PEERS & MARKETS

International stock markets performed well during the week from the 10th to the 14th of October (Milan +4.9%, London +3.1%, Frankfurt +4%, Paris +5.1%). Markets benefited from the speech of the President of the European Commission, which favoured a stronger European Financial Stability Facility.

A strong increase for the auto sector: the DJ Stoxx Auto rose by 10.8%.

Pirelli closed the week at €6.4 (+13.7%), outperforming the Milan stock market (+8.8pp), the sector index (+2.9pp) and its main peers (+3.6pp v. Michelin, +1pp v. Continental). The share price was sustained by the positive reports of Intermonte (Outperform and TP to 7.5€ from 5.7€) and Mediobanca (Outperform and TP to 7.0€ from 6.9€). According to Intermonte, the scenario is improving for Pirelli and the sector compared to the beginning of August: 1) solid winter demand (winter season 2011 should be better than last year); 2) valuations are attractive since the sector and Pirelli are at a record low; 3) further cuts of consensus estimates are not likewise; 4) positive expectations for the business plan; 5) possible regulatory changes that will have a positive impact on the sector (mandatory winter tires in France and new minimum tread thickness in Germany).

The mean consensus TP is 7.95€ with BUY recommendations from 92% of brokers.

PEERS & MARKETS

Stocks advanced in the first week of October (Milan +4.7%, London +3.4%, Frankfurt  +3.2%, Paris +3.8%), marking the second consecutive week of gains. In Europe, political willingness seemed to favor helping the banking sector, in the form of capital injections to those institutions most exposed to the sovereign debt crisis. At the same time, in his last decision as ECB president, Trichet instituted temporary unlimited funding for banks and a covered bonds buying program, while keeping the benchmark interest rate unchanged. Positive sentiment was further fuelled by labor markets data in the US, which came out better than expected.

Auto & Parts stocks were up last week as well (+1.9%). Pirelli closed at €5.63, gaining 4.8%, on an average daily volume of 4.85mln stocks while Michelin (+0.1%) and Nokian (-0.4%) were largely unchanged with respect to the previous week.

PEERS & MARKETS

Markets performed well during the week from the 26 to 29 September (Milan +8.6%, London +1.2%, Frankfurt +5.9%, Paris 6.1%): they were “backed” by the expectations of a more levered European Financial Stability Facility, and of cuts of interest rates by the BCE.

It was a positive week for the Auto & Parts sector as well (+1.4%).

Pirelli closed the week at 5.37€, gaining 4.2% in line with its peers (Nokian +4.2%, Continental +5.5%, Michelin +5%).

Banca Profilo initiated coverage on Pirelli: BUY and TP of €7.2 per share. Given the current weakening macroeconomic scenario, Pirelli should be more resilient thank to its focus on emerging markets and premium vehicle manifacturer.