Fiat Industrial. Downgrade HOLD (prev. BUY) Target: 10.3 (prev. 10.0) Risk: Low. ITALY / Auto and related JUST TAKING PROFIT

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1 Fiat Industrial ITALY / Auto and related Downgrade HOLD (prev. BUY) Target: 10.3 (prev. 10.0) Risk: Low STOCK DATA Ord Price 9.6 Bloomberg code FI IM Market Cap. ( mn) 10,447 Free Float 70% Shares Out. (mn) 1, w eek range Daily Volumes (mn) 4.5 PERFORMANCE 1M 3M 12M Absolute 9.2% 16.8% 20.8% Rel. to FTSE all shares 7.0% 7.3% -0.4% MAIN METRICS E 2014E Rev enues 25,785 26,914 28,174 EBITDA 2,795 2,986 3,245 Trading profit 2,079 2,262 2,476 Adj. trading profit 1,732 1,880 2,050 Net income 810 1,186 1,424 MULTIPLES E 2014E P/E adj 12.1 x 10.7 x 9.1 x EV/EBITDA 4.8 x 4.3 x 3.8 x REMUNERATION E 2014E Div idend Yield 2.4% 2.4% 2.9% ROCE 17.3% 17.6% 17.9% ROE 16.9% 21.9% 22.7% FCF INDEBTEDNESS E 2014E Industrial NFP -1,642-1, Debt/EBITDA 0.6 x 0.4 x 0.2 x Interests cov 6.1 x 7.7 x 9.1 x PRICE ORD LAST 365 DAYS JUST TAKING PROFIT 2012 results and 2013 guidance are positive on the operating side, while FCF was slightly disappointing. Nothing really changed for the equity story but following the positive performance (+31% relative to FTSE All Shares TR index since our upgrade on October 2011) and the limited residual upside (+8%) on February 1 st (stock closing at 9.5 PS) we downgraded it to Hold. FY12 results mixed FY12 overall performance is positive but mixed trading profit +23% to 2.08 bn, in line; net profit after minorities +30% to 810 mn, 6% worse mainly because of non-recurring items (related to the termination of Kobelco jv); industrial net debt at 1.64 bn, slightly worse mainly because of NWC; dividend at PS (vs 0.20-PS expected), 2.4% yield guidance: trading profit achievable As already anticipated, because of worsened market conditions, FY13 trading profit guidance was revised downwards from bn (according to the business plan presented in April 2010) to bn (ROS %). We believe this is achievable and based on reasonable reference markets assumptions, in line with consensus ( 2.29 bn) and slightly higher than our estimate ( 2.19 bn). industrial net debt without pleasant surprise FY13 industrial net debt seen at bn is coherent with our estimate ( 1.28 bn), but much worse than consensus ( 0.8 bn), which presumably assumed a more favourable NWC and/or lower capex. We never factored in our estimates the zero net debt target in FY13 (announced at the time of the demerger), but FY12-13 trend (only partly attributable to unexpected events) make us more prudent about FCF. Marginal adjustments to estimates. Target up by +3% We slightly revise upwards operating estimates (trading profit +2% and net profit +1%) changing the mix: higher CNH and lower Iveco. As a result target price +3% to 10.3 PS, all attributable to CNH. Downgrade to Hold due to valuation reasons We appreciate the story, the strategy and management but on February 1 st downgraded to Hold essentially because of valuation reasons: the strong performance: +31% relative to FTSE All Italian shares TR index since our upgrade on October 28 th 2011 the limited residual upside (8%) the multiples no more at evident discount vs peers: currently FY13/14E Adj. P/E = 10.7/9.1x under IFRS, but we estimate around 10% more expensive under US Gaap (mainly because of R&D costs which cannot be anymore capitalised). ANALYSTS Martino De Ambroggi m.deambroggi@equitasim.it February 4, 2013 # 23 IMPORTANT DISCLOSURES APPEAR AT THE BACK OF THIS REPORT 1

2 Fiat Industrial February 5, 2013 BUSINESS DESCRIPTION Fiat Industrial is the newly born company resulting from Fiat Spa demerger effective since January 1 st Main assets are CNH (worldwide player in agricultural and construction equipment sector - wheel loaders, excavators, tractors and combine harvesters) and Iveco (leading European trucks maker, also present in LatAm and China) and Fiat Powertrain (FPT producing engines, gears and axles mainly for captive business). GEOGRAPHICAL SALES BREAKDOWN 2011 Germany 5% France 9% Italy 10% Australia Canada 3% 5% Brazil 14% UK 3% Spain 3% USA 20% Other 28% DIVISIONAL TRADING PROFIT BREAKDOWN 2012E MAIN FIGURES mn E 2014E Revenues 17,968 21,342 24,289 25,785 26,914 28,174 Growth n.a. 19% 14% 6% 4% 5% EBITDA 959 1,757 2,352 2,795 2,986 3,245 Growth n.a. 83% 34% 19% 7% 9% Trading profit 322 1,092 1,686 2,079 2,262 2,476 Growth n.a. 239% 54% 23% 9% 9% Operating profit -19 1,017 1,629 1,862 2,262 2,476 Growth - 400% 69% 20% 9% 9% Profit before tax ,169 1,485 1,957 2,216 Growth n.m. n.m. 103% 27% 32% 13% Net income ,186 1,424 Growth n.m. n.m. 83% 30% 46% 20% Adj. net income ,188 1,400 Growth n.m. n.m. 98% 30% 23% 18% MARGIN E 2014E Ebitda Margin 5.3% 8.2% 9.7% 10.8% 11.1% 11.5% Ebitda adj Margin 1.8% 5.1% 6.9% 8.1% 8.4% 8.8% Ebit margin 1.0% 4.0% 6.0% 6.7% 7.0% 7.3% Pbt margin -2.6% 2.7% 4.8% 5.8% 7.3% 7.9% Ni rep margin -2.6% 1.6% 2.6% 3.1% 4.4% 5.1% Ni adj margin -1.4% 1.8% 3.1% 3.8% 4.4% 5.0% SHARE DATA E 2014E EPS - cents Growth n.m. n.m. 83% 35% 40% 15% Adj. EPS - cents Growth n.m. n.m. 98% 35% 17% 13% DPS ord - cents Iv eco 22% FPT 6% VARIOUS - mn E 2014E Capital employed 7,106 6,644 6,650 7,623 8,144 8,772 FCF n.a. -1,029 1, Capex ,350 1,400 1,358 Working capital 2,653 1,660 1,375 1,696 1,581 1,612 CNH 72% INDEBTNESS - mn E 2014E Industrial NFP -1,315-1,900-1,239-1,642-1, D/E 0.30 x 0.59 x 0.33 x 0.40 x 0.27 x 0.14 x Debt/EBITDA 1.4 x 1.1 x 0.5 x 0.6 x 0.4 x 0.2 x Interests cov 2.4 x 3.5 x 4.3 x 6.1 x 7.7 x 9.1 x MARKET RATIOS E 2014E P/E n.m x 12.6 x 14.4 x 10.7 x 8.9 x P/E adj n.m x 10.5 x 12.1 x 10.7 x 9.1 x P/CF 40.2 x 10.9 x 6.1 x 7.7 x 6.7 x 5.8 x PBV 1.37 x 2.75 x 1.73 x 2.32 x 2.20 x 1.89 x EV FIGURES E 2014E EV/Sales 0.46 x 0.60 x 0.38 x 0.52 x 0.48 x 0.44 x EV/EBITDA 8.6 x 7.3 x 3.9 x 4.8 x 4.3 x 3.8 x EV/EBIT 25.7 x 11.8 x 5.4 x 6.4 x 5.7 x 5.0 x EV/CE 1.2 x 1.9 x 1.4 x 1.7 x 1.6 x 1.4 x REMUNERATION E 2014E Div. Yield ord 0.0% 0.0% 2.9% 2.4% 2.6% 2.9% ROE -6.0% 7.5% 14.6% 16.9% 21.9% 22.7% ROCE 2.9% 10.4% 16.1% 17.3% 17.6% 17.9% Source: company data and EQUITA SIM estimates IMPORTANT DISCLOSURES APPEAR AT THE BACK OF THIS REPORT 2

3 FY12 RESULTS: TRADING PROFIT IN LINE 4Q12 results were mixed: revenues +3% to 7.01 bn slightly better than our 6.74 bn; trading profit +11% YoY to 438 mn was basically in line with expectations; all divisions had a positive contribution: - CNH sales +8% and TP +19%; - Iveco sales -3% but TP +4% benefitting from military business seasonal contribution; - FPT Industrial sales -9% but TP +28% (whose captive business is 66% of sales), reflecting the absence of production start-up costs and efficiency gains; net income +20% YoY to 148 mn was worse because of - non-recurring items ( 37 mn non-cash in connection with the termination of CNH s strategic alliance with Kobelco); - higher financial costs ( 20 mn). FIAT INDUSTRIAL: QUARTERLY RESULTS ( mn) Group/ mn 1Q12 % 2Q12 % 3Q12 % 4Q12E % 4Q12E % % 4Q12E % % Act. Exp. change Cons. change Sales 5, , , , , % 6, % Incr. % 9% 5% 8% 3% -1% 0% Gross profit 1, , , , , % 1, % Incr. % 24% 15% 10% 13% 6% 3% EBITDA % % Incr. % 37% 16% 16% 12% 5% 8% Trading profit % % Incr. % 57% 19% 19% 11% 5% 9% Pre-tax profit % % Incr. % 77% 4% 38% 6% 45% 46% Net Income % 215 * % Incr. % 70% 4% 38% 20% 59% 75% NF Position (1,906) (1,963) (2,203) (1,642) (1,535) 7% (1,440) 14% TRADING PROFIT CNH % % % % % 13% % -1% Iveco 64 29% % % % % 6% % 20% Other 0 3% 23 3% 17 3% 4 3% 23 3% -83% 20 3% -80% TOTAL % % % % % 5% % 2% % CHANGE CNH 74% 26% 33% 19% 5% 21% Iveco -10% -6% -11% 4% -2% -13% OPERATING PROFIT MARGIN CNH 9.8% 11.6% 11.0% 6.6% 6.1% n.a. Iveco 3.4% 5.6% 5.4% 6.2% 6.4% n.a. * before minorities Source: EQUITASIM estimates and company data WHILE INDUSTRIAL NET DEBT SLIGHTLY WORSE Net debt at 1.66 bn was worse than our expectation ( 1.54 bn) and consensus median ( 1.44 bn, but we believe the latter is misleading since some contributors did not include the 0.2-bn CNH extraordinary dividend distributed on December 28 th ). However it is coherent with the bn guidance range announced before the decision to distribute the extraordinary dividend to CNH minority shareholders. Seasonal NWC generation was strong in 4Q ( 1.0 bn), but not enough to achieve the zero FY NWC change. IMPORTANT DISCLOSURES APPEAR AT THE BACK OF THIS REPORT 3

4 FIAT INDUSTRIAL: 4Q-FY12 CASH FLOW STATEMENT ( mn) Source: company presentation At divisional level we estimate FCF was entirely generated by CNH, while the remaining business (Iveco, FPT Industrial and corporate) burnt cash ( ~-0.4 bn) CNH: MAIN PROFITS DRIVER CNH s was the FY12 results most important driver: revenues +16% to bn; trading profit +36% to 1.57 bn, 9.8% on sales (or +150 bps YoY). Trading profit performance was driven by both volume/mix ( +257 mn) and pricing effects ( +392 mn), which were positive in each and every quarter since 1Q11. CNH: FY12 TRADING PROFIT BRIDGE ( mn) Source: Company presentation FY13 equipment operations guidance (under US Gaap): revenues approximately +5% YoY; operating margin %, or +7/+13% YoY to USD bn. IMPORTANT DISCLOSURES APPEAR AT THE BACK OF THIS REPORT 4

5 In our view these figures are achievable being based on reasonable worldwide market assumptions: both agricultural equipment flat/+5% YoY (both tractors and combines); North American drought should not have a particularly negative effect; and construction equipment flat/+5% YoY (both light and heavy); factoring in weak European area projections. CNH REFERENCE MARKETS ASSUMPTIONS * Performance relative to market From Jan 1st onward region split has been changed as follows: USA, Canada and Mexico; EAME & CIS: 27 EU Countries, CIS, Balkans, African continent, Middle East; LA: Central and South America, and Caribbean Islands; APAC: Continental Asia and Oceania Source: Company presentation IVECO: GOOD IN A VERY CHALLENGING ENVIRONMENT Iveco s FY12 trading profit was down only 4% YoY despite volumes down 11% YoY (volume/mix effect negative by 121 mn) and the negative price effect ( -44 mn) IVECO: FY12 TRADING PROFIT BRIDGE ( mn) Source: Company presentation since the financial division reduced its losses from 151 mn in 2011 (mainly because of provisions related to Eastern European clients) to 37 mn. IMPORTANT DISCLOSURES APPEAR AT THE BACK OF THIS REPORT 5

6 Net of this effect industrial business trading profit margin was down by only 100 bps to 5.7%. Trading profit ( mn) IVECO: OPERATING LEVERAGE ( E) E E 2011 ind ind Nr. of trucks sold (k) 2011 industrial = excluding the 151-mn financial division non-recurring provisions 2012 industrial = excluding the 37-mn financial division non-recurring provisions Source: EQUITA SIM estimates and company data Q12 orders were up 17% YoY to around 41k units. Book-to-bill ratio was 0.9x, for the first time after 3 quarters in a row it was below 1x, despite the recovery in LatAm evidenced by some peers (for instance Scania 1.33x). This is a negative figure to be checked going forward, but we believe this can be partially influenced by the military business which is typically very strong in 4Q. IVECO: QUARTERLY ORDERS INTAKE AND BOOK TO BILL 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 Orders intake (k units) Book to bill ratio 0.74 x 0.96 x 0.85 x 0.92 x 1.11 x 1.02 x 0.96 x 0.95 x 1.13 x 1.11 x 0.91 x 0.81 x 1.20 x 1.04 x 1.04 x 0.88 x Source: Equita SIM on company data We believe FY13 margin improvement is achievable because of: 80-mn annualised cost savings connected to the restructuring initiative announced in 3Q12 (see also our short note n. 276 dated August 3 rd 2012); LatAm market recovery: FI estimates market growth around 10% which we consider reasonable thanks to incentives scheme recently introduced; on the contrary the European market seen flattish needs some confirmation going forward; IVECO: REFERENCE MARKETS ASSUMPTIONS Source: Company presentation possible further reduction in financial division losses ( 37 mn in FY12). IMPORTANT DISCLOSURES APPEAR AT THE BACK OF THIS REPORT 6

7 FY13 GUIDANCE: AS EXPECTED WERE LOWERED As already anticipated FY13 guidance was revised downwards: revenues +5% to 27.1 bn, in line with the business plan presented in April 2010 when demerger was announced; trading profit margin at 8.3/8.5%, i.e bn (a very narrow range) in line with consensus at 2.29 bn and slightly better than our estimate at 2.19 bn, from previous bn (according to the business plan presented in April 2010); net debt at 1.1/1.4 bn, coherent with our 1.28 bn but much worse than consensus expectation ( 0.8 bn); implicit FCF is in the bn range. Underlying exchange rate assumptions to calculate the sensitivity to currency translation effect were not disclosed. No indication on net profit. We know it will benefit from lower interest costs because of the centralized financial management, more evident in the next two years since the FI-CNH merger will be effective in 3Q, more than 6 months later than expected at the time of the deal proposal announcement (May 2011); cost of carry effect improvement, since liquidity can be reduced from 4.6 bn as of Dec-12 to a normalized level (indicated during the conference call) around 2.5 bn; tax-rate to be lowered by around 1% p.a. CAPITALISED R&D COSTS MAIN CHANGE UNDER US GAAP It is worth underlying Fiat Industrial (under IFRS) capitalises R&D costs; the difference between R&D costs capitalised and amortized typically has a positive trading profit contribution (however much lower than for Fiat Spa): in FY11 it was 237 mn (14% of total trading profit); in FY12 it was ~350 bn (17% of total) during the conference call CFO Di Si stated it should be slightly higher in FY13 (we consider it could be 380 mn, or around 17% of total). FIAT INDUSTRIAL: IMPACT OF R&D CAPITALISATION ON TRADING PROFIT ( mn) R&D net effect on trading profit Capitalised R&D costs as a % of trading profit 35% 30% 25% 20% % 10% 5% 0 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 0% Source: company data and EQUITA SIM estimates Once CHN-FI merger will be finalised (in 3Q instead of 2Q) and the new entity also listed in the US, results will be presented under US Gaap, becoming perfectly comparable with CNH s US peers. This transition imposes the elimination of R&D costs capitalisation effect (the most relevant among several adjustments), causing lower profitability in absolute terms. IMPORTANT DISCLOSURES APPEAR AT THE BACK OF THIS REPORT 7

8 We limit our analysis to R&D costs adjustments, and PE ratio to be compared with the most important US AG and CE peers (John Deere, Caterpillar and Agco), since CNH contributes to more than 60% of total sales and around 80% of trading profit. FIAT INDUSTRIAL: ESTIMATED NET PROFIT & PE RATIO UNDER US GAAP (USD mn) * US GAAP (USD) 2012E 2013E 2014E CNH EBIT equipment 1,674 1,870 2,010 financial TOTAL CNH 2,004 2,220 2,380 IFRS IFRS IFRS IVECO trading profit FPT Industrial trading profit Captive & holding costs Iveco+FPT R&D adj TOTAL IVECO+FPT OPERATING PROFIT 2,454 2,816 3,085 Change% 15% 10% Pre Tax Profit 1,944 2,403 2,733 Change% 24% 14% Net Profit 1,180 1,433 1,671 Change% 21% 17% MARKET CAP USD mn 17,222 17,222 17,222 PE ratio 14.6 x 12.0 x 10.3 x * assuming /USD = 1.35 Source: EQUITA SIM estimates FI is currently trading at FY13/14E adj. P/E=10.7/9.1x under IFRS, but once figures are transformed into US Gaap FI is not anymore at evident discount vs peers which on average are trading at 11.0/9.9x. CNH: MAIN US PEERS MULTIPLES MARKET DATA PE Company Currency Price Mkt cap ( mn) 2013E 2014E DEERE & CO USD , x 10.5 x CATERPILLAR INC USD , x 10.3 x AGCO CORP USD , x 8.6 x Average 10.9 x 9.8 x Median 11.2 x 10.3 Source: Equita SIM and Bloomberg consensus estimates IMPORTANT DISCLOSURES APPEAR AT THE BACK OF THIS REPORT 8

9 MINOR CHANGES IN CONSOLIDATED ESTIMATES We slightly revise upwards operating estimates (trading profit +2% and net profit +1%) slightly changing the mix, increasing CNH and lowering Iveco. FIAT INDUSTRIAL: CHANGE IN ESTIMATES ( mn) Group/ mn 2012 % 2012 % Chg 2013E % 2013E % Chg 2013E % 2013E % Chg Exp. Act. Prev. Curr. Prev. Curr. Sales 25, , % 26, , % 27, , % Incr. % 5% 6% 4% 4% 5% 5% Gross profit 4, , % 5, , % 5, , % Incr. % 14% 15% 4% 4% 5% 6% EBITDA 2, , % 2, , % 3, , % Incr. % 17% 19% 6% 7% 10% 9% Trading profit 2, , % 2, , % 2, , % Incr. % 22% 23% 7% 9% 12% 9% Pre-tax profit 1, , % 1, , % 2, , % Incr. % 35% 27% 21% 32% 16% 13% Net Income % 1, , % 1, , % Incr. % 37% 30% 35% 46% 22% 20% NF Position (1,542) (1,642) 6% (1,275) (1,264) -1% (788) (773) -2% TRADING PROFIT Exp. Act. Prev. Curr. Prev. Curr. CNH 1,535 75% 1,566 75% 2% 1,492 68% 1,614 71% 8% 1,592 65% 1,689 68% 6% Iveco % % 2% % % -3% % % -7% Other 63 3% 44 2% -30% 88 4% 54 2% -39% 124 5% 105 4% -16% TOTAL 2, % 2, % 1% 2, % 2, % 3% 2, % 2, % 1% % change 22% 23% 7% 9% 12% 9% CNH 33% 36% -3% 3% 7% 5% Iveco -6% -4% 33% 27% 20% 15% OPERATING MARGIN CNH 9.7% 9.8% 9.3% 9.7% 9.9% 9.8% Iveco 5.3% 5.3% 6.4% 6.4% 7.0% 6.8% Source: company data and EQUITA SIM estimates Pro-forma net profit is basically entirely generated by CNH. CNH-FIAT INDUSTRIAL MERGER JUST A MATTER OF TIME Finalisation of CNH-FI merger has been postponed to 3Q13 (vs previous 2Q13) just for bureaucratic reasons. We confirm our opinion: the deal is positive more from a qualitative standpoint (simplified group structure with only one listed stock, higher stock liquidity, better credit profile, and preserved flexibility needed for further strategic deals) than from a quantitative one (financial costs savings at mn by 2-3 years) since the company is already working as a single entity. NEXT PRIORITIES NOT EXPECTED IN THE SHORT-TERM We do not rule out new M&A deals aiming to fix CNH s CE division problems which in FY12 was loss-making (USD 6 mn); improve Iveco geographical exposure (still too concentrated in Europe representing ~70% of sales); Marchionne mentioned the possibility to penetrate the US market through Chrysler s RAM dealer network; but we perceive it is unlikely something could materialise in the short-term. IMPORTANT DISCLOSURES APPEAR AT THE BACK OF THIS REPORT 9

10 VALUATION +3% Marginal adjustments to our SOTP now assuming CNH 100% controlled (valued 5x FY13E EBITDA) and the new number of shares following CNH-FI merger. FIAT INDUSTRIAL: SUM-OF-THE-PARTS ( mn) Asset Sector Stake % #shares PS mn % Valuation IVECO Trucks 100.0% 4,479 52% 2013E EV/Sales = 0.51/0.48x-EV/EBITDA 6.5/5.5x FPT Industrial & Marine ** Car comp. (engines) 100.0% 451 5% 2013E EV/Sales = 0.44/0.41x-EV/EBITDA 4.4/4.5x Iveco Finance Holding Financial services 100.0% 234 3% BV as of Jun-12 Other (50% Naveco & 50% SAIC Iveco) 221 3% BV as of Jun-12 TOTAL EV NOT LISTED SHAREHOLDINGS (1) 5,385 63% CNH ord. * AG. & CE EQUIPMENT 100.0% 12, % FY13E EV/EBITDA = 5x TOTAL VALUE OF LISTED SHAREHOLDINGS (2) 12, % ATTRIBUTABLE INDUSTRIAL NET DEBT + SEVERANCE INDEMNITY FUND (3) -4,015-47% Excluding CNH (valued at market price) HOLDING COSTS (4) % NPV cash costs net of tax shield 10%) TAX-CREDITS (5) 0 0% STOCK OPTIONS / GRANT DILUITON (6) -88-1% Based on existing plans TOTAL NET ASSET VALUE ( ) 13, % Number of Shares (mn) 1,330 Value per ord. share 10.3 * assuming exchange rate /USD = 1.36 ** assuming captive business around 65% Source: EQUITA SIM estimates FIAT INDUSTRIAL: SENSITIVITY TO CNH VALUATION 100% CNH EV/EBITDA CNH FIAT INDUSTRIAL SOTP % change Mkt price Stake ( mn) 2013E % on SOTP mn PS % change 48% , x 92% 13, % 45% , x 91% 13, % 40% , x 91% 13, % 35% , x 91% 12, % 30% , x 90% 12, % 25% , x 90% 11, % 20% , x 90% 11, % 15% , x 89% 10, % 10% , x 89% 10, % 5% , x 88% 10, % Current , x 88% 9, % , x 87% 9, % -10% , x 87% 8, % -15% , x 86% 8, % -20% , x 85% 7, % -25% , x 84% 7, % -30% , x 84% 7, % -35% , x 83% 6, % -40% , x 81% 6, % -45% , x 80% 5, % -50% , x 78% 5, % Source: EQUITA SIM estimates IMPORTANT DISCLOSURES APPEAR AT THE BACK OF THIS REPORT 10

11 P&L E 2014E Revenues 17,968 21,342 24,289 25,785 26,914 28,174 Growth n.a. 19% 14% 6% 4% 5% Total opex -17,009-19,585-21,937-22,990-23,928-24,929 Growth n.a. 15% 12% 5% 4% 4% Margin -95% -92% -90% -89% -89% -88% EBITDA 959 1,757 2,352 2,795 2,986 3,245 Growth n.a. 83% 34% 19% 7% 9% Margin 5% 8% 10% 11% 11% 12% Depreciation&provision Trading profit 322 1,092 1,686 2,079 2,262 2,476 Growth n.a. 239% 54% 23% 9% 9% Margin 2% 5% 7% 8% 8% 9% Gain (loss) on the disposal of equity investments Restructuring costs Other unusual income (expenses) Operating profit -19 1,017 1,629 1,862 2,262 2,476 Growth - 400% 69% 20% 9% 9% Margin 1% 4% 6% 7% 7% 7% Net financial profit/expenses Profits/exp from equity inv Total financial expenses Profit before tax ,169 1,485 1,957 2,216 Growth n.m. n.m. 103% 27% 32% 13% Taxes Tax rate -7% 34% 40% 38% 37% 35% Minoritiy interests Net income ,186 1,424 Growth n.m. n.m. 83% 30% 46% 20% Margin -3% 2% 3% 3% 4% 5% Adj. net income ,188 1,400 Growth n.m. n.m. 98% 30% 23% 18% CF Statement E 2014E Cash Flow from Operations 1,043 1,367 1,637 1,965 2,201 (Increase) decrease in OWC (Purchase of fixed assets) ,344-1,400-1,358 (Other net investments) (Distribution of dividends) Rights issue Other -1, (Increase) Decrease in Net Debt Source: company data and EQUITA SIM estimates IMPORTANT DISCLOSURES APPEAR AT THE BACK OF THIS REPORT 11

12 INFORMATION PURSUANT TO ARTICLE 69 ET SEQ. OF CONSOB (Italian securities & exchange commission) REGULATION no /1999 This publication has been prepared by Martino De Ambroggi on behalf of EQUITA SIM SpA (licensed to practice by CONSOB resolution no of December 22nd 1998 and registered as no. 67 in the Italian central register of investment service companies and financial intermediaries) In the past EQUITA SIM has published studies on Fiat Industrial. EQUITA SIM is distributing this publication via to more than 700 qualified operators today: Monday, 04 February 2013 The prices of the financial instruments shown in the report are the reference prices posted on the day before publication of the same. EQUITA SIM intends to provide continuous coverage of the financial instrument forming the subject of the present publication, with a semi-annual frequency and, in any case, with a frequency consistent with the timing of the issuer s periodical financial reporting and of any exceptional event occurring in the issuer s sphere of activity. The information contained in this publication is based on sources believed to be reliable. Although EQUITA SIM makes every reasonable endeavour to obtain information from sources that it deems to be reliable, it accepts no responsibility or liability as to the completeness, accuracy or exactitude of such information. If there are doubts in this respect, EQUITA SIM clearly highlights this circumstance. The most important sources of information used are the issuer s public corporate documentation (such as, for example, annual and interim reports, press releases, and presentations) besides information made available by financial service companies (such as, for example, Bloomberg and Reuters) and domestic and international business publications. It is EQUITA SIM s practice to submit a pre-publication draft of its reports for review to the Investor Relations Department of the issuer forming the subject of the report, solely for the purpose of correcting any inadvertent material inaccuracies. This note has been submitted to the issuer. EQUITA SIM has adopted internal procedures able to assure the independence of its financial analysts and that establish appropriate rules of conduct for them. Furthermore, it is pointed out that EQUITA SIM SpA is an intermediary licensed to provide all investment services as per Italian Legislative Decree no. 58/1998. Given this, EQUITA SIM might hold positions in and execute transactions concerning the financial instruments covered by the present publication, or could provide, or wish to provide, investment and/or related services to the issuers of the financial instruments covered by this publication. Consequently, it might have a potential conflict of interest concerning the issuers, financial issuers and transactions forming the subject of the present publication. Equita SIM S.p.A. performs the role of market maker for financial instruments whose underlying assets are shares issued by EXOR S.p.A. Equita SIM S.p.A. performs the role of market maker for financial instruments whose underlying assets are shares issued by Fiat S.p.A. Equita SIM S.p.A. performs the role of market maker for financial instruments whose underlying assets are shares issued by Fiat Industrial S.p.A. In addition, it is also pointed out that, within the constraints of current internal procedures, EQUITA SIM s directors, employees and/or outside professionals might hold long or short positions in the financial instruments covered by this publication and buy or sell them at any time, both on their own account and that of third parties. The remuneration of the financial analysts who have produced the publication is not directly linked to corporate finance transactions undertaken by EQUITA SIM. The recommendations to BUY, HOLD and REDUCE are based on Expected Total Return (ETR expected absolute performance in the next 12 months inclusive of the dividend paid out by the stock s issuer) and on the degree of risk associated with the stock, as per the matrix shown in the table. The level of risk is based on the stock s liquidity and volatility and on the analyst s opinion of the business model of the company being analysed. Due to fluctuations of the stock, the ETR might temporarily fall outside the ranges shown in the table. EXPECTED TOTAL RETURN FOR THE VARIOUS CATEGORIES OF RECOMMENDATION AND RISK PROFILE RECOMMENDATION/RATING Low Risk Medium Risk High Risk BUY ETR >= 10% ETR >= 15% ETR >= 20% HOLD -5% <ETR< 10% -5% <ETR< 15% 0% <ETR< 20% REDUCE ETR <= -5% ETR <= -5% ETR <= 0% The methods preferred by EQUITA SIM to evaluate and set a value on the stocks forming the subject of the publication, and therefore the Expected Total Return in 12 months, are those most commonly used in market practice, i.e. multiples comparison (comparison with market ratios, e.g. P/E, EV/EBITDA, and others, expressed by stocks belonging to the same or similar sectors), or classical financial methods such as discounted cash flow (DCF) models, or others based on similar concepts. For financial stocks, EQUITA SIM also uses valuation methods based on comparison of ROE (ROEV return on embedded value in the case of insurance companies), cost of capital and P/BV (P/EV ratio of price to embedded value in the case of insurance companies). FIAT INDUSTRIAL MOST RECENT CHANGES IN RECOMMENDATION AND/OR IN TARGET PRICE (OLD ONES IN BRACKETS): Date Rec. Target Price ( ) Risk Comment Nil DISCLAIMER The purpose of this publication is merely to provide information that is up to date and as accurate as possible. The publication does not represent to be, nor can it be construed as being, an offer or solicitation to buy, subscribe or sell financial products or instruments, or to execute any operation whatsoever concerning such products or instruments. EQUITA SIM does not guarantee any specific result as regards the information contained in the present publication, and accepts no responsibility or liability for the outcome of the transactions recommended therein or for the results produced by such transactions. Each and every investment/divestiture decision is the sole responsibility of the party receiving the advice and recommendations, who is free to decide whether or not to implement them. Therefore, EQUITA SIM and/or the author of the present publication cannot in any way be held liable for any losses, damage or lower earnings that the party using the publication might suffer following execution of transactions on the basis of the information and/or recommendations contained therein. The estimates and opinions expressed in the publication may be subject to change without notice. EQUITY RATING DISPERSION AS OF DECEMBER 31, 2012 (art. 69-quinquies c. 2 lett. B e c. 3 reg. Consob 11971/99) COMPANIES COVERED COMPANIES COVERED WITH BANKING RELATIONSHIP BUY 45.1% 51.1% HOLD 49.1% 44.4% REDUCE 5.8% 4.4% NOT RATED 0.0% 0.0% IMPORTANT DISCLOSURES APPEAR AT THE BACK OF THIS REPORT 12