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Magna International Stock Pitch

Magna International Stock Pitch. March 8 th , 2014. Chris, Jubin , Taha. Company Overview. Global Presence. Business Description. Leading Global Automotive Supplier Diverse Product Portfolio Listed on NYSE (MGA) & TSX (MG) Market Capitalization of $20 Billion Major Competitors:

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Magna International Stock Pitch

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  1. Magna International Stock Pitch March 8th, 2014 Chris, Jubin, Taha

  2. Company Overview Global Presence Business Description • Leading Global Automotive Supplier • Diverse Product Portfolio • Listed on NYSE (MGA) & TSX (MG) • Market Capitalization of $20 Billion • Major Competitors: • Delphi Automotive (NYSE: DLPH) • Ingersoll-Rand Plc. (NYSE: IR) Major Customers Key Management • Donald J. Walker, CEO • 25+ years in the auto industry • $7.3 Million annually in compensation tied to stock options • SwamyKotagiri, CTO • 20+ years in the auto industry • Holds 12 patents in automotive product and design

  3. Company Overview Index Stock Chart May 2011 = 100

  4. Macroeconomic & Industry Outlook Demographics • Growth in average age of automobile buyers; baby boom generation now largest target market in Europe and North America • In Canada alone, size of 55 to 64 year old cohort to rise by more than 500,000 by 2018 Replacement Demand • Average age of Vehicles across Europe and North America on the rise after the 2008 Financial Crisis • Average Vehicle age in the U.S at an all time high of 11.4 years • Rebounding American and European economies to create demand for deferred sales • Increased replacement automobile part sales Average Age of Light Automobiles in the U.S

  5. Investment Thesis Argument One: Solid Growth Potential • Potential Growth in Asian Automobile Production and Magna’s Strategic Positioning Argument Two: Reasonable Valuation Current Price: $93.65 Target Price: $104.98 Current Share Price: ___ Upside of 12.1% Argument Three: Employee Innovation • Employee incentives for Innovation

  6. Solid Growth Potential Growth in Chinese Automobile Market Historic and Forecast Auto Sales in China • China consumed a record high of 16M light vehicles in 2013 • Growth expected to be robust in 2014 on economy; manufacturers like Ford reporting February sales in excess of 700,000 units • Increased urbanization and middle class incomes to catalyze demand • According to Mckinsey & Company, China said to drive 35% of total Auto sales till 2021 with forecast sales of 23M units Magna International’s Strategic Positioning 2013 China Light Vehicle Market Shares • Magna International’s two largest customers currently hold more than 57% of the Chinese Auto Market • Magna International Investing around $1B till 2015 to build 8 plants new plants China • History of solid Magna International sales growth in China, with sales forecast to top $2 Billion by 2015

  7. Employee Innovation Incentives to drive growth

  8. Valuation Valuation

  9. Valuation – Ratios & Comparables Ratio Highlights Dupont Analysis Comparable Price-Multiple Ratios

  10. Valuation – Discounted Cash Flow Model Discounted Cash Flow Model Revenue Growth Gross Margin Implied Equity Value: $110 • Lean Manufacturing • Decentralization • Profit-based Compensation

  11. Valuation – Risk Analysis Scenario Analysis Scenario1 Scenario1 - Upside Scenario2 - Upside Scenario2

  12. Recommendation • BUY • Capital Gain 12.1% Current Price: $93.65 Target Price: $104.98 Valuation ($)

  13. Appendices Thank you for listening. We will now take questions

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