Piaggio - Equita · Piaggio is the leading 2W manufacturer in the European market with an estimated market share of 27% in the scooter segment and around 5% in the motorcycle segment.

IMPORTANT DISCLOSURES APPEAR AT THE BACK OF THIS REPORT� 1

Piaggio ITALY / Motorcycle

3Q13 results

HOLD (Unchanged) Target: € 2.30 (prev. € 2.20) Risk: High

STOCK DATA

Price € 2.2

Bloomberg code PIA IM

Market Cap. (€ mn) 781

Free Float 46%

Shares Out. (mn) 360.7

52-week range 1.8 - 2.3

Daily Volumes (mn) 0.96

PERFORMANCE 1M 3M 12M

Absolute 2.0% 6.5% 0.6%

Rel. to FTSE all shares 2.2% -1.0% -7.7%

MAIN METRICS 2012 2013E 2014E

Revenues 1,406 1,236 1,403

EBITDA 176 154 190

Net income 42 25 45

Adj. EPS - € cents 11.7 6.8 12.4

DPS ord - € cents 9.2 7.0 9.0

MULTIPLES 2012 2013E 2014E

P/E adj 18.6 x 31.7 x 17.5 x

EV/EBITDA rep 6.8 x 7.9 x 6.4 x

REMUNERATION 2012 2013E 2014E

Div . Yield ord 4.2% 3.2% 4.2%

FCF y ield -5.1% -1.0% 3.1%

INDEBTEDNESS 2012 2013E 2014E

NFP -392 -434 -435

Debt/EBITDA 2.2 x 2.8 x 2.3 x

Interests cov 5.5 x 4.6 x 5.2 x

PRICE ORD LAST 365 DAYS

ANALYSTS Stefano Lustig - +39 026204357 – [email protected] November 14, 2013 # 374

VERY WEAK SALES BUT STABLE MARGINS

The trend of top line (-19%) is by far the worst since the company was

listed in 2006. Despite that EBITDA margin grew due to higher gross

margin (success of the high-end products) and further efficiency

enhancement. We remain confident on improvement in 2014-2015

� Very weak sales, higher than expected margins

Despite very weak sales, EBITDA and bottom line were in line with

estimates.

• Revenues: € 283.5 mn (-18.6% YoY) vs € 302.7 mn Exp.

• EBITDA: € 33.1 mn (-20.4% YoY) vs € 33.3 mn Exp.

• Margin: 11.7% (-2.2% YoY) vs 11% Exp.

• Net income: € 2.8 mn (-73.9% YoY) vs € 3.1 mn Exp.

• NFP: € -454.6 mn (24.5% YoY) vs € -448 mn Exp.

� Record negative turnover….

• The trend of top line (-19%) is by far the worst since the company

was listed in 2006. No single geographical area of business gave

indication of a top line growth and all areas have experienced a

worsening vs. the 2Q trend (with the “exception” of Europe with -19%

after....-20% in 2Q). The extreme weakness also hit Asia this time with

volumes -22%, while India (-4% in volumes and -19% in sales) has

especially suffered from adverse FX.

• The debt rose further because of a worsening in the Working Capital

(€ 65 mn in 9M), and despite the severe cut in capex (-47 mn in 9M).

� ….but also many positive qualitative elements:

• The market share in Europe was confirmed at 26% (scooter) and at

34% in India (LCVs),

• the gross margin rose by 40bp as a reflection of the good performance

of premium models like Vespa (+9% in value in 9M) and Guzzi (+10 %

in volume). The average price has increased in all areas.

• The EBITDA margin grew also due to further efficiency enhancement

actions (e mn in the quarter and € 22mn in 9M).

• the weakness of Vietnam (the core market) prevailed in Asia, but at

least Indonesia appears to have entered a satisfactory pace (5k pieces

sold in the quarter).

� Estimates confirmed. Valuation +5% to € 2.30

We increase the valuation + 5% to € 2.30 due to a slight improvement in

the risk-free in the DCF model and maintain a neutral view on the stock. At

our target the implied 2015 PE is 13.5x.

During the conference call the management announced a strengthening

in the management team (particularly in Asia/India), and the

strengthening of mktg and communication efforts to emphasize the

vocation to high-end/aspirational segment. We welcome the move as we

see PIA plenty of opportunities but with some lack in execution.

2013 has been a very weak year and the stock is trading >30x earnings. At

the same time we are convinced, once again, that the European business

(43% of sales) is on the eve of recovery (after a decline of 55% in the last 5

years) and that the range of product is appealing, therefore we maintain

the estimates of double-digit growth for the next 2 years. At our target

the implied 2015 PE is 13.5x

Piaggio – November 14, 2013


BUSINESS DESCRIPTION

With 410k 2W vehicles PIA is the leading 2W manufacturer in

the European market with a mkt share of 27% in the scooter

segment and 6% in the motorcycle one. Brands are Piaggio,

Vespa, Aprilia, Guzzi, Scarabeo, Gilera. In 2009 it started to

produce Vespa in Vietnam soon to be 10% of group sales.

PIA generates some 25% of sales in the 3W and 4W Light

Commercial Vehicles. The majority of sales comes from India

where PIA is leader (up to 40% mkt share) in some specific

niche.

SALES BY PRODUCT - 2012

Scooter49%

Moto9%

LCV Europe5%

LCV India24%

Parts11%

Other2%

SALES BY AREA - 2012

MAIN FIGURES € mn 2010 2011 2012 2013E 2014E 2015E

Revenues 1,485 1,516 1,406 1,236 1,403 1,539

Growth 0% 2% -7% -12% 14% 10%

EBITDA 197 201 176 154 190 215

Growth -2% 2% -12% -13% 23% 13%

Adjusted EBITDA 197 201 176 154 190 215

Growth -2% 2% -12% -13% 23% 13%

EBIT 111 106 97 72 106 131

Growth 6% -5% -8% -25% 47% 23%

Profit before tax 84 79 68 43 73 98

Growth 18% -5% -14% -36% 70% 33%

Net income 43 47 42 25 45 62

Growth -4% 10% -11% -41% 81% 38%

Adj. net income 44 41 42 25 45 62

Growth -8% -7% 4% -41% 81% 38%

MARGIN 2010 2011 2012 2013E 2014E 2015E

Ebitda Margin 13.3% 13.2% 12.5% 12.5% 13.5% 14.0%

Ebitda adj Margin 13.3% 13.2% 12.5% 12.5% 13.5% 14.0%

Ebit margin 7.5% 7.0% 6.9% 5.9% 7.6% 8.5%

Pbt margin 5.6% 5.2% 4.8% 3.5% 5.2% 6.4%

Ni rep margin 2.9% 3.1% 3.0% 2.0% 3.2% 4.0%

Ni adj margin 2.9% 2.7% 3.0% 2.0% 3.2% 4.0%

SHARE DATA 2010 2011 2012 2013E 2014E 2015E

EPS - € cents 11.5 12.6 11.7 6.8 12.4 17.1

Growth 2.4% 10% -8% -41% 81% 38%

Adj. EPS - € cents 11.7 10.9 11.7 6.8 12.4 17.1

Growth -1.9% -7% 7% -41% 81% 38%

DPS ord - € cents 7.0 8.2 9.2 7.0 9.0 9.0

BVPS - € cents 1.1 1.2 1.2 1.3 1.2 1.3

VARIOUS - € mn 2010 2011 2012 2013E 2014E 2015E

Capital emloyed 791 772 848 881 901 926

FCF 2 49 -40 -8 24 37

Capex -96 -126 -148 -90 -95 -100

Working capital -23 -39 -35 -30 -34 -38

INDEBTNESS - €mn 2010 2011 2012 2013E 2014E 2015E

NFP -350 -327 -392 -434 -435 -430

D/E 0.83 x 0.74 x 0.88 x 0.95 x 0.97 x 0.92 x

Debt/EBITDA 1.8 x 1.6 x 2.2 x 2.8 x 2.3 x 2.0 x

Interests cov 7.2 x 7.2 x 5.5 x 4.6 x 5.2 x 5.8 x

MARKET RATIOS 2010 2011 2012 2013E 2014E 2015E

P/E ord 18.8 x 17.1 x 18.6 x 31.7 x 17.5 x 12.7 x

P/E ord Adj 18.5 x 19.9 x 18.6 x 31.7 x 17.5 x 12.7 x

PBV 1.9 x 1.8 x 1.8 x 1.7 x 1.7 x 1.7 x

P/CF 6.3 x 5.7 x 6.4 x 7.4 x 6.1 x 5.3 x

EV FIGURES 2010 2011 2012 2013E 2014E 2015E

EV/Sales rep 0.8 x 0.7 x 0.9 x 1.0 x 0.9 x 0.8 x

EV/EBITDA rep 5.9 x 5.6 x 6.8 x 7.9 x 6.4 x 5.6 x

EV/EBIT 10.4 x 10.7 x 12.4 x 16.8 x 11.4 x 9.3 x

EV/CE 1.5 x 1.5 x 1.4 x 1.4 x 1.3 x 1.3 x

REMUNERATION 2010 2011 2012 2013E 2014E 2015E

Div. Yield ord 3.2% 3.8% 4.2% 3.2% 4.2% 4.2%

FCF yield 0.2% 6.1% -5.1% -1.0% 3.1% 4.8%

ROE 10.1% 9.2% 9.3% 5.5% 9.8% 12.8%

ROCE 7.3% 7.9% 7.8% 4.9% 7.3% 9.3%

Source: Company data and EQUITA SIM estimates

2WEmea49%

2W Americas

6%

2W Asia15%

LCV Europe5%

LCV India24% 2W India

1%



2012 BREAKDOWN

EMEA and India

Asia Pacific

America

Volumes (.000) 278 225 113

Net Sales (€ mn) 837 358 211

Gross Profit (€ mn) 254 82 82

Gross Margin 30% 23% 39% Source: Company Data

BUSINESS DESCRIPTION

Piaggio is one of the world’s leading manufacturer of bikes and scooters.

Piaggio is the leading 2W manufacturer in the European market with an

estimated market share of 27% in the scooter segment and around 5% in

the motorcycle segment. It operates with several popular brands such as

Piaggio, Vespa, Aprilia, Moto Guzzi, Scarabeo, Gilera.

In 2009 PIA started to produce Vespa in Vietnam to serve both the local

market and neighboring countries with a strategy based on a high premium

price. Penetration of Vietnam has been an immediate strong success (only

recently slowing down) while some difficulties emerged in penetrating

Indonesia with a direct sales network. Many other countries are going to be

served mainly through wholesaler and importer. We expect Asia Pacific

to represent 15% of Group Sales in 2013 but very likely >20% of

Group EBITDA. In Spring 2012 PIA also started the production and

marketing of Vespa in India with a moderate premium price policy.

By now the results have been mixed. We calculate Vespa India to

contribute for 2% to FY13 Group Sales.

Piaggio generates some 30% of group sales in the 3-wheeled (3W)

and 4-wheeled (4W) Light Commercial Vehicles sector (210K units sold

in 2012). The vast majority of sales comes from India where PIA holds a

leading position (>30% mkt share) in the covered segments. The main

competitor in the 3W segment is Bajaj.

Lesson from historical numbers

2007 2008 2009 2010 2011 2012 2013E

Total Group Revenues 1,692 1,570 1,487 1,485 1,516 1,406 1,319

European 2W 1,304 1,045 921 822 800 688 584

Americas 2W 79 93 61 24 38 77 80

Asia 2W 52 43 84 133 188 211 217

India 2 Wheels - - - - - 17 32

LTV Europe 152 145 135 108 96 72 59

LTV India 238 244 287 389 395 341 345

EBIT 137 95 105 111 106 97 86

Margin 8.1% 6.0% 7.0% 7.5% 7.0% 6.9% 6.5% Source: Company data and EQUITA SIM estimates

By reading the historical figures it emerged that in the last 6 years PIA lost

around € 350 mn of sales of which > € 700 mn have been lost in the

European 2Wheels. Sales suffered by the fall of the market (>-50%)

mainly because of recession. PIA all in all did not change its market

shares. In the meantime PIA remarkably expanded its Indian and

Asian presence now counting for around € 250 mn more than in 2007.

In the same period EBIT margin was quite stable because PIA tackled the

reduction in sales by focusing on the higher segment vehicles (Vespa, MP3,

Guzzi) by also benefitting from higher margins in India and in Vietnam.

Strenghts/Opportunities Weaknesses/Threats

• Vespa is an iconic brand celebrated all

over the world

• MP3 scooter testifies to the success of

the innovation capacity

• The range of product (2W + LCV) is

appropriate to attack new EM

• Ability to lower the break-even point

• European market still depressed

• Some lack of execution in

penetrating new countries

• Too levered structure combining

PIA and main shareholder IMMSI



VERY WEAK SALES BUT STABLE MARGINS

Despite very weak sales, EBITDA and bottom line were in line with estimates.

QUARTERLY FIGURES

QUARTERLY FIGURES EXPECTED ACTUAL

3Q12 3Q13E YoY ∆% 3Q13A YoY ∆% Abs ∆

Revenues 348.3 302.7 -13% 283.5 -19% -19

EBITDA 41.6 33.3 -20% 33.1 -20% 0

Margin 11.9 11.0 -8% 11.7 -2% 1

EBIT 24.1 13.2 -45% 13.8 -43% 1

Net income 10.6 3.1 -70% 2.8 -74% 0

NFP -365.0 -448.0 23% -454.6 25% -7 Source: Company data and EQUITA SIM estimates

The trend of top line (-19%) is by far the worst since the company was listed in 2006.

No single geographical area of business gave indication of a top line growth

and all areas have experienced a worsening vs. the 2Q trend (with the

“exception” of Europe with -19% after....-20% in 2Q).

The extreme weakness also hit Asia this time with volumes -22%, while India (-4%

in volumes and -19% in sales) has especially suffered from adverse FX.

BREAKDOWN OF SALES AND TREND

1Q12 1Q13 Var. 2Q12 2Q13 Var. 3Q12 3Q13 Var.

2Wheels Total 234 208 -11% 328 281 -14% 243 195 -20%

European 2W 166 136 -18% 252 201 -20% 169 137 -19%

Americas 2W 18 19 6% 27 26 -4% 15 13 -16%

Asia 2W 50 45 -9% 46 47 2% 51 41 -20%

India 2 Wheels 0 8 n.m. 4 8 108% 6 5 -20%

Light Comm.Vehic. Tot. 110 95 -13% 93 87 -6% 105 88 -16%

LTV Europe 20 16 -22% 21 16 -22% 16 16 -4%

LTV India 90 79 -11% 72 71 -2% 89 73 -19%

Total Group Sales 343 303 -12% 421 368 -13% 348 284 -19% Source: Company data and EQUITA SIM estimates

• The market share in Europe was confirmed at 26% (scooter) and at 34% in

India (LCVs),

• the gross margin rose by 40bp as a reflection of the good performance of

premium models like Vespa (+9% in value in 9M) and Guzzi (+10 % in

volume). The average price has increased in all areas.

• The EBITDA margin grew also due to further efficiency enhancement actions

(e mn in the quarter and € 22mn in 9M).

• the weakness of Vietnam (the core market) prevailed in Asia, but at least Indonesia

appears to have entered a satisfactory pace (5k pieces sold in the quarter).

PIAGGIO GROUP: ESTIMATES

2012 2013 Var. % 2014 Var. % 2015 Var. % 2016 Var. %

Revenues 1,406 1,247 -11.3% 1,410 13.1% 1,546 9.7% 1,685 9.0%

Adjusted EBITDA 176 154 -12.6% 189 22.6% 214 13.5% 241 12.3%

EBIT 97 72 -25.0% 105 45.3% 130 23.3% 155 19.5%

Net income 42 25 -41.5% 44 78.5% 60 37.2% 78 29.2%

NFP -392 -434 10.7% -443 2.2% -441 -0.6% -434 -1.4%

Total Group Revenues 1,406 1,247 -11.3% 1,410 13.1% 1,546 9.7% 1,685 9.0%

2Wheels Total 993 877 -11.7% 999 13.8% 1,114 11.5% 1,234 10.8%

European 2W 688 577 -16.1% 634 10.0% 698 10.0% 768 10.0%

Americas 2W 77 75 -3.2% 82 10.0% 88 7.0% 94 7.0%

Asia 2W 211 200 -5.0% 242 20.5% 274 13.4% 304 11.0%

India 2 Wheels 17 26 n.m. 41 n.m. 54 n.m. 68 25.0%

Light Comm.Vehic. Tot. 413 369 -10.6% 411 11.3% 432 5.1% 451 4.4%

LTV Europe 72 61 -15.5% 61 0.0% 61 0.0% 58 -5.0%

LTV India 341 308 -9.5% 350 13.5% 371 6.0% 393 6.0% Source: Company data and EQUITA SIM estimates

Very weak top line but higher than

expected margins

Weak sales everywhere. India mainly

affected by FX.



� Valuation +5% to € 2.30

We increase the valuation + 5% to € 2.30 due to a slight improvement in the risk-

free in the DCF model and maintain a neutral view on the stock. At our target the

implied 2015 PE is 13.5x.

We trimmed 2013 EBITDA by 1% to 154 mn and Net Profit by 4% to 25 mn. We

are basically confirming the 2014-2015 estimates.

A new business plan will be presented in the next few months.

During the conference call it was announced the strengthening in the

management team (particularly in Asia / India), and the strengthening of mktg and

communication efforts to emphasize the vocation to high-end/aspirational

segment. We welcome the move as we see PIA plenty of opportunities but with

some lack in execution.

The turnaround in Europe for PIA has been long expected and unfortunately it

did not happen. On the contrary 2013 results have been affected by the decline of

Asia and the monetary storm in India.

We are convinced, once again, that the European business (43% of sales) is on

the eve of recovery (after a decline of 55% in the last 5 years) and that the range

of product is appealing, therefore we maintain the estimates of double-digit growth

for the next 2 years.

DCF VALUATION: TARGET € 2.30 per share

Assumptions

2013E 2014E 2015E 2016E 2017E Perpetuity

g 2.50%

Sales 1,247 1,410 1,546 1,685 1,804 1,849

WACC 8.3%

Change % -11.35 13.08 9.66 8.99 7.07 2.50

EBITDA 154 189 214 241 260 259

Change % -12.59 22.60 13.50 12.27 7.88 -0.27

Margin 12.4 13.4 13.9 14.3 14.4 14.0

D&A 82 84 85 86 88 88

Valuation (€ mn)

EBIT 72 105 130 155 172 171

Change % -25.04 45.32 23.28 19.50 10.94 -0.4

NPV of Free Cash Flows 233

Margin 5.8 7.5 8.4 9.2 9.5 9.3

NPV of Terminal Value 974

Taxes -26 -38 -47 -56 -62 -62

Estimated Enterprise Value 1,207

Cash Flow 108 146 158 175 187 187

2012 Adj. NFP -392

Capex -90 -95 -100 -110 -115 -115

PIA Equity 815

(increase) decrease in WC -20 -5 -10 -10 -10 -10

Free Cash Flow before minorities 18 51 58 65 73 72

Adj. # of shares 361

Discount Factor 1.0 1.0 0.9 0.8 0.8

Target Price 2.3

PV of FCF 17.95 50.61 52.86 54.90 56.83 Source: EQUITA SIM estimates

SENSITIVITY ANALISYS

G FACTOR 2.0% 2.5% 3.0%

WACC

7.8% 2.3 2.6 2.9

8.3% 2.0 2.3 2.5

8.8% 1.8 2.0 2.2 Source: EQUITA SIM estimates



STATEMENT OF RISK

The primary elements that could impact PIA stock prices include:

1. Significant change in the reference macroeconomic scenario

2. Significant change in interest rates

3. Deterioration of the competitive arena caused by

a. Entrance of new competitors from low cost countries

b. Increase in promotions, marketing expenditure and discounts by current

competitors

P&L 2010 2011 2012 2013E 2014E 2015E

Revenues 1,485 1,516 1,406 1,236 1,403 1,539

Growth 0% 2% -7% -12% 14% 10%

Total opex -1,288 -1,316 -1,230 -1,082 -1,213 -1,323

Growth 0% 2% -7% -12% 12% 9%

Margin -87% -87% -87% -88% -86% -86%

EBITDA 197 201 176 154 190 215

Growth -2% 2% -12% -13% 23% 13%

Margin 13% 13% 13% 12% 14% 14%

Depreciation& amortization 86 95 80 82 84 85

Provisions na na na na na na

Depreciation&provistion 86 95 80 82 84 85

EBIT 111 106 97 72 106 131

Growth 6% -5% -8% -25% 47% 23%

Margin 7% 7% 7% 6% 8% 9%

Net financial profit/Expenses -27 -28 -32 -33 -37 -37

Profits/exp from equity inv na na na na na na

Other financial profit/Exp na na na na na na

Total financial expenses -27 -28 -32 -33 -37 -37

Non recurring pre tax 0 2 4 4 4 4

Profit before tax 84 79 68 43 73 98

Growth 18% -5% -14% -36% 70% 33%

Taxes -41 -32 -26 -19 -29 -36

Tax rate -49% -41% -38% -43% -39% -37%

Minoritiy interests 0 0 0 0 0 0

Non recurring post tax na na na na na na

Net income 43 47 42 25 45 62

Growth -4% 10% -11% -41% 81% 38%

Margin 3% 3% 3% 2% 3% 4%

Adj. net income 44 41 42 25 45 62

Growth -8% -7% 4% -41% 81% 38%

Margin 3% 3% 3% 2% 3% 4%

CF Statement 2010 2011 2012 2013E 2014E 2015E

Cash Flow from Operations 122 141 118 102 124 142

(Increase) decrease in OWC 8 49 8 -20 -5 -10

(Purchase of fixed assets) -96 -126 -148 -90 -95 -100

(Other net investments) n.a. n.a. n.a. n.a. n.a. n.a.

(Distribution of dividends) -28 -26 -30 -34 -25 -32

Rights issue n.a. n.a. n.a. n.a. n.a. n.a.

Other n.a. n.a. n.a. n.a. n.a. n.a.

(Increase) Decrease in Net Debt 2 37 -52 -42 -1 0

Source: Company data and EQUITA SIM estimates



INFORMATION PURSUANT TO ARTICLE 69 ET SEQ. OF CONSOB (Italian securities & exchange commission) REGULATION no. 11971/1999 This publication has been prepared by Stefano Lustig on behalf of EQUITA SIM SpA (licensed to practice by CONSOB resolution no. 11761 of December 22nd 1998 and registered as no. 67 in the Italian central register of investment service companies and financial intermediaries)

In the past EQUITA SIM has published studies on Piaggio.

EQUITA SIM is distributing this publication via e-mail to more than 700qualified operators today: Thursday, 14 November 2013

The prices of the financial instruments shown in the report are the reference prices posted on the day before publication of the same.

EQUITA SIM intends to provide continuous coverage of the financial instrument forming the subject of the present publication, with a semi-annual frequency and, in any case, with a frequency consistent with the timing of the issuer’s periodical financial reporting and of any exceptional event occurring in the issuer’s sphere of activity. The information contained in this publication is based on sources believed to be reliable. Although EQUITA SIM makes every reasonable endeavour to obtain information from sources that it deems to be reliable, it accepts no responsibility or liability as to the completeness, accuracy or exactitude of such information. If there are doubts in this respect, EQUITA SIM clearly highlights this circumstance. The most important sources of information used are the issuer’s public corporate documentation (such as, for example, annual and interim reports, press releases, and presentations) besides information made available by financial service companies (such as, for example, Bloomberg and Reuters) and domestic and international business publications. It is EQUITA SIM’s practice to submit a pre-publication draft of its reports for review to the Investor Relations Department of the issuer forming the subject of the report, solely for the purpose of correcting any inadvertent material inaccuracies. This note has been submitted to the issuer. EQUITA SIM has adopted internal procedures able to assure the independence of its financial analysts and that establish appropriate rules of conduct for them.

Furthermore, it is pointed out that EQUITA SIM SpA is an intermediary licensed to provide all investment services as per Italian Legislative Decree no. 58/1998. Given this, EQUITA SIM might hold positions in and execute transactions concerning the financial instruments covered by the present publication, or could provide, or wish to provide, investment and/or related services to the issuers of the financial instruments covered by this publication. Consequently, it might have a potential conflict of interest concerning the issuers, financial issuers and transactions forming the subject of the present publication.

In addition, it is also pointed out that, within the constraints of current internal procedures, EQUITA SIM’s directors, employees and/or outside professionals might hold long or short positions in the financial instruments covered by this publication and buy or sell them at any time, both on their own account and that of third parties.

The remuneration of the financial analysts who have produced the publication is not directly linked to corporate finance transactions undertaken by EQUITA SIM.

The recommendations to BUY, HOLD and REDUCE are based on Expected Total Return (ETR – expected absolute performance in the next 12 months inclusive of the dividend paid out by the stock’s issuer) and on the degree of risk associated with the stock, as per the matrix shown in the table. The level of risk is based on the stock’s liquidity and volatility and on the analyst’s opinion of the business model of the company being analysed. Due to fluctuations of the stock, the ETR might temporarily fall outside the ranges shown in the table.

EXPECTED TOTAL RETURN FOR THE VARIOUS CATEGORIES OF RECOMMENDATION AND RISK PROFILE

RECOMMENDATION/RATING Low Risk Medium Risk High Risk

BUY ETR >= 10% ETR >= 15% ETR >= 20%

HOLD -5% <ETR< 10% -5% <ETR< 15% 0% <ETR< 20%

REDUCE ETR <= -5% ETR <= -5% ETR <= 0%

The methods preferred by EQUITA SIM to evaluate and set a value on the stocks forming the subject of the publication, and therefore the Expected Total Return in 12 months, are those most commonly used in market practice, i.e. multiples comparison (comparison with market ratios, e.g. P/E, EV/EBITDA, and others, expressed by stocks belonging to the same or similar sectors), or classical financial methods such as discounted cash flow (DCF) models, or others based on similar concepts. For financial stocks, EQUITA SIM also uses valuation methods based on comparison of ROE (ROEV – return on embedded value – in the case of insurance companies), cost of capital and P/BV (P/EV – ratio of price to embedded value – in the case of insurance companies).

MOST RECENT CHANGES IN RECOMMENDATION AND/OR IN TARGET PRICE (OLD ONES IN BRACKETS):

Date Rec. Target Price (€) Risk Comment

29 July 2013 HOLD (HOLD) 2.30 (2.05) Change in estimates and valuation

28 February 2013 HOLD (BUY) 2.25 (2.50) High Change in estimates and valuation

DISCLAIMER The purpose of this publication is merely to provide information that is up to date and as accurate as possible. The publication does not represent to be, nor can it be construed as being, an offer or solicitation to buy, subscribe or sell financial products or instruments, or to execute any operation whatsoever concerning such products or instruments. EQUITA SIM does not guarantee any specific result as regards the information contained in the present publication, and accepts no responsibility or liability for the outcome of the transactions recommended therein or for the results produced by such transactions. Each and every investment/divestiture decision is the sole responsibility of the party receiving the advice and recommendations, who is free to decide whether or not to implement them. Therefore, EQUITA SIM and/or the author of the present publication cannot in any way be held liable for any losses, damage or lower earnings that the party using the publication might suffer following execution of transactions on the basis of the information and/or recommendations contained therein. The estimates and opinions expressed in the publication may be subject to change without notice.

EQUITY RATING DISPERSION AS OF SEPTEMBER 30, 2013 (art. 69-quinquies c. 2 lett. B e c. 3 reg. Consob 11971/99)

COMPANIES COVERED COMPANIES COVERED WITH BANKING RELATIONSHIP

BUY 44.9% 50.0%

HOLD 46.0% 44.2%

REDUCE 8.5% 5.8%

NOT RATED 0.6% 0.0%

Piaggio - Equita · Piaggio is the leading 2W manufacturer in the European market with an estimated market share of 27% in the scooter segment and around 5% in the motorcycle segment.

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