PEERS & MARKETS

The week 10 to 14 January was a positive one for the financial markets: Milan +4.5%, London +0.3%, Frankfurt +1.8%, Paris +3.0%. The success of the Portuguese and Spanish bond auctions has mitigated fears about the debts of peripheral euro area countries and shifted the focus of investors to banks: reference index +6.2%, best sector at European level. 
 

 Pirelli closed 2.7% down. Despite the positive view expressed by Kepler (which maintained its Buy recommendation and Target price of €7.6, catalyst: geographical diversification, exposure on premium and management quality) which recommends investment in Pirelli for 2011,  the share price is affected by profit taking by banks and financial institutions as well as sector concerns about the trend in raw material costs.

PEERS & MARKETS

The major international markets rose in the week from 6 to 10 December (Milan +1.8%, London +1.2%, Frankfurt +0.8%, Paris +2.8%), buoyed by recovery in the banking and insurance segments (European index +1.5% and +4.7% respectively).

The Auto&Parts sector remained substantially the same (-0.2%) reflecting the risk that China will abolish car purchase incentives (1.6 litres or less engines) at the end of December (duty on cars has been reduced to 7.5% from 10%).

The news from China and the progressive rise in the cost of natural rubber, with futures reaching maximums of 4.558 $/ton (9/12) in Tokyo, affected share prices in the European tyre segment, which had dipped by the end of the week: Michelin -3.1%, Continental -5.0%, Nokian -1.2%.

Pirelli closed at €6.14, a fall of about 1%. Less trading on average: about 3 million, compared to about 4 million last month. Deutsche Bank resumed coverage of the share with TP €7.6 and a BUY recommendation. According to the broker, exposure on emerging markets and in the premium segment will guarantee above-market growth for the company. Profitability decidedly better, with a forecast of 11.5% for ebit margin in 2013.

PEERS & MARKETS

Profit taking on the major international stockmarkets in the week 7-11 December 2009, with sharp losses, particularly in financial securities.
Pirelli & C fell 0.8% to close at 0.429€; with Michelin, the company outperformed the European Auto&Parts sector as a whole (+1pp vs DJ Stoxx Auto).
The analysts’ average valuation of Pirelli was 0.46€, with a BUY recommendation from most (71%) of the coverage, represented by 18 investment banks, with 29% recommending Hold and 0% Sell.
Pirelli RE shares also outperformed their sector average, despite falling 2.1% during the week to close at 0.501 (+2pp vs the Epra Europe Index).

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