Piaggio Equity Report
Autor: doodlebob888 • November 19, 2017 • Research Paper • 350 Words (2 Pages) • 597 Views
Business overview:
Based in Italy, the Piaggio Group is a leading global manufacturer and distributor of light motor vehicles. With global production and a robust portfolio of brands (nine major names including Piaggio and Vespa), the group has solid market positions in the two-wheeler (scooters and motorbikes) market and in the three- and four-wheel commercial vehicles sector. Employing 6,982 people worldwide, Piaggio is currently the largest European manufacturer of two-wheelers and the market leader in the scooter segment by sales volume, ahead of Honda. In India (26% of Piaggio’s FY16 revenue), the group ranks second in the three-wheel vehicle markets, behind major local manufacturer Bajaj Auto Ltd. [pic 1]
As of FY16 (ending December), the group sold 532,000 vehicles (+2.7% YoY) and reported total revenue of €1,313mm (+1.4%) and EBITDA of €171mm (+5.6%).
Investment risks and mitigants:
Risk | Mitigant |
Volatility in emerging markets: Demand for two-wheeler vehicles in emerging Asia is volatile and uneven. Rising competition in countries like Vietnam and India continue to offset market growth. | This is mitigated by volume growth in Piaggio’s other core markets. Management expects to benefit from a continued recovery in Western Europe, maintaining the 2016 positive trend (+8.5% growth YoY), with market expansion in the motorbike segment driving this. Strong growth of 5-8% is expected in FY17 and FY18. Furthermore, Piaggio’s management has effectively demonstrated their responsiveness to competitive pressures. For example, in 2016, they revamped their commercial network in Vietnam in efforts to regain market share. |
Seasonality: Demand for two-wheeler vehicles (70% of FY16 revenue) is seasonal, particularly in western markets where sales mainly takes place in spring and summer seasons. Furthermore, adverse weather (e.g. a wet spring) could lead to fewer sales and therefore hamper Group revenue. | This is mitigated by Piaggio’s strategy to focus on Asian markets like India and APAC, where sales are not seasonal by nature. In FY16, management continued their expansion into the Thai and Chinese market, with revenue from the regions growing 40% and 70% YoY respectively. Furthermore, the group adopts a flexible production structure that can deal with peak demand through vertical part-time and fixed-term employment contracts, as well as seasonal planning. |
Competition: |
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