Report BMW PDF

Research Report
BMW Group
WUTIS Student Research
Consumer Discretionary– Automotive
Frankfurt Stock Exchange
BMW - Group
Date: 06/15/2018 Current Price: EUR 84.15 Target Price: EUR 86.3
Ticker: FRA: BMW Headquarters: Munich, Germany Recommendation: HOLD
Highlights
Executive summary 200
Bayerische Motorenwerke AG (BMW) founded in 1916 is one of the
most prestigious automobile and motorcycle manufacturers in the 150
world. Though the group cannot compete with the biggest players in the
industry in terms of the number of units produced, this is mainly due to 100
BMWs choice to focus on the premium automotive segment. In 2017,
around 2.46mn BMW, Rolls-Royce and MINI vehicles were sold. 50
Investment Recommendation 0
 We initiate coverage on BMW Group (BMW:GR) with a Hold F-13 F-14 F-15 F-16 F-17 F-18
recommendation based on a three months target price of EUR 86.3 BMW Group Dax
offering 2.3% upside from its closing price of EUR 84.15 on June
15th 2018. Our recommendation is primarily driven by:
 BMW might be negatively affected by any trade barriers. For

Market Profile
instance, the Brexit caused 5.7% decline in cars sold in UK, whereas
Moody’s forecasts further fall by 5.5%. Similiar situation might Closing Price 84.15
happen soon at far bigger markets, since the US President Donald Target Price 86.33
Trump has proposed to raise the taxes on imported cars. 52-W High/Low 77.1/ 97.5
 China and recovery in Europe as drivers for global vehicle sales. 52-W Return 4.62%
 Global vehicle sales in the premium segment are expected to rise by Market Cap. (bn) 55.6
2.6% annually by 2022 Dil. Shares Out. (mm) 657.1
Free Float 57.18%
BMW Group performance Beta 1.23
 In Q1 2018, the largest manufacturer of premium automobiles failed Dividend Yield 4.68%
to boost sales revenues. These dropped by 5.1% to EUR 22.69 bn. LTM EV / Revenue 1.35x
Simultaneously, also EBIT dropped by 3.1% to EUR 2.73 bn. LTM EV / EBITDA 7.29x
 The falls were primarily due to negative currency effects. LTM P / E 6.42x
 The BMW Group continues to achieve records in terms of sales
(+3% to 604,629 vehicles). The electrified models, of which BMW
sold 26,858 units (+38.4%) in Q1 2018 and more than 100,000 units
in 2017 as a whole, once again registered the most attractive growth Research Team
rates. As a result, BMW is already one of the largest manufacturers
Alexander Thiel
of electrified automobiles and outraces other premium Equity Research Director
manufacturers in this regard. [email protected]
 With an EBIT in the core Automobiles segment of EUR 1.88 bn
(+0.2%), the corresponding result margin stood at 9.7% in Q1
Johannes Scheufele
(previous year: 9.4%). As a result, the latter not only found itself at Equity Research Associate
the upper end of its own target corridor, but also above the level of
the direct competition from Germany. Since the current year’s model
offensive primarily includes product novelties from the luxury or SUV Wojciech Lata
segment, the EBIT margin should remain at a high level. Equity Research Associate
 Due to the continued product offensive as well as the electrification
of vehicles and further development of autonomous driving, research
Elias Kurta
and development costs are increasing. The focus here is on the Equity Research Analyst
largest model offensive in the company’s history. Besides the new X
models (X2, X4, X5, X7), around 20 model innovations and revisions
will come onto the market across the group this year. Consequently, Nóra Zsuzsanna
BMW refers to 2018 also as the “Year of X”, which is likely to Equity Research Analyst
additionally boost sales especially in the second half of the year. In
the subsequent years, the model offensive will be continued
particularly through electrified vehicles. Valeriya Krasilnikova
Equity Research Analyst
BMW Group (FRA: BMW)
1. Business Description Figure 1: Revenue split

per segment
BMW Group AG (GY:BMW) is a worldwide-operating conglomerate,
mainly producing premium (BMW, Mini) and luxury cars (BMW, Rolls- 2,3%
Royce), motorcycles (BMW Motorrad) and providing broad spectrum of
financial services. (For overview of sector revenues see figure 1.) 26,2%
71,5%
BMW’s financial sector sales comprise mostly BMW Bank, that offers
credit, insurance and leasing services. Apart from aforementioned,
there exist few smaller, yet recognizable brands: DriveNow (EU car
sharing service), ReachNow (US car sharing service), ParkNow
(cashless payment solution & search engine), ChargeNow (plug-in Automobiles Motorcycles
battery charging network). Recently BMW Group has implemented the
NUMBER ONE > NEXT strategy, that focuses on accomodating to and Financial Services Other Entities
supporting the market-wide shift towars electrified mobility, as well as
frontrunning other manufacturers by implementing unique Sources: Company presentation, Team estimates
technological solutions (ACES – autonomous, connected, elctrified, Figure 2: Automotive
split per model
shared)
16,0% 9,7%
BMW 8,7%
Since 86% of the Group’s sold cars are BMWs, there is no doubt it is 8,7%
the most significant BMW Group’s brand. BMW has also the widest
selection of products, each coming in numerous variants – enough to 7,0% 19,6%
say, nearly every quality-conscious customer will find a product suiting
his or her needs. Only in 2017 there took place 15 revisions and 6 new 13,7%
16,6%
launches.
BMW is likewise the most impacted entity by NUMBER ONE > NEXT.
1 Series 2 Series 3 Series 5 Series
So far, the brand have been successfully selling two iconic for the
X1 X3 X5 Other
brand electrified vehicles, targeted at very different markets (BMW i3 – Sources: Company presentation, Team estimates
affordable and agile, BMW i8 – excellent performance and efficiency)
as well as electrified versions of already known models, hitting 100.000 Figure 3: BMW brand overview
electrified vehicles sold in 2018.
Mini
Mini has just 14% share in sold cars volume, but still brings
considerable contribution to the company’s profit. Since past three
years, the brand consequently raises the bar in terms of revenues. Mini
has recently launched new Countryman generation, that also comes in
plug-in hybrid variant.
Sources: Company presentation, Team estimates
Rolls-Royce
Rolls-Royce under the BMW’s wings seem to serve the overall image
rather than boosting the performace. With sales volume fluctuating Figure 4: Financial Service EBT
around steady value of 4000 it doesn’t bring much cash into the
EUR mn
company, even though it is working in high-margin car subsegment.
2500
2166 2207
BMW Bank 1975
BMW Bank offers much more services than just car financing, leasing 2000
1723
and insurance. Although these remain the core activities, the bank 1561 1619
offers also investment products and retail banking services. The 1500
financial services generated in FY2017 26% of Group-wide revenues.
1000
Car sharing & other mobility-related services
Even though „shared” was mentioned among other key aspects of
500
NUMBER ONE > NEXT strategy, the size and significance of car 2012 2013 2014 2015 2016 2017
sharing services do not look impressive anymore. DriveNow operates
so far just in 13 cities and generated very slight lossess in the last two
fiscal years. However, the existence of these entities is indicative for
BMW Group’s readiness for potential reshape of the market.
2. Industry Overview & Competitive Environment Figure 5: Global car sales
International automobile sales grew by 1.9% to 87.7 million units in 100

2017. The overall positive trend from the previous year therefore 80
60
continued, albeit at a less dynamic pace, about 81 million vehicles are 40
expected to be sold by the end of 2018. Momentum came primarily 20
from Europe (15.6 million units; + 3.3%) and China (24.7 million units; + 0
2.4%). By contrast, registrations in the USA fell by 1.8% to 17.2 million
units. Automobile markets in major emerging economies came out of
recession in much stronger health in 2017. Russia saw a 16.1%
increase to 1.5 million units, while registrations in Brazil grew by 9.9%
to 1.9 million units. Sources: Company presentation, Team estimates
China is the most desired market

Figure 6: Automotive brands
All major players are looking forward to increasing the influence in the
by market share
Chinese market. It is where the biggest number of passenger cars is
sold (24.72 million units in 2017) and according to industry experts, the 6,29%
local market is not yet saturated. Not only is the country Asia’s main 14,98% 24,31%
producer of automobiles, but it has also emerged as the number one
producer of light vehicles. Chinese joint ventures and leading
15,39%
manufacturers like General Motors or Volkswagen were among the
leading passenger car manufacturers in China. It is expected that 20,58%
automakers will undertake unprecedented investment programs to 18,45%

grow their businesses not only in China and India, but also in other
TOYOTA VW FORD
emerging markets.
HONDA NISSAN BMW
Key Industry Trends: Electro vehicles Sources: Company presentation, Team estimates
Since 2016, the sales of electric cars have reached close to 10 million
Figure 7: Number of electric
units, which explains why stalwarts like General Motors, Daimler AG, vehicles sales
and VW have entered this lucrative market with their own models. The (In thousands of units)
declining reservoir of non-renewable energy sources is a major push 1.400
1.209
for the production of electric vehicles, which is reflected in the 1.200
increased market share of electric cars in the European market.
1.000
The numbers are in, and in the U.S. alone, electric vehicle sales 746
800
increased 21 percent last year -- from 158,614 vehicles sold in 2016 to
600
199,826 vehicles sold in 2017. In 2018, the sale of electric cars is 420
expected to reach close to 12% in the US market. December 2017 also 400 227
200 113
marked the 26th consecutive month of year-over-year sales increases
for EVs. 0
2012 2013 2014 2015 2016
Last year automakers make several major EV announcements. Toyota
announced its plans to electrify its entire line-up by 2025, General
Motors plans 20 new EVs by 2023, Volkswagen will spend $82 billion Figure 8: Range of selected
electric vehicles 2017
on a multifaceted initiative to develop electric vehicles, mobility
services, and autonomous driving by 2022. BMW will mass-produce
electric cars by 2020 and make 12 different models by 2025 and Volvo 8,17%
8,71% 24,06%
announced that all models introduced after 2019 will either be hybrids
or all-electric. In total, the automotive industry is expecting 127 battery- 8,79%
electric models to be introduced worldwide over the next five years.
Figure 9: Car sales in selected countries 9,55%
30
22,54%
25 18,18%
20
China
15 Model S* (Tesla) Model X* (Tesla)
U.S.
10 Chevrolet Bolt (GM) e-Golf (VW)
Japan
5 Focus Electric (Ford) i3 (BMW)
Germany
Leaf (Nissan)
0
Driverless with autonomous vehicles Figure 10: Motorcycles segment

Mn Units
Though fully autonomous vehicles will take some more time to make
their way onto the roads, autonomous vehicles are definitely worth the 160
watch in 2018. It is predicted that 40% of the mileage driven in Europe
could be covered by autonomous vehicles in 2030. With benefits like 120
reduced accidents, better traffic management, and increased
passenger comfort, the autonomous vehicle is most definitely the future 80
of automotive technology. Currently there are several companies
working on driverless car and one of them is Google, up until recently 40
this tech company was putting its own self-driving technology into the
cars made by other manufacturers, such as BMW and Audi, but in May 0
Google announced that it would begin producing cars of its own. 2008 2013 2018
Car sharing Figure 11: Car Sharing
Car Sharing Market size was over USD 1.5 billion in 2017, with fleet Users Worldwide
size of over 100,000 in the same year. The number of members is 40 36
forecast to grow at over 20% between 2018 and 2024. Germany car
sharing market holds the majority share in Europe and is expected to 30
grow significantly due to increasing taxi fares and rising costs of
owning a vehicle, currently there are about 140 service providers in the 20
country. he automotive players are facing constant pressure due to 7
10
reducing car ownership. This is encouraging them to enter the car
sharing industry either by forming partnerships with the existing players 0
in the industry or by establishing subsidiaries that provide car sharing
services. For instance, the German auto makers will form a joint-
venture company that combines Daimler’s Car2Go and BMW’s
DriveNow car-sharing providers to fend off competition from tech giants Sources: Company presentation, Team estimates
like Uber, the global ride-hailing leader. The German joint venture will Figure 12: Number of vehicles
also have to compete with the deep resources of Alphabet Inc.’s in selected European cities
Google, and Apple Corp., which are sizing up opportunities in 0 1000 2000 3000 4000 5000
transportation. Daimler and BMW said the agreement—50% in the joint Paris 3.827
venture for each of company—would likely boost their earnings in 2018 London 2.800
through a one-time increase in the valuation of their mobility holdings.
Berlin 2.070
Milan 2.062
Figure 14: BMW Strategy number one Rome 1.450
160 Madrid 1.020

140
140 Turin 930
BMW i3 93 Ah/33kWh
120 BMW iPerformance Florence 660
103
100
BMW i8 Roadstar
80 Figure 13: Autonomous driving
BMW i3 BMW i8 62
features
60 60 Ah/22kWh (in billion U.S. dollars)
32 BMW i3s
40 MINI Cooper S E
18 100
20
0 80
0 60
2013 2014 2015 2016 2017 2018
40
20
0
1990 2000 2014 2015 2016 2017 2018
to to
1999* 2013*
Source: Thomson Reuters
3. Management Team & Corporate Governance Figure 15: Shareholder structure
Management Team 2,0%

BMW’s executive management team has been a key driving force
behind the company’s overall success during the last 100 years. The 20,7%
board of management consists of eight highly motivated members. 53,2%
Chairman of the board is Mr. Harald Krueger, who joined BMW in 1992 16,6%
and is CEO since May 2015. Mrs. Milgros Caiña Carreiro-Andree is 9,0%
Head of Human Resources and Labor Relations at BMW Group since
July 2012. Markus Duesmann is Head of Purchasing and Supplier Free float
Network. Before joining BMW in 2007 he worked in several key AQTON SE,
AQTON GmbH & Co
positions at Daimler AG. Mr. Klaus Fröhlich is member of the Susanne Klatten Beteiligungs GmbH
management board since December 2014 and is responsible for Susanne Klatten
development. After working for Unilever and Beiersdorf AG, Mr. Pieter Stefan Quandt
Nota joined BMW in January 2018. His responsibilities are Sales, Source: Company information
Aftersales and Brand Management of the BMW Group. Since more Figure 16: Geographic split
than 25 years Dr. Nicolas Peter is working for BMW as a finance
manager. He is also a member of the board and responsible for the 0,7%
6,4%
financial agenda. Mr. Peter Schwarzenbauer is the seventh board
member and his fields are Mini, Rolls-Royce, BMW Motorrad and
Customer Engagement, as well as Digital Business Innovation. Last, 33,7%
but not least, Oliver Zipse is board member of BMW Group and Head
of Production. 59,2%
Management Compensation
The compensation system for the board of management at BMWAG is North America Europe
designed to encourage a management approach focused on the
sustainable development of the BMW Group. The compensation of the Asia Rest of World
board of management comprises both fixed and variable remuneration Source: Company information
as well as a share-based component. Retirement and surviving Figure 17: Management
dependents benefit entitlements are also in place. Team overview
Supervisory Board
The supervisory board of BMW Group consists of 20 members with Management Team
different backgrounds. Chairman of the supervisory board is Dr.-Ing.
Dr.-Ing. E.h. Norbert Reithofer since 2015. He is appointed until 2020. First
End of
Formerly he was the Chairman of the management board of BMW Name YOB Appointme
Term
nt
Group. Furthermore, BMW has four deputy chairmen of the supervisory
board. Harald Krüger 1965 2008 -
MILAGROS
Sustainability CAIÑA
Economic success, the responsible use of resources and the 1962 2012 -
CARREIRO-
assumption of social responsibilities form the basis for long-term ANDREE
growth within the BMW Group. It secures the future of its business MARKUS
1969 2016 -
model through promoting sustainable activities such as: DUESMANN
The development of products and services for sustainable individual KLAUS
mobility (e.g. electric mobility and services such as DriveNow and 1960 2014 -
FRÖHLICH
ReachNow)
The efficient use of resources along the entire value chain PIETER NOTA 1964 2018 -
Responsibility towards employees and society in general DR. NICOLAS

1962 2017 -
PETER
Compliance Management PETER
The BMW Group Compliance Committee consists of the heads of the SCHWARZENB 1959 2013 -
following departments: Legal Affairs, Corporate and Governmental AUER
Affairs, Corporate Audit, Group Reporting, Organizational Development OLIVER ZIPSE 1964 2015 -
and Corporate Human Resources. It manages and monitors activities
necessary to avoid non-compliance with the law. These activities
Source: Company information
include training, information and communication measures, compliance
controls and following up cases of non-compliance.
4. Investment Summary Figure 18: DUPont Analysis I
“ Market uncertainty and strategic market changes provide unfavorable 120,0% 19,0%
investment environment “ 17,1%
16,0% 16,0%
13,6%
15,0%
We therefore issue a Hold recommendation on BMW Group with a 3- 80,0%
months target price of EUR 86.3 per share. Combined with an annual
dividend forecasted at EUR 4.0 per share, this represents a total return 11,0%
of 7.13% from its closing price of 84.1 on June 15th, 2018. Our target 40,0%
price is based on a mix of the Discounted Cash Flow to Enterprise 7,0%
Value Model, Dividend Discount Model, and EV/EBITDA trading
multiples, attributing 50% /25% /10% and 15% weighting respectively 0,0% 3,0%
to each methodology. The key investment drivers for our 201220132014201520162017
recommendation are: Tax Burden
Interest Burden
Key investment drivers Operating Margin
Du Pont ROE
 In Q1 2018, the largest manufacturer of premium automobiles failed Source: Team estimate
to boost sales revenues. These dropped by 5.1% to EUR 22.69 bn.
Figure 19: DUPont Analysis II
Simultaneously, also EBIT dropped by 3.1% to EUR 2.73 bn
6,00 19,0%
 BMW Group maintains one of the highest levels of profitability
4,44
among global automobile manufacturers, as well as continued 4,10 4,04 4,10 4,02 15,0%
3,77
recovery in European demand, partially offset by sharp declines in 4,00
the South American and Russian markets.
11,0%
 In our view, BMW faces the same difficult challenges from intense 2,00
competition as any other global automaker, as well as higher 7,0%
research and development costs as the company steps up spending
for its long term plan under the banner “Strategy Number One > - 3,0%
Next”. 2012 2013 2014 2015 2016 2017
Asset Turnover Leverage Ratio
 Besides the new X models (X2, X4, X5, X7), around 20 model
innovations and revisions will come onto the market across the Du Pont ROE
group this year. Consequently, BMW refers to 2018 also as the Source: Team estimate
“Year of X”, which is likely to additionally boost sales especially in
the second half of the year. In the subsequent years, the model Figure 20: Group Locations
offensive will be continued particularly through electrified vehicles
Headquarters Munich
 Even though BMW has successfully defended against pricing
pressure, the growing excess capacity is still undeniable. For the
next several years, industry capacity additions will be driven by the
growth in global vehicle production, primarily in Chin, India, Brazil
and Russia. As excess capacity grows, the potential for irrational
pricing behavior will also increase, threatening excess returns above
cost of capital.
Key risks to our investment thesis:

R1: Being a global enterprise, BMW might be negatively affected by
any trade barriers. For instance, the Brexit caused 5.7% decline in cars
sold in UK, whereas Moody’s forecasts further fall by 5.5%. Similiar R&D Facilities
situation might happen soon at far bigger market, since the US Production Plant
President Donald Trump has proposed to raise the taxes on imported Partner Plant
cars.
M2: Cars, especially premium-class ones are very income-elastic. Source: Company information
Therefore any economic slowdown is likely to have amplified impact on
the Group’s sales. The risk is especially meaningful in context of
Eurozone low-interest era, which might be over soon (45% of
revenues).
5. Financial Analysis Figure 21: Part of ROIC Tree

(FY 2014 - 2019E)
ROIC Tree (from FY 2014 until 2019E) – healthy performance ROIC
Firstly it is worth to look at the drivers of Return On Invested Capital 22% 23%
19% 18% 17% 20%
(see in Appendix the whole analysis as „ROIC Tree”) to understand the
current financial position of BMW and also to tackle those areas where
the firm may has problems but these ratios are stable or even
improving from 2014 until 2019. The increasing ROIC is positively
affected by the tax reforms in the Scandanavian countries and the
TAX RATE PRE-TAX ROIC
U.S., moreover the decreasing Working Capital Requirements suggest 33% 31%
29%
operating efficiency and liquidity in the following years. 29% 28%
26% 27%
18% 18% 18%
24% 24%
Financial Ratios & Key

FY 2014 FY 2015 FY 2016 FY 2017 2018E 2019E
Indicators
Profitability Ratios
21.15% 19.67% 19.88% 20.20% 20.23% 20.23% WCR/REV
Gross Profit margin %
37% 36%
Operating Profit margin % 11.34% 10.41% 9.97% 10.01% 10.44% 10.45%
34%
Net Profit margin % 7.23% 6.94% 7.34% 8.82% 12.43% 12.43% 33%
34%
32%
ROA % 3.76% 3.71% 3.67% 4.50% 6.66% 6.93%
ROIC % 19.25% 18.28% 17.24% 20.00% 22.00% 22.92%
ROE % 24.36% 22.43% 19.82% 17.40% 20.78% 17.13%
Cash Return on Assets % 1.88% 0.56% 1.68% 3.05% 2.98% 3.10% Source: Team estimate
Financial Ratios
LT-Debt/Assets (x) 0.28 x 0.29 x 0.29 x 0.28 x 0.23 x 0.26 x Figure 22: Revenue growth
120.000 20%
LT-Debt/Equity (x) 1.15 x 1.16 x 1.17 x 0.94 x 0.87 x 0.76 x 14,64% 4,79%
2.15 x 2.14 x 2.06 x 1.67 x 1.63 x 1.34 x
100.000
Total Debt/Equity (x) 15%
0.05 x 0.04 x 0.03 x 0.08 x 0.01 x 0.01 x 80.000
Interest Coverage (x)
Equity Ratio % 24.18% 24.84% 25.12% 29.34% 26.91% 34.01% 60.000 10%
In % of revenue 40.000
5%
Cost of materials % 78.85% 80.33% 80.12% 79.80% 79.77% 79.77% 20.000
EBITDA % 20.38% 18.88% 18.60% 18.61% 15.61% 15.61% 0 0%
SG&A % 16.89% 14.05% 14.26% 14.70% 9.65% 9.65% FY FY FY FY 2018E2019E
9.42% 8.89% 8.61% 8.57% 5.16% 5.16% 2014 2015 2016 2017
D&A %
Other operating exp. % 0.30% 0.26% 0.20% 0.45% 0.89% 0.83% Revenues (in Millions of EUR)
EBIT % 10.96% 9.99% 9.98% 10.04% 10.44% 10.45% Revenue growth rate (%)
Tax rate in % of EBIT 3.28% 30.70% 29.31% 19.67% 18.29% 18.29%
Source: Team estimate
Interest expenses % 0.41% 0.46% 0.35% 0.27% 0.19% 0.19%
Liquidity KPIs Figure 23: Profitability
Current Ratio (x) 1.04 x 1.06 x 1.02 x 0.96 x 0.97 x 1.12 x
Quick Ratio (x) 0.77 x 0.77 x 0.81 x 0.85 x 0.79 x 0.92 x 120.000 14%
Cash Ratio (x) 0.13 x 0.09 x 0.12 x 0.13 x 0.07 x 0.08 x 100.000 12%
Millions of EUR
Working Capital Req. (WCR) 26,600 31,706 34,501 35,698 35,730 36,795 10%
80.000
8%
Record revenues and optimistic forecasts 60.000
6%
BMW posted record revenues of almost EUR 99 billion in 2017. The 40.000
4%
Motorcycles segment has the most substantial revenue growth of 20.000 2%
10.3% from 2016 to 2017, the Automotive grew by 4.1% while the
0 0%
Financial Services by 7.3%. In terms of profitability, the increasing net
profit margins for full year 2017 also suggest optimistic outlook and
based on the assumptions, the profitability margins will increase or at
least remain stable in the upcoming 2 years. Group profit before tax Revenues Net Income
increased significantly from 2016 to 2017 by 10.2% to EUR 10,66 Net Profit margin %
billion. This profit derives not only from the strong volume growth in the
Automotive and Motorcycles segments. The significantly higher Source: Team estimate
financial results also played an important role, resulting from equity

accounted investments caused by the joint venture of Shenyang as
well as valuation effects. Annual net profit was up 26% to EUR 8.7
billion.
A slight increase can be observed in workforce from 2016 to 2017 (+ Figure 24: EBIT – ROE performance
4.2%), what corresponds to the growth in automobile and motorcycle 14.000 30%
business, expansion of financial and mobility services and projects 12.000 25%
undertaken by the firm (e.g. electrification of vehicles, autonomous 10.000 20%
driving). 8.000
15%
6.000
10%
EBIT Margin in target range, Sustainability, decreasing ROE 4.000
BMW maintains the Automotive EBIT margin in the corridor of 8-10% 2.000 5%
despite ongoing challanges, ensuring that BMW Group has the 0 0%
financial resources to fund the upfront investments in the future – the FY FY FY FY 2018E 2019E
2014 2015 2016 2017
projected R&D ratio will increase from 6.5 to 7%, or around EUR 7
billion in 2018. Financial Services has significantly contributed to the EBIT (in Millions of EUR) ROE (%)
positive outlook for the performance of Operating Profit due to the Sources: Company presentation, Team estimates
increasing share of EBIT for the whole Group from 2014 (19%) to Figure 25: Assets & Liabilities
2017 (22%). 250.000 40%
The management also takes into account the average CO2 emmisions 200.000
30%
Millions of EUR
for the fleet, which, through their influence on ongoing development
costs and due to regulatory requirements, can have significant long- 150.000
20%
term impact on Group performance. 100.000
As predicted one year earlier, the Return on Equity of Financial 10%
Services segment was lower by 3.1 percentage points in 2017 than in 50.000
2016, at 18.1%. The slight decrease may due to the more stringent 0 0%
regulatory requirements for equity capital. FY FY FY FY 2018E2019E
2014 2015 2016 2017
Balanced capital structure Total assets Total liabilities
A broad range of instruments on international money and capital LT-Debt/Assets (%)
markets is used by the firm to refinance worldwide operations. Funds Figure 26: Liquidity KPI-s
raised are used almost exclusively to finance the BMW Group’s 1,20 x
Financial Services business. The current Equity ratio is 28.2% which is
1,00 x
expected to grow over 30% to 2019. Group equity rose by EUR 7,185
million to EUR 54,548 million from 2016 to 2017, mainly as a result of 0,80 x
the net profit attributable to shareholders, fair value gains on derivative 0,60 x
financial instruments and the positive impact of remeasurements of 0,40 x
the net defined benefit liability for pension plans. The Long-Term Debt
to Assets ratio represents the average level of leverage in the industry. 0,20 x
0,00 x
Improved Credit Rating and Liquidity FY FY FY FY 2018E 2019E
Moody’s has upgraded BMW AG’s long-term rating to A1 from A2 in 2014 2015 2016 2017
January 2017, thus the outlook has been changed from positive to Current Ratio (x) Quick Ratio (x)
stable, making BMW Group the best rated automotive manufacturer in
Cash Ratio (x)
Europe and the best rated premium manufacturer globally. BMW also
Figure 27: Group Liquidity
has the highest Standard & Poor’s rating of any European automobile
manufacturer. The ratings underline the BMW Group’s robust financial 14
profile and excellent creditworthiness. As a result, the company not 12
Billions of EUR
only enjoys good access to international capital markets, but also 10

benefits from attractive refinancing conditions. BMW continues to 8
maintain a solid liquidity position. 6
4
Significant increase in dividend 2
Due to the positive earnings development, the Board of Management
0
and the Supervisory Board are proposing to the AGM to use the net FY FY FY FY 2018E 2019E
profit of BMW AG of EUR 2,630 million (2016: EUR 2,300 million) for 2014 2015 2016 2017
the payment of a dividend of EUR 4.00 per share of common stock
(2016: EUR 3.50) and a dividend of EUR 4.02 per share of preferred
stock (2016: EUR 3.52). The pay-out ratio for the year 2017 therefore Marketable securities & investment funds
stands at 30.2% (2016: 33.3%). Cash & cash equivalents
6. Valuation Figure 28: Target price Equity Bridge

Valuation Price Target: EUR 86.33 140.661 (83.932)
160
The EUR 86.33 Target Price is derived primarily using the 10-Y DCF, 120
10-Y DDM and relative multiples valuation by weighting the base case
80 56.730
50%, 25%, 10%, 15% each. The resulting HOLD recommendation has
a deviation of -7.2%. 86.3
40 EUR
Discounted Cash Flow Model (DCF) 0
To estimate the intrinsic Value of BMW’s share price, we computed a Weighted Net debt + Equity Weighted
discounted cash flow analysis due to the predictability of its cash flows EV Minority value Share
interest Price
in relation to growth and profitability. With regards to industry
developments, we performed a three scenario DCF analysis (Bull,
Figure 29: Cost of capital
Base and Bear Case) by forecasting Revenue, EBIT and CAPEX for
10 years. Our approach generates a price target of EUR 86.33. The WACC Calculation
three cases for this model were formulated using guidance from Risk Free Rate 1.20% 30Y German Bond
Relevered beta 1.23 Peer Group
historical performance, industry outlook, an assessment of BMW’s
Market Risk Premium 7.85%
competitive positioning, company guidance on revenue, EBIT, Cost of Equity 10.83%
investment policy and earnings growth. The DCF is most sensitive to Cost of Debt 5.00% Weighted Interest
the following factors: Equity ratio 37.50%
Debt ratio 62.50%
Weighted Average Cost of Capital (WACC) and growth rate: Tax rate 30.00%
WACC 6.31%
As discount rate we used the WACC (6.31%) with the firms Cost of
Equity (CoE) and Cost of Debt (CoD) weighted with BMW’s capital Source: Team estimate
structure. For CoE we used the current bond-yields for a 30-Y German Figure 30: DCF Forecast I
EUR
government bond (as of March 2018) as risk-free rate and 5-Y mn
historical returns of DAX as market proxy, while we decided to derive a 11,34%
160.000 10,01% 9,70% 12,0%
beta based on the average 5-Y monthly unlevered beta of our peer
group with regards to BMW’s free float. It was then relevered with our 120.000
target D/E ratio of 62.5% Debt and 37.5% Equity. While we used the 8,0%
CAPM for computing CoE (10.83%), we weighted interest rates of 80.000
BMW’s long term debt (>1 year) according to the bond maturities to 4,0%
40.000
derive CoD (5.0%). For calculating the terminal value we used the
perpetuity growth method (PGM) and assumed a long-term growth rate 0 -
of 1.5%, which is in line with German’s GDP growth rate and below the
current inflation rate in Germany.
Revenue Growth and EBIT margin Revenues COGS EBIT Margin
We forecasted BMW’s automobile revenues with a 10-Y CAGR of Source: Team estimate
4.2%. We expect, that the motorcycle business will grow with a solid Figure 31: DCF Forecast II
10-Y CAGR of 8.8%. We further forecast the Financial Services revues EUR
with a CAGR of 7.5% with continuing its constant EBIT Margin of mn
approximately 10% per year. 8.000 10,0%

Figure 32: Valuation football field 8,0%
€ 84.15 6.000
DDM 6,0%
4.000
DCF 4,0%
NTM Transaction… 2.000
2,0%
LTM Transaction…
0 -
LTM EBITDA
NTM EBITDA
Unlevered FCF CAPEX D&A
LTM P/E Share…
NTM P/E Share…
€ 20 € 70 € 120 € 170 € 220

Source: Company information
Figure 33: Benchmarking

Relative Valuation – Trading Multiples (EV/EBITDA) P/E multiple
The peer group for the relative valuation consits of competitors with 12,00 x
comparable size, business model and risk profile, leading to a peer 7,55 x
group of 6 companies. We used the EV/EBITDA and P/E multiples for 8,00 x
our comparable company analysis. As the charts show, BMW is slightly 4,00 x
above the average (orange dotted line) of these companies but based
0,00 x
on P/E ratios, BMW is currently undervalued.
2018E
The LTM median share price based on EBITDA is EUR 102 while BMW AG
based on P/E it is EUR 90. Daimler AG
Geely Automobile Holdings Ltd
REVENUE
ACQUIRER NAME TARGET NAME
CLOSED EV
MIO. EUR
EV / EBITDA General Motors Co
DATE MIO. EUR Honda Motor Co Ltd
LTM NTM LTM NTM Nissan Motor Co Ltd
Toyota Motor Corp
Delphi Automotive Plc Delphi Technology PLC 05/12/2017 3,83 4,26 4,04 8.42 x 7.54 x
Figure 34: Benchmarking
Pierer Industrie AG SHW AG 08/08/2017 238 406 463 5.45 x 5.57 x EV/EBITDA multiple
Superior Industries
12,00 x Average: 8.41 x
Uniwheels AG 22/05/2017 726 464 437 10.33 x 12.36 x
International Inc
8,75 x
Schouw & Co A/S Borg Automotive A/S 03/04/2017 168 77 59 11.14 x 18.47 x 8,00 x
LKQ Corporation, Inc. Mekonomen AB 01/12/2016 810 573 559 9.50 x 9.25 x
Grupo Industrial
Infun S.A. 24/11/2016 315 140 198 22.66 x 7.76 x
4,00 x
Saltillo, S.A. de C.V.
Johnson Controls, Inc. Adient plc 31/10/2016 5,18 17,85 17,37 5.70 x 6.95 x 0,00 x
BMW AG 2018E
Alliance Automotive
Lookers Plc 04/11/2016 140 297 265 8.22 x 8.45 x Daimler AG
Group
CIMC Vehicle (Group) Retlan Manufacturing Geely Automobile Holdings Ltd
27/06/2016 111 234 237 6.74 x 8.27 x
Co Ltd Ltd
Fiat Chrysler Fiat Chrysler General Motors Co
03/01/2016 8,09 2,76 2,34 11.93 x 12.77 x
Automobiles N.V. Automobiles N.V Honda Motor Co Ltd
TRW Automotive Nissan Motor Co Ltd
ZF Friedrichshafen AG 15/05/2015 9,82 12,66 12,45 7.67 x 8.51 x
Holdings Corp.
Toyota Motor Corp
Rolls-Royce Power
Rolls-Royce Plc 26/08/2014 4,86 3,34 3,02 10.43 x 11.65 x Figure 35: Precedent
Systems AG
Transactions
Relative Valuation – Transaction Analysis
For the comparable transaction analysis we have collected € 91.15
transactions from the automotive industry based on market
NTM Trading EV/EBITDA:
capitalization, business model and risk profile. These deals were
EV/EBITDA 7.44x - 10.61x
completed in the last 4 years and we did not include ones with small
deal values compared to market capitalization, leading to 12 LTM Trading EV/EBITDA:
transactions. EV/EBITDA 7.71x - 11.83x
As only EBITDA were published by the companies, we have
conducted our analysis based on this multiple. Here the price ranges € 20,00 € 120,00 € 220,00
are much wider than for company comparables and also the LTM Share Price
median share price with value of EUR 119. Figure 36: DDM Input
16,00
34%
Discounted Dividend Model (DDM)
12,00
With regards to the Discounted Dividend Model, three different
scenarios were constructed to account for certain situations to gain a 31%
8,00
more robust range for the valuation. In the first scenario, dividend
growth was calculated from the historical CAGR (2011-2017) of 4,00
28%
11.50% and constructed to decline linear by 0.5% every third year.
The second scenario follows a similar pattern, however, the linear 0,00 25%
growth rate is inclining (-0.5%) meaning that the historical CAGR of 2013 2014 2015 2016 2017
11.50% is met in the final three years. The final scenario assumes
absolute growth, calculated by the average of absolute dividend DPS EPS Payout Ratio
growth of the past four years (€0.52 p.a.), for the next 11 years. Based
on these three scenarios the resulting share price of BMW Group is
EUR 80.21.
7. Investments Risks Figure 37: Risk matrix

Operational Risk Macroeconomic Risk
Financial Risk
Market Risk Regulatory Risk
F1: The liquidity risk borne by BMW Group is low. Since more than five
years the company’s current ratio fluctuates around 1.00, the quick ratio
and the cash ratio around 0.75 and 0.25 respectively, what is a decent
High
result. The company is of very good financial health, since net debt is only M1
2x bigger than EBITDA. It may be therefore concluded, that liquidity risk
will not influence the investment considerably.
Medium
Probability
F2: The residual value risk and interest rate risk remain significant for
BMW. The car aftermarket is currently very saturated, what drags down R1
the prices of used cars. This poses the risk that the residual value of
leased assets (cars) will be lower than estimated, what may result in write- M1 O1
offs.
Low
Legislative Risk
R1: Being a global enterprise, BMW might be negatively affected by any High
trade barriers. For instance, the Brexit caused 5.7% decline in cars sold in Low Medium
UK, whereas Moody’s forecasts further fall by 5.5%. Similiar situation
Impact
might happen soon at far bigger market, since the US President Donald
Trump has proposed to raise the taxes on imported cars. Source: Team estimate
R2: The risk related to environmental regulations is not very significant.
The BMW Group’s product portfolio already has a large quota of energy- Figure 38: Porters five forces
efficient cars and moreover, it keeps advancing into this market. Since the
environmental regulations appear to be stagnant right now and usually Competiti
have long vacatio legis period, it is more than safe to assume that BMW on in the
Group’s management will act reasonably and will refrain from investing industry
heavily in dirtier combustion engines in time.
Potential
Market Risk Threat of of new
M1: BMW Group bears medium market risk, due to the fact that its substitute entrants to
portfolio of products is very well diversified, yet there is still lack of fully products the
electric models. Impact of any rapid shift of customers’ interst towards industry
electric cars will not last long anyway, since BMW plans to launch 12
electric long-range models until 2025. We cannot forget, however, that
automotive industry is characterized by very tight competition and losing Power of Power of
dominant positions will cost a lot and is likely to have long-term customers suppliers
consequences. Source: Team estimate
M2: Cars, especially premium-class ones are very income-elastic.
Therefore any economic slowdown is likely to have amplified impact on
the Group’s sales. The risk is especially meaningful in context of
Eurozone low-interest era, which might be over soon (45% of revenues).
Figure 39: Costs by input factor
Business Risk / Operational risk
O1: The BMW Grup’s very high reliance on IT systems is likely to 1200
intensify further. Apart from crimes and misconducts related to personal
data, an extremely important class of risks is represented by attacks on 1000
physical infrastructure, that becomes more and more automated.
800
Therefore operational risk related to IT is high and is likely to become
even higher, whereas its potential impact is already enormous. 600
O2: BMW Group declares that the complexity of its supply-chain grows,
especially among low-tier suppliers, what makes it more mutually 400
beneficial, but on the other hand more co-dependent and difficult to
200
manage. Any shortage on the supply side may lead to production
interruptions. Furthermore, the risk related to the quality of purchased 0
components has enormous impact on the Group’s revenues and Costs ($ bn)
reputation in long run.
Macroeconomic risks Material Machines Labour
M1: can lead to reduced purchasing power in the countries and regions
affected and lead to reduced demand for the products and services R&D Others
offered by the BMW Group. For BMW, the reorientation of the US Source: Team estimate
economic policy, the planned exit of the UK from the EU and possible
election wins for anti globalization parties in other EU countries have
shown to be more influential in the past year.
Appendix A: Team Overview I
Alexander Thiel Johannes Wojciech Lata Elias Kurta

Director Scheufele Associate Analyst
Associate
 MSc Finance  BSc Business  BSc Business  MSc Finance

 BSc Business  BSc Business
 CFA Level 2  CFA Level 2
Candidate Candidate
Appendix A: Team Overview II
Valeriya Nóra Zsuzsanna

Krasilnikova Nagy
Analyst Analyst
 BSc Business  MA Business

Consultancy
 BSc Business
Appendix B: BMW Group Global Overview
Headquarters Munich
R&D Facilities
Production Plant
Partner Plant
Source: BMW Group IR
2,1% Germany
7,0% Rossyln, South Africa

9,2%
Spartanburg, USA
11,1% 2,4m Units 47,7%
Dadong, China
5,3%
15,3% Tiexi, China
Oxford, UK
2,2%
Graz, Austria
Born, Netherlands
Appendix C: Management Team
 Harald Krüger  Norbert Reithofer
Chairman of the Board Chairman of the

of Management of BMW Supervisory Board
AG
 Milagros Carreiro-  Markus Duesmann  Klaus Fröhlich

Andree
Purchasing and Supplier Development
Human Resources Network
 Dr. Nicolas Peter  Pieter Nota  Oliver Zipse

Finance Sales and Brand Production
DISTRIBUTION OF INSTITUTIONAL EQUITY

SHAREHOLDER STRUCTURE INVESTORS
2,0% 2,0% 0,7%

Free float North
6,4% America
AQTON SE,
20,7% 33,7% Europe
AQTON GmbH & Co
53,2%
16,6% Susanne Klatten Asia
Beteiligungs GmbH 59,2%
Susanne Klatten
9,0% Rest of World
Stefan Quandt
Appendix D: DuPont Analysis
Du Pont
Analysis 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Tax Burden 65,2% 67,2% 66,6% 59,1% 71,0% 80,9% 79,4% 81,4% 78,8% 79,6% 79,0%
Net Income /
EBT
Interest Burden 97,4% 96,0% 96,4% 95,6% 96,7% 96,3% 88,9% 90,4% 89,6% 90,4% 90,5%
EBT / EBIT %
Operating Margin 10,4% 10,8% 11,2% 10,5% 10,6% 11,2% 7,3% 8,1% 7,3% 7,6% 7,4%
EBIT / Sales %
Asset Turnover 0,60 0,56 0,55 0,56 0,52 0,52 1,04 1,04 1,05 1,06 1,06
Sales / Total Assets
Leverage Ratio 4,44 4,10 4,04 4,10 4,02 3,77 1,71 1,70 1,68 1,67 1,66
Total Assets / Total Equity
Du Pont ROE 17,6% 16,0% 16,0% 13,6% 15,2% 17,1% 9,2% 10,6% 9,1% 9,7% 9,4%
Appendix E: Financial Analysis

REVENUE GROWTH PROFITABILITY
150.000 20%
150.000 15%
14,6%
15% 105.781 113.396
94.163 98.678 12,4% 12,4%
Millions of EUR
100.000 92.175
100.000 80.401 10%
7,2%
10% 8,8%
7,2%
50.000 7,2% 6,9% 7,3%
50.000 5%
5,7% 5%
4,8% 6.910 8.706 13.147 14.100
5.817 6.396
2,2%
0 0% 0 0%
FY 2014 FY 2015 FY 2016 FY 2017 2018E 2019E FY 2014 FY 2015 FY 2016 FY 2017 2018E 2019E
Revenues Net Income Net Profit margin %
Revenues (in Millions of EUR)
EBIT-ROE PERFORMANCE ASSETS & LIABILITIES

15.000 30% 250.000 40%
24,4% 20,8% 27,9% 28,8% 29,4%
Millions of EUR
22,4% 200.000
19,8% 30%
10.000 20%
150.000
17,4% 17,1% 20%
5.000 10% 100.000 27,7% 23,3% 25,7%
50.000 10%
0 0% 0 0%
FY 2014 FY 2015 FY 2016 FY 2017 2018E 2019E FY FY FY FY 2018E 2019E
2014 2015 2016 2017
EBIT (in Millions of EUR) ROE (%)
Total assets Total liabilities LT-Debt/Assets (%)
Appendix F: Valuation
EUR mn
EUR mn
REVENUE FORECAST
160.000
120.000
80.000
40.000
0
2012 2013 2014 2015 2016 2017 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E
CAGR 2012-2017: CAGR 2018-2027:

+ 5.1% + 5.0%
TOTAL EBIT-MARGIN FORECAST

EUR mn
160.000 10,80% 11,34% 12,0%
10,01% 9,70%
120.000
8,0%
80.000
4,0%
40.000
0 -
2012 2013 2014 2015 2016 2017 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E
Revenues COGS EBIT Margin
Stable EBIT Margin

between 9% - 10%
FREE CASHFLOW BREAKDOWN

EUR mn
8.000 10,0%
8,0%
6.000
6,0%
4.000
4,0%
2.000
2,0%
0 -
2012 2013 2014 2015 2016 2017
EUR mn
8.000 10,0%
8,0%
6.000
6,0%
4.000
4,0%
2.000
2,0%
0 -
2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E
DCF BASE CASE – EQUITY BRIDGE

DCF valuation assumptions Current market valuation

WACC 6,314% Current market value (BMW group) 56.767
Terminal EV/EBITDA multiple 7,0x NOSH (m) - all share types 657,1
Terminal growth 1,5% Implied share price 86,4
Tax rate 29,6% Fair Value DCF 80,2
NOSH (m) 657,1 Return % -7,2% Hold
Net Debt (per 31/12/17)

( + )Short Term Debt 40.727
( + ) Long Term Debt 52.831
( - ) Cash & Cash Equivalents (9.039)
( - ) Short Term Investments (7.965)
( - ) Financial Subsidiary Debt (41.582)
Net Debt 34.972,0
Sensitivity Analysis
Fair Price perShare

WACC
80,16 6,01% 6,16% 6,31% 6,46% 6,61% 6,76% 6,91%
0,25% 59,9 54,7 49,7 45,0 40,5 36,2 32,2
1,25% 86,6 79,6 73,0 66,8 60,9 55,4 50,2
Terminal growthrate
1,50% 95,2 87,5 80,4 73,6 67,3 61,3 55,7

1,60% 98,8 90,9 83,5 76,6 70,0 63,9 58,1
1,70% 102,7 94,5 86,8 79,6 72,9 66,5 60,5
1,80% 106,7 98,2 90,2 82,8 75,8 69,2 63,1
1,90% 111,0 102,1 93,8 86,1 78,9 72,1 65,7
2,00% 115,4 106,2 97,6 89,6 82,1 75,1 68,5
2,10% 120,1 110,5 101,5 93,2 85,4 78,2 71,4
Terminal Growth Method 1 2 3 4 5 6

Terminal Value
( + ) Present Value 4.419 4.415 4.418 4.309 4.301 4.275 4.2
Enterprise Value(Jan-2018) 136.606 % TV implied EV/EBITDA x
( - ) Minority Interests (436) 68,1% 5,7
( - ) Net Debt (83.496)
Equity Value(Jan-2018) 52.675
NOSH (m) 657,1
Fair Price per Share (€) 80,16
Terminal Multiple Method

Terminal Value (EBITDA Multiple)
( + ) Present Value 4.419 4.415 4.418 4.309 4.301 4.275 4.2
Enterprise Value(Jan-2018) 135.186 % TV implied EV/EBITDA x
( - ) Minority Interests (436) 67,8% 5,6
( - ) Net Debt (83.496)
Equity Value(Jan-2018) 51.254
Nosh (m) 657,1
Fair Price per Share (€) 78,00
Appendix G: Company History
Establishme Entering into Setting up Acquisition of Founding

nt of BMW automotive BMW Kredit Rolls-Royce DriveNow
1916 industry 1971 1998 2011
1928
1923 1951 1994 2001 2013

The first The first BMW enters Launching Launching
BMW post-war USA MINI brand BMW i3
motorcycle BMW
AUTONOMOUS DRIVING CAMPUS CONNECTED DRIVE
0 No assistance
1 Assisted
2 Partially automated
3 Highly automated
4 Fully automated
5 Autonomous
 In 2021, the BMW iNEXT will take to the roads with

an electric drivetrain and full connectivity
 Around 10 million vehicles in 45 countries are already
connected through Connected Drive
 From mid-2018, Alexa will also be fully integrated into
all BMW and MINI models
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 WUTIS
– Trading and Investment Society with regard to this company’s stock.

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Research Report

 BMW might be negatively affected by any trade barriers. For

1. Business Description Figure 1: Revenue split

2. Industry Overview & Competitive Environment Figure 5: Global car sales

International automobile sales grew by 1.9% to 87.7 million units in 100

China is the most desired market

automakers will undertake unprecedented investment programs to 18,45%

Driverless with autonomous vehicles Figure 10: Motorcycles segment

Figure 14: BMW Strategy number one Rome 1.450

160 Madrid 1.020

3. Management Team & Corporate Governance Figure 15: Shareholder structure

Management Team 2,0%

Responsibility towards employees and society in general DR. NICOLAS

4. Investment Summary Figure 18: DUPont Analysis I

Key risks to our investment thesis:

5. Financial Analysis Figure 21: Part of ROIC Tree

Financial Ratios & Key

financial results also played an important role, resulting from equity

only enjoys good access to international capital markets, but also 10

6. Valuation Figure 28: Target price Equity Bridge

approximately 10% per year. 8.000 10,0%

€ 20 € 70 € 120 € 170 € 220

Figure 33: Benchmarking

7. Investments Risks Figure 37: Risk matrix

Appendix A: Team Overview I

Alexander Thiel Johannes Wojciech Lata Elias Kurta

 MSc Finance  BSc Business  BSc Business  MSc Finance

Appendix A: Team Overview II

Valeriya Nóra Zsuzsanna

 BSc Business  MA Business

Appendix B: BMW Group Global Overview

Source: BMW Group IR

7,0% Rossyln, South Africa

15,3% Tiexi, China

Appendix C: Management Team

 Harald Krüger  Norbert Reithofer

Chairman of the Board Chairman of the

 Milagros Carreiro-  Markus Duesmann  Klaus Fröhlich

 Dr. Nicolas Peter  Pieter Nota  Oliver Zipse

DISTRIBUTION OF INSTITUTIONAL EQUITY

2,0% 2,0% 0,7%

Appendix D: DuPont Analysis

Appendix E: Financial Analysis

EBIT-ROE PERFORMANCE ASSETS & LIABILITIES

CAGR 2012-2017: CAGR 2018-2027:

TOTAL EBIT-MARGIN FORECAST

Revenues COGS EBIT Margin

Stable EBIT Margin

FREE CASHFLOW BREAKDOWN

Unlevered FCF CAPEX D&A

Unlevered FCF CAPEX D&A

DCF BASE CASE – EQUITY BRIDGE

DCF valuation assumptions Current market valuation

Net Debt (per 31/12/17)

Fair Price perShare

1,50% 95,2 87,5 80,4 73,6 67,3 61,3 55,7

Terminal Growth Method 1 2 3 4 5 6

Terminal Multiple Method

Appendix G: Company History