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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

Fears that economic growth would be slowed by repeated anti-inflation measures taken by China and India  caused a downturn in the international stock markets in the week 2 to 6 May (Milan –2.1%, London –1.5%), Paris +1.2%, Frankfurt –0.3%).

Sales in the Auto&Parts sector (Stoxx index -1.3%) were affected by the profit-taking that followed an excellent reporting season, and widespread uncertainty about the impact of the disaster in Japan and the pressure raw material market prices might exert on second quarter results.  

Pirelli closed at €6.96 (-0.9%) outperforming both the sector index (+0.4pp v Stoxx Auto) and Piazza Affari (+1.2pp) with an average of over 5 million trades. After the publication of the Q1 2011 results, which were better than expected, analysts were positive, with revised guidance for 2011. There were many increased valuations, by 60 eurocents on average, with a TP of €8.2 (with an average TP of 7.9 for the whole coverage). The most prevalent recommendation was Buy ((82% of total coverage).


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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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PEERS & MARKETS


Enduring fears about the situation in Ireland forced prices down in the week 22 to 26 November 2010.
In terms of sector, financial securities were hit particularly hard (banks –4.9%, insurance companies –4.5%).

 The tyre segment was uncertain, after the downgrading of the sector by HSBC in view of the recent rally in natural rubber prices.

Pirelli closed the week at € 6.1, in line with Continental, Michelin fell by 2.4%. Pirelli volumes were in line with the average for the last month.
Pirelli upgraded by Equita (BUY, target price from €7.2 from €7.0). The broker has a positive view on the MoU signed with Russian Technologies and Sibur Holding to develop joint activities in the tyre and steelcord sectors, and in the supply and production of synthetic rubber derivatives in Russia.
Following Equita, the agreement will allow Pirelli to rapidly enter the Russian market with a technology compatible with Pirelli standards


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