on Cost Inflation Decreasing cost of labour Increasing cost of materials Decreasing G&A Costs Cost structure: Increasing Ebitda Margin: Data and Charts

74 Terminal Value Two-Stage modelThree-Stage model Analytical Period + Perpetuity Ability of the company to generate cash flow Convergence Stage: Exponential Decay of FCFF Growth Rates Perpetuity: Long Term FCFF Growth Rate = 0.5% Sum-of-the-Parts Approach: HighMediumLow Strongly developing3-5%2-3%0-1% Moderately developing %1-2%0% Stable0-1%0% Decadent0% Industry Source: Guatri (1998) Analytical Period + Convergence Stage + Perpetuity + Source: Politecnico Estimates Data and Charts

75 XXX Source: Companys financial statements, Bloomberg, (1) Damodaran, Politecnico Estimates NWC Historical evolution EU & US INDIAAsean Notes: 7.63%9.31%10.72% Gearing Ratio (D/E)0.7 Target declared by the company Cost of Debt5.58% Marginal tax rate43% Corporate tax rate Gross cost of debt9.79% 1/3 of debt is indexed to Euribor Cost of Equity10.76%13.61%16.01% Beta ß1.00 Measured on 5Y of weekly returns Risk free rate4.81% Yield on Italian Gov. Debt ( ) Equity market premium5.20% Implied market premium (1) ( ) Country risk premium0.75%3.60%6.00% Countrys default spread adjusted by 1.5 times (1) WACC Data and Charts

76 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 = 9.3 x DMs multiple: Mkt_Multiple = (EBITDA_DMs x Multiple_DMs) + (EBITDA_EMs x Multiple_EMs) known estimated 9.3 x 4.4 x EMs and DMs Multiples. Data and Charts

77 Piaggio's current market multiple Median Hero Honda Mahindra & Mahindra Bajaj Auto Tata Motors Yamaha Motor Harley- Davidson Ktm AG Honda Motor Suzuki Peugeot Citroen EV/EBITDA 2011E median = E median = E E N/A N/A Price/Earnings 2011E median = E median = E E (1) E Price/Book Value 2011E E (1) E N/A PiaggioMedian Hero Honda Mahindra & Mahindra Bajaj Auto Tata Motors Yamaha Motor Harley- Davidson Ktm AG Honda Motor Suzuki Peugeot Citroen Sales CAGR E 4.1%-1%14%17%21%20%-3%-6%-4%-3% 1% EBITDA margin (2) 13.5% 12% 15%18%20%13% 8%23%12%11%9% EBITDA growth (3) 10.0%11%9.5%12.1%16.7%26.4% 18.6%32.2%8.2%7.7%9.7%3.5% EBIT margin (2) 8.0% 8% 14%15%20%10% 5%17%5%6%4%3% Profit margin (2) 3.2% 6% 12.1%8.9%15.0%6.5% 2.5%8.8%2.1%5.5%1.9% EPS growth (3) 15.2 %21%9.7%13.0%21.8%32.9%20.4%119.4% %11.5%25.7%24.4% Leverage (D/E) (1) no automotive peers (2) E Average (3) 2011E Piaggio and its peers (CY 2011E): Global playersIndian based players Source: Bloomberg, Politecnico Estimates ( ) Data and Charts

78 Historical P/E: Average: 15.7 Source: Bloomberg, Politecnico Estimates ( ) Data and Charts

79 XXX Source: Bloomberg, Politecnico Estimates ( ) (1) FTM P/E ratio EPSP/E (1) E E E E E P/E future evolution: CAGR EPS PEG ratio E 24.5% E 18.3% % Data and Charts

80 Piaggios Hedging Policy Risk area RiskHedging Policy Strategic risks Unsuccessful product launches Local R&D departments, continuous investment, frequent introduction of innovative products. Stronger competition Focus on premiumisation and differentiation; frequent introduction of innovative products. GDP growth rates Flexible structure, fixed term employment contracts and CIGO funds to align production capacity with demand. Operative risks Increase in energy, row mat. and components costs Multi-year supply contracts, premiumisation strategy, bargain power. IP and brand plagiarism risk Legal protection (patents), with exception to India, where laws are not strict enough. Vehicles defects Strict quality controls both on finished products and on inbound components. Financial risks Exchange rate risk Derivatives purchase and sell operations on 100% of the transaction risk and on 66% of the translation risk. Fluctuations are also mitigated with natural hedging. Liquidity risk Strong cash generation and committed lines available (150 mln unrevocable, 125 mln revocable). Interest rate risk Half debt is fixed rate. Derivatives for variable rate debt. Credit risk Low concentration (17,500 dealers); agreements for the transfer of trade recievables without recourse. Complian. Tighter regulations CSR policy, R&D investments, auditing by indep. auditors. Data and Charts Source: Company annual report

81 Data and Charts Costs breakdown Data and Charts Source: Company data, Politecnico estimates

82 USD/bbl USD/ton Crude oil Aluminium Data and Charts Oil price impact on Rubber and Alluminium USD/bbl USD/kg Crude oilRubber Crude oil and Rubber price RUBBERALLUM. Actual price5,5 USD/kg2.600 USD/ton Correlation index with oil price 91% (strong)83% (strong) RationaleMore than 75% of syntetic rubber raw materials are derived on petroleum. Alluminium production is energy intensive Price increse estimation +0.5 $/kg for each +10 $/bbl oil increase +300 $/ton for each +10 $/bbl oil increase Source: World Bank Community price data Crude oil and Aluminium price Data and Charts

83 Sensitivity on Oil Price RESULTS: KEY DRIVERS TO PROTECT EPS: EPS 2011 E2012 E CRUDE OIL PRICE ( $/BBL) (base case) Oil Oil, Rubber, Alluminium Data and Charts Bargaining power: Improving Global Sourcing Pricing power: Premiumization SUPPLIERS CUSTOMERS Source: Politecnico estimates

84 Sensitivity on Indian Business 16.9%17.4%17.9%18.4%18.9%19.4%19.9%20.4%20.9% 4.4% % % % % % % % % % % Indian 2015 Ebitda Margin Indian LCV Volume CAGR According to our DCF, Indian business is worth 1.3 Data and Charts

85 Sensitivity on ASEAN Business According to our DCF, ASEAN business is worth %19.1%19.3%19.5%19.7%19.9%20.1%20.3%20.5% 18.9% % % % % % % % % % % ASEAN 2015 Ebitda Margin ASEAN 2W Volume CAGR Data and Charts

86 Sensitivity on European Business According to our DCF, European business is worth %10.7%10.9%11.1%11.3%11.5%11.7%11.9%12.1% 0.4% % % % % % % % % % % European 2015 Ebitda Margin European 2W Volume CAGR Data and Charts

87 Independence: 15 August 1947 Republic: 26 January 1950 Worlds most populous democracy Federal parliamentary democratic republic: -INC (India National Congress), center left: liberal -BJP (Bhartiya Janata Party), center right: conservative Current Government: the INC party won the general elections both in 2004 and 2009, forming the government with the UPA coalition and Manmohan Singh as prime minister. XXX Not a major threat for Piaggios business Data and Charts Political risk - India Source: Reuters, Politecnico Estimates Key Political Risks: -Inflation -Corruption Data and Charts

88 Euromoney Country Risk Score (March 2011): XXXData and Charts Political risk - India Source: Reuters, Politecnico Estimates Data and Charts

89 Earthquake 4Q 2010 data release Middle East turmoil Data and Charts The Japans earthquake: :Peak of S&P Bottom of Nikkei days later Piaggio ( + 4.3%)2.51 ( + 8.7%) S&P500 1, , ( - 4.6%)1, ( - 2.0%) Nikkei22510, , ( %)9, ( %) Source: Bloomberg, Politecnico Estimates Data and Charts

90 XXXData and Charts Source: krugman.blogs.nytimes.com How rising interest rates affect share prices: If fears of default were driving rates, a rise in interest rates should be associated with a fall in stock prices. If, on the other hand, rates rise because people think the US will emerge from the liquidity trap sooner, stocks and rates should move in the same direction. And heres what it looks like: Its all about economic optimism. Data and Charts

91 Montecarlo Simulation ASSUMPTIONS: RiskBusiness UnitDrawn VariableDistributionStd. Dev.Comment GDP growth rateIndia LCVYoY volumes growth (%)Inverted Lognormal1%Unexpected Indian slowdown India 2WInverted Lognormal5% Europe 2WLognormal1%Unexpected European recovery Europe LCVNormal0.5%Structural decline ASEAN 2WInverted Lognormal2%Unexpected ASEAN slowdown Success of new modelsIndia LCVVolumes (units)Normal6000 units India 2WNormal4000 units ASEAN 2WNormal5000 units Stronger CompetitionIndiaEBITDA Margin (%)Inverted Lognormal1% EuropeInverted Lognormal0.5% ASEANInverted Lognormal1% Exchange Rate VolatilityIndiaEBIT ()Normal3.5% EBIT3.5% is the avg yearly INR std dev ASEANNormal4.5% EBIT4.5% is the avg yearly VND std dev Legend: Upside risk Lognormal Downside risk Inverted Lognormal Data and Charts

92 Montecarlo Simulation IMPACT ON CASH FLOW STATEMENT: INDIA2011 E2012 E2013 E2014 E2015 E LCV volumes (units) 250,000265,000280,000295,000310,000 % growth 25%18%15%12%8% LCV ARPU () 50,00075,00095,000110,000 … Sales from India 439,895526,074601,840671,067736,122 % growth 19.92%19.59%14.40%11.50%9.69% EBITDA from India 89,739107,319122,174134,213144,280 EBITDA margin India 20.40% 20.30%20.00%19.60% D&A India 24,86725,24425,74526,45427,266 EBIT from India 64,87182,07596,429107,759117,013 EBIT margin India 14.75%15.60%16.02%16.06%15.90% Tax Rate India 42.00% … 27,24634,47140,50045,25949,146 D&A India 24,86725,24425,74526,45427,266 Change in NWC India (12,172)(12,670)(11,150)(10,914)(9,855) Cash Flow From India 43,48452,22860,09868,77474,963 Capex India 26,45426,85627,38828,14329,007 RISKS: Success of new models GDP / Industry growth rate Stronger competition Exchange rate volatility Data and Charts

93 Montecarlo Simulation RESULTS: Target price volatility: Geographical breakdown: ASEAN EUROPE + USINDIA PiaggioIndiaEuropeASEAN TP DCF Std. Dev CV1.9%2.26%2%3.67% Data and Charts

94 ComplyDoes not comply Independence of the board of directors: 4 of 11 members are independent. Internal Control Committee : Composed of independent directors, convenes at least 5 times per year. Appointment Proposals Committee: The majority of members are non executives, and there is a transparent procedure for the presentation of candidate lists. Financial disclosure and transparency : Piaggio follows COSO Reporting guidelines. Internal Control Supervisor : Tight relationship between the Company and Immsi Audit S.c.ar.l. CEO undermines auditors autonomy. Independence of Chairman : Chairman and CEO are not separate. Board of Directors members maximum offices in other companies: Board has not established a limit to the number of offices directors can cover in other companies. Remuneration Committee : The attendance of the CEO by invitation creates a conflict of interest. Source: Politecnico Estimates Corporate Governance Snapshot Data and Charts

95 NamePosition In office from Indep.% attendance Other offices Roberto ColaninnoChairman CEO 04/16/ Matteo ColaninnoDeputy Chairman 04/16/ Michele ColaninnoDirector04/16/ Livio CorghiDirector04/16/ Franco DebenedettiDirector04/16/2009X915 Daniele DiscepoloDirector04/16/2009X1009 Andrea ParoliDirector22/09/ Giorgio MagnoniDirector04/16/ Luca CrespiDirector04/16/2009X915 Riccardo VaraldoDirector04/16/2009X822 Vito VarvaroDirector04/16/ Source: Piaggios 2009 CG Report Composition of the Board of Directors Data and Charts

96 CG and CSR Valuation Piaggios CG and CSR are under control, with improvement margins Data and Charts

97 Steel impact on EPS Steel price chart (USD/kg) Source: World Bank Community price data Data and Charts DRIVERSWeight Why increasing? Coking Coal Accounts for 50% of steel price fluctuations Economic recovery Iron OreAccounts for 30% of steel price fluctuations Increase in demand form EMs, mainly China and India Source: Companys data Worst case scenario: -0.3% EBITDA margin

98 Data and Charts India and Vietnam nominal GDP growth rates Source: IMF, World Economic Outlook Database IndiaVietnam EMs nominal GDP growth rates ( ) 12.29% CAGR 14.00% CAGR Piaggios top line growth rate (11-15) 12.86% CAGR* 13.41% CAGR* (ASEAN) *Source: Politecnico estimates GDP growth rates in EMs


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