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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.

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PEERS & MARKETS

The week of July 18th has been a positive one for major international markets (Milan +5.5%, London +1.6%, Paris -0.7%, Frankfurt +1.5%). After starting with a strong downswing, listings benefitted from the EU decision to relaunch the new bailout plan for Greece, by also involving private financial institutions.

Strong buybacks in the banking industry posted the best European performance: +5.7%, the reference Stoxx.

Sales in the tyre Industry: June and second quarter market data marked a slowdown in sales volumes compared to the first quarter of 2011. Major stocks underwent a downturn: Continental -3.5%, Nokian -3.2%, Michelin -2.8%. Pirelli, the best equity in the industry from the beginning of the year, closed the week at 7.25€ (-5.3%). Pirelli shares were upgraded by Exane, whose rating went from Neutral to Buy and a 9.7€ TP, and by Centrobanca, Buy and 9.5€ TP. Merrill Lynch took another view and started buying Pirelli when it was rated Underperform, with a 7€ Target Price. According to the latter broker, Pirelli overperformed the industry and its main peers in the last two years, because of an “appealing restructuring story” and a sound “earning generation”. The company can also count upon a strong brand, an efficient cost structure, robust pricing power and “an experienced management team”. The broker’s view of 2011-13 plan targets is again different: the growing competition in LatAM, as well as in Europe, could hinder the company’s ability to increase its profitability.

Pirelli average consensus Target Price is of 8.54€ with 96% of brokers buying the security at Buy rating.



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PEERS & MARKETS

A hard week from 13 to 17 December for the main international markets (Milan -2.0%, London +1.0, Frankfurt -0.3%, Paris +0.3%).
After Moody’s downgrade of Ireland (Aa2 to Baa1) and the decision to monitor Spain’s rating (AA1), fears for the financial stability of the peripheral countries in Euroland were reawakened. Bank and insurance shares suffered with the respective European benchmark indexes down by 2.8% and 1.4%.

The negative figures for new car registrations in Eastern Europe in November (-8.3% yoy) hit the Auto sector, down by 2.1% (DJ Stoxx Auto).
Tyre sector shares were hit too (Continental -6.5%, Michelin, -1.4%) suffering, in addition to the auto figures, from the continuous rise in the cost of natural rubber, with futures touching 4.7$/kg (RSS 3) and 4.6$/Kg (TRS20), .

Pirelli contained its losses closing the week almost at par (-0.3%) outdoing both the European benchmark index (+1.8pp) and the FTSEMib (+1.7pp). Share  dealings fell with an average of approx. 1.6 million pieces exchanged (monthly average over 3 million).
Centrobanca’s upgrade of the share (BUY at 7.35€ from 7€) following its reviewed assessment of the tyre business is worth note: +9% at 2.68 billion €, a multiple P/E of 10.7x in 2011 in line with the average of its peers but up on Michelin by 16%. Forecasts are for average annual growth in tyre profits of 6.5% and an EBIT margin of 9.5% in 2013 (EBIT of 556 million €).
The reduced risk of M&A, high exposure on emerging markets, “sound debt position” and “safe dividend policy” were particularly appreciated according to brokers. The development of business in Russia also acted as an important stock catalyst.
IMI bank’s addition of Pirelli to the “securities to bet on in 2011” is also worth noting. Its focus on the premium sector and redistribution of production (with the projects in China, Latin America and Russia) will enable Pirelli to achieve and probably exceed its objectives despite the constant  increase in cost of raw materials.


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