TEAM | 250 GTO
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02/19 04/19 06/19 08/19 10/19 12/19 02/20 04/20 06/20 08/20 10/20 12/20
INITIATION OF COVERAGE14th February 2020
HOLDYEAR-END TARGET PRICE € 158.45
14th February price €159.75Downside -0.81%Dividend Yield 0.7%Total Shareholder Return -0.1%
Source: Thomson Reuters Eikon, Team Elaboration
INVESTMENT SUMMARY
FERRARI AT A GLANCE
INDUSTRY OVERVIEW
COMPETITIVE POSITIONING
FINANCIAL ANALYSIS
VALUATION RISKS
CARS & SPARE PARTSREVENUES € 2,926 bn
n° of Units Shipped 10.131
ENGINESREVENUES € 0,198 bn
Maserati V8 3.0 6l Engine
BRANDREVENUES € 0,538 bn
Other Revenues € 0,104 bn
DIVISIONS
FERRARI AT A GLANCE
INDUSTRY OVERVIEW
COMPETITIVE POSITIONING
FINANCIAL ANALYSIS
VALUATION RISKS
7.000
8.000
9.000
10.000
11.000
2015 2016 2017 2018 2019 2020 2021 2022
43,72%
34,45%
13,87%
7,96%
48,32%
28,63%
14,81%
8,25%EMEA
Americas
Rest of APAC
Mainland China,Hong Kong, Taiwan
2015 2019
REVENUE & CAR SHIPMENTS
UNITS SHIPPED (by year)
2.0802.926
4.095219
198
128
441
538
691
114
104
139
2015A 2019A 2022E
Other
Sponsorship,Commercial and Brand
Engines
Cars & spare parts
UNITS SHIPPED (by area)
REVENUE BREAKDOWN
FERRARI AT A GLANCE
INDUSTRY OVERVIEW
COMPETITIVE POSITIONING
FINANCIAL ANALYSIS
VALUATION RISKS
MAIN COMPETITORS
CARS
SEGMENTS ICONAavg price €1.7m
Monza SP1Monza SP2
SPECIAL SERIESavg price €350k
488 Pista Series
GRAN TURISMOavg price €210k
GTC4SeriesPortofino
Roma
SPORTavg price €320k
812 SeriesF8 Series
SF90 Stradale
0
50
100
150
200
250
300
350
400
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E
€ th
ousa
nds
Sport & Special Series GT Icona Average Price
FERRARI AT A GLANCE
INDUSTRY OVERVIEW
FINANCIAL ANALYSIS
VALUATION RISKS
GROWTH KEY DRIVERSPrice
Brand AwarenessInnovation
Design
STRATEGYLaunch of The Ferrari SUV
Parent Box Tax RegimeElectric engines (faster than ICEs)
60% of hybrid cars by 2022Controlled growth
Official Ferrari aftersales Department
INTANGIBLESBrand awarenessHigh visibilityExclusivityLong-term value resilience
FINANCIALSNo demand elasticity for price
Controlled growthFinancial Services
Payments in advance(for the Sp1 & Sp2 models)
PRODUCTION PROCESSHigh level of personalisation
High tecnologiesDiversification
CUSTOMERS & SALESNear-to-zero ciclicalityStrong client loyaltyWaiting listHNWC base
COMPETITIVE POSITIONING
THE FUTURE
FUTURE CHALLENGESEnvironmental standards
R&D costs to soarCompetitors new launches
Trade-off driving emotions/sustainability Environmental issues
Preservation of exclusivityGrowth of the aftersales market
SWOT ANALYSIS
FERRARI AT A GLANCE
INDUSTRY OVERVIEW
COMPETITIVE POSITIONING
FINANCIAL ANALYSIS
VALUATION RISKS
STRENGTHS
Strong brand image
Strong integration of performance with image, leveraging track expertise
Exclusivity created desire
Innovation & technology as key drivers
OPPORTUNITIESGrowth in the global market for high-performance supercars due to growing economies and developing nations
Increasing customer base through adding more family orientated vehicles
Development of technology
WEAKNESSESFerrari business model, based on scarcity, hinders growth and scales possibilities
Due to the ”waiting list” Ferrari may lose out on customers to the competition
Performance and speed so built into Ferrari it is costly to maintain
THREATSAutomotive policies being pushed by countries & continents
Tough competition from other iconic supercar brands such as Lamborghini
Competing brands do not follow Ferrari low volumes strategy hence they sell more and capture a large market share
FERRARI AT A GLANCE
INDUSTRY OVERVIEW
COMPETITIVE POSITIONING
FINANCIAL ANALYSIS VALUATION RISKS
Cars and spare parts 75-80% of total revenue
HNWI growth, pricing, segments mix
CAGR 2015-2019 = 7.2%
CAGR 2020-2022 (expected) = 11.5%
Overall CAGR 2015-2022 = 8.5%
REVENUES & GROWTH
EBITDA MARGIN
Highest by far in the automotive industry, in line with luxury
Expected to get very close to the luxury outlier Hermes in 2022
Growth driven by sales increase, gross profit improvement (Icona) and fix
costs control20%
25%
30%
35%
40%
0,0
0,5
1,0
1,5
2,0
2,5
3,0
3,5
4,0
4,5
5,0
2015 2016 2017 2018 2019 2020 2021 2022
€ bi
llion
Revenues EBITDA EBITDA Margin
2,1 2,2 2,5 2,5 2,9 3,2 3,5 4,1 0,2 0,3
0,4 0,3 0,2
0,2 0,2
0,1
0,4 0,5
0,5 0,5 0,5
0,6 0,6
0,7
0,1 0,1 0,1 0,1
0,1 0,1
0,1
0,1
-
1,0
2,0
3,0
4,0
5,0
6,0
2015 2016 2017 2018 2019 2020 2021 2022
€ bi
llion
Cars & spare parts Engines Sponsorship, Commercial and Brand Other
FINANCIAL ANALYSIS
FERRARI AT A GLANCE
INDUSTRY OVERVIEW
COMPETITIVE POSITIONING
FINANCIAL ANALYSIS VALUATION RISKS
PROFITABILITY
€ 1,1
€ 1,6
€ 2,1
€ 2,6
€ 3,1
€ 3,6
€ 4,1
€ 4,6
€ 5,1
2015 2016 2017 2018 2019 2020 2021 2022
10%
15%
20%
25%
30%
35%
40%
45%
0,0
0,5
1,0
1,5
2,0
2,5
3,0
3,5
4,0
2015 2016 2017 2018 2019 2020 2021 2022
€ bi
llion
EBIT Invested Capital ROIC
2017-2019 period facilitated by Patent Box positive impact
2018-2022 suffer higher investment level (higher D&A)
Overall growth driven by EBITDA increase and share buybacks (accretion)
EPS
From 2018 higher level of invested capital, not yet converted into sales
(lower Invested Capital turnover)
ROS increase
FINANCIAL ANALYSIS
SOLVENCY
FERRARI AT A GLANCE
INDUSTRY OVERVIEW
COMPETITIVE POSITIONING
FINANCIAL ANALYSIS VALUATION RISKS
-1,0
-0,5
0,0
0,5
1,0
1,5
2,0
2,5
3,0
2016 2017 2018 2019 2020 2021 2022
€ bi
llion
Beginning Cash FCFO Delta Debt + Interests Delta Equity + Dividends Ending Cash
Very generous operating cash flows, despite higher level of capital
expenditures
Share buybacks financed issuing new debt
Increasing dividends
Important overall cash generation
Very high debt level post spin-off
Decrease of NFP (thanks to above mentioned cash generation), slower from
2018 due to higher capital expenditures and shares buybacks
Growing EBITDA
-
0,50x
1,00x
1,50x
2,00x
2,50x
3,00x
0,0
0,5
1,0
1,5
2,0
2,5
2015 2016 2017 2018 2019 2020 2021 2022
€ bi
llion
Net Financial Position EBITDA NFP/EBITDA
CASH GENERATION
FINANCIAL ANALYSIS
FERRARI AT A GLANCE
INDUSTRY OVERVIEW
COMPETITIVE POSITIONING
FINANCIAL ANALYSIS VALUATION RISKS
DCF VALUATION
WACC
30.738 5,20% 5,40% 5,60% 5,80% 6,00% 6,20% 6,40% 6,60% 6,80% 7,00% 7,20%
4,00% 44005 37701 32974 29297 26356 23949 21943 20247 18792 17532 16429
4,10% 47925 40534 35114 30969 27697 25048 22860 21022 19456 18107 16931
4,20% 52630 43839 37559 32850 29187 26257 23860 21862 20172 18723 17467
4,30% 58380 47744 40381 34982 30853 27593 24955 22775 20944 19384 18040
4,40% 65567 52431 43673 37418 32727 29078 26159 23771 21781 20097 18654
4,50% 74808 58159 47564 40230 34851 30738 27491 24862 22691 20867 19313
4,60% 87129 65319 52233 43509 37278 32605 28970 26062 23683 21700 20023
4,70% 104379 74525 57940 47385 40079 34720 30623 27388 24770 22607 20790
4,80% 130254 86800 65073 52037 43346 37138 32483 28862 25965 23595 21620
4,90% 173379 103984 74244 57722 47207 39929 34591 30509 27286 24678 22523
5,00% 259628 129761 86472 64828 51841 43184 37000 32362 28755 25869 23508
Term
inal
Gro
wth
Rat
e
WACC
158 5,20% 5,40% 5,60% 5,80% 6,00% 6,20% 6,40% 6,60% 6,80% 7,00% 7,20%
4,00% 229,83 195,92 170,48 150,70 134,88 121,93 111,14 102,01 94,18 87,40 81,47
4,10% 250,93 211,16 182,00 159,70 142,09 127,84 116,07 106,18 97,76 90,50 84,17
4,20% 276,24 228,94 195,16 169,82 150,11 134,35 121,45 110,70 101,61 93,81 87,05
4,30% 307,17 249,95 210,34 181,29 159,07 141,54 127,34 115,61 105,76 97,37 90,14
4,40% 345,84 275,17 228,05 194,40 169,16 149,53 133,82 120,97 110,26 101,20 93,44
4,50% 395,56 305,99 248,98 209,52 180,58 158,45 140,98 126,84 115,16 105,34 96,99
4,60% 461,85 344,51 274,10 227,17 193,64 168,50 148,94 133,30 120,50 109,83 100,81
4,70% 554,66 394,04 304,81 248,02 208,71 179,88 157,84 140,43 126,34 114,71 104,93
4,80% 693,87 460,08 343,18 273,05 226,29 192,89 167,84 148,36 132,78 120,02 109,40
4,90% 925,89 552,54 392,53 303,63 247,06 207,90 179,18 157,22 139,89 125,85 114,26
5,00% 1389,94 691,22 458,32 341,87 272,00 225,42 192,14 167,19 147,78 132,26 119,56
Term
inal
Gro
wth
Rat
e
SHARE PRICE
Enterprise Value € 30.738m
- Net Financial Position € 1.184m
-Pension Liabilities € 96m
-Non controlling interests € 7m
Equity Value € 29.451m
Shares Outstanding 185.865.925
Value per Share € 158,45
DATA (in €m) 2020E 2021E 2022E NORMALIZED TERMINAL VALUE
FCFO461 449 614 573 35.205
Discounted FCFO434 399 513 - 29.392
SENSITIVITY ANALYSES ON EV AND SHARE PRICE
COMPANY NAME EV/EBITDA EV/EBIT
Ferrari 32,46x 43,91x
Richemont 13,25x 20,75xKering 14,82x 17,51xBurberry Group 12,82x 18,78xMoncler 19,25x 24,20xTiffany 18,72x 25,11xLVMH 14,40x 20,03xHermès 27,75x 31,72xBMW 9,10x 17,35x
Average 16,26x 21,93x
Median 14,61x 20,39x
Richemont
Kering Burberry
Moncler Tiffany
LVMH
BMW
15,00
20,00
25,00
30,00
35,00
40,00
45,00
7% 12% 17% 22% 27% 32% 37%
EV/E
BIT
EBIT Margin
FERRARI AT A GLANCE
INDUSTRY OVERVIEW
COMPETITIVE POSITIONING
FINANCIAL ANALYSIS VALUATION RISKS
MULTIPLES VALUATION
SHARE PRICE
Ferrari EBIT 2020E € 942m
Hermes EV/EBIT 31,72xEnterprise Value € 29.883m - Net Financial Position € 1.184m
-Pension Liabilities € 96m
-Non controlling interests € 7m
Equity Value € 28.596m
Shares Outstanding 185.866.925
Value per Share € 153,86
FERRARI AT A GLANCE
INDUSTRY OVERVIEW
COMPETITIVE POSITIONING
FINANCIAL ANALYSIS
VALUATION RISKS
RISK MATRIXhi
gh
L K J
IMPA
CT
med
ium
I N M AB
H
D P E F Q
low
O R C G
S
low mediumLIKELYHOOD
high
RISK
R&D A
Hybrid technology B
Competitors C
Brand Awareness D
Formula1 Team E
Emissions F
Forex G
Tax & Tariffs H
Design I
Purosangue J
Stocks & Dividends K
Car Recalls L
Controlled Growth M
Emerging Countries N
Licences O
Suppliers P
Maserati Q
Conflicts of interest R
Financial Services S
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02/19 04/19 06/19 08/19 10/19 12/19 02/20 04/20 06/20 08/20 10/20 12/20
INITIATION OF COVERAGE14th February 2020
HOLDYEAR-END TARGET PRICE € 158.45
14th February price €159.75Downside -0.81%Dividend Yield 0.7%Total Shareholder Return -0.1%
Source: Thomson Reuters Eikon, Team Elaboration