At the end of the morning the Pirelli stock comes one step away from +2% in Piazza Affari, driven by the positive opinion of Mediobanca, less than a month after the presentation of the new business plan, scheduled for November 6th. The investment bank, in a report entitled "Sales are vanity, profits are common sense ... but cash is reality", raised the rating on the stock from neutral to outperform and the target price from 8,8 to euro at 12 euros, compared to the current market price of 9,835 euros, believing that the company is undervalued.
“Treating at 10 times the 2014 price/earnings ratio and having performed in line with the market but worse than its competitors, Pirelli is undervalued – writes Mediobanca – the business plan and the tighter Camfin shareholders' agreement are a key factor in allowing the stock to perform".
According to experts, the new plan, which will focus on cash generation, return on invested capital (ROCE) and core portfolio management, could aim to double EBIT to around €1,3 billion by 2017, reaching Continental's margin at 16/17%.
For this year, however, Piazzetta Cuccia expects a cut in EBIT estimates, due to exchange rates and prices and inventories in Europe. The reduction in the guidance should be counterbalanced by the ambitious long-term objectives of the industrial plan: "Latin America remains, in our opinion, the main risk".
With the aim of maximizing the long-term value of Pirelli (in view of a potential exit of Camfin), the analysts write, the Bicocca group could sell some of its non-core assets, such as steel cables and tires per truck: the market value of these assets is in fact hardly incorporated in the market capitalization and could eliminate the debt of the group.
