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CFA Institute Research Challenge Hosted by

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Moncler SpA February, 2018

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Sales Ebit Ebitda Net income FCF

Team Estimates and Consensus

Team Consensus

Italy | Apparel & Accessories | Apparel, Accessories, Footwear

Highlights

Source: FactSet

Moncler, growth in the past and future We initiate our coverage on Moncler S.p.A. (BIT:MONC) with a BUY recommendation, assessing a €31.11 target price by the end of 2018 delivering an upside of 10.12% (considering 21st February closing price). We believe the market is undervaluing Moncler, considering the sales growth due to geographical retail expansion, the Chinese market growth and brand strength, as well as the strong profitability due to operational efficiency. Current growth Moncler has exhibited YoY sales growth of 15% in 9M 2017, while sporting a strong EBITDA margin of 34.5% (against a class average of 23%). For the last three years, Moncler has double-digit percentual YoY growth in invested capital, and since going public in 2013, the number of retail stores has grown by over 15% per year on average. Net income had a CAGR of 20% for 2013-2016. Continuing growth in market penetration and size Moncler’s revenue growth is driven by: Overall economic growth; Global economic growth is estimated to be at 3,7% globally. China, where Moncler currently runs 30 retail stores, is estimated to have a GDP growth of 6,5%. Luxury customers are among the groups that most profit from GDP growth, consequently, a similar organic growth rate can be expected in the future as a base rate. Expansion strategy; Moncler continues to enter new markets internationally while further saturating countries with existing retail presence. Due to good practice in supply chain management, the net margin has remained stable despite growth, implying a near-sustainable growth rate. Valuation Our target price of €31.11 is based on the sales growth and global expansion strategy. The sales growth estimate is based on a multi-stage DCF, with variable YoY growth. The DCF target price is then tested by looking at the relative valuation, and combined with equal weight. This completes our valuation to a final target price of €31.11.

Important disclosures appear at the back of this report.

€ mln 2015 2016 2017E 2018E 2027E

Revenues 880.3 1040.3 1160.7 1261.8 2514.9

Gross Margin 74.4% 75.7% 74.9% 75.4% 76.0%

EBIT 252.6 297.6 323.9 358.4 730.3

EBIT Margin 28.7% 28.6% 27.9% 28.4% 29.0%

EBITDA 300 355 391.3 435 895

Capex 66.2 62.3 73.2 67.5 67

Free Cash Flow

182.6 247.7 291.5 379.1 849.1

Net Income 167.8 196 216.6 240.1 488.8

NOPAT 228 259.8 287.9 314.5 647

2017E 2018E 2019E

EPS 0.86 0.96 1.07

DPS 0.18 0.22 0.26

Price to book 8.49 7.40 5.99

ROE 29.5% 25.7% 23.2%

ROCE 35.5% 32.9% 30.8%

Moncler S.p.A. Price: 28.26€ Target price: Upside: Div. Yield: Listed on: Italian Stock Exchange Ticker: MONC-IT, MONC.MI Market Data Main Shareholders

Initial Coverage | 21th February 2018

BUY

Price: €28.25 Target price: €31.11 Upside: 10.12% Div. Yield: 0.6% Listed on: Italian Stock Exchange Ticker: MONC-IT, MONC.MI

Market Data

Main Shareholders

Insiders:

Ruffini Partecipazioni Srl 26.27%

Ecip M Sa 5.31%

Tamburi Investment Partners Spa 2.90%

Institutions:

Norges Bank 2.66%

Morgan Stanley Asia Ltd. 2.51%

The Vanguard Group, Inc. 1.48%

Market Cap (€M) 7,134

Shares outstanding (M) 254.8

Free float 64.9%

Stock Data

52w H/L €28.75/€17.48

Avg daily vol (3Mo) 895,676.8

Key financials

2017E 2018E 2019E

EPS 0.86 0.96 1.07

DPS 0.18 0.22 0.26

Price to book

8.49 7.40 5.99

ROE 29.5% 25.7% 23.2%

ROCE 35.5% 32.9% 30.8%

Source: Company information, FactSet, team estimates


3

1952 - Born in the mountains

From 2003 - quality, timeless-being, versatility, luxury, innovation

From ca. 2008 -INTERNATIONALIZATION

CURRENT KEY ASSETS: high quality, store location, clear strategy and management

RETAIL

WHOLE

SALE

ONLINE

Business description Company Introduction Born in the mountains, living in the city. Moncler is one of the biggest Italian clothing companies, founded in 1952 by René Ramillon and Andrè Vincent in Monestier-de-Clermon, an Alpine town near Grenoble whose abbreviation was gave the brand its name. Firstly focused on the production of sleeping bags, since 1954 it started developing its first down jackets that were chosen to supply important expeditions. In 2003 it was acquired by Remo Ruffini, who elaborated a fundamental repositioning of the brand, whose key features are now high quality, timelessness, versatility and innovation, allowing it to become a luxury brand albeit maintaining its origins. From its listening on the Milan Stock Exchange with its 2013´s IPO onwards, it had only widely positive bottom line with a double-digit growth in revenue every year as a sign of its strong financial stability, outperforming the Italian Stock Market in June 2016. As of Dec 2016, the company had a total of 3,216 employees. The main strengths of the Group are its historical and well-acknowledged brand, its customers recognizing the products´ high quality, the store location, the clear strategy on sales, its management and controlling together with the key point of the internationalization. Moncler operates all around the world with more than 200 stores in Europe, Pacific Asia, UAE, Americas and Australia and with an estimate of over 1.3B€ in revenues. It fiercely claims its uniqueness and fosters the idea of keeping itself unlevered, progressively expanding its business at an increasing rate in terms of number of shops which eventually drives the company’s profitability also in terms of EBITDA margin from the 2013‘s 33% to 2016’s 34%. Business Units The business of Moncler consists in three fundamental channels:

• the so called DOS, directly operated stores, consisting in free standing stores, concessions, travel retail stores and outlets, • the online store, on which the company aims to maintain its direct control, • the wholesale channel, comprising stores managed by third parties that sell Moncler products either in single-brand spaces (i.e. shop-in-shops in department stores) or in multi-brand stores. Business model

The key characteristics of Moncler´s business model is control, which the company exercises over the quality of its products, over its value chain, the store location, and the domestic strategy, highly focused on defining luxury through heritage and innovation, and over their own e-commerce website, Moncler.com, operating in 35 countries, controlled through a fluctuant availability of products.

Secondly, the management of Moncler is a fundamental asset for the company, constantly adding value through its activities and decisions and allowing the overall performance to boost. Throughout the last decade Moncler has taken particular care of its brand, trying to impress a clear message into the minds of costumers. If satisfied customers recognizing the high quality of the products are extremely important to the company, being able to open stores in key places, able to fit with the image the management is willing to create has become essential for Moncler.

That´s why the management, according to its branding development, has put a lot of efforts so far to build a network of exclusive stores all around the world. New York, London, Seoul, Paris, Moscow, Hong Kong and Milan are the main cities in which Moncler has opened mono-brand stores in the most glamour avenues.

All these policies are connected to the element Moncler wants to focus the most: the perceived and recognized quality. Thanks to the image that branding campaigns have been building, costumers perceive a high quality of the products and are willing to pay for buying an image rather than simply a cloth.

Business segments In this section we analyze the brand products that Moncler has expanded over the years: • high fashion - Haute Couture, with the Gamme Rouge (launched in 2006) and Gamme Bleu (launched in 2009) collections, whose key features are the exclusivity of the products and the limited availability to the most prestigious boutiques worldwide, • the Grenoble collection (2010), the more technical and innovative one, with ski products reminding of the roots of the company, • the Special Projects, consisting of experimental labs created for extraordinary collaborations with renowned designers, • the products of the Main collection combining high quality to various uses, • the enfant products, knitwear, shoes and eyewear.

CONTROL OVER THE MAIN PHASES

MANAGEMENT BOOSTING THE PERFORMANCE

INTERNATIONAL STORE NETWORK

QUALITY

KEY COMPANY FEATURES

KEY BUSINESS MODEL

FEATURES

Haute Couture lines

Grenoble

Special projects

Main collection

Enfant, knitwear, shoes, eyewear


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Collection development

Raw materials purchasing

Production

Quality inspection

Delivery

Production and value chain The supply chain involves four categories of suppliers – the majority of which (75.4%) is located in Italy. Raw material suppliers: fabrics are sourced from Italy and Japan, accessory components from Italy, furs from Europe, down from Europe and North America. Faco̧n manufacturers, supplied with raw material and characterized by a high technical know-how, are based in Eastern Europe (Romania). Finished product suppliers: cut-and-sew product suppliers are based in Europe and Turkey; soft accessories are produced by Italian suppliers; handbags suppliers are European, mainly Italian. Service suppliers are local suppliers, based near the Group itself. The quality inspection is a key phase of the value chain, for which Moncler has been awarded the Down integrity System and Traceability certification for ensuring animal welfare. The Gammes are produced entirely in Italy. Strategy Production and Distribution Channels On the whole, the production process, monitored by Moncler experts, takes place in Eastern Europe, in Romania, where faco̧n manufacturers are located, and is entirely focused on quality. Distribution places the focus on the customer and occurs worldwide in the major markets through two main channels, i.e. the wholesale channel, consisting of multi-brand stores and shop-in-shops located in department stores, and the retail channel, comprising DOS and online stores. Exerting control over these distribution channels is the major scope of the company’s strategy. The aim of direct managing its markets and core activities is reached through strong local management teams that work in coordination with the headquarters. Furthermore, Moncler is planning to concentrate its program in terms of expansion-relocations and new openings only on mono-brand stores in order to empower its brand campaign and boost its revenues. When scouting the most suitable locations for the stores, it is important for the company to carry out a qualitative evaluation of the brand mix characterizing the streets and the purchasing power of the potential customers frequenting that particular location. By taking into account the regional distribution, retail-shops are located mainly in Asia and in EMEA (respectively 94 and 55, as of December 2016). Pillars The Company officially defines its strategy summarizing its long-term vision in six key statements. Moncler’s intention is to pay attention to the continuous development of the brand, conveying its uniqueness and supporting it internationally, and to the monobrand distribution. The retail excellence aims at increasing the customer experience, in particular by strengthening clienteling activities and improving in-store operations and design. The Group is also concentrating on the improvement of the digital channel. As regards product and production, Moncler is currently planning to selectively expand in complementary product categories and is placing a strong focus on knitwear. Furthermore, the Group is paying strong attention to sustainability and responsible long-term development.

Investment Summary Drivers In order to better understand how Moncler’s business is run, an analysis of its main drivers has to be carried out. First of all, one needs to identify such drivers. These are: the number of retail shops, the average square meters per shop and the sales per square meter. The company’s management strongly believes that an increase in the number of mono-brand stores will be beneficial for the company, as it will boost the sales and concretize the branding campaign. These drivers are likely to explain how the growth will work. Let us go through them. First, considering the number of retail shops, we considered an average increase by fifteen shops every year. This assumption is based on the management’s declarations and it will bring the company to have over 350 retail stores within 2027. It must be mentioned that wholesale will be definitely avoided. This growth is consistent with the company’s policy of basing itself on a retail-based strategy. Second, the average square meter per shop has to be taken into account as a main driver. In this case, the average size of the shops will grow up to 200 square meter as an average. This growth starts from now, with an average of 125 square meter, and is likely to achieve the target by the end of 2025. An increased number of shops and an increased average surface, are likely to drive to consequences. This brings us to the third driver, which is the sales per square meter. In fact, due to the increase in both the number of the shops and the average square meter, Moncler must have a large increase in revenues in order to keep this driver at the level that has been showing through the last years.

Strategy

1. Development of the brand

2. Monobrand distribution

3. Retail excellence

4. Digital

5. Product and production

6. Sustainability

Moncler operates on retail, wholesale

and ecommerce channel


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These three drivers are representative of the company and clearly show how it runs because they are strictly related to its core business. If the average sales per square meter increase along with an increase in number of shops and average square meter per shop, as it is expected to perform, it means that the company is improving its profitability. Nonetheless, the average sales per square meter let us avoid the volume bias, as it focuses on a ratio and not on an absolute number. To conclude, we ended up concluding that these three driver are representative of the business. As their simultaneously growth positively correlated with the one of the company, we can conclude that the company is likely to enhance its overall performance and revenues through this retail-based strategy.

Risks Macro risks: Spending on luxury goods might decrease because of a slowdown in the GDP growth. Government regulations jeopardizing Chinese customers’ purchasing power could contribute to a slowing sector growth. Global shopping trends could also be affected by fluctuations in consumers’ confidence and other asset classes’ performances. Strategic risks: Missing opening opportunities and pursuing relocations differently as planned might prevent the correct implementation of the retail expansion. The business performances could be negatively affected by overnight deficiencies in the supply chain and by a difficult provision of key raw materials. Financial risk: Keeping a close eye on the increase in Euro strength in relation to USD and JPY weakness could be fundamental for euro-denominated luxury Groups. Operative risks: Low sales density would harm the overall performance of the company. A failed correspondence between low inventory levels and an efficient replenishment and an inattentive analysis of the inventory mix would exert a negative effect on the sustainability of increasing gross margins.

Financials On the basis of our financial analysis concerning the Group, we estimate a steady increase in the revenues and in profitability driven by a major growth in the retail sector. We expect revenues to increase from €1160m in 2017 to €2514m in 2027, with Gross Margin equal to 76%. Moncler’s EBIT will increase to €730m in 2027, with EBIT margin corresponding to 29.04%. We predict a continuing free cash flow generation, foreseeing €849m available in 2027, and an increase in EBITDA to €895m in 2027. Net Income from continuing operations will grow from €216m in 2017 to €488m in 2027.

Valuation – Target Price Our year-end target price of €31.11 results from a combination of two valuations, i.e. a company valuation based on a DCF analysis supported by a relative company valuation based on multiples (EV/EBITDA, EV/EBIT, P/E). We first performed a multi-stage forecast model, basing the DCF on the revenue drivers, sales growth and FCF projections and assuming the terminal value added after 10 years. This led the DCF component of the target price to be €35.24. We proceeded by taking into account an average of the implied stock prices for the different multiples’ values, arriving at a relative valuation component of the target price of €26.98. The equally weighted combination of the DCF component with the relative valuation component leads to our final target price of €31.11.

Industry Overview and Competitive Positioning Industry Overview Apparel market The reference industry is the global apparel sector, which currently grows at a healthy and increasing rate, being characterized by short product life cycles and a great product differentiation, which means that even renowned brands have to make great efforts to maintain their market share and continuously offer functional clothing articles. Furthermore, the global apparel market is a very mutating one, as fashion is traditionally always following trends and innovation. It is currently valued 3 trillion dollars, accounting for the 2% of the world´s GDP. (source: Fashionunited). Moncler is not only an apparel company, but also a key actor within the fashion & luxury market. In 2015, the main strategies followed to create economic value from fashion and luxury companies were development of new distribution channels, penetration of new geographical markets, and focus on the supply of always fresh products, in terms of innovation (source: Deloitte). Macro Trends Population movement, sustainability and climate challenge. By the 2050, 70 out of 100 people worldwide will live in cities, which already now represents a big challenge in terms of sustainability and the creation of sustainable cities for national governments. The most

2017E 2018E 2027E

Revenues 1,160 1,261 2,514

Gross Margin 74.9% 75.4% 76.0%

EBIT 323 358 730

EBIT Margin 27.9% 28.4% 29.0%

EBITDA 391 435 895

FCF 291 379 849

Net Income 216 240 488

Domestic market values of the Fashion sector in billions

Italy 60.5€

France 48 €

UK 66£

EU 295.6£

Usa 385.7$

Japan 97$

China 795.5¥

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Totalfashion

Luxury Discount Europeemerging

APACemerging

Source: McKinsey Global Fashion Index

Exhibit 2 - Global Fashion sales growth 2018 forecasts

3.5-4.5%

4-5%

4-5%

5.5-6.5%

6.5-7.5%



Exhibit 1 – Key Financials

Exhibit 3


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rapidly growing regions in terms of individuals´ and families´ movement from rural areas to cities are East Asia and the Pacific (actual annual urbanization rate 3%) and Africa. More than 80% of global GDP is generated in cities, which also play an important role in facing climate change, since they consume close to 2/3 of the world´s energy and account for more than 70% of global greenhouse gas emissions. [source: World Bank and UN World Urbanization Prospects] Middle class growth. Increasingly demanding and sophisticated consumer base. Key factors: GDP growth (real GDP growth 2015-2020: India 40%, China 33%, Indonesia 30%), productivity growth (average annual growth in productivity, CAGR of labour productivity measured in real US$ per person employed: China 8%, India 6%, Thailand and Indonesia 4%), attractive business environment (ease of doing business from 1 to 190 countries – 1 as best, June 2017: China 78, India 100, Thailand 26, Mexico 49, Russia 35). [source: Euromonitor International from World Bank, OECD forecasts] A more connected world. Worldwide Internet users: 2005 16%, 2010 30%, 2016 47%. [source: International Telecommunications Union] Micro Trends CAGR: 6.0% for luxury and 5.0% for mid-market from 2005 to 2015, source – Businessoffashion. Forecasts as regards the size of the global apparel market expect it to generate double digit growth between now and 2020, which is significantly guided by developing markets. Particularly relevant is the increasing buying power among the Asian emerging middle class, which is now beginning to view clothes as the expression of its new lifestyle. These consumers represent a great potential for the market since they are currently travelling and shopping abroad more and more. By 2020, foreign spending of Asian-Pacific residents outside of their home countries will triple, totaling $600 billion. In the luxury goods segment, 75 percent of all sales will be from Chinese consumers, with more than half of that being spent outside of China [source: Mc Kinsey]. Geographic overview The Moncler Group operates in local markets through five regional organizations:

• Europe, managed from the Italian headquarters. In Europe, Italy represents the core market, with the turnover increasing of 4.5% from 2015 to 2016 thanks to the growth of both the retail and the wholesale channel. Italy alone brought 34% of the sales in 2010, which by the end of 2016 was 14%. In the rest of Europe turnover rose by 13% in 2016, with the opening of the London Old Bond Street flagship resulting in a strong performance. • Asia Pacific Region, with offices in Hong Kong and Shanghai. • Korea, with offices in Seoul. • Japan, with offices in Tokyo. If the European region resulted for the 76% of sales in 2010, now Italy and the rest of Europe account for the 43%, with the Asian-and-rest-of-the-world region accounting for 40% (against the 18% of the end of 2010). • Americas, with offices in New York. Even this region saw many openings from 2010 to 2016, with an improvement in the influence on sales from 6% to 17%. The number of stores worldwide is 207 (Dec 31st, 2017), 4 wholesale and 203 retail shops.

Competitive Positioning Overall competitive landscape Moncler is placed, in terms of financial performance, above average, but still below the truly big competitors, especially in terms of sales and size. Roughly, the competition can be split into three groups: Italian Premium: Smaller Italian premium brands like Herno or Colmar are lower in terms of pricing. They are not really luxury and do not have the necessary size or brand strength to compete. The threat level is low.

01234

Intensity ofInternalRivalry

BargainingPower of

Buyer

BargainingPower of

Buyer

Threat ofNew

Entrants

Presence ofSubstituteProducts

Porter´s 5 forcesScale 1-5

Luxottica

Hermes

RichemontPrada

LVMH

Burberry

FerragamoHugo Boss

Kering Luxury

Brunello CuccinelliTod's Group

Canada Goose

Moncler

10%

15%

20%

25%

30%

35%

40%

45%

15 20 25 30 35 40 45 50 55 60

EBIT

DA

Mar

gin

P/E

Exhibit 4 - Map of countries where

Moncler´s shops can be found,

colors with % in sales in the text


Exhibit 5 -

Exhibit 6 - Competitive position against competitors




7

Aspiring luxury: Canada Goose has been extending its outerwear product line, and is placed beneath Moncler in pricing. However, their focus is more on function than luxury. Threat is low to medium, but should be monitored. Established global brands: The true competition for Moncler consists of the strong global luxury brands like Prada, Burberry, and Gucci (owned by Kering), all of which sport small outerwear product lines. None of them is as specialized in outerwear as Moncler, but the key takeaway is that they are superior in terms of brand recognition and firmly placed in the luxury sector. Competitive Drivers The largest factor in terms of competition is the brand strength. All notable competition and big players in the luxury sector have immense brand strength, recognition and strategy. The image of exclusivity and perceived quality and relevance drive customer demand. Compared to Moncler, competitors are somewhat less concentrated on retail. The threat of substitute products is medium, as there is no barrier for substitution or exit in the luxury outerwear market. Though customer loyalty is pertinent, it grows and shrinks with brand strength. Additionally, the right balance between demand and supply must be applied. Supply shortages in the past have been exploited by the competition; at the same time, the exclusivity of Moncler products should not be diminished by supply surplus. Concerning existing competitors, the most important group in Moncler’s competition, the threat is medium, for now. The large players have their respective specialization areas and remain there in terms of product and brand differentiation. However, the risk remains and would grow considerably if the competition chooses more aggressive strategies. On the other hand, new entrants pose little risk, as the entry barriers for the luxury industry are high; the required time and money for building a significant brand strength are immense. Barring any unpredictable acquisitions (as Moncler itself was), no significant development is to be expected. In terms of pressure from suppliers, Moncler has reduced the number of sourcing to few companies in Italy, Germany, France, the US and Japan, choosing the ones that best fit their criteria, mainly in terms of geographical vicinity, quality and transparency. There is not a huge amount of suppliers that meet their high standards; however, the suppliers are in general in a weaker position to make demands.

Competitive advantages and disadvantages Moncler is visible and placed firmly in the luxury area, with a niche leadership in luxury outerwear. They maintain exclusivity with high prices and no markdown policies, paired with a decrease in wholesale. Their online retail presence is mainly to manage online demand and control the channel; the majority of sales goes through their retail stores. The fashion aspect is not too strong to inhibit global appeal, and their sales per square meter is considerable. Their proliferation and retail store position is strong and increasing, and is not easy to replicate without considerable investments. Brand strength is not so much an advantage but a differentiation attribute, and some competitors simply have more of it. Brand in general is not easy or fast to grow. Moncler will need time to reduce this disadvantage, the same goes for the weaker competitors.

Financial Analysis Our historical analysis starts from the year in which the IPO of Moncler took place, 2013. We carried out a 10-year period future analysis comprising annual estimates for the years 2017-2027.

Historical analysis Revenues Moncler’s revenues reached €1040m in 2016, up to 79% from €580m in 2013. By analyzing the trend in the revenues during the above mentioned time frame, we noticed a steady increase in sales that is attributable to the growth in the retail sector. This growth reached its peak value at €764m in 2016, representing 73% of Moncler’s sales, and it is positively correlated to the new openings of retail shops (83 new retail shops were opened in 2016 with respect to Moncler’s distribution as of December 2013) and to the increasing number of sales per square meters. In the wholesale sector, revenues increased slightly over time, approaching their upper value at €276m in 2016 (€247m in 2013), 27% of the total sales. The slight increase in the wholesale revenues is coherent with the group’s declared strategy to focus on the retail area. In 2015 we notice a slight decrease in this sector’s sales, which is related to the lower number of new openings compared to the previous year (34 in 2015, 28 in 2014). We drew attention to the historical analysis of Moncler’s revenues by taking into account the distribution channel. However, the nature of the business requires to break down

0

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0.6

0.8

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2013 2014 2015 2016

Mill

ion

s

Exhibit 9 - Revenues by distribution channel

Sales Wholesale Retail

5.70

2.80

8.00

3.40

2.50

3.10

2.40

2.60

1.80

3.50

3.70

2.10

8.68

5.70

Moncler

Luxottica

Hermes

Richemont

Prada

LVMH

Burberry

Ferragamo

Hugo Boss

Kering Luxury

Brunello Cuccinelli

Tod's Group

Canada Goose

Moncler

EV/Sales 2018E EV/Sales 2017E

EV/Sales 2016

19.40

22.00

17.60

31.00

19.40

20.60

17.30

20.20

25.60

31.80

22.10

68.59

19.40

28.80

26.30

38.70

33.80

30.10

24.10

22.30

28.30

19.90

25.20

39.10

27.00

64.58

29.03

27.33

24.30

35.40

24.10

29.20

22.00

19.40

28.50

19.30

21.10

34.60

23.80

49.68

27.52

Moncler

Luxottica

Hermes

Richemont

Prada

LVMH

Burberry

Ferragamo

Hugo Boss

Kering Luxury

BrunelloCuccinelli

Tod's Group

Canada Goose

Moncler

P/E 2018E P/E 2017E P/E 2016




Exhibit 7 – Multiples overview

Exhibit 8 – Multiples overview


8

revenues by region. On the whole, there was a steady growth in each region. In Asia, sales increased significantly from €181m in 2013 to €418m in 2016. These values led Asia to become the leading region in terms of sales’ growth since EMEA (excl. Italy), which was originally the region with the highest sales’ volume (€200m in 2013), reached only €303m in 2016. Italy and America reveal lower values, reaching respectively €143m and €175m in 2016. Margins Gross Margin. Gross margin increased slightly over time from 71.3% in 2013 peaking at 75.7% in 2016. Ebit Margin. Ebit margin remained steady at 28%. Returns and Cash Flows Returns. The acquisition of shops led certainly to an increase in Capital Employed. However, this increase in CE did not exert a negative effect on ROCE, which slightly increased from 30% in 2013 to 33.84% in 2016. It is important to notice that as shareholders’ equity value and net income increase, Return on Equity increases from 24.49% in 2013 to 27.86% in 2016, although, by comparing the 2016 result to the returns for 2014-2015, the company seems to register a lower value. Cash flows. Moncler was able to generate increasingly Free Cash Flows overtime. The steady increase in Capex, mainly due to the retail based strategy adopted by the company, was outweighed by a positive trend in the Ebitda. In spite of a general increase in Capital expenditures from €34m in 2013 to €62m in 2016, Capex decreased slightly in 2016 because of higher costs per m2 related to the openings of retail shops in New York, London and Seoul.

Future analysis Revenues We expect Moncler’s revenues to increase steadily from €1160m in 2017 to €2514m in 2027 with a major growth in the retail sector, as in the long run we do not assume new openings of wholesale shops. These future projections are based on the assumptions made on the drivers of the sales’ growth, which we identified in the number of new openings, the sales per m2 and the shops’ surface. According to the management, the average surface of the shops will grow up to 200 m2 and the company will have an increased number of retail shops by 2027. Thus, we expect Moncler to more than double its revenues. Drawing the attention to the regional breakdown, we assume that Asia will confirm its leading position, reaching €836m in 2027. In EMEA (excl. Italy), we expect revenues to increase from €343m in 2017 to €745m in 2027. Margins and costs Gross Margin and Ebit Margin. We expect an increase in Gross Margin from 74.87% in 2017 to 76% in 2027 driven by the steady growth of the sales and the increasing cost of goods sold over time, whereas EBIT margin is expected to increase more significantly, from 27.91% in 2017 to approximately 29% in 2027. SG&A expenses. Our expectations towards these expenses’ categories foresee an increase in both the selling costs and in the general and administrative expenses. On the whole, we expect a major and significant increase in the selling expenses based on the nature of the drivers of the growth. Thus, according to our forecast, these costs will increase from €348m in 2017 to €755m in 2027, whereas general and administrative expenses will grow from €103m to €223m. The increase in G&A expenses is also driven by those R&D costs linked to collaborations and consulting. Advertising expenses. We consider an increase in the advertising costs coherent with our growth assumptions based on the identified drivers. Therefore, we expect these expenses to increase from €76m in 2017 to €164m in 2027. R&D expenses. According to the management, Research and Development costs incurred for the development of technical products and for testing products and machines should be categorized as cost of sales, which we expect to increase from €291m in 2017 to €603m in 2027. Returns and Cash flows Returns. We expect CE to increase significantly overtime because of the implementation of the retail expansion. This will exert a negative effect on the ROCE in spite of the predicted steady growth of the EBIT, which will increase to €730m in 2027 according to our estimation. Thus, we foresee a decrease in ROCE from 35.5% in 2017 to 13.3% in 2027. We also expect ROE to decrease from 29.5% in 2017 to 9.5% in 2027. This is due to the fact that we expect the increase in shareholders’ equity to be greater than the net income growth. Cash flows. We expect Moncler to continue to generate increasing Free Cash Flows. We estimated a significant increase in FCF from €291m in 2017 to €849m in 2027 by taking into account a positive trend in the EBITDA and negative changes in the Working Capital. We foresee an increase in Capex, reaching its peak value at €99m in 2024, driven by the growth

€ 130,931 € 200,413 € 181,633€ 67,600

€ 130,625

€ 232,743 € 235,135

€ 95,668

€ 136,997

€ 268,468 € 333,501

€ 141,427

€ 143,186

€ 303,344€ 418,524

€ 175,257

Italy EMEA (excl.Italy)

Asia&Restof the world

Americas

Exhibit 10 - Revenues by region (mln)

2013 2014 2015 2016

0

200

400

600

800

1,000

Exhibit 13 - Cashflows Forecast

EBITDA Capex Free Cash Flow

0%

20%

40%

60%

80%

100%

2013 2014 2015 2016

Exhibit 11 - Margins

Gross Margin EBIT margin

€ 0.00

€ 0.50

€ 1.00

€ 1.50

€ 2.00

€ 2.50

€ 3.00

2017 2019 2021 2023 2025 2027

Mill

ion

s

Exhibit 12 - Revenues Forecast by distribution channel

Sales Wholesale Retail






9

of Capex for retail. Accordingly, our analysis shows lower values of capital expenditures starting from 2025, as Capex for retail in compliance with our estimations starts to decrease from €81m to €50m in 2027. WACC

Risk free rate Rf 2% Yield on the Italian BTP 10Y as of Feb. 2018

Equity Risk Premium MRp 4.75% Team estimation

Beta ß 0.77 Beta adjusted 5Yrs

Cost of equity Re Capital Asset Pricing Model Re = Rf + β ∗ Mrp

Cost of debt Rd 0.25% Leasing contracts´ coherent risk

Tax rate Tc 33% Average of the last years´ tax rates

Complete explanation in the Appendix

DCF Method


Due to the forex, equity market and margin sustainability risks (see app. 8), we adjust the WACC upwards by 3.4% to 8,6%. Using the adjusted WACC and a terminal growth rate of 2%, we propose a multi-stage forecast model. We based the DCF on the revenue drivers, Sales growth and subsequent FCF projections, with growth fading over time (due to market forces and diminishing returns for competitive advantages), and the terminal value added after 10 years. The growth phase lasts until 2022, followed by a stabilizing phase of 5 years, followed by the terminal saturation phase, at which point growth will settle at 2%. This leaves the DCF component of the target price at 35.24€.

Multiples Analysis We carried out a relative company valuation based on 2017 and 2018 multiples (EV/Sales, EV/Ebitda, EV/Ebit, P/E) taking into account comparable companies in terms of business products (luxury brands) – Luxottica, Hermes, Richemont, Prada, LVMH, Burberry, Ferragamo, Hugo Boss, Kering Luxury, Brunello Cuccinelli, Tod’s Group. On the whole, the results of the analysis allow to predict, for both 2017 and 2018 (2yrs forward data: EV/Sales 5.0x; EV/Ebitda 14.6x; EV/Ebit 17.7x; P/E 27.3), multiples higher than theaverage value given by the valuation of the peers that we took into account for the analysis (2yrs forward average values: EV/Sales 3.0x; EV/Ebitda 13.3x; EV/Ebit 17.5x; P/E 25.6x).

Source: Company information, FactSet, team estimates Methodology. In order to predict the enterprise value used for the multiples’ computation, we have foreseen for 2017 a market capitalization amounting to €6118m. In 2018, we expect a higher market cap, i.e. €6369m, according to our estimation.

5.2

7

5.0

5

15

.64

14

.64

18

.89

17

.77

28

.80

27

.33

3.2

6

3.0

1 14

.65

13

.27

19

.51

17

.55

28

.62

25

.61

2.8

0

2.7

0

13

.10

12

.80

18

.70

16

.30

27

.00

24

.10

2 0 1 7 E 2 0 1 8 E 2 0 1 7 E 2 0 1 8 E 2 0 1 7 E 2 0 1 8 E 2 0 1 7 E 2 0 1 8 E

E V / S A L E S E V / E B I T D A E V / E B I T P / E

EXHIBIT 17 - MULTIPLE ANALYSISMoncler Average Median

€ 0

€ 200

€ 400

€ 600

€ 800

2017 2019 2021 2023 2025 2027

Exhibit 14 - Expenses Forecast

Gen&Amm Exp

Selling Exp

Advertising Ex

Source: Company information, FactSet, team

estimates

Year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

FCF 142,488 171,300 232,011 274,142 360,216 427,757 468,830 521,259 569,485 623,947 678,299 731,008 765,407 811,467

Growth 20,2% 35,4% 18,2% 31,4% 18,8% 9,6% 11,2% 9,3% 9,6% 8,7% 7,8% 4,7% 6,0%

PV of FCF 274,142 331,690 362,692 366,038 374,744 376,993 380,337 380,726 377,819 364,270 355,609

Historicals Growth Phase Stability Phase

DiscountedFCF2018-2027 3670.918

TerminalGrowth 2%

WACC 8.6%

TerminalValue2022 12540.859

PVofTerminalValue 5495.776

EnterpriseValue 9166.694

NFP 191

EquityValue 8,975.694

NumberofShares 254.7

TargetPrice(€) 35.24

Source: Company information, FactSet,

team estimates

Exhibit 16 – Target price

Exhibit 15 – DCF


10

Taking an average of the implied stock prices for the different values, we arrived at:

The relative valuation component of the price is €26.98. Combining it with the DCF component at equal value, our target price is 31.11€.

Risks Based on the structure and the targets of Moncler’s business, we identified a number of risky occurrences that the company might encounter. Macro risks Slow GDP growth, Shrinking Chinese demand, New shopping trends. Since spending on luxury goods are strongly correlated to GDP growth, the main risks would be a slowing GDP growth and negative economic developments. Another relevant risk would be a decreasing purchasing power of Chinese tourists, a major force driving the sector growth, due to government regulations affecting Chinese consumers’ travelling and spending possibilities. Fluctuations in consumers’ confidence and peaks in other asset classes might also lead to changes in the global shopping trends. Strategic risks Implementation of the retail expansion, Supply chain and raw materials provision, Fashion risks, Seasonality. Strategic risks are company-specific risks. A failure in carrying out the retail expansion would be the most obvious risk, which could be incurred missing opening opportunities in the right locations and not pursing the relocations planned by the Group. Another relevant risk would be a deficiency in supply chain performances, being the supply chain the backbone of the business and relying the company on an efficient supply chain organization. A further related risk would be a provision of strategic raw materials difficult in terms of availability and costs. Moncler might also incur a relative fashion risk in relation to the ascent of Goose down jackets. Hardly predictable fluctuations in the seasonal patterns of demand would be an additional risk. Financial risks Forex. A key risk concerning euro-denominated groups operating in the luxury sector would be an increase in Euro strength in relation to USD and JPY weakness. A potential CHF evolution should be taken into account. Operative risks Low sales density, Inventory and replenishment, Gross margin sustainability. Since sales density represents revenues per square meter, i.e. one of the identified drivers of the company’s growth, a significant risk would be a lower value of this figure, as it would jeopardize the overall performance of the business. Another relevant risk would be a lack of harmony between low levels of inventory and an efficient replenishment of the products. Furthermore, a superficial adjustment of the inventory mix would lead to a negative repercussion on the sustainability of an increasing gross margin.

Corporate Governance and Social Responsibility Corporate Governance Governance The main conflict of interest of Moncler may be the fact that the CEO is also the chairman of the board of directors and also owns the majority of shares. The board of directors is composed of 11 members 6 of which are independent (54%). There are 3 committees (Control, Risk and Sustainability committee, Nomination and Remuneration committee and Related Parties committee) among the board of directives formed almost entirely of independent directors except the Nomination and Remuneration committee which fairly has an internal director. Apart from the Control, Risk and Sustainability Committee, which has the duty to monitor and consult the board, other Control Systems are: Board of Statutory Auditors, the independent external audit firm, the Group Internal Audit Manager,

TargetPrice

EV/EBITDA2018 EV/Ebit2018 EV/EBIT2019 P/E2018 P/E2019

Average 13.3 17.5 15.9 25.6 23.7

Sales

EBIT 382,000,000 424,000,000

EBITDA 438,000,000

EPS 1.07 1.19

impliedEnterpriseValues 5,813,454,545 6,702,363,636 6,741,600,000

-NFP 191,374,000 191,374,000 191,374,000

MarkCap 6,004,828,545 6,893,737,636 6,932,974,000

AverageOutstandingshares 250,168,324 250,168,324 250,168,324

Targetprice €24.00 €27.56 €27.71 €27.40 €28.20

AverageTargetprice €26.98

Exhibit 18 – Target price

Source: Company information, FactSet,

team estimates


11

one of the directors (S. Buongiovanni) with the duty of Internal Control and Risk Management System, the manager in charge of corporate accounting documents and the Supervisory Body. One noticeable fact is that there is a control’s system’s redundancy and some people have more than one duty of supervision, which can be seen as a conflict. Management Remo Ruffini is the CEO since 2003 and before he managed and owned another clothing company (New England) for 18 years until 1999. The directors’ team is formed by 6 people, 66% of which has previous experience in other companies or holds other positions in other companies, with 2 of them having previous experience in the clothing sector. Best Practices Moncler is in compliance with the Code of Ethics released from Italian Stock Exchange. It has adopted an anti-corruption policy to ensure that there is no single person in charge of a specific duty or relationship with a stakeholder by ensuring the traceability and accountability of tasks, may it be from the public or private sector. For that purpose, a whistleblowing procedure is available by contacting an external firm that is in charge of taking and evaluating every non-compliance notification. Furthermore, Moncler adopted an Enterprise Risk Management System that evaluates every type of risks, implements risks mitigation actions and lastly keeps a register in order to keep track of founded solutions. Ownership Regarding ownership there is a very low chance from institutional owners to influence the management on the decisional point of view. Singularly, they possess a maximum percentage of 2.66% (together 35.45%), which means that the coordination of all these funds would require an extreme effort. Generally, the activism is very low except for two cases that aren’t relevant enough. Ruffini, the CEO, owns the most shares with a quota of 26.27% and the internal ownership totals 35.13%. Although the CEO is mostly free to run the company as he likes, a class action could potentially remove him from office, if necessary. Due to the difficulties in the organisational aspect of gathering a majority, an action to stop managerial decisions is to exclude. All in all, since there is a concrete possibility (even though small) of a potential removal of the CEO, it can be said that the minority interest is safeguarded thanks to the last 29.9% of unknown ownership.

Source: FactSet Remuneration Remuneration reports are discussed and approved by the Board of Directors once a year after the proposal of the Nominations and Remuneration Committee and have to be in compliance with the Corporate Governance Code provided by the Italian Stock Exchange. The KPI for determining Top Line Management’s remunerations are EBITDA, FCF and the Sustainability Plan Accomplishments. For other positions the variable component is determined by a Scoreboard composed by 4 dimensions: Finance, Customers, Process and Learning/Growth. Other forms of incentives and remuneration plans are performance shares’ plans and performance stock option plans.

Source: Company information Social Responsibility Moncler is heavily focused on its sustainability in every aspect, from the corporate to the human recourses (stakeholders) to the environment. A sustainability plan is implemented, whose product is a Sustainability Report, also used to calculate remunerations based on non-financial KPI’s. Communication is fostered among stakeholders in order to satisfy needs and improve efficiency. The wellbeing of the employee inside and outside working time is promoted. The supply chain is made accountable for the raw materials by certifying the traceability, lowering the environmental impact, reducing energy consumption and employing renewable resources, as well as supporting scientific research with donations to foundations or local communities. All these efforts are made in order to improve the image of the brand and creating a long lasting solid business by safeguarding its interests not only taking care about itself but also by taking care about the whole supply chain from the raw materials to the end product.

Exhibit 19 – Ownership

Exhibit 20 – Remunerations


12

Appendix – Table of contents 1. PRODUCTS DESCRIPTION 2. REVENUE ESTIMATION 3. PORTER 5 FORCES AND SWOT ANALYSIS 4. FINANCIAL ANALYSIS 5. WACC COMPUTATION 6. DCF 7. RISK ANALYSIS 8. CORPORATE GOVERNANCE


13

1. PRODUCTS DESCRIPTION The company is extremely characterized by seasonality, which structures its offering.

Source: Company

information, FactSet,

team estimates


14

2. REVENUE ESTIMATION

Historical trends

Year

2013 2014 2015 2016

Sales

580,570 694,180 880,390 1,040,300

By distribution channel

Wholesale

247,020 263,500 260,710 276,130

Retail

333,550 430,680 619,680 764,170

By region

Italy

130,931 130,625 136,997 143,186

EMEA (excl. Italy)

200,413 232,743 268,468 303,344

Asia&Rest of the world

181,633 235,135 333,501 418,524

Americas

67,600 95,668 141,427 175,257 Source: Company information, FactSet, team estimates



247,020 263,500 260,710 276,130333,550

430,680

619,680

764,170

580,570

694,180

880,390

1,040,300

2013 2014 2015 2016

Revenues by distribution channel

Wholesale Retail Sales

0

100000

200000

300000

400000

500000Italy

EMEA (excl. Italy)


Americas

Revenues by region

2013 2014 2015 2016


15

Future trends Year 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

Sales 1,160,747 1,261,802 1,392,504 1,530,685 1,676,354 1,829,519 1,990,189 2,158,373 2,319,546 2,417,177 2,514,961

By distribution channel

Wholesale 294,591 310,232 319,539 329,125 338,999 349,169 359,644 370,433 381,546 389,177 396,961

Retail 865,287 951,570 1,072,965 1,201,560 1,337,355 1,480,350 1,630,545 1,787,940 1,938,000 2,028,000 2,118,000

By region

Italy 162,133 178,300 196,079 215,631 237,133 260,779 286,783 315,379 346,827 381,412 419,444

EMEA

(excl. Italy)

343,483 377,734 415,400 456,822 502,374 552,468 607,558 668,141 734,765 738,032 745,360


456,683 487,532 541,027 594,303 646,600 697,083 744,832 788,834 813,443 830,892 836,765

Americas 198,448 218,236 239,997 263,929 290,247 319,189 351,017 386,018 424,510 466,841 513,392




294,591 310,232 319,539 329,125 338,999 349,169 359,644 370,433 381,546 389,177 396,961

865,287951,570

1,072,9651,201,560

1,337,3551,480,350

1,630,5451,787,940

1,938,0002,028,000

2,118,000

1,160,747 1,261,8021,392,504

1,530,6851,676,354

1,829,5191,990,189

2,158,3732,319,546

2,417,177 2,514,961

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

Estimated revenues by channel (yrs: 2017-2027)

Wholesale Retail Sales

0

200000

400000

600000

800000

10000002017

2018

2019

2020

2021

20222023

2024

2025

2026

2027

Estimated Revenues by Region (yrs: 2017-2027)

Italy EMEA (excl. Italy) Asia&Rest of the world Americas


16

We expect Moncler’s revenues to increase steadily from €1160m in 2017 to €2514m in 2027 with a major growth in the retail sector, as in the long run we assume that the wholesale channel will be avoided and therefore we do not expect new openings of wholesale shops. These revenues’ future projections are based on the assumptions made on the drivers of the sales’ growth, which we identified in the number of new openings, the sales per m2 and the shops’ surface. According to the management declaration, the average surface of the shops will grow up to 200 m2 and the company will have an increased number of retail shops by 2027. We considered an average increase by fifteen retail-shops every year based on the statements made by the management. This assumption will lead the company to have over 350 retail-stores within 2027. We expect Moncler to more than double its revenues and we consider this growth consistent with the company’s policy of basing itself on a retail-based strategy.

Estimated new openings

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

Shops 135 172 207 232 207 218 233 248 263 278 293 308 323 338 353

Wholesale 28 38 34 42 4 0 0 0 0 0 0 0 0 0 0

Retail 107 134 173 190 203 218 233 248 263 278 293 308 323 338 353


Drawing the attention to the regional sales’ breakdown, we assume that Asia will confirm its leading position, reaching €836m in 2027. In EMEA (excl. Italy), we expect revenues to increase from €343m in 2017 to €745m in 2027. These future projections are taking into account the sales’ proportion by region experienced during the years 2013-2016 and a percentage variation in the retail channel approximately equal to 13% for 2017 and to 10% up to 2027, assuming a successful implementation of the retail expansion and therefore no new openings of wholesale-shops. Our sales’ estimates for 2017 and 2018, respectively €1161m and €1262m, are lower than the consensus (€1184m for 2017 and €1308 for 2018). However, we expect Moncler to generate in the same timeframe free cash flows higher than the analysts’ estimates.

Team Estimates vs Consensus

Sales Ebit Ebitda Net income FCF

2017E 2018E 2017E 2018E 2017E 2018E 2017E 2018E 2017E 2018E

Team Estimates 1,161 1,262 324 358 391 435 217 240 291 379

Consensus 1,184 1,308 344 382 396 438 239 264 203 246


Distribution of stores in % as of website Asia 53% Americas 12% Europe 35% Total: 203 stores



17

3. PORTER 5 FORCES ANALYSIS Intensity of Internal Rivalry 3 Bargaining Power of Buyer 1 Bargaining Power of Buyer 1 Threat of New Entrants 3 Presence of Substitute Products 4


Intensity of internal rivalry 3

The competition among the clothing industry is generally fierce, but Moncler positioned itself on a segment with a lower one,

thanks to the uniqueness of its product. As part of Moncler’s brand, it distanced itself cleverly from the competition by using

its resources to focus instead on the growth of the company.

Threats new entrants 1

There is a discrete-low probability of a new entrance due to the barriers which mainly consists in a creation of a new distribution

network or trying to get to use one of the existing ones which in case of success obviously will result in high fees. Another issue

may be the creation of a brand capable of standing the competition with Moncler. Nevertheless, there are many competitors

that have already overcame this kind of investments and could potentially enter the same Moncler’s business.

Bargaining Power of Buyers 1

Suppliers have to comply with Moncler’s directives in order to supply it for image purposes as part of the CSR plan. That could

indicate the superior position of Moncler since it assumes a guidance role among the supply chain. Since then the gathering of

raw materials is relatively not difficult due to the number of potential suppliers, we may conclude that suppliers don’t have a

significant power as stakeholders.

Bargaining power of Suppliers 3

Moncler’s customers are directly the end-customers so they don’t have much power, they are simply taking what Moncler has

to offer. Nevertheless, market research is required to know their preferences so investments in the excellence program and

training of employers has made it possible. Another fact to take into account is the no-discount policy of Moncler, which also

indicates the strong position took by the company.

00.5

11.5

22.5

33.5

4

Intensity ofInternal Rivalry

Bargaining Powerof Buyer

Bargaining Powerof Buyer

Threat of NewEntrants

Presence ofSubstituteProducts

Porter´s 5 forcesScale 1-5


18

Threats of Substitute Products 4

There may be some discrete chances of substitution from already affirmed brands that may be willing to differentiate and

take a portion of Moncler’s market. The clothing industry is usually constantly following the last trends featuring a high

turnover and differentiation in term of products. As Moncler started to position itself also in other segments and branches of

its industry, other companies may be doing the same.

SWOT Analysis

Strenghts Weaknesses Opportunities Threats

Power of the Brand (Internationalisation)

High control on inventories (especially the online sales)

Exclusive store locations

Efficient supply chain management

Collaboration with renowned designers

Loyal customer base

Stable growth

Own Distribution channel

Clear strategy on sales

Strong financial position and high marginality

Strong synergies among stakeholders and good communications system

Relatively easy gathering of raw materials

High seasonality

Wide product differentiation

Merger & Acquisition to improve the financial position

Pay-out to further improve the relations with shareholders

Potential misevaluation of a rising competitor

Too much confidence

Loss of the power of the brand overtime

Failure to communicate the core values of the brand

Potential distancing from the original core values

Bad image of the industry because of foreign line of production



19

4. FINANCIAL ANALYSIS


Balan

ce Sh

eet

(EUR

/000

)20

1320

1420

1520

1620

17E

2018

E20

19E

2020

E20

21E

2022

E20

23E

2024

E20

25E

2026

E20

27E

Bran

ds an

d oth

er in

tang

ible a

sset

s -ne

t25

2,73

925

8,77

126

8,01

426

6,88

227

2,63

632

7,16

339

2,59

647

1,11

556

5,33

867

8,40

681

4,08

797

6,90

41,

172,

285

1,40

6,74

21,

688,

090

Good

will

155,

582

155,

582

155,

582

155,

582

155,

582

186,

698

224,

038

268,

846

322,

615

387,

138

464,

565

557,

478

668,

974

802,

769

963,

323

Prop

erty

, plan

t and

equip

ment

- ne

t58

,248

77,25

410

2,23

412

3,92

512

4,25

814

9,11

017

8,93

221

4,71

825

7,66

130

9,19

437

1,03

244

5,23

953

4,28

764

1,14

476

9,37

3

Othe

r non

-curre

nt as

sets

11,66

317

,251

22,67

624

,691

25,13

630

,163

36,19

643

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52,12

262

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75,05

690

,067

108,

080

129,

696

155,

635

Defe

rred t

ax as

sets

25,13

345

,968

65,97

074

,682

82,50

199

,001

118,

801

142,

562

171,

074

205,

289

246,

347

295,

616

354,

739

425,

687

510,

824

Non-

curre

nt as

sets

503,

365

554,

826

614,

476

645,

762

660,

113

792,

136

950,

563

1,14

0,67

51,

368,

810

1,64

2,57

21,

971,

087

2,36

5,30

42,

838,

365

3,40

6,03

84,

087,

246

Inven

torie

s and

wor

k in p

roge

ss77

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122,

821

134,

063

135,

849

172,

837

207,

404

248,

885

298,

662

358,

395

430,

074

516,

089

619,

306

743,

167

891,

801

1,07

0,16

1

Trad

e acc

ount

rece

ivable

76,52

186

,593

89,78

210

4,86

455

,119

66,14

379

,371

95,24

611

4,29

513

7,15

416

4,58

419

7,50

123

7,00

228

4,40

234

1,28

2

Incom

e tax

es21

,350

5,93

84,

155

5,56

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426

10,11

112

,133

14,56

017

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20,96

725

,160

30,19

236

,230

43,47

652

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Othe

r cur

rent

asse

ts41

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33,54

720

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13,35

620

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24,58

329

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35,40

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50,97

661

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73,40

588

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105,

703

126,

844

Finan

cial c

urre

nt as

sets

03,

019

7,78

17,

781

7,78

17,

781

7,78

17,

781

7,78

17,

781

7,78

17,

781

7,78

1

Cash

and c

ash e

quiva

lent

105,

300

123,

419

148,

603

243,

389

235,

594

282,

713

339,

255

407,

106

488,

528

586,

233

703,

480

844,

176

1,01

3,01

11,

215,

613

1,45

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6

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nt as

sets

332,

260

372,

318

397,

588

506,

037

500,

243

598,

735

716,

926

858,

755

1,02

8,95

01,

233,

184

1,47

8,26

51,

772,

361

2,12

5,27

72,

548,

777

3,05

6,97

6

Tota

l asse

ts82

5,62

592

7,14

41,

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1,15

1,79

91,

160,

356

1,39

0,87

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667,

489

1,99

9,43

12,

397,

761

2,87

5,75

63,

449,

352

4,13

7,66

64,

963,

643

5,95

4,81

57,

144,

222

Shar

e Cap

ital

50,00

050

,000

50,02

550

,043

50,84

650

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50,87

751

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51,22

451

,397

51,57

151

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51,91

852

,091

52,26

5

Shar

e pre

mium

rese

rve

107,

040

107,

040

108,

284

109,

187

149,

347

142,

208

150,

884

159,

560

168,

236

176,

912

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588

194,

265

202,

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211,

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220,

293

Othe

r res

erve

s74

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219,

986

348,

179

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01,

365,

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1,70

3,19

12,

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8,29

53,

185,

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0,65

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736,

448

Net r

esult

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up sh

are

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7,86

319

6,04

341

,835

121,

600

121,

323

121,

046

120,

769

120,

492

120,

215

119,

938

119,

661

119,

384

119,

107

Equi

ty, G

roup

shar

e30

7,49

541

9,50

354

6,15

870

3,45

273

5,12

593

2,75

51,

157,

655

1,41

7,53

61,

705,

974

2,05

1,99

32,

466,

914

2,96

4,24

23,

560,

107

4,27

3,74

85,

128,

113

Non

cont

rollin

g int

eres

ts3,

090

1,07

164

911

922

627

132

539

146

956

267

581

097

21,

166

1,39

9

Equi

ty31

0,58

542

0,57

454

6,80

770

3,57

173

5,35

193

3,02

71,

157,

981

1,41

7,92

71,

706,

443

2,05

2,55

52,

467,

589

2,96

5,05

13,

561,

078

4,27

4,91

45,

129,

513

Long

-term

borro

wing

s16

0,11

615

4,24

312

7,01

675

,835

75,56

644

,303

19,55

20

00

00

00

0

Prov

ision

s non

-curre

nt3,

162

3,11

05,

688

11,88

011

,746

12,92

114

,213

15,63

417

,197

18,91

720

,809

22,89

025

,179

27,69

630

,466

Pens

ion fu

nds a

nd ag

ents

leavin

g ind

ennit

ies6,

455

5,11

24,

604

5,25

85,

361

6,43

37,

398

8,50

89,

784

11,25

212

,939

14,88

017

,112

19,67

922

,631

Defe

rred t

ax lia

biliti

es

72,55

174

,436

68,75

370

,953

72,58

679

,845

87,82

996

,612

106,

273

116,

900

128,

591

141,

450

155,

595

171,

154

188,

269

Othe

r non

-curre

nt lia

biliti

es1,

860

3,48

96,

222

12,04

311

,077

13,84

617

,308

21,63

527

,043

33,80

442

,255

52,81

966

,024

82,53

010

3,16

3

Non-

curre

nt lia

bilit

ies

244,

144

240,

390

212,

283

175,

969

176,

336

157,

347

146,

300

142,

389

160,

298

180,

874

204,

594

232,

039

263,

910

301,

060

344,

529

Shor

t-ter

m bo

rrowi

ngs

116,

244

80,33

171

,182

64,77

737

,628

47,03

558

,794

73,49

291

,865

114,

832

143,

539

179,

424

224,

280

280,

350

350,

438

Trad

e acc

ount

s pay

ables

107,

077

112,

323

112,

969

132,

586

163,

532

196,

238

235,

486

282,

583

339,

100

406,

920

488,

304

585,

965

703,

158

843,

789

1,01

2,54

7

Incom

e tax

es

13,93

043

,556

36,61

324

,577

4,16

75,

209

6,51

18,

139

10,17

312

,717

15,89

619

,870

24,83

731

,047

38,80

8

Othe

r cur

rent

liabil

ities

33,64

529

,970

32,21

050

,319

43,34

652

,015

62,41

874

,902

89,88

210

7,85

912

9,43

015

5,31

718

6,38

022

3,65

626

8,38

7

Curre

nt lia

bilit

ies27

0,89

626

6,18

025

2,97

427

2,25

924

8,67

330

0,49

736

3,20

943

9,11

653

1,02

164

2,32

777

7,17

094

0,57

51,

138,

655

1,37

8,84

21,

670,

180

Tota

l liab

ilities

and

equi

ty82

5,62

592

7,14

41,

012,

064

1,15

1,79

91,

160,

360

1,39

0,87

11,

667,

489

1,99

9,43

12,

397,

761

2,87

5,75

63,

449,

352

4,13

7,66

64,

963,

643

5,95

4,81

57,

144,

222


20

Incom

e Stat

emen

t

(EUR/

000)

2013

2014

2015

2016

2017

E20

18E

2019

E20

20E

2021

E20

22E

2023

E20

24E

2025

E20

26E

2027

E

Sales

580,5

7069

4,180

880,3

901,0

40,30

01,1

60,74

71,2

61,80

21,3

92,50

41,5

30,68

51,6

76,35

41,8

29,51

91,9

90,18

92,1

58,37

32,3

19,54

62,4

17,17

72,5

14,96

1

Cost

of sa

les16

6,500

192,5

2422

5,495

252,3

0329

1,724

310,8

2533

7,254

367,3

6440

2,325

439,0

8547

7,645

518,0

1055

6,691

580,1

2360

3,591

Gros

s marg

in41

4,070

501,6

5665

4,895

787,9

9786

9,023

950,9

771,0

55,25

01,1

63,32

11,2

74,02

91,3

90,43

41,5

12,54

41,6

40,36

41,7

62,85

51,8

37,05

51,9

11,37

0

Margi

n1

11

11

11

11

11

11

11

Gen&

Amm

Exp

57,91

166

,043

79,53

594

,093

103,1

4411

2,121

123,7

3213

6,007

148,9

4716

2,552

176,8

2319

1,761

206,0

7521

4,743

223,4

25

Sellin

g Exp

147,6

4318

2,966

253,4

4831

2,353

348,5

1737

8,860

418,1

0345

9,593

503,3

3054

9,318

597,5

6064

8,058

696,4

5072

5,764

755,1

24

Adve

rtising

Exp

35,98

546

,072

57,84

768

,143

76,03

382

,652

91,21

310

0,265

109,8

0711

9,839

130,3

6414

1,380

151,9

3815

8,333

164,7

38

Total

costs

408,0

3948

7,605

616,3

2572

6,892

819,4

1888

4,458

970,3

031,0

63,22

91,1

64,40

81,2

70,79

41,3

82,39

21,4

99,20

81,6

11,15

41,6

78,96

31,7

46,87

8

Othe

r non

recu

rring i

tems

-6,11

9-5,

034

-11,38

9-15

,738

-17,41

1-18

,927

-20,88

8-22

,960

-25,14

5-27

,443

-29,85

3-32

,376

-34,79

3-36

,258

-37,72

4

EBIT

166,4

1220

1,541

252,6

7629

7,670

323,9

1735

8,417

401,3

1444

4,496

486,8

0053

1,282

577,9

4562

6,789

673,5

9970

1,956

730,3

59

EBIT

adjus

ted17

2,531

206,5

7526

4,065

313,4

0834

1,328

377,3

4442

2,201

467,4

5651

1,946

558,7

2560

7,797

659,1

6570

8,392

738,2

1476

8,083

Ebit m

argin

00

00

00

00

00

00

00

0

Intere

st inc

ome

627

6,100

4,267

492

2,871

3,433

2,766

2,390

2,865

2,863

2,721

2,710

2,790

2,771

2,748

Intere

st ex

pens

es-21

,780

-12,16

4-5,

975

-5,08

4-5,

084

-5,08

4-5,

084

-5,08

4-5,

084

-5,08

4-5,

084

-5,08

4-5,

084

-5,08

4-5,

084

Net fi

nanc

ial re

sult

-21,15

3-6,

064

-1,70

8-4,

592

-2,21

3-1,

651

-2,31

8-2,

694

-2,21

9-2,

221

-2,36

3-2,

374

-2,29

4-2,

313

-2,33

6

EBT

145,2

5919

5,477

250,9

6829

3,078

321,7

0435

6,766

398,9

9544

1,802

484,5

8252

9,062

575,5

8262

4,416

671,3

0569

9,644

728,0

23

Taxe

s-50

,816

-65,37

7-83

,061

-96,76

7-10

6,711

-118,2

82-13

2,217

-146,3

44-16

0,461

-175,1

39-19

0,491

-206,6

06-22

2,080

-231,4

31-24

0,796

Net In

come

from

cont

inuing

opera

tions

94,44

313

0,100

167,9

0719

6,311

214,9

9323

8,484

266,7

7829

5,459

324,1

2135

3,923

385,0

9141

7,810

449,2

2546

8,212

487,2

26



21


Cash

Flow

State

ment

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

EBIT

adjus

ted17

2,531

206,5

7526

4,065

313,4

0834

1,328

377,3

4442

2,201

834,4

5351

1,946

558,7

2560

7,797

659,1

6570

8,392

738,2

1476

8,083

D&A

19,18

526

,276

35,95

941

,635

50,00

057

,700

65,40

073

,100

80,80

088

,500

96,20

010

3,900

111,6

0011

9,300

127,0

00

EBITD

A19

1,716

232,8

5130

0,024

355,0

4339

1,328

435,0

4448

7,601

907,5

5359

2,746

647,2

2570

3,997

763,0

6581

9,992

857,5

1489

5,083

Chan

ge in

work

ing ca

pital

-35

,129

51,13

544

,994

26,57

5-11

,663

-33,43

8-28

,625

-36,21

8-37

,606

-43,22

9-46

,746

-42,93

7-9,

883

-21,15

6

Cape

x34

,300

50,20

066

,200

62,30

073

,200

67,56

472

,395

77,39

282

,559

87,90

393

,427

99,13

797

,128

65,73

267

,047

Free C

ash Fl

ow-

147,5

2218

2,689

247,7

4929

1,553

379,1

4344

8,645

858,7

8754

6,404

596,9

2865

3,800

710,6

7576

5,801

801,6

6584

9,192

Finan

cial R

atio

s

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

ROCE

30.0%

30.5%

33.3%

33.8%

35.5%

32.9%

30.8%

28.5%

26.1%

23.8%

21.6%

19.6%

17.6%

15.3%

13.3%

ROE

24.5%

31.0%

30.7%

27.9%

29.5%

25.7%

23.2%

21.0%

19.1%

17.3%

15.7%

14.1%

12.7%

11.0%

9.5%

Cape

x/D&

A1.8

1.91.8

1.51.5

1.21.1

1.11.0

1.01.0

1.00.9

0.60.5

Good

will/

CE28

.0%23

.5%20

.5%17

.7%17

.1%17

.1%17

.2%17

.2%17

.3%17

.3%17

.4%17

.4%17

.5%17

.5%17

.6%

Net d

ebt/E

quity

0.60.3

0.1-0

.1-0

.2-0

.2-0

.2-0

.2-0

.2-0

.2-0

.2-0

.2-0

.2-0

.2-0

.2

Net d

ebt/E

BITD

A0.9

0.50.2

-0.3

-0.3

-0.4

-0.5

-0.4

-0.7

-0.7

-0.8

-0.9

-1.0

-1.1

-1.2

Asse

t Tur

nove

r (Re

v/As

sets)

0.70.7

0.90.9

1.00.9

0.80.8

0.70.6

0.60.5

0.50.4

0.4


22


Mult

iples

Ana

lysis

EV/Sa

lesEV

/Ebit

daEV

/Ebit

P/E

2015

2016

2017

E20

18E

2015

2016

2017

E20

18E

2015

2016

2017

E20

18E

2015

2016

2017

E20

18E

Monc

ler4.4

03.5

05.2

75.0

513

.5010

.6015

.6414

.6415

.6012

.3018

.8917

.7723

.4019

.4029

.0327

.52

SALE

S11

60.75

1261

.80

EBITD

A39

1.33

435.0

4

EBIT

323.9

235

8.42

EARN

INGS

214.9

923

8.48

EV61

18.30

6369

.8061

18.30

6369

.8061

18.30

6369

.80

Luxo

ttica

2.89

2.81

2.80

2.60

13.79

13.63

13.10

12.00

18.57

18.75

17.90

16.30

35.95

28.87

26.30

24.30

Herm

es6.7

06.4

08.0

07.0

018

.1017

.0021

.1018

.9020

.9019

.8023

.9021

.5035

.1022

.0038

.7035

.40

Riche

mont

3.30

2.90

3.40

3.20

11.10

12.20

15.40

13.60

13.00

15.50

20.30

17.00

29.70

17.60

33.80

24.10

Prada

3.50

2.90

2.50

2.70

13.00

13.00

12.60

12.80

17.60

20.50

20.60

20.00

27.80

31.00

30.10

29.20

LVMH

2.40

2.20

3.10

2.90

10.60

9.60

13.00

11.50

13.30

11.80

15.90

14.30

22.30

19.40

24.10

22.00

Burbe

rry2.5

02.3

02.4

02.3

011

.1010

.4011

.109.6

014

.1013

.7014

.7012

.6020

.9020

.6022

.3019

.40

Ferra

gamo

3.10

2.40

2.60

2.50

13.50

10.90

14.90

14.90

16.50

13.50

20.30

20.50

25.20

17.30

28.30

28.50

Hugo

Boss

2.60

1.50

1.80

1.80

12.10

9.20

10.10

9.80

16.00

15.20

15.00

14.40

22.20

20.20

19.90

19.30

Kerin

g Lux

ury2.2

02.1

03.5

03.1

012

.6011

.1016

.0013

.7015

.7013

.6018

.7015

.8032

.8025

.6025

.2021

.10

Brun

ello C

uccin

elli

2.90

2.60

3.70

3.10

17.60

15.80

21.40

18.00

23.90

21.40

29.20

24.60

34.90

31.80

39.10

34.60

Tod's

Grou

p2.5

01.9

02.1

01.9

012

.7010

.4012

.5011

.2017

.3014

.6018

.1016

.0029

.7022

.1027

.0023

.80

Avera

ge

3.17

2.72

3.26

3.01

13.24

11.96

14.65

13.27

16.83

15.96

19.51

17.55

28.06

22.76

28.62

25.61

Media

n 2.7

52.3

52.8

02.7

012

.6511

.0013

.1012

.8016

.2514

.9018

.7016

.3028

.7521

.3027

.0024

.10


23

5. WACC COMPUTATION

WACC =𝐸

V * Re +

𝐷

V * Rd * (1-Tc), with V=E+D

2013 2014 2015 2016

WACC WACC 0.061 0.061 0.058 0.054

Market value of equity E 3593056 2675750 3385598 4025679

Cost of equity Re 0.057 0.057 0.057 0.057

Market value of debt* D 171060 111155 49595 -105796

Cost of debt Rd 0.25 0.25 0.25 0.25

Corporate tax rate** t 35.0% 33.4% 33.1% 33.0%

Market value of debt-cash and

equity E+D 3764116 2786905 3435193 3919883

*We assume the market value of debt is equal to the book value of debt - cash (NFP)

**effective tax rate

Cost of equity - Re Re 0.057 0.057 0.057 0.06

Risk free rate Rf 2.00% 2.00% 2.00% 2.00%

Beta β 0.77 0.77 0.77 0.77

Market risk premium 4.75% 4.75% 4.75% 4.75%

***average value equity reports

Cost of debt - Rd Rd 0.25 0.25 0.25 0.25 Source: Company information, FactSet, team estimates

Market value of equity E: we obtained it by multiplying the number of shares outstanding by an average of the daily share prices (adjusted values) of the month of December for each year. Market value of debt E: we assume that the market value of debt is equal to the book value of debt – cash and cash equivalents (NFP/net debt). Cost of Equity Re: we calculated it with the formula of the Capital Asset Pricing Model -> Re = Rf + β ∗ Mrp, where Rf is the risk free rate, β the beta of the company and Mrp the Market risk premium. Cost of debt Rd: we chose a cost of debt of 0.25% considering the fact that Moncler mainly has got leasing contracts and since the latter are particular financial instruments in which the goods´ ownership is passed to the financer, the conditions are to be considered as similar to the ones of rent. 0.25% is a coherent value to the risk profile and for the counterpart. Risk free rate: yield on the Italian BTP 10Y as of February 2018. Market risk premium: team estimation. Beta: first of all, we computed and represented graphically the beta of the company referring it to the FTSE MIB. We got a beta with a non-significant R2, so our following step was to calculate and represent graphically the betas of the company´s comparables to be able to obtain in this way a beta with a significant R2 for Moncler. As of this second step, we didn´t get Moncler´s comparables´ betas with significant R2 either. At that point we realized that the methodology we were following was based on a linear model; however, the geometric distribution of Moncler´s yields wasn´t linear, so we couldn´t apply our methodology to Moncler´s empirical case. That´s why we looked again at the betas adjusted 5Yrs of the comparables, realizing that they were all in the range 0.60 to 1.06. We therefore chose to take for Moncler the beta adjusted 5Yrs: 0.77 [source: FactSet]. Tax rate: company guidance

Year 2013 2014 2015 2016

Tax rate 35% 33.40% 33.10% 33% Source: Company information, FactSet, team estimates


24

6. DCF Method Year 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

Revenues 1261,802 1392,504 1530,685 1676,354 1829,519 1990,189 2158,373 2319,546 2417,177 2514,961

Growth 8,7% 10,4% 9,9% 9,5% 9,1% 8,8% 8,5% 7,5% 4,2% 4,0%

EBIT 358,417 401,314 444,496 486,800 531,282 577,945 626,789 673,599 701,956 730,359

D&A 57,700 65,400 73,100 80,800 88,500 96,200 103,900 111,600 119,300 127,000

∆WC 11,663 33,438 28,625 36,218 37,606 43,229 46,746 42,937 9,883 21,156

Capex -67,564 -72,395 -77,392 -82,559 -87,903 -93,427 -99,137 -97,128 -65,732 -67,047

FCF 360,216 427,757 468,830 521,259 569,485 623,947 678,299 731,008 765,407 811,467

Growth 31,4% 18,8% 9,6% 11,2% 9,3% 9,6% 8,7% 7,8% 4,7% 6,0%

PVofFCF 331,690 362,692 366,038 374,744 376,993 380,337 380,726 377,819 364,270 355,609 Source: Company information, FactSet, team estimates

Discounted FCF 2018-2027 3670.918

Terminal Growth 2%

WACC 8.6%

Terminal Value 2022 12540.859

PV of Terminal Value 5495.776

Enterprise Value 9166.694

NFP 191

Equity Value $8,975.694

Number of Shares 254.7

Target Price $35.240 Source: Company information, FactSet, team estimates

The sales growth diminishes over time, with the

derived values following. We set terminal growth at a

conservative 2%, and NFP estimated to be 191 million.


25

7. RISK ANALYSIS

LIKELIHOOD

Rare Unlikely Possible Likely Almost certain

IMP

AC

T

Severe

Low sales density; Disequilibrium between inventory and replenishment; Gross margin sustainability

Major

Failure in the implementation of the retail expansion

Deficiencies in the supply chain and raw materials' provision

Moderate

Seasonality risks Slow GDP growth Forex risk

Minor

Shrking Chinese demand Fashion risks

Not Significant

New shopping trends


RISKS

MA

CR

O

Slow GDP growth: Spending on luxury goods are correlated to GDP growth, which could be negatively affected by an economic slowdown. Likelihood and impact: The risk is possible but its impact on the business would be moderate. The reason is due to the fact that Moncler's customers are high-income consumers and therefore less affected by economic developments. Mitigating factors: Moncler cannot influence the GDP growth.

Shrinking Chinese demand: Chinese demand is a major force driving the sector growth that could be affected by government regulations concerning travelling and spending possibilities. Likelihood and impact: The risk is possible although its impact is minor, as tourists' purchasing power is only one of the major forces driving the growth of the luxury sector. Mitigating factors: Close monitoring of the marketing efforts in China.

New shopping trends: Fluctuations in consumers’ confidence and peaks in other asset classes might lead to changes in the global shopping trends. Likelihood and impact: The occurrence of the risk is somewhat possible. However, the impact on the business would not be significant because of the power of the brand. Mitigating factors: Maintaining and increasing brand strength as much as possible will mitigate this risk sufficiently.


26

STR

ATE

GIC

Failure in the implementation of the retail expansion: This strategic risk is company-specific. A failure in the retail expansion could be incurred missing openings in the right locations and not pursuing relocations as the Group planned. Likelihood and impact: Since the implementation of the expansion in the retail sector is the core element of Moncler's current and future strategic decisions, its occurrence is unlikely but it would have a major impact on the business. Mitigating factors: Articulating and implementing an appropriate expansion strategy.

Deficiencies in the supply chain and raw materials' provision: The supply chain is the backbone of the business. Lack of visibility or innovation would lead to inefficiencies in the supply chain. Scarce availability of key raw materials and costs' increases would expose the company to further strategic risks. Likelihood and impact: The occurrence of these risks is possible and the impact exerted on the business would be significant but not severe in the short-term. Mitigating factors: Having contingencies in place for any potential failures in the supply chain.

Fashion risks: Goose down jackets could gain appeal posing a threat to Moncler's products. Likelihood and impact: The risk posed by the ascent of these jackets is likely but it would have a minor impact on the business because of Moncler’s powerful branding and different positioning. Mitigating factors: Maintaining and increasing brand strength as much as possible will mitigate this risk sufficiently.

Seasonality risks: Seasonality risks refer to hardly predictable fluctuations in the seasonal patterns of demand. Likelihood and impact: The occurrence of the risk is rare and its impact would be moderate. Mitigating factors: Running a tight and flexible inventory (low amount of inventory days, just-in-time), which reduces redundancy in inventory.

FIN

AN

CIA

L

Equity Market risk: The recent and expected increases in bond yields are putting pressure on the equity market. As the risk-free rate grows, so does the cost of equity. The probability of this happening is very high; the effects of this risk are already being felt in the bond and equity markets. The impact will be major. Mitigating factors: This development cannot be mitigated and must be taken into account in the calculations, in particular for the WACC. Forex risk: A key risk concerning euro-denominated groups operating in the luxury sector would be an increase in Euro strength in relation to USD and JPY weakness. A potential CHF evolution should be taken into account. Likelihood and impact: Forex risk is likely to occur because of the regional breakdown of revenues and its impact would be moderate. Mitigating factors: This development cannot be mitigated and must be taken into account in the calculations, in particular for the WACC.

OP

ERA

TIV

E

Low sales' density: Sales' density represents revenues per square meter (i.e. one of the identified drivers of the company’s growth). A lower value of this figure would jeopardize the overall performance of the business. Likelihood and impact: We don't expect revenues to decrease. Thus, we consider the occurrence of the risk unlikely. However, its impact on the business would be severe. Mitigating factors: Sales are driven by brand strength and availability, making these the mitigating factors.

Disequilibrium between inventory and replenishment: A lack of harmony between low levels of inventory and an efficient replenishment of the products would pose a threat to the business. Likelihood and impact: The occurrence of the risk is unlikely because of excellent managerial competencies but the impact exerted on the business would be severe. Mitigating factors: Managing of the inventory days and supply chain; this risk (of under-supply) must be balanced with the seasonality risk (of over-supply).

Gross margin sustainability risks: A superficial adjustment of the inventory mix (for example, according to sales instead of gross margin) would lead to a negative repercussion on the sustainability of an increasing gross margin. Likelihood and impact: The occurrence of the risk is unlikely. However, the impact exerted on the business would be severe. Mitigating factors: Monitoring the inventory mix and the interdependence of Sales and margins.



27

8. CORPORATE GOVERNANCE The following are the components of Moncler´s Internal Control and Risk Management System:

• the Board of Directors • the Director with mandate for the Internal Control and Risk Management System

Source: Company information

the Control, Risks And Sustainability Committee (Gabriele Galateri di Genola, Marco de Benedetti, Guido Pianaroli)

Board of Statutory Auditors

Chairman (Riccardo Losi)

2 Standing Statutory Auditor (Antonella Suffriti, Mario Valenti)

the Audit Firm (KPMG S.p.A.)

the Manager for the corporate accounting documents (Luciano Santel)

the Group Internal Audit Manager

the Surpervisory Body (External Consultant and Management Riccardo Losi).

Vice Chairman

Independent

Director

Executive

Director

Lean

Independent

Director

Independent

Director

Independent

Director

Independent

Director

Independent

Director

Executive

Director

Director

Chairman of the Board of Directors & Chief Executive Officer

Nerio

Alessandri

Marco De

Benedetti

Sergio

Buongiovanni

Gabriele

Galateri di

Genola Diva Moriani

Stephanie

Phair

Guido Pianaroli

Luciano

Santel

Juan

Carlos

Torres Carretero

Virginie

Morgon

Gabriele

Galateri di

Genola

Juan

Carlos

Torres Carretero


28

DISCLOSURES

Ownership and material conflicts of interest The authors, or a member of their household, of this report do not hold a financial interest in the securities of this company. The authors, or a member of their household, of this report do 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 authors of this report is not based on investment banking revenue. Position as an officer or a director The authors, or a member of their household, does not serve as an officer, director, or advisory board member of the subject company. Market making The authors do 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 authors to be reliable, but the authors do 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 Recordati S.p.A, CFA Institute, or the CFA Institute Research Challenge with regard to this company’s stock.

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