Urbanization And Electrification Will Ignite Compact Mobility Solutions

Key Takeaways

• New product launches and destocked inventory are set to drive faster-than-expected revenue growth and market share gains across key regions.
  
• Expanding electric, robotics, and digital offerings will boost margins and recurring revenue, positioning Piaggio as a leader in urban mobility and premium services.
  
• Piaggio faces shrinking market demand, reliance on subsidies, slow EV transition, rising competition, and persistent supply chain pressures threatening profitability and competitiveness.

Catalysts

Engages in development, manufacture, and distribution of two-wheeler and commercial motor vehicles.

• While analyst consensus expects dealer restocking to simply stabilize revenues post-destocking, current signals-such as a clean-out of nearly all old inventory and several strategically timed new product launches-support a much sharper rebound in both market share and top-line growth as pent-up demand combines with normalized sell-in, likely driving higher-than-expected revenue acceleration.
  
• Analysts broadly agree Piaggio's push into electromobility will support margin growth, but this outlook likely understates the transformative potential of the company's expanding robotics and advanced technology investments, which are positioned to create proprietary platforms and a higher-margin, tech-driven product mix, boosting both net margins and future earnings power.
  
• Urbanization trends and tightening emission controls are poised to accelerate adoption of Piaggio's newly launched electric Porter and compact EVs, with uniquely strong positioning in last-mile urban logistics and city mobility solutions translating to rapid share gains in both European and Asian metropolitan centers, elevating future revenue streams above current market expectations.
  
• The rapidly growing middle class in Asian economies, combined with successful new two-wheel and three-wheel launches in India and Southeast Asia, will underpin multi-year volume expansion and sustained pricing power as disposable incomes shift consumer preference towards branded, premium mobility solutions, fueling compounding revenue and net profit growth.
  
• Piaggio's strategic focus on premiumization, brand equity, and its multiplex distribution model sets the stage for enhanced penetration into shared mobility fleets and digital services; as recurring revenue from subscriptions, fleet partnerships, and after-sales grows, long-term EBITDA margins and earnings quality will improve more than is being currently recognized.

Piaggio & C Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Piaggio & C compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Piaggio & C's revenue will grow by 7.2% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 2.9% today to 6.3% in 3 years time.
• The bullish analysts expect earnings to reach €121.3 million (and earnings per share of €0.34) by about August 2028, up from €45.2 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 19.2x on those 2028 earnings, up from 15.1x today. This future PE is lower than the current PE for the GB Auto industry at 42.8x.
• Analysts expect the number of shares outstanding to grow by 0.32% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 17.78%, as per the Simply Wall St company report.

Piaggio & C Future Earnings Per Share Growth

Risks

• Declining demand in core markets such as Europe, the U.S., and China, as evidenced by a 13 percent drop in revenues in the first half and ongoing market share losses, highlights the risk that long-term secular shifts toward urbanization and public transit could continue to shrink the addressable market for Piaggio and constrain revenue growth in coming years.
  
• The company's CEO acknowledges that growth in electric vehicles is directly linked to government subsidies, especially in India, where the electric three-wheeler market is described as low-margin and highly sensitive to subsidy changes, raising concerns that any reduction or removal of subsidies could sharply impact future revenues and margins.
  
• Piaggio's limited EV product lineup and cautious approach to the electric transition, particularly the choice not to aggressively push low-margin electric models, exposes it to the risk that tightening environmental policies in Europe and elsewhere could erode competitiveness, driving up compliance costs and potentially compressing margins if the ICE business declines faster than Piaggio can scale EVs.
  
• There is explicit mention of intensifying competition from Asian manufacturers, particularly Chinese brands that are becoming more aggressive with commercial policies and are growing in quality, which could translate into ongoing downward pressure on pricing and market share in Europe and Asia, ultimately squeezing net earnings.
  
• The CEO states that logistics costs remain stubbornly high and unchanged, with continued global supply chain fragility-such as shipping route disruptions and cost inflation-which threatens to impact profitability by inflating costs and potentially limiting the company's ability to maintain stable net margins.

Valuation

• The assumed bullish price target for Piaggio & C is €4.01, which represents two standard deviations above the consensus price target of €2.46. This valuation is based on what can be assumed as the expectations of Piaggio & C's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €4.1, and the most bearish reporting a price target of just €1.6.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be €1.9 billion, earnings will come to €121.3 million, and it would be trading on a PE ratio of 19.2x, assuming you use a discount rate of 17.8%.
  
• Given the current share price of €1.94, the bullish analyst price target of €4.01 is 51.7% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.