Question

• What do you think Ferrari is worth in Euros? Justify your recommendation based on current market multiples valuation and a DCF valuation.

• 	2012	2013	2014		First Half 2015
  Sales
  Cars and Spare Parts (1)	1,695	1,655	1,944		1,007
  Engines (2)	77	188	311		121
  Sponsorship, Commercial and Brand (3)	385	412	417		212
  Other (4)	69	80	91		46
  Total Sales	2,225	2,335	2,762		1,387
  Cost of Sales excluding Dep. and Amort.	961	964	1,217		592
  Depreciation and Amortization Expense	238	270	289		130
  Selling, General, and Admin. Expense	243	260	300		152
  Research and Development	431	479	541		291
  Other Operating Expense	17	-2	26		4
  Operating Income (EBIT)	335	364	389		218
  Net Financial Income (Expense)	-1	3	9		-27
  Profit before Tax	335	366	398		191
  Income Tax Expense	101	120	133		65
  Net Profit	233	246	265		126
  Capital Expenditures	258	271	330		151

• 	31-Dec-2013	31-Dec-2014	30-Jun-2015
  Cash and cash equivalents	798	1,077	258
  Trade receivables	206	184	154
  Receivables from financing activities	863	1,224	1,181
  Inventories	238	296	352
  Other current assets	115	64	100
  Total current assets	2,219	2,845	2,045
  Investments and other financial assets	37	47	48
  Deferred tax assets	42	112	149
  Property, plant, and equipment	568	585	589
  Intangible assets (1)	242	265	283
  Goodwill	787	787	787
  Total assets	3,895	4,641	3,900
  Trade payables	486	536	578
  Current tax payables	104	110	182
  Other current liabilities	475	774	836
  Total current liabilities	1,065	1,420	1,595
  Long-term debt	317	510	2,267
  Other liabilities	197	233	239
  Total equity	2,316	2,478	-201
  Total liabilities and equity	3,895	4,641	3,900

• 	Total Revenue	Capital Expend	EBITDA	Projected Growth Rate	Market Value of Equity	Total   Debt	Cash
  Auto Manufacturers
  BMW	80,401	6,099	16,426	6.1%	56,562	77,506	7,688
  Daimler	129,872	6,307	18,514	6.9%	77,906	86,689	15,543
  Fiat Chrysler	96,090	8,121	8,271	4.6%	18,657	33,724	23,601
  Ford Motor	108,619	5,626	8,537	10.1%	52,925	98,484	25,743
  General Motors	117,554	8,946	6,674	4.5%	46,554	38,710	24,391
  Honda Motor	96,196	6,374	12,730	6.9%	51,128	52,483	11,427
  Hyundai Motor	63,924	3,385	7,233	6.8%	33,631	40,802	19,547
  Kia Motors	33,730	1,446	2,800	1.6%	16,977	3,535	5,502
  Nissan Motor	82,101	11,432	10,879	6.2%	40,013	51,796	6,698
  Peugeot	53,607	2,428	3,318	7.0%	12,230	21,914	10,521
  Renault	41,055	2,703	3,967	8.9%	23,096	36,299	14,049
  Tata Motors	33,811	4,100	5,647	5.5%	16,701	10,952	7,125
  Tesla Motors	2,411	731	9	94.9%	26,400	2,051	1,590
  Toyota Motor	196,622	24,233	30,260	3.2%	186,069	147,344	40,497
  Volkswagen	202,458	16,613	23,048	3.5%	52,916	139,021	34,143
  Luxury Brands
  Burberry Group	3,221	199	745	2.6%	7,691	90	865
  Cie Financiere Richemont	10,410	708	2,902	3.1%	38,986	3,093	8,553
  Hermes International	4,119	279	1,478	6.8%	35,297	41	1,481
  LVMH Moet Hennessy	30,638	1,848	7,027	2.1%	80,731	9,243	4,648
  Prada	3,552	362	954	1.9%	8,772	519	720
  Tiffany & Co.	3,248	189	819	4.7%	9,125	989	648

Answer 1

My answer is based on a few assumptions:
Assumptions:

1. Ferrari is being valued in the second half of 2015

2. The balance sheet and income statement provided corresponds to Ferrari

3. The figures are in euros units.

With the data provided, it is not possible to value Ferrari using DCF as it requires a lot of other information such as future revenue projections, cost of debt, cost of equity, footnotes to balance sheet to understand each item etc. It is hence easier to value using multiples method. I utilized enterprise value to EBITDA (EV/EBITDA) multiples to find the fair value of Ferrari. I calculated EV and EV/EBITDA for all other subject market participants provided in the question as shown in the figure.

	Total Revenue	Capital Expend	EBITDA	Projected Growth Rate	Market Value of Equity	Total   Debt	Cash	EV	EV/EBITDA
Auto Manufacturers
BMW	80,401	6,099	16,426	6.10%	56,562	77,506	7,688	126,380	7.7
Daimler	129,872	6,307	18,514	6.90%	77,906	86,689	15,543	149,052	8.1
Fiat Chrysler	96,090	8,121	8,271	4.60%	18,657	33,724	23,601	28,780	3.5
Ford Motor	108,619	5,626	8,537	10.10%	52,925	98,484	25,743	125,666	14.7
General Motors	117,554	8,946	6,674	4.50%	46,554	38,710	24,391	60,873	9.1
Honda Motor	96,196	6,374	12,730	6.90%	51,128	52,483	11,427	92,184	7.2
Hyundai Motor	63,924	3,385	7,233	6.80%	33,631	40,802	19,547	54,886	7.6
Kia Motors	33,730	1,446	2,800	1.60%	16,977	3,535	5,502	15,010	5.4
Nissan Motor	82,101	11,432	10,879	6.20%	40,013	51,796	6,698	85,111	7.8
Peugeot	53,607	2,428	3,318	7.00%	12,230	21,914	10,521	23,623	7.1
Renault	41,055	2,703	3,967	8.90%	23,096	36,299	14,049	45,346	11.4
Tata Motors	33,811	4,100	5,647	5.50%	16,701	10,952	7,125	20,528	3.6
Tesla Motors	2,411	731	9	94.90%	26,400	2,051	1,590	26,861	2984.6
Toyota Motor	196,622	24,233	30,260	3.20%	186,069	147,344	40,497	292,916	9.7
Volkswagen	202,458	16,613	23,048	3.50%	52,916	139,021	34,143	157,794	6.8
Luxury Brands
Burberry Group	3,221	199	745	2.60%	7,691	90	865	6,916	9.3
Cie Financiere Richemont	10,410	708	2,902	3.10%	38,986	3,093	8,553	33,526	11.6
Hermes International	4,119	279	1,478	6.80%	35,297	41	1,481	33,857	22.9
LVMH Moet Hennessy	30,638	1,848	7,027	2.10%	80,731	9,243	4,648	85,326	12.1
Prada	3,552	362	954	1.90%	8,772	519	720	8,571	9.0
Tiffany & Co.	3,248	189	819	4.70%	9,125	989	64	10,050	12.3

The EV/EBITDA for Tesla motors seems an outlier as it is a huge figure. Hence I'm omitting it from using for our calculation purposes. The median of these observations is 8.5. Further I calculated EBITDA for Ferrari which comes to around 1,219 for 2014. I would consider 2014 EBITDA as it shows a full year cycle compared to half year of 2015. Hence multiplying 8.5 and 1,219 gives an EV of 10,383 euro units.