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PIAGGIO S.p.A.

Risk Analysis. Valuation. Financial Analysis. Why Invest in Piaggio. Company Overview. Initiation Coverage. Automobiles & Parts. PIAGGIO S.p.A. Politecnico Student Research ICFAS Investment Research Challenge 2011. COMPANY OVERVIEW. Initiation Coverage. Financial Analysis.

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PIAGGIO S.p.A.

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

  2. COMPANY OVERVIEW Initiation Coverage Financial Analysis Company Overview WhyInvest in Piaggio RiskAnalysis Valuation

  3. Company Overview Largest European producer of 2w and LCVs Wide brand portfolio RevenueBreakdown(Q3 2010) Successful turnaround Ability to manage business in hard times Ability to manage business in hard times Internationalization strategy Initiation Coverage Financial Analysis Company Overview WhyInvest in Piaggio RiskAnalysis Valuation

  4. InitiationCoverage As of 01.21.2011: Historical Price: € 2.40 Target Price: € 2.65 Upside potential: 10.42% Rating: Accumulate Initiation Coverage Financial Analysis Company Overview WhyInvest in Piaggio RiskAnalysis Valuation

  5. WHY INVEST IN PIAGGIO Initiation Coverage Financial Analysis Company Overview WhyInvest in Piaggio RiskAnalysis Valuation

  6. Whyinvest in Piaggio 1. Launch of new products in India 2. Expansion in South-Eastern Asia 3. Efficiency gains in Europe Initiation Coverage Financial Analysis Company Overview WhyInvest in Piaggio RiskAnalysis Valuation

  7. Whyinvest in Piaggio: newproducts in India 3w 4w Initiation Coverage Financial Analysis Company Overview WhyInvest in Piaggio RiskAnalysis Valuation

  8. Whyinvest in Piaggio: expansion in Asia Malaysia Indonesia Vietnam Thailand Taiwan Initiation Coverage Financial Analysis Company Overview WhyInvest in Piaggio RiskAnalysis Valuation

  9. Whyinvest in Piaggio: Consolidation in Europe EBITDA Margin Initiation Coverage Financial Analysis Company Overview WhyInvest in Piaggio RiskAnalysis Valuation

  10. FINANCIAL ANALYSIS Initiation Coverage Financial Analysis Company Overview WhyInvest in Piaggio RiskAnalysis Valuation

  11. Financial Analysis 7.8% Revenue CAGR 10-13 + 165bps EBITDA margin Div. Capex ∆NFP ∆NWC OCF 19.2% From EMs 2.6% From DMs ~€500M ~ €300M 12.1% EBITDA CAGR 10-13 LimitedD&A and Financial Charges CAGR 24.3% EPS CAGR 10-13 2010 2013 ~ €60M In linewith EBITDA CAGR ~ €40M 11.6% OCF CAGR 10-13 ~ €100M Source: Politecnico Estimates Initiation Coverage Financial Analysis Company Overview WhyInvest in Piaggio RiskAnalysis Valuation

  12. VALUATION Initiation Coverage Financial Analysis Company Overview WhyInvest in Piaggio RiskAnalysis Valuation

  13. Valuation: DiscountedCash Flow Sum-of-the-part approach Two-Stage model Three-Stage model Analytical Period + Perpetuity Analytical Period + Convergence Stage + Perpetuity Source: Politecnico Estimates Initiation Coverage Financial Analysis Company Overview WhyInvest in Piaggio RiskAnalysis Valuation

  14. Valuation: DiscountedCash Flow €13M 26.2% 9.31% 42% 21.05% €1.08 €3.6M 49.1% 10.72% 7.5% 22.75% €0.72 FCFF 2010E FCFF CAGR 10-15 WACC Tax Rate EBITDA margin 2010E PRICE €22M 11.3% 7.63% 30% 10.15% €0.93 Source: Politecnico Estimates Initiation Coverage Financial Analysis Company Overview WhyInvest in Piaggio RiskAnalysis Valuation

  15. Valuation: Multiple Analysis Piaggio’s Indian and Vietnamese businesses compared to the Indian peers… …with the EV/EBITDA multiple: 11.7% discount Initiation Coverage Financial Analysis Company Overview WhyInvest in Piaggio RiskAnalysis Valuation

  16. 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: 9.7 x 3.8 x Target Price: € 2.48 Initiation Coverage Financial Analysis Company Overview WhyInvest in Piaggio RiskAnalysis Valuation

  17. Valuation: Target Price 70% weight € 2.73 DCFAnalysis: MultipleAnalysis: Year-end Target Price: (upside: 10.42%) 30% weight € 2.48 € 2.65 Initiation Coverage Financial Analysis Company Overview WhyInvest in Piaggio RiskAnalysis Valuation

  18. RISK ANALYSIS Initiation Coverage Financial Analysis Company Overview WhyInvest in Piaggio RiskAnalysis Valuation

  19. Riskanalysis: Riskscomingfrom Asia Unsuccessful product launches Stronger competition Exchange rate risk Initiation Coverage Financial Analysis Company Overview WhyInvest in Piaggio RiskAnalysis Valuation

  20. Riskanalysis: Global risks GDP growth rates Increase in energy, raw materials and component costs Tighter regulations Initiation Coverage Financial Analysis Company Overview WhyInvest in Piaggio RiskAnalysis Valuation

  21. Riskanalysis: Montecarlo Simulation Price Confidence Interval: € 2.57 - € 2.74 80% of risk comes from Asia Initiation Coverage Financial Analysis Company Overview WhyInvest in Piaggio RiskAnalysis Valuation

  22. Questions Initiation Coverage Financial Analysis Company Overview WhyInvest in Piaggio RiskAnalysis Valuation

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

  24. Data and Charts BalanceSheet Ratios ComparableCompanies 2 Income Statement WACC VolatilityAnalysis SWOT analysis Cash Flow Statement India Adj. TaxRates Cash Flow Statement Europe Terminal Value ProductLaunches Cash Flow Statement South Eastern Asia ComparableCompanies 1 Corporate Governance Initiation Coverage Financial Analysis Company Overview WhyInvest in Piaggio RiskAnalysis Valuation

  25. Cash flow growthcapabilityof the company Industry Source:Guatri (1998) Long termgrowth rate = long termpopulationgrowth + long termproductivitygrowth Terminal Value Data and Charts

  26. BalanceSheet Source: Company Data, Politecnico Estimates Data and Charts

  27. Data and Charts Source: Company data, Politecnico Estimates

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

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

  30. Source: Politecnico Estimates Cash Flow Statement South Eastern Asia Data and Charts

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

  32. ComparableCompanies Data and Charts

  33. EV/EBITDA multiple for the whole Company: • Basic Assumptions: • EBITDA margin is 50% higher in EMs • Markets’ exposure is equal to the percentage of Sales in EMs • EMs multiple: • Equal to the Indian peers’ multiple = 9.7 x • DMs multiple: • Mkt_Multiple = (EBITDA_DMs x Multiple_DMs) + (EBITDA_EMs x Multiple_EMs) known estimated estimated 9.7 x 3.8 x ComparableCompanies Data and Charts

  34. Source: Politecnico Estimates VolatilityAnalysis Data and Charts

  35. Source: Politecnico Estimates WACC Data and Charts

  36. Source: Politecnico Estimates AdjustedTaxRates Data and Charts

  37. SWOT Analysis Data and Charts

  38. ProductLaunches Data and Charts

  39. Corporate Governcance Data and Charts

  40. Questions RiskAnalysis Valuation Financial Analysis WhyInvest in Piaggio Company Overview InitiationCoverage Automobiles & Parts PIAGGIO S.p.A. Politecnico Student Research ICFAS Investment Research Challenge 2011

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