Pirelli & C SpA: Risk Reward Update

Research evidence excerpt

Pirelli & C SpA: Risk Reward Update

UpdateM

Risk Reward – Pirelli & C SpA (PIRC.MI)

KEY EARNINGS INPUTS

Drivers 2025 2026e 2027e 2028e

Airbags, steering wheels organic

7.0 0.0 0.0 0.0

growth (% YoY) (%)

Seatbelt organic growth (% YoY) (%)

(11.0) 0.0 0.0 0.0

(%)

Capex / Sales (%) 5.6 6.7 6.9 6.8

Reported operating margin US GAAP

13.2 13.3 14.3 14.5

(%) (%)

INVESTMENT DRIVERS RISKS TO PT/RATING MS ESTIMATES VS. CONSENSUS

OE/RT volume developments RISKS TO UPSIDE FY Dec 2027e

Pricing for premium tyres Margins could recover more quickly if Pirelli

Changes in raw material prices can cut costs and de-lever the balance sheet Sales / 7,114

FX trends ahead of our expectations Revenue 6,893 7,340

Faster EV adoption and a more benign (€, mn) 7,068

GLOBAL REVENUE EXPOSURE backdrop for the consumer would also help RT

demand for Pirelli

0-10% MEA

APAC, ex Japan, Mainland RISKS TO DOWNSIDE EBITDA 1,452 1,722 10-20% (€, mn) China and India Lower cost competition could cap pricing 1,609

10-20% Latin America power for premium tyres

20-30% North America Potential selling pressure from insiders

30-40% Europe ex UK Slower EV adoption & prolonged FX headwinds Net income 607

560 704

Source: Morgan Stanley Research Estimate (€, mn)

View explanation of regional hierarchies here OWNERSHIP POSITIONING

MS ALPHA MODELS Inst. Owners, % Active 70.1% EPS 0.62

HF Sector Long/Short Ratio 1.6x (€) 0.52 0.65

4/5 3 Month HF Sector Net Exposure 7.7% 0.57

MOST Horizon

Refinitiv; MSPB Content. Includes certain hedge fund Mean Morgan Stanley Estimates

Source: Refinitiv, FactSet, Morgan Stanley Research; 1 is exposures held with MSPB. Information may be Source: Refinitiv, Morgan Stanley Research

the highest favored Quintile and 5 is the least favored inconsistent with or may not reflect broader market