Data - ubibanca.com 4 November 20… · Ferrari reported a solid set of results in 3Q19 showing sound YoY growth (+13% in units and +14% revenues for cars & spare parts), nice price/mix

1

FERRARI Company report Buy (maintained)

04 November 2019 – 5:30 PM MARKET PRICE: EUR144.5 TARGET PRICE: EUR180 (from EUR163)

Branded goods

Data

Shares Outstanding (m): 179.7

Market Cap. (EURm): 28,033

Enterprise Value(EURm): 27,127

Free Float (%): 62.3%

Av. Daily Trad. Vol. (000): 0.415

Main Shareholder: Exor NV (23.5%)

Reuters/Bloomberg: RACE.MI RACE IM

52-Week Range (EUR) 84.1 152.6

Source: FactSet, UBI Banca estimates

Performance

1m 3m 12m

Absolute 4.1% -3.3% 37.2%

Rel. to FTSE IT 0.0% -9.2% 19.3%

Source: FactSet

Graph area Absolute/Relative 12 M

Source: FactSet

Massimo Vecchio Senior Analyst [email protected] Tel. +39 02 62753016

Dario Fasani Analyst [email protected] Tel. +39 02 62753014

www.ubibanca.com/equity-research

Strong 3Q19, guidance & estimates raised

Ferrari reported a solid set of results in 3Q19 showing sound YoY growth (+13% in units and +14% revenues for cars & spare parts), nice price/mix improvement (+5.1% to EUR286K), margins expansion (70bps at EBITDA level) and above all impressive cash flow generation, despite heavy investments (EUR40 million increase in R&D alone). The cash generation was probably the biggest surprise in this set of results: Net Industrial Debt reached the EUR369 million mark, in line with our estimates, but with more share buyback than expected (EUR93 million delta). Following the strong 3Q19 the company raised its guidance (now above consensus on cash generation). We reiterate our BUY rating and raise our target price by 10.0% to EUR180 on the back of a 3.8% increase in estimates and a supportive peers re-rating.

> 3Q19 in more details: Units delivered grew by a nice 9.4% YoY mostly

thanks to EMEA and Asia (ex-China) and to Portofino and 812

Superfast. Group revenues were up 9.2% YoY with Cars & Spare parts

up 16% YoY thanks also to price/mix and personalization. This had a

positive impact on EBITDA which in fact expanded by 80bps YoY,

reaching the 34% mark and up +11.9% YoY. Net Income grew 16% YoY

while FCF reached EUR138 million from EUR79 million a year ago.

> Conference call feedback. During the call management presented its

new strategy on brand diversification which will focus on three pillars

(brand extension, entertainment and car adjacencies) and implies a

reshuffle of the licensing agreements (to be cut by 50%), product

categories (-30%) and SKUs (-50%). The reference market is estimated

being worth EUR800 million and the division should contribute 10% of

overall group profits and be accretive to margins.

> Raising estimates by 3.8% on average for 2019-22. We do not see

our estimates as aggressive (4Q19 volumes seen up 1.4% YoY, after

the +13% posted in 9M19) with ARPU growing slightly ahead of 9M19

thanks to the ramp up of the Monza. The new guidance is broadly

aligned with consensus on 2019 but shows a stronger cash generation.

Our numbers are slightly above consensus on 2019 and significantly

above on 2020 (+15% in terms of Adj. EPS and 47% for Industrial FCF).

> Buy confirmed, TP raised to EUR180.0. Our positive stance is based

on: a) the unicity of the asset which materializes in unparalleled pricing

power and a long waiting list; b) the conviction we have that hybrids is a

plus both from the customer view and the company profitability; c) the

fact that we expect earnings surprises.

Financials EURm

2018 2019E 2020E 2021E

Revenues (EURm) 3,420 3,721 4,228 4,748

EBITDA (EURm) 1,135 1,321 1,520 1,810

EBITDA margin (%) 33.2% 35.5% 35.9% 38.1%

EBIT (EURm) 826 926 1,075 1,250

EPS (EUR) 4.2 3.9 4.5 5.3

CFPS (EUR) 2.7 3.8 4.4 6.1

DPS (EUR) 1.0 1.1 1.3 1.6

Source: Company data, UBI Banca estimates

Ratios (priced on 31 October 2019)

2018* 2019E 2020E 2021E

P/E (x) 25.3 37.5 32.2 27.4

P/CF (x) 38.8 27.5 24.1 17.4

P/BV (x) 14.7 10.5 7.8 6.1

Dividend Yield 1.0% 0.7% 0.9% 1.1%

EV/EBITDA (x) 17.3 19.9 17.0 13.9

Debt/Equity (x) -0.3 -0.2 0.1 0.3

Debt/EBITDA (x) -0.3 -0.2 0.1 0.5

Source: Company data, UBI Banca estimates * 2018 av. price

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No

v-18

Dec

-18

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-19

Feb

-19

Mar

-19

Ap

r-19

May

-19

Jun

-19

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19

Au

g-19

Sep

-19

Oct

-19

No

v-19

Ferrari NV FTSE Italia All-Share

mailto:[email protected]

FERRARI 04 November 2019

2

Key Financials

(EURm) 2018A 2019E 2020E 2021E

Revenues 3,420 3,721 4,228 4,748

EBITDA 1,135 1,321 1,520 1,810

EBIT 826 926 1,075 1,250

NOPAT 568 638 741 863

Free Cash Flow 425 637 690 946

Net Capital Employed 2,487 2,986 3,171 3,234

Shareholders' Equity 1,354 1,883 2,526 3,263

Net Financial Position (1,133) (1,104) (645) 29


Key Profitability Drivers

2018A 2019E 2020E 2021E

Net Debt/EBITDA (x) -0.3 -0.2 0.1 0.5

Net Debt/Equity (x) -0.3 -0.2 0.1 0.3

Interest Coverage (%) 49.3 33.0 49.7 94.6

Free Cash Flow Yield (%) 2.1% 2.3% 2.5% 3.5%

ROE (%) 58.1% 38.4% 33.4% 30.4%

ROI (%) 61.0% 49.2% 42.6% 38.3%

ROCE (%) 22.9% 21.4% 23.4% 26.7%


Key Valuation Ratios

2018* 2019E 2020E 2021E

P/E (x) 25.3 37.5 32.2 27.4

P/BV (x) 14.7 10.5 7.8 6.1

P/CF (x) 38.8 27.5 24.1 17.4

Dividend Yield (%) 1.0% 0.7% 0.9% 1.1%

EV/Sales (x) 5.7 7.1 6.1 5.3

EV/EBITDA (x) 17.3 19.9 17.0 13.9

EV/EBIT (x) 23.7 28.4 24.0 20.1

EV/CE (x) 7.9 8.8 8.1 7.8

Source: Company data, UBI Banca estimates, * 2018 average prices

Key Value Drivers

2018 2019E 2020E 2021E

Payout 24.6% 27.7% 30.0% 30.0%

NWC/Sales -1.5% -5.0% -5.0% -4.7%

Capex/Sales 18.6% 19.8% 17.1% 14.3%



3

Recent developments

> Solid revenues growth despite “Engines” decline and China weakness.

Group revenues grew 9% YoY (+7% excluding forex) despite the -34% reported

in the Engines division, hit by Maserati slowdown in sales coupled with

destocking. Cars & Spare Parts revenues grew 15% YoY (12% excluding forex)

thanks to a 9% YoY growth in shipments, a +5.1% in ARPU (that reached the

EUR286,176 mark) and a small forex tailwind. The volume growth was not

homogeneous across regions: while Americas was flat and China marginally

declined (-2%) EMEA (+14%) and Rest of APAC (+23%) sustained the growth.

8 and 12 cylinder growth were almost equals (+9.5% and +8.9% respectively)

so no major product mix impact. 3Q19 included the very first deliveries of the

Monza SP1 and SP2 although the precise number was not disclosed.

> Profitability expanded despite a significant ramp-up in costs/investments.

EBIT margin reached the 24.8% mark, expanding by 60bps vs. 3Q18 and

despite a EUR40 million in R&D increases (attributable in our view to hybrids

development). Volumes, personalization and price/mix together with a release of

provisions were the drivers. Forex explains EUR15 million of the EUR24 million

increase in Adj. EBIT.

> 3Q19 was above our estimates and consensus. In details: a) Units delivered

stood at 2,474 better than our estimates of 2,285; b) Group revenues stood at

EUR915 million, compared with UBI @ EUR853 million and consensus @

EUR866 million; c) EBITDA Adj. stood at EUR311 million, compared with UBI

@ EUR282 million and consensus @ EUR296 million; d) EBIT Adj. stood at

EUR227 million, compared with UBI @ EUR203 million and consensus @

EUR213 million; e) Adj. Diluted EPS stood at EUR0.90 per share, compared

with UBI @ EUR0.89 per share and consensus @ EUR0.87 per share; f) Net

Industrial Debt stood at EUR303 million, compared with UBI @ EUR318 million

and consensus @ EUR432 million.

Figure 1 – Ferrari 3Q19 and 9M19 results

(EURm) 3Q 2018A 3Q 2019A YoY chg. 3Q 2019E A/E change Consensus 9M18A 9M19A YoY chg. 9M19E

Shipments (units) 2,262 2,474 9.4% 2,285 8.3% n.a. 6,853 7,755 13.2% 7,566

Total sales 838 915 9.2% 853 7.2% 866 2,575 2,839 10.3% 2,777

EBITDA Adj. 278 311 11.9% 282 10.3% 296 840 936 11.4% 907

EBITDA margin % 33.2% 34.0%

33.0%

34.2% 32.6% 33.0%

32.7%

EBIT 203 227 11.8% 203 12.0% 213 630 698 10.8% 675

EBIT margin % 24.2% 24.8%

23.7%

24.6% 24.5% 24.6%

24.3%

Net profit 287 169 -41.1% 162 4.3% n.a. 533 596 11.8% 526

Industrial Net (Debt)/Cash (372) (369)

(318) 16.1% (432) (372) (303) -18.5% (318)

Adj. Diluted EPS 0.80 0.91 13.4% 0.89 1.7% 0.87 2.39 2.81 17.6% 2.79

Res. Net profit 146 169 15.8% 162 4.3% 166 454 533 17.4% 526

Source: Company data, UBI Banca estimates, FactSet


4

Financial Projections

> The company raised its 2019 guidance. The new FY2019 guidance points to:

a) Net Revenues >EUR3.7 billion from previous >EUR3.5 billion; b) Adj EBITDA

EUR1.27 billion from 1.2-1.25 billion; c) Adj. EBIT EUR0.92 billion from 0.85-

0.90 billion; d) Adj diluted EPS EUR3.70-3.75 from 3.50-3.70 per share; e)

Industrial free cash flow >EUR0.6 billion from >EUR0.55 billion.

> From the call: strong level of orders and a new model to be unveiled next

week. CEO had a confident tone during the call hinting at: a) strong level of

orders and a solid order book; b) no area of weaknesses by region nor by

models; c) a new model to be unveiled next Wednesday; d) impatience to be on

the waiting list also for the SF90 Stradale which is the first ever hybrid model in

the range series lineup. This is very relevant as it fortifies our view that Ferrari

customers will welcome positively products that enhance the performances (no

push back on price was mentioned during the call. We remind investors that, at

EUR430,000, the SF 90 Stradale is one of the most expensive range car ever).

> The new “Brand diversification strategy”. Management gave some hints on

how it is overhauling Ferrari non-cars revenues. It will be focused on three

pillars: a) brand extension; b) entertainment; c) car adjacencies. It will imply first

a decline in revenues due to the reshuffle of the licensing agreements (to be cut

by 50%), of the product categories (-30%) and of the SKUs in inventory (-50%).

A huge payback is expected thought, with a reference market estimated being

worth EUR800 million. The division should contribute 10% of overall group

profits and be accretive to margins. While not huge in absolute terms this could

represent a nice growth driver by the end of the current BP period 2022.

> New F1 rules: neutral for the P&, maybe some upside. During the call the

CEO commented also on the first release of the new F1 rules, which should be

applied from 2021 (when the Concordia agreement expires). The

announcement made over the week end was described as the “beginning of the

process” as lot of details have to be yet finalized. However, from the point of

view of the company financials, thanks to the “budget cap” it seems that the

impact could be anywhere between neutral to marginally positive. In other words

some reduction in spending is envisaged while revenues should maintain

current levels or even increase. Obviously the impact on the sport results are to

be seen and, in the short terms, Ferrari next year will develop both the 2020 car

and the 2021 (with an inevitable increase in development costs).

> We are raising our estimates. Yet, we do not define our projection as

aggressive (4Q19 volumes seen up 1.4% YoY, after the +13% posted in 9M19)

with ARPU growing slightly ahead of 9M19 thanks to the ramp up of the Monza.

The new guidance is broadly aligned with consensus on 2019 but shows a

stronger cash generation. Our numbers are slightly above consensus on 2019

and significantly above on 2020 (+15% in terms of Adj. EPS and 47% for

Industrial FCF).


5

Figure 2. Old vs. new estimates

2019E 2020E 2021E

(EURm) Old New % diff. Old New % diff. Old New % diff.

Sales 3,630 3,721 2.5% 4,122 4,228 2.6% 4,650 4,748 2.1%

Adj. EBITDA 1,301 1,321 1.5% 1,490 1,520 2.0% 1,776 1,810 1.9%

Adj. EBIT 903 926 2.5% 1,044 1,075 3.0% 1,215 1,250 2.9%

EBIT % 24.9% 24.9%

25.3% 25.4%

26.1% 26.3%

Adj. Net Profit 664 668 0.6% 830 844 1.6% 967 991 2.4%

Net Debt/(Cash) (298) (311) -4.5% 146 147 -0.8% 799 821 -2.7%

Source: UBI Banca estimates

Figure 3 – UBI estimates vs. guidance vs. consensus

2019

2020

(EURm, %) Guidance UBI % change Consensus % change Guidance UBI % change Consensus % change

Shipments (units) n.a. 10,187

n.a.

n.a. 10,698

n.a.

Net Revenues >3,700 3,721 6.3% 3,717 0.1% >3800 4,228 11.3% 4,050 4.4%

EBITDA - Adj 1,27 1,321 7.8% 1,266 4.3% >1300 1,520 16.9% 1,446 5.1%

% c.a. 34% 35.5%

34.1%

c.a. 34% 35.9%

35.7%

EBIT - Adj 0,92 926 5.8% 922 0.4% >900 1,075 19.4% 1,042 3.1%

% c.a. 24.5% 24.9%

24.8%

c.a. 24% 25.4%

25.7%

ADJ. EPS Diluted 3,7-3,75 3.72 3.3% 3.75 -0.9% >3,40 4.69 38.1% 4.09 14.9%

Ind. FCF > 600 637 15.8% 487 30.7% >400 690 72.5% 468 47.3%

Source: Company data, UBI Banca estimates, FactSet


6

Valuation

> Raising the target price to EUR180 (from EUR163). We are raising our target

price by 10% driven by the increase in our estimates (3.8%) and the peers re-

rating.

> We reiterate our Buy. While we acknowledge the astonishing performance the

stock had also in 2019 and the multiples (which optically seems full) we believe

that, seen on a longer terms horizon, the valuation is still appealing. We

reiterate our positive stance on the back of: a) the unicity of the asset which

materializes in unparalleled pricing power and a long waiting list; b) the

conviction we have that hybrids is a plus both from the customer view and the

company profitability; c) the fact that we expect earnings surprises.

Figure 4 – Valuation summary

(EUR) New Old % difference

DCF 183 161 14%

Peers comparison 173 154 12%

EVA 184 175 5%

Average 180.0 163 10%


Figure 5 – Peer group – Multiples (priced on 3 November 2019)

Company name TIER Price Currency Mkt Cap EV/EBITDA EV/EBIT P/E FCF Yield

(bn) 2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E

Hermes I 651.8 EUR 68.8 23.6 x 21.4 x 19.2 x 27.8 x 24.9 x 22.2 x 44.9 40.4 36.6 2.1% 2.4% 2.8%

EssilorLuxottica I 136.1 EUR 59.4 16.0 x 14.7 x 13.4 x 23.0 x 20.9 x 18.8 x 30.7 28.3 25.5 2.8% 3.4% 3.7%

Brunello Cucinelli II 28.8 EUR 2.0 19.1 x 17.4 x 15.8 x 25.9 x 23.5 x 21.3 x 37.5 35.7 32.3 1.3% 1.9% 2.2%

Kering SA II 515.0 EUR 65.0 12.3 x 11.1 x 10.1 x 14.4 x 12.9 x 11.6 x 20.8 18.0 16.6 3.0% 4.5% 5.4%

Aston Martin Lagonda II 4.7 GBP 1.1 7.9 x 5.3 x 4.3 x 24.8 x 11.4 x 7.8 x

19.8 9.4 -11.9% -3.6% 4.5%

Moncler II 35.2 EUR 9.1 14.8 x 12.7 x 11.1 x 17.1 x 14.6 x 12.7 x 24.7 22.9 20.5 3.3% 3.7% 3.9%

LVMH II 389.3 EUR 2.9 3.5 x 3.2 x 11.5 x 12.6 x 11.6 x 13.7 x 15.9 14.4 30.9 3.4% 3.8% 4.3%

Burberry Group II 23.6 GBP 2.3 2.5 x 2.3 x 10.8 x 11.4 x 10.2 x 13.9 x 14.7 12.9 25.1 3.3% 3.8% 4.4%

Salvatore Ferragamo II 16.8 EUR 2.1 1.8 x 1.7 x 13.1 x 11.4 x 10.1 x 18.8 x 15.9 13.7 32.4 3.4% 3.9% 4.4%

Co. Fin. Richemont II 71.3 CHF 2.1 2.4 x 2.2 x 10.4 x 11.6 x 10.4 x 15.2 x 15.7 13.9 27.5 2.8% 3.5% 4.1%

Tiffany & Co. II 113.7 USD 2.2 3.3 x 3.1 x 9.6 x 13.9 x 13.0 x 12.4 x 18.2 16.8 27.0 3.0% 3.2% 3.5%

Average – Tier I 18.8 x 16.6 x 14.6 x 23.1 x 18.9 x 17.2 x 28.0 x 24.2 x 20.1 x 3.4% 4.2% 5.1%

Median – all peers

19.0 x 16.6 x 14.5 x 25.4 x 21.5 x 18.1 x 29.6 x 25.2 x 21.8 x 3.5% 4.2% 4.8%

Ferrari

144.5 EUR 27.1 19.9 x 17.0 x 13.9 x 28.4 x 24.0 x 20.1 x 37.5 x 32.2 x 27.4 x 2.3% 2.5% 3.5%

Premium/(Disc.) to peers

1.7% -4.6% -13.9% 11.0% 3.9% -3.1% -0.5% -7.5% -12.9% -10.9% 2.4% -17.6%

Source: FactSet


7

Income Statement

(EURm, %) 2018P/F 2019E 2020E 2021E

Net Revenues 3,420 3,721 4,228 4,748

EBITDA 1,135 1,321 1,520 1,810

EBITDA margin 33.2% 35.5% 35.9% 38.1%

EBIT 826.0 925.9 1,075.0 1,250.1

EBIT margin 24.2% 24.9% 25.4% 26.3%

Net financial income/expense (23.0) (40.0) (30.6) (19.1)

Associates & Others 3.0 4.5 5.0 5.4

Profit before taxes 803.0 885.9 1,044.4 1,231.0

Taxes (16.0) (162.6) (200.7) (240.4)

Minorities & disc. operations - - - -

Net Income 787.0 723.3 843.7 990.6


Balance Sheet

(EURm) 2018P/F 2019E 2020E 2021E

Net working capital (51) (186) (211) (224)

Net Fixed assets 2,374 2,716 2,996 3,117

Other assets/(liabilities) 164 (387) (426) (378)

Capital Employed 2,487 2,986 3,171 3,234

Shareholders' equity 1,349 1,878 2,521 3,258

Minorities 5 5 5 5

Shareholders' funds 1,354 1,883 2,526 3,263

Net financial debt/(cash) (1,133) (1,104) (645) 29


Cash Flow Statement

(EURm) 2018P/F 2019E 2020E 2021E

NFP Beginning of Period (1,158) (1,133) (1,103) (645)

EBITDA 1135 1321 1520 1810

Interest expenses (23) (40) (31) (19)

Cash taxes (16) (163) (201) (240)

Change in Working Capital 16 135 25 13

Other (70) 80 70 45

Operating Cash Flow 1,042 1,333 1,384 1,608

Net Capex (637) (736) (725) (681)

Other Investments (146) (98) (59) (118)

Free Cash Flow 259 499 601 809

Dividends Paid (136) (195) (200) (253)

Other & Chg in Consolid. Area 0 0 0 0

Chg in Net Worth & Capital Incr. (243) (373) 0 0

Change in NFP 25 29 459 674

NFP End of Period (1,133) (1,103) (645) 29



8

Financial Ratios

(%) 2018P/F 2019E 2020E 2021E

ROE 58.1% 38.4% 33.4% 30.4%

ROI 61.0% 49.2% 42.6% 38.3%

Net Fin. Debt/Equity (x) -0.3 -0.2 0.1 0.3

Net Fin. Debt/EBITDA (x) -0.3 -0.2 0.1 0.5

Interest Coverage 49.3 33.0 49.7 94.6

NWC/Sales -1.5% -5.0% -5.0% -4.7%

Capex/Sales -18.6% -19.8% -17.1% -14.3%

Pay Out Ratio 24.6% 27.7% 30.0% 30.0%


Per Share Data

(EUR) 2018P/F 2019E 2020E 2021E

EPS 4.17 3.85 4.49 5.27

DPS 1.03 1.07 1.35 1.58

Op. CFPS 5.52 7.10 7.37 8.56

Free CFPS 2.25 3.39 3.67 5.04

BVPS 7.18 10.02 13.45 17.37


Stock Market Ratios

(x) 2018P/F 2019E 2020E 2021E

P/E 25.3 37.5 32.2 27.4

P/OpCFPS 38.8 27.5 24.1 17.4

P/BV 14.7 10.5 7.8 6.1

Dividend Yield (%) 1.0% 0.7% 0.9% 1.1%

Free Cash Flow Yield (%) 2.1% 2.3% 2.5% 3.5%

EV (EURm) 19,609 26,281 25,822 25,148

EV/Sales 5.7 7.1 6.1 5.3

EV/EBITDA 17.3 19.9 17.0 13.9

EV/EBIT 23.7 28.4 24.0 20.1

EV/Capital Employed 7.9 8.8 8.1 7.8


Growth Rates

(%) 2018P/F 2019E 2020E 2021E

Growth Net Sales 0.1% 8.8% 13.6% 12.3%

Growth EBITDA 9.5% 16.4% 15.1% 19.1%

Growth EBIT 6.6% 12.1% 16.1% 16.3%

Growth Net Profit 46.5% -8.1% 16.7% 17.4%



9

Disclaimer

Analyst Declaration

This research report (the “Report”) has been prepared by Massimo Vecchio and Dario Fasani on behalf of UBI Banca S.p.A. (“UBI Banca”) in the context of the ancillary service provided by UBI Banca named “Investment research and financial analysis or other forms of recommendation relating to transactions in financial instruments” under Paragraph 5), Section B, Annex I of the Directive 2014/65/EU (“MiFID II”). UBI Banca is an Italian bank under art. 4 (1)(27) of MiFID II and it is supervised by the European Central Bank and duly authorised to provide investment services pursuant to Article 1, Paragraph 5, letter a), b), c), c-bis), e) and f) of the Legislative Decree 24 February 1998, n° 58 under the supervision of the Italian Authority for the financial markets (Consob). UBI Banca has its head office at Piazza Vittorio Veneto 8, 24122 Bergamo.

The analyst who prepared the Report, and whose name and role appear on the front page, certifies that:

a. The views expressed on the company, mentioned herein (the “Company”) accurately reflect his personal views, but do not represent the views or opinions of UBI Banca, its management or any other company which is part of or affiliated with UBI Banca group (the “UBI Banca Group”). It may be possible that some UBI Banca Group officers may disagree with the views expressed in this Report;

b. He has not received, and will not receive any direct or indirect compensation in exchange for any views expressed in this Report;

c. The analyst does not own any securities and/or any other financial instruments issued by the Company or any financial instrument which the price depends on, or is linked to any securities and/or any financial instruments issued by the Company.

d. Neither the analyst nor any member of the analyst’s household serves as an officer, director or advisory board member of the Company.

e. The remuneration of the analyst is not directly tied to transactions for services for investment firms or other types of transactions it or any legal person, part of the same group performs, or to trading fees it or any legal person that is part of the same group receives.

f. Massimo Vecchio is member of AIAF’s Directive Counsel.

General disclosure

This Report is for information purposes only. This Report (i) is not, nor may it be construed, to constitute, an offer for sale or subscription or of a solicitation of any offer to buy or subscribe for any securities issued or to be issued by the Company, (ii) should not be regarded as a substitute for the exercise of the recipient’s own judgement. In addition, the information included in this Report may not be suitable for all recipients. Therefore the recipient should conduct their own investigations and analysis of the Company and securities referred to in this document, and make their own investment decisions without undue reliance on its contents. Neither UBI Banca, nor any other company belonging to the UBI Banca Group, nor any of its directors, managers, officers or employees, accepts any direct or indirect liability whatsoever (in negligence or otherwise), and accordingly no direct or indirect liability whatsoever shall be assumed by, or shall be placed on, UBI Banca, or any other company belonging to the UBI Banca Group, or any of its directors, managers, officers or employees, for any loss, damage, cost, expense, lower earnings howsoever arising from any use of this Report or its contents or otherwise arising in connection with this Report.


10

The information provided and the opinions expressed in this Report are based upon information and data provided to the public by the Company or news otherwise public, and refers to the date of publication of the Report. The sources (press publications, financial statements, current and periodic releases, as well as meetings and telephone conversations with the Company’s representatives) are believed to be reliable and in good faith, but no representation or warranty, express or implied, is made by UBI Banca as to their accuracy, completeness or correctness. Past performance is not a guarantee of future results. Any opinions, forecasts or estimates contained herein constitute a judgement as of the date of this Report, and there can be no assurance that the future results of the Company and/or any future events involving directly or indirectly the Company will be consistent with any such opinions, forecasts or estimates. Any information herein is subject to change, update or amendment without notice by UBI Banca subsequent to the date of this Report, with no undertaking by UBI Banca to notify the recipient of this Report of such change, update or amendment.

Organizational and administrative arrangements to prevent conflicts of interests

UBI Banca maintains procedures and organizational mechanism (physical and non physical barriers designed to restrict the flow of information between the unit which performs investment research activity, and other units of UBI Banca) to prevent and professionally manage conflicts of interest in relation to investment research in accordance with art. 23 of Directive 2014/65/EU and under art. 34 (3) and art. 37 of the Regulation 2017/565/EU.

More specifically, UBI Banca has established, implements and maintains an effective conflicts of interests policy aimed at preventing and managing the potential conflicts of interest that could occur during the performance of the investment research services.

Insofar as the above mentioned organizational and administrative arrangements established by UBI Banca to prevent or manage potential conflicts of interests are not sufficient to ensure, with reasonable confidence, that risks of damage to the interests of the client will be prevented, UBI Banca engages to provide a clear disclosure of the specific conflicts of interests arising from the performance of investment research services, including a description of the sources of those conflicts and the steps undertaken to mitigate them, taking into account the nature of the client to whom the disclosure is being made. For further information please see UBI Banca’s website (www.ubibanca.com/equity-research - “Informativa sintetica sull’attività di ricerca”) and (www.ubibanca.com/Mifid - “Policy sintetica conflitti di interessi”). More details about the conflicts of interests policy will be provided by UBI Banca upon request.

Disclosure of interests and conflicts of interests pursuant to Delegated Regulation 2016/958/EU

In relation to the Company the following interest/conflict of interest have been found:

> UBI Banca may have long or short positions with the issuer

On the basis of the checks carried out no other interest/conflict of interest arose.

Frequency of updates

UBI Banca aims to provide continuous coverage of the companies in conjunction with the timing of periodical accounting reports and any exceptional event that occurs affecting the issuer’s sphere of operations and in any case at least twice per year. The companies for which UBI Banca acts as Sponsor or Specialist are covered in compliance with regulations of the market authorities.

For further information please refer to www.ubibanca.com/equity-research.

http://www.ubibanca.com/equity-research


http://www.ubibanca.com/Mifid



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Valuation methodology

UBI Banca’s analysts value the Company subject to their recommendations using several methods among which the most prevalent are: the Discounted Cash Flow method (DCF), the Economic Value Added method (EVA), the Multiple comparison method, the SOP method and the NAV method.

The analysts use the above valuation methods alternatively and/or jointly at their discretion. The assigned target price may differ from the fair value, as it also takes into account overall market/sector conditions, corporate/market events, and corporate specifics (i.e. holding discounts) reasonably considered to be possible drivers of the company’s share price performance. These factors may also be assessed using the methodologies indicated above.

For further information please refer to www.ubibanca.com/equity-research.

Ranking system

UBI Banca’s analysts use an “absolute” rating system, not related to market performance. The explanation of the rating system is listed below:

Buy: if the target price is 15% higher than the market price, over the next 12 months.

Hold: if the target price is 15% below or 15% above the market price, over the next 12 months.

Sell: if the target price is 15% lower than the market price, over the next 12 months.

No Rating: the investment rating and target price have been suspended as there is not sufficient fundamental basis for determining an investment rating or target. The previous investment rating and target price, if any, are no longer in effect. Alternatively, No Rating is assigned in certain circumstances when UBI Banca is acting in any advisory capacity in a strategic transaction involving the Company.

Target price: the market price that the analyst believes that the share may reach within a one-year time horizon.

Market price: closing price on the day before the issue date of the report, appearing on the first page.

Distribution

Italy: This document is intended for distribution in electronic form to “Professional Clients” and “Qualified Counterparties” as defined by Legislative Decree 24 February 1998, n. 58 and by Consob Regulation n. 16190 dated 29.10.2007, as further amended and supplemented.

This Report has been released within 30 minutes from the timing reported on the front page.

IN THE UNITED KINGDOM, THIS DOCUMENT IS BEING DISTRIBUTED ONLY TO, AND IS DIRECTED ONLY AT PERSONS WHO (A) ARE (I) PERSONS FALLING WITHIN ARTICLE 19 OR ARTICLE 49 OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER 2005 (AND ONLY WHERE THE CONDITIONS CONTAINED IN THOSE ARTICLES HAVE BEEN, OR WILL AT THE RELEVANT TIME BE, SATISFIED) OR (II) ANY OTHER PERSONS TO WHOM IT MAY BE LAWFULLY COMMUNICATED; AND (B) ARE QUALIFIED INVESTORS WITHIN THE MEANING OF ARTICLE 2(1)(E) OF THE PROSPECTUS DIRECTIVE (DIRECTIVE 2003/71/EC), (ALL SUCH PERSONS BEING REFERRED TO AS "RELEVANT PERSONS"). THIS DOCUMENT MUST NOT BE ACTED ON OR RELIED ON BY PERSONS WHO ARE NOT RELEVANT PERSONS.



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SWITZERLAND THIS REPORT DOES NOT CONSTITUE A PROSPECTUS WITHIN THE MEANING OF THE ARTICLE 652a OR ART. 1156 OF THE SWISS CODE OF OBLIGATIONS OR A LISTING PROSPECTUS WITHIN THE MEANING OF THE LISTING RULES OF THE SIX SWISS EXCHANGE OR ANY OTHER TRADING VENUES IN SWITZERLAND, OR A SIMILAR COMMUNICATION WITHIN THE MEANING OF ART. 752 OF THE SWISS CODE OF OBBLIGATIONS, AND HAS BEEN PREPARED WITHOUT REGARD TO THE SWISS LAWS AND REGULATIONS, AND DOES NOT CONSTITUTE AN OFFER TO SUBSCRIBE FOR, BUY OR OTHERWISE ACQUIRE ANY SECURITY OF THE COMPANY.

Copyright

This Report is being supplied solely for the recipient’s information and may not be reproduced, redistributed or passed on, directly or indirectly to any other person or published, in whole or in part, for any purpose without prior written consent of UBI Banca.

The copyright and intellectual property rights on the data are owned by UBI Banca Group, unless otherwise indicated. The data, information, opinions and valuations contained in this Report may not be subject to further distribution or reproduction, in any form or via any means, even in part, unless expressly consented by UBI Banca.

By accepting this Report the recipient agrees to be bound by all of the forgoing provisions.

Distribution of ratings

Equity rating dispersion in the past 12 months

Buy Hold Sell No Rating

90.6% 7.6% 1.90% 0.0%

Proportion on issuers to which UBI Banca has supplied investment banking services relating to the last 12 months

Buy Hold Sell No Rating

92.5% 100.0% - -

For further information regarding yearly and quarterly rating statistics and descriptions, please refer to www.ubibanca.com/equity-research. Historical ratings and target prices

Date Rating Target Price (EUR) Market Price (EUR)

15 October 2019 BUY 163.0 140.2

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