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Research: Industrials
PIERER Mobility’s performance during the pandemic has been exceptional, with proactive management control enabling the company to successfully expand market share as demand for its products has surged. The positive momentum in Q421 has led to another upgrade to FY21 guidance. We expect growth to continue in FY22 albeit moderating as booming motorcycle demand normalises. The rapid expansion of the e-bikes business and entry into the e-scooter market provide growing and complementary revenue streams. The now complete simplification of the Bajaj shareholding enhances FY22 EPS by a further 23%. Shareholder returns are significantly enhanced, which is reflected in our capped DCF valuation of the group, which currently stands at €116 per share.
Written by
PIERER Mobility |
Outstanding performance continues |
FY21 guidance increase |
Automobiles & parts |
19 January 2022 |
Share price performance
Business description
Next events
Analyst
PIERER Mobility is a research client of Edison Investment Research Limited |
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PIERER Mobility’s performance during the pandemic has been exceptional, with proactive management control enabling the company to successfully expand market share as demand for its products has surged. The positive momentum in Q421 has led to another upgrade to FY21 guidance. We expect growth to continue in FY22 albeit moderating as booming motorcycle demand normalises. The rapid expansion of the e-bikes business and entry into the e-scooter market provide growing and complementary revenue streams. The now complete simplification of the Bajaj shareholding enhances FY22 EPS by a further 23%. Shareholder returns are significantly enhanced, which is reflected in our capped DCF valuation of the group, which currently stands at €116 per share.
Year end |
Revenue (€m) |
EBIT* |
EPS* |
DPS |
P/E |
Yield |
12/19 |
1,520 |
131.7 |
2.42 |
0.00 |
37.2 |
N/A |
12/20 |
1,530 |
107.2 |
1.55 |
0.30 |
58.1 |
0.3 |
12/21e |
2,027 |
188.6 |
3.20 |
0.50 |
28.4 |
0.6 |
12/22e |
2,235 |
204.1 |
4.08 |
1.00 |
22.1 |
1.1 |
Note: *EBIT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Record year in prospect
With continued strong global demand for motorcycles augmented by the rapid growth of the e-bike activity, FY21 is set to be a record year for the group. In FY21 it sold 332,881 motorcycles (FY20: 270,407), up 23% and a record for the 11th consecutive year. The bicycle division (operating under the HUSQVARNA, R RAYMON and GASGAS brands) grew sales by over 40% to 102,753 bicycles (FY20: 73,277), of which 76,916 were e-bicycles (FY20: 56,064). The move into urban mobility should accelerate in FY23 with the launch of the e-scooter range approaching. The growth in demand for e-bikes should continue, driven by positive market dynamics in PIERER Mobility’s established European markets, as well as entry into new sales territories in Europe and North America, as evidenced by the recent acquisition of the FELT brand with its US market position.
Simplified Bajaj shareholding enhances returns
The recent deal with Bajaj to simplify its shareholding in the group has served to enhance returns to investors as PIERER Mobility expands its e-mobility portfolio. In addition to the run of trading upgrades, FY21 EPS are further enhanced by 5% reflecting the part year benefit of the transaction. In FY22 the EPS estimate is enhanced by 23%. In the longer term there is some value sacrifice as Bajaj will participate in the growing e-bikes business as well as the motorcycles business.
Valuation: Justifying a premium rating
The shares have performed well in FY21 and the company retains a premium rating, with the FY22 P/E of 22.1x reflecting the prospects for sustainable growth accompanied by strong cash flows to invest in growing the new e-mobility revenue streams.
FY21 setting new records
PIERER Mobility, Europe’s leading supplier of powered two wheelers, is set to report record FY21 results on 1 February 2022. This follows the heavily disrupted FY20 trading but more significantly FY21 will be well ahead of the FY19 pre-pandemic performance. The continued strong demand globally for both motorbikes and e-bikes and the targeted replenishment of dealer inventory levels mean that motorcycle production is running at close to capacity in Austria and supporting strong growth from India. Supply chain issues have been manageable and the impact limited. The situation for e-bikes has been more difficult with the market generally relying on an Asian supply chain that remains disrupted, with some basic components such as frames in short supply. PIERER Mobility has addressed this through the expanded supply cooperation with its main supplier in Bulgaria.
As a result, management has raised the forecast range again for FY21 and now expects to report revenues of €2.02–2.04bn (from €1.90–2.00bn). In addition, it has raised its EBIT margin expectation to 9.0–9.5% (from 8.0–9.0%).
FY22 expected to grow well although at more moderate rates
We expect growth in motorcycles to continue even if the current boom has satisfied the immediate enlarged appetite for both street and off-road models. In addition, while we expect the shortages of components due to the pandemic-related supply chain issues to diminish as the year progresses, they are still constraining production in the short term. The urban mobility exposure should be further advanced by the launch of the e-motorcycle and e-scooter ranges over the next few years (for clarity, ride-on scooters not electric stand-ons). The strong growth in demand for e-bikes should continue, driven by positive market dynamics in PIERER Mobility’s established DACH markets, as well as entry into new sales territories in Europe and North America.
Revisions to earnings estimates
Following the latest guidance, we have updated our estimates to reflect the strong trading momentum through FY21 as well as the simplification of Bajaj’s shareholding. It has been some time since we last updated our numbers so with several guidance increases, the uplift shown below is considerably greater than the c 13% increase in EBIT implied by the centre of the ranges in the latest management guidance issued on 12 January 2022. We now include e-motorcycles in our model with a modest sales contribution in FY21 and FY22, but this could grow rapidly from FY23 as PIERER Mobility seeks to penetrate the European urban mobility market.
Before the Bajaj transaction, the increase compared to our previous estimates is shown in Exhibit 1.
Exhibit 1: PIERER Mobility earnings estimates revisions (before Bajaj deal)
Year to December (€m) |
2021e |
2021e |
|
2022e |
2022e |
|
Prior |
New |
% change |
Prior |
New |
% change |
|
Core motorcycle business |
1,641.2 |
1,836.1 |
11.9% |
1,739.7 |
1,942.5 |
11.7% |
E-motorcycles |
12.0 |
24.0 |
71.4% |
40.0 |
40.0 |
0.0% |
E-bikes |
169.9 |
163.0 |
0.1% |
230.3 |
248.3 |
7.8% |
Other |
3.8 |
3.8 |
0.0% |
3.8 |
3.8 |
0.0% |
Total revenues |
1,826.9 |
2,026.9 |
11.8% |
2,013.8 |
2,234.6 |
11.0% |
EBITDA |
306.3 |
333.1 |
8.8% |
335.0 |
361.1 |
7.8% |
D&A |
(151.6) |
(144.5) |
-4.7% |
(156.0) |
(157.0) |
0.6% |
EBIT |
154.7 |
188.6 |
22.0% |
179.0 |
204.1 |
14.0% |
PBT |
142.9 |
165.5 |
15.9% |
167.6 |
181.3 |
8.2% |
Net income |
59.1 |
68.4 |
15.9% |
70.5 |
75.0 |
6.3% |
|
|
|||||
EPS (€) |
2.62 |
3.04 |
15.9% |
3.13 |
3.33 |
6.3% |
Dividend (€) |
0.30 |
0.50 |
66.7% |
0.30 |
1.00 |
233.3% |
Adjusted net debt |
302 |
231 |
-23.5% |
215 |
129 |
-40.2% |
Source: Edison Investment Research
As discussed later, the additional enhancement arising from the Bajaj deal is shown in Exhibit 2.
Exhibit 2: Earnings enhancement arising from Bajaj transaction
Year to December (€m) |
2021e |
2021e |
|
2022e |
2022e |
|
Prior |
New |
% change |
Prior |
New |
% change |
|
Total revenues |
2,026.9 |
2,026.9 |
0.0% |
2,234.6 |
2,234.6 |
0.0% |
Total gross profit estimates |
577.0 |
577.0 |
0.0% |
634.3 |
634.3 |
0.0% |
EBITDA |
333.1 |
333.1 |
0.0% |
361.1 |
361.1 |
0.0% |
D&A |
(144.5) |
(144.5) |
0.0% |
(157.0) |
(157.0) |
0.0% |
EBIT |
188.6 |
188.6 |
0.0% |
204.1 |
204.1 |
0.0% |
PBT |
165.5 |
165.5 |
0.0% |
181.3 |
181.3 |
0.0% |
Net income |
68.4 |
78.0 |
14.0% |
75.0 |
137.8 |
83.8% |
EPS (€) |
3.04 |
3.20 |
5.3% |
3.33 |
4.08 |
22.6% |
Dividend (€) |
0.50 |
0.50 |
0.0% |
1.00 |
1.00 |
0.0% |
Adjusted net debt |
231 |
231 |
0.0% |
129 |
129 |
0.0% |
Source: Edison Investment Research
Valuation
With the elimination of the large minority and dividend and the imminent start of the new e-scooter product segment, we now use our capped discounted cash flow (DCF) model as our primary valuation tool. It encompasses all of the PIERER Mobility operations, whereas previously we had separated the core DCF from the new e-mobility offerings. We regard it as relatively conservative as after a six-year forecast period we assume a growth rate of zero in the terminal period, albeit normalising capex to depreciation and neutralising working capital flows, which in combination eliminate significant value from the tail period when e-mobility activities are expected to be growing strongly.
Currently our calculation returns a value of €116 per share using a calculated WACC of 7.4%. The sensitivity to WACC and terminal value growth rates is shown in the table below.
Exhibit 3: PIERER Mobility capped DCF sensitivity to WACC and terminal growth (€/share)
WACC |
6.0% |
7.0% |
7.4% |
8.0% |
9.0% |
10.0% |
Terminal growth rate |
||||||
0% |
151 |
125 |
116 |
106 |
91 |
79 |
1% |
180 |
144 |
133 |
119 |
101 |
87 |
2% |
222 |
172 |
157 |
138 |
114 |
97 |
3% |
294 |
212 |
190 |
164 |
132 |
109 |
Source: Edison Investment Research
Research: TMT
The MISSION Group’s year-end trading update indicates FY21 PBT will be in line with market expectations, with a good H221 performance on revenue and margin. The net debt figure of £10.2m is also in line with the anticipated level, with £6.3m of deferred consideration paid out in H221. Management is indicating a higher level of investment in talent recruitment and retention in FY22, which will up the cost base in the short term but put it in a better position to take advantage of trends, particularly in data and analytics. The FY22 PBT market estimate has now reduced from £10.2m to £8.4m. MISSION’s shares continue to trade at a discount to peers.