Morning Note Mediobanca del 30 settembre 2003 su FIAT

Per quanto riguarda le avvertenze si fa rinvio alla Studio di Mediobanca Industry Research del 7 Luglio 2003: 'Fiat - Last chance but one worth taking', già depositato ai sensi di legge presso Consob e Borsa Italiana, e disponibile 'cliccando' sul link sottostante.

Last chance but one worth taking
- Managing a business turnaround in a gloomy market and from a precarious financial starting point is not an easy task, even with a strongly committed management. Fiat's new business plan appears sound, since the announced targets are expected to be reached mainly thanks to cost efficiencies, and assumptions of market shares and revenue growth are not aggressive. However, we would have preferred to have had
more information from Fiat on financial and industrial issues, besides the larger commitment to investment in capex and R&D. Moreover a bigger rights issue would have been a safer bet, to reduce the risk of a further financial crisis.
- A lot has been done. Asset disposals and debt restructuring have put Fiat in a healthier position than a few months ago. Once the financial emergency has been addressed, the disruption to cash flow remains the biggest issue. We believe there is further room for cost cutting but the real challenge will be for the management to boost revenues. Massive funds are to be invested in trying to close the gap with competitors in terms of product portfolio, market share and profitability. Visibility remains low: the 2003 pipeline would help to improve the situation but revenue growth is a long run objective and a real turnaround is not expected before 2005.
- Fiat remains in a tricky situation. Our SOP delivers a fair value (post capital increase) of €7.20 or some 27% higher than current levels. Fiat shares have strongly underperformed the stock market (and the auto sector in particular) in recent weeks, following the official announcement of the capital increase. We do not expect further negative newsflow in the coming months, so we believe the stock could bottom during the capital increase. Shareholders and management know perfectly well that this is the last chance, but maybe it is one worth taking.

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