BMW AG

Paul, Nika, Rema, Omar, Eric

BMW AG
Overview Strategy Financial Analysis & Valuation Recommendation

Overview

Premium Automobile and Motorcycle Manufacturer Strong Global Presence Core Businesses Luxury Automobiles Motorcycles Financial Services

BMW AG
BMW AG

Auto BMW Mini Rolls BMW

Motorad Husqvarna

Recent Milestones
1994 Acquires Rover Group. 1998 Acquires Rolls Royce Brand. 1999 Rover Loses 1.2 Billion Euros. 2000 Rover and Land Rover sold separately, Reentered F1 Racing with Williams team. 2001 Mini Launched. 2007 Millionth Mini Delivered, Number One Strategy Announced. Acquires Husqvarna Motorcycle. 2009 Z4 Launched. 2011 On track to sell 1.6 Million vehicles in 2011. 2012 BMW official automobile partner for London Olympic and Paralympic Games.

Reference

Generic Strategies
Cost Leadership
Efficient supply chain (low cost) Premium product (higher profit)

Differentiation
Many product offerings Effective use of technology to excite

Segmentation
Geographic

R&D Ratio

Reference

Capex Ratio

Automotive Growth Markets

Reference

Financial performance
70,000

Millions of Euros

60,000 50,000 40,000 30,000 20,000 10,000 0

56B 49B 53B 51B

61B
Total Revenues Net Operating Cash Flow

13,428 2,868

10,047 3,126

10,560 324

11,794 204

9,980 3,218

Net Income

FY2006 FY2007 FY2008 FY2009 FY2010

Core Competencies
Manufacturing
Common Use of Parts Efficient Assembly

Marketing
Use of technology to generate excitement Well targeted marketing

Link

BMWs Competition
Daimler AG (Mercedes Benz) "Mercedes is the perfect competitor," "If there was no Mercedes, we would have to invent it." -Helmut Panke
(former BMW AG CEO)

Partnerships

Industry Analysts
2010: Arndt Ellinghorst, a London-based automotive analyst with Credit Suisse outperform (for Daimler, VW and BMW) 2011: Morningstar rates BMW as undervalued

Our 6 Month Target Price

71 Euros (Currently trading at 65)

Thank You

Mini Brand Models

Audi vs. BMW

Financial Comparison
(In millions of Euros, where applicable)

BMW AG

VW AG

Daimler AG 29,664

Toyota Motor Company 61,067

Competitor Average4 42,113

BMW vs. Competitor Average Well Below

BV of Firm1,2

13,621

35,608

MV of Firm3 P/E Ratio Return on Equity % Dividend Yield % Revenue Growth % Gross Margin % Operating Margin % Gearing (Leverage) FCF/Sales
1 2

42,840 11.9 15.0 0.6 23.8 18.1 8.4 4.7 -2.5

57,460 7.0 16.8 2.2 20.6 16.9 5.6 4.3 3.2

44,900 11.8 13.5 1.9 23.9 23.3 7.4 3.7 3.4

115,210 20.0 2.1 1.4 0.5 12.0 0.8 2.9 5.9

72,523

Well Below

12.9 Slightly Below 10.8 1.8 15.0 17.4 4.6 3.7 4.2

Above
Well Below

Well Above
On Par

Well Above Above

Well Below

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

Volkswagen AG

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

Daimler AG

BMW AG

BMW Market Reach

Volkswagen AGs Brands

BMW AG Risks
FX Currency Risk Significant Debt Obligations could Limit Growth Potential
FY 2011 Outstanding Debt of E62,353 million BMW could be forced to allocate considerable portions of operating cash flow to debt service payments. The reduction of CAPEX and R&D investments could cause the company to lose its advantage against competitors who may have less debt. FY 2010 fair value of planned pension assets: E10,455 million vs defined benefit obligations of E12,008 million. Unfunded status is at E1,533 million Financial market volatility could lead to a decline in pension fund asset values forcing BMW to make regular cash contributions to bridge the gap between pension assets and liabilities. This will put pressure on the current liquidity position of BMW.

Unfunded Pension Obligations

Appendix 5: BMW Brand Models

Appendix 7: VWs Audi Division Challenges

Megacities (limit car use) Technology, Markets and Resources Politics, Climate, Consumer Values

Financial Comparison
(In millions of Euros, where applicable)

BMW AG

VW AG

Daimler AG 29,664

Toyota Motor Company 61,067

Competitor Average4 42,113

BMW vs. Competitor Average Well Below

Book Value of Firm1,2

13,621

35,608

Market Value of Firm3 P/E Ratio Return on Equity % Dividend Yield % Revenue Growth % Gross Margin % Operating Margin % Gearing (Leverage) FCF/Sales
1 2

42,840 11.9 15.0 0.6 23.8 18.1 8.4 4.7 -2.5

57,460 7.0 16.8 2.2 20.6 16.9 5.6 4.3 3.2

44,900 11.8 13.5 1.9 23.9 23.3 7.4 3.7 3.4

115,210 20.0 2.1 1.4 0.5 12.0 0.8 2.9 5.9

72,523

Well Below

12.9 Slightly Below 10.8 1.8 15.0 17.4 4.6 3.7 4.2 Above Well Below Well Above On Par Well Above Above Well Below

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

Qurandt Family Tree