Investor Channel is the communication channel between Pirelli and the financial community. Analysts, shareholders and web users can use the channel for direct dialogue with the Group. The blog is moderated by Pirelli Investor Relations.
European stock markets were down in the week from 19th to 23d March 2012 (-3.5% Milan, London -1.9%, -2.3% Frankfurt, Paris -3.3%). Market sentiment was affected by the renewed fears of a weakening Chinese economy.
An increase in fuel prices operated by the government in Beijing (the second in the last 6 weeks) plus a warning on estimates of the auto market by Chinese producers’ association (probably less than 5% growth), weighted on the Auto&Parts sector, which was down by 4.7% in Europe.
Pirelli closed the week at € 8.83 (-1.8%) with an average daily traded volumes of approximately 5 million. Goldman Sachs (Buy, € 14.3) and Citi (Buy, TP € 10.5 from € 8.5) renewed the positive view on the stock indicating Pirelli as one of the few companies in the sector with room for upside in spite of the recent rally. The consensus target price now stands at € 9.85 with 91% of coverage with positive recommendations.
The week from 12th to 16th March was positive for the main European stock markets (+3.7% Milan, London +1.3%, +4.0% Frankfurt, Paris +3.1%) driven upward by the release of the first tranche of aid to Greece from the EU and the positive macroeconomic newsflow. The Chairman of the Fed confirmed the willingness to keep interest rates low until 2014 despite the progress observed in the labor market and the better-than-expected US leading macroeconomic indicators (employment, consumer confidence, industrial production).
Another good performance of the Auto & Parts sector with an increase of +2.5% along with Industrials (+4.0%) and Banks (+5.3%).
Pirelli, after the publication of the annual results, ended the week up by +15.0% at 8.99€ with an average daily traded volumes of more than 12 million pieces, about three times higher than last quarter.
According to analysts reports, Pirelli closes the year with a “good set of results” in line with expectations. The upward revision of guidance on profitability surprised the market by offering room for upside to consensus. The new targets, according to analysts, adds credibility to the business plan 2012-2014.
10 brokers have revised upward the valuation on the stock (TP) by an average of EUR +1.2. The consensus Target Price is now at € 9.70 with over 90% of coverage with positive recommendations.
Pirelli’s 2012-specification tyres delivered on their promise to provide a greater variety of race strategies by decreasing the performance gaps between the compounds this year. The new versions of the P Zero Yellow soft and P Zero White medium were nominated for the Australian Grand Prix, but the drivers had very little dry running with them before the start, as Friday’s free practice sessions in Albert Park were characterised by rain.
The top finishers adopted a two-stop strategy for the race, as was the case last year, but with the pace of the medium and the soft compound only differing by around 0.5 seconds per lap, the way in which they used the tyres was different – with some drivers favouring two stints on the soft tyre and others preferring two stints on the medium.
One of the turning points of the race was a safety car on lap 36, which bunched up the field and allowed Red Bull Racing’s Sebastian Vettel to claim second place by passing McLaren driver Lewis Hamilton in the pits.
At the restart, race leader Jenson Button demonstrated the rapid warm-up time of the medium compound even in the cool conditions of the afternoon by pulling out a second within the first sector, to eventually claim his third victory in Australia. Vettel, who finished runner-up, had adopted a completely different strategy by using the soft tyre during his medium stint. Last year, Vettel’s winning margin was 22 seconds; this year Button won by just over two seconds.
Pirelli’s motorsport director Paul Hembery commented: “The Australian Grand Prix certainly lived up to expectations, and we fulfilled our objective of providing scope for more strategies by reducing the performance gaps between the compounds and extending the window of peak performance. An interesting element was that there were many pit stops that were not for wear level but instead for degradation, confirming what we wanted to achieve strategy-wise. We also saw more use of the medium tyre than the soft tyre, contrary to last year. Despite this range of strategies there were some very tight battles all the way down the field right up to a dramatic final lap, with one driver crashing out and eighth, ninth and 10th places crossing the finish line practically together! The wear and degradation of the tyres was around 0.1 seconds per lap on the soft tyre – with the frontrunners choosing to pit twice, despite the rapid pace at the front of the field. Many congratulations to Jenson Button and McLaren for a stylish victory and also to Mark Webber, who scores his best-ever finish on home territory.”