CFA Institute Research Challenge Hosted by CFA Society

Team Purosangue

The CFA Institute Research Challenge is a global competition that tests the equity research and valuation, investment report writing, and presentation skills of university students. The following report was prepared in compliance with the Official Rules of the CFA Institute Research Challenge, is submitted by a team of university students as part of this annual educational initiative and should not be considered a professional report.

Disclosures: Ownership and material conflicts of interest: The author(s), or a member of their household, of this report does not hold a financial interest in the securities of this company. The author(s), or a member of their household, of this report does not know of the existence of any conflicts of interest that might bias the content or publication of this report. Receipt of compensation: Compensation of the author(s) of this report is not based on investment banking revenue. Position as a officer or director: The author(s), or a member of their household, does not serve as an officer, director or advisory board member of the subject company. Market making: The author(s) does not act as a market maker in the subject company’s securities. Disclaimer: The information set forth herein has been obtained or derived from sources generally available to the public and believed by the author(s) to be reliable, but the author(s) does not make any representation or warranty, express or implied, as to its accuracy or completeness. The information is not intended to be used as the basis of any investment decisions by any person or entity. This information does not constitute investment advice, nor is it an offer or a solicitation of an offer to buy or sell any security. This report should not be considered to be a recommendation by any individual affiliated with CFA Society Italy, CFA Institute or the CFA Institute Research Challenge with regard to this company’s stock. CFA Institute Research Challenge Initiation of Coverage Valuation as of February 7th, 2020

€/mln FY 2019 E FY 2020 E FY 2021 E FY 2022 E FY 2023 E FY 2024 E FY 2025 E BUY REVENUES 3,766 4,140 4,641 5,231 5,596 5,976 6,369 EBIT 917 1,023 1,367 1,649 1,821 2,000 2,184 Current Price: € 153.15 EBITMARGIN 24.4% 24.7% 29.5% 31.5% 32.5% 33.5% 34.3% Target Price: € 185.9 Diluited EPS 3.72 3.95 5.41 6.60 7.35 8.08 8.83 Target Upside: + 21.4% DPS 1.03 1.20 1.63 2.00 2.43 2.75 3.10 ROE 51.1% 56.4% 68.1% 64.4% 51.4% 41.4% 34.4% Stock Exchange: Borsa Italiana ROIC 23.4% 29.7% 37.3% 40.8% 36.8% 31.2% 27.8% Ticker Bloomberg: RACE:IM P/E 39.8x 38.8x 28.3x 23.2x 20.8x 19.0x 17.4x Ticker Factset: RACE.MI EV/EBITDA 22.6x 20.1x 15.4x 13.4x 12.5x 11.7x 11.1x Sector: Consumer Discretionary Industry: Automobiles NET DEBT 1,190 1,443 1,393 1,151 424 (350) (1,406) Source: Team estimates Market Data Annual Dividend: € 1.03 We issue a BUY recommendation on Ferrari NV with a target price of € 185.9, Dividend Yield: 0.67% representing a 21.4% upside from the current price. Our valuation is based on a 52w range: € 108.95 - €157.25 discounted cash flow (DCF) model which better embodies the uniqueness of company’s 52w avg daily volume: 462 k value with an indipendent insight from relative market perspective. Beta 2y vs FTSE Mib: 0.84 Strong pricing power, exclusivity and scarcity are the main key drivers of Company Market Cap: € 28,513.1 M performance (€ 3.8bln net revenues in FY 2019 and 2015-2019 CAGR of 7.2%), Shares Outstanding: 185.9 M strenghtened by a long successful history in the racing context with its , the most winning team in F1 history (16 Constructor Championship titles and 15 Ownership Structure Drivers world titles) close to reach 1,000 Grand Prix presence in 2020. EXOR NV: 23.91% Ferrari Piero: 10.17% The , high-performance and long-term strategy Treasury Shares: 4.73% Born from ’s racing dream, Ferrari is nowadays a symbol of elegance, Free Float: 61.19 % luxury and speed, recognized worlwide as confirmed by the nomination as the most powerful brand in 2019, for the second year in a row [Source: Brand Finance Global 500]. ’s actual product range relies on 11 models: 488 Pista, 488 Pista Spider, 812 Superfast, F8 Tributo, F8 Spider, SF90 Stradale and 812 GTS for the Sport and Special Series segment; Portofino, GTC4 Lusso, GTC4 Lusso T and the latest Roma part of the GT segment. Ferrari also produces limited edition series including the new Icona family, with the € 1.2mln Monza SP1 and the € 1.6mln Monza SP2, whose shipments started at the end of FY 2019. The low volume production strategy pursued by the Company contributes to a constant excess of demand over supply, delivering a sustainable and controlled shipments growth, crossing according to the last reported results the 10k units production for the first time in its history.

Figure 1: Historical prices and volumes (08/01/2016 – 07/02/2020) 18000000 180,00 07/09/2018 09/02/2018 Mr Camilleri elected as CEO 16000000 Buyback announcement 160,00

14000000 140,00

12000000 02/05/2016 31/12/2019 120,00 Mr Marchionne substituted Shipments > 10k units Mr Amedeo Felisa as CEO 10000000 100,00

8000000 25/07/2018 29/05/2019 80,00 Mr Marchionne passed away First Ferrari plug-in hybrid road car 6000000 60,00

4000000 40,00

2000000 20,00

0 0,00 January 2016 July 2016 January 2017 July 2017 January 2018 July 2018 January 2019 July 2019 January 2020 Vol Price (€) Source: Team elaboration

2 INVESTMENT SUMMARY

We initiate our coverage on Ferrari NV (RACE) with a BUY recommendation and a 12- Figure 2: month target price of € 185.89 per share, offering an upside of 21.4% on the 7th of Normalised prices RACE vs FTSE MIB February 2020 closing price of € 153.15. Bullish assumption and financial items FTSE MIB (167202) 450,00 Ferrari NV (RACE-IT) The actual business plan will cover the next 2 years, ending up in 2022. Company 400,00 targets are very ambitious, but we strongly believe that management capabilities and 350,00 historically achieved financial performances will lead to exceed proposed targets (FY 300,00 2022E net revenues >€ 5.2bln vs <€ 5.0bln , EBITDA >€ 2.2bln vs € 1.8 - 2.0bln with an 250,00 estimated EBITDA margin ∼42% vs >38%, EPS diluted € 6.6 (including buyback) vs 200,00 €> 4.70). 150,00 Our upward revision of Company’s estimates is mainly related to a favourable effect of 100,00 price/mix coming from the introduction of new accretive models enhanced by hybrid 50,00 lineup presence targeted up to 60% and a substantial cut-off of R&D expensed to 0,00 the P&L due to the new budget cap imposed by the 2021 F1 regulations. EPS diluted 2016 2017 2019 team estimates also take into account the buyback program of € 1.5b started in FY Source: Team elaboration 2018 and supposed to be completed within FY 2022. A look forward: earnings visibility We identify the exclusive waiting list as Ferrari’s distinctive signature: it allows the Figure 3: total control of the shipments with a consequent long-run earnings visibility, ensuring P/E historical protection from potential downturn and management of geographical deliveries. New RACE.MI Median peers Ferrari SF90 Stradale (rumored to be priced nearly € 550k) is a work-of-art embracing a 50 shining example of Made-in-Italy craftsmanship to an exciting driving experience 39,59 (1000HP – 340Km/h max speed) most derived from F1 high technological know-how. 40 30,90 26,21 This first plug-in hybrid model opens a new era for Prancing Horse, combining 30 20,86 engineering marvels (more than 100mln lines of coding implemented, more than an 20 Airbus A350 – Source: Q2 2019 Earning Call) to an environmental concern, today more topical than ever. Book orders are strong, with a waiting list of at least 18 months just 10 few weeks after presentation. 0 Future opportunity: call it FUV FY 2016FY 2017FY 2018FY 2019 Rumored to be called Purosangue – Italian equivalent of thoroughbred – Ferrari first Source: Team elaboration utility vehicle could represent a winning move in a rapidly expanding market (Suv market FY 14-18 CAGR of 15.72%) where direct competitors already set foot (e.g. Lamborghini) or are going to do so (e.g. Aston Martin). Expected to be launched within Figure 4: the end of the actual business plan (FY 2022), Ferrari Purosangue is undoubtedly a CAPEX/Sales further reason of potential future growth. 0,20 18,62% 18,75% Diversification strategy: dual identity and unique brand All non-car business will be partially reshuffled within actual business plan, relying on 3 0,15 main pillars: elevate quality standard of all apparel products; enhance Ferrari’s 10,32% 11,10% entertainment universe; offer exclusive experiences to customers with car adjacencies. 0,10 Long-term manufacturing contract with Giorgio Armani Group, e-sports activities and the opening of a restaurant in Maranello with the Michelin-starred chef Massimo Bottura 0,05 well represents management plan to achieve 10% of EBIT contribution from brand activities within 7-10 years. - FY 2016 FY 2017 FY 2018 FY2019 Valuation: Eyes on the street, hands on the steering wheel Our €185.9 target price is the result of a 3-stages discounted cash flow (DCF) model RACE which better embodies the uniqueness of company’s value with an indipendent insight Source: Team elaboration from relative market perspective. For that reason, multiple relative valuation has not been taken into account in target price definition, due to the peculiar nature of the company and the absence of listed car-makers within luxury peers (except for AML). A convincing and promising business plan is the milestone of our assumptions, Figure 5: strenghten by past company results that constantly beated targets and expectation. SHIPMENTS Favourable price/product mix, increase of hybrid presence in Ferrari line-up and FUV 12000 opportunity will undoubtely boost financial results (FY 19-25 EBITDA CAGR of 13.3%, with an exit margin of 42.1%; Net Profit FY 19-25 CAGR of 14.7%, with an exit margin 10000 of 24.9%; FCFFps to 6.2 in 2025 and FY 19-25 CAGR of 9.2%). 8000 Investment risks Ferrari intrinsic nature and targeted customer base (High Net Worth Individuals) makes 6000 Maranello’s Company broadly immune from macro-trends. Nevertheless, unforeseeable events such as Coronavirus could slowdown revenues growth in the most affected 4000 region. Brexit and Canada’s new luxury tax seems to be affordable 2000 challenges for the Company, with eventual costs directly shifted on final customers. Therefore, main risks need to be traced at industry level, with tighter environmental 0 regulations and progressive switch to electric vehicle.New FIA regulation coming in FY15 FY16 FY17 FY18 FY19 force from 2021 could enhance competitiveness within F1 Circus, with potential Source: Team elaboration negative return in terms of brand image.

3 BUSINESS DESCRIPTION

Founded in 1947 by Enzo Ferrari in Maranello, Ferrari is the strongest brand in the world for the second year in a row [Source: Brand Finance Global 500 (2020)]. Design, engineering, production and sale of luxury high-performance cars are the four main pillars of the Company’s core business, strengthened by the successful 90-year presence in the racing contest through Scuderia Ferrari, the most winning team in Formula 1. Since the separation from Fiat Chrysler Automobiles NV and the holding Ferrari NV establishment, the Company was listed on New York Stock Exchange in October 2015, completing the spin-off on January 3rd, 2016 with the debut in Borsa Italiana.

Born to RACE… Società Anonima Scuderia Ferrari can be considered the milestone of a long successful history. Born in 1929 as the Alfa Romeo racing division, Scuderia Ferrari made its first appearance in 1930 at Mille Miglia. In 1932, the famous “Prancing Horse” was included in the livery of the car, a symbol of the war hero Francesco Baracca’s family, which became soon an iconic and distinctive emblem. In 1939, Enzo founded his own Company in under the name of “Auto Avio Costruzioni” due to an ongoing contract with Alfa Romeo, which inhibited to use his own name and to build racing cars. Figure 6: The headquarter was moved four years later to Maranello. In 1947, after the contract Revenue split FY 2019 expiration, the Company came back to its original name of Scuderia Ferrari, giving the birth, one year later, to the first road car, Ferrari 166. Three years later, Ferrari debuted 3% 5% in the F1 Championship, putting a milestone for the longest winning running team. In 1969, Enzo Ferrari sold 50% of the Company to FIAT (now FCA NV) as a consequence of a difficult financial situation. 14% … on the road After Enzo Ferrari passed away, FIAT increased its participation to 90% and Luca 78% Cordero di Montezemolo was appointed as Chairman and finally as CEO. Ferrari completed the transformation into a luxury car company and restarted winning in F1, obtaining eight World Championship titles. Its continuos presence in the racing context, Cars and Spare Parts Sponsorships, not only limited to the F1, permitted not only to leverage brand visibility and promotion, commercial & brand Engines but also, to apply the technological knowledge (R&D) proper to Formula 1 to road cars. Other The latest case is the power unit installed in the hybrid road car models, granting carbon Source: FY 2019 Results emissions reduction and increasing engine power. HY-KERS system was implemented in LaFerrari, the first car equipped with the F1-derived hybrid ever produced.

Figure 7: Shipments by Region FY 2019 Ferrari’s revenues split In FY 2019, Ferrari for the first time in its history delivered more than 10,000 units worldwide. EMEA results as the first region per shipments with a share of 48%, followed 15% by Americas (29%), Mainland China, Hong Kong and Taiwan (8%) and the rest of APAC 8% (15%). The Company reported total net revenue of € 3,766mln (+10% vs FY 2018). Cars 48% and spare parts accounted for 78%, followed by sponsorship, commercial and brand (14%), engine supply to Maserati and rental to other F1 teams (5%), Financial Services 29% and Mugello race-track activities (3%). Revenues growth vs FY 2018 was mainly ascribed to an increase in cars and spare parts (+15.4%) and in Sponsorship, EMEA commercial and brand (+6.3%), which relates to revenues earned by F1 racing team, AMERICAS sponsorship agreements and net revenues generated by brand merchandising, MAINLAND CHINA, HONG KONG, TAIWAN licensing and royalty income. The overall growth was partially offset by a reduction in REST OF APAC engine revenues (-30.3%), as a direct consequence of the announced Maserati supply Source: FY 2019 Results cut-off, which will be gradually ending by FY 2021. Other revenue items remained quite stable (+9.5%). Figure 8: Shipments by Segment FY 2019 Models line-up < 1% Ferrari’s road car range consists of 3 main pillars: Sport and Special Series, GT, and Icona. In FY 2019, Sport and Special Series’ segment accounts for 64% of the total shipments, followed by Gran Turismo (36%), and less than 1% by the new Icona, whose delivery programme started just in Q4 FY 2019. The Prancing Horse has planned to 36% reveal 15 new models between 2019 and 2022, five of which are already presented. The new entries will be well-balanced across the different segments, striving to achieve 64% around 60% of hybrid cars over the entire product range. A completely new model will be included in the Ferrari’s production range: it will be the first FUV (Ferrari Utility Vehicle) made in Maranello and announced to be named“Purosangue”. Sport & Special Series The average retail price will boost due to a deliberate business plan target, as shown by GT the first plug-in hybrid SF90 Stradale, which is rumored to be priced more than € 500k. Shipments by pillar split will partially change up to FY 2022, with an expansion of GT Icona segment (<40%) and consolidation of Special Series (>5%) and Icona (<5%)models. Source: FY 2019 Results

4 INDUSTRY OVERVIEW & COMPETITIVE POSITIONING

Figure 9: Ferrari’s positioning in the market is quite special. The mere mention of the Prancing Engine of the year – V8 Horse as automaker does not embrace the uniqueness of products that Ferraridelivers.

… in the Luxury market With an estimated value of € 1.3 trillion and a +4% of growth in 2019, the luxury market has been dominated by the performance of luxury car segment that grew by 7% at constant exchange rates to € 150bln, accounting for nearly ∼44% of the global upmarket [Source: Bain & Company]. An important key driver for the industry is represented by the number of High Net Worth Individual (HWNI), people with liquid assets above € 1mln. The amount peak of almost 18mln individuals in 2018 [Source: Capgemini] with a CAGR 15-18 of 5.46% [Source: Team computation]. Luxury brands' target market will be Figure 10: profitable and solid, since the growth will be sustainably supported in the next years, Millions of Vehicles sold reaching an estimated number of more than 20mln HNWI in2020E. 100 The role of China in the Luxury market 80 China has been the main driver of the rise in the last years, delivering more than half of the global growth in luxury spending between 2012–18, and is expected to account for 60 40% of the world’s luxury spending heading into 2025. In 2018, the Chinese market 40 accounted for a third of the global spend, mainly thanks to the Generation Y, the driving force of the country’s luxury appetite that delivers more than half of the total spending 20 on luxury by Chinese consumers. Following the footsteps of their slightly older peers, China’s post-’90s consumers, better known as Generation Z, are delivering the shot in 0 the arm for China’s luxury market emerging from several years of stagnation, and their 2010 2015E 2020E 2025E presence in the Luxury industry will rise exponentially in the following years [Source: China DEVELOPED NATIONS Luxury Report (2019), McKinsey & Company]. EMERGING MARKETS Source: Team elaboration … in the Automotive Industry The determinants of the automotive industry demand are mainly driven by the level of Figure 11: technological innovation and macroeconomic factors, such as gross domestic product Urban Population (% of total) (GDP), urbanization rate (Figure 11), and inflation. Lately, the growing concern about environmental matters has breached in, altering significantly the market dynamics. It is 2015 expressed in the industry by the stricter legislation on greenhouse gas emissions, which limits carmakers' fleets' CO2 emissions. But still, in most of the markets in which it operates, Ferrari has been granted the Small Volume Manufacture status (SVM), a tailored appoint for those companies that manufacture or import less than a set number 2016 of vehicles, which gives to the Company more room for manoeuver in order to comply with the CO2 emission standards. The status is granted by different regulatory authorities across the globe, such as the European Union, by the EPA in USA and by the Chinese government. Ferrari shifting to new hybrid models goes in this direction. 2017 Ferrari’s competitors in the Automotive Ferrari’s main competitors within the luxury car segment are clearly outlined in its Annual Report. More precisely, the company specifies particular technical requirements 2018 that the other carmakers should possess in their fleet vehicles to be stated as a ‘competitor’, such as >500 HP and a starting price of >€ 150k (VAT included). Therefore, there are only a few peers in the automotive market, such as Lamborghini, 0 50 100 McLaren, Porsche, Mercedes, Audi, Rolls Royce, Bentley and Honda. The list of China, Hong Kong Italy United Kingdom Germany competitors’ models refers only to GT and SPORTS, excluding so Limited Series or US France Japan Fuoriserie for all of these peers. Furthermore, we exclude FORD GT simply because in our opinion it would be unfair to add a model that has been built in a limited number and Source: Team elaboration does not properly belong to a “road car” category as the others included in the list (Appendix 1). Since the average price of its pipeline is the highest among competitors, peaking € 292,524, Ferrari can be ranked as the most desired and exclusive automotive brand within the market.

… closer to a diamond rather than a car Automotive cannot be considered as an industry performance metric for Ferrari since most of its direct competitors (Lamborghini, Rolls-Royce and Bentley among the others) are not separately listed from their respective major automotive groups. The only Table 1: example that followed Ferrari spin-off from the FCA group and consequent IPO is Aston Customised Index TR Martin Lagonda (LON: AML), but its fortune, at the moment, is a long way off from TotalReturn Asset (2016-2020) Maranello’s stock history. Therefore, we have replicated two market indexes that include different constituents: one is related to the luxury goods market, and the other is related Ferrari NV 277.78% to the automotive sector (Appendix 2).The overall return (Table 1) of these indexes PLI Index 275.10% compared to Ferrari's performance leaves no doubt about the exclusive nature of the Auto Index 64.65% Company: a dreamy carmaker in a luxury dress. Source: Team elaboration

5 INDUSTRY OVERVIEW & COMPETITIVE POSITIONING

Figure 12: SWOT ANALYSIS SWOT Analysis STRENGHTS SWOT Analysis has been performed in order to identify Strengths and Weaknesses of the Company and Opportunities and Threats in the industry. The main Ferrari’s Strengths identified are: the powerful brand image; a unique Italian handmade craftsmanship tradition; strong racing and reputational image in F1; the solid

THREATS WEAKNESSES customer base community, both in racing and core business (‘Tifosi’); Ferrari Approved program: reliable and smooth second-hand sales; a robust and constant customer demand due to the waiting list strategy; high performance products driven by constant technological improvements. Conversely, the most relevant Weaknesses are: the current high presence of OPPORTUNITIES combustion engine in its fleet, in a framework with a spreading concerns over the Source: Team elaboration environment; racing results below the expectation in the last years; potential switch of customers to other brands due to the long waiting list; high geographical concentration of production facilities (Maranello and Modena) increasing the exposure to Figure 13: % SUV in automotive market unforeseeable events. 50% Focus on Industry Opportunities: SUVs and hybridization 40% Sport utility vehicles (SUVs) is turning to be one of the most attractive and competitive

30% market in the automotive industry. With a CAGR of 15.72% in 2014-2018, this segment has reached the highest market share of all time (36.4%) in the overallindustry. 20% Despite expressed consumer concerns about climate change, the increasing preference 10% for safety and comfort has been one of the primary growth drivers to the shift from traditional cars to SUVs throughout the last years. 0% The major market players are encouraged to develop and introduce technologically 2014 2016 2018 USA - CAGR9% China - CAGR14% advanced models of SUVs, due to the increased fuel economy standards and the EU - CAGR15% World- CAGR12% high requirement of power consumption, which could limit the effective ease of Source: Team elaboration driving of these vehicles, and hence to force carmakers to develop specifically electric models. The trend is universal. Today in China, the biggest market worldwide, SUVs are considered symbols of wealth and status, and count for almost 35% of SUV global Figure 14: P5F FORMULA 1 sales, with 10,353 thousand units sold in 2018, notwithstanding the slight decrease

BUYER compared to the previous yeas (-3%), due mostly by the Chinese Government’s POWER austerity. Almost half of all cars sold in the United States (7,745k units) and one-third of the cars sold in Europe (5,540k units) are SUVs. The future of SUVs market is bright as there is an increasing demand in highly COMPETITING SUPPLIER RIVARLY POWER populated and industrialized regions such as China, India and Europe. In the United States and the Middle East, the expansion can be said to be moderate. As such, there has been an important expansion towards the luxury SUVs market in EXTRA- THREAT OF the last years, as clearly shown by the unveiling of Urus by Lamborghini, Bentayga INDUSTRY POTENTIAL (Bentley) and Cullinan (Rolls-Royce) (Appendix 3). Therefore, Ferrari could no longer SUBSTITUTES ENTRANTS ignore the upward trend of SUVs segment, which after all led to the decision to Source: Team elaboration manufacture Ferrari Utility Vehicle, the first in its proud heritage, rumored to be called Purosangue, which will be unveiled presumably in 2022.

Figure 15: P5F CORE BUSINESS Porter Five Forces’ analysis BUYER POWER Due to different dynamics involved in R&D primary source (Formula 1) and Company core business, we decided to conduct a separate P5Fs’ analysis (Appendix 4) on both determinants, in order to get a more accurate point of view on the actual state-of-art COMPETITING SUPPLIER RIVARLY POWER within industry competitive forces. Company’s strenght is well described by the high relative bargaining power both over its clients and suppliers, with the last ones that usually are paid later than payments

EXTRA- THREAT OF collection from buyers. Ferrari solid position and competitive advantage also relies on INDUSTRY POTENTIAL a strong value-chain management (Appendix 5) that combines key strategic partnerships SUBSTITUTES ENTRANTS within supply stage to a worldwide distribution with its 190 PoS. Source: Team elaboration Furthermore, after-sale care for its customers and products ensure a tight relationship between Ferrari and car owners, often associated with repeated purchases and a high residual value of cars over the years. SALES SUPPLIERS INTENSIVE R&D MANUFACTURING OFFICIAL DEALERS SPONSORSHIP TRANSFERFROM - MARANELLO NETWORK STRATEGIC PARTNERS F1 ACTIVITIES - MODENA AFTER SALES 20 Y – FERRARI CLASSICHE MAINTANANCE & CLIENTS EVENTS CUSTOMER LOYALTY PREWONED – FERRARI WARRANTY PROGRAMS CORSE CLIENTI PROGRAM REPEATED PURCHASES APPROVED

6 FINANCIAL ANALYSIS

Figure 16: REVENUES Historical Revenues (mln) An historical outlook Others Ferrari’s income stream (FY 2019 | € 3,766mln) comes from the sales of Cars & spare Sponsorship, commercial and brand parts (€ 2,926mln) followed by Sponsorship, Commercial & Brand (€ 538mln), Engines Engines 4000 (€ 198mln) and Others (€ 104mln), mainly related to financial services. With a FY 15-19 CAGR of 7.2%, Ferrari’s total net revenues has been driven by strong increase in 3500 shipments, with the historical overcome of 10k units sold in the last reportedyear. 3000 Cars & spare parts includes revenues generated by shipments of cars with associated 2500 personalization and sales of spare parts. This income voice has grown at a FY 15-19 2000 CAGR of 8.9% boosted by higher volumes and a bigger impact of personalization programs. 1500 Sponsorship, Commercial & Brand is worth more than € 530mln (FY 2019) with a FY 1000 15-19 CAGR of 5.1% and is mainly related to sponsor contracts (e.g. Philip Morris, 500 Shell, UPS) and share of commercial profit related to F1 activities. Brand activities include revenues generated by all non-car businesses, mostly based on apparel and FY15 FY16 FY17 FY18 FY19 accessories sold in mono-brand stores & website, franchising, and through licensing. Source: Team elaboration Engine revenues stream (5.3% of revenues in FY 2019 | CAGR 15-19: -2.5%) includes Figure 17: Estimated Revenues V6 production and supply to Maserati, automotive firm in FCA NV group, following an agreement that will expire between 2021 and 2022. Furthermore, Ferrari rents Formula Others 1 engines to Alfa-Romeo and Haas racing teams, generating and estimated revenue of Sponsorship, commercial and brand € 66mln in FY 2019. Engines Cars and spare parts Other refers to interest income generated from Ferrari Financial Services (FFS) 7000 activities and Mugello racetrack management. Proceeds accounted for € 104mln in FY 6000 2019 with a FY 15-19 CAGR of -2.3%, mainly attributable to sale of majority stake of FFS GmbH to FCA Bank in 2016. 5000 Assumption and forecast 4000 We estimate a total net revenue of over € 6bln in FY 2025 (FY 19-25 CAGR of 9.2%). 3000 Our assumption is based on two different growth phases: the first one relies on the company Business Plan that will cover next three years (FY 19-22 CAGR of 11.6%) 2000 and the latter reflects the consolidation of hybrid and price/product mix and of new 1000 potential market opportunities (Ferrari Utility Vehicles), with a FY 22-25 CAGR of 6.8%. FY20E FY21E FY22E FY23E FY24E FY25E Cars & spare parts is expected to grow at FY 19-25 CAGR of 11.2%, due to the combined effect of increase in price/mix and volume. Phase in/phase out scheme of Figure 18: Ferrari lineup, new profitable Icona segment, Purosangue incoming and targeted 60% ROE vs luxury peers of hybrid/mix in 2022 will be main drivers of our growth estimate. Source: Team elaboration Sponsorship, Commercial & Brand the actual business plan will partially reshape the 3 existing licensing contract, reducing it by almost 50% and cutting 30% of the actual 265,95% product lines sold, in order to increase quality standards and to propose new initiatives 2,5 that will boost profitability margin of brand. The effect of this restructuring will be not significant in terms of revenues, and a positive effect will be tangible at the end of the 2 business plan. Therefore, we estimate that this income voice will be essentially flat until FY 2022, starting to grow around 5% per year from FY 2023. Even if official contribution 1,5 of brand activities in terms of revenues has never been disclosed by the company, the aim to reach 10% of EBIT within 7-10 years is quite reasonable. Proposed initiatives 97,02% (Armani agreement, Bottura’s restaurant opening, e-sports) will certainly represent main 1 73,77% 51,09% growth drivers. 0,5 Engine We estimate a progressive decrease with residual revenues accounted in FY 16% 21% 18% 21% 2022. In a conservative view, estimated € 66mln from this income voice has been 0 considered fixed for the next years, therefore a potential provision for a third team rental 2016 2017 2018 2019 (as already occurred in 2016) has not been taken into account. RACE peers median Other We estimate a FY 19-25 CAGR of 6.4%, with a flat contribution of Mugello Source: Team elaboration activities and an increase in FFS Inc. operations associated with the US shipments’ share on the overall growth. Table 2: Income Statement snapshot

€ M FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 E FY 2020 E FY 2021 E FY 2022 E FY 2023 E FY 2024 E FY 2025 E Revenues 2,854 3,105 3,417 3,420 3,766 4,140 4,641 5,230 5,596 5,976 6,369 Cost of Sales 1,499 1,580 1,651 1,623 1,808 1,821 2,181 2,458 2,630 2,809 2,994 EBITDA 719 843 1,036 1,115 1,269 1,479 1,924 2,224 2,381 2,537 2,684 EBIT 444 595 775 827 917 1,024 1,367 1,649 1,821 1,999 2,184 Patent Box - - - 141 60 ------EPS 1.52 2.11 2.82 4.14 3.72 3.95 5.41 6.60 7.35 8.08 8.83 EPS adj 1.63 2.24 2.82 3.4 3.72 3.95 5.41 6.60 7.35 8.08 8.83

Source: Team elaboration

This report is published for educational purposes only by students competing in the CFA Institute Research Challenge. 7 FINANCIAL ANALYSIS Figure 19: Historical CAPEX and R&D R&D & CAPEX R&D EXPENSED TO THE P&L GROSS CAPEX R&D expensed to the P&L represents for Ferrari an important key cost and it is mainly CAPEX TO SALES D&A Margin attributable to F1 activities. Nevertheless, as already said, high capital intensity 800 25% activities in F1 guarantee an extraordinary transfer of know-how and technological skills 700 that constitutes a unique competitive advantage within luxury car industry. New 20% 600 technological challenge (e.g. hybridization) has driven the growth of this cost (FY 15-19 CAGR of 5.8%) which will boost in 2020E (+25% vs FY 2019) due to the simultaneous 500 15% development of F1 single-seats for both 2020 and 2021 seasons. The budget cap 400 imposed by new FIA regulation by 2021 will hugely reshape this cost (-39% vs FY 300 10% 2020). It’s important to highlight that the € 175mln limitation will not affect power unit 200 R&D associated costs, preserving future transfer of technological improvement. 5% Following the same direction, CAPEX nearly doubled between 2015 and 2019, reaching 100 an estimated peak (€ 800mln) in FY 2020. A progressive anticipation of expenses 0% before F1 budget cap 2021, PP&E expenses related to the manufacture of hybrid FY15 FY16 FY17 FY18 FY19 segment and capitalized R&D attributable to new model introduction have been driving Source: Team elaboration this important growth. A change of direction is expected to be realized from 2021, with an estimated decrease of capital expenditure to € 500mln in FY 2025 (FY 20-25 CAGR Figure 20: Estimated CAPEX and R&D -7.5%). Nevertheless, we retain that CAPEX will not retrace its steps to the level 2015- 2018, in order to correctly invest for a future potential electric segment switch.

Budget Cap EARNINGS R&D EXPENSED TO THEP&L GROSS CAPEX Higher revenues and lower cost margin have been partially offset by the increase in CAPEX TO SALES D&A Margin R&D costs, determining an EBITDA FY 15-19 CAGR of 15.3% passing from € 719mln 1000 25% (FY 2015 | EBITDA margin 25.2%) to around € 1.3bln (FY 2019 | EBITDA margin 33.7%). Stable (or decreasing) D&A margins in the same period result in an EBIT FY 800 20% 15-19 CAGR of 19.9%, with € 917mln in FY 2019 (EBIT margin 24.36%). Future growth assumptions associated with lower R&D cost and higher margin (price/mix effect) will 600 15% fuel a projected FY 2025 EBITDA of almost € 2.7bln (FY 19-25 CAGR of 13.3% | EBITDA margin 42.1%). Patent box agreement for 2015-2017 of € 141mln boosted FY 400 10% 2018 Net Profit, with a lower effect on 2019; the Company applied for a new agreement with Italian Revenue Agency for the period of 2020-2024. In a conservative view we set 200 5% future normalized tax rate at 27%, assuming therefore no effect of tax benefit. Under this assumption, Net Profit will raise to € 1.6bln in 2025E with an estimated FY 19-25 0% FY20E FY22E FY24E CAGR of 14.6%. Source: Team elaboration RETURNS Figure 21: Over the period 2016-2019, Ferrari Return on Average Equity overperformed within EBIT and EBIT Margin luxury peers, reaching a ROE of 51.1% vs Luxury Peers average (estimate) of 19.6% EBIT EBIT Margin 2500 40% in FY 2019. ROIC at 23.4% in FY 2019 is above historical path of luxury peers within 35% the last three reported year (FY 16 – 18), with an average of 18.7% vs 27.5% of Ferrari. 2000 30% Despite the high R&D costs accounted to the P&L for Maranello company, EBIT margin is well in line within the competitive framework, with a 24.3% for FY 2019 and an 1500 25% historical peers average of 25.3%. Once again, we point out the fact that Ferrari 20% profitability measures would behave completely as outliers if compared within 15% 1000 automotive industry, where historical average EBIT margin and ROIC stalled around 10% 4.8% and 4.3%,respectively. 500 5% CASH FLOW & LIQUIDITY Strong collection of downpayments from SP1 & SP2 has been one of the 0% FY20E FY22E FY24E main driver of the impressive € 675mln Industrial FCF in FY 2019 (+67% vs FY 2018, Source: Team elaboration FY 15-19 CAGR of 12%), resulting in Cash Conversion Ratio of almost 97%. Working Figure 22: capital benefits from a negative cash conversion cycle of -38.5 (days), which is the ROIC vs luxury peers result of a clever management of inventory items due to a targeted production based on 30 a strong long-run book orders. Higher Capital Expenditures planned for 2020 will only temporary slowdown this growth, with Industrial FCF expected to overcome € 1.6bln in 25 FY 2025 (FY 19-25 CAGR of 15.9%). Furthermore, excellent liquidity position is suitable with Buyback program of € 1.5bln within FY 2022 (almost € 500mln already executed) 20 and 2021 and 2023 repayment of Bond (€ 500mln and € 384mln respectively) in 15 addition to the anticipated reimbursement of € 315mln in2019. Table 3: Cash Flow 10 € M FY 2019E FY 2020 E FY 2021 E FY 2022 E FY 2023 E FY 2024 E FY 2025 E

CF from Operating Activities 1,306 1,164 1,492 1,707 1,879 1,986 2,082 5 CF from Investing Activities (706) (800) (700) (650) (600) (550) (500) 0 FREE CASH FLOW 600 364 793 1,057 1,279 1,435 1,582 2016 2017 2018 2019 Funded portion of the self-liquidating 105 101 127 139 78 81 86 financial receivables portfolio FERRARI AVERAGE (exc Ferrari) Cash & Cash equiv. from FS activities 30 30 30 30 30 30 30

Source: Team elaboration FCF from INDUSTRIAL ACTIVITIES 675 435 890 1,166 1,327 1,486 1,635 Source: Team computation 8 VALUATION

Figure 23: We issue a BUY recommendation on Ferrari NV with a target price of € 185.89, FCF and FCFFps representing a 21.4% upside from the current price. Our valuation is based on a 1800 7,00 Discounted Cash Flow (DCF) model which better embodies the uniqueness of 1600 6,00 company’s value with an indipendent insight from relative market perspective. A 1400 convincing and promising business plan is the milestone of our assumptions, 1200 5,00 1000 4,00 strenghten by past company results that constantly beated targets and expectation. 800 Favourable price/product mix, increase of hybrid presence in Ferrari line-up and FUV 3,00 600 opportunity will undoubtely boost financial results (EBITDA FY 19-25 CAGR of 13.3%, 400 2,00 with an exit margin of 42.1%; Net Profit FY 19-25 CAGR of 14.7%, with an exit margin 200 1,00 of 24.8%); FCFFps to 6.17 in FY 2025 and FY 19-25 CAGR of 9.2%). Extraordinary earnings visibility due to the exclusivity of waiting list management – at least 18 month 0,00 book order – perfectly express Ferrari future growthpotential. FY15 FY18 FY20E FY23E

INDUSTRIAL FCF FCFFps DISCOUNTED CASH FLOW The model relies on 3 different stages related to different assumptions: the first one Source: Team elaboration covers the business plan implementation up to FY 2022, the second one refers to a consolidation stage (FY 23-25) when a relative slowdown in revenues growth will be Figure 23: offset by lower R&D costs and capital expenditure. The Terminal Value (TV) represents EPS the last stage and is computed with perpetuity growth formula, with a long term growth 10,00 of 2.85%. 8,00 STAGE I – Business Plan and line-up hybridization 6,00 Net revenues are positively affected by Ferrari choice to increase average price mainly driven by hybrid/mix at 60% within 2022. This strategy is supported by an increase in 4,00 shipments (but definitely lower than FY 17-19 CAGR of 9.8% for deliveries), with a normalization of shipments growth rate to around 5% (linear estimation). Cars and 2,00 Spare Parts revenues will increase with a FY 20-22 CAGR of 15.4% mainly due to a boost in fleet avg price, coherently with price-over-volume priority of the Company. We 0,00 applied a compounded growth rate between the two driving variables in order to track a reliable forecast of futures scenarios.

Source: Team elaboration STAGE II – Brand diversification and Capex slowdown We estimate a phase of consolidation beyond 2022, with a stabilization in total revenues growth (FY 23-25 CAGR of 6.8% vs FY 20-22 CAGR of 11.6%) as outcome of a lower Table 4: WACC calculation Cars & Spare parts growth offset by visible effects of brand diversification strategy and Capex and R&D decline. We highlight that, in order to profile a coherent framework for Parameter Value TV associated with Capex & D&A, we set for 2025 an exit D&A to Sales equal to exit Risk free rate 0.94% Capex to Sales (7.9%). Beta 0.84 TERMINAL VALUE – Eyes on the street, hands on the steering wheel Market Risk Premium 7.37% Our assumption for TV rely on perpetuity growth model, using a WACC of 6.74% Cost of Equity (Ke) 7.20% (Appendix 6) and a LTG of 2.85%. «Looking to 2060: Long-term global growth prospects» (Appendix 7) provides a clear analysis of future GDP growth projections both for OECD Cost of Equity (Kd) 2.01% and non-OECD countries. We accurately weighted those growth rates looking at D/E 0.07 geographical split of Ferrari revenues and considering the actual official dealers number within those countries (very low dealer turnover strenghtens our analysis). Tax rate (τ) 27.00% We strongly reaffirm our confidence in Ferrari capability to retain a competitive WACC 6,74% advantage also in the very long term. Environmental challenge mainly related to electrification will be a further test bench, where Ferrari will show, as usual, its high Source: Team elaboration technological capabilities combined with the exclusive emotion of driving a work-of-art. Looking forward: eyes on the street, hands on the steeringwheel. Table 5: DCF calculation – First and Second Stages € M FY 2020 E FY 2021 E FY 2022 E FY 2023 E FY 2024 E FY 2025 E

Revenues 4,140 4,641 5,231 5,596 5,976 6,369

EBT 1,002 1,351 1,633 1,805 1,984 2,167

EBT (1-tax rate) 731 986 1,191 1,318 1,448 1,582

D&A 455 557 575 560 537 500

Change in WC 18 18 15 14 11 11

Other cash operating activities 60 58 63 66 69 72 Change in receivables from financing (101) (1279 (139) (78) (81) (84) activities CAPEX (800) (700) (650) (600) (550) (500)

Discounted Industrial FCFFps 2.22 4.30 5.35 5.70 5.98 6.17 Source: Team estimates 9 VALUATION

Figure 24: RELATIVE VALUATION EV/EBITDA We performed a multiple analysis based on both Enterprise Value and Equity approach. 25,00 22,6 Multiples theory requires a panel of comparable companies with similar industrial and financial structure but the uniqueness of Ferrari is endorsed by its challenging 20,00 17,07 positioning within a neat peers group. Automotive sector is an extremely cyclical 15,64 14,05 industry, however, exclusivity and niche customer target of Ferrari high-priced cars is 15,00 almost totally immune to potential downturn, making the comparison not significant both in terms of profitability margins and units production. Scarcity and low volume 10,00 production strategy, associated with a clever management of waiting lists in delivering final products to customers, are undoubtful traits of the purest luxury maisons. 5,00 Nevertheless, high capital intensity required by Ferrari core business and high cost of production associated with the deliberate non-exploitation of economies of scale (low - volume strategy) would eventually create inconsistency in terms of comparison both FY 16 FY 17 FY 18 FY 19 with automotive and luxury industry. For these reasons, we strongly believe that a relative multiple valuation would be conceptually and statistically biased, supported by Source: Team elaboration low R² (<0.3) obtained by linear regression analysis carried out on P/E forward vs EPS Figure 25: growth 2020E and EV/EBITDA forward vs Reinvestment Rate 2020E. P/E With a 41.1x 2019 P/E and a 23.4x EV/EBITDA, Ferrari is trading at multiples discount 25,00 22,6 to Hermés (47.6x) but at premium with respect to the overall luxury peers average estimate (31.7x and 17.28x respectively for 2019). Under our assumption and 20,00 17,07 15,64 considering actual prices, we estimate a P/E forward of 38.7x (EV/EBITDA forward of 14,05 20.1x), vs Hermés P/E 42.7x (24.1x) and peers average of 28,8x (15.7x). 15,00 In accordance with our investment thesis, we assert that a premium in multiples is absolutely justified by the peculiarities of the Prancing Horse: - strong brand appeal 10,00 and exclusivity of products; - high pricing power (no elasticity) due to the HNWI target customer; - high client loyalty rate; - strong earnings visibility due to the accurate 5,00 control of waiting list (e.g. at least 18 months strong order book for SF90 Stradale).

- CORPORATE GOVERNANCE FY 16 FY 17 FY 18 FY 19 Source: Team elaboration SHAREHOLDER STRUCTURE Ferrari has 185,865,925 shares outstanding, differentiated in two classes: “Common Shares” and “Special Voting Shares”. The first ones are listed, freely transferable and Figure 26: Shareholders each of them confers the right to cast one vote; the second type shares are not listed and not transferrable, and each of them confers the right to cast one vote. The purpose of Special Voting Shares is to reward long-term ownership of Common ones to promote 24% the stability of the Company’s shareholder base. Presently, Exor NV holds a stake of 23.91% corresponding approximately to 33.6% of voting power, Piero Ferrari (Enzo Ferrari’s son) possesses 10.17% of Ferrari shares 10% equivalent to 15.5% of voting power. The remaining part (free float) is equal to 61.19%. 61% A significant factor, which is necessary to be highlighted, is the percentage of institutional investors and its growth presence in the last period. The biggest one is 5% BlackRock Inc which had 1,352,114 shares more in Q4 2019 than in the previous quarter, arriving to 9.75% of the total shares. EXORNV PIEROFERRARI

TREASURY SHARE FREEFLOAT ENVIRONMENTAL SUSTAINABILITY AND SOCIAL RESPONSIBILITY Source: Bloomberg Ferrari is a member of the Standard Ethics Italian Index, started by Standard Ethics (SE), an independent Sustainability rating agency, who inspires the governance standard principles adopted by European Union, the OECD and the United Nations. On October 1st, 2018 SE upgraded Ferrari’s Rating from “E” to “E+” (6th grade out of Table 6: Institutional Investors eight), claiming a long-term positive view and showing that there are some Investors Amount [k] % improvement areas in the Corporate Governance field. The upgrade was mainly determined by the more BoD’s independence from EXOR NV, due to the new CEO BlackRock 18’128’138 9,75% appointment not related with the main shareholders alreadyparticipant. Baillie Gifford 13’579’009 7,31% Since the FY 2017, Ferrari publishes the “Sustainability Report” in accordance with the increasing environment and social concerns, in order to reduce CO2 emissions and Vanguard Group 3’799’059 2,04% pursuing the “Formula Uomo” programme. This project started in 1990, its central aim Canada Pension is to create a high-quality working environment and increase the education level; the 2’645’589 1,42% Plan Investment proof is the increase in training hours and the introduction of Ferrari Corporate Executive AKO Capital 2’558’461 1,38% MBA 1st edition. Today all new buildings in Maranello are Class A-ranked and Formula 1 Team headquarters comply with the new net zero energy building protocol (NetZeb), D1 Capital 2’511’311 1,35% thus the total amount of energy used by buildings is approximately equal to the amount Winslow Capital 2’175’588 1,17% of self generated renewable energy [Source: Sustainability Report (2019)]. Management Moreover, Ferrari became «Carbon Neutral» in China in 2014 planting a large number Source: Bloomberg of trees in cooperation with the non-profit association «Roots&Shoots» (Appendix 18).

10 INVESTMENT RISKS

Figure 27: Business & Operational BUSINESS AND OPERATIONAL RISKS: Risks Matrix #B&O1 Formula 1 risk (Probability: Medium, Impact: High) Since 2021, in Formula

1 the regulations will change and a budget reduction for cars development will be

t c

a applied. This brings a costs cut, but at the same time it should increase the

p #B&O5 #B&O1 m I competitiveness during the races. Therefore, this could penalise Ferrari, which has #B&O2 never had expenses limitations in the cars engineering, and, consequently, this can #F1 #B&O3 have an impact on Company’s transfert of know-how from Formula 1 to road cars. #B&O4 #B&O2 Brand Dilution risk (Probability: Low, Impact: Medium) The increase in cars shipment can be misunderstood by people as an easier accessibility to the notorius Probability exclusive waiting list. Source: Team elaboration #B&O3 New customer generation risk (Probability: Low, Impact: Medium) Millenials can be perceived as a question mark for Ferrari, they have not the same priorities as past generations. Therefore, if the e-sports (a possible magnet for new generations) will not have the desired impact on them, a reduction in the number of future customers could be realistic. #B&O4 Brand activities contribution (Probability: Medium, Impact: Low) Ferrari aims to reach a 10% contribution from the brand activities within the next 7-10 years [Source: Capital Market day 2019]. The missing of this ambitious objective can slightly Figure 28: Industry Risks Matrix impact the total revenues for the future years, because Ferrari wants to increase the

EBIT at the same time, thus the requested change in brand activies is more tough to t

c achieve. Indeed, the attention is focused also on the Ferrari store, collaborations with a

p Armani and Bottura, and the theme parks. m I #B&O5 Electric Vehicles 2026 (Probability: Low, Impact: High) The guidance on a #I1 #F1 #I2 potential full electric model is fearly clear, it will not be produced before 2026. The risk is that some competitors (e.g. Tesla) could take an important advantage based on their electric DNA core business. Probability Source: Team elaboration INDUSTRY RISKS: #I1 Raw Material risk (Probability: Low, Impact: Medium) In order to benefit from lower prices of raw materials (aluminium alloy, carbon, palladium, etc), Ferrari signed long-term contracts with its key suppliers. For that reason, it is necessary to consider the addition of new raw materials such as Lithium for the batteries, that can increase the cost of goods sold (COGS), due to the uptrend in hybrid segment. #I2 Emission Standards risk (Probability: High, Impact: Medium) The possible change in the emission standards can deeply influence the engineering of the new incoming models, increasing the R&D costs for the engines production because of new technologies’ requirements. The central focus is on a potential unification of the rules due to the differences in regulations for eachcontinent.

Figure 29: Financial Risks Matrix t

c FINANCIAL RISKS:

a p

m #F1 Exchange rate risk (Probability: Medium, Impact: Low) Since Ferrari activities I are based in Italy, they are valuated in Euro, while the distribution of its products is ##F1F1 globally extended. Therefore, the company is exposed to the exchange rate fluctuations #F2 #F3 such as USD, GBP, YUAN, and YEN. The usage of swaps derivatives can soften this, #F4 but cannot cover the sudden shocks. Probability #F2 Interest rate risk (Probability: Low, Impact: Low) The interest rates trajectory Source: Team elaboration could represent an issue or an opportunity for the company’s investing and financing activities. An ECB restrictive monetary policy has a very low probability, thereby the possible consequences could have a minimal blowback. #F3 Credit risk (Probability: Low, Impact: Low) Ferrari solvency and default risk can be shown through the comparison with the luxury peers (Appendix 26). A potential warning factor is represented by the total ownership of FFS Inc., that is for now totally mitigated by the asset backed securitization. An exclusion from the securitization market could adversely affect the funding of the financing business, due to an increase of the Figure 30: Other Risks Matrix interest rate cost and a consequential liquidityissue.

t #F4 Liquidity risk (Probability: Low, Impact: Low) Ferrari generally receives

c a

p payments for cars between 30/40 days after the car is shipped, while it tends to pay m I almost all suppliers between 60 and 90 days after receiving raw materials or ##O1F1 components. The potential entrance of new suppliers (e.g. power cells) could have a negative impact on the cash conversion cycle.

OTHER RISKS: Probability #O1 Unforeseeable Risk (Probability: Low, Impact: Medium) An extraordinary event Source: Team elaboration such as the Corona virus, the long-awaited Brexit or a new tax regulations (BC luxury vehicules tax in Canada) might have a downturn on the overall economy, but also it can affect negatively the amount of shipments.

11 TABLE OF CONTENTS 1) Appendix 1 – Competitors 2) Appendix 2 - Models Lyfe Cycle 3) Appendix 3 - Revenues Estimation Model 4) Appendix 4 – Luxury SUV: Competitors & Impact 5) Appendix 5 – Value Chain 6) Appendix 6 – Brand Diversification Strategy 7) Appendix 7 – Social Media 8) Appendix 8 – Porter Five Forces 9) Appendix 9 – Moat Analysis 10) Appendix 10 – Customised Index 11) Appendix 11 – Buyback Program 12) Appendix 12 – Ferrari Financial Services 13) Appendix 13 – R&D & CAPEX 14) Appendix 14 – HNWI 15) Appendix 15 – Key Cost Drivers 16) Appendix 16 – IAS IFRS 16 17) Appendix 17 – Corporate Governance 18) Appendix 18 – ESG Standard Ethics Index 19) Appendix 19 – Target Price Sensitivity Analysis 20) Appendix 20 – Forex Sensitivity Analysis 21) Appendix 21 – CO2 Emissions Standard 22) Appendix 22 – WACC Calculation 23) Appendix 23 – Multiple Valuation 24) Appendix 24 – Ferrari Multiples 25)Appendix 25 – Composition of DEBT and Liquidity 26)Appendix 26 – Altman Z-Score 27)Appendix 27 – M-Score 28)Appendix 28 – Income Statement 29)Appendix 29 – Balance Sheet 30)Appendix 30 – Cash Flow Statement

12 APPENDIX 1 - COMPETITORS

Table 7: Comparison between Ferrari models and its competitors COMPETITOR MODEL HP 0-100 CO2 EMISSION STARTING MAX SPEED (combined) PRICE (€) 812 SUPERFAST V12 800 2.9s – 340 Km/h 366 g/Km 303,727 812 GTS V12 800 2.9s – 340 Km/h 373 g/Km 336,000 F8 SPIDER V8 720 2.9s – 340 Km/h 298 g/Km 262,000 F8 TRIBUTO V8 720 2.9s – 340 Km/h 292 g/Km 236,000 SF90 STRADALE V8 – HYBRID 780+220 2.5s – 340 Km/h N/A ∼ 550,000 PORTOFINO V8 600 3.5s – 320 Km/h 267 g/Km 198,061 GTC4 LUSSO V12 689 3.4s – 335 Km/h 366 g/Km 273,060 GTC4 LUSSO T V8 610 3.5s – 320 Km/h 294 g/Km 236,525 PISTA V8 720 2.8s – 340 Km/h 282 g/Km 296,000 488 PISTA SPIDER V8 720 2.8s – 340 Km/h 289 g/Km 326,400 ROMA V8 620 3.4s – 320 Km/h N/A ∼ 200,000

HURACAN EVO V10 640 2.9s – 325 Km/h 332 g/Km 226,521 HURACAN EVO SPIDER 640 3.1s – 325Km/h 338 g/Km 248,973 HURACAN EVO RWD 610 3.3s – 325Km/h 330 g/Km 194,520 AVENTADOR S V12 740 2.9s – 350 Km/h 499 g/Km 345,701 LAMBORGHINI AVENTADOR SVJ 770 2.8s – 350 Km/h 486 g/Km 432,181 AVENTADOR S ROADSTER 740 3.0s – 350 Km/h 499 g/Km 384,510 AVENTADOR SVJ ROADSTER 770 2.9s – 351 Km/h 486 g/Km 474,149

540 C V8 540 3.5s – 320 Km/h 249 g/Km 176,000 570 S V8 570 3.2s – 328 Km/h 249 g/Km 194,000 MCLAREN 570 S SPIDER V8 570 3.2s – 328 Km/h 249 g/Km 214,450 570 GT V8 570 3.4s – 328 Km/h 249 g/Km 204,500 600 LT V8 600 2.9s – 328 Km/h 266 g/Km 236,000 600 LT SPIDER V8 600 2.9s – 324 Km/h 266 g/Km 256,500 NEW GT V8 620 3.2s – 326 Km/h 245 g/km 203,000

911 SPEEDSTER 510 4.0s – 310 Km/h 317 g/Km 277,384 911 GT3 RS 520 3.2s – 312 Km/h 303 g/Km 201,378 PORSCHE

NSX 581 3.6s – 308 Km/h 228 g/Km 201,000 HONDA

CLASSE S 63 4MATIC+ 612 3.5s – 250 Km/h 276 g/Km 213,640 AMG GT S COUPE 522 3.8s – 310 Km/h 262 g/Km 151,100 AMG GT C COUPE 557 3.7s – 317 Km/h 284 g/Km 164,320 AMG GT R COUPE 585 3.6s – 318 Km/h 284 g/Km 181,400 AMG GT S SPIDER 522 3.9s – 308 Km/h 262 g/Km 162,690 MERCEDES AMG GT C SPIDER 557 3.7s – 316 Km/h 284 g/Km 176,880 AMG GT R SPIDER 585 3.6s – 317 Km/h 284 g/Km 218,490 AMG GT COUPE 4MATIC+ 585 3.4s – 310 Km/h 252 g/Km 163,460 AMG GT COUPE 4MATIC+ S 639 3.2s – 315 Km/h 257 g/Km 176,940

R8 COUPE V10 570 3.4s – 324 Km/h 293 g/Km 182,300 R8 COUPE V10 PERFORMANCE 620 3.1s – 331 Km/h 297 g/Km 200,500 AUDI R8 SPIDER V10 570 3.5s – 322 Km/h 297 g/Km 195,600 R8 SPIDER V10 PERFORMANCE 620 3.2s – 329 Km/h 301 g/Km 213,800 VANTAGE 510 3.16 – 314 Km/h 236 g/Km 162,582 DB11 COUPE V8 510 3.9s – 300 Km/h 230 g/Km 188,162 ASTON MARTIN DB11 VOLANTE V8 510 3.9s – 300 Km/h 230 g/Km 203,541 DB11 AMR V12 639 3.7s – 322 Km/h 265 g/Km 264,639 DBS SUPERLEGGERA V12 725 3.6s – 340 Km/h 285 g/Km 282,428

WRAITH 632 4.6s – 250 Km/h 327 g/Km 300,000 DAWN 571 5.0s – 330 Km/h 330 g/Km 355,000 ROLLS ROYCE

CONTINENTAL GT W12 635 3.7s – 333 Km/h 308 g/Km 210,500 CONTINENTAL GT V8 CONVERT 507 5.0s – 308 Km/h 254 g/Km 247,976 BENTLEY CONTINENTAL GT V8 SC 529 4.7s – 308 Km/h 258 g/Km 267,740 CONTINENTAL GT W12CONVERT 590 4.7s – 315 Km/h 333 g/Km 273,962

Source: Companies official websites, Quattroruote.it, AlVolante.it In order to replicate a list of potential competitors within the luxury car market, two-door car models with a starting retail price of more than € 150,000 (including VAT) and powered by engines producing more than 500HP have been selected. Only Sport & GT models have been chosen, therefore Hypercars, One-Off and Limited cars are excluded. Ferrari positioning within the target market is quite strong, both in terms of pricing (+24% vs average competitors pricing) and performance (+5% vs average maximum speed; +22% vs average competitors HP). Despite Euro 6 engines introduction, CO2 emissions for high performance cars are clearly much higher than the corresponding traditional ones. In this framework, Ferrari is well in line with the other manufacturers, with an average CO2 emission per km less than 5% higher than its competitors, mainly due to the stronger performances of Maranello engines. Furthermore, the data emissions for Roma and for SF90 Stradale have not been released yet. We believe that new technological efforts and the hybrid/mix target to 60% of the fleet in 2022 will certainly reduce this parameter in these newmodels.

13 APPENDIX 2 - MODELS LYFE-CYCLE

Prancing Horse relies on the renewal of its product range on the moments of V8 Architecture V12 Architecture phase-in and phase-out. The phase-in refers to the introduction of a new model, which often coincides with the phase-out of an old one, holding the integrity of the fleet. As such, the entry of a whole new line of a model that enriches Ferrari’s gamma occurs when the unveiling of a new product doesn’t match with the withdrawal of any present product in the actual range, for instance, the SF90 Future V6 Architecture Stradale in 2019. Main traditional segments (Sports cars, Gran Tourism, Special Series) come together with more tailored lines, like Hypercars, Track cars and Fuori Serie. Furthermore, the new ICONA segment has enriched Ferrari’s fleet with a totally new concept of car that homages the glorious past of the Prancing Horse and embraces its future, thanks to a combination between modern engineering and vintage style. The limited production (499 models) of Icona Monza SP1 and SP2 surround their exclusive price of € 1.2M and € 1.6M. As clearly shown by the graph (Table 8), the average price of every segment has overall increased YoY. Engine architectures include the well-renowned V8 90° and the powerful V12 90°. A new architecture – V6 – will be part of the Ferrari engine family before2022. Table 8: Ferrari Models Lyfe-cycle

MODEL PRICE ENGINE TYPE 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 SPORT 458 ITALIA 197,000 € V8 458 SPIDER 228,750 € V8 F12 BERLINETTA 270,000 € V12 488 SPIDER 326,400 € V8 488 GTB 236,000 € V8 812 SF 303,727 € V12 F8 TRIBUTO 236,000 € V8 SF90 STRADALE 550,000 € V8 812 GTS 336,000 € V12 F8 SPIDER 262,000 € V8 Average price per segment/year 294,588€ 231,917€ 255,538 € 251,630 € 277,467 € 284,032 € 269,864 € 258,576 € 337,545 € 346,000 € 346,000 € GT CALIFORNIA 30 123,900 € V8 FF 264,334 € V12 CALIFORNIA T 189,700 € V8 GTC4 LUSSO 273,060 € V12 GTC4 LUSSO T 236,525 € V8 PORTOFINO 198,061 € V8 ROMA 200,000 € V8 Average price per segment/year 229,448€ 194,117€ 192,645 € 227,017 € 242,365 € 233,095 € 235,882 € 235,882 € 211,529 € 199,031 € 275,000 € SPECIAL SERIES 458 SPECIALE 239,000 € V8 458 SPECIALE A 350,000 € V8 F12 TDF 350,000 € V12 488 PISTA 296,000 € V8 488 PISTA SPIDER 326,400 € V8 Average price per segment 312,280€ 239,000€ 294,500 € 313,000 € 350,000 € 350,000 € 296,000 € 311,200 € 311,200 € 326,400 € ICONA Monza SP1 1,200,000 € V12 Monza SP2 1,600,000 € V12 Average price per segment/year 1,400,000 € 1,400,000 € 1,400,000 € 1,400,000 € HYPERCARS LaFerrari 1,000,000 € V12 LaFerrari Aperta 1,000,000 € V12 Average price per segment/year 1,000,000 € 1,000,000 € 1,000,000 € 1,000,000 € 1,000,000 € 1,000,000 € TRACK CARS * FXX K 250,000 € V12 FXX K EVO 400,000 € V12 Average price per segment/year 325,000€ 250,000 € 250,000 € 400,000 € 400,000 € FUORISERIE * F60 AMERICA 250,000 € V12 J50 250,000 € V8 Average price per segment/year 250,000€ 250,000 € 250,000 €

Source: Ferrari Annual reports, Quattroruote,it, AlVolante.it, Team computations Phase-in Phase-out BusinessPlan 14 APPENDIX 3 – REVENUES ESTIMATION MODEL

The main assumptions of our revenues forecast are based on the favourable price/mix resulting from the introduction of new hydrid engine in the Ferrari gamma and shipments estimate. With the aim to assess the average price of the new Maranello line-up, we combined: - the estimate average price of the new combustion engine model, based on the historical FY 14-19 CAGR (2.06%) of the average price per model weighted to the different fleet segment (Sports, Gran Tourism, Special Series and new Icona family)

Table 9: Average weighted price calculation Average price per segment FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Sport & Special Series 255,538 € 251,630 € 277,467 € 284,032 € 269,864 € 258,576 € GT 192,645 € 227,017 € 242,365 € 233,095 € 235,882 € 235,882 € Special Series (2016 - 2018) 294,500 € 313,000 € 350,000 € 350,000 € 296,000 € 311,200 € Icona - - - - - 1,400,000 € FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Total shipments* 7,255 7,664 8,014 8,398 9,251 10,131 Sport & Special Series 72% 61% 59% 64% 64% 64% GT 28% 39% 33% 30% 32% 35% Special Series (2016 - 2018) - - 8% 6% 4% - Icona - - - - - 1% FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Averageweighted price 251,868 € 260,951 € 271,686 € 272,709 € 260,035 € 278,887 € Change in AVG w. price 3.6% 4.1% 0.4% - 4.6% 7.2%

* Fuoriserie, Track Cars and One-off excluded Source: Team computation - the price premium added to the new line-up price estimate, fueled by the debut of hydrid engine. The markup is justified by the extra-charge of 38.9% relative to the first Prancing Horse V8 plug-in hybrid model (SF90 Stradale, rumored price: € 550k) with respect the latest 812 GTS (rumored price: € 336k), best-in-class model powered by V12 engine. The amount was added to the average weighted price of the Ferrari fleet in 2019 in order to obtain a new normalized price for future hybrid segment, aiming to be 60% of the overall fleet within2022.

Table 10: Hybrid models price estimates calculation Model Engine Year Price 812 GTS Combustion - V12 2019 € 336,000 Hybrid extra-price % SF90 Stradale V8 Hybrid plug-in 2019 € 550,000 38.9% Weighted AVG Price Combustion - V8/V12 2019 € 278,886 Adj. Price (Personalization premium) Hybrid models Estimates Hybrid plug-in 2020- € 387,399 € 400,000 Source: Team computation Lastly, a compounded growth rate of the shipments’ growth estimate and the increase of fleet average price was calculated in order to forecast the total Cars and Spare parts revenues.

Figure 11: Cars and Spare Parts calculation 2019A 2020E 2021E 2022E 2023E 2024E 2025E Avg. price combustion engine 278.887 € 284.629 € 290.489 € 296.471 € 302.575 € 308.805 € 315.163 € Avg. price hybrid engine 400.000 € 408.236 € 416.641 € 425.220 € 433.975 € 442.910 € Combustion % of the 100% 80% 60% 40% 40% 40% 40% fleet Hybrid % of the fleet 0% 20% 40% 60% 60% 60% 60% Combustion&Hybrid 368.573 € avg. price 278.887 € 307.703 € 337.588 € 376.162 € 383.907 € 391.811 € price change % 10,3% 9,7% 9,2% 2,1% 2,1% 2,1%

Shipments 10.131 10.543 11.160 11.777 12.394 13.011 13.628 shipments change % - 4,1% 5,9% 5,5% 5,2% 5,0% 4,7% Cars and spare parts 15,4% 14,8% 16,1% 15,2% 7,4% 7,1% 6,9% change% 2.926.000 Cars and spare parts € 3.359.588 € 3.901.621 € 4.495.269 € 4.828.219 € 5.172.974 € 5.529.878 €

Source: Team computation

15 APPENDIX 4 - LUXURY SUV : COMPETITORS & IMPACT

Figure 12: Luxury Suv market players COMPETITOR MODEL HP 0-100 / CO2 EMISSION STARTING MAX SPEED (combined) PRICE (€)

URUS V8 650 3.6s – 305 Km/h 325 g/Km 214766 LAMBORGHINI

MERCEDES MAYBACH GLS 600 4MATIC V8** 550+21 4.8s – 250 Km/h NA ∼200000

ASTON MARTIN DBX V8** 550 4.5s – 291 Km/h 325 g/Km 224663

CULLINAN V12 571 5.2s – 250 Km/h 341 g/Km ∼380000 ROLLS ROYCE BENTAYGA ONYX W12 608 4.1s – 301 Km/h 296 g/Km 195220 BENTAYGA SPEED W12** 635 3.9s – 306 Km/h 335 g/Km 245220 MULLINER W12 608 4.1s – 301 Km/h 296 g/Km 302100 BENTLEY ** Sales from 2020 Source: Companies official websites, Quattroruote.it, AlVolante.it, Team computations “Can I say that I abhor hearing SUV in the same sentence as Ferrari?” That’s how CEO Mr. Camilleri intervened on the hot topic during Capital Market Day in September 2018, leaving no space to interpretation about the uniqueness that will dress future Purosangue – first ever Maranello FUV (Ferrari Utility Vehicle). To the eyes of many die-hard Ferraristi, the utility vehicle project could not seem to be in line with the heritage of the brand and what it represents. Nevertheless, ignore the great potential behind this growing market could be a missing point and recent Lamborghini Urus results totally confirm this hypothesis. Following the same criteria adopted for Sport & GT luxury competitors (price > € 150k including VAT, > 500HP) we highlighted players in the luxury SUV market: Lamborghini (Urus), Mercedes (Maybach – from 2020), AML (DBX – from 2020), Rolls Royce (Cullinan) and Bentley (Bentayga, Mulliner). We analysed then the impact in terms of shipment on the overall fleet composition of Bentley, Rolls-Royce and Lamborghini, which entered in the market segment between 2015 and 2018. Bentayga was introduced at the end of 2015 and in its first full-year presence in Bentley line-up, accounted for 47% of total shipment, with a revenue growth of 5%. Roll-Royce Cullinan, launched in November 2018, is expected to account for 47% of FY 2019 total shipment, with a revenues boost of 23%. The most interesting results come from Lamborghini, since the manufacturer from Sant’Agata Bolognese can be considered nearer to Ferrari in terms of cars performances and customer target. Urus accounted for nearly 60% of total shipments in FY 2019 with a revenue growth of 20% that tracked 40% growth of FY 2018 mainly related to the introduction of SUV in July. Notwithstanding the differences between Lamborghini and Ferrari, these results are undoubtedly drawing attention of potential entrants and could be a significant yardstick in terms of future performances in this segment. With the expected debut in 2022, Ferrari will face also the presence in the market of Aston Martin Lagonda that, after the underwhelming results following IPO, is ready to ride the wave in 2020 with its first SUV DBX. We are sure that Ferrari will not simply join its competitors in the Utility vehicles battle, but will come out with a completely new redefinition of this luxury segment, proudly showing recognizable feature that will strengthen brand positioning. Don’t call it SUV. It’s a FUV.

Table 13: SUV impact in total units shipments LAMBORGHINI PERFORMANCE - VW group 2015 2016 2017 2018 2019 Revenues mln € (Company Source & Team Estimates) 872 906 1.009 1.415 1.700 Revenues (YoY grow th) 4% 11% 40% 20% Total Units 3245 3457 3815 5750 8205 Units (YoY grow th) 7% 10% 51% 43% URUS Units (from July 2018) 1761 4962 URUS Units to Total (annualized) 31% (47%) 60% ROLLS-ROYCE PERFORMANCE- BMW group 2015 2016 2017 2018 2019E Revenues mln € (Factset Source & TeamEstimates) 487 547 482 668 819 Revenues (YoY grow th) 12% -12% 39% 23% Total Units 3785 4011 3362 4107 5036 Units (YoY grow th) 6% -16% 22% 23% CULLINAN Units (from November2018) 544 2373 CULLINAN Units to Total (annualized) 13% (48%) 47% BENTLEY PERFORMANCE - VWgroup 2015 2016 2017 2018 2019E Revenues mln € (Company Source & Team Estimates) 1.936 2.031 1.843 1.548 1.745 Revenues (YoY grow th) 5% -9% -16% 13% Total Units 10888 11817 11089 10494 11006 Units (YoY grow th) 9% -6% -5% 5% BENTAYGA Units (from December 2015) 96 5586 4849 4072 4805 BENTAYGA Units to Total (annualized) 1% (10%) 47% 44% 39% 44%

Source: Companies official websites, Quattroruote, AlVolante

16 APPENDIX 5 - VALUE CHAIN

Maranello, house of Made-in-Italy Ferrari production facilities are based in Maranello and Modena. The actual production capacity can reach, according to the CEO statement during the presentation of FY 2019, an approximate number of 15’000 vehicles. Despite the historically low volumes of cars produced, a great number of inputs (over 40k identifier codes) is necessary in order to ensure the high technological and performance requirements proper to Ferrari cars. The company identifies an approximate number of 750 total suppliers but relies particularly on 14 key strategic partners (e.g. Brembo, Marelli, Mahle) fundamental to establish strong and durable synergies. Generally, in-house production is retained in order to preserve know-how, flexibility, and no large dependence; from the last full-year report (FY 2018) it can be noticed that no supplier accounted for more than 10% of total procurement costs. While Modena facility (Carrozzeria Scaglietti) is dedicated to shaping cars’ aluminum bodywork, the manufacturing process is mostly concentrated in Maranello, where the Prancing Horse accounts on his own foundry where aluminum alloy casting and engine production (blocks, cylinders head and crankshafts) take place. The in-house engine production develops in three different lines respectively dedicated to the manufacturing of V8, V12 and V6 (at the moment only for Maserati supply). Almost 144 engines per day are produced (FY 2018 Company data). The work of art continues through body assembly, painting and final check. The last step involves the personalization process that is crucial in terms of customization but also in terms of higher profitability. For that reason, Ferrari relies on a strategic channel of Atelier and Tailor Made Center placed in Maranello, New York and Shanghai. Road tests, finishing and cleaning complete the manufacturingprocess.

Lights out: it’s R&D time It’s important to highlight that Formula 1 plays a fundamental role in the production process. This is an essential source of innovation and high-tech improvement, and the transfer of know-how from racing to road cars ensures an extraordinary result in terms Figure 29: of performance and stability of the output. A shining example is Ferrari’s Galleria del Employees split Vento, an extraordinary engineering project that permits to test and study the 2,90% aerodynamic ground effect and the way to reduce downforces. Many other 14,20% technologies and components previously tested on single-seater have been 53,20% implemented later on road cars, such as KERS, F1-Trac, 7-speed dual-clutch gearbox and, most important, hybrid technology. The combination of R&D excellence and SENIOR MANAGERS Italian handmade craftsmanship tradition results in an exclusive product for which a MIDDLE MANAGERS deliberate low volume production strategy allows to maintain a high reputation, also AND PROFESSIONALS enhanced by a careful waiting list management. WHITE COLLARS

A long-lasting value WORKERS Sales distribution channel takes place through a network of 166 authorized dealers (except one-offs and track cars, directly sold to end clients by the Company) operating 29,80% in 60 markets worldwide with 187 PoS. Careful and strict selection of the dealers is another key factor for promoting the integrity and success of the brand, also confirmed Source: Annual Report 2018, Team computations by the low dealer turnover. Furthermore, Ferrari offers retail clients and dealer financing through Ferrari Financial Services which mainly operates directly in the US through a fully owned subsidiary (“FFS Inc”) and in EMEA through a minority (49%) participation (“FFS GmbH”). The after-sales program involves a scheduled program of recommended maintenance services in order to ensure that all Ferrari cars are maintained with the highest standards to meet the strict requirements of performance, safety and brand image. The Company offers a 7-Year maintenance program, free of charge, in order to strengthen customer retention. This program can be expanded through the MAIN POWER coverage up to 15 years of car life, followed by a further extension called Ferrari Premium. If the car has followed the complete 20-year maintenance program, it is automatically certified by the “Ferrari Classiche”. Moreover, Ferrari Approved is a pre- owned certification program designed to guarantee maximum security to owners purchasing registered within the last 14 years. This attention to the after-sales context is extremely important in order to combine the strong pricing power with a very high resilient aftermarket value. This is demonstrated by the fact that 8 out of the 10 most valuable cars auctioned in the past 3 years were Ferrari.

17 APPENDIX 6 – BRAND DIVERSIFICATION STRATEGY

Ferrari’s value chain is extended by its Brand activities, aiming to maintain and strengthen the most powerful brand in the world for the second year, according to Brand Finance.

Non-car business is mainly focused on the development of products sold exclusively in its mono-brand store, on web stores and through franchised selected partners. Brand activities also include the management of Museo Ferrari in Maranello and Museo Enzo Ferrari in Modena, which had 600.000 visitors in 2019, an increase of 12% compared to the previous year. (Source: corporate.ferrari.com) In the latest Business Plan, Ferrari has revealed his Brand diversification program, aimed to reach the 10% of the total EBIT within 7/10 years, composed of three main strategic pillars: €899 PILOTA EVO LIMITEDEDITION (499) SWISS MADE WATCH • a refined collection of products embodying Ferrari DNA based on: the overhaul of 50% of the existing licensing contracts, a clearance of 30% of product categories and a complete restructuring of the franchising network.In this direction, managements announced a signing of a long-term manufacturing agreement with Giorgio Armani Group, highlighting the further intention to elevate the standard of quality of all apparel products.

€ 15,500 SF01 BIANCHI LIMITED • an enhanced Ferrari’s entertainment universe through team EDITION (12) participation both in the F1 Esports championship and in Ferrari mono-brand Esports championship starting in the second half of 2020. This platform will represent an excellent way to attract new and younger fans in the red Ferrari passion. Furthermore, there is an opportunity to expand licenses related to Theme Parks, operating today in Abu Dhabi and Barcellona, which account, together with Modena and Maranello Museum, to near 3 million visitors annually.

• car adjacencies for Ferrari most valued customers, with an offer of very limited luxury products and one-offs artifacts that reflects uniqueness of Ferrari craftsmanship. Moreover, the experience for Ferrari customers will be enriched by the opening of a restaurant in Maranello with the Michelin-starred chef Massimo Bottura, which is planned to be unveiled in the H2 2020.

BRAND ENTERTAINMENT CAR ADJANCENCIES EXTENSION: BRAND DIVERSIFICATION -FERRARI ESPORTS -ONE-OFFS HIGH QUALITY LUXURY -THEME PARKS -MARANELLO GOODS EXPERIENCE

Current EBIT contribution of brand activities has never been officially disclosed since it is accounted as part of sponsorship, commercial & brand voice to the income statement. We estimate that the current size of brand activities is worth approximately <5% of EBIT FY 2019 and, according to management, will substantially be flat in terms of growth until 2021, due to restructuring program of non-car business. Therefore, we retain that the impact of higher revenues coming from diversification plan will be registered starting from 2022. This must be considered as a potential upside scenario that will be diluted over time, considering low capital intensity required and Ferrari (10% of EBIT) time horizon of reaching the target within 7-10 years.

APPENDIX 7 - SOCIAL MEDIA

Ferrari brand diversification strategy is certainly related to its presence on principal Social Media platforms, probably the most efficient communication tool for global brands in order to enhance brand visibility and to reach younger people, such as Z-generation. Instagram followers of Ferrari main page impressively increased of 60% in 2019 only, but its presence is spreading among the other main social networks. Furthermore, Ferrari diversify its accounts in accordance with the different nature of the activity involved such as “Scuderia Ferrari”, “Scuderia Ferrari Collection”, “Ferrari e-sports”, “Ferrari races” and “Musei Ferrari”.

18.1 mln Followers 16.4 mln Followers 602k Followers +60% vs 2018 725 k Subscription 318k Followers 73.7mln video views 41mln times Ferrari tag read Source: Team computation

18 APPENDIX 8 – PORTER FIVE FORCES

BUYER POWER

COMPETITING SUPPLIER RIVARLY POWER

EXTRA- THREAT OF INDUSTRY POTENTIAL BUYER POWER: MEDIUM/HIGH SUBSTITUTES ENTRANTS It constitutes a crucial point in Ferrari’s F1 revenues. The ongoing developments and evolutions due to new F1 rules (effective from 2021) make more uncertain the framework in which Scuderia Ferrari operates. The new imposed budget cap of $ 175mln and the redefinition of media revenues coming from Liberty Media show how buyers have an important bargaining power in defining the slice of pie relative to media rights. Furthermore, it is strictly connected with the number of fans that follow this sport, both in the case of physical attendance to F1 events and with subscription to pay for view services. Sponsorship represents another source of buyer power, since they could finance their marketing operations using other racing teams that could offer more exposure and visibility. The last component of buyer arena is represented by other racing teams that rely on SF’s supply of engine (Haas, Alfa Romeo); in that case we think that the incidence in the overall buyer power indicator is less significant due to the fact that being furnished by SF engines could be an important competitive advantage for interested teams and there is a pair interest on ongoing agreements for both parts involved. SUPPLIER POWER – MEDIUM New rules coming effective from 2021 established unique and common supplier for some mechanical parts valid for all racing teams, representing a potential suppliers’ reinforcement. This is partially offset by the fact that SF possesses the in-house capacity of manufacture some of the components necessary to their one-seat and that are for that reason immune from the effect of the new regulation. POTENTIAL ENTRANTS – LOW Start-up and running costs are very high. Furthermore, costs have to be accompanied by high amount of experience and expertise necessary to compete both technologically and in terms of performances. EXTRA-INDUSTRY SUBSTITUTES - MEDIUM Sports range is very wide and a switching of follower to other sports could mean lower margin coming from media rights and sponsorship contribution; the effects could certainly fall on SF revenues. In the past years F1 Circus significantly lived a decrease of audience, mainly due to the reallocation of F1 media rights to pay-per-view services that limited fans participation. This is being partially offset by the new management of Liberty Media that pushes on the use of social media and the entrance of new gran prix (e.g. Vietnam from 2020). BUYER POWER

COMPETITING SUPPLIER RIVARLY POWER

EXTRA- THREAT OF INDUSTRY POTENTIAL COMPETITING RIVALRY – HIGH SUBSTITUTES ENTRANTS Scuderia Ferrari won its last Championship Driver Title and Championship Constructor Title respectively in 2007 and 2008. It demonstrates that in the last years SF has particularly suffered competition, mainly coming from Mercedes and teams. Engineering, drivers and management have been the key factors of more of ten years without a title. Next budget cap limitations and new regulations could broaden the number of strong competitors. THREAT OF NEW ENTRANTS: LOW The niche luxury car market relies on crucial factors like history of the company, brand image and technological know-how, representing a strong deterrent for new entrants. The economies of scales are difficult to be achieved in the short-term due to the high capital investments to face, especially in CAPEX. Furthermore, the limited customer target is often bound to a specific brand thanks to particular loyalty base programs tailed for them (e.g. Ferrari Corse Clienti, Lamborghini Programma Esperienza) BARGAINING POWER OF SUPPLIERS: LOW/MEDIUM Ferrari rely on make or buy strategy and generally adopt in-house production whenever there is interest in preserving or developing technological know-how. The number of suppliers in the automotive sector is extremely large compared to the number of buyers of luxury cars, this means that buyers have a weaker bargaining power. No supplier accounts for more than 10% of Ferrari total procurement costs. While payments for cars are received generally between 30 to 40 days, Ferrari tends to pay most suppliers between 60 to 90 days. A contract to supply Ferrari is very valuable from the supplier point of view, also in terms of image return. BARGAINING POWER OF BUYERS: MEDIUM Ferrari’s customer target is represented by the High Net Worth Individuals, small in numbers and extremely wealthy. Low volumes production and long waiting list make Ferrari’s cars a dream object of desire. There is one factor that could affect the relatively low bargaining power of buyers: emissions consideration. Next generation of potential buyers could be extremely concerned about combustion engine, moving to other luxury carmakers that already adapt full-hybrid or electric engines. THREAT OF SUBSTITUTE PRODUCTS/SERVICES: LOW Strong customers loyalty (65% of the total customers owns already a Ferrari). The few numbers and the high costs of the potential substitute product (private jet, yacht) result in a low threat of substitute products. Potential extra-industry substitutes cannot provide the same experience provided by a Ferrari. RIVALRY AMONG EXISTING FIRMS: MEDIUM/HIGH Small number of competitors, including both large automotive companies that own luxury brands as well as small producers exclusively focused on luxury cars like Ferrari. Luxury brands owned by large automotive companies can heavily rely on economies of scale production. High technological competition to address new market trends (e.g. hybridization or electrification). Market’s exit barriers are quite high because of big investment required to operate. Low volume production and strong brand appeal protect from car market volatility.

19 APPENDIX 9 - MOAT ANALYSIS

Coined by the renowned investor Warren Buffett, the term economic moat expresses a competitive advantage that distinguishes a company in comparison to peers within the same industry. The sustainability of a company moat is a relevant indicator of how the edge can be preserved in the long-term period. We believe that Ferrari, through accurate and forward-looking management, has been capable of building, preserving and enhancing a wide moat. Since Enzo Ferrari's dream came true with the debut of Scuderia Ferrari, the Company has pursued a long building walk for his brand, with the Prancing Horse that soon became a strong recognizable symbol of speed, luxury and quality, both on and off-track circuit. Ferrari's moat is well-revealed by its strong pricing power that comes along with the highest operating margin and Return on Invested Capital within the automotive industry. Since 2015 (NYSE IPO), notwithstanding the high manufacturing costs that affect luxury carmakers, Ferrari's profitability measures show a strong and consistent bullish trend. Looking at the graphs, Ferrari can be considered a real outlier within the auto industry, with an operating margin of 24.18% (CY 2018) and an ROIC of 30.17%, with an industry average (excluding Ferrari) of, respectively, 5.96% and 4.93% (CY 2018). The hybrid nature of the Company makes it more comparable, in terms of pricing power and profitability, with luxury peers (CY 2018: Operating Margin -23.38%; ROIC – 17.41%). 25 20 OPERATING MARGIN - AUTOMOTIVE 15 10 5 0 FERRARI ASTON MARTIN FORD VOLKSWAGEN HONDA TOYOTA FCA DAIMLERAG TESLA RENAULT PEUGEOT BMW GENERAL AVG (excluding AVG (including AG PREF MOTORS Ferrari) Ferrari) -5 -10 2015 2016 2017 2018 -15 Source: Factset, Team computations 100 OPERATING MARGIN - LUXURY 80

60

40

20

0 FERRARI HERMES MONCLER RICHEMONT FERRAGAMO BURBERRY BRUNELLO LVMH PRADA MOUTAI REMY AVERAGE AVERAGE Source: Factset, Team computations CUCINELLI COINTREAU (exc Ferrari) (inc Ferrari) 30 25 ROIC - AUTOMOTIVE 20 15 10 5 0 FERRARI ASTON MARTIN FORD VOLKSWAGEN HONDA TOYOTA FCA DAIMLERAG TESLA RENAULT PEUGEOT BMW GENERAL AVG (excluding AVG (including -5 AG PREF MOTORS Ferrari) Ferrari) -10 -15 -20 -25 -30 Source: Factset, Team computations 40 ROIC - LUXURY

30

20

10

0 FERRARI HERMES MONCLER RICHEMONT FERRAGAMO BURBERRY BRUNELLO LVMH PRADA MOUTAI REMY AVERAGE(exc Source: Factset, Team computations CUCINELLI COINTREAU Ferrari) 20 APPENDIX 10 – CUSTOMISED INDEX

Since the debut in Borsa Italiana on January 8th, 2016, Ferrari’s stock price is following the Luxury market path, outperforming the Automotive Index. For that reason, we set up two market weighted Indexes that replicate the performances of two peer-groups. The first one, where RACE is included, is composed of Luxury peers (Purosangue Luxury Index – PLI): • Ferrari (RACE-IT) • Ferragamo (SFER-IT) • LVMH (MC-FR) • Hermes (RMS-FR) • Prada (193-HK) • Brunello Cucinelli (BC-IT) • Richemont (CFR-CH) • Moncler (MONC-IT) • Remy Cointreau (RCO-FR) • Burberry (BRBY-GB) • Kering (KER-FR) • Kweichow Moutai (600519-CN)

While, the following companies are included in the second Index related to the Automotive industry, where Ferrari is not considered: • Aston Martin (AML-GB) • Volkswagen (VOW3-DE) • Renault (RNO-FR) • Ford (F-US) • BMW (BMW-DE) • Peugeot (UG-FR) • Honda (7267-JP) • Tesla (TSLA-US) • General Motors (GM-US) • Toyota (7203-JP) • FCA (FCA-IY) • Daimler (DAI-DE)

As shown by the graph below, Maranello’s race perfectly embodied peculiarity of luxury stock, with a +277.78 % price return since its listing (closing price of €40,54) and an average yearly return of 37.91%. At the same time, PLI index performed a +275.10% return, with a yearly average of 36.49%. On the other side, after few months from Ferrari IPO, automotive index carried out a different path, resulting in a price return of 64.65% (12.69% on average yearly basis).

Figure 30: Customised Indexes (prices normalised) RACE PRICE MWI - PLIINDEX MWI - AUTOMOTIVEINDEX 4

3,5

3

2,5

2

1,5

1

0,5

0 01/2016 07/2016 01/2017 07/2017 01/2018 07/2018 01/2019 07/2019 01/2020 Source: Bloomberg, Team computations

The most interesting fact, visible from the Figure above, is the strenght of Ferrari performances after June 2016. It outperformed the PLI Index most of the time, emblem of strongness and sureness perceived from the market.

APPENDIX 11 – BUYBACK PROGRAM

Table 15: Customised Indexes (prices normalised)

BUYBACK PROGRAM FY 2018 FY 2019 FY 2020 E FY 2021 E FY 2022 E Shares Outstanding (k) 187,921 185,865 183,659 181,452 179,245 Cumulated Buyback Program Equivalent 100,093 486,093 824,062 1,162,031 1,500,000 (€k) Shares buybacked 1,033 3,971 6,178 8,385 10,591 (mln) Buyback Equivalent - 386,000 337,969 337,969 337,969 Yearly (€/k) Cumulated buyback at 1,013,907 € FY2019 Yearly spending up to 337,969 € FY2022 Source: Bloomb erg, Team computations

21 APPENDIX 12 - FERRARI FINANCIAL SERVICES

Ferrari Financial Services (merged into Ferrari S.p.A on May 31, 2018) is the Figure 31: Company's financial services provider, created to enhance and facilitate the Receivables from Financing Activities experience of purchasing a Ferrari. 1.200.000 FFS offers retail client financing, generally secured on the titles of cars or other guarantees, especially in the United States, through the fully owned subsidiary Ferrari Financial Services Inc. (“FFS Inc”). From FY16, FFS Inc 1.000.000 has pursued a strategy of autonomous financing for its financial services activities, further reducing dependence on intercompany funding and 800.000 increasing the portion of self-liquidating debt with various securitization transactions, amount that corresponds approximately to 90% of the total 600.000 recevaibles from finanincing activities, cash which Ferrari Financial Services inc, the fully owned subsidiary, has to collect from its clients that have relied 400.000 on its services within one year. Since the transactions are conducted in the US, where it is very popular to lease cars, the overall portfolio is completely denominated in US Dollar ($), therefore affected by forex exchange 200.000 variability. As such, the Company sells certain of its receivables from financing activities - (€878mln, FY18), relating entirely to the financial services portfolio in the 2017 2018 2019 United States, under securitization programs. Source: Annual Report 2019 Securitization transactions involve the sale of the financial receivables portfolio to an SPV (special purpose vehicle),which in turn finances the Figure 32: CHANGE IN THE SELF- LIQUIDATING FINANCIAL purchase of such financial receivables by issuing asset-backed securities in RECEIVABLES PORTFOLIO the form of notes whose repayment of principal and interest depends on the 200.000 cash flows generated by the related financial receivables. The receivables sold as part of securitization programs are still consolidated until collection 100.000 from the customer.* - Ferrari offers financial services also in certain markets of EMEA (primarily the 2015 2016 2017 2018 2019 UK, Germany and Switzerland) thanks to the associate Ferrari Financial -100.000 Services GmbH (51% of which are controlled by FCA Bank) and through new -200.000 contabilization various partnerships in other major international markets, such as Japan and rules decreases Australia. -300.000 cash FFS 30m/€ -400.000 *by Ferrari 2018 Annual Report -500.000 Source: Annual Report 2019 APPENDIX 13 - R&D & CAPEX

Table 16: R&D COSTS & CAPEX

2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E 2025E

R&D EXPENSED TO THE P&L (IS) 446,726 509,580 556,617 527,847 559,000 700,000 425,000 425,000 425,000 425,000 425,000 AMORTIZATION OF CAPITALIZED 114,856 104,055 100,502 115,191 140,000 193,800 219,603 192,153 178,428 164,703 150,977 DEVELOPMENT COSTS (IS)

NET CAPEX (CF) 317,066 320,461 379,440 636,944 706,000 800,000 700,000 650,000 600,000 550,000 500,000

Investments in PP&E 184,910 175,647 188,904 300,794 353,023 400,026 350,023 325,021 300,020 275,018 250,016

Investment in Intangible Assets 171,033 166,340 202,506 337,542 352,977 399,974 349,977 324,979 299,980 274,982 249,984

Source: Team computations The estimated peak in FY2020 for R&D costs is mainly related to research and development expenses to the P&L (IS), fueled by the Formula 1 costs, which are going to cover both the manufacture of the single-seat for current F1 Championships and the 2021 F1 model, anticipating the new FIA regulations coming into force, with budget cap set at near €175mln. R&D costs are set to be fixed beyond 2020 at €475mln, composed ,in addition to the budget cap, by the engine and other costs which are not affected by future limitation. The capital expenditure in 2020 will see a peak of €800 mln, due to a shifting of about €50mln from FY2019 to FY2020 to anticipate the 2021 budget cap and for investment in land acquisition near Maranello. From 2021 the capex will see a slowdown according to Ferrari’s guidelines with a 2025 capex level still higher than the amounts before the 2018, according to the fueling future growth Ferrari’s target (e.g. potential first electric vehicle production beyond 2025).

22 APPENDIX 14 - HNWI – HIGH NET WORTH INDIVIDUALS

8000

6000

4000

2000

0 ASIA-PACIFIC NORTH AMERICA EUROPE LATIN AMERICA MIDDLE EAST AFRICA

2015 2020 2021 2022 Source: Team estimates We performed an analysis on the High Net Worth Individuals (HNWI), Ferrari’s main target customer, based on historical data of the different regions in which Ferrari operates (2015-2019, source: Capgemini) and the Wealth-X High Net Worth Handbook’s estimates (2020-2022) for the HNWIprojections. From the first year of our investigation, the most performing macro-areas were Asia-Pacific (CAGR 15-19: 6.21%), North- America (CAGR 15-19: 5.94%) and Latin America (CAGR 15-19: 5.52%). North America shows a positive GDP growth in 2018 linked to a stable equity market resulting in a solid growth trend of HNWI through the years. In 2018, Asian-Pacific scored an impressive +8% of GDP but the negative outcome of equity market (2018’s result in -20% combined growth between NIKKEI and ACNAC) results in a negative impact on HNWI, indicating that, despite the growth in GDP, in order to achieve a well balanced trend of growing HNWI this macro area needs more stability in its equitymarket. For our estimates (2019-2022), we have considered Wealth-X High Net Worth Handbook’s central scenario. It highlights a potential modest growth in the US over the next three years, which in the pessimistic scenario could be affected by a recession due to global geopolitical tension and the duo between the perpetual annual inflation rate high levels (from 1.9 in 2018 to 2.3 in 2019, +21%) and a leveraged corporate debt market, potentially jeopardizing the worldwide economy. Estimates suggests Asia-Pacific and North-America to be at the top of the list for the growth of the HNWI, due to a well- balanced GDP rate of growth and increasingly more stable equity markets. Ferrari worldwide penetration currently is 0.05% (FY19). Therefore, growth opportunities, while preserving exclusivity of the brand through controlled growth allowed by the waiting list, are achievable given by the growth of HNWI forecasted for the next three years. APPENDIX 15 - KEY COST DRIVERS For the analysis of historical key drivers we have used the XGBoost F-score metric which corresponds to the feature importance in terms of generating a better accuracy and predictions on upsides and downsides of COGS. According to the analysis’s output, historically some of the most related raw materials have been the labour market cost in Europe, Iron, Aluminium and Glass (as showed in the above table). We have also investigated further, finding some positive but not strong correlations between COGS and some drivers such as Copper, Steel, labour market cost in Europe, Iron and Aluminium. Some doubts have arisen regarding the negative correlation with Plastics and Glass and other raw materials which we consider reasonable to be positively correlated with COGS, ending up that due to supply contracts between Ferrari and its suppliers this metric could be misleading in some unlucky cases. According to our thesis, the most relevant raw material has been and will be (for the manufacture of light vehicles in relation to less co2 emissions) the Aluminium Alloy (which refers to Aluminium, Iron and Silicon) and in the future, due to new hybrid and electric technologies, raw materials involved in the manufacture of batteries (e.g. Lithium) will become increasingly relevant. According to J.P. Morgan “Driving into 2025” outlook: “Prices (of batteries) are falling 15-20% per annum as the scale of production ramps up and battery suppliers increasingly give away their margins”. Despite all, given the controlled growth strategy of Ferrari, the company will not have a sudden increase in shipments/demand and will always be able to foresee its needs in terms of raw materials and will not get into trouble due to volatility easily, through mid/long term supply contracts. Figure 33: XGBoost F-score Plastics Iron Titanium Labour MarketEurope Glass Lithium Platinum Aluminium 0 2 4 6 8 10 12 14 Source: Team computations Figure 34: Increased Cost of materials per weight

Source: Goldman Sachs report about cars in 2025 - https://www.goldmansachs.com/insights/technology-driving-innovation/cars-2025/ 23 APPENDIX 16 - IAS/IFRS 16 International Financial Reporting Standards are accounting principles underneath the financial statements of companies, they take relevance in companies with listed shares or securities on the stock exchange market. The IFRS mission is the harmonization of financial reports around the world, and improvement of their comparability of them across different countries. International accounting standard board and IFRS foundation are the organization that issue them. IFRS are not applied in United States where US GAAP (Generally Accepted Accounting Principles) are in force. IFRS 16 has impacted RACE financials starting from 2019. Operative leases are treated as financial leases. The change in accounting rules increase liabilities, and we expect that the value will be stable, around € 63mln, as reported in the last quarter. IFRS 16 positively impacted FY 2019 EBITDA for € +17mln. Table 17: IAS/IFRS 16 Effect IFRS 16 Leases 2018 Q4 2019 Q1 2019 Q2 2019 Q3 2020-2025 E Industrial buildings 27% 25% 25% 27% 26% Plant, Machinery and Equipments 16% 14% 11% 16% 14% Other Assets (priorly Ferrari stores) 57% 59% 61% 57% 59% Source: Team computations APPENDIX 17 - Corporate Governance - Board of Directors

Since the FY 2017, the Company joins the “Dutch Corporate Governance Code” following its principles and best practice provisions. The Board of Directors is composed of twelve members as follows: • , Chairman and non-Executive Director • Piero Ferrari, vice Chairman and non-Executive Director • One Executive Director: Louis Carey Camilleri, Chief Executive Officer, who replaced who passed away in 2018 • Other nine non-Executive Directors Since the roles of Chairman and CEO aren’t carried out by the same person, any conflicts of interest are avoided. The Board is well-blended with regard to gender (at least 30% of the seats are occupied by women) and age (four out of twelve Directors aged under 50 at the day of their nomination), according to the Dutch law in compliance and with Ferrari’s “Diversity Policy”. Two-thirds of BoD’s members are certified as independent for purposes of NYSE rules, bringing wider and fairer opinions on the board’s conduct and align Company’s and shareholders’ interests. The Board of Directors has titled three internal committees: (i) the Audit Committee, (ii) the Governance and Sustainability Committee, who reviews the Annual Sustainability Report, and (iii) the Compensation Committee, that determines the Remuneration policy, different for Executive (CEO’s compensation: 90% of fixed remuneration and 10% of long-term incentives) and non-Executive Directors (fixed and not dependent on the Company’s financial results), aiming to strengthen competitiveness and meritocracy in its management. Moreover, the Management’s value is enhanced by the member’s various experiences both in automotive and luxury industry such as John Elkann (Chairman and Chief Executive Officer of EXOR NV and Chairman of FCA NV), Piero Ferrari who covered different management positions in Ferrari’s motorsport division, Mr. Camilleri, Chairman of the Board of Philip Morris International and since 1996 present in various companies’ management, as well as Delphine Arnault, member of the Executive Committee of Christian Dior Couture. Table 18: BoD information

Other Committee Annualfee Name Office held compensation Total (€) Governance& (€) Audit Compensation (€) Sustainability Chairman X John Elkann 79,554 13,025 92,579 Non-Executive Director (Chairperson) CEO Louis Camilleri 270,412 - 270,412 Executive Director Vice Chairman Piero Ferrari 68,149 12,397 80,546 X Non-Executive Director X Sergio Duca Non-Executive Director 94,890 - 94,890 (Chairperson) Delphine Arnault Non-Executive Director 63,889 - 63,889 X Giuseppina Capaldo Non-Executive Director 73,781 - 73,781 X (Chairperson) X Eddy Cue Non-Executive Director 68,149 - 68,149 X X Lapo Elkann Non-Executive Director 63,889 - 63,889 Amedeo Felisa Non-Executive Director 63,889 - 63,889 Maria PatriziaGrieco Non-Executive Director 72,408 - 72,408 X Adam Keswick Non-Executive Director 63,889 - 63,889 Elena Zambon Non-Executive Director 72,030 - 72,030 Source: Annual Report 2019 24 APPENDIX 18 – ESG and Standard Ethics Index

Carbon neutral target As stated in the Sustainability Report FY18, Ferrari’s commitment to sustainability comes to fruition in the polluting emissions reduction programme, through the improvement of efficiency of the cars themselves and of the production process, implementing the latest environmental standards in the construction of the newest buildings on site, and using a trigeneration plant and renewable sources to cover its entire energyneeds. As a result, Ferrari became Carbon Neutral in China. Thanks to the collaboration with the no-profit Roots&Shoots, the Prancing Horse planted 111,627 trees in the interior of Mongolia. Trees outset the amount of CO2 emitted by Ferrari on the road, based on the average of kilometres travelled by its clients in addition to the manufacture and the transport of vehicles from Maranello to China. Ferrari is the first luxury sport cars brand to be defined Carbon Neutral in China.

Table 19: Enviromental & Social activities impact

Activity Impact Description

Initiative that aims to develop high quality work life for its employees. This is obtained betting on Formula Uomo workers’ well-being, using advanced technologies for functional and ergonomic working

The total amount of energy used by the new building is approximately equal to the amount of NetZeb renewable energy it is generated

Carbon Neutrality in China Planting a quantity of trees to cover the total amount of carbon produced by Ferrari cars in China

Top Employer Italia 2020 It certificates the optimal conditions that employee can find in the company environment

Motorvehicle University of Emilia-Romagna is a campus as big as a region, that has its root in the MUNER Partner Motor Valley. Ferrari is a partner because in this University can find new topemployees

Environmental and social sustainability event that wants to make people conscious that it is KiSS Mugello possible to have a smaller green footprint

It wants to improve the management skills of the attendees, to let them gain experience on the Corporate Executive MBA most recent innovation trends and to convey the Ferrari leadership model

Founded with the aim of providing young drivers with a training program that will ultimately reward Driving Academy them with a career in a F1 Prancing Horse car Source: Sustainability Report 2018, Teamcomputations

Standard Ethics Italian Index The Standard Ethics Italian Index is an equity index that embed the confidence on Corporate Social Responsibility and Corporate Governance of the 40 major Italian listed companies, launched by the Standard Ethics in FY 2014. On October 1st, 2018, the Standard Ethics updated Ferrari’s Rating, which was increased from “E” to “E+”, showing that there are some improvement areas in the Corporate Governance. As stated by the agency, “the new business plan takes into account some environmental strategies and, during the two- year period 2016-2018, improvements have been registered in corporate governance documents (such as the Code of Ethics) and in extra-financial reporting. The new composition of the Board of Directors gives the Italian luxury sports car manufacturer a more independent structure and a new CEO exclusively dedicated to the management of Ferrari, significantly improving governance and reducing the number of crossdirectorship.” Even though the score remains quite low, in our opinion this upgrade represents an added value for the Company, and anticipates potentials for a better compliance in thefuture.

EEE EEE- EE+ EE EE- E+ E E- F

Full Excellent Very strong Strong Adequate Non-compliant Low Very low Lowest level

Investment Grade Lower Investment Grade Non-Investment Grade

Source: Standard Ethics Index website

APPENDIX 19 – TARGET PRICE SENSITIVITY ANALYSIS

LONG TERM GROWTH 185,89 1,65% 1,95% 2,25% 2,55% 2,85% 3,15% 3,45% 3,75% 4,05% 5,54% 184 198 214 234 258 289 328 380 452 5,84% 172 184 198 215 235 259 289 328 381 6,14% 162 173 185 199 215 235 260 290 329 W 6,44% 154 163 173 185 199 216 236 260 291 A 6,74% 146 154 163 174 186 200 216 237 261 C C 7,04% 139 146 154 164 174 186 200 217 237 7,34% 133 139 147 155 164 174 187 201 218 7,64% 127 133 140 147 155 164 175 187 201 7,94% 122 128 134 140 147 155 165 175 188

25 APPENDIX 20 - FOREX SENSITIVITY ANALYSIS

Since the exposure in different market, we considered a forex risk for Ferrari. We have performed the sensitivity analysis for Revenues versus a range of exchange rate changes. The Table 20.a summarizes FY 2019 percental revenue per currency based on geographical revenue distribution for USD, GBP, YUAN and YEN. The Table 20.b shows the analysis results. The percentages on right of currencies are the geographical revenues in €mln due to change in pair in the firstrow. Forex analysis shows low level of risk (based on historical volatility), but unexpected differences in exchange pairs on financial market can accentuate the effect on revenues so, it is appropriate to be sensible at that side. Table 20.a: % revenues per currency Table 20.b: Sensitivity Analysis for the major currencies Currency % Revenues €mln -8% -6% -4% -2% 0% 2% 4% 6% 8%

USD 24.0% USD 866.09 888.03 909.05 929.21 948.57 967.17 985.06 1,002.27 1,018.84

GBP 10.1% GBP 364.08 373.30 382.14 390.62 398.75 406.57 414.09 421.32 428.29

YUAN 8.8% YUAN 316.84 324.86 332.55 339.93 347.01 353.82 360.36 366.65 372.72

YEN 5.1% YEN 183.43 188.08 192.53 196.80 200.90 204.84 208.63 212.27 215.78

Source: FY 2019 presentation; Source: FY 2019 presentation; Bloomberg; Team computations Bloomberg; Team computations

APPENDIX 21 - CO2 EMISSIONS STANDARDS

Table 21: CO2 emissions standards for different Regulators CO target SVM status Proceed Produced / Exceed SVM Shipments Market Regulator 2 MPG limit 20-25 (g/km) (units of cars limit) $mln Imported Shipments FY 2019 FY 2019 Worldwide NHTSA 163 10,000 40.20 2.20 Produced 131 10,131 USA EPA 163 5,000 40.20 7.67 Imported - 2,900 Europe EU 277 1,000-10,000 23.65 - Produced - 4,628 China CAFC 116 2,000 56.50 - Imported - 836

Source: FY 2019 presentation; NHTSA, EPA, EU, CAFC websites

Due to the increasing environmental concerns, it is of great relevance to clarify the current framework of the CO2 emission standard regulations in the main market in which Ferrari operates (Unites States, Europe, China). Given the low amount of deliveries, Ferrari possesses the Small Volume Manufacture (SVM), which assures to the Company room for higher CO2 emission with respect to bigger competitors. We have to highlight that the global regulations concerning the SVM status are not aligned properly, since the worldwide regulator, the NHTSA (National Highway Traffic Safety Administration), set up a limit of units of cars sold (10,000), a number lower than the sum of the volume limits of the various market regulators (17,000). WORLDWIDE - NHTSA Based on number of vehicle produced, manufacturer can be classified in micro, small and big. Based on NHTSA, an American regulator, if a manufacture produces more than 1,000 and less than 10,000 vehicles worldwide it is classifiable as SVM (Small Vehicle Manufacturer). USA - EPA The United States Environmental Protection Agency is another agency that regulates greenhouse and gas (GHG) emissions. The actual regulation on vehicle emissions is called CAFE (Corporate Average Fuel Economy) and is produced by EPA and NHTSA. Each class has different rules that impose different limits on CO2 emissions. NHTSA regulates how much distance vehicles must do on a gallon per fuel that can be converted into grams per kilometer. An aspect to take in consideration is that in FY 2019 the Company has exceeded for 131 vehicles the limit to be recognized as SVM in United States from NHTSA, that could trigger lower emission standard for the future. The 2020-2025 target g/km introduced by NHTSA is quite low, 163 g/km, and Ferrari is x1.7 on average fleet that value nowadays. The penalty is $ 5.50 per every 0.1 MPG over the standard. We estimate that EPA and NHTSA there could fine RACE for (ceteris paribus) 2.2 + 7.67 = $9.87mln. EUROPE - EU commission In FY 2015 Ferrari has submitted target levels for 2017-2021, approved in October 2016. The agreement is to maintain for EU registered cars CO2 emissions below 277 g/km*. In case of non-compliance, the fine is € 95 for each g/km that exceeds the limit. Since the limit is an OTC agreement between the company and the European commission, we expect that the target levels submitted by Ferrari will be respected. CHINA - CAFC In China Ferrari possess has the SVM status since it imports less than 2,000 vehicles. As in the past, given the low volume of cars sold, there is low probability to be called to fine payments. Considering the lower future emissions standard there could be some risks for Ferrari to be fined, but looking at the past, the company is not on the radar of the Chinese watchdog. Assuming that in the next years (2020-2025) with some hybridization of the fleet and the effort to increase MPG, the trend in vehicles emissions is keeping interest from the company. *Source: “https://ec.europa.eu/clima/policies/transport/vehicles/cars_en#tab-0-1”

26 APPENDIX 22 – WACC CALCULATION

Historical beta against FTSEMIB is 15,00% computed on 104 weeks from 02/09/18 to 2/7/2020. Furthermore we have computed the beta in up and down trend 10,00% of the market (Beta +/-) . Beta positive

and negative reflect how investors value 5,00% FERRARI differently from the rest of the market. A profile defined by high competitive 0,00% -6,00% -4,00% -2,00% 0,00% 2,00% 4,00% 6,00% advantage and a niche market

leadership position are the main reasons -5,00%

for a so strong independence from the FTSEMIB rest of the world. y = 0.84 x + 0.0044 Table 22: BETA +/- -10,00% R² = 0.2699 1.14 BETA + 0.53 BETA - -15,00% RACE Table 23: Parameters to calculate WACC Parameter Value Description Risk free rate 0.94% 10-years Italian Government Bond yield at 07/02/2020 Beta 0.84 2Y Beta estimation against FTSE MIB with weekly data Market Risk Premium 7.37% Italian MRP calculated by Damodaran (January 2020) Cost of Equity (Ke) 7.20% CAPM formula: Rf + β *MRP Cost of Equity (Kd) 2.01% Calculated dividing the net financial expenses by the net debt D/E 0.07 Obtained dividing Debt (2,088,588 ) with Market Equity (28,465,366) Tax rate (τ) 27.00% Italian tax rate (IRES) equal to 24%, IRAP in Emilia Romagna equal to 3% WACC 6.74% Similar result to Ferrari guidance (∼7%) Source: Factset, Team computations APPENDIX 23 - MULTIPLE VALUATION

45,00 P/E 30,00 Brunello Hermes EV/EBITDA 40,00 Cucinelli Ferrari Hermes Ferragamo 25,00 Brunello 35,00 Prada Remy Kweichow Kweichow Remy Cucinelli Cointreau Moutai 30,00 Moutai 20,00 Cointreau Moncler Ferrari 25,00 Moncler Prada LVMH 15,00 20,00 Kering LVMH Richemont Kering 15,00 Burberry 10,00 Ferragamo Burberry Richemont 10,00 5,00 5,00 y =-86,575x + 38,693 y = 11,226x +14,295 R² =0, 2989 R² =0,0609 0,00 0,00 0,0% 5,0% 10,0% 15,0% 20,0% 0,0% 5,0% 10,0% 15,0% 20,0% 25,0% 30,0%

EV/EBITDA Ferrari Richemont LVMH Prada P/E 2019 P/E 20 EV/EBITDA 20 Kweichow 2019 Hermes Ferragamo Burberry Moutai Average 31.7 x 17.8 x 29.6 x 15.7 x Brunello Excl. Ferrari 32.5 x 17.3 x 28.8 x 15.6 x Moncler Cucinelli Kering Remy Cointreau Source: Bloomberg,Team computations Source: Bloomberg, Team computations We performed an OLS (Ordinary Least Squares) regression using two different types of multiples and regressors (companion variables): one is based on Equity approach (Price-to-Earnings fwd vs EPS growth 2020) and the other based on Enterprise Value Approach (EV-to-Ebitda fwd vs Reinvestment Rate 2020). As already highlighted, the analysis has been performed to confirm our hypothesis on the limits of relative valuation applied to Ferrari. The Company presents unique characteristics and it’s not possible to identify a group of comparable peers which present a combination of same high margins (typical of luxury firms) and same capital intensity (typical of automotive industry). Therefore, we retain that Ferrari deserves a premium for its multiples due to the intrisic nature of business: high visibility of earnings (at least 18 month of book orders), exclusivity of brand, resilience in economic downturn and an experienced management well justify this trend.

Multiple (Y) Y Companion Variable (X) X Equation R² (R² adj) Output PT (€) P/E fwd 38.8 x EPS Growth 2020 6.4% y = -86,575x + 38,693 0,29 (0,23) 33.2 x 131.15 EV/EBITDA 15.4 x Reinvestment Rate 2020 28.3% y = 11,226x + 14,295 0,06 (-0,03) 17.4 x 174.20 fwd Source: Bloomberg, Team computations 27 APPENDIX 24 – FERRARI MULTIPLES

2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E 2025E P/E 26.2 31.0 21.0 39.8 38.8 28.3 23.2 20.8 19.0 17.4 P/B 31.7 21.1 12.0 19.7 21.6 17.3 13.0 9.0 6.9 5.2 P/SALES 3.4 4.8 4.8 7.3 6.8 6.0 5.2 4.9 4.6 4.3 P/FCF 15.3 58.3 54.9 45.8 68.9 35.6 28.6 26.9 25.6 24.8 EV/EBITDA 14.1 17.1 15.6 22.6 20.1 15.4 13.4 12.5 11.7 11.1 EV/SALES 3.8 5.2 5.1 7.6 7.2 6.4 5.7 5.3 5.0 4.7 EV/EBIT 19.9 22.8 21.1 31.3 29.0 21.7 18.0 16.3 14.9 13.6 EV/IC 11.9 14.5 11.7 21.4 16.8 15.5 14.5 13.7 12.9 12.4 EV/CE 5.4 6.6 5.4 8.1 9.0 9.0 8.3 7.0 5.6 4.7 ROE 51.1% 56.4% 68.1% 64.4% 51.4% 41.4% 34.4% 51.1% 56.4% 68.1% ROIC 23.4% 29.7% 37.3% 40.8% 36.8% 31.2% 27.8% 23.4% 29.7% 37.3% Source: Factset, Team computations APPENDIX 25 - COMPOSITION OF DEBT AND LIQUIDITY NET INDUSTRIAL DEBT We performed an accurate analysis on Ferrari composition of Debt (FY 2019), since it is impacted by different variables. The net debt amounts to € 2016 2017 2018 2019 1,192mln, calculated as the sum of the total debt (€2,090mln, of which €60mln corresponds to lease liabilities ad per IFRS 18) and the cash and cash equivalent (€ 898mln, of which € 30mln generated by FFS). The majority of the net debt is constituted by the net debt of financial services activities (€ 885mln), correspond to the debt and cash and cash equivalents related to financial services activities. The part of total net debt not related to -337 the industrial activities of the Company is split-off leading to the assessment -370 of the net industrial debt (€ 337mln vs FY 2018 € 370mln). The company -508 aim is to be net industrial debt free up to FY2022, supported by its steady decrease since FY 2016. The total available liquidity (€ 1,248mln) is the sum of the cash and cash equivalent and the undrawn committed credit lines -690 (€ 350mln). The latter amount is identifiable as the new unsecured five-year tenor revolving credit facility (“The new RCF”), signed on 11th December GROSS DEBT MATURITY PROFILE(€mln) 2019, entered into with a group of twelve banks and intended for general 2020 2021 2022 2023 2029 2031 corporate and working capital purposes. This facility replaces the € 500mln US committed revolving credit facility due November 2020, which has been Securitizations 338 277 141 32 cancelled and will assist to reduce the cost of capital. Moreover, its lower size Bond 500 385 reflects an overall evaluation of the optimal capital structure of the Notes 150 150 Company going forward. of which: NET DEBTOF of which : Lease FINANCIAL FINANCIAL UNDRAWN TOTAL liabilities as per CASH ANDCASH SERVICES SERVICES NET INDUSTRIAL COMMITTED AVAILABLE TOTAL DEBT IFRS 16 EQUIVALENTS ACTIVITIES NET DEBT ACTIVITIES DEBT CREDIT LINES LIQUIDITY 1.248 898 350 60 30

-337 -855 -1.192 -2.090 Prior to FY19, the Company calculated the net industrial debt by subtracting from the net debt the funded portion of the self- liquidating financial receivables portfolio, which is the portion of receivables from financing activities funded with external debt, but not the cash and cash equivalents of the financial activities, since such cash was considered also available for use in the industrial activities. EstimateFUNDED PORTION OF THE SELF- OF WHICHFROM LIQUIDATING Estimate FINANCIAL FINANCIAL RECEIVABLE CASH ANDCASH SERVICES RECEIVABLES EstimateNET FROMFINANCIAL TOALDEBT EQUIVALENTS ACTIVITIES NETDEBT PORTFOLIO INDUSTRIALDEBT ACTIVITIES 898 983 30

-307 -885 -1192 -2090

28 APPENDIX 26 - ALTMAN Z-SCORE

The score is computed starting from five ratios from 10-K annual report of the company. The sides we are looking are: liquidity, solvency, leverage, activity and profitability. The aim is to predict the probability of credit default (insolvency). Below 1.8 the score indicates that the company’s bankruptcy probability is high (sell), if the score is above 3, the probability is low. Looking to the bankruptcy probability of RACE the Altman Z-score is equal to 6.39 , it indicate low probability of bankruptcy. Historical dynamic of this score is positive since it is growing (FY 2016 – FY 2019 29.06% CAGR) with high changes from FY 2016 to FY 2018, stabilizing into FY 2019.

Table 24: Z-score

COEFFICIENT VARIABLES FY 2016 FY 2017 FY 2018 FY 2019 1,2 WC / TA -0,01 -0,02 0,02 -0,02 1,4 Retained Earnings / Total Assets 0,12 0,14 0,18 0,14 3,3 EBIT/ Total Assets 0,51 0,62 0,56 0,59 0,6 Market Cap / Total Liabilities 1,61 2,82 4,97 4.72 1 Sales / Total Assets 0,74 0,75 0,70 0,66 Z-Score 2.971 4.308 4.376 6.082

Source: Factset, Team computations

Figure 34: Z-score Figure 35: Quick ratio Hermes 15,4 1,8 1,6 13,4 166% 1,4 11,4 139% 1,2 134%

9,4 1 111% Moncler

Ferrari 0,8 SCORE

- 7,4 Z Remy 0,6 5,4 Cointreau Kering Burberry 0,4 LVMH Brunello Ferragamo 3,4 Cucinelli 0,2 Prada 0 1,4 FY 2016 FY 2017 FY 2018 FY 2019 0,5 1 1,5 2 2,5 RACE.MI Peers median QUICK RATIO Source: Factset, Team computations Source: Factset, Team computations

Performing a peer analysis on 2019 data, team has compared Quick ratio [(Current Assets – Inventories)/Current Liabilities] and Altman Z-score of Ferrari vs peers. The takeaway is that Ferrari has a good position in terms of peers with low probability of default and high capacity to face with short term obligation. RACE is well positioned on credit score (short and long term), that’s another plus to add on the valuation of the company. APPENDIX 27 - M-SCORE

M-score is a score that indicates the probability of the earnings to be manipulated by the company. When the M-score has a value less than -2.22 the company is unlikely to be a manipulator otherwise the opposite. Since Ferrari has a ratio of -2.72 (FY 2016 – FY 2020 median is equal to -2,64) the company is not an earningmanipulator. Table 25: M-score Variables Weight 2016 2017 2018 2019

+ Days Sales in Receivables Index (DSRI) 0.920 1.30 0.82 0.81 0.76 + Gross Margin Index (GMI) 0.528 0.51 0.50 0.52 0.53 + Asset Quality Index (AQI) 0.404 0.27 0.37 0.37 0.38 + Sales Growth Index (SGI) 0.892 0.97 0.98 0.89 0.98 + Total Accruals to Total Assets (TATA) 0.115 0.15 0.13 0.12 0.11 + Depreciation Index (DEPI) -0.172 - 0.14 - 0.17 - 0.17 - 0.16

- Sales General and Administrative Expenses Index (SGAI) -0.327 0.29 0.29 0.29 0.35

- Leverage Index (LVGI) 4.679 - 0.78 - 0.63 - 1.25 - 0.83 M-SCORE -4.840 - 2.27 - 2.56 - 3.25 - 2.72 Source: Team computations 29 APPENDIX 28 - INCOME STATEMENT

Table 26: Income Statement Amounts in €m (except for shipment) 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E 2025E Shipments 7,664 8,014 8,398 9,251 10,131 10,543 11,160 11,777 12,394 13,011 13,628 % Growth 4.57% 4.79% 10.16% 9.51% 4.07% 5.85% 5.53% 5.24% 4.98% 4.74% Cars and spare parts 2,080,228 2,180,045 2,455,955 2,535,245 2,926,000 3,359,588 3,901,621 4,495,269 4,828,219 5,172,974 5,529,878 % Growth 4.80% 12.66% 3.23% 15.41% 14.82% 16.13% 15.22% 7.41% 7.14% 6.90% Engines 218,657 337,924 373,313 284,546 198,000 134,881 83,220 67,722 66,000 66,000 66,000 % Growth 54.55% 10.47% -23.78% -30.42% -31.88% -38.30% -18.62% -20.69% -2.54% 0.00% Maserati engines revenues 184,444 241,478 315,407 217,922 137,763 68,881 17,220 1,722 - - - % Growth 30.92% 30.62% -30.91% -36.78% -50.00% -75.00% -90.00% F1 rental engines 34,213 96,446 57,906 66,624 66,000 66,000 66,000 66,000 66,000 66,000 66,000 % Growth 181.90% -39.96% 15.06% -0.94% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Sponsorship, commercial and brand 441,128 488,514 494,082 505,701 538,000 538,000 538,000 538,000 564,900 593,145 622,802 % Growth 10.74% 1.14% 2.35% 6.39% 0.00% 0.00% 0.00% 5.00% 5.00% 5.00% Others 114,356 98,601 93,540 94,829 104,000 107,192 118,032 129,905 136,564 143,459 150,598 % Growth -13.78% -5.13% 1.38% 9.67% 3.05% 10.11% 10.06% 15.70% 10.43% 10.28% Ferrari Financial Services 61,587 58,236 50,254 52,702 59,000 67,192 78,032 89,905 96,564 103,459 110,598 % Growth -5.44% -13.71% 4.87% 11.95% 13.88% 16.13% 15.22% 23.75% 15.08% 14.53% Mugello racetrack 52,769 40,365 43,286 42,127 45,000 40,000 40,000 40,000 40,000 40,000 40,000 % Growth -23.51% 7.24% -2.68% 6.82% -11.11% 0.00% 0.00% 0.00% 0.00% 0.00% Total net revenues 2,854,369 3,105,084 3,416,890 3,420,321 3,766,000 4,139,661 4,640,874 5,230,896 5,595,683 5,975,578 6,369,278 % Growth 8.78% 10.04% 0.10% 10.11% 9.92% 12.11% 12.71% 6.97% 6.79% 6.59% Cost of Sales 1,498,806 1,579,690 1,650,860 1,622,905 1,807,680 1,821,451 2,181,211 2,458,521 2,629,971 2,808,522 2,993,561 Cost Margin 52.51% 50.87% 48.31% 47.45% 48.00% 44.00% 47.00% 47.00% 47.00% 47.00% 47.00% Growth 5.40% 4.51% -1.69% 11.39% 0.76% 20.66% 12.71% 6.97% 6.79% 6.59% of which Industrial Cost of Sales 1,472,854 1,556,450 1,615,217 1,585,094 1,766,222 1,775,631 2,129,441 2,399,887 2,558,556 2,726,340 2,899,436 Growth 5.68% 3.78% -1.86% 11.43% 0.53% 19.93% 12.70% 6.61% 6.56% of which Cost of Maserati engine production 2,250 1,933 4,698 3,982 3,587 2,690 1,681 924 0 0 0 Growth -14.09% 0143.04% -15.24% -9.93% -25.00% -37.50% -45.00% of which FFS Cost of Sales 23,702 21,307 30,945 33,829 37,872 43,130 50,088 57,710 71,415 82,182 94,125 Growth -10.10% 45.23% 9.32% 11.95% 13.88% 16.13% 15.22% 23.75% 15.08% 14.53% Gross Income 1,355,563 1,525,394 1,766,030 1,797,416 1,958,320 2,318,210 2,459,663 2,772,375 2,965,712 3,167,056 3,375,717 Margin 47.49% 49.13% 51.69% 52.55% 52.00% 56.00% 53.00% 53.00% 53.00% 53.00% 53.00% SG&A 338,626 295,242 329,065 327,341 338,940 396,185 442,712 500,622 534,664 570,963 609,076 SG&A Margin 11.86% 9.51% 9.63% 9.57% 9.00% 9.57% 9.54% 9.57% 9.55% 9.55% 9.56% Growth -12.81% 11.46% -0.52% 3.54% 16.89% 11.74% 13.08% 6.80% 6.79% 6.68% R&D COSTS 561,582 613,635 657,119 643,038 699,000 893,800 644,603 617,153 603,428 589,703 575,977 Growth 9.27% 7.09% -2.14% 8.70% 27.87% -27.88% -4.26% -2.22% -2.27% -2.33% of which R&D EXPENSED TO THE P&L 446,726 509,580 556,617 527,847 559,000 700,000 425,000 425,000 425,000 425,000 425,000 Growth 14.07% 9.23% -5.17% 5.90% 25.22% -39.29% 0.00% 0.00% 0.00% 0.00% F1 budget cap 175,000 175,000 175,000 175,000 175,000 Engines costs 160,000 160,000 160,000 160,000 160,000 Other F1 not budgetcapped 90,000 90,000 90,000 90,000 90,000 of which AMORTIZATIONOF 114,856 104,055 100,502 115,191 140,000 193,800 219,603 192,153 178,428 164,703 150,977 DEVELOPMENT COSTS Amortization(t)/CAPITALIZED R&D(t-1) 60.84% 60.42% 56.88% 41.48% 54.90% 54.90% 54.90% 54.90% 54.90% 54.90% Other expenses, net 11,035 24,501 6,867 3,195 6,000 8,320 9,327 10,513 11,246 12,009 12,800 Margin 0.39% 0.79% 0.20% 0.09% 0.16% 0.20% 0.20% 0.20% 0.20% 0.20% 0.20% Result from investments (FFS GmbH from 0 3,066 2,437 2,665 2,926 3,446 4,001 4,610 4,952 5,305 5,671 2016) 0.14% 0.10% 0.11% 0.10% 0.10% 0.10% 0.10% 0.10% 0.10% 0.10% EBITDA 719,077 842,799 1,036,022 1,115,255 1,269,306 1,478,714 1,923,927 2,224,097 2,380,894 2,537,489 2,683,536 Margin 25.19% 27.14% 30.32% 32.61% 33.70% 35.72% 41.46% 42.52% 42.55% 42.46% 42.13%% Industrial EBITDA 681,192 802,804 1,014,276 1,093,717 1,245,252 D&A 274,757 247,717 260,606 288,748 352,000 455,363 556,905 575,399 559,568 537,802 500,000 D&A Margin 9.63% 7.98% 7.63% 8.44% 9.35% 11.00% 12.00% 11.00% 10.00% 9.00% 7.85% EBIT 444,320 595,082 775,416 826,507 917,306 1,023,351 1,367,022 1,648,698 1,821,326 1,999,687 2,183,536 Margin 15.57% 19.16% 22.69% 24.16% 24.36% 24.72% 29.46% 31.52% 32.55% 33.46% 34.28% Net Industrial Financial Expenses 10,151 27,729 29,260 23,563 42,000 21,775 16,000 16,000 16,000 16,000 16,000 0.69% 1.78% 1.81% 1.49% 2.38% 1.23% 0.75% 0.67% 0.63% 0.59% 0.55% EBT - Profit before taxes 434,169 567,353 746,156 802,944 875,306 1,001,576 1,351,022 1,632,698 1,805,326 1,983,687 2,167,536 Margin 15.21% 18.27% 21.84% 23.48% 23.24% 24.19% 29.11% 31.21% 32.26% 33.20% 34.03% Income Tax Expense 144,115 167,635 208,760 16,317 176,500 270,426 364,776 440,829 487,438 535,595 585,235 Tax rate 33.19% 29.55% 27.98% 2.03% 20.16% 27.00% 27.00% 27.00% 27.00% 27.00% 27.00% Net Profit 290,054 399,718 537,396 786,627 698,806 731,151 986,246 1,191,870 1,317,888 1,448,091 1,582,301 Margin 10.16% 12.87% 15.73% 23.00% 18.56% 17.66% 21.25% 22.79% 23.55% 24.23% 24.84% Net Profit attributable to Owners of the parent 287,816 398,762 535,393 784,678 694,430 729,151 984,246 1,187,870 1,313,888 1,444,091 1,578,301 Non-controlling interests 2,238 956 2,003 1,949 4,376 2,000 2,000 4,000 4,000 4,000 4,000 Basic EPS 1.52 2.11 2.83 4.16 3.74 3.98 5.44 6.64 7.35 8.08 8.83 Diluted EPS 1.52 2.11 2.82 4.14 3.72 3.95 5.41 6.60 7.35 8.08 8.83

Source: FY 2019 presentation; Team estimates 30 APPENDIX 29 - BALANCE SHEET

Table 27: Balance Sheet Amounts in €m 2015A 2016A 2017A 2018A 2019E 2020E 2021E 2022E 2023E 2024E 2025E

Goodwill 787,178 785,182 785,182 785,182 785,182 785,182 785,182 785,182 785,182 785,182 785,182

Intangible assets 307,810 354,394 440,456 645,797 747,348 862,419 963,106 1,056,602 1,142,905 1,222,017 1,293,937

Property, plant and equipment 626,130 669,283 710,260 850,550 921,364 1,001,607 1,071,819 1,137,016 1,197,198 1,252,364 1,302,516 Investments and other financial 11,836 33,935 30,038 32,134 42,060 45,506 49,507 54,117 59,069 64,374 70,046 assets Deferred tax assets 122,622 119,357 94,091 60,744 60,000 60,000 60,000 60,000 60,000 60,000 60,000

Total non-current assets 1,855,576 1,962,151 2,060,027 2,374,407 2,555,954 2,754,713 2,929,614 3,092,917 3,244,354 3,383,938 3,511,681

Inventories 295,436 323,998 393,765 391,064 386,134 383,539 380,429 377,005 373,441 370,210 367,374

Trade receivables 158,165 243,977 239,410 211,399 195,437 194,382 193,199 192,200 191,487 190,726 189,915 Receivables from financing 1,173,825 790,377 732,947 878,496 983,496 1,096,229 1,237,157 1,391,506 1,478,073 1,567,709 1,660,504 activities Current tax receivables 15,369 1,312 6,125 128,234 70,849 1,000 1,000 1,000 1,000 1,000 1,000

Other current assets 185,649 53,729 45,441 64,295 107,769 91,377 91,377 91,377 91,377 91,377 91,377

Current financial assets 8,626 16,276 15,683 10,174 12,690 12,690 12,690 12,690 12,690 12,690 12,690

Cash and cash equivalents 182,753 457,784 647,706 793,664 898,276 704,954 363,935 725,735 1,136,729 1,979,714 2,757,663

Total current assets 2,019,823 1,887,453 2,081,077 2,477,326 2,654,651 2,484,170 2,279,787 2,791,512 3,284,797 4,213,425 5,080,523

Totalassets 3,875,399 3,849,604 4,141,104 4,851,733 5,210,604 5,238,883 5,209,401 5,884,429 6,529,151 7,597,363 8,592,204

Trade Payable 507,499 614,888 607,505 653,751 700,478 723,037 746,202 767,939 787,635 804,928 822,002

Other Current liabilities 289,694 309,864 264,380 235,180 428,072 289,694 289,694 289,694 289,694 289,694 289,694

Other financial liabilities 103,332 39,638 1,444 11,342 30,366 30,366 30,366 30,366 30,366 30,366 30,366

Current tax payables 125,232 41,595 29,160 7,635 63,191 96,818 130,598 157,827 174,514 191,755 209,527

ST Debt and Curr. Portion LTDebt 919,409 399,876 312,190 352,409 202,140 990,285 538,742 975,069 446,579 477,400 334,307

Total Current Liabilities 1,945,166 1,405,861 1,214,679 1,260,317 1,424,247 2,130,201 1,735,603 2,220,894 1,728,788 1,794,143 1,685,896 Total LT Debt -vedi ultimo 1,340,981 1,448,165 1,493,991 1,574,758 1,615,806 1,157,972 1,218,593 901,733 1,113,970 1,152,528 1,017,445 commento Deferred Income Tax 23,345 13,111 10,977 39,142 62,815 23,345 23,345 23,345 23,345 23,345 23,345

Employee benefits 78,373 91,024 84,159 86,575 85,033 85,033 85,033 85,033 85,033 85,033 85,033

Provisions 141,847 215,227 197,392 182,539 184,251 184,251 184,251 184,251 184,251 184,251 184,251

Deferred income 268,452 273,069 274,186 271,817 336,431 273,069 273,069 273,069 273,069 273,069 273,069

Accrued expenses 76,514 61,403 77,024 81,408 107,681 80,806 80,806 80,806 80,806 80,806 80,806

Other non-current liabilities 20,124 11,939 4,760 1,338 0 0 0 0 0 0 0

Total non-current Liabilities 1,949,636 2,113,938 2,142,489 2,237,577 2,392,017 1,804,476 1,865,097 1,548,237 1,760,474 1,799,032 1,663,949

Total liabilities 3,894,802 3,519,799 3,357,168 3,497,894 3,816,264 3,934,677 3,600,700 3,769,131 3,489,262 3,593,175 3,349,845 Equity attributable to owners ofthe -25,123 324,995 778,678 1,348,722 1,386,846 1,296,328 1,598,983 2,102,520 3,021,525 3,979,999 5,210,691 parent Non controlling interests 5,720 4,810 5,258 5,117 7,494 7,879 9,718 12,778 18,364 24,189 31,668

TotalEquity -19,403 329,805 783,936 1,353,839 1,394,340 1,304,206 1,608,701 2,115,299 3,039,888 4,004,188 5,242,359 Total Liabilities &Shareholders' 3,875,399 3,849,604 4,141,104 4,851,733 5,210,604 5,238,883 5,209,401 5,884,429 6,529,151 7,597,363 8,592,204 Equity Source: FY 2019 presentation; Team estimates APPENDIX 30 - CASH FLOW STATEMENT

Table 28: Balance Sheet

Amounts in €m 2015A 2016A 2017A 2018A 2019E 2020E 2021E 2022E 2023E 2024E 2025E Cash and Cash Equivalents at 134,278 182,753 457,784 647,706 793,664 898,276 704,954 363,935 725,735 1,136,729 1,979,714 beginning of the year EBT - Profit before taxes 434,169 567,353 746,156 802,944 875,306 1,001,576 1,351,022 1,632,698 1,805,326 1,983,687 2,167,536

Amortization and Depreciation 274,757 247,717 260,606 288,748 352,000 455,363 556,905 575,399 599,568 537,802 500,000 Changes in Operating Working -32,984 -16,253 -58,930 62,561 26,175 18,715 18,123 15,956 13,721 11,247 11,009 Capital Other Cash Flows from Operating 55,441 53,940 -25,424 -25,114 334,019 60,224 58,385 63,019 65,884 68,868 71,960 Activities Chg in receivables from financing 120,902 404,568 -44,123 -107,353 -105,000 -101,460 -126,836 -138,914 -77,910 -80,663 -83,516 activities Income Tax paid -145,017 -252,026 -215,486 -87,745 -176,500 -270,426 -364,776 -440,829 -487,438 -535,595 -585,235 CASH FLOWS FROM 707,268 1,005,299 662,799 934,041 1,306,000 1,163,993 1,492,824 1,707,330 1,879,152 1,985,336 2,081,755 OPERATINGACTIVITIES Net CAPEX -317,066 -320,461 -379,440 -636,944 -706,000 -800,000 -700,000 -650,000 -600,000 -550,000 -500,000 CASH FLOWS FROM -317,066 -320,461 -379,440 -636,944 -706,000 -800,000 -700,000 -650,000 -600,000 -550000 -500000 INVESTINGACTIVITIES CASH FLOWS FROM -351,273 -411,036 -85,065 -152,091 -495,388 -557,314 -1,133,843 -695,530 -818,158 -492,351 -553,805 FINANCING ACTIVITIES Translation Exchange differences 9,546 1,229 -8,372 952 3,000 Total Change in Cash & Cash 48,475 275,031 189,922 145,958 107,612 -193,322 -341,019 361,800 410,994 842,985 777,949 Equivalents Cash & Cash Equivalents at the 182,753 457,784 647,706 793,664 898,276 704,954 363,935 725,735 1,136,729 1,979,714 2,757,663 end of the year Source: FY 2019 presentation; Team estimates 31