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Research: Industrials
PIERER management have confirmed strong market demand for its powered two-wheeler (PTW) product portfolio since lockdowns have lifted. H220 management guidance is for revenue growth compared to H219 and we have increased our EPS estimates by c 2% for FY21, primarily reflecting higher than anticipated e-bike sales.
Written by
PIERER Mobility |
Strong momentum into H220 |
Half year trading update |
Automobiles & parts |
23 July 2020 |
Share price performance
Business description
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Analysts
PIERER Mobility is a research client of Edison Investment Research Limited |
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PIERER management have confirmed strong market demand for its powered two-wheeler (PTW) product portfolio since lockdowns have lifted. H220 management guidance is for revenue growth compared to H219 and we have increased our EPS estimates by c 2% for FY21, primarily reflecting higher than anticipated e-bike sales.
Year end |
Revenue (€m) |
EBIT* |
EPS* |
DPS |
P/E |
Yield |
12/18 |
1,462 |
128.7 |
1.82 |
0.30 |
26.7 |
0.6 |
12/19 |
1,520 |
131.7 |
2.42 |
0.00 |
20.1 |
N/A |
12/20e |
1,441 |
72.8 |
1.01 |
0.30 |
48.1 |
0.6 |
12/21e |
1,710 |
134.5 |
2.11 |
0.30 |
23.0 |
0.6 |
Note: *EBIT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Robust performance despite COVID-19 effects
Unit sales of motorcycles and e-bikes fell by 8% in H120 to 124,682 (H119: 135,711). The drop reflects lower KTM and Husqvarna motorcycle brand sales by Indian partner Bajaj Auto due to the severe impact of COVID-19 in the sub-continent, where unit sales fell 12,379 or 38% to 20,160. Excluding Bajaj sales, motorcycle and e-bike sales actually rose by 1.3% to 104,522 units (70,171 and 34,351, respectively), although volumes include initial GasGas motorcycle sales. Management expect H120 revenues of c €600m, 20% below H119 (€754.9m), generating a modest EBIT of €1.7m (H119 €46.5m). Since the end of lockdowns in many territories, PTW demand has been strong, which may be attributable to changed attitudes to private versus public forms of transport. Global motorcycle sales grew by 4% in H120, with North America up 20% and Australia up 39%. KTM and Husqvarna brands both grew market share and PIERER has responded by increasing production to above pre-lockdown levels and adding staff.
Market strength augurs well for FY21
The underlying strength of the market should lead to a strong H220 performance. Management expects sales to exceed €800m, more than 4.5% above H219 revenues of €765.3m. FY20 sales are expected to be more than €1,400m. The ebikes activity is now expected by management to contribute over €110m to sales, €10m above our estimate, which we have now raised to match guidance. We do not expect this to increase FY20 EBIT and maintain our previous assumption. The growth in demand for e-bikes and the general positive recovery for powered two-wheeler markets should continue in FY21, although COVID-19 remains a risk to the assumption in some markets. With the sales growth expected to continue from the higher base in FY21, our EPS estimates increase by around 2%.
Valuation: Return to growth anticipated
The share price has recovered strongly, reflecting the expectation that the previous growth trajectory can be attained. The move into urban mobility markets should augment the core business share gains, warranting the P/E ratio rating premium.
Earnings estimate revisions
We have increased our revenue estimates by €10m to reflect the stronger than expected e-bikes performance, and the strength from the higher base carries through to FY21. While this only has a modest impact on earnings in FY21, it is nevertheless encouraging given the robust recovery being seen in the core motorcycle business following the COVID-19 shutdowns.
Exhibit 1: PIERER Mobility revised estimates
Year to 31 December |
2020e |
2021e |
||||
€m |
Prior |
New |
Change |
Prior |
New |
Change |
Core Motorcycle business |
1330.8 |
1330.8 |
0.0% |
1577.8 |
1577.8 |
0.0% |
E-motorcycles |
0.0 |
0.0 |
0.0 |
0.0 |
||
E-bikes |
100.0 |
110.0 |
10.0% |
120.0 |
132.0 |
10.0% |
Total revenues |
1430.8 |
1440.8 |
0.7% |
1697.8 |
1709.8 |
0.7% |
Core Motorcycle business |
387.1 |
387.1 |
0.0% |
460.9 |
460.9 |
0.0% |
E-motorcycles |
0.0 |
0.0 |
0.0 |
0.0 |
||
E-bikes (PEXCO) |
15.0 |
15.0 |
0.0% |
21.6 |
23.8 |
10.0% |
Total gross profit |
402.1 |
402.1 |
0.0% |
482.5 |
484.7 |
0.4% |
Operating expenses |
202.0 |
202.0 |
0.0% |
212.4 |
212.4 |
0.0% |
EBITDA |
200.1 |
200.1 |
0.0% |
270.1 |
272.3 |
0.8% |
D&A |
-127.2 |
-127.2 |
0.0% |
-137.8 |
-137.8 |
0.0% |
EBIT |
72.8 |
72.8 |
0.0% |
132.3 |
134.5 |
1.7% |
PBT |
57.3 |
57.3 |
0.0% |
118.1 |
120.5 |
2.0% |
Net Income |
22.7 |
22.7 |
0.0% |
46.7 |
47.6 |
2.0% |
EPS (€) |
1.01 |
1.01 |
0.0% |
2.07 |
2.11 |
2.0% |
Dividend (€) |
0.30 |
0.30 |
0.0% |
0.3 |
0.30 |
0.0% |
Adjusted net debt |
385 |
380 |
-1.4% |
368 |
361 |
-1.9% |
Source: PIERER Mobility reports, Edison Investment Research estimates
Management has already decided not to pay a dividend in respect of FY19 as part of the mitigation factors aimed at preserving cash through the COVID-19 pandemic. We have adjusted our debt estimates for the €7m cash retention in FY20 this achieves. We expect a resumption of dividend payments for FY20 (at the FY18 level) despite the tougher trading year, reflecting a still good level of earnings cover as well as the strong recovery already appearing in H220.
Exhibit 2: Financial summary
Accounts: IFRS, Yr end: December, EUR: Millions |
|
|
2017A |
2018A |
2019A |
2020E |
2021E |
Income statement |
|
|
|
|
|
|
|
Total revenues |
|
|
1,354 |
1,462 |
1,520 |
1,441 |
1,710 |
Cost of sales |
|
|
(945) |
(1,031) |
(1,074) |
(1,039) |
(1,225) |
Gross profit |
|
|
409 |
431 |
446 |
402 |
485 |
SG&A (expenses) |
|
|
(128) |
(194) |
(191) |
(176) |
(185) |
R&D costs |
|
|
(34) |
(27) |
(24) |
(25) |
(26) |
Other income/(expense) |
|
|
(28) |
1 |
10 |
(1) |
(1) |
Depreciation and amortisation |
|
|
(97) |
(82) |
(109) |
(127) |
(138) |
Reported EBIT |
|
|
122 |
129 |
132 |
73 |
134 |
Finance income/(expense) |
|
|
(11) |
(15) |
(14) |
(15) |
(14) |
Other income/(expense) |
|
|
(2) |
(1) |
0 |
(1) |
0 |
Reported PBT |
|
|
109 |
112 |
118 |
57 |
121 |
Income tax expense |
|
|
(30) |
(27) |
(22) |
(14) |
(29) |
Minorities |
|
|
(39) |
(44) |
(41) |
(21) |
(44) |
Reported net income (post-minorities) |
|
|
40 |
41 |
54 |
23 |
48 |
Basic average number of shares, m |
|
|
225 |
23 |
23 |
23 |
23 |
Basic EPS |
|
|
1.98 |
2.99 |
2.42 |
1.01 |
2.11 |
Dividend per share |
|
|
0.30 |
0.30 |
0.00 |
0.30 |
0.30 |
Adjusted EBITDA |
|
|
219 |
211 |
241 |
200 |
272 |
Adjusted EBIT |
|
|
122 |
129 |
132 |
73 |
134 |
Adjusted PBT |
|
|
109 |
112 |
118 |
57 |
121 |
Adjusted EPS |
|
|
1.77 |
1.82 |
2.42 |
1.01 |
2.11 |
Adjusted diluted EPS |
|
|
1.77 |
1.82 |
2.42 |
1.01 |
2.11 |
|
|
|
|
|
|
|
|
Balance sheet |
|
|
|
|
|
|
|
Property, plant and equipment |
|
|
357 |
283 |
380 |
413 |
435 |
Goodwill |
|
|
117 |
96 |
146 |
146 |
146 |
Intangible assets |
|
|
280 |
327 |
345 |
345 |
345 |
Other non-current assets |
|
|
28 |
39 |
17 |
17 |
17 |
Total non-current assets |
|
|
782 |
745 |
888 |
921 |
943 |
Cash and equivalents |
|
|
169 |
89 |
161 |
157 |
156 |
Inventories |
|
|
297 |
287 |
324 |
313 |
351 |
Trade and other receivables |
|
|
216 |
220 |
235 |
227 |
255 |
Other current assets |
|
|
1 |
13 |
8 |
8 |
8 |
Total current assets |
|
|
683 |
609 |
728 |
705 |
769 |
Non-current loans and borrowings |
|
|
373 |
339 |
477 |
457 |
437 |
Other non-current liabilities |
|
|
89 |
95 |
110 |
110 |
110 |
Total non-current liabilities |
|
|
461 |
435 |
587 |
567 |
547 |
Trade and other payables |
|
|
178 |
191 |
205 |
198 |
234 |
Current loans and borrowings |
|
|
171 |
73 |
80 |
80 |
80 |
Other current liabilities |
|
|
125 |
104 |
116 |
116 |
116 |
Total current liabilities |
|
|
475 |
368 |
401 |
394 |
430 |
Equity attributable to company |
|
|
318 |
297 |
334 |
350 |
376 |
Non-controlling interest |
|
|
211 |
253 |
295 |
316 |
360 |
|
|
|
|
|
|
|
|
Cashflow statement |
|
|
|
|
|
|
|
Profit for the year |
|
|
84 |
114 |
96 |
44 |
92 |
Taxation expenses |
|
|
33 |
29 |
22 |
14 |
29 |
Net finance expenses |
|
|
4 |
(16) |
(16) |
16 |
14 |
Depreciation and amortisation |
|
|
86 |
91 |
109 |
127 |
138 |
Movements in working capital |
|
|
(23) |
(83) |
70 |
12 |
(30) |
Interest paid / received |
|
|
(13) |
(15) |
(12) |
(16) |
(14) |
Income taxes paid |
|
|
(10) |
(36) |
(10) |
(14) |
(29) |
Cash from operations (CFO) |
|
|
161 |
85 |
258 |
183 |
200 |
Capex |
|
|
(182) |
(167) |
(165) |
(160) |
(160) |
Acquisitions & disposals net |
|
|
28 |
70 |
0 |
0 |
0 |
Other investing activities |
|
|
0 |
(6) |
(1) |
0 |
0 |
Cash used in investing activities (CFIA) |
|
|
(154) |
(102) |
(166) |
(160) |
(160) |
Movements in debt |
|
|
(96) |
(38) |
0 |
(20) |
(20) |
Dividends paid |
|
|
(20) |
(19) |
(20) |
(7) |
(21) |
Other financing activities |
|
|
(2) |
(6) |
(1) |
0 |
0 |
Cash from financing activities (CFF) |
|
|
(118) |
(63) |
(21) |
(27) |
(41) |
Currency translation differences and other |
|
|
(4) |
0 |
0 |
0 |
0 |
Increase/(decrease) in cash and equivalents |
|
|
(115) |
(80) |
72 |
(4) |
(1) |
Cash and equivalents at end of period |
|
|
169 |
89 |
161 |
157 |
156 |
Net (debt) cash |
|
|
(375) |
(323) |
(396) |
(380) |
(361) |
Movement in net (debt) cash over period |
|
|
(375) |
52 |
(73) |
16 |
19 |
Source: Company reports. Edison Investment Research estimates
|
|
Research: Industrials
The impact of COVID-19 on current trading at the beginning of FY21 has been material but less so than previously anticipated and the underlying cash flow performance has been solid. Comfort here should allow investors to examine the strategic roadmap laid out by management targeting a significant sustainable uplift in profitability. We are reintroducing estimates, which show single-digit FY22 multiples, only partway through the business improvement programme that is underway.