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DATE: 30 MARCH 2014

HYDE INVESTMENTS
Market Research


TI CKER
TSLA

EXCHANGE
NASDEQ

COMPANY PROFI LE
Tesla Motors designs, manufactures, and
sells electric vehicles and EV powertrain
components. Founded in 2003, the company
introduced the first widely available highway-
capable electric vehicle in 2008.

SENI OR MANAGEMENT
CEO/Chairman: Elon Musk
CFO: Deepak Ahuja
CTO: Jeffrey Straubel
Vice President (Sales):Jerome Guillen
Vice President (OEM):Gilbert Passin
Vice President (Production)Greg Reichow

COMPANY KEY FI NANCI ALS*
Market Cap (US$m) 26,088.0
Share outstanding (m) 124.1M
Enterprise Value (US$m) 25,636.5
Net Debt (US$m) 2,130.8
EPS (T12M) -0.98
DPS 0.00
Beta v S&P index 0.87
52-week Range (US$) 88.25-265.00
ROE -23.5%
ROA -4.8%

OTHER FI NANCIALS*
Price-to-Book 26.56
Price-to-Sales (P/S) 12.4
Revenue Growth (1yr) 387.2%
Quick Ratio 1.3
Current Ratio 1.9
Interest Coverage Ratio -1.7
Debt-to-Equity (D/E) 91%
Gross Profit Margin 22.7%
EBITDA Margin (FY2013) 2.22
*values at 30/05/14 from Bloomberg

PRI CE PERFORMANCE


Other strengths:
1) Supercharger network
(Free charging aspec & first in the market)
2) Aligned management interests
3) Government support for environmentally
conscious initiatives



COMPANY
TESLA MOTORS, INC

GEOGRAPHY
North America

I NDUSTRY
Automotive & Auto components

RECCOMENDATI ON
HOLD

Price (30/05/14): $210.24
Target price (30/05/14): $222.18

Our View
Although we see large growth potential for Tesla through untapped markets and the
Gigafactories, we believe the current price fully reflects the speculative growth
prospects. Significant challenges lie ahead for Tesla while all foreseeable catalysts are
presently only at planning stages - nothing concrete or contractual has been
established. We believe the current share price fully reflects possible upsides but it but
not the current risks and challenges present. Hence, we remain cautious on Tesla
stock, and recommend a hold until more substantial plans are materialize.

Investment Highlights:
1. Revolutionary product. Teslas electric vehicles and its patented technologies will
be at the forefront of the next generation
Tesla's electric vehicles has rapidly gained traction in the automotive market as
a result of appeal in direct cost efficiencies in fuel and maintenance, its zero-
carbon emissions and a powerful combination of market and media hype.
Entire car recycling will potentially allow owners to simply replace their
deteriorated battery whilst retaining their original chassis and components .
Demand for the Model S has far exceeded production ability. In the US alone,
they have sold out for the 2014Q2.
The Gen III (due release in 2017) for ~US$35k is a more affordable option for
the masses, leading Tesla to tap into the mass-market space

2. Gigafactories. Two Gigafactories are in Tesla's pipeline of projects, which could lead
to profound revolution across the industry.
The Gigafactories will expand production capacity and significantly reduce costs
for the battery pack (targeted 30-50% reduction), translating to greatly improved
margins in the electric vehicle business.
The Gigafactory presents an important opportunity to diversify operations,
transforming Tesla into a major battery manufacturer. This provides a shield in
Tesla's exposure to downturns in the cyclical automotive business. However, the
Gigafactories are only at planning stages and possible investment partner,
Panasonic, has only confirmed a Letter of Intent

3. Expansion to China. As the worlds largest auto market, China will be one of Teslas
greatest long term opportunities and presents a stepping stone into Asia.
Chinas longstanding issue of air pollution has increased the governments
support for EVs. Tesla has been the first foreign company in Shanghai for the
license plate fees (~US$15000) to be waived
Tesla has started planning for a network of supercharger stations in China. It
intends to work with Chinas two major power network operators: State Grid
Corporation of China and China Southern Power Grid.
Furthermore, the Chinese are known to be attracted to the appeal of luxurious
western cars which have become a status symbol. Tesla cars were sold
promptly despite the order and wait delivery process.

4. Further expansion in Europe
Tesla announced that it is committed to making Superchargers available almost
everywhere in Europe and planned to make 30 new service stations and stores
to build its presence.
The implementation of Low Emission Zones (LEZ) in the EU where access by
vehicles will be limited by their emissions will act as a catalyst for low emission
producing car companies. Tesla is in a prime position to reap from the new
regulatory changes with its 2
nd
most extensive Supercharger network in Europe.




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100
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Tesla NASDAQ Rebased
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SENSI TI VI TY ANALYSI S

*Model adjusted for flat % growth assumpitons

FORECAST EBI TDA MARGI NS


REVENUE BY GEOGRPAHI CAL SEGMENT


DCF VALUATI ON SUMMARY:
Matrix DCF Valuation
Enterprise Value
(Conservative)
27,012,231.1
Less: Net Debt 607,465,600
Add: Cash and cash equivalent 814,126,600
Equity Value 27,283,902,500
Divide: Outstanding Shares 123,091,000
Implied Share Price (US$) 221.70
Margin of Safety 6.48%

COMPARABLES VALUATI ON SUMMARY
Matrix
Median
EV/EBIT
Multiple
(13.86X)
Median
EV/EBITDA
Multiple
(10.24X)
2017 Forecast
EBIT/EBITDA
2,654,000,000 3,447,498,500
Enterprise Value
*Using 2017
Forecast EBIT/EBITDA
36,783,249,810 35,285,168,178
Implied EV Discount:
WACC: 7.778%
27,260,236,263 26,150,001,049
Add: Cash & cash
equivalent
814,126,600 814,126,600
Less: Net Debt 607,465,600 607,465,600
Equity Value 27,466,897,263 26,356,662,049
Divide: Outstanding
Shares
123,091,000 123,091,000
Implied Share Price
(US$)
223.14 214.12

5. Shares are fully reflect growth potential even in the opinion of CEO Elon Musk.
Shares IPO in June 2010 at $21 and now is at xx (at xx). This is presents a xx
growth in 1 year.
Tesla is a prime example as a momentum stock for 2014.
Our model accounts for organic growth in Tesla. Sensitivity to changes in growth
are great as a 2% drop in revenue growth results in almost 10% drop in intrinsic
price.

Key Challenges Ahead:
1. Capital expenditure: More will be required and one time infrastructure discounts
cannot be replicated.
Teslas current and only factory was bought at a discount from Toyota, along
with various complementary machines.
More capital expenditure will be required for the 2 Gigafactories (est. ~$5b) to
and expand manufacturing infrastructure to produce the target of 500K cars per
year in 2020. more than what has already been spent at start up for future
growth.
Cost of borrowing may increase in commercial markets as current debt was
downgraded to junk bond status by S&P.
2. Lack of materialised plans
Speculation about whether Tesla is making PR stunts as it makes premature
announcements to keep excitement and momentum going and avoid admitted
on actual delays.
Eg. Gigafactory has neither a confirmed partner, a selected location or a
completed factory design. Lack of quantifiable evidence of successful expansion
in China.

Medium term challenges Risks
1) Development of lower cost vehicles
(Gen III)
2) Expand manufacturing capacity
3) Expand distribution
4) Future vehicle residual value
5) Shortage of battery cells
6) Junk bond debt status
1) Potential for stronger competition
(Imitations, patent expiration)
2) Shortage of sources in supply chain
& increasing commodity prices
3) Panasonic partnership/investment
4) Possible declining public policy
subsidies
5) US: Dealership union controversy
6) US: Labour union

Operating Model:



Valuations Summary
Final Valuation: 50% DCF + 25% EV/EBITDA + 25% EV/EBIT
Final Implied Share Price: 50%(221.70) + 25%(223.14) + 25%(214.12) =USD$222.18


Tesla P&L Sensitivity Analysis
Revenue (% Growth)
- 36% 37% 38% 39% 40%
19% 208.6 216.7 225.0 233.6 242.6
20% 202.5 210.4 218.5 226.8 235.5
21% 196.5 204.0 211.9 220.0 229.2
22% 190.4 197.7 205.3 213.2 221.3
23% 184.3 191.4 198.8 206.4 214.3
24% 178.3 185.1 192.2 199.6 207.2
O
p
.

E
x
p
e
n
s
e
s

(
%

R
e
v
e
n
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e
)
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
0
2
4
6
8
10
12
14
16
2014F 2015F 2016F 2017F 2018F 2019F
M
i
l
l
i
o
n
s

33%
67%
USA
Europe/Asia
% of Revenue Geographic
Tesla Operating Model
('000) 2012A 2013A 2014F 2015F
Total Revenue 413,256.0 2,013,496.0 3,126,188.1 4,457,425.8
Less: COGS (354,364.0) (1,451,151.000) (2,032,022.247) (2,763,604.006)
Gross Profit 58,892.0 562,345.0 1,094,165.8 1,693,821.8
% Gross Profit Margin 14.3% 27.9% 35.0% 38.0%
Total Operating Expenses (424,350.0) (517,545.0) (719,023.3) (936,059.4)
% of Revenue 102.7% 25.7% 23.0% 21.0%
EBITDA (365,458.0) 44,800.0 375,142.6 757,762.4
% EBITDA Margin (88.4%) 2.2% 12.0% 17.0%
EBIT (394,283.0) (61,283.0) 71,497.2 317,869.3
% EBIT Margin (95.4%) (3.0%) 2.3% 7.1%
NPAT (396,213.0) (74,014.0) 56,751.1 293,673.8
% NPAT Margin (95.9%) (3.7%) 1.8% 6.6%
EPS (USD/Share)
Basic (3.69) (0.62) 0.48 2.46
% Growth 45.6% (83.2%) (176.7%) 417.5%
Income Statement Summary