BMW AG

Paul, Nika, Rema, Omar, Eric

BMW AG

• Overview

• Strategy

• Financial Analysis & Valuation

• Recommendation

Overview

• Premium Automobile and Motorcycle Manufacturer

• Strong Global Presence

• Core Businesses

• Luxury Automobiles

• Motorcycles

• Financial Services

BMW AG

Recent Milestones• 1994 Acquires Rover Group.• 1998 Acquires Rolls Royce Brand.• 1999 Rover Loses 1.2 Billion Euros. • 2000 Rover and Land Rover sold separately, Re-

entered F1 Racing with Williams team.• 2001 Mini Launched.• 2007 Millionth Mini Delivered, Number One Strategy

Announced. Acquires Husqvarna Motorcycle. • 2009 Z4 Launched.• 2011 On track to sell 1.6 Million vehicles in 2011.• 2012 BMW official automobile partner for London

Olympic and Paralympic Games.

Reference

Generic Strategies

• Cost Leadership– Efficient supply chain (low cost)– Premium product (higher profit)

• Differentiation– Many product offerings– Effective use of technology to excite

• Segmentation– Geographic

R&D Ratio

Reference

Capex Ratio

Reference

Automotive Growth Markets

Financial performance

Core Competencies

• Manufacturing• Common Use of Parts

• Efficient Assembly

• Marketing• Use of technology to generate excitement

• Well targeted marketing

Link

BMW’s Competition

• Daimler AG (Mercedes Benz)

"Mercedes is the perfect competitor,"

"If there was no Mercedes, we would have to invent it."

-Helmut Panke (former BMW AG CEO)

Partnerships

Industry Analysts

• 2010: Arndt Ellinghorst, a London-based automotive analyst with Credit Suisse “outperform” (for Daimler, VW and BMW)

• 2011: Morningstar rates BMW as “undervalued”

Our 6 Month Target Price

• 71 Euros (Currently trading at 65)

Thank You

Mini Brand Models

Audi vs. BMW

Financial Comparison(In millions of Euros, where applicable) BMW AG VW AG

Daimler AG

Toyota Motor

Company

Competitor Average4

BMW vs. Competitor

Average

BV of Firm1,2 13,621 35,608 29,664 61,067 42,113 Well Below

MV of Firm3 42,840 57,460 44,900 115,210 72,523 Well Below

P/E Ratio 11.9 7.0 11.8 20.0 12.9Slightly Below

Return on Equity % 15.0 16.8 13.5 2.1 10.8 Above Dividend Yield % 0.6 2.2 1.9 1.4 1.8 Well BelowRevenue Growth % 23.8 20.6 23.9 0.5 15.0 Well AboveGross Margin % 18.1 16.9 23.3 12.0 17.4 On ParOperating Margin %

8.4 5.6 7.4 0.8 4.6 Well Above

Gearing (Leverage) 4.7 4.3 3.7 2.9 3.7 AboveFCF/Sales -2.5 3.2 3.4 5.9 4.2 Well Below

1 Book value = Total Assets - Intangible Asset & Liabilities (Source: 2010 Annual Reports: Daimler AG, Volkswagen AG, Toyota Motor Company)2 Market Value of the Firm as of 31 Jan 2012 (Yahoo! Finance)3 For 31 Dec 2010, 1 JPY = 0.0092 EUR (Exchangerates.org.uk)4 Average of Volkswagen AG, Daimler AG, and Toyota Motor Company

Volkswagen AG

http://www.volkswagenag.com/content/vwcorp/info_center/en/publications/2011/03/Volkswagen_AG_Geschaeftsbericht_2010.-bin.acq/qual-BinaryStorageItem.Single.File/GB_2010_e.pdf

Daimler AG

BMW AG

BMW Market Reach

Volkswagen AG’s Brands

BMW AG Risks• FX Currency Risk

• Significant Debt Obligations could Limit Growth Potential• FY 2011 Outstanding Debt of E62,353 million

• BMW could be forced to allocate considerable portions of operating cash flow to debt service payments. The reduction of CAPEX and R&D investments could cause the company to lose its advantage against competitors who may have less debt.

• Unfunded Pension Obligations• FY 2010 fair value of planned pension assets: E10,455 million vs defined

benefit obligations of E12,008 million. Unfunded status is at E1,533 million

• Financial market volatility could lead to a decline in pension fund asset values forcing BMW to make regular cash contributions to bridge the gap between pension assets and liabilities. This will put pressure on the current liquidity position of BMW.

Appendix 5: BMW Brand Models

Appendix 7: VW’s Audi Division Challenges

• Megacities (limit car use)

• Technology, Markets and Resources

• Politics, Climate, Consumer Values

Financial Comparison

(In millions of Euros, where applicable) BMW AG VW AG

Daimler AG

Toyota Motor

Company

Competitor Average4

BMW vs. Competitor

Average

Book Value of Firm1,2 13,621 35,608 29,664 61,067 42,113 Well Below

Market Value of Firm3 42,840 57,460 44,900 115,210 72,523 Well Below

P/E Ratio 11.9 7.0 11.8 20.0 12.9Slightly Below

Return on Equity % 15.0 16.8 13.5 2.1 10.8 Above Dividend Yield % 0.6 2.2 1.9 1.4 1.8 Well BelowRevenue Growth % 23.8 20.6 23.9 0.5 15.0 Well AboveGross Margin % 18.1 16.9 23.3 12.0 17.4 On ParOperating Margin %

8.4 5.6 7.4 0.8 4.6 Well Above

Gearing (Leverage) 4.7 4.3 3.7 2.9 3.7 AboveFCF/Sales -2.5 3.2 3.4 5.9 4.2 Well Below

1 Book value = Total Assets - Intangible Asset & Liabilities (Source: 2010 Annual Reports: Daimler AG, Volkswagen AG, Toyota Motor Company)2 Market Value of the Firm as of 31 Jan 2012 (Yahoo! Finance)3 For 31 Dec 2010, 1 JPY = 0.0092 EUR (Exchangerates.org.uk)4 Average of Volkswagen AG, Daimler AG, and Toyota Motor Company

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