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Deutsche Börse Student Research. Piaggio & C. Spa. Università degli Studi di Padova Facoltà di Economia. OUR ANALYSIS IN BRIEF. Current price: € 2,37 Fair Value: € 2,59 - 2,85 (twelve months) Target Price: € 2,6 Upside: 9% Rating: HOLD. COMPANY DESCRIPTION.
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Deutsche Börse Student Research Piaggio & C. Spa Università degli Studi di Padova Facoltà di Economia
OUR ANALYSIS IN BRIEF Current price: € 2,37 Fair Value: € 2,59 - 2,85 (twelve months) Target Price: € 2,6 Upside: 9% Rating: HOLD
COMPANY DESCRIPTION • Biggest European motorcycle manufacturer. • Two Business Units: 2W and LCV. • Seven well-differentiated brands. • Strong presence in developed countries. • Growing focus on emerging countries (Asia).
EMERGING COUNTRIES • 2W serve family and work transportation purposes. • Small size, low cost are paramount. • Premium products have10% market share. • Growing registrations. • New Asian manufacturers are emerging. INDUSTRY OVERVIEW: 2W DEVELOPED COUNTRIES • Scooters used for fast urban transportation. • Motorcycles as recreational vehicles. • Preference for power and design (premium vehicles). • Flat registrations. • The Japanese manufacturers (Yamaha and Honda) dominate the market in the EU and US.
INDUSTRY OVERVIEW: LCV EUROPE • LCV are used for cargo transportation in city centers. • Key feature is small-size/high capacity ratio. • Piaggio focuses on <2,5 tons. • Market is declining, but Piaggio performed better than industry (-18% vs -20%) in 2009. INDIA • LCV to overcome lack of infrastructure. • Affordable and versatile vehicles. • Piaggio is leader for 3W (+14 YoY in ’09). • Growth expectations are 15-18% YoY. • Piaggio’s share is 41% in 3W and 5% in 4W. Key competitor: Bajaj
Piaggio focuses on a well-defined niche, and is therefore relatively small if compared to the Japanese manufacturers COMPETITIVE POSITIONING • Piaggio focuses on 2W and LCV. • In general, the market is dominated by Japanese manufacturers. • Piaggio has 7 different brands, some are icons (Vespa). • The strategy consists in premiumisation.
Link to European market is still strong FINANCIAL ANALYSIS:
PROFITABILITY: Improvement thanks to a larger share of units made in the Asian plants. FINANCIAL ANALYSIS REGISTRATIONS: Flat 2W and LCV in developed countries strategy: maintain the market share. Growth is expected in emerging countries, especially thanks to: • introduction of 2W in India in mid-2012 • launch of new 2W designed for the Asian market • development in the LCV (new engines, focus on 4W)
WHY SLOW AND STEADY (DOES NOT) WIN THE RACE... • Piaggio is still heavy focused on the flat European market. • Asian countries are expected to grow, but Piaggio concentrates on a premium niche with little numbers (market share will remain approx. 2,5% in 2W in India and Vietnam). • New 2W vehicles in Asia will be introduced only in 2011 (2012 in India). • MAIN RISKS TO OUR ANALYSIS • Negative impact on operating leverage as revenues slow down (-2% in revenues may impact up to -22% on EPS in 2013). • Cyclicality of demand. Performance will be disappointing in the event of an economic setback. • Regulations, especially in developed countries, may push the industry players towards eco-sustainable solutions. • Exposure to emerging countries: weak enforcement of industrial property regulations may encourage product imitation by competitors. • Food inflation in Asia may reduce the income share dedicated to transportation. RISK ANALYSIS AND RATING For all these reasons, considered the fair value range between Eur 2,59 and Eur 2,85, we considered appropriate a 12-months target price of Eur 2,6 and a HOLD recommendation.
