PEERS & MARKETS

Despite the profit taking of recent sessions – in line with the general market trend – Pirelli has been outperforming both the Italian Blue Chip index and its main international peers decisively.   From the start of the year to 30 December 2010, the share price rose by 39.5% (from €4.34 to €6.05), positioning itself as one of the best shares on both the Italian market (relative performance +52.7 pp compared to the FTSE MiB index) and in the European auto & parts sector (+35.8pp higher then Michelin). Trading increased over the year: the daily average was 4.3 mln shares, +10% compared to 2009. 
The full transformation of the Group into a pure tyre company, the solid operating performance and the presentation of its new industrial plan for 2011-2013 all supported Pirelli’s performance on the stock market in 2010. It also remains one of the stocks preferred by analysts. The prevalent recommendation was Buy, with a consensus Target Price of €7.05.

Pirelli confirmed world leader in Dow Jones Sustainability Indexes for the fourth year in a row

For the fourth year in a row, Pirelli was confirmed world leader in the Autoparts and Tires sector in the Dow Jones Sustainability Europe and Dow Jones Sustainability World indexes.

For the second year in a row, Pirelli was also the only Italian company to be ranked as world leader in its sector.

The 2010 review was carried out by SAM Group, the Swiss asset management group in charge of the assessment and selection process for admission to the Dow Jones Sustainability Indexes. Criteria include corporate governance, risk management, codes of conduct, brand management and innovation processes. On the environmental front, SAM looks at reporting, environmental policies, procedures and systems, responsible product management, climate change and emissions reduction strategy and energy efficiency. There are also social criteria: development and management of human resources, philanthropy, health and safety in the workplace, supply chain management and stakeholder engagement.

PEERS & MARKETS

Sector rotation in favor of bank sector characterized the week from 26 to 30 July on the stocks markets. Following the results of stress tests required by the European Commission, the European Banks sector index recorded 5% upside. Profit taking affected sector that have better performed since the beginning of the year : Automotive & Parts marks -1.8% despite the positive indications for 2010 given that emerged from the publication of half-year results by the major car and components manufacturers such as Daimler, Pirelli, Continental and Michelin. Pirelli closed the week at € 5.37 (-1.1%) containing profit taking (-3.6% Michelin, Continental -2.5%). Pirelli 2Q 2010 results beated consensus estimates (+ 21% EBIT vs. the figure expected by market) with a positive impact both in terms of tyre estimates for 2010 (in line with the new target) and a higher evaluation of Pirelli stock. Ten brokers have revised their target price on Pirelli & C by an average of 40 € cents from €5.75 to €6.15. The full consensus target price stands now at € 6.04; Buy is the prevalent recommendation (83% of coverage). Pirelli, despite last week trend, is still the best performer on Ftse Mib year to date, with a relative performance of +26 pp compared to the index of blue chips. Pirelli RE, that confirmed its guidance for 2010 closed at € 0367 with an increase of 2.4% (+1.7 pp vs. the European Real Estate Index).

Peers & Markets 26-30.07.2010