Latin American Equity Research

New York, January 2013

LATAM UNIVERSE BOOK

2013

Important disclosures/certifications are in the “Important Disclosures” section of this report.
U.S. investors’ inquiries should be directed to Santander Investment Securities Inc. at (212) 583-4629/ (212) 350-3918.
* Employed by a non-US affiliate of Santander Investment Securities, Inc. and is not registered/qualified as a research analyst under FINRA rules.

Santander LatAm Team
Ignacio Mendive
Head of LatAm Equities
1-212-350-3958 / imendive@santander.us

Jesus Gomez
Head of LatAm Equity Research, Strategy
1-212-350-3992 / jgomez@santander.us

LatAm Strategy Team

Economists

Jesus Gomez
Stefano Rizzi
Walter Chiarvesio
Marcelo Audi
Daniel Gewehr

LatAm
LatAm
Argentina
Brazil
Brazil

1-212-350-3992
1-212-350-3979
5411-4341-1564
5511-3012-5749
5511-3012-5787

jgomez@santander.us
srizzi@santander.us
wchiarvesio@santanderrio.com.ar
maudi@santander.com.br
dhgewehr@santander.com.br

Joao Noronha, CFA
Francisco Errandonea
Gonzalo Fernández
Andres Soto

Brazil
Chile
Mexico
Andean

5511-3012-5734
5622-336-3357
5255-5269-1931
1-212-407-0976

jonoronha@santander.com.br
ferrando@santander.cl
gofernandez@santander.com.mx
asoto@santander.us

Christian Audi

Sector Head

1-212-350-3991

caudi@santander.us

Vicente Falanga Neto

Brazil

5511-3012-6042

vneto@santander.com.br

Daniel Gewehr

Sector Head

5511-3012-5787

dhgewehr@santander.com.br

Bruno Giardino, CFA

Brazil

5511-3012-5914

bgiardino@santander.com.br

Pulp & Forest Products

Luis Miranda, CFA

Mexico

5255-5269-1926

lmiranda@santander.com.mx

Felipe F. dos Reis

Brazil

5511-3012-5758

ffreis@santander.com.br

Ana Reynal

Mexico

5255-5269-1900

areynal@santander.com.mx

Alex Sciacio, CFA

Brazil

5511-3012-5870

azsciacio@santander.com.br

Cement, Construction, Infrastructure & Real Estate

Rodrigo Ordonez

Chile

5622-336-3358

rordonez@santander.cl

Eugenia F. Pouchan, CFA

Argentina

5411-4341-1218

Retail & Consumer Goods
Sector Head

5511-3553-0699

tstingelin@santander.com.br

Brazil
Chile
Mexico
Mexico
Mexico

mfernandezpouchan@santanderrio.com.ar
5511-3012-7414
fpgama@santander.com.br
5622-336-3358
rordonez@santander.cl
5255-5269-1931
gofernandez@santander.com.mx
5255-5257-8172
rurrutiac@santander.com.mx
mareyesc@santander.com.mx
5255-5269-1921

Tobias Stingelin, CFA

Fabiola Gama
Rodrigo Ordonez
Gonzalo Fernández
Rogelio Urrutia
Marco Reyes

Ronaldo Kasinsky
Bruno Soares Taveira
Adoflo Ortuzar
Reinaldo Santana
Ana Reynal

Brazil
Brazil
Chile
Mexico
Mexico

5511-3553-2396
5511- 3553-602
5622-336-3359
5255-5269-2102
5255-5269-1900

rkasinsky@santander.com.br
btaveira@santander.com.br
aortuzar@santander.cl
rasantana@santander.com.mx
areynal@santander.com.mx

Rodrigo Ordonez

Chile

jvalder@santander.com.br

Agribusiness

Juan Pablo Cabrera-Head of LatAm Macro
Sergio Galván
Argentina
Maurício Molan
Brazil
Juan Pablo Castro
Chile
Hector Chavez
Mexico

3491-257-2172 jupcabrera@gruposantander.com
5411-4341-1728
sgalvan@santanderrio.com.ar
5511-3012-5724
mmolan@santander.com.br
5622-336-3389
jcastro@santander.cl
5255-5269-1925
hchavez@santander.com.mx

Oil, Gas, and Petrochemicals

Capital Goods

5622-336-3358

rordonez@santander.cl

Education

Christian Audi

Sector Head

1-212-350-3991

caudi@santander.us

Vicente Falanga Neto

Brazil

5511-3012-6042

vneto@santander.com.br

Eugenia F. Pouchan, CFA

Argentina

5411-4341-1218
mfernandezpouchan@santanderrio.com.ar

Telecom, Media & Technology
Valder Nogueira

Sector Head

5511-3012-5747

Eugenia F. Pouchan, CFA

Argentina

5411-4341-1218

Bruno Giardino, CFA

Sector Head

5511-3012-5914

bgiardino@santander.com.br

Daniel Gewehr

Brazil

5511-3012-5787

dhgewehr@santander.com.br

Boris Molina

Sector Head

1-212-350-3977

bmolina@santander.us

Henrique Navarro

Brazil

5511-3012-5756

havieira@santander.com.br

Renata F. Cabral

Brazil

5511-3012-5731

rcabral@santander.com.br

Luis Guzmán

Mexico, Andean

1-212-297-1367

lguzman@santander.us

Transportation

Financial Services

mfernandezpouchan@santanderrio.com.ar
Bruno Mendonça

Brazil

5511-3012-5759

Francisco Errandonea

Chile

5622-336-3357

brmendonca@santander.com.br
ferrando@santander.cl

Nicolás Khaliliyeh

Chile

5622-336-3423

nkhaliliyeh@santander.cl

Rogelio Urrutia

Mexico

5255-5257-8172

rurrutiac@santander.com.mx

Nicolás Schild

Chile

5622-336-3361

nschild@santander.cl

Pedro Balcão Reis

Sector Head

5511-3012-5765

pbalcao@santander.com.br

Henrique Navarro

Brazil

5511-3012-5756

havieira@santander.com.br

Bruno Amorim

Brazil

5511-3012-6016

bamorim@santander.com.br

Renan Manda
Cristian Jadue
Rogelio Urrutia

Brazil
Chile
Mexico

5511-3012-6535
5622-336-3323
5255-5257-8172

rmanda@santander.com.br
cjadue@santander.cl
rurrutiac@santander.com.mx

Marcio Prado

Sector Head

5511-3012-5751

mprado@santander.com.br

Maria Carolina Carneiro

Brazil

5511-3012-6682

macarneiro@santander.com.br

Cristian Jadue

Chile

5622-336-3323

cjadue@santander.cl

Eugenia F. Pouchan, CFA

Argentina

Food & Beverage
Luis Miranda, CFA
Francisco Errandonea

Sector Head
Chile

5255-5269-1926
5622-336-3357

lmiranda@santander.com.mx
ferrando@santander.cl

Ana Reynal

Mexico

5255-5269-1900

areynal@santander.com.mx

Daniel Gewehr

Sector Head

5511-3012-5787

dhgewehr@santander.com.br

Bruno Giardino, CFA

Brazil

5511-3012-5914

bgiardino@santander.com.br

Walter Chiarvesio
Felipe F. dos Reis
Alex Sciacio, CFA

Argentina/Peru
Brazil
Brazil

5411-4341-1564
5511-3012-5758
5511-3012-5870

wchiarvesio@santanderrio.com.ar
ffreis@santander.com.br
azsciacio@santander.com.br

Rodrigo Ordonez

Chile

5622-336-3358

rordonez@santander.cl

Brazil

5511-3012-5731

rcabral@santander.com.br

Healthcare

Metals & Mining

Quantitative
Renata F. Cabral

5411-4341-1218
mfernandezpouchan@santanderrio.com.ar

Fixed Income Research
Aaron Holsberg

Sales

Head of Credit

1-212-350-0978

aholsberg@santander.us

Alejandro Estevez-Breton Head of Rates

1-212-350-3917

aestevez@santander.us

1-212-756-9165
1-212-756-9241
1-212-756-9242
1-212-756-9164
1-212-756-9166
1-212-756-9164
1-212-756-9240
4420-7756-6606
5511-3012-6330

msouza@santander.us
dcummings@santander.us
myallop@santander.us
tlyon@santander.us
mmischel@santander.us
ndrohojowski@santander.us
achavez@santander.us
bohara@gruposantander.com
fmsanchez@santander.com.br

1-212-583-4602
1-212-583-4635
1-212-756-9243
1-212-583-4607

jalmuina@santander.us
dsheehan@santander.us
iprada@santander.us
hevans@santander.us

1-212-756-9160
1-212-350-3659

jnardella@santander.us
ynuriev@santander.us

Sales Trading

New York
Patryck Pimpao, Head of Equity Sales
Victoria Santaella
Lola Wisener
Geoffrey Knoell, CFA, Hong Kong
London
Fabio Faraggi
Luiz Franca
Alex Pallin
Regina Rodriguez, Mexico

1-212-350-0744
1-212-350-3919
1-212-407-0908
852-3921-3080

ppimpao@santander.us
vsantaella@santander.us
lwisener@santander.us
gknoell@gruposantander.com

4420-7756-6602
4420-7756-6608
4420-7756-6601
5255-5269-8760

ffaraggi@gruposantander.com
lfranca@gruposantander.com
apallin@gruposantander.com
rrodriguezsa@santander.com.mx

5511-3012-5302
5511-3012-5305
5511-3012-5303

eduardo.t.pereira@santander.com.br
cdias@santander.com.br
mborin@santander.com.br

New York
Marcio Souza, Head Trading & Sales
Darrin Cummings
Martin Yallop, CFA
Tomas Lyon
Maury Mischel
Nicolas Drohojowski
Alejandro Chavez
Benson O’Hara, London
Fernando Sanchez, São Paulo

Equity Derivatives New York

São Paulo
Eduardo Toledo
Caio Dias
Mirella Borin

Utilities

Jacobo Almuiña
Donna Sheehan
Isaac Prada
Harley Evans

Program Trading – New York
Jason Nardella
Yan Nuriyev

SANTANDER RESEARCH AVAILABLE ON
BLOOMBERG: SIEQ <GO>
CAPITAL IQ: WWW.SPCAPITALIQ.COM

FACTSET: WWW. FACTSET.COM

REUTERS KNOWLEDGE: HTTP://KNOWLEDGE.REUTERS.COM
THOMSON ONE ANALYTICS: HTTP://THOMSONONEIM.COM

TABLE OF CONTENTS
ARGENTINA
Banco Macro
BBVA Frances
Cresud
GF Galicia
Irsa
Siderar
Telecom Argentina
BRAZIL
AES Tiete
ALL America Latina
Ambev
Anhanguera
Autometal
B2W
Banco do Brasil
Banco Pine
BicBanco
BM&F Bovespa
BR Properties
Bradesco
Brasil Foods
Brasil Insurance
Braskem
Brookfield
CBD
CCR
Celesc
Cemig
Cesp
Cetip
Cia. Hering
Cielo
Coelce
Comgas
Copasa
Copel
Cosan
Cosan Limited
CPFL Energia
CSN
Cyrela Brazil Realty
DASA
Duratex
Ecorodovias
Eletrobras
Eletropaulo
Embraer
Energias do Brasil
Estacio
Even
EZ Tec
Fibria

10
12
14
16
18
20
22
24
26
28
30
32
34
36
38
40
42
44
46
48
50
52
54
56
58
60
62
64
66
68
70
72
74
76
78
80
82
84
86
88
90
92
94
96
98
100
102
104
106
108
110

BRAZIL (ctd)
Fleury
Gafisa
Gerdau
Gol
GP Investments
HRT
IMC
Iochpe-Maxion
Itausa
Itaú Unibanco
JBS
JSL
Klabin
Kroton
Light
LLX Logistica
Localiza
Log-In
Lojas Americanas
Lojas Renner
Lupatech
Magnesita
Marcopolo
MMX
MPX Energia
MRV Engenharia
Multiplan
Multiplus
Natura
OdontoPrev
OGX
OI
PDG Realty
Petrobras
Porto Seguro
Positivo Informatica
Providencia
Qualicorp
Queiroz Galvão E&P
Randon
Renova Energia
Rodobens
Romi
Sabesp
Santos Brasil
São Carlos
São Martinho
Saraiva
Sul America
Suzano
TAESA
Tecnisa

112
114
116
118
120
122
124
126
128
130
132
134
136
138
140
142
144
146
148
150
152
154
156
158
160
162
164
166
168
170
172
174
176
178
180
182
184
186
188
190
192
194
196
198
200
202
204
206
208
210
212
214

BRAZIL (ctd)
Tegma
Telefonica Brasil
TIM Participações
TOTVS
Tractebel
Transmissao Paulista
Ultrapar
Unicasa Móveis
Usiminas
Vale
Weg
Wilson, Sons
CHILE
AES Gener
Aguas Andinas
Andina
Banco de Chile
BCI
Besalco
CAP
CCU
Cencosud
CMPC
Colbun
Concha y Toro
Copec
CorpBanca
Cruz Blanca Salud
E-CL
Endesa
Enersis
Entel
Falabella
IAM
LATAM Airlines
Parque Arauco
Ripley
Salfacorp
Sonda
SQM
COLOMBIA
Almacenes Exito
Bancolombia
Cementos Argos
Davivienda
Ecopetrol
Grupo Argos
Grupo Aval
Grupo Nutresa
Grupo Sura
Pacific Rubiales

216
218
220
222
224
226
228
230
232
234
236
238
240
242
244
246
248
250
252
254
256
258
260
262
264
266
268
270
272
274
276
278
280
282
284
286
288
290
292

294
296
298
300
302
304
306
308
310
312

MEXICO
Alfa
Alsea
Ara
Arca
Asur
Banorte
Banregio
Bolsa Mexicana de Valores
Cemex
Chedraui
Coca-Cola FEMSA
Comerci
Compartamos SAB
FEMSA
GAP
Genomma Lab
Geo
GF Inbursa
Gruma
Grupo Bimbo
Grupo Famsa
Grupo Herdez
Grupo Mexico
Homex
ICA
Kimberly Clark
Liverpool
Mexichem
OHL Mexico
Oma
Soriana
Sports World
Urbi
Vesta
Walmex
PERU
Buenaventura
Copeinca
Credicorp
Ferreyros
Intercorp
Pesquera Exalmar
Southern Copper
Volcan
MULTINATIONAL
Copa Holdings
Tenaris
Ternium

314
316
318
320
322
324
326
328
330
332
334
336
338
340
342
344
346
348
350
352
354
356
358
360
362
364
366
368
370
372
374
376
378
380
382
384
386
388
390
392
394
396
398

400
402
404

1

2013 Latin American Universe Book

Latin American Equities: Under-Valued, Under-Owned, Under-Recommended, and Under-Estimated
Jesus Gomez
Head of Latin American Equity Research, LatAm Strategist
+1 212 350-3992 / jgomez@santander.us

The 17th edition of our LatAm Universe Book aims to help investors navigate once more the investment cases,
most updated estimates, and valuation metrics of 198 companies. This flagship research, launched in 1996 with
29 companies, has been growing in tandem with the development of capital markets in our region. We believe this
Universe Book will prove to be a useful tool in helping investors make fruitful investment decisions in 2013 and
reap the benefits of participating in our XVII Annual Latin American CEO Conference. Our research teams—
located in Brazil, Mexico, Chile, and Argentina, as well as New York—have made it possible thanks to their skill
and effort.
The “risk on, risk off” debate dominated investment decisions in 2011-12. We believe that the appetite for Latin
American equities should return in 2013 after two consecutive years of underperformance. Today, Latin American
equity markets are under-valued, under-owned, under-recommended, and under-estimated, in our view. These
four key characteristics should support the outperformance of Latin America over the next 12 months, and
investors should reposition their portfolios accordingly.
Our central scenario calls for a more stable 2013, as early signs of economic acceleration will be visible not only
in emerging but also in developed economies, as leading indicators have been signaling lately. The central banks
have shown the world that they have the will and the capacity to avoid systemic risk (stemming either from the
financial sector or the sovereigns). On the other hand, political consensus finally has been reached to avoid the
most adverse scenarios from investors’ perspectives (the fiscal cliff in the U.S., default by large Mediterranean
countries, etc.). Economic, monetary, and institutional stability in the developed world should translate into more
supportive global conditions for equity investors.
This constructive global scenario should bode well for emerging markets, in our view. The improved levels of
confidence should refocus investors’ attention on the long-term fundamentals of emerging markets. We believe
that the global long-term trend will still be dominated by the need of developed economies to continue their
healing process: forging ahead with cuts in fiscal spending, reducing financial leverage (both public and private),
and strengthening the financial sector. At the same time, emerging economies have sound public finances, lower
financial leverage versus their developed economy counterparts, and strong financial systems, thus providing
them with a much better fundamental base to continue capturing global economic growth. In the next five years,
we estimate that emerging markets are likely to account for more than two-thirds of global economic growth and
that the combined nominal GDP of all emerging economies should surpass that of developed economies in 2013.
Investors’ portfolios do not reflect this scenario yet. Today, only 14% of global equity investment goes to emerging
markets, and the representation of Latin American equities barely surpasses the 2% mark.

2

The stabilization of China’s growth rate, the acceleration in other emerging economies, and better short-term
prospects for Latin America should take the limelight in 2013. In our view, after two years of disappointment,
investors, analysts, and economists have lowered their expectations regarding economic growth and corporate
earnings to the point that an inflection is likely to be reached in the first half of 2013. The fundamentals of Latin
America have been vindicated after a nearly six-year global financial crisis, but the equity market has overlooked
them.
The long-term picture should not be blurred by the short-term cloudiness that has affected financial markets so
badly over the last two years, in our opinion. We believe that when fear reigns in financial markets, financial
assets become correlated and investors become risk-averse, consequently seeking refuge in developed markets.
As fear recedes, fundamentals and growth should drive investment decisions. For 2013, more upside and less
risk should, in our opinion, direct investors back to LatAm.
Changes in recommendations and target prices. The Universe Book contains our changes in
recommendations and target prices for our LatAm universe of coverage. We outline the most actionable changes
(upgrades to Buy and all downgrades) in Figure 1 and highlight the investment case in Figure 2 for 14 select
stocks based on their significance. Furthermore, Figure 3 outlines all the changes in ratings and target prices for
our universe of coverage.
Figure 1. Actionable Changes in Recommendation (Upgrades to Buy and All Downgrades)
UPGRADE
To Buy

To Hold

DOWNGRADE
To Underperform

Brookfield

ASUR

CEMEX

Buenaventura

Banco de Chile
Bolsa Mexicana de Valores

CorpBanca

Cementos Argos

Cresud

Credicorp

Cia Hering

E-CL

Eletrobras (ELET6)

Cruz Blanca Salud

Embraer

Fleury

Estacio

Irsa

LLX

Grupo Herdez

Siderar

Lojas Americanas

Grupo Mexico

Suzano

Romi

Grupo Nutresa

Weg

Grupo Sura
Marcopolo
Mexichem
Multiplan
Parque Arauco
Positivo Informatica
Renova Energia
Rodobens
Sao Carlos
Unicasa Moveis
Urbi
Source: Santander estimates.

3

2013 Latin American Universe Book

Figure 2. Select Recommendation Changes
Company

Investment Case

Upgrade to Buy

CEMEX
[Cement & Construction]

 Given the successful refinancing agreement reached in mid-2012 and the use of proceeds from the IPO of Cemex
LatAm Holdings (CLH) to reduce debt, the company does not have significant banking debt maturities until 2017. In
addition, we think Cemex could benefit from the good momentum of the construction sector in Mexico and Latin
America, and we saw initial signs of a turnaround in the U.S. in 2012.

CorpBanca
[Financial Service]

 CorpBanca is in the process of transforming itself into a one-of-a-kind Andean player, as it will become one-third
Colombian and two-thirds Chilean in 2013E. We view the Colombian operation favorably, as it should create value,
with ROI being above the cost of capital starting in 2014E.
 We believe that the risk of an additional capital increase (after the one expected in 1Q13) should be significantly
lower than we previously thought.

Credicorp
[Financial Service]

 In a country of robust loan and revenue penetration potential, we believe that Credicorp is in a good position to
capture the 6% GDP growth rate in years ahead thanks to its dominant position in banking, insurance, and pension
funds. We view favorably the bank’s proactive approach in expanding to new growth areas in Peru (e.g., consumer
finance) via organic expansion and corporate finance in neighboring countries via M&A.

Eletrobras (ELET6)
[Utilities]

 We believe preferred stock (ELET6) shareholders will continue receiving their bylaws’ guaranteed annual dividend
per share of approximately R$1.48 (15% yield).
 If Eletrobras’s estimates of an indemnification value of R$20 billion is correct (we think it is), we estimate an asset
write-off of R$10-15 billion for Eletrobras. This write-off will not wipe out Eletrobras’s R$20 billion profit reserves.
Therefore, the company should continue paying ELET6 mandatory dividends. If the write-off wipes out profit
reserves, the dividend payment could be interrupted.

Lojas Americanas
[Retail & Consumer]

 We believe that the company is still one of the best-positioned Brazilian retailers to capture the expected growth in
the industry due to its (1) proven track record in opening stores of different sizes across Brazil, (2) product
diversification (no single category represents more than 10% of sales), (3) limited credit exposure, (4) resilient
business (average ticket ~ R$40), and (5) high returns (36% at B&M level).

Downgrade to Hold

ASUR
[Transportation]

 We are downgrading based on the stock’s rich valuation levels. In our view, current passenger traffic trends at
Cancun airport—Asur’s largest operating unit—are not sustainable in the short term, particularly after factoring in
that hotel room capacity in the Mayan Riviera has not expanded at the same pace as passenger traffic, and due to
the still limited seat capacity of domestic airlines. Regarding the LMM airport lease agreement, we believe that the
value contribution to Asur will not be significant during the concession’s first year of operation.

Cementos Argos
[Cement & Construction]

 As much as we like Cementos Argos’s investment case, its current valuation already reflects the company’s strong
fundamentals, in our view. Moreover, we see some downside risk at current price levels if the expected growth or
margin improvement does not materialize in 2013.

Cia Hering
[Retail & Consumer]

 We expect share volatility to persist in the near term as the Street works to incorporate more bearish assumptions.
(Our 2013 EPS estimate is 12% below consensus.) We continue to believe that Hering’s business model is strong
as evidenced by (1) decent near-term earnings growth (10% EPS CAGR in 2012E-14E), (2) high returns (ROIC
52% in 2013E), (3) solid cash flow generation (4% FCFE in 2013E) and dividend outlook (4% dividend yield
2013E), and (4) no credit exposure.

Sources: Santander estimates.

4

Figure 2. (Continued) Recommendation Change Highlights
Company

Investment Case

Downgrade to Hold
Grupo Mexico
[Metals & Mining]

 The current discount to NAV takes away from the attractiveness of the stock. We also believe that it is fairly priced
versus its controlled subsidiary Southern Copper. We expect EBITDA to decline 2.0% owing to a 5% YoY lower
copper price and cost pressures at Southern Copper. We expect volume at the ITM division to grow 3.5%, in-line
with the Mexican economy.

Grupo Sura
[Financial Services]

 We are downgrading our rating due to the unattractive upside potential to our new YE2013 target price, and after
the strong performance in Sura’s shares toward year-end 2012. The stock is currently trading at a 4% premium to
its NAV at current prices, which we believe is a fair value for the shares, given the nil holding company discount the
shares historically trade at, due to the low holding company overheads and low taxation of investment vehicles in
Colombia.

Mexichem
[Capital Goods]

 We view Mexichem as an attractive company for 2013, as we believe that the company’s current operations and
business will lead to attractive growth rates despite the challenging economic outlook. Also, the company is
currently working on projects that we believe could result in additional profitable growth in the chlorine-PVC or
fluorite chains. However, after the 76% rally in 2012, we see limited upside potential from current levels.

Downgrade to Underperform

Banco de Chile
[Financial Services]

 In the last 12 months, Banco de Chile has outperformed the market by 10% and other large-cap Chilean banks by
23% thanks to its strong loan growth while continuing to deliver low twenties adjusted ROEs. However, we believe
the bank’s solid outlook is fully priced-in, and we recommend that investors seek less expensive vehicles to gain
exposure to the Chilean banking industry, such as other large- or small-cap banks.

Bolsa Mexicana de
Valores
[Financial Services]

 We see limited upside in derivatives and SIF-ICAP, whose growth outlook is less than desirable, in our view.
Furthermore, the stock is trading at a 2013E FV/EBITDA of 17.1x, which is a record high and significantly higher
than its three-year average of 12x. Hence, we see limited upside in the stock.

Weg
[Capital Goods]

 We believe that WEG’s deserved premium investment case is already reflected in the current share price, and we
recommend investors take profits after the rally caused by the stock’s inclusion in the MSCI LatAm Standard Index.
The shares are trading at 24.1x our 2013E P/E estimate (14.1x FV/EBITDA), respectively, about 35% higher than
its five-year historical multiples and 40% higher than its international peers.

Sources: Santander estimates.

5

2013 Latin American Universe Book
Figure 3. Rating & Target Price Changes
Inv. Code
Company
Argentina

Sector

Ticker

Banco Macro
BBVA Frances
Cresud
GF Galicia
Irsa
Siderar

Financial Svcs
Financial Svcs
Cement, Constru, Infra & RE
Financial Svcs
Cement, Constru, Infra & RE
Metals & Mining

Ambev
Autometal
B2W
Banco do Brasil
Banco Pine
BicBanco

YE2013 Target Price

Current

Previous

Current

Previous

BMA US
BFR US
CRESY US
GGAL US
IRS US
ERAR AR

Uperf
Uperf
Uperf
Uperf
Uperf
Uperf

Uperf
Uperf
B
Uperf
B
B

17.50
4.90
9.90
5.60
8.50
2.31

16.10
4.40
-5.10
---

Food & Beverage
Capital Goods
Retail & Consumer Goods
Financial Svcs
Financial Svcs
Financial Svcs

ABV US
AUTM3 BZ
BTOW3 BZ
BBAS3 BZ
PINE4 BZ
BICB4 BZ

H
B
Uperf
Uperf
B
H

H
B
Uperf
Uperf
B
H

45.00
24.00
15.00
24.00
16.70
6.30

-20.00
-22.00
-8.30

BM&F Bovespa

Financial Svcs

BVMF3 BZ

Uperf

Uperf

12.30

12.40

BR Properties

Cement, Constru, Infra & RE

BRPR3 BZ

B

B

31.50

28.00

Bradesco

Financial Svcs

BBD US

B

B

21.20

19.30

Brasil Foods

Food & Beverage

BRFS3 BZ

B

B

47.00

--

Brookfield

Cement, Constru, Infra & RE

BISA3 BZ

B

H

4.90

4.50

CBD

Retail & Consumer Goods

PCAR4 BZ

B

B

108.00

--

CCR

Transportation

CCRO3 BZ

B

B

21.00

--

Celesc

Utilities

CLSC4 BZ

H

Uperf

25.30

--

Cemig

Utilities

CMIG4 BZ

B

B

27.70

30.60

Brazil

Cetip

Financial Svcs

CTIP3 BZ

Cia Hering
Cielo
Coelce
Comgas
Copasa
Cosan
Cosan Limited
CPFL Energia
Cyrela Brazil Realty
DASA
Eletrobras
Eletropaulo
Embraer
Energias do Brasil
Estacio Part
Even
Fleury
Gafisa
Gol
GP Investments
HRT
IMC
Iochpe Maxion
Itaú Unibanco
Itausa

Retail & Consumer Goods
Financial Svcs
Utilities
Utilities
Utilities
Agribusiness
Agribusiness
Utilities
Cement, Constru, Infra & RE
Health Care
Utilities
Utilities
Transportation
Utilities
Education
Cement, Constru, Infra & RE
Health Care
Cement, Constru, Infra & RE
Transportation
Financial Svcs
Oil, Gas & Petrochemicals
Retail & Consumer
Capital Goods
Financial Svcs
Financial Svcs

HGTX3 BZ
CIEL3 BZ
COCE5 BZ
CGAS5 BZ
CSMG3 BZ
CSAN3 BZ
CZZ US
CPFE3 BZ
CYRE3 BZ
DASA3 BZ
ELET6 BZ
ELPL4 BZ
ERJ US
ENBR3 BZ
ESTC3 BZ
EVEN3 BZ
FLRY3 BZ
GFA US
GOL US
GPIV11 BZ
HRTP3 BZ
IMCH3 BZ
MYPK3 BZ
ITUB US
ITSA4 BZ

B

B

34.70

36.50

H
H
H
B
H
B
B
B
H
B
B
Uperf
Uperf
B
H
B
B
H
H
B
H
B
B
H
B

B
H
H
B
H
B
B
B
H
B
Uperf
Uperf
H
B
B
B
H
H
Uperf
B
H
B
B
H
B

50.00
64.00
46.94
63.38
49.53
49.00
22.00
27.40
19.50
16.50
16.69
9.29
27.50
14.30
44.00
11.80
28.00
5.30
7.00
7.40
5.80
31.00
34.00
19.35
13.00

52.00
62.60
-----27.80
18.50
17.50
9.69
---44.00
10.30
28.00
---4.60
-36.00
16.90
--

6

00 7.00 155.50 6.50 9.00 --24.00 --16.00 13. Constru.00 37.100.70 41.42 3.00 ----- AESGENER CI AGUAS/A CI CHILE CI BCI CI BESALCO CI CCU CI CENCOSUD CI CMPC CI COLBUN CL CONCHA CI COPEC CI B H Uperf B B B B H H H H B H B B B B B H Uperf H H 370.Figure 3.50 12.00 84. Gas & Petrochemicals Utilities Cement.30 39.00 6.00 34.00 8.050.00 ---1.00 49.50 9.000.00 61.00 24. Media & Tech Retail & Consumer Goods Health Care Oil.00 92.00 1.30 5.70 12.000.00 28.00 22.850.050.000.00 7.50 15.00 12.00 11.00 2.30 25.50 -13.00 365. Infra & RE Capital Goods Cement.60 51.00 -10.00 7.00 8. Gas & Petrochemicals Financial Svcs Telecom.700. Rating & Target Price Changes (continued) Rating Company Brazil (continued) Sector Ticker JBS Klabin Kroton Light LLX Logistica Log-In Lojas Americanas Lojas Renner Lupatech Marcopolo MMX MPX Energia Multiplan Multiplus Natura OdontoPrev OGX Porto Seguro Positivo Informatica Providencia Qualicorp Queiroz Galvão E&P Renova Energia Rodobens Romi São Carlos Saraiva Sul America Suzano Tegma Trans.27 13.00 10.700.31 29.69 63. Infra & RE Food & Beverage Retail & Consumer Goods Pulp & Forest Products Utilities Food & Beverage Pulp & Forest Products YE2013 Target Price Current Previous Current Previous JBSS3 BZ KLBN4 BZ KROT3 BZ LIGT3 BZ LLXL3 BZ LOGN3 BZ LAME4 BZ LREN3 BZ LUPA3 BZ POMO4 BZ MMXM3 BZ MPXE3 BZ MULT3 BZ MPLU3 BZ NATU3 BZ ODPV3 BZ OGXP3 BZ PSSA3 BZ POSI3 BZ PRVI3 BZ QUAL3 BZ QGEP3 BZ RNEW11 BZ RDNI3 BZ ROMI3 BZ SCAR3 BZ SLED4 BZ SULA11 BZ SUZB5 BZ TGMA3 BZ TRPL4 BZ UGP US UCAS3 BZ USIM5 BZ WEGE3 BZ WSON11 BZ H H B H B H B H Uperf H H H H B H Uperf H B H B B B H H B H B B Uperf B B B H Uperf Uperf H H H B H H H H H Uperf B H H B B H Uperf H B B B B B B B H B B B H B B B B Uperf H H 7. Gas & Petrochemicals Capital Goods Metals & Mining Utilities Cement.50 23.00 ----83.00 65. Constru. Constru. Infra & RE Financial Svcs Retail & Consumer Goods Health Care Oil.00 3.00 10.50 13.50 5.00 ----1.00 1.80 14.50 7.00 39.00 20.50 13. Constru.50 6.50 4.40 26.00 3.300.50 -37.00 5.07 -53. Infra & RE Retail & Consumer Goods Financial Svcs Pulp & Forest Products Transportation Utilities Oil.20 50.60 56.00 1. Gas & Petrochemicals Retail & Consumer Goods Metals & Mining Capital Goods Transportation Utilities Utilities Financial Svcs Financial Svcs Cement.00 36.00 Chile AES Gener Aguas Andinas Banco de Chile BCI Besalco CCU Cencosud CMPC Colbun Concha y Toro Copec 7 .000.77 27. Paulista Ultrapar Unicasa Móveis Usiminas WEG Wilson Sons Food & Beverage Pulp & Forest Products Education Utilities Transportation Transportation Retail & Consumer Goods Retail & Consumer Goods Oil.

00 -- 8 .00 95.00 -- Retail & Consumer Goods ALSEA* MM B B 31.00 -- LATAM Airlines Transportation LFL US H Uperf 25.00 -- GF Inbursa Financial Svcs GFINBURO MM Uperf Uperf 30.350. Infra & RE SALFACOR CI Uperf Uperf 1.00 -- Grupo Famsa Retail & Consumer Goods GFAMSAA MM H H 17.00 Grupo Sura Financial Svcs PFGRUPSU CB H B 42.00 -- Chedraui Retail & Consumer Goods CHDRAUIB MM B B 48.00 Compartamos Financial Svcs COMPARC* MM H Uperf 21.00 -- E-CL Utilities ECL CI Uperf H 1.250. Infra & RE CEMARGOS CB H B 11.00 1.00 Arca Food & Beverage AC* MM H H 106.000.600.00 Gruma Food & Beverage GRUMAB MM H H 48.500.00 Comerci Retail & Consumer Goods COMERUBC MM H H 46. Media & Tech ENTEL CI H H 11.00 140.00 Entel Telecom.100.00 Cemex Cement.00 1.00 -- Bancolombia Financial Svcs CIB US B B 79.300.00 -- Nutresa Food & Beverage NUTRESA CB H B 27.750. Infra & RE PARAUCO CI H B 1.000. Constru.00 25.75 5. Constru.00 -- Cementos Argos Cement.00 Coca-Cola FEMSA Food & Beverage KOF US H H 160.00 Sonda Telecom.10 6.00 GAP Transportation PAC US Uperf Uperf 55.00 -- Salfacorp Cement. Infra & RE ARA* MM H H 4. Constru.200.00 -- Almacenes Exito Retail & Consumer Goods EXITO CB B B 40.350. Infra & RE CX US B H 12. Rating & Target Price Changes (continued) Rating Company Chile (Continued) Sector Ticker YE2013 Target Price Current Previous Current Previous CorpBanca Pulp & Forest Products CORPBANC CI B H 8.00 -- Grupo Aval Financial Svcs PFAVAL CB Uperf Uperf 1. Constru.00 24.00 103.00 -- Davivienda Financial Svcs PFDAVVND CB B B 31.00 30.50 Colombia Mexico Alsea Ara Cement.00 90.000.00 -- Banorte Financial Svcs GFNORTEO MM B B 100.00 -- Grupo Argos Capital Goods INVERARG CB H H 22.00 42.00 -- IAM Utilities IAM CI H H 1.20 Parque Arauco Cement.00 -- Falabella Retail & Consumer Goods FALAB CI H H 5.50 16.50 23.85 Cruz Blanca Salud Health Care CRUZBLAN CI H B 690.00 -- Enersis Utilities ENI US B B 23.50 28.050.160.00 46.00 Asur Transportation ASR US H B 129.00 FEMSA Food & Beverage FMX US H H 110.2013 Latin American Universe Book Figure 3.00 Bolsa Mexicana Financial Svcs BOLSAA MM Uperf B 33. Constru.00 -- Grupo Bimbo Food & Beverage BIMBOA MM H H 36.300.450. Media & Tech SONDA CI B B 1.

48 -- Multinational     Copa Holdings Transportation CPA US Tenaris Oil.00 Mexichem Capital Goods MEXCHEM* MM H B 83. Infra & RE ICA Cement.50 -- Pesquera Exalmar Fishmeal EXALMC1 PE B B 2. Rating & Target Price Changes (continued) Rating Company Mexico (Continued) Sector Grupo Herdez Food & Beverage Grupo Mexico Metals & Mining Homex Cement.50 20.00 HXM US B B 16.00 32.40 -- Peru Intercorp Financial Svcs IFS PE B B 42.00 -- Sports World Retail & Consumer Goods SPORTS MM B B 23. Constru. Infra & RE URBI* MM H B 9.80 25.75 -- Walmex Retail & Consumer Goods WALMEXV MM H H 44.20 -- Retail & Consumer Goods KIMBERA MM H H 37.00 80.Figure 3.80         B B 115.50 -- Soriana Retail & Consumer Goods SORIANAB MM Uperf Uperf 50.00 -- Credicorp Financial Svcs BAP US B H 176.00 ICA US B B 12. Infra & RE VESTA* MM B B 25.00 OMA Transportation OMAB US H H 25.00 OHL Mexico Transportation OHLMEX* MM B B 33.90 24.00 146.00 Vesta Cement.48 -- Ferreyros Capital Goods FERREYC1 PE B B 3.00 -- GMEXICOB MM H B 51. Constru. Gas & Petrochemicals TS US B B 50 -- Ternium Metals & Mining TX US B B 27.00 -- Urbi Cement. Infra & RE Kimberly Clark Ticker YE2013 Target Price Current Previous Current Previous HERDEZ* MM H B 44.00 51.00 Buenaventura Metals & Mining BVN US H B 38. Constru.00 -- Exalmar Fishmeal EXALMC1 PE B B 2.00 -- Source: Santander 9 .00 -- Liverpool Retail & Consumer Goods LIVEPOLC MM B B 154. Constru.00 40.00 -- Copeinca Food & Beverage COP NO B B 54.

We continue to monitor the macroeconomic and regulatory situation Luis Guzmán New York: Santander Investment Securities Inc. Santander estimates and company reports.4 Shares Outstanding .10 52-Week Range (US$) 11.10  Investment Case: We remain cautious on Banco Macro. Nevertheless. Daily Vol (US$ Mn) 1.67 / Ar$ 12.  Asset quality: better than expected in 2012 but could suffer in 2013.0x. hurting profitability. We have BMA US / BMA AR Current Price (01/03/13) US$ 18.70 Target Price (YE 2013) US$ 17. leading to higher NPL provisions and lower operating profitability. However.37 adapted our estimates of the bank’s CT1 capital ratio to reflect the Market Capitalization (US$ Mn) impact of tough operating risk capital requirements (which do not get Float (%) reflected in RWA under Argentine rules).50 RAISING YE2013 TARGET PRICE TO US$17. 40 20 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet.Mn 59 led to lower capital surpluses and lower adjusted ROE (due to the higher capital required). We expect NPLs to end 2012 at 1. the ongoing slowdown in the Argentine economy should lead to higher NPLs in 2013 and thereafter.us Banco Macro’s capital surplus to be much smaller than before. +1-212-297-1367 | lguzman@santander.  2013 Outlook: Loan growth should largely track inflation projections. in our view.9 3-Mth Avg.2013 Latin American Universe Book ARGENTINA—FINANCIAL SERVICES BANCO MACRO UNDERPERFORM CURRENT PRICE: US$18.  Price Performance (US$) Banco Macro Merval 120 100 Stock fully priced in. Bloomberg Capital surplus shrinks under regulatory pressure. +1-212-350-3977 | bmolina@santander. which is much better than our previous estimate of 2. negatively affecting our valuation of Banco Macro.7%. in our view.50 FROM US$16. as the Boris Molina harsher capital requirements introduced in Argentina in 2012 led New York: Santander Investment Securities Inc.50 / Ar$ 13. we still believe Macro’s exposure to those regional economies that are  largely agricultural should allow it to fare better than the Argentine Company Statistics banking system as a whole in terms of asset quality.1%.110 30. We maintain our target YE2013 adjusted P/BV at 1. with little if any growth in real terms and a slowdown from previous years.us for any developments that could unleash strong hidden value at Banco Macro. hurting adjusted profitability and causing us to lower our valuation.67 TARGET PRICE: US$17.1x in US$ where we find little room for multiple expansion or 60 potential upside and reiterate our Underperform rating on the stock. however. the stock has recently rallied slightly above that to 80 1. These requirements have 1.26.56 . We expect asset quality to start deteriorating. 10 .

0 2014E 4.9 6.373 0 9.99 3.47 177.969 23 8.4 35.5 105.0 2013E 9.2 52.844 (658) 1.903) 2. with the largest distribution network (427 branches) and a strong capital base.1 0.7 0.6 11.953 (1.68 18.180 133 0 971 967 2012E 1.3% Shareholder Structure.9 39.176 1.6 1.6 2.433 1.6 0.582 784 150 0 1.8 35.521 5.302 298 41.00 2.00 2.863 1.06 16.129 330 47. Gains/Shr 2011A 19.8 27.7 26.9 864 (1.3 3.008 202 49.0 102.763 6.9 35.905 2014E 10.437 (1.8 13.6% Free Float 30.78 79.ar Loan Portfolio. 3Q12 Delfin Ezequiel Carvallo 18.289 1.176 2.462 2013E 4.3 3.6 2.7% NII 56.950 2011A 1.095 3.9 35.7 82 (123) 2013E 2.964 4.0 2013E 3.3 43.0 21.0 0.2 104.499 23.2 52.7 38.7 61.7 12.macro.9 110.7% Sources for all charts and tables: Company reports and Santander estimates.50 159.00 3.6 11.7 12.392 24.136) 2. Key Personnel: Jorge Horacio Brito (CEO and Chairman).1 85.7 2.78 130.658 9.786 45.65 13.821 2011A 582 (62) 520 447 967 (566) 419 (150) 267 244 2012E 615 (83) 532 400 932 (531) 408 (159) 247 247 2013E 635 (126) 509 395 904 (559) 354 (124) 228 225 2014E 654 (131) 523 409 932 (584) 355 (124) 229 219 BALANCE SHEET Cash and Equivalents Securities Loans (net) Intangible Assets Total Assets Core Deposits Other Financial Liabilities Subordinated Debt Technical Provisions Equity Adjusted Equity 2011A 6. 11 .685 859 150 0 1.503 24.732 648 0 4.271 905 5.410 (938) 1.3 12.173 801 4.693 3.5% Personal Loans 35.8 0.90 1.0 MARKET RATIOS Adj P/E Adj P/BV Div Yield (%) 2011A 5. Its shares trade in the Buenos Aires Stock Exchange and in ADR form on the NYSE.8 0.07 0.0 2014E 3.4 1.2 63.407 174 51 4.0 102.0 388 (605) 2012E 13.0 2012E 8.0 2.759 5.00 0.4 6.8 0.8 13.360 19.266 1.0 111.00 Banco Macro is one of the leading banks in Argentina.129 330 30.634 (489) 3.2 0.085) 4.43 0.26 0.319 (3.9% Others 0.0 2012E 8.3 0.0 2013E 4.0 2013E 9.3 52.117 781 150 0 948 951 2013E 1.617 31 7.3 1.3 2.96 163.6 7.53 103.00 2014E 31.00 2011A 44. The bank is focused on retail banking for low-tomiddle income individuals.3 2.458 1.00 2012E 24.205 849 4.086 24. Jorge Pablo Brito (CFO) and Jorge Scarinci (IRO) Web: www.0 2.98 0.1% Fees 38.8 51.121 0 7.28 3.858) 2.055 1.com. 2013E Trading 4.531 4.0 PER SHARE DATA EPS BVPS DPS Adj EPS Adj BVPS Surplus Capital per Share Unrealized Cap.7 11.8 51.5 114.847) 2011A 2.145 2.759 1.751 (4.3 59.BANCO MACRO Financial Highlights: P&L and Balance Sheet.6 7.3 12.6 3.5 2012E 3. and servicing provincial governments.79 3.00 2013E 26.53 0.1% Companies 45.3 109.00 4.626 235 69 5.3 59.559 123 36 5.0 2.6 7.0 2014E 9.205 30.439 (882) 3.0 2014E 9.626 4.00 2014E 38.39 8.6 11.0 35.0 21.009 6.020 15 8.8 1.164 6.562 (273) 2.9 2012E 4.434 34.087 LOAN BOOK Companies Total Consumer Mortgages Other Loans Gross Loans Loan Grow th (%) NPL Provisions 2011A 10.3 1.46 10.624 5.1 1.720 4.0 35.42 19.153 42.2 12.128 2.489) 1.8 25.9 27.32 4.3 11.6 2.510 (3.0 2.2 63.3 109.9 1.365 5.11 16.2 0.00 2012E 41.2 0.68 0.974 7.00 3.397 24.129 330 38.16 15.6 2.9 6.95 0.253 (2.592 1.46 0.472 (865) 1.346 37.1 85.902 1.9 39.0 2011A 7.002 61 8.6% Revenue Breakdown.74 3.556 2.857 1.2 12.568 26.68 0.636 1.45 0.00 3.351 3.9 0.33 174.00 2013E 38.1 532 (797) 2013E 17.322 2.99 162.297) 2014E 22.5 80 (125) 2012E 2. From its origins as a wholesale bank.698 2012E 7.143 336 24. 2011–14E in Millions Ar$ Company Description US$ INCOME STATEMENT Net Interest Income NPL Provisions Adj Net Interest Income Non-Interest Income Total Operating Revenue Non-Interest Expense Profit Before Taxes Taxes Net Profit Adjusted Net Profit 2011A 2.075 2012E 3.085 4.756 7.8 66.6 0.3 116 (173) 2014E 2.9% ANSES 30.0 1.8% Jorge Brito 19.0 22.1 0.0 22.81 7.572 2014E 5.058 2014E 1.577 151 44 5.143 169 60.6 1.6 1.7 2.038 1.0 111.8 35.7 135 (202) KEY RATIOS NIM Risk Charge Operating Revenue / ATAs Cost / ATAs Adj Efficiency Effective Taxes Reported ROE (%) Adj ROE (%) NPL Ratio Adj NPL Ratio Loans / Total Assets Loans / Core Deposits RWA % Total Assets Core Tier I Ratio (%) Dividend Payout (%) 2011A 7.457 2. SMEs.51 0.232 (1.7 11.7 26.172 4.034) 1.5 114.179 2013E 9.061 2.0 2011A 3. the company has expanded via acquisitions of smaller regional banks in areas with low penetration of financial products.199 850 5.8% Mortgages Other 3.442 22.9 110.7 55.5 105.7 1.79 17.50 1.56 0.2 103.8 27.3 43.3 11.7 1.099 4.2 104.4 35.399 7. 2013E Credit Cards 13.7 63.7 38.8 25.7 63.648 1.27 4.39 1.6 7.959 140 74.898 7.0% 2.4 6.3 52.8 1.336 12.30 2.574 51.7 61.8 1.6 11.076 975 0 6.9 27.058 10.252 5.6 3.395 15.59 0.7 55.4 1.

20 52-Week Range (US$) 3. which we believe is Luis Guzmán New York: Santander Investment Securities Inc.90 FROM US$4.  2013 Outlook: We expect Frances to continue its cautious loan growth policy. Adjusting RWA to Market Capitalization (US$ Mn) 932 reflect the new capital regime results in less surplus capital and lower Float (%) 16. in our opinion. In our view. Our valuation of Frances has been affected by the sharp increase in noncredit BFR US / FRAN AR Current Price (01/03/13) US$ 5. we expect the bank to post the best NPL ratios in our universe of Argentine banks.us unlikely.us While we believe that Frances is a low-risk franchise.9 adjusted profitability due to higher capital consumption. However. Company Statistics Bloomberg  Higher capital requirements hurt our valuation. +1-212-350-3977 | bmolina@santander. which should pressure earnings. in our view there is little scope for relaxation of the rules in the near future. That trend started in 2012. we expect the bank will also suffer some asset quality deterioration and inflation-driven cost increases.3 Shares Outstanding .90 RAISING YE2013 TARGET PRICE TO US$4.  Decline in NPL coverage ratio close to an end.40  Investment Case: We reiterate our Underperform rating on BBVA Boris Molina Frances.  Price Performance (US$) BBVA Frances Merval 120 100 Our new target price reflects stronger nominal growth from our expectations of high inflation for the near term (as opposed to our 80 previous normalization scenario) with our cost of equity estimate 60 remaining unchanged. require an improvement in the macroeconomic or regulatory environment.21 / Ar$ 11.53 (market and operating) risk capital requirements.2013 Latin American Universe Book ARGENTINA—FINANCIAL SERVICES BBVA FRANCES UNDERPERFORM CURRENT PRICE: US$5. Daily Vol (US$ Mn) 0.90 / Ar$ 12. BBVA Frances still has some room to support reported earnings by using its excess NPL provisions in 2013 via a lower NPL coverage ratio.Mn 179 believe the current requirements are probably stricter than in other countries. 12 . as the stock price still shows downside to our target price. This offsets Frances’s weaker capital position 40 after tighter capital regulations took effect in 2012.80 Target Price (YE 2013) US$ 4. While we 3-Mth Avg. in our view. Even so.21 TARGET PRICE: US$4. as we think the bank will continue to favor asset quality over market share. +1-212-297-1367 | lguzman@santander.6. leading us to estimate 2013 loan growth below expected inflation for the second year running.09 . Santander estimates and company reports. New York: Santander Investment Securities Inc. which depressed 20 adjusted profitability. any upside to the shares would. J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet.

0 2013E 3.5 76.4 6.3 98.63 21.9 0.518 750 33 26.493 (502) 3.9 35.97 5.1 34.00 2.00 2012E 7.9 7.3% BBVA 75.2 2.bancofrances.201 (850) 1.18 0.96 14.1 97.23 0.45 0.00 2013E 6.27 14.4 98.3 33 (73) 2013E 2.05 45.0 2014E 7.445 6.0 PER SHARE DATA EPS BVPS DPS Adj EPS Adj BVPS Surplus Capital per Share Unrealized Cap.1 1.4 0.0 21.202 0 7.1% Fees 39.8 38.761 25.7 55.083 2.5 1. 13 .5 35.9 47 (104) 2014E 2.721 2014E 10.4 0.9 29.5 0.31 0.8 0.0 1.335 18.9 60.3 212 (476) 2013E 17. 2013E Credit Card 16.210 721 33 32.9% Sources for all charts and tables: Company reports and Santander estimates.02 1.0 7.6 7.0 22.407 0 53.0 2014E 2.9 56.868 4.80 0.817 5. The bank was acquired by BBVA in 1996.268 0 0 3.950 3.6 29.862 879 0 0 796 842 2012E 1.2% Others 2.4 59.304 1.2% Others 2.8 0.8% Shareholder Structure.10 4. Ignacio Sanz y Arcelus (CFO) and Cecilia Acuña (IRO) Web: www.5 2012E 3.00 0.5 1.142 4.642 9.9 0.089 2012E 7.833 0 0 8.8 2012E 8. with the Spanish banking group currently owning approximately 76% of total capital.948 (682) 1.0 1. Ricardo Enrique Moreno (CEO).6 55.2 26.5 0. Key Personnel: Jorge Carlos Bledel (Chairman).045 (133) 1.9 0.5 11.2 12.9 60.0 21.987 76 4 4.0 2013E 8.148 485 0 0 798 825 2013E 1.7 79.9 29.4 13.0 2013E 4.210 2014E 4.0 76.7 79.991 3.35 0.7 55.635 288 0 0 862 899 2014E 1.189 5.00 2014E 3.479 4.629 (3.9 7.0 60.5% Car Loans 9.993 0 44.7 76.0 MARKET RATIOS Adj P/E Adj P/BV Div Yield (%) 2011A 5.9 12.90 36.4 35.0 2014E 7.8 1.3 0.999 0 6.8 12.62 0.8 4.2 6.397 2.50 1.084 886 3.760 309 0 0 883 917 LOAN BOOK Companies Total Consumer Mortgages Other Loans Gross Loans Loan Grow th (%) NPL Provisions 2011A 12.2 0.992) 2.315 39.1 11.8 38.620 1.3 12.3 12.00 1.222 14.14 4.8 2012E 8.00 2013E 2.62 2.8 12.1 1.00 0. 2013E Trading 4.1 1.470 21.5 76.494 0 8.0 22.5 0.99 2.144 5.9 56.0% NII 54.7 1.34 1.291 0 7.0 2014E 4.00 2.121 2.5 1.BBVA FRANCES Financial Highlights: P&L and Balance Sheet.154 0 0 5.0 2013E 8.830 0 38.546 5.13 1.162 1.8 1.97 5.9 1.8 0.306 2.446 2011A 465 (30) 435 443 878 (520) 358 (125) 229 197 2012E 527 (34) 494 391 885 (506) 372 (144) 223 204 2013E 523 (82) 441 364 806 (530) 279 (98) 177 173 2014E 540 (60) 480 376 856 (551) 307 (108) 195 174 BALANCE SHEET Cash and Equivalents Securities Loans (net) Intangible Assets Total Assets Core Deposits Other Financial Liabilities Subordinated Debt Technical Provisions Equity Adjusted Equity 2011A 6.258 25.168 11.73 13.330 1.4 13.3% Personal Loans 18.3 98.657 (574) 3. with a market share of 7% in loans to the private sector and 9% in deposits .36 29.4 0.7 57.38 0.25 9.2 12.149 964 4.463 3.39 0.556 (894) 1.9 33.308 1.1 34.69 15.7 79.7 12.310 5.824 188 9 4.125 7.3 25.534 52.00 BBVA Frances is one of Argentina’s leading financial institutions.7 53 (106) KEY RATIOS NIM Risk Charge Operating Revenue / ATAs Cost / ATAs Adj Efficiency Effective Taxes Reported ROE (%) Adj ROE (%) NPL Ratio Adj NPL Ratio Loans / Total Assets Loans / Core Deposits RWA % Total Assets Core Tier I Ratio (%) Dividend Payout (%) 2011A 6.154 0 0 6.0 0.7 79.085 8. Gains/Shr 2011A 5.5 35.007 868 2012E 3.118 (198) 2.0 1.180 1.84 13.0 2011A 3.00 0.291 0 66.8 105 (445) 2012E 14.862 915 46 21.0 60.com.0 2011A 6.472 1.1 11.00 2.70 1.197 692 33 40.317 1.3 76.7 57.ar Loan Portfolio.4 0.6 354 (779) 2014E 21.901 96 4 4.575 (550) 1.6 29.353 5.4 98.017 4.01 0.209 31.00 0.5% Revenue Breakdown.3 0.64 4.1 483 (966) 2011A 2.3 76.206 2013E 3.9 33.0 0.6 55.981 28.00 2012E 3.2 26.6 7.4 6.9 1.4 59.4 35.8 0.3 25. The shares are listed on the Buenos Aires stock exchange and trade in ADR form in the NYSE.701) 1.9 12.0 1.7 12.399 2011A 1.6 22 (92) 2012E 2.2 0.361 2013E 8.61 0.9 35.235 1.288) 1. 2011–14E in Millions Ar$ Company Description US$ INCOME STATEMENT Net Interest Income NPL Provisions Adj Net Interest Income Non-Interest Income Total Operating Revenue Non-Interest Expense Profit Before Taxes Taxes Net Profit Adjusted Net Profit 2011A 2.267 5.07 0.863 (2.0 76.00 2014E 9.9 0.4 53.024 5.2 2.912 1.7 76.4% Companies 53.9% ANSES 7.8 0.919 2.494 9.229 (2.25 12.772 115 5 4.52 3.5 11.00 2011A 3.587 7.2 2012E 4.25 0.62 7.048 5.007 8.400 42. 3Q12 Free Float 16. The bank focuses on corporate and SME lending and retail operations.4 53.5 0.072 3.580) 2.7 0.96 0.186 21.0 7.1 97.1 1.830 46.30 0.3 1.548 21.9 1.116 (4.312 33.736 2.

As malls’ rental income is tied to tenants’ sales revenue. although the former may maintain their Company Statistics valuations owing to corporate demand as a shelter against inflation. Float (%) 65. which we do not expect. the currency real appreciation is hurting the segment’s profitability. Finally.com. Merval 80 60 40 20 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet. as it is considered a safe 120 investment in the country. However.94 . we do not think that the minority investor 100 will benefit from this in the short term.A.  Shopping should continue to be the source of cash flow for Cresud.53 will be difficult for the sector to improve from the current tight or Market Capitalization (US$ Mn) 445 negative margins in beef. 3-Mth Avg. CFA stock price indicates its strong undervaluation. the shopping malls segment provides some hedge to inflation and currency depreciation.2013 Latin American Universe Book ARGENTINA—CEMENT. INFRA & RE CRESUD UNDERPERFORM CURRENT PRICE: US$8. although Price Performance (US$) Cresud the price of land should remain stable. with the current sluggish economic growth.ar justified by increasing regulatory and macroeconomic risk in Argentina. Bloomberg We do not expect improvements in the agricultural segment. Daily Vol (US$ Mn) 0.5 Shares Outstanding . We are less constructive regarding cash flow generation from office rental and development segments in the short term due to delicate  macroeconomic conditions. which we believe is Argentina: Santander Rio Sociedad de Bolsa S.60 52-Week Range (US$) 6. and grain production. Eugenia Fernández Pouchan*. +5411-4341-1218 | mfernandezpouchan@santanderrio.8 only a substantial increase in grain prices. REPLACING YE2012 TARGET PRICE OF US$15. led by its shopping mall operations that should post top-line nominal growth in the middle 20s. 14 .com. CONSTRUCTION.87 TARGET PRICE: US$9. +5411-4341-1564 | wchiarvesio@santanderrio.40  Investment Case: The implied value of Cresud’s real assets in the M. In addition.A.  2013 Outlook: We expect Cresud’s consolidated operating profits to be sustained by IRSA’s operations.13.98 Target Price (YE 2013) US$ 9.90 DOWNGRADING RATING TO UNDERPERFORM FROM BUY INTRODUCING YE2013 TARGET PRICE OF US$9. We do not expect investors’ perception to change in the short term.87 / Ar$ 5.90 / Ar$ 7. with strong valuation discounts on the stock versus Walter Chiarvesio* Argentina: Santander Rio Sociedad de Bolsa S.Mn 50 could lead to an improvement.ar LatAm real estate peers to continue. It CRESY US / CRES AR Current Price (01/03/13) US$ 8. we expect revenue to remain flat in real terms.90. milk. At this point. Santander estimates and company reports.

3 (87) (16) 31 151.8 1.4 9.709 1.4 29.958 10.581 514 424 489 548 LT Debt FINANCIAL RATIOS 2013E 3.895 1.4 34.6 4. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 2.4 2.4 179 16.3 56.8 4.0 2.8 1.6 8.3 5.3) 28. 2012E IFISA 34.794 4.3 200 7.14 0.1 9.2 2.6) (14.653 1.7 7.119 995 908 Net Debt/EBITDA 3.8 7.687 4.4 13.4 4.3 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 15.4 14.5 US$ 2012E 507 (17.5) (74.7) 28.4 741 22.4 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E Net Debt 3. The company operates in the urban real estate segment through its controlled company IRSA (63.497 2012E 270 1. Alejandro Elsztain (CEO) and Matias Gaivironsky (CFO) Web: www.14 0.4 2011A 611 30.5 Ar$ 2012E 2.024) (1.1 40.1) 0.0 1. and it has agricultural and urban real estate assets within its main assets. Cresud is controlled by the holding firm IFISA.110 15.3 9. which has a 34.722 4. IFISA is.51 15.566 7.599 19.6 6.1 9.597 3.211 2.234 573 679 496 862 348 2012E 40 243 288 1.1 7.5) 247 23.6 1.120 1.2 (2.4 1.6 29.2 56.6 FV/Revenue 3.7 9.345 1.2% Free Float 65.4 26.6) (14. The firm owns equity in a controlling participation in the Brazilian agribusiness fund BrasilAgro (35.614 2.000 hectares of land reserves in Argentina and Bolivia.8 40.3 834 39.0 30.6 1.8 (21.0 2.9 8.1 (71.212 9.231 720 557 584 625 Capital Employed 8.6 80.3) 20.2 0.7 73.3 2.ar Sales by Segment.8% Sources for all charts and tables: Company reports and Santander estimates.6 (102) 4 12 (69.1 ROE (%) 7.06 BVPS 4.62 18.5 225.3 116 10.25 9.3 19.28 0.3 (630) (119) 220 216.9 133 (8.56 0.8) 33.0 10. 15 .9 2014E 3.0 104.1 1.20% stake in the company.9 2.6 988 4.3 14.CRESUD Financial Highlights: P&L.5 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 0.2 0.133 3.064 1.3) 2.1 1.3 19.6 (584) 21 69 (57.217 636 2011A 141 483 1.50 0.578 4. in turn.622 7.9 3.577 4.7 2.6 (88) (19) 35 13.475 261 541 672 597 173 2013E 27 226 241 1.331 207 605 519 611 121 2014E (2) 211 205 1.28 0.000 m2.6 6.9 2014E 467 6.5 11.5) 145 (41.6 26.9 2.8 8.4 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.0 26.1 1.1 8.9 1.12 DPS 0.9 5.2 8.7 7.177 2013E 204 1.24 0.5 5.7 26.612 3.0% Urban Real Estate 100.3 11.9 139 4.3 3. 2012E Agricultural 39.9 1.7 992 19.040 1.7) 35.5 6.9 1.8 23.3) 186 9.6 29.3 8.717 1.33 0. Key Personnel: Eduardo Elsztain (Chairman). In the agricultural segment.03 8.832 10.887 3.5 Net Debt/Equity 1.6 5.5) (17.4 80.45 PER SHARE DATA Cresud is one of the main real estate firms in Argentina.9 2.4 (549) (100) 163 37.0 1.018 29.9 1. Balance Sheet and CF Statement.4 3.0 237.9 22.7) (17. (4) urban property developments and land reserves and (5) 30% stake in Banco Hipotecario.6 0. (2) office rentals with a total GLA of 150.212 2.8 1.23 0. Intercontinental.522 37.9 15.66 0.2 (2.081 5.5 0.1 6.cresud.156 7.2 66.169 9.0) 169 (29.5 239 (0.945 4.467 2.7 10.44 0.000 m2.6 8.644 922 2014E (14) 1.921 2.591 1.7 960 16.08 0.1 3.407 5.6 (700) (149) 278 26.04 0.100 3. 2012E Agricultural 0.0% Urban Real Estate 61./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A 278 61 (240) 262 (2.7) 20.237 168 671 398 624 76 2.3 (20.4) 0.8 11.4 29.2 7.0% EBITDA by Segment.4 4.4 2013E 440 (13.6 12.0 8.896 14.768 1.2 2.6 0.6 105 (41.1) 30.5 11.7 1.9 8.776 3. it has 470.6 4.8 964 (2.com.4 (133) (24) 40 30.12 7.3 8.3 2.441 5.3 5.2% stake). which has four lines of business: (1) shopping centers with a total GLA of 307.0 4.0% Shareholder Structure.95 13.5 ROCE (%) 7.337 38.8%).0 2.9 6.2 8.4) 828 (18. controlled by Argentine businessman Eduardo Elsztain.0 2.3 P/BV 1.6 598 (19.762) 723 (281) 0 2012E 230 (209) 69 160 (568) (408) 248 (119) 0 2013E 126 (71) (69) 206 (200) 6 0 (72) 0 2014E 118 (146) (143) 107 (200) (93) 0 (124) 0 2011A 67 15 (58) 64 (491) (427) 175 (68) 0 2012E 40 (37) 12 28 (99) (72) 43 (21) 0 2013E 17 (10) (10) 29 (28) 1 0 (10) 0 2014E 15 (18) (18) 13 (25) (12) 0 (16) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 609 2.1 7.8 1.3 96.9 6.1 40.6) Capex/Revenue (%) Int Cover (%) Dividend Payout (%) MARKET RATIOS P/E P/CE FV/EBITDA FV/EBIT FCF Yield (%) Div Yield (%) 11.5 2.9 6.732 17.714 10.7 124 7.5 0.5) 2.326 5. (3) 3 hotels with 710 rooms (Sheraton. and Llao Llao).89 1.86 6.

45% for 2013.60 RAISING YE2013 TARGET PRICE TO US$5. and 53% for 2014. However. Float (%) 49. Our estimate of the bank’s Core Tier Current Price (01/03/13) US$ 6. leading us to expect adjusted ROE to be materially below the 100 cost of equity. 80 60 40 20 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet. which represent approximately 60% of the group’s loan book. indicating that the share price has downside risks.10  Investment Case: We continue to see downside risk to Galicia’s Boris Molina share price.1x.Mn 124 Price Performance (US$) GF Galicia Merval 120 quality.8 Shares Outstanding . we believe that profitability could remain weak into the future owing to cost pressures and weak asset 3-Mth Avg.2013 Latin American Universe Book ARGENTINA—FINANCIAL SERVICES GF GALICIA UNDERPERFORM CURRENT PRICE: US$6.8% level we consider for  GGAL US / GGAL AR valuation purposes. we expect to see the Luis Guzmán New York: Santander Investment Securities Inc. Santander estimates and company reports. Our target price implies a 2013E adjusted P/BV of 0. Daily Vol (US$ Mn) 0. +1-212-350-3977 | bmolina@santander.20 52-Week Range (US$) 4.20 1 capital for 2013 is 8. Our EPS estimate cuts are largely driven by deteriorating efficiency and higher provisions for NPLs. Weaker GDP growth leads us to expect further New York: Santander Investment Securities Inc. below the cost of equity. owing to a combination of lower adjusted earnings in local currency (reduced an average 20%) and a weaker Argentine peso.  2013 Outlook: We expect Grupo Financiero Galicia to continue to post the strongest rates of loan growth in our universe of Argentine banks.97 TARGET PRICE: US$5.21 .97 / Ar$ 4.76 Target Price (YE 2013) US$ 5. +1-212-297-1367 | lguzman@santander.us shares trade at an adjusted P/BV multiple lower than 1x. 16 . GF Galicia is trading at an adjusted P/BV of 1.60 FROM US$5.5%.1 Cheap valuation could get cheaper. opening a capital deficit and leading us to apply Market Capitalization (US$ Mn) 865 a 22% valuation discount to the shares.60 / Ar$ 4. With an adjusted ROE in the mid-teens.us deterioration in asset quality in consumer loans. rising provisions for consumer delinquencies and inflationdriven cost pressures should limit the scope for ROE to expand from 2012’s 15%  We are cutting our adjusted EPS estimates in US$ by 36% for 2012. Company Statistics  Capital ratios back under pressure from increasing capital Bloomberg consumption for operating risks.9x. below the 11.8. However. despite high inflation rates expected over the next two years.

6 2.2 8.22 1.939 5.7 60.777 6.5 8.863 7. 2013E Trading Other 1.010) 337 (118) 189 150 BALANCE SHEET Cash and Equivalents Securities Loans (net) Intangible Assets Total Assets Core Deposits Other Financial Liabilities Subordinated Debt Technical Provisions Equity Adjusted Equity 2011A 6.3 15.1 115.7 9.063 2.4 61.24 1. which has a strong presence outside the Greater Buenos Aires region where the core bank franchise is present.3% Free Float 49.0 65.166 6.2 2012E 9.0 35.687 5.92 1.00 1.04 (2.0 65.0 4.18 1.247 2011A 848 (182) 666 611 1.678 56.133 1.3 15.744 16.2 117.8 82.193 27.65 0. Key Personnel: Eduardo J.0 PER SHARE DATA EPS BVPS DPS Adj EPS Adj BVPS Surplus Capital per Share Unrealized Cap.87 1. The bank has a strong position in credit cards.065 (1.2 9.503 2013E 8.8 82.7 9.0 67.1 8.321 1.515 32.94 2.0 67.1 2.2 6.23 2.231 30.7 290 (290) 2014E 2.211 8.455 (8.6 0.076 2014E 7.69 0. José Luis Gentile (CFO) and Pablo Firvida (IRO) Web: www.243 0 6. largely thanks to its Tarjetas Regionales subsidiary.8 35.04 1.779 1.5 0.853 149 0 6.8 61.927 984 0 3.164 6.6 9.4 117.1 37.37) 0.922) 2011A 2.789 (6.2 3.047 970 0 41.004 80.5 85.110 19.096 152 9. and Brown families controlling 33% of the capital and 65% of votes.77 (0.0 2011A 8.2 248 (273) 2013E 2.203 (932) 380 (133) 214 132 2013E 868 (213) 655 603 1.0 2011A 4.7 3.0 22.342 2011A 1. Gains/Shr 2011A 8.166 10.7 2.1 37.493 3.85 1.2% NII 52.715 2012E 7.6 4.1 8.3 15.171 (2.2 63.380 960 1 32.5 35.9 5.608 13.487) 4.6 117.0 9.6 64.014 98.20 0.257 (1.8 4.205) 2.8 10.3 2.41 (1.2 37.683 2.22 2.5 8.00 2013E 12.1% Shareholder Structure.70) 0.931 2.400 27.1% Sources for all charts and tables: Company reports and Santander estimates.00 0.6 2.343 130 0 7.950 27.032 (754) 1.1 6.1 30.110 (5.6 0.786 2014E 9.5 68.0 2.885 300 0 842 774 2014E 1.510) 2.7 87.495 1.00 1.2 0.34) 0.0 27.918 111 10.911 10.8 4.615 (1.571 1.683 45.715 50.5 35.0 4.520 7.8 10.0 2014E 7.199 40.3% Fees 45.9 2.5 68.8 35.0 22.171) 2014E 25.382 25.107 1. 3Q12 ANSES 17.730 (799) 2.3 15.094 970 0 66.00 1.63 1.470 8.2 6.084 3.0 35.867 203 0 731 765 2012E 1.97) 0.27 3.578 723 51.6 4.6 13.4 31.00 2012E 17.00 2014E 15.342 1.499 2.538 5.00 2011A 20.0% Credit Cards 42.6 9.42) 0.378 (2.5 85.978 39.747 0 7.3 13.082 1.794 6. GGAL has a shareholding structure with dual voting rights.419 5.0 9.0 27.2 2012E 9.294 149 10.5 4.0 4.7 87.5 2012E 8.805) 2. Ayerza.23 (2.90 0.26 0.950 0 4.17 (1.00 2014E 12.9 5.gfgsa.659 63.6 117.2 8.6 4.6 2.00 2012E 10.315 26.00 2013E 17.793 134 10.379 106 0 7.1 0.6 2.5 0.0 2013E 8.670 (934) 1.277 (956) 462 (171) 252 241 2012E 815 (207) 607 596 1.17) 0.35 (0.3 2.6 64.9 1.9 12.7 304 (319) KEY RATIOS NIM Risk Charge Operating Revenue / ATAs Cost / ATAs Adj Efficiency Effective Taxes Reported ROE (%) Adj ROE (%) NPL Ratio Adj NPL Ratio Loans / Total Assets Loans / Core Deposits RWA % Total Assets Core Tier I Ratio (%) Dividend Payout (%) 2011A 8.226) 3.7 3.047 21.54 0.6 0. Escasany (Chairman).4 31.8 61.5 0.4 60.552 3.3% Revenue Breakdown.2 6.1% Others 4.783 (2.4 2.752 4.6% EBA Holding 33.2 0.0 2014E 6.48 (1.0 0.292 5.0 2013E 7. 2011–14E in Millions Ar$ Company Description US$ INCOME STATEMENT Net Interest Income NPL Provisions Adj Net Interest Income Non-Interest Income Total Operating Revenue Non-Interest Expense Profit Before Taxes Taxes Net Profit Adjusted Net Profit 2011A 3.0 0.6 1.2 11.151 2.619 (4.4% 1.00 1.com Loan Portfolio Breakdown.989 198 0 6.369 4.601 35.1 30.21 2.07 2.9 2.797 4.2 37.81) 0.611 4.291) 2012E 15.74 0.0 2014E 8.289 5.237 2.573 300 0 738 693 2013E 1.98 (2.728 1. Pedro A.2 3.00 2.4 117.264 782 2013E 6.2 63. with the Escasany.0 3.258 (974) 382 (134) 214 154 2014E 887 (251) 636 621 1.7 60.1 12.0 2013E 7.088) 5.1 115.2 9. which represent 43% of total loans.680 8.00 Grupo Financiero Galicia (GGAL) is one of the leading private financial groups in Argentina.776) 2013E 19.65 1.9 12.060 2012E 4.0 2013E 8.816 (1.568 2.0 2014E 8.2 2012E 9.2 117.134 6.3 13.1 6.0 MARKET RATIOS Adj P/E Adj P/BV Div Yield (%) 2011A 6.464 970 0 52.403) 2.GF GALICIA Financial Highlights: P&L and Balance Sheet. 2013E Personal Loans 18.6 13.450 42.7 845 (1.366 3.6 2.264 25.805 (982) 1.28) 0.4 60.5 4.2 11.244 (788) 1.026 2.45 1.5% Companies 35.62 0.5 0. with market share of approximately 11% in loans and 6% in deposits.847 300 0 859 802 LOAN BOOK Companies Total Consumer Mortgages Other Loans Gross Loans Loan Grow th (%) NPL Provisions 2011A 12.8 174 (266) 2012E 2. The bank's shares trade in the Buenos Aires Stock Exchange and in ADR form on the NYSE. 17 .32 0.578 4.097 1.077 6.590 3.624 990 64.6 4. Richards (CEO).00 0.074 6.9 2.4 61.1 12.

 Shopping malls should provide sales growth. The Float (%) 35. However. REPLACING YE2012 TARGET PRICE OF US$15.  Company Statistics IRS US / IRSA AR Market Capitalization (US$ Mn) 431 Developments on hold under current macro conditions.50 52-Week Range (US$) 6. this.com.ar view. CONSTRUCTION.24 currency.2013 Latin American Universe Book ARGENTINA—CEMENT. CFA IRSA’s stock price indicates its strong undervaluation. We do not expect the stock’s strong valuation discounts versus LatAm real estate peers to change in the short term. Daily Vol (US$ Mn) 0. Price Performance (US$) Irsa Merval 120 100 80 60 40 20 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet. although to remain flat in real terms.com. Bloomberg we see little room for short-term rental rates to improve in hard Current Price (01/03/13) US$ 7. Therefore. INFRA & RE IRSA UNDERPERFORM CURRENT PRICE: US$7. As malls’ rental income is tied to tenants’ sales revenue.Mn 58 operations in the real estate segment.5 government’s restrictions on FX access negatively affected 3-Mth Avg.60  Investment Case: Although the implied value of real assets in M. +5411-4341-1564 | wchiarvesio@santanderrio.A.  Walter Chiarvesio* Argentina: Santander Rio Sociedad de Bolsa S. under dividend payment 2 restrictions. the shopping mall segment provides some hedge to inflation and currency depreciation. room for development growth is limited.ar 2013 Outlook: We expect IRSA’s revenue and operating profit to grow in the mid-20s in local currency.50. we expect revenue to remain flat in real terms.48 . 18 . as most transactions are in U.50 / Ar$ 6. +5411-4341-1218 | mfernandezpouchan@santanderrio.45 / Ar$ 5.  Office space value could be resilient.3 Shares Outstanding . Consumption in shopping malls should be the main driver of top-line growth. dollars.50 DOWNGRADING RATING TO UNDERPERFORM FROM BUY INTRODUCING YE2013 TARGET PRICE OF US$8.11. Eugenia Fernández Pouchan*. in our Argentina: Santander Rio Sociedad de Bolsa S.S.10 Target Price (YE 2013) US$ 8.45 TARGET PRICE: US$8. Anecdotal evidence suggests that corporate investors with strong cash positions prefer to allocate their cash to real assets. with sluggish economic growth. However. Santander estimates and company reports. in our opinion.A. sustaining office space demand and price/m . is justified by increasing regulatory and macroeconomic risk in Argentina. We do not expect this situation to change soon.

8 1.305 3.5 P/BV 1.9 2.633 792 2012E 185 809 3.942 3.3 2.402 2.0 4.7 49.52 DPS 0.8 3.86 0.000 m2.3 49.6 Ar$ 2012E 1.6 7.1 3.1 40.7 4.2 (448) (166) 307 37.5% CRESUD 64.2 8.4) 169 (22.2 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E Net Debt 2.490 2.758 819 2011A 90 248 783 1.1 2.5 847 7.280 32.2 (75) (15) 39 (34.0 5. (4) property developments and land reserves.1 10.6 5.08 1.91 1.4 6.39 0.0 13.9 48.com.29 0.2 606 19.160 6.9 6.1 66.7 22. 2012E Office Rentals 16.25 1.2 192 8.3 3.010 522 422 394 360 Capital Employed 5.2 10.939 428 351 351 351 LT Debt FINANCIAL RATIOS 2013E 2.672 2.3) 48.1) 13.1 42.2 2.57 3.6) 16.2 (62) (23) 43 8." Key Personnel: Eduardo Elsztain (Chairman and CEO).364 5.52 4.7 1.6 6.516 17. (2) premium office rentals with an approximated total GLA of 142.8% Shopping Centers 74.7 3.9 15.2 2011A 360 3.7 8. 19 .1 3.492 326 529 565 612 184 2012E 27 119 493 848 235 421 192 449 98 2013E 55 157 431 803 255 402 146 449 98 2014E 89 199 378 776 266 405 104 449 98 1.5 4.5 11.2 41.430 2.2 0.3 38.245 2.9 10.9 (101) (29) 60 (9.0% Office Rentals 12.6 3.8 3.874 2.0 P/CE 40.05 PER SHARE DATA IRSA is the largest and most diversified real estate company in Argentina.827 1.9) 191 13.276 2.3 3.1 10.7 5.3 39.4 2.841 2.1 2.8% EBITDA by Segment.9 880 34.0 41.392 2.274 6.8 72.2 27.1 3.9% Hotels Operation -1.2 (427) (88) 224 (8.4 48.88 3.246 782 645 577 Net Debt/EBITDA 2./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A 183 619 (18) 1.3 131.79 1.1 2013E 297 (1.4 2.7 964 7.4 2014E 2.226 17.5 1.7 3.5 12.661 3.5 2. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 1.9 2.771 1.4) 178 5.3 10.20 2.5) 49.3 70.27 0.6 14.7) 38.5 0.029 (844) 185 166 (340) 0 2012E 190 (591) 358 182 (177) 5 9 (179) 0 2013E 164 0 (3) 469 (79) 389 0 (154) 0 2014E 160 0 (3) 590 (47) 543 0 (216) 0 2011A 44 150 (4) 249 (205) 45 40 (82) 0 2012E 33 (103) 63 32 (31) 1 1 (31) 0 2013E 23 0 (0) 65 (11) 54 0 (21) 0 2014E 20 0 (0) 74 (6) 68 0 (27) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 388 1.8 Capex/Revenue (%) Int Cover (%) Dividend Payout (%) ROCE (%) ROE (%) 3.3 5.8 79.5 8.0 14.3 Net Debt/Equity 0.8 65.1 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.5 15.5) 16. 2012E Free Float 35.2 FV/EBIT 8.416 745 2014E 748 1.108 3.7 2.6 FV/EBITDA 6. and Llao Llao).3 48.3 657 8.3 2.ar Sales by Segment.9 122 6.9 63. Its main assets are: (1) shopping centers with a total GLA of approximately 307.9 10.2 11.4 789 19.8% Development 10.3 10.4 (56) (29) 54 26.50 8.7 1.1 154 5.5% Sources for all charts and tables: Company reports and Santander estimates.1 17.228 3.423 1.0 2.2 147 13.9% Hotels Operation 6.4 1.059 667 2013E 421 1.9 2.7 1.870 1.597 2.31 0.7 10.6 68.6 US$ 2012E 301 (16.6 17.066 21.7 7.6 18.907 4.056 1. Matias Gaivironsky (CFO) and Santiago Donato (IR) Web: www.3 3.7 12.1% Shareholder Structure.2 12.5 56.8 2.07 0.7 14.372 6.484 8.7 6.3 124.3 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 0.11 0.9 FV/Revenue 3.534 19.09 BVPS 4.3 9.322 4. and (5) 30% stake in Banco Hipotecario.137 24.2 7.6 17.106 1.1 53.6 27.0 4.8 MARKET RATIOS Div Yield (%) 13.8 21.068 3.4 (446) (233) 432 40. Intercontinental.8 49.196 3.8 56.43 0.75 0.2 6.7 2.995 3.3 115 (21.5 3.6 897 3.000 m2.8 2.1 FCF Yield (%) 7.7 14.IRSA Financial Highlights: P&L.0 2.1 3.0 2.1 8.2 40.7 2.044 23.2 6.3% Shopping Centers 62.37 0.718 15.7 1.2 9.359 5.7 133 9.5 6.5 70.3 42.392 870 3.1 6.4 2014E 315 6.6 17.7 1. Balance Sheet and CF Statement.3 10.0 217 (1.7 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 10.8) 13.9 17.1 1.2 145 (2.8 5. 2012E Developme nt 18.8 3.1 7.53 0.irsa.3) 148 (22.9 13.59 0.0 53.9 (417) (121) 246 (4. (3) 3 hotels with 710 rooms (Sheraton.

517 Price Performance (Ar$) estimate the total investment to be US$50 million. REPLACING YE2012 TARGET PRICE OF US$0.56  Investment Case: Although we expect Siderar to post stable Walter Chiarvesio* EBITDA in the short term.000 tonnes of slabs capacity are expected to be added to Siderar facilities at a cost of US$360/tonne.  2013 Outlook: We expect Siderar’s volume to improve by 10%. Although the new slabs line has lower margins than finished steel. 20 . +5411-4341-1564 | wchiarvesio@santanderrio. Santander estimates and company reports. helped by the scheduled start-up of its new continuous casting line in 2H13 that should enable it to export to TX’s operations in Mexico. owing to lower production costs next year.ar regulatory and macroeconomic risk. Dividend payments continue to be uncertain and depend on the government’s decision to allow the company to pay in 2013.21 . we expect its strong discount against peers to persist. EBITDA should recover 12%.Mn requirements should help the company to improve margins.A. a new vacuum degassing facility that will produce 1. Daily Vol (US$ Mn) million tonnes of ultra-low-carbon steel to meet automotive industry Shares Outstanding . We 1.2013 Latin American Universe Book ARGENTINA—METALS & MINING SIDERAR UNDERPERFORM CURRENT PRICE: US$0.  New steel capacity to start operations in 2H13.com. we believe that the company faces high Argentina: Santander Rio Sociedad de Bolsa S. mainly in coking coal and iron ore.2 4.30 DOWNGRADING RATING TO UNDERPERFORM FROM BUY INTRODUCING YE2013 TARGET PRICE OF US$0. Siderar Start-up is scheduled for 2Q13. the result of accounting methods.30.2. New 500. it should allow Siderar to begin integrating with its Controller TX subsidiary’s facilities in Mexico. Therefore. Merval 110 100 90 80 70 60 50 40 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet.494 Float (%) 0.0 In addition. offsetting the reduced steel demand stemming from construction sector contraction. We expect average revenue/tonne to decline 14% due to the new slab component in the sale mix. or US$42/tonne.05 Market Capitalization (US$ Mn) 11. Company Statistics Bloomberg ERAR AR Current Price (01/03/13) Ar$ 1.2 3-Mth Avg. Argentine government restrictions on imports of cars and home appliances should continue to help Siderar to sustain its domestic volumes sold to these industries.63 / US$ 0.33 TARGET PRICE: US$0.31 / US$ 0.30 52-Week Range (Ar$) 1.33 Target Price (YE 2013) Ar$ 2.

6 5.5 (42) (73) 168 (48.8 million tons per year.5 11.8 1.800 27.9 17.1 6.39 0.2 21.0 468 6.1 2.118 3.462 12.323 15.145 7.344 10.9 1.6 404 33.8 7.29 2.1 0.307 (1.1 8.988 32.8 208 (45.5 0.6 3.761 5.280 14.8 2.2 14.2 3.3 0.9 15.1 8.30 0.936 13.198) 1.663 16.154 (27.6 0.041 1.7 0.1 3.0 30 (157) 323 (29.6 14. Martín Berardi (CEO).143 2.3 9.934 19.7 2.048) 279 (2.5) 396 (2.8 (210) (871) 1.9 2.6) 0.7 0.2) 9.24 0.ternium.04 0.0% Ternium 61.101 2013E 2.0) 7.775 3.58 0.686 (12.0 16.979) 486 (860) (374) 523 2.4 PER SHARE DATA 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 0.01 0. Key Personnel: Daniel Novegil (Chairman).4 0.6 2014E 21.0 41. and tinplate steel sheet products.505 6. and 10% is traded on the stock market.8 (26) (109) 222 (6.3 38.8) 3. employees hold a 3.0 Ar$ 2012E 12.229 2.3% Coated & Others 35.0% Sources for all charts and tables: Company reports and Santander estimates.0 7.07 0. Siderar is part of Ternium (a Luxembourg holding company that encompasses Siderar in Argentina and Ternium Mexico).5 FV/Revenue 0. Siderar directly owns 28.1) 11.886 739 318 2.4 0.0 7.5 0. Siderar manufactures hot-rolled.0 13.7 10.3 2.543 938 10.237 1.194 (25.8 16.034 2. 2012E Exports 10.6 15.3 P/BV 0.611 3.2 13. hot-dip galvanized.183 2.8 0.5) 9.6 9.4 14.927 60.7) 9. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 12.076 23.6 0.0% ANSES 26.076) 1.512 21.4 3.2 9. Government Social Security Agency (ANSES) holds 26%.1 4.9 8.5 13.351 2.08 0.2 85.877 2.5% Shareholder Structure.6 7.8 15.6 4.5 5.5 2.7 37.914 17. cold-rolled.6 FV/EBITDA 3./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A 351 775 (1.591 1.6 6.63 4.2 4.6 0.0) 4.045 77.218 2014E 3.401 2. In addition.746 45.1 0.05 0.1 Net Debt/Equity (0. electrogalvanized.3 2.3 38.4 643 9. pre-painted.6 13.913 9.172 0 0 (216) 0 2014E 1.449 824 218 2.6 2014E 2.663 3.6 9.0 5.130 3.7 2013E 2.745 995 3.7 8.1) 1.3) 7.540 2011A 769 1.232 Net Debt/EBITDA (0.5 8.5 Capex/Revenue (%) ROCE (%) ROE (%) MARKET RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 5.05 DPS 0.5 0.4 4.3% Sales by Region. Balance Sheet and CF Statement.2 9.145 27.0 124 (651) 1.0 P/CE 7.1 4.5% Domestic 89.41 5.3) 8.0 (0.01 0.417 19.6 0.1) 13.710 83.9 8.9) 13.6 16.5 (152) (842) 1. 2012E Free Float 11.0 5.327 (1.211 (1.1 0.0 5.3 FCF Yield (%) (4.651 715 318 2.com/siderar Sales Volumes by Product.1) 0.39 0.503 527 232 1.2 545 23.9 7.578 11.482) (100) (180) 0 2013E 865 (7) 210 2.0) 14.2 85.3 2011A 2.01 BVPS 2.448 (8.4 23.1 (0.2) 441 (31. The company is listed on the Buenos Aires Stock Exchange.SIDERAR Financial Highlights: P&L.186 0.744 315 309 2013E 282 1.3 34 42 65 71 8 6 9 9 FINANCIAL RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E Net Debt (1.2 4.0 3.04 0.4 284 36.6 7.4 537 (1.53 0.3 4.618 432 423 2014E 391 1.339 (25.1 4.4% Hot Rolled 39.3 FV/EBIT 4.1 3.288 9.0 41.1) 0.7 5.196 2012E 742 4.585 12.1 2.659 23.0 9.401 1.6 12.5 (233) (404) 933 (30.158 8.9 3.314 3.7 15.3 20. 2012E Cold Rolled 25.0 US$ 2012E 2.109 0 0 (240) 0 2011A 85 187 (478) 117 (208) (90) 126 534 (365) 0 2012E 96 (95) 70 239 (189) 50 (447) (18) (32) 0 2013E 120 (1) 29 385 (223) 163 0 0 (30) 0 2014E 130 (1) (63) 289 (150) 139 0 0 (30) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 3.4 0.0% Employees 2.909 72.4 4.5) 0.9 383 5. Ternium holds 61% of Siderar.0 5.832 3.8 0.046 3.5 8.605) 1.9 15.9 3.4 0.1 0.1 (5.0 80.839 27. 21 .7 265 (6.7 Dividend Payout (%) 84.694 5.1 2.05 0.2 3.694 9.407 518 511 2012E 109 689 868 2.7% of Ternium Mexico (Hylsamex and Imsa).0% stake in the company.6 Int Cover (%) 37.1 11.1 3.271 10.38 0.05 0.436 2.3 7.21 0.0 1.8 0.502 4.138 341 (250) 206 150 41 Capital Employed 10.33 0.7 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.5) 303 (35.6 9.214 3.4 2.829 432 423 LT Debt 2013E 17.1 12.040 (8) (501) 2.4 0.8 Div Yield (%) 19.907 3.6 4.777 (1.63 Siderar is Argentina’s largest steel company and has an installed capacity of 2.6 9.6 7.1 5.283 3.5 8.6) 11.6 14.5 (21) (117) 237 41. Silvia Sanchez (CFO) and Guillermo Etchepareborda Web: www.294 3.512) 0 2012E 531 (526) 388 1.305 7.4 2.

com. In addition. we expect EBITDA to decline 6% in U.6 3-Mth Avg. more than outweigh the company’s cash-flowgeneration ability. Argentina: Santander Rio Sociedad de Bolsa S. we believe these discounts are justified due to increasing regulatory and macro risks in the telecommunications sector.  Increasing regulatory and macroeconomic risks.ar Valder Nogueira*  2013 Outlook: We expect mobile subscribers to grow 3%. 80 especially in value-added services.6 Shares Outstanding .com. Although data on telco network capacity utilization is not available. we believe.36 / Ar$ 16. we remain uncertain as to whether the company will be able to pay dividends in 2013.433 Float (%) Telecom Argentina Merval 120 suggests that network depletion is high. 60 40 20 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet.  Network capacity utilization possibly at the limit. Santander estimates and company reports. Brazil: Banco Santander S. Eugenia Fernández Pouchan*.com.2013 Latin American Universe Book ARGENTINA—TELECOM. this risk is partially mitigated by the low percentage of TEO’s share capital owned by ADR holders (approximately 15%).A. +5411-4341-1564 | wchiarvesio@santanderrio. Furthermore.A. Although we estimate that TEO will generate free operating cash flow of Ar$2.Mn 197 Price Performance (US$) than-expected capex. with U. risk of higher- Company Statistics Bloomberg TEO US / TECO2 AR Current Price (01/03/13) US$ 12.br dollar-ARPU declining 12% on FX depreciation impact. However.  Cash flow generation is sound.S.A. Despite TEO’s strong cash position.10 52-Week Range (US$) 9. we believe telcos 100 may need to increase their capex to meet increasing demand. MEDIA & TECHNOLOGY TELECOM ARGENTINA UNDERPERFORM CURRENT PRICE: US$12.70 Target Price (YE 2013) US$ 11.90  M. which. anecdotal evidence of poor service quality 2. Daily Vol (US$ Mn) 1. Although TEO is trading at 65% P/E and FV/EBITDA discounts versus its LatAm peers. 22 .90 / Ar$ 18.S. but dividends are uncertain. dollar terms. Therefore.5 billion per year on average.94 Market Capitalization (US$ Mn) 44.ar Walter Chiarvesio* Argentina: Santander Rio Sociedad de Bolsa S. CFA Investment Case: Our Underperform rating for Telecom Argentina is based mainly on increasing regulatory and macroeconomic risks. we are uncertain of TEO’s ability to distribute dividends in the short to medium term due to the current implicit restrictions.37 . rising costs that have eroded margins also support our Underperform rating. +5511-3012-5747 | jvalder@santander. +5411-4341-1218 | mfernandezpouchan@santanderrio.21.36 TARGET PRICE: US$11.

178 (538) 640 0 (7) (222) - 2012E 452 (158) 150 926 (546) 380 0 2 (141) - 2013E 391 (34) (5) 921 (623) 298 0 3 0 - 2014E 371 (76) (6) 996 (616) 380 0 0 0 - BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 2.2 5.telecom.3 14.422 32.9 1.259 2.017 9.180 177 67 2011A 655 1.2 84.6 2.15 million fixed lines in service (47% of the country’s total).5 0.671 27.0 47.4 30.6 26.831 26.2 9.9 18.418 14.0 25.5 11. Balance Sheet and CF Statement.1% Mobile 73.875) (624) (544) (768) (1.ar Sales by Segment.155 8.052 13.2 0.6 1.7 million mobile subscribers (a 33.646 19.062 (5.852 7.261 29.082 1.3 Dividend Payout (%) 50.48 0.4 14.2% EBITDA by Segment.830 1.5 0.3 3.9 14. 18.12 PER SHARE DATA Telecom Argentina is one of the two main players in Argentina’s telecommunications industry.0 0.335) 4.00 13.0) 1.78 2.440 1.7% economic stake).063 11.7% Sources for all charts and tables: Company reports and Santander estimates.0 US$ 2012E 3.4 P/E P/CE P/BV FCF Yield (%) Div Yield (%) 2014E 1.70 3.0 0.8 21.263 1.535 33.5) Capex/Revenue (%) 11.6 33.653 9.833 1.8 69.054 21 8 115 103 110 110 27 15 14 13 LT Debt 2013E 24.9 22. Solange Barthe Dennin (IR) and Pedro Insusarry (Finance Director) Web: www.310 9.3 0.362 17.0 Ar$ 2012E 22.59 4.861 (2.8 3.2 30.5) (0.6 25.7 578. 1H12 Free Float 44.8 FV/Revenue 0.2 21.2 Int Cover (%) MARKET RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E 6.2 3.7 578.9 1.1) 17.1 27.9) Net Debt/Equity (0.584 (904) 854 5.6 49 (321) 587 25.487) 2.931 9.0 4.525 20.4 0.903) 3.5 1.306 23.834 (5.6 22.0 18.825 5. Adrian Calaza (CFO).220) 2.015 21.9) 11.8 5.4) (0.82 0 0 0.59 million Internet subscribers (35% of market share) through its brand name ARNET.4 0.8 17.4 1.2 84.954 3.0 5.2 32.1 30.1 4.6) (0.23 0.808 11.7 6. Franco Bertone (CEO).7 0.667 10.9 2013E 3.737 5.6 6.9 2011A 4.3 1.4) (0.8 671 (31.9 5.0 0.0 0.6% NORTEL 54.2 185.842 146 43 2013E 6.7% market share) through its brand name Telecom Personal.3 224.116) 2.725 23 9 2014E 1.6 9.8 24.814 (247) (36) 6.1 30.56 DPS 0.124 (17.8) 671 (70.713 17.0) 19.445 22 6 2013E 791 1.4) 17.632 (4.9% Shareholder Structure.2 30. 1H12 Fixed Telephony & Internet 26.6 6.4 27.7 14.701 7.204 17.619 23.9 3.5 30.831 26.7 14.0 19.0 ROCE (%) 34.2 24.9 409 (2.390 3. and 1.2 1.3 1.7 671 (0.192 849 263 2. 1H12 Fixed Telephony 13.641 0 (29) (916) - 2012E 2.com.2 1.4) (0.596 6.271 1.6 203 (1.2) 784 16.4) (0.0 7.3 0.462 (11.844 1.9 4.6 36.839) (8.786 134 19 2012E 3.4 606 (1.0 12.287 (3.7 33.4) (0.928 11.040 26.1 27.3% Mobile 72.5) 28.104 2.2 44 (251) 465 (20.5 0.958 (608) (49) 7./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A 1.280 2.0) (0.0 18.1 979 19.534 Net Debt/EBITDA (0.172 0 9 (807) - 2013E 2.811 31 4 2012E 566 1.93 0.TELECOM ARGENTINA Financial Highlights: P&L.516 29. As of 2Q12.448 1.8 69.6 ROE (%) 31.5 26.1 FV/EBITDA 2.3 2. which is owned by Telecom Italia (68%) and the local W de Argentina Group (32%).064 1.40 0.818 5.7 1.9 25.0 18.9 51 (292) 543 10.262 320 1.2 FV/EBIT 3. The main shareholder of the firm is Nortel Inversora (with a 54.145 0 20 0 - 2014E 2.0 224.46 2.9 FINANCIAL RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E Net Debt (2.2 252 (1.1 33.8 1.2 11.3 6.684) (3.3 0.579 (550) (310) 4.8) (1.900 (13.0 221.6 13.4 1.2 17.2 15.626 26.4% Internet 14. 23 .432) 2.840 823 266 1. a holding company controlled by Sofora (78%).1 2.0 26.45 1.6 1.2 2014E 3.0 11.7 0.7 4.33 17.0 4.15 0 0 BVPS 7.0 6.4 29.402 14.324) 2.336 22.7) (0.9 13.195 12.9 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.6% ESOP Program 0.2 4.91 10.425 1.9 14.430 8.5 18.5) (0.0 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 2.4 84 (264) 491 5.5) 30.705) (5.472 1.51 0.87 1.8 6.117 177 67 2014E 9.9 1.2 14.248 8. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 18.024 13.7 15.834 (59.49 1.7) 6.8 2.2 28.605 857 276 1.220 20.2 17.951 (4.261 29.420 (1.9) 1.8 784 16.2) 671 (0.5) (0.8 5.6 1.0 2.562 1.317 2.5 1.6 14.3) (0.916) 3.5) (0.6 15.274 19.0 18.2 2014E 27.60 0. the company had 4.035 0 0 0 - 2011A 383 (133) (75) 1.7 1.876 9.061) Capital Employed 7. Key Personnel: Enrique Garrido (Chairman).377 7.

with the company having predictable results. 110 AES Tiete IBOVESPA 100 90 80 70 60 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet.br shares.02 4. these could affect cash (and dividend) flow after 2015.A. +5511-3012-5751 | mprado@santander.5 3-Mth Avg.2013 Latin American Universe Book BRAZIL—UTILITIES AES TIETE HOLD CURRENT PRICE: R$23.br lack of expected mid-term growth and the challenge to negotiate its firm energy after its contract with Eletropaulo expires (2015).Mn 381 Price Performance (R$) strategy (following 2Q12 and 3Q12 energy allocation). we highlight that the company faces two main challenges: (i) selling its energy beyond 2015 at attractive levels.  GETI4 BZ Current Price (01/03/13) New estimates: We slightly adjusted our estimates to include the updated macroeconomic scenario and different energy allocation 20. low capex Maria Carolina Carneiro* needs. and (ii) fulfilling its expansion obligation (a requirement established with privatization to increase capacity by 15%). as we forecast lower sales prices (R$110/MWh) for energy still Bloomberg not contracted. We see downside risk associated with these two Company Statistics goals.20 .A. Daily Vol (US$ Mn) 5.10 to close gas supply contracts at reasonable/competitive prices for the 52-Week Range (R$) development of its new thermal project (which we view as key to Market Capitalization (US$ Mn) meeting the expansion requirement). at the same time as the company has not been able R$ 23.30  Investment Case: We see AES Tietê as a top dividend player in the Marcio Prado* sector.30.8% for 2013 for the PN Brazil: Banco Santander S. Santander estimates and company reports. 24 .01 TARGET PRICE: R$23. and a sound balance sheet. The main drawbacks include the Brazil: Banco Santander S. We forecast a dividend yield of 12% for 2013. we expect Tietê to accelerate trading activities during the year to prepare for the sale of the majority of its firm energy after the end of the contract with Eletropaulo. +5511-3012-6682 | macarneiro@santander. with an estimated dividend yield of 11.  Challenges for the investment case: As negatives.30 Target Price (YE 2013) R$ 23.01 / US$ 11.com.  2013 Outlook: EBITDA growth in 2013 should be sustained by price adjustment for the contract with Eletropaulo (IGPM).30 / US$ 11. These 130 changes had no major impact on our target price or dividend 120 expectation.com.6 Shares Outstanding . In addition.309 Float (%) 39.

2 803 2.301 785 558 584 593 Net Debt/EBITDA 0.3 5.2 6.2 4.1 69.4 0.22 2.9 7.2 8. Rinaldo Pecchio Junior (CFO) and Clarissa Sadock (IR Director) Web: http://ri.4 0.5 71.0 108.4 5.9% Others 39.6 44.2 55.131 854 1.7 (24) (265) 514 2.2) (1.5 12.7 74.652 MW and 1.7% Eletropaulo 69.71 2.0 87.2 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.9 81.7% EBITDA by Segment.5 8.116 1.8 2011A 1.6 4.45 BVPS 4.466 10.0 (23) (258) 501 2.076 1.7 5. 25 .3 Capex/Revenue (%) 9.1 122.2 4.0 (26) (252) 488 (3.9 15.650 12.3 Net Debt/Equity 0.701 924 26 2012E 286 586 586 3.4 0.0 P/BV 6.4 5.4 2014E 2.46 4.7 (52) (568) 1.250 1.4 7.89 1.2 782 2.8 25.4) 848 (3.3 5.3 0.126 13.5 74.6 0.1) 881 1.692 14.38 2.9 FV/EBIT 8.1 3.0 (47) (529) 1.1 (28) (245) 504 20.8 FV/EBITDA 7.056 (2.4 6.4 1.6 47.5 104.2 Int Cover (%) Dividend Payout (%) MARKET RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 12.1 (47) (411) 845 14.7 69.49 2.38 4.6 1.AES TIETE Financial Highlights: P&L.35 DPS 2.91 3.1 7.874 953 1.0 (51) (491) 950 12.4 10.9 3. accounting for 2% of Brazil’s generation market.6 0. The company operates 10 hydropower plants located in the central and northeastern regions of the State of São Paulo.3 1.2) 78.4 44.2 6. Key Personnel: Britaldo Pedrosa Soares (Chairman).5% Sources for all charts and tables: Company reports and Santander estimates.3 0.7 26.937 476 625 836 460 160 2013E 161 315 315 1.7) 0.847 473 595 778 438 152 2014E 168 325 325 1.8 R$ 2012E 2.4 21.0 5.6 1.5 81.28 1.91 PER SHARE DATA AES Tietê is a privately owned generation company.2 116. 9M12 Generation 100.8 12.2 1.250 1.1 1.0 5.227 1.7 9.8 ROE (%) 49.6 1.9 93.4 74.603 7.8 P/CE 10.2 108.309 6.br/ Sales by Segment.0 6.3 0.3 4.aestiete.4 0.1 4.44 1.4 5.473 1.594 919 320 2011A 236 399 399 2.723 7.5% MRE + Losses 26.4 ROCE (%) 60.42 2. GETI has an installed capacity of 2.1 81.2 8.9 875 16.2 1.878 994 1.1 3./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (164) (65) 49 (172) (123) 2 (862) - 2012E (158) (151) (74) (82) (156) (5) (922) - 2013E (155) (19) 135 (84) 51 0 (1.492 14.939 7.4) 71.079 (4.5 6.2) 870 (1.7 87.302 12.4 2014E 1.0 74.1 77.634 919 320 2014E 369 712 712 3.3 FV/Revenue 5.1 9.4 10.3 0.027 8.0 10.4 0.19 2.251 1. 9M12 Eletrobrás 7.6 108.4 7.5% Companhia Brasiliana de Energia 52.6 767 (1.7 26.5 45.11 1.576 1.9 62.9 3.18 2.4 (1.5 4.4 0.763 466 570 727 419 146 LT Debt FINANCIAL RATIOS Net Debt 2013E 2.29 4.7 56.4 69.5 5.8 69.110) - 2011A (98) (39) 29 (103) (74) 1 (515) - 2012E (81) (77) (38) (42) (80) (3) (474) - 2013E (76) (9) 66 (41) 25 0 (503) - 2014E (71) (6) 57 (42) 15 0 (517) - BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 442 748 748 4.5 77.865 1.2 88.com.9 3.32 1.8 25.9 109.9 3.8 9.2) 45.875 6.3 1.758 6.8 5.805 6. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 1.3 857 1.8 US$ 2012E 1.4 21.3 0.0% Shareholder Structure.04 1.9 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 2.477 10.42 1.6 96.8 70.8 5.8 1.6 47.5 8.7 5.5 78.2 15.103 7. controlled by Brasiliana (a holding company controlled by AES Group and BNDES).8 778 18.7 4.5 89.3 5.5 88.3 7.275 MW of firm capacity.8 898 599 599 599 479 300 285 273 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 482 633 582 550 257 317 277 251 Capital Employed 1.31 1.886 7.0 9.3) (1.4 5.3 11.8 904 2.3 0.6 62.8) 0.0 12.3 59.4 FCF Yield (%) Div Yield (%) 8.3 0.1 7.69 2.1 47.165 3.9 9.021 1. Balance Sheet and CF Statement.7 1.671 919 320 2013E 337 662 662 3.5 (1.202 455 840 907 493 14 2012E 143 293 293 1.6 874 1.0 882 15.39 1.5 5.0 5.7 81.5 47.100 11. 9M12 Other Bilateral 3.3 0.032) - 2014E (152) (14) 121 (89) 32 0 (1. Britaldo Pedrosa Soares (CEO).2 2013E 1.5 1.

expires in 2079. According 90 to the government.  No concession renewal. 60 50  The potential change in ALL‘s control remains an overhang and its potential impact on the company’s governance is still J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet.03 immediate impact as low. Although we see the ALLL3 BZ Current Price (01/03/13) R$ 8. as we see Pedro Balcão Reis* limited upside to our valuation (13%) and too many risks on the Brazil: Banco Santander S. the government has repeatedly criticized the railway concessions of the 1990s (ALL and MRS) as having triggered the current monopoly with Bruno Amorim* Brazil: Banco Santander S.44 52-Week Range (R$) 7.br high prices and low investment. Daily Vol (US$ Mn) 10. which.11.A.br horizon.85 .960 authorization to increase tariffs above the new cap.34 Target Price (YE 2013) R$ 10. It remains unclear as to whether this authorization will be made permanent. as we estimate rail volume growth of ~10% YoY in Brazil. the cut would likely limit potential tariff Market Capitalization (US$ Mn) increases in a scenario of increasing diesel prices. obtaining a provisory 2.A. (ii) potential asset renationalization. Also.2013 Latin American Universe Book BRAZIL—TRANSPORTATION & INFRASTRUCTURE ALL HOLD CURRENT PRICE: R$8. +5511-3012-5765 | pbalcao@santander.com. including: (i) a limited capacity to pass through fuel price increases due to the new tariff cap. The other Brazilian railway concession.0 3-Mth Avg. and 2028. and (iii) a possible change in control. we estimate rail division capex will fall to R$690 million (vs.83 TARGET PRICE: R$10.com. 26 .00  Investment Case. Company Statistics Bloomberg  Price cap reduction. 2027. +5511-3012-6016 | bamorim@santander. We expect a positive year from an operating standpoint.br Renan Manda* Brazil: Banco Santander S.Mn 682 argument to court against the regulator.83 / US$ 4. respectively). could translate into several risks. ALL took its Float (%) 63.2 Shares Outstanding . ALL issued a press release announcing a cut in the tariff ceiling by ANTT. Price Performance (R$) ALL  IBOVESPA 110 The government has shown an unfavorable attitude toward 100 ALL.com.A. Our model does not consider the renewal of the Malha Oeste.00 / US$ 4. boosted by a good harvest and additional capacity in Rondonopolis. in our view. Also. Malha Norte. We reiterate our cautious view on ALL. R$820 million in 2012) due to the end of Rondonopolis’ construction works in 2H12. Santander estimates and company reports. the monopoly that exists in the railway sector has 80 spurned high prices and low investment and can only be broken up 70 through the renationalization of some stretches of rail. Malha Sul and Malha Paulista concessions (expiring in 2026. On September 10.  2013 Outlook. unpredictable. +5511 3012-6535 | rmanda@santander.

5 1.8 635 (9.7 5.6 36.112 2.0 1.8 1.719 15.8% Brado 6.4 3.941 8.3 7.9 25.4 1.252 2.561 5.2 12.490 11.691 7.5 2011A 1.6 1.2 17.7 10.1 FV/EBITDA 8. de M.2 1.687 1.204 16.3 1.183 2.1 25. ALL’s shares are listed in the Bovespa’s Novo Mercado segment.29 DPS 0.805 7.2 25.6 17.1 2013E 1.8 684 (1.8 20.5 (522) 10 146 7.819 4.4 44.291 4.8 Dividend Payout (%) 23.40 0.1) 36.927 13. 27 .3 1.0 1.0 2.8 P/CE 9.0 1.464 6.570 Net Debt/EBITDA 3.7 21.6 3.0 2.5 28.680 10.2 2.7% Brazil 79.9 1.4 8.303 6. Key Personnel: Eduardo M.1 1.3 7.413 321 2013E 348 763 4.665 6.9% Argentina 6.89 6.3 1.0 25.1 18.9 FV/Revenue 3.10 3.6 3.2% Free Float & Others 69.6 1.4 0.579 5.C.47 0.09 0. November 2012 Julia Dora Arduni BRZ ALL FUNCEF PREVI 4.399 12.716 10.8 (385) (104) 201 36.715 13.4 3.1 9.5 Capex/Revenue (%) Int Cover (%) 2.095 locomotives.5 698 16.062 2.1 21.818 6.930 4.7 3.797 1.1) 0.837 5.1 25.9 35.4 6.612 1.9 3.22 0.4 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 0.2 9.2 2014E 4.6 1.3 1.565 2.937 701 2012E 1.24 0.9 1.020 7.727 11.8 20.08 0.7 36.3 46.91 2.8 7.135 4.8 1.0 44.1) 44.5 1.050 818 3.1 7.2 7.1% 5.9 3.6 US$ 2012E 1.8 2.7 10.1 2.0 24.36 0.9 23.8) 694 (10.170 11.5 25. distribution centers.1 23.274 Capital Employed 9.4% Sources for all charts and tables: Company reports and Santander estimates.5 3.2 6.4 (417) (57) 147 16.0 1.9 3. In Brazil.09 0. ALL operates a 21.6% Rail Operations Volume Breakdown (RTK).913 22.2 8.0 2.3 1.0 46.18 0.603 1.7 8.2 6.com Revenue Breakdown.6 16.12 0.342 3.772 5.984 5.279 (769) 80 0 (642) (80) 0 2011A (243) 0 58 450 (537) (2) 0 259 (34) (47) 2012E (223) 0 (59) 411 (455) 23 0 (358) (32) 0 2013E (224) 0 (2) 496 (371) 28 0 (312) (28) 0 2014E (222) 0 (1) 556 (334) 35 0 (279) (35) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 2.6% 4.4 7. Pelleissone (CEO).ALL Financial Highlights: P&L.3 849 7.05 0.539 1.7 1.4 36.8) 791 (11.3 2.3 36.084 (810) 61 0 (681) (61) 0 2014E (512) 0 (3) 1.241 1.8 1.7 Net Debt/Equity 1.454 7.3 890 17.9 3.727 1.035 4.1 7.91 3.355 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E Net Debt 5.913 425 2011A 1.0 636 0.9 7.0 (468) (25) 126 (14.119 1.0 6.1 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.5 6.02 ROE (%) MARKET RATIOS P/E FV/EBIT FCF Yield (%) Div Yield (%) PER SHARE DATA América Latina Logística (ALL) provides fully integrated solutions in Brazil and Argentina for long-haul transportation.701 4.1 5.4% Shareholder Structure. a fleet of 650 trucks.05 BVPS 5.1 ROCE (%) 16.736 5.391 11.6 R$ 2012E 3.841 7.3 1.1 1.6 6.1 1.361 2.547 3.608 3.1 1.0) 44.2 1.4 8.913 285 2014E 243 669 4.8% 4.217 10. Balance Sheet and CF Statement.8 13.143 4.845 5. and warehousing installations.952 13.0 1.5 9. and industrial commodities and goods.68 0.8 1.5 4.3 1.358 4.181 4.5 (875) 17 245 2.3 17.571 10.983 3.214 7./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (407) 0 96 753 (899) (4) 0 433 (56) (78) 2012E (436) 0 (115) 805 (890) 45 0 (701) (62) 0 2013E (489) 0 (4) 1.05 0.14 2.4 (912) (125) 321 30.250 3.2 16.506 10.236 681 2013E 783 1.142 1.826 720 3. the products typically transported are agricultural commodities.475 851 3.669 4.1) 7. 2012E Ritmo 6.54 7.4 1.628 2.4 704 10.100 2.3 7.all-logistica.495 10.517 181 LT Debt FINANCIAL RATIOS 2013E 3.7 7. 31.243 6. Campos (CFO) and Carlos Eduardo Baron (IR Manager) Web: http://www.5 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 25.037 2.0 1. 2012E Argentina 6.984 2.7 7.765 (7.5 1.1 36.204 7.9 5.8 6. Rodrigo B.6 44.9 2.2 2014E 1.5 P/BV 1.4) 790 (0.213 13.823 2.0 1.3 6.8 (886) (239) 461 43.2 9.2 (0.555 642 2014E 571 1.4 1. and warehouse storage services.6 17.618 16.962 9.113 10.3 18.300-km rail network that includes 1.7 20.3 2.8 44.6 23.0 (916) (49) 246 0.0% BNDESPAR 12.1 28.3 (0.5 7.1) 0.9 8. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 3.3 2.7 8.780 14.8 20.633 1.2 35.8 3.650 railcars.9 17. door-to-door shipping.004 1.9 10.3 778 12.04 0.4 748 9.5 8.913 6.6% Brazil 93.496 13.2 1.16 6.231 374 2012E 590 997 4.161 4.

Santander estimates and company reports. +5255-5269-1900 | areynal@santander.7%. coupled with its razor-sharp focus on costs. (4) best- Market Capitalization (US$ Mn) in-class management team and corporate culture. the ―carry-over‖ of the price action during 3Q12 (net revenue per HL +18%) should have a positive impact. (3) high payout and good dividend yield (2%).com. we expect the company to continue to benefit from its (1) packaging strategy. CFA Mexico: Banco Santander S.00. We maintain our Hold rating on the name solely on valuation. (5) dominant Float (%) market position. (2) changes and/or increases in taxes.00  Investment Case: AmBev remains a core holding in the global branded consumer space.2013 Latin American Universe Book BRAZIL—FOOD & BEVERAGE AMBEV HOLD CURRENT PRICE: US$42. (2) Luis Miranda*.48 . +5255-5269-1926 | lmiranda@santander.00 INTRODUCING YE2013 TARGET PRICE OF US$45. 28 .com. +5511-3553-0699 | tstingelin@santander. Daily Vol (US$ Mn) 69.51 / R$ 86. as our expected TSR is currently 13%. REPLACING YE2012 TARGET PRICE OF US$45.508 29.br growth in the Northeast. In the Brazilian beer market.Mn 3. mainly in Canada. On the pricing front. CFA Brazil: Banco Santander S. to continue to drive sustainable free cash flow growth.mx Ana Gabriela Reynal* Mexico: Banco Santander S.117 innovation and brands.51 TARGET PRICE: US$45.A. and (4) competition. and (6) opportunity to continue growing through 132.25 double-digit EBITDA growth (13% CAGR 2012-14E). based on a DCF using a nominal cost of capital in USD of 8.18 (55% ROIC). positives include (1) solid low- ABV US Current Price (01/04/13) US$ 42. (3) 140 an economic slowdown.A.2 3-Mth Avg. We expect the company’s dominant position in several markets. Taxes will continue to increase. (2) high returns 52-Week Range (US$) 34. We anticipate relatively stable margins.mx Tobias Stingelin*. concerns include (1) upside Ambev IBOVESPA 160 relatively capped currently.com.44. We also expect AmBev to use its market position to offset any tax increase and the cost pressure stemming from higher raw material. (3) premiumization strategy.A.7 Shares Outstanding . 100 80 60 J-11 M-11 S-11 D-11 A-12 A-12 D-12 Sources: FactSet.00 / R$ 101.  2013 Outlook: We expect the Brazilian beer market to grow 3% YoY in 2013 and AmBev to keep its market share relatively stable. 120  Valuation: We are introducing our YE2013 target price of US$45. still the company’s core segment. but we believe that the introduction of a fixed schedule eliminates some volatility.56 Target Price (YE 2013) US$ 45. (4) market dominance. resulting in EPS growth of about 14% 2012-14E and growing dividends. and (5) powerful cost control and focused culture. Company Statistics Bloomberg  Investment Positives: In our view. Price Performance (US$)  Investment Concerns: In our view.

7 42.942 1.174 (2.478 0 54 (5.79 2.593) 11.7 11.3 8.8 24.784 21.489 (1.2) (0.681 3.514 12.3 48.3) (0.648 6.255 34.8 45.755 12.672 12.141 18.7 (231) (1. which represents a 74% voting interest.1 31.4 4.5 18.560) 10.5% Beer 87. Ecuador.408 5.305 7.0 FV/EBITDA 15.2% Canada 11.274 23.245 0 163 (10.0% Brazil 69.8 45.6% stake in the company.911 (1. It has operations throughout the region.1 Div Yield (%) 2.2 31.9 17.0 28.7 8.732 33.96 3. Paraguay.076 14.7 98.1 FV/EBIT 17.420 1.5 19.475) (50) BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 8.2 2014E 41.6 40.2) (0.2 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.853 2.2 2012E (1.6% AnheuserBush Inbev 61.ambev.607 (3.5 18.3 2011A 16.308) 5.089) (2.350 19.274 (1.903 25.8 41.017 13.507) 0 2011A (869) 1.3 P/BV 8.204 2.388 8.793 18.048 1.1 48.273 12.77 3.892 (2.166 2013E 16.484 2013E 10.9 43.8 48.994) (135) 546 13.455) 1.615 2. Nicaragua.61 1.139 14.045 1.2) (0.758 8. Key Personnel: Carlos Alves de Brito (Chairman).3) (0.2 10.4 94.195 13.8 26.167) (4.4 26.373) 4.4 18./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (1.32 3.945 2.8 42.183 31.002 18.3 3.597 0 124 (12.008 29.570 2.3 110.6% FAHZ 9.695 2.22 8.3 111. Canada (13% and 12%).05 DPS 1.914 0 (2.1 7.1 91.0 43.128 0 (1. Bolivia. ABInBev has a 61.4 13.655 13.813 21.0 48.7 43.141 12.680 28.896) (5.94 9. and Uruguay) (16% and 15%).8 (544) (3.06 4.3 7.597 7.9 US$ 2012E 16.977 20.9 (386) (1.555 18.931 19. Balance Sheet and CF Statement.179 2012E 4.6 3.4 11.4 7.168 2014E 4.2 13.710 (3. Nelson Jamel (IRO) and Lucas Lira (IR Manager) Web: www.127 7.955 1.930 14. Its SKOL beer brand is the seventh biggest beer brand in the world in volume.1 MARKET RATIOS 17.2) (0.9 19.3 8.590 9.9 18.797 18.6 15.097 13.629 2014E 10.611 4.6 Dividend Payout (%) 72.744 4.4 7.0 10. 2012E Quinsa & HilaEx 19. Chile.002 34.8% EBITDA by Product.022 14.8 48.668) (5.7 37.9 22.592) Capital Employed 31.174) 0 2014E (2.87 1.2 16.276 28.0 8.2 17. and Hila Ex (Guatemala.6 76.7 3.656) 0 2014E (988) (78) 378 6.147 13.021 23.945 14. El Salvador.1 21.5 FV/Revenue 7.916 15.522) 8.3 16. 29 .686 14.2) (0.110) 12.650 16.7 40.787) 5.9 19.2) (0. with a market share of 71% as in 3Q11.3) Net Debt/Equity (0.AMBEV Financial Highlights: P&L.26 2. 2011–14E in Millions P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 27.414) (2.9 17.48 PER SHARE DATA AmBev is the fifth largest brewer in the world and the largest beverage company in Latin America. LAS (Argentina.013 0.0 2. Nelson Jamel (CFO).2 2014E 17.739 2011A 4.4 14.0 50.9 17.533) 4.42 4.76 2.3 45.5 3.709) 0 2013E (912) (62) 250 6.3) (0.2) 31.100 0.079 1.1 14.3) (0.874 4.3 ROCE (%) 36.08 4.8 9. 2012E Free Float 28.9 3.3) (0.37 1.15 1.329 1.9 7.8 8.7 (531) (4.402 13.222) (2.4 6.3 6.527 (1.304 17.3 1.309) (2.4 4.927 13.333 9.724 49.000) 10.1 42.5 4.218 7.6 12.431) (6.3 48.8 (249) (1.7 31.3 6.1 (468) (2.727) 12. 2012E Soft Drink 12.6 23.658 23.567 15.272) (180) 870 15.014 6.482 46.0 17.7 11.200) 6.952 0 306 (9.7 21.63 4.2) (0.641 14.6 8.998 1.8 32.6 15.445 8. The company also bottles the Pepsi Cola carbonated and noncarbonated soft drinks.0 FCF Yield (%) 3.463 8.347 14.4 15.224 14.439) 0 2012E 9.1 (279) (1.623 8.8 25.4 48.2 7.813 Net Debt/EBITDA (0.58 8.5 32. João de Castro Neves (CEO).159 20.1 42.644) 5.097 355 7.420 7.0 3.6 11.890 1.185 55.7 16.298 4.826 15.212 LT Debt Company Description 2013E 36.947 1.6 Int Cover (%) 12.677 8.5 21.2 10.4 24.8 9.5 40.2) Capex/Revenue (%) 11.4 31.1 11.9 22.br EBITDA by Region.506) 5.64 1.3 3.4 42.98 BVPS 8.2 21.5% Shareholder Structure.239 2.702 (3.593) (3.6 48.24 4.1 14.9 R$ 2012E 32.538 6.3 31.4 20.102 2.46 1.4 10.601 1.654 2.01 0.9 (756) (2.1 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 2.847 12. with Brazil accounting for 69% of consolidated sales (2012E) and 73% of EBITDA.408 2.911) 4.7 41.9 15.186) 5.288 2.8% Sources for all charts and tables: Company reports and Santander estimates.2 3.905 30.com.000) 8.8 7.924 1.157 27.172 2013E 4.5 4.730 52. and Venezuela) (2% and 0%).7 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 24.0 42.304 9.4 15.799 16.3 15.689 0 74 (4.665 8.9 7.184 24.7 ROE (%) 33.9 7. Dominican Republic.9 17.389 2.846 18. Peru. It is the market leader in the Brazilian beer market.217) 0 2013E (1.1 8.3) (0.031 1.008 907 863 832 FINANCIAL RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E Net Debt (4.4 6.6 15.508 12.758) (80) 674 12.037 26.3) (0.6 3.6 45.7 38.269) (30) 2012E (898) (41) 344 6.3 12.4 10.980 8.6 P/CE 20.9 24.187 1.837 595 12.3 50.4 106.4 11.573 0 156 (4.8 20.737 12.

and dividends.80 .69 TARGET PRICE: R$43. Daily Vol (US$ Mn) 13. driven by organic growth. Rio and Recife were mentioned 20 by CEO Ricardo Scavazza) and with some degree of profitability J-11 M-11 S-11 J-12 M-12 A-12 D-12 Sources: FactSet.com. for instance.8 3-Mth Avg.com.36. According to Anhanguera.5x. (earnings accretive).br business model in the upcoming years: we project a sizable EBITDA margin expansion from 20% in 2012 to 30% in 2016. Santander estimates and company reports. thanks to 13% net revenue growth and a 200bp margin expansion to 22. This result confirms Company Statistics Bloomberg AEDU3 BZ Current Price (01/03/13) R$ 35. CFA conditions are set for Anhanguera to unlock value from its strong Brazil: Banco Santander S. strategic acquisitions.50  Business model expected to unlock value. and financial deleverage. +5511-3012-5787 | dhgewehr@santander. +5511-3012-5914 | bgiardino@santander. We expect robust operating cash flow of R$239 million.000 new students. which is justified by the 2012-14E EPS CAGR of 49% and the shares’ higher liquidity compared with its peers. considering a valuation of R$6.  Think FIES.50 INCREASED FROM R$31.2013 Latin American Universe Book BRAZIL—EDUCATION ANHANGUERA BUY CURRENT PRICE: R$35.71 Anhanguera than it is for Kroton. Daniel Gewehr* Brazil: Banco Santander S.50 INTRODUCING 2013 TARGET PRICE OF R$43. suggesting 2. the turnaround of recent acquisitions. driven by financial deleveraging on top of higher operating income.br Anhanguera is trading at a 2013E P/E of 22.  2013 Outlook: We expect Anhanguera to post EBITDA of R$411 million. our YE2013 target price would be R$57. targets 60 could be players with campuses located in cities where the company 40 is not yet present (Curitiba. in which Price Performance (R$) Anhanguera IBOVESPA 120 100 management expects to invest R$30-40 million (due to the addition 80 of ~ 6.Mn 146 that cash flow generation could remain robust.62 Market Capitalization (US$ Mn)  Focus on organic growth. Management is considering a payout of 25% for 2013. Organic growth should be the company’s main focus for 2013.A. This multiple is also in-line with the company’s historical one-year forward P/E ratio.000/student.554 Float (%) 82.A. buy Anhanguera. cash flow. We believe that Bruno Giardino*.4 Shares Outstanding . 52-Week Range (R$) 19. 30 . complemented by small. up 24% YoY. which could be partly consumed by the payment of Anhanguera’s recent acquisitions (leading to a FCFE of just R$3 million in 2013).50 / US$ 20. driven by organic top-line growth and the integration of recent acquisitions. Salvador.2%.69 / US$ 17.53 our perception that the campus operation is more relevant for Target Price (YE 2013) R$ 43. Our EPS estimate implies 51% YoY growth. In our sensitivity analysis. in-line with previous transactions).00 (31% higher) by applying our FIES exercise under the assumption that FIES represents 50% of Anhanguera’s campus students in the long run.

3 7.4 23.7% Shareholder Structure.4 0.9 1.7 200 18.9) 15. EBITDA and net income reached R$1.815 3.232 22. In 2011.103 297 27 2013E 130 421 1.0 0.3 16.97 7.6 16.507 1.0 3.120 14.9 37.4 15.069 306 21 2012E 137 416 1.640 33.3 368 10.375 1.854 13.207 593 55 2013E 274 883 2.1) 1.71 7.3 (37) (16) 231 51.3 21.0 0.3 2013E 904 7.0 18.8 9.8% Sources for all charts and tables: Company reports and Santander estimates.58 2.2 9.0 0.2% Campus 63.5 170 45.6 2.05 1.6 FV/Revenue 3.9 86 (45.3 0.77 1.3 9.3 0.5) (0.6 8.21 7. focusing on the underpenetrated working adult segment (mainly class C population).9 1.901 4.7 25.2 3.6 332 24.3 7.3 0.7 7.8 11.1 63. 3Q12 FEBR 17.4 6.263 271 25 LT Debt 2013E 1.9 530 29.770 593 55 2011A 150 438 1.119 2.823 248 472 1.0 2011A 736 29.3) (0.7 14.1 1.1 112 118.400 1.442 1.4 US$ 2012E 843 14.9 11.5 P/BV 1.4 2.6 10.5 1.6 411 24.2% Free Float 82.4 2014E 2.0 267 14.9 10.0 535 539 539 539 285 269 256 246 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 744 664 513 267 396 332 244 122 Capital Employed 2.579 2. 9M12 Distance Learning 15.0 3.1 12. 31 .1) 1.4 22.4 R$ 2012E 1.93 15.76 13. As of September 2012.2) 7.8 13.8 11.6 1.741 433 873 2.827 3.2 284 30.3 (49) (17) 153 262.1 22.3 63.4 919 21.1 20.408 1.9 12.0 15. and R$42 million.7) 3. R$270 million.4 12.2 25.1 754 16.5 13.648 549 1.858 3. Balance Sheet and CF Statement.3 2.0 FV/EBITDA 18.01 13.54 0.9 16.7 447 8.0 (11) (16) 25 (64./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (76) (21) (143) 10 (777) (789) 118 (1) 0 2012E (67) (7) (20) 293 (290) (3) (50) (2) 0 2013E (78) 0 (35) 359 (271) 89 0 (2) 0 2014E (84) 0 (45) 465 (197) 267 0 (3) 0 2011A (46) (13) (85) 6 (464) (471) 71 (1) 0 2012E (34) (4) (10) 151 (149) (2) (26) (1) 0 2013E (38) 0 (17) 175 (132) 43 0 (1) 0 2014E (39) 0 (21) 216 (92) 125 0 (2) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 281 821 2.0) 3.0 0.1 2.2 18.02 0 0.0 (18) (26) 42 (65.1 0.0 393 38.2 20.7 20.01 0.6 9.534 Net Debt/EBITDA 3.5 12.01 0.1 ROE (%) 2.8% Sales by Segment. José Augusto Teixeira (CFO) and Vitor Pini (IR Officer) Web: www.01 0.1 6.4 2014E 988 9.8 22.2 0.5 3.2 8.3 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.1 FV/EBIT 42.32 0.9 9.0 183 32.4 0.5 1.2 428 16.0 P/CE 24.5 Net Debt/Equity 0.ANHANGUERA Financial Highlights: P&L.1 13.7 5.3 16.006 573 39 2012E 273 832 2.8 2.9 11.34 6.323 1.2 FINANCIAL RATIOS Net Debt Capex/Revenue (%) MARKET RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 68.647 497 943 2.3 (18) (8) 113 43.029 3.1 17.62 BVPS Anhanguera Educacional is one of the largest for-profit postsecondary educational institutions in Brazil.0 0.0 15.4 1.160 283 26 2014E 205 510 1.1 0. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 1.5 247 23.7 33.6 9.945 292 583 1.0 22. The company is listed on the Bovespa’s Novo Mercado Level of corporate governance. the company had 441. respectively.6 3.093 2.aesapar.1 9.9) 15.3 2.1 9.6 17. net revenue.4) 7.8 13.02 0.1 2.9 51 (42.29 1.3 Int Cover (%) 3.3 32.5 (16) (9) 158 40.834 172 398 1.1 1.361 1.5 (34) (20) 339 46.15 16.4 6.3 16.103 students (of which 159.0 1.6 196 (21.1 646 44.4 2.2 billion.0 2.800 3.4 3.1 22.2 0.6 13.17 0.1 17.5 ROCE (%) 2.1 FCF Yield (%) Div Yield (%) PER SHARE DATA 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 0.6 330 68.2 0.0 0.4 2.com Students by Segment.7 5.1 (30.9 (27.0 4.0 1.4 12.2 139 23.2 Dividend Payout (%) 1.5 12.4 61. 3Q12 Distance Learning 36.0 25.2% Campus 84.435 593 55 2014E 450 1.4 19.08 DPS 0 0.2 26.2 2.5 3.2 0.1 219 153.3 (25) (9) 78 211.7 14. Key Personnel: Ricardo Scavazza (CEO).2 117 (17.677 are in distance learning programs) enrolled throughout 71 campuses in 8 states.020 377 873 2.364 1.0 16.782 206 416 1.3 13.5 15.

br 17. He believes that the Mexico unit’s Target Price (YE 2013) R$ 24. which could AUTM3 BZ Current Price (01/03/13) R$ 21. +5511-3012-5734 | jonoronha@santander. The company is building a greenfield to be completed in 1.0 Shares Outstanding .br EBITDA.A. 32 . and 23%. Santander estimates and company reports. due to the Century founders’ OEM network. 25%.00 / US$ 10. respectively.com.00  Daniel Gewehr* Investment Case: Based on a 2013E FCFE yield of 5%. we believe Autometal is an attractive way to play the underpenetrated Brazilian market and the recovering NAFTA automotive market.6 3-Mth Avg.9%. respectively. following the above-mentioned recent acquisitions. Acquisition rationale: (a) Century: positive earn-out (estimated growth of 50% in EBITDA) and potential US$30 million in new orders from Price Performance (R$) Autometal IBOVESPA 160 140 the Mexican operation. 60 f-11 j-11 o-11 f-12 j-12 s-12 Sources: FactSet. +5511-3012-5914 | bgiardino@santander.  What‘s changed: We increased our 2013 sales. Brazil: Banco Santander S. EBITDA. Management believes local content requirements could lead to auto parts production outgrowing vehicle production in the medium term. with Mexico as an export platform.A.com. CFA profitable case (2013E ROIC and EBITDA margin of 20. +5511-3012-5787 | dhgewehr@santander.  Company Statistics Bloomberg M&A continues to be a focus. 100 80  Brazil‘s new auto regime (Inovar Auto) offers upside risk.  Bullish on NAFTA market.5 years (to supply GM and Chrysler).10 TARGET PRICE: R$24.2013 Latin American Universe Book BRAZIL—CAPITAL GOODS AUTOMETAL BUY CURRENT PRICE: R$21.00 RAISING YE2013 TARGET PRICE TO R$24. respectively).91 . Joao Noronha*.com.67 2013 sales could reach US$450 million. up from its current seventh position. Daily Vol (US$ Mn) 1.10 Market Capitalization (US$ Mn) 1. 12% and 19%. and net income growth rates of 22%.21.305 Float (%) 22. mainly due to the consolidation of two acquisitions (Century and China JV) and an improvement in growth and profitability in Brazil.10 / US$ 10. We are 15% above sell-side consensus in terms of net income. with the contribution of 52-Week Range (R$) Century (with 12-18% of this amount coming from organic growth). Autometal’s CEO believes that Mexico could become the fourth to fifth largest worldwide car producer in 2020.36 receive ~US$40 million in orders. and net income estimates by 15%.00 FROM R$20.5% and Brazil: Banco Santander S.A. presenting a  Brazil: Banco Santander S.Mn 126 controlling entity) has a weekly meeting to discuss targets and that Autometal is CIE’s vehicle for emerging markets (including India). 120 (b) China JV: expected to increase margins 500 bps and sales 150% in four years.br Bruno Giardino*. The company stated that CIE (the 12. CFA 2013 Outlook: We expect Autometal to post attractive sales.

0 50.164 10.6 11.7 136 4.6) 18.0 15.8 3.6% CIE Automotive 74. the company delivered R$1. Balance Sheet and CF Statement.0 11.1 1.6 FV/Revenue 1.563 (0.9 285 29.157 2.0 50.0 14.168 547 278 2013E 806 1.9 1.0) Net Debt/Equity (0.38 4.2% Brazil 56.0 Int Cover (%) 6.73 0. forging.2 12.0 MARKET RATIOS P/E P/CE 13.3 7.8 15.88 0.780 (54) 89 (76) (2) (66) (47) (0) 2013E 29 0 (12) 123 (54) 65 0 (41) 0 2014E 30 0 (4) 134 (56) 73 0 (48) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 929 1.467 1.9 11.0 4.8 47.9) (0.9) (0.5 50.6 241 (2.96 9.73 0.4 1.6 11.3) (0.2 9.2) Capex/Revenue (%) 6.8 6.4 4. 9M12 Brazil 49.2) 13.9 20.2 6.4 221 (7.5 2.583 814 427 1.7 10.4 4. 9M12 Mexico 43.9) (1.4 11.7 11.268 1.397 547 278 2011A 495 702 492 1.567 791 692 674 667 Net Debt/EBITDA (1.3 6. In 2011.1 14.8 390 (3.87 0.0 18.7% Sales by Region.37 0.953 21.3 1.0) 199 (17. In January 2011.7) 293 (2.5 3.9 FCF Yield (%) 6.1 ROCE (%) 12.483 1.4 8.000 products.1 11.5 2.8% Sources for all charts and tables: Company reports and Santander estimates.3) (0.5 11 (76) 237 7. casting.393 745 427 1.7 42. 33 .1 P/BV 1.41 BVPS 8.94 0.2 12.72 PER SHARE DATA Autometal is a company focused on auto parts.0 6.8% Shareholder Structure.5 8.3 2.606 2.2 17.5 6.8 11.3) (0.9 131 15.7 5.4) 404 (6.6 1.8 11.1 14.4 17.5 4. machining and painting.3 15.6) 279 (4.0) 175 2.9 6.5 15.72 0. Autometal is controlled by the Spanish auto parts maker. 9M12 Free-float 22.233 387 216 602 355 218 2012E 352 598 491 1.2) (0.9 15.7 5 (44) 180 (2.8 US$ 2012E 821 (12.8 Dividend Payout (%) 4.4 Div Yield (%) 0.4 18.0 14.0 1.8 R$ 2012E 1.28 10.6 3 (28) 101 9.7 17.3) (0.2 1.4 21. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 1.7 166 3.179 371 182 595 233 118 LT Debt FINANCIAL RATIOS 2013E 1.6 12.4 4. stamping.3 228 1.7 (0.2 2013E 894 8.042 2.0 257 269 269 269 137 127 119 114 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E (160) Net Debt (311) (248) (308) (376) (166) (117) (137) Capital Employed 1.3 17.9 225 12.7 3 (23) 92 (16.4 6.2 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.2) 11.82 DPS 0.2 17. with 17 plants: 10 in Brazil and 7 in Mexico.7 314 10.0 350 25.3 4.0 6.3 17.78 4. Fernando Mearim (CFO).4 113 (21.316 923 2. Key Personnel: Jesus Maria Herrera (CEO).6 11.9 1.517 1.0) 15.6 491 26.6 8.3 2.399 (105) 175 (148) (3) (129) (92) (1) 2013E 64 0 (27) 268 (118) 143 0 (90) 0 2014E 69 0 (9) 308 (130) 167 0 (110) 0 2011A 32 3.7 240 (3.3% Mexico 50. CIE Automotive.autometal.1 0.4 7.7 12.80 0.5) 17.0 7.09 4.4 3.313 726 406 1.278 547 278 2014E 873 1.4 FV/EBITDA 5.3 2014E 2.15 11.5) 142 (18.2 8.br EBITDA by Region. Pedro Echegaray (COO Brazil) and Oscar González (COO Mexico) Web: www.7 143 1. The company specializes in managing high-value-added processes.2 9.5 13.2 0.4 12.2 9.3 11.2 16.563 million in sales.7 15.4 3.com. the highest level of corporate governance of BM&F Bovespa stock exchange.095 2.5 14.46 1. the company raised R$440 million in its IPO and is now listed in Novo Mercado.8 525 7.148 362 190 568 243 124 2014E 372 651 492 1.9) (1.3 7 (53) 184 33.8) (0.1 ROE (%) 16.6 7 (61) 221 22.1) 11.766 (8) 153 (58) 70 94 (4) 247 2012E 30 3.1) 5.2 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 1.4 17.0 16.3 17.0 6.7 14.404 1. R$293 million in EBITDA and R$184 million in net income.3 4 (32) 110 40.2) (0.51 4.5 5 (33) 103 2.3 2014E 941 5.9) 13.5 (0.129 666 410 2012E 745 1.AUTOMETAL Financial Highlights: P&L.6 11.2 FV/EBIT 6.0 382 9.1 6.2 6.8 160 12.8 14.75 1.8) 17.9 50.5 14.8 11.6% Others 2.0 2011A 933 4.44 0.1) 5./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A 53 6.530 1.770 871 427 1.129 351 201 551 258 131 2013E 358 624 487 1.40 0.2) (0.308 (13) 255 (97) 118 158 (6) 413 2012E 58 7.9 17.7 7.0 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 9.0) (0.88 0.1 1. producing more than 6.1) (0. such as plastic molding.43 1.

a change in sales mix toward longertail products and tax incentives. improved technology and Ronaldo Kasinsky* Brazil: Banco Santander S. in our view. in our model. Our YE2013 target price is based on a blend of DCF (80%) and EV/sales (20%) ratio.A. CFA implementing the right steps to fix its technology.com. High  Company Statistics Bloomberg BTOW3 BZ Current Price (01/03/13) R$ 16. The company’s recently released results of double-digit top-line growth and margin stabilization suggest that this strategy is starting to pay off.A.5 3-Mth Avg. +5511-3553-2396 | rkasinsky@santander.27 / US$ 7.2 Shares Outstanding .27 TARGET PRICE: R$15.99 interest expenses will still result in a R$40 million loss.00 INTRODUCING YE2013 TARGET PRICE OF R$15. 40 20  Valuation. 52-Week Range (R$) Investment positives: In our view. Cash flow generation. Daily Vol (US$ Mn) 7. (3) potential end of tax incentives.00  Investment Case: We continue to believe that B2W has been Tobias Stingelin*. 5. we believe that these results might allow B2W to recover some lost market share. logistics and service Brazil: Banco Santander S.br Bruno Soares Taveira* Brazil: Banco Santander S.com.Mn 157 Price Performance (R$) B2W IBOVESPA 120  Investment concerns: In our view. as we believe the company is now better prepared to recover some of the market share lost in the last four years. concerns are: (1) negative 100 FCFF until 2015 and FCFE thereafter. Santander estimates and company reports.00 target price. Although we believe that momentum and sales growth could continue to drive performance. however. we anticipate EBITDA margin expansion and a sizable 47% YoY growth (+23% vs. +5511-3553-0699 | tstingelin@santander. 34 . based on a mixture of operating leverage.00 / US$ 6. remains elusive.  2013 Outlook: We expect B2W’s sales to accelerate 25% YoY.05 . +5511-3553-9602 | btaveira@santander.67 flow will remain negative. Furthermore. we maintain our Underperform rating.00 Market Capitalization (US$ Mn) 1. price while our EV/Sales yields a R$16.com.19. (2) substantial investments logistics could build a competitive advantage. and (3) expectations of better sales and margins. as several peers deemphasize growth. as part of its strategy to become the most customer-centric ecommerce company in Brazil. FCFF stays in negative territory until 2015.br issues. according to our estimates.2013 Latin American Universe Book BRAZIL—RETAIL & CONSUMER GOODS B2W UNDERPERFORM CURRENT PRICE: R$16. Combined with its additional substantial logistics investments. and (4) 60 competition. while cash Target Price (YE 2013) R$ 15. positives are: (1) marginal improvement in competition. and a new capital injection at some point remains a possibility. 2011).00 target 0 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet.251 Float (%) 33. (2) a possible capital injection 80 to fix capital structure. REPLACING YE2012 TARGET PRICE OF R$12.A. Our DCF yields a R$15.br CRM capabilities.00. Moreover.

8 8.522 860 2011A 500 1.623 2.1 0.6 181 39. Submarino. and sells over 500.2) 9. CDs.9 1.3 6.527 9.9 1.2) 8.55 (00.662 1.0) 7. housewares.2 2.9 FV/EBITDA 5.6) 596 (5.7) 2014E 3.4 15.0% Shareholder Structure.1 1.9 1.8 7.50 2.7 0.9) (16. Shoptime.230 1.1) 7.292 2. and computer-related products.5 0.8) (14.4 9.434 1.190 406 2013E 400 1.9 2.4) (2.7 1.023 4.6 0.25) 0.0) (2.8 0.4 ROE (%) (7.1 349 (16.1 8.3 10.4 556 40.2 1.1 (222) 27 (53) (379.7) 2014E 7.4 6.6 395 55.2) (51.48) (00.662 782 784 738 707 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E Net Debt 1.7 17.436 (3.946 27. The company is a multi-channel etailer that offers its products through the Internet.739 12.000 items.0 1. and customer financing through Submarino Finance.1) US$ 2012E 2.5 0.9 Capex/Revenue (%) 8.0 512 46.8 (9.898 1.7 2.8 0.0% Others 25.4 234 31.1) 9.48) (00.5 0.com.9) (3.5) (4. games.5 (380) (44) 86 n/m 1. and kiosks.8) (4.073 366 LT Debt 2013E 5.769 12.8 Net Debt/Equity 1.7 2.815 992 2.82 BVPS B2W’s portfolio comprises the brands Americanas. 2010 Entertainme nt 20.1 Int Cover (%) 1.3% Controlling Group 59. and Blockbuster Online.2 1.3 6.121 382 2014E 214 1. and three other subsidiaries.1 5.538 1.2 5.018 625 580 721 859 Capital Employed 2.3 5.229 1. and Ingresso.0 11.0 ROCE (%) 14.801 1.6 9.2 (8.060 (6.1 5.000 2012E (95) (44) (456) (552) (303) (58) 797 411 0 0 2013E (117) (50) (238) (211) (305) (393) 124 0 0 0 2014E (142) (71) (227) (70) (380) (396) 55 0 0 0 2011A (43) (100) (214) (324) (210) (521) 13 20 (4) 597 2012E (48) (23) (233) (282) (155) (30) 407 210 0 0 2013E (54) (23) (109) (97) (140) (180) 57 0 0 0 2014E (62) (31) (99) (31) (165) (172) 24 0 0 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 938 2.12) 0./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (73) (167) (359) (543) (352) (872) 22 33 (6) 1.0 0.419 4.6) 5.7) (62.0% Third Party Credit Cads 37.984 25. Murilo Correa (CFO) and Fabi Abrate (Director of Investor Relations) Web: www.125 878 823 423 1.8 (0.247 1.34 6.853 952 2.125 344 2012E 609 1.3 5.7) (15.81) (00.9 2.2) 33.493 545 2. B2W Viagens provides travelrelated services.6 P/BV 0.5) (2.230 4. Anna Saicali (CEO).1) 2013E 2.1 10.982 1. Key Personnel: Miguel Gutierrez (Chairman).com offers 37 product categories.173 1.3 1.0 0.5 0.7 2.33 6.7 7.B2W Financial Highlights: P&L.1 2.3 254 (25.528 31.1 (372) 46 (89) (365.662 1.9) 5.0 19.8) 178 (28.0% Sales by Payment Type.7 1.936 1.2 MARKET RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E (11.522 860 2013E 899 2.0 0.06 0 0 0 0.03 0 0 0 10. travel services.2 8.0) 29.250 Net Debt/EBITDA 2.1) (18. 35 .657 5.090 1.3 (405) 76 (147) (64.9 6.111 645 2012E 1. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 4.2 11.0 FV/Revenue 0.4 0.8) (2.3 3.7) (47.9) FCF Yield (%) Div Yield (%) 0.24 DPS 0. Balance Sheet and CF Statement.2) 8.7 10.2 8. phone.7) (3.b2winc.166 10.7 0.2% Sources for all charts and tables: Company reports and Santander estimates.7) 415 (24.8 205 (26.6 (192) 9 (18) 75.551 1.63 5.780 1. 3Q12 Free Float 33.7 1.2 2011A 2.3 15.975 1.2 1.4 699 17.6 (419) 21 (40) 72.5 (87.5 3.0 0.1 10.805 2.0 0.466 1.8 1.223 17.3 (207) 39 (75) (40.297 631 2.411 23.1) R$ 2012E 4.9 1.2 14.5 1.5) (98.8 3. Submarino is positioned as a technological innovator and offers 29 product categories.0 0.9 2.3 7. catalogs.139 2.3) 32.400 1.4 FV/EBIT 6.94) (00.0 0. DVDs.324 1.1) (63.918 1.3 130 (36.5 8.1 6.99 2. Shoptime currently offers 21 product categories to over 3.5 11.9) (15.6 14.7 846 21.375 580 2.0 PER SHARE DATA 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS (00.9 12.180 746 827 607 1. 2011E Cash 29.690 2.0 0.0% Durables 55.5% Oppenheim er 7. TV.914 1.5 8. Americanas. has over 460 kiosks installed in Lojas Americanas’ stores.08 6.0 304 29.4 698 36.232 3.731 1.165 2.8 FINANCIAL RATIOS Dividend Payout (%) 18.com Sales by Category.1 P/CE (60.8 14.2) (15. focused mainly on books.9 1.6 6.0 0.1) CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.8 343 (30.5 3.7) 8.5 million clients.199 949 808 442 1.2) 8.6 0.70 2.0) 248 (20.141 817 856 468 1.038 2.5 4.1 0.4) (15.807 2.7 0.com is the leading online ticket reseller.2 633 (2.269 705 2.8 17.7 2.2 1.5 (165) (19) 37 n/m 1.4 242 33. focused on portable electronics.7 (0.2 (53.0% Submarino Card 34.8) 29.522 860 2014E 504 2.4) (15.

Price Performance (R$) Banco do Brasil  IBOVESPA 110 Capital weakness continues despite noncore capital injections via 100 issuance of perpetual subordinated debt.00  Investment Case: We continue to recommend investors be cautious Boris Molina on the shares of Banco do Brasil given the risks of 2013 GDP falling New York: Santander Investment Securities Inc.858 bank return on tangible bank common equity (ROTE) falling from 18% in 2012E to 13% by 2014E. +5511-3012-5756 | havieira@santander.00 FROM R$22. we expect BB Seguridade to have a R$18. in our view. Equity investors should take little 80 comfort. Margins should continue to contract owing to lower lending spreads and changes in the mix.00 / US$ 11.29.61 IPO highlights weak profitability in banking operations.6% in 2013E. with the underlying 36. the deal could net a capital gain Bloomberg of R$2. Also. When we Market Capitalization (US$ Mn) strip BB Seguridade’s earnings and equity from the consolidated Float (%) figures.A.2 billion for Banco do Brasil.32 52-Week Range (R$)  18. which reduces the risk of a 90 capital increase in the short term. leading to sustained government efforts to counter the structural slowdown in credit growth via lower lending rates at public banks.br Luis Guzmán New York: Santander Investment Securities Inc.00 RAISING YE2013 TARGET PRICE TO R$24.e. J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet.2013 Latin American Universe Book BRAZIL—FINANCIAL SERVICES BANCO DO BRASIL UNDERPERFORM CURRENT PRICE: R$26.1. as the stock of loss-absorbing capital as a going concern 70 remains weak (i. BBAS3 BZ Current Price (01/03/13) R$ 26. for a 2013 P/E of 11. According to our preliminary valuation of the company. +1-212-297-1367 | lguzman@santander. driven by Henrique Navarro* Brazil: Banco Santander S. with loan growth of 18. 60 The IPO of BB Seguridade may have a 28-basis-point positive 50 impact on this ratio.2 billion market cap at its IPO price.5 Shares Outstanding . 36 . Assuming the Company Statistics sale of a 25% stake in the company.31 / US$ 12. we believe the IPO of BB Seguridade (insurance) should highlight stronger growth in insurance and pensions over banking earnings. it shows a trend of weakening profitability. We expect asset quality to deteriorate slightly.us short of the government’s 4% target.us government influence on the bank.4 3-Mth Avg. as fast loan growth in the past two years could continue despite the still-high levels of household leverage.937 30.92 Target Price (YE 2013) R$ 24. Core Tier I capital of 6. Santander estimates and company reports.Mn 2.. driven by loans to SMEs and individuals.20 . particularly in auto and mortgage lending.  2013 Outlook: We expect BBAS to continue to gain market share.  BB Seguidade IPO in 1H13. Daily Vol (US$ Mn) 60. +1-212-350-3977 | bmolina@santander.31 TARGET PRICE: R$24.com.2% YE2013E).

978 62.5 47.1 18.903 981.55 (4.br Loan Book.0 2013E 4.799 88.4 2.9 2014E 7.0 17.242 (24.9 14.805 18.738 7.5 6. 3Q12 Previ 10.3 1.124 (25.972 65.3 2.041 (48.837 32.5 2.1 45.604) 5. Gains/Shr 2011A 4.60) 2.5 29.072 (4.229 33.5 2.1 71.292 2014E 8.7% Fees 34.4 56.5 111.638) 6.2 2.31 10.3 30.273 302.455 (2. Key Personnel: Nelson Henrique Barbosa Filho (Chairman).718 30.169 (5.44 Banco do Brasil is Brazil’s leading bank. 2013E Other 11.069 24.0 0.18 (12.159 19.235 123.5% Shareholder Structure.478.25 1.525 6.345 165.560 33. Banco do Brasil recently restructured its insurance operations via a joint venture with Spain's Mapfre.3 4. with total assets of approximately US$545 billion as of 3Q12.396 (3.3 4.337 1.1 98.023 62.9 14.522 40.548 141.893 74.948 19.712 39.62 (5. Ivan de Souza Monteiro (CFO) and Gustavo Sousa (IRO) Web: www.4 24.890) 17.102 (18. 2013E Abroad 8.411 (24.031 17.4 2012E 5.292) 2013E 252.384 4.03 12.6 0.024) 13.399 11.054 27.3 44.817) 14.2 2.6 66.15 (14. 2011–14E in Millions R$ 2012E 39.979 379.05 4.8 4.203 (1.3 0.66 17.1 6.258 57.3 15.4 6.100 505.2% Corporate 24.6 10.28 1.06 11.6 5.212 (52.0 12.8 PER SHARE DATA EPS BVPS DPS Adj EPS Adj BVPS Surplus Capital per Share Unrealized Cap.760) 2013E 118.61 4.292 (1.935 (8.58 2011A 2.508 195.143 18.383 (55.0 4.3 23.139) 13.79 9.7 4.352 (16.864 77. becoming the second largest insurance group in the country.9 18.846 109.650 17.386 555.495 84.187 (3.014 (3.0 8.7 57.233 64.21 13.736 16.BANCO DO BRASIL Financial Highlights: P&L and Balance Sheet.4% SME 17.237 283.570) 28.5 6.076) 10.7 2014E 7.932) KEY RATIOS NIM Risk Charge Operating Revenue / ATAs Cost / ATAs Adj Efficiency Effective Taxes Reported ROE (%) Adj ROE (%) NPL Ratio Adj NPL Ratio Loans / Total Assets Loans / Core Deposits RWA % Total Assets Core Tier I Ratio (%) Dividend Payout (%) 2011A 5.136 31.3 30.3 0.8 53.483 36.456 (6.926 269.683 240.3 5.82 2.1%% in deposits in Brazil.2 0.51 22.8 3.3 4.4 103.2 4.756 66.4 24.348) 2014E 134.50 28.730 56.465 23.356 2013E 8.036 244.8 62.713 73.8% Individuals 30.9 5.247 7.72 4.181 620.730 128.3 1.513 15.974 483.678 701.1 4.84 0.402 231.213 226.408 35.8 53.447 8.244) 2011A 91.02 22.308 2012E 8.8 62.892 Company Description US$ INCOME STATEMENT Net Interest Income NPL Provisions Adj Net Interest Income Non-Interest Income Total Operating Revenue Non-Interest Expense Profit Before Taxes Taxes Net Profit Adjusted Net Profit 2011A 36.2 2.5 23.492 21.559 (13.com.035 121.372 (37.0 MARKET RATIOS Adj P/E Adj P/BV Div Yield (%) 2011A 6.7 4.114 (24.425) 14.585 9.272 30.034 17.935 488.6 13.0 2013E 4.0 17.00 (10.6 4.645 70.0% market share in loans and 24.4 2012E 5.416 631. The bank has a 50% stake in Banco Votorantim. the highest in the country.256 (10.936 549.4 56.889 15. The bank has a regulatory mandate to lend to the agricultural sector in Brazil under several government-sponsored programs.2 30.4 43.891 78.1 4.034) 12.599 2013E 20.897 1.483 31.0 2011A 5.767 45.1 45.9 6.74) 7. The bank is majority owned by the Brazilian National Treasury and its CEO is appointed by the Brazilian government.976 80.1 4.21 0.02) 7.155) 12.6 19.5 5.9 6.4% Agri-business 19.049 172.4 5.466) 29.315 2013E 42.4 43.38 2014E 3.3 15.725 (10.3 2.204 61.9 40.480 12.56) 7.705 3.0 2.657 571.48 2014E 1.8% NII 47.9 5.85 2012E 2.3 4.306 36.1 6.868 319.0 2014E 4.230 1.594 32.6 66.4% Free Float 30.330 18.5 29.183) 28.821 (19.7 4.436 77.759 16.094 106.556 35.716 427.bb.904 (28.5 2012E 6.4 5. 37 .024 7.621 229.139 422.1 6.7 4.124 27.182 16.986) 13.918 32.891 226.4 6.721 7.933 95.149 (4.314.119 265.126 13.1 68.2% Revenue Structure.4 103.158 55.444 235.5 111.0 24.9 2012E 6.7 5.1 2013E 7.0 2.519 92.235 261.616 2014E 47.447) 5. which boosts its presence in the auto financing market.2 4.015) 2012E 209.822) 6.2 2. and has a plan to expand its presence in Latin America and in the US.0 2.0 4.238 78.048 166.623 145.5 47.54 10.2 2.62 12.290 124.2 54.07 2013E 4.086 8.99 1.360 403.092 5.889 (22.861 600.863 10.0 12.083 31.61 2. Aldemir Bendini (CEO).4 2.754 50.70) 3.761 34.162 12.501 68.84 (8.3 23.0 2011A 5.230 191.1 98.2 54.117 216.87 1.820 86.138.4 2013E 7.33 2012E 4.579) 28.808 (8.874 (13.207 9.019 2014E 21.10 0.25 20.41 2013E 2.4 22.6 19.410) 14.26 25.7 57.647 2011A 22.411 672.803 65.406 (10.143 68.8 6.9 40.1 18.426 525.2 30.1 68.3 5.0 2014E 4.1 4.174 LOAN BOOK Companies Total Consumer Mortgages Other Loans Gross Loans Loan Grow th (%) NPL Provisions 2011A 171.989) 8.677 9.375 90.59) 5.118 31.133) 11.10) 3.355 43.1% Sources for all charts and tables: Company reports and Santander estimates.293 233.922) 6.424) 4.447 331.28 4.67) 3.0 0.803 6.6 108.483) 7.71 (6.299) 2014E 296.319 BALANCE SHEET Cash and Equivalents Securities Loans (net) Intangible Assets Total Assets Core Deposits Other Financial Liabilities Subordinated Debt Technical Provisions Equity Adjusted Equity 2011A 2012E 2013E 2014E 10.844 664.602) 13.6 108.88 1.41 26.256 287.910 (41.661 (1.49 2.957 2012E 20.206 18.5 23.224 11.458 168.4% National Treasury 59.860 69.9% Insurance 5.0 7. and approximately a 20.6 5.4 22.630 6.77 30.6 4.084 186.3 44.11 12.9 40.876 6.2 2.0 2.000 13.03 2.8 4.186) 2012E 101.0 24.168 2011A 5.895 35.7 8.989 156.1 71.9 40.7 5.752 27.35 (5.989 18.

but now expect ROE in the vicinity of 18%. Daily Vol (US$ Mn) 0. Banco Pine IBOVESPA 110  A dividend-play bank.70. cross-selling  Brazil: Banco Santander S.70 / US$ 7.00 Market Capitalization (US$ Mn) 784 Strong capital ratios to face upcoming Basel III. 70 60 50 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet. the loan growth expectation is still in the low-teens range.us factors are likely to lead to profitability levels in the high-teens on a Renata Cabral* sustained basis. Santander estimates and company reports. Brazil: Banco Santander S.70 / US$ 7.70 TARGET PRICE: R$16.  PINE4 BZ 52-Week Range (R$) 11. leaves the bank with no stress ahead of the upcoming Price Performance (R$) Basel III requirements.50  Henrique Navarro* Investment Case: We reiterate our Buy rating on Banco Pine owing to a combination of what we believe to be its compelling valuation. We expect Float (%) 23.  Better safe than sorry. +5511-3012-5731 | rcabral@santander. For 2013. Current Price (01/03/13) R$ 14. we expect Banco Pine’s profitability levels to continue to exceed those of peers.com.98 . and top-of-its-class dividend yield.70 INTRODUCING YE2013 TARGET PRICE OF R$16.5 Banco Pine to end 2013 with a solid capital ratio (Tier I above 14%). these New York: Santander Investment Securities Inc. coupled with the softer loan growth we estimate for the next year.Mn 109 This sound ratio.A. in our view. We expect Banco Pine to have dividend yields exceeding 6% for the next few years. niche approach (upper segment of the SMEs). 3-Mth Avg. coupled with the strong contribution from Pine Investimentos. +1-212-350-3977 | bmolina@santander. REPLACING YE2012 TARGET PRICE OF R$16. so we see this stock as suitable for dividendplay funds/strategies.br 2013 Outlook: The bank’s previous target of a 20% ROE for the next couple of years was affected by the slowdown in the industry (softer GDP growth in 2012) and a more cautious approach by top management. which.2013 Latin American Universe Book BRAZIL—FINANCIAL SERVICES BANCO PINE BUY CURRENT PRICE: R$14. In our opinion. 38 .5 Shares Outstanding .A.com. which may result in modest 10% loan growth for 2012. We believe that top management will continue to opt for a more Bloomberg cautious approach with a commitment to long-term profitability. This is higher than the 100 90 80 4% level for Brazilian banks generally. Pine posted good operating trends through 3Q12.64 choosing liquidity over expanding its loan book. Nevertheless. led to what we consider a good Company Statistics year.15. +5511-3012-5756 | havieira@santander.br Boris Molina potential. The softer (we could also say ―cautious‖) loan growth resulted in low NPL levels.22 Target Price (YE 2013) R$ 16. Banco Pine also has a history of stable earnings flow.

13 5.3 27 882 2012E 2.5 5.0 0.0 2013E 4.177 2.5 61 1.00 Banco Pine was founded in 1997 and is majority controlled by Mr.682 326 242 0 565 589 2013E 83 2.8 31.91 2.494 10. The bank specializes in the corporate segment.9 1.5 167.566 2013E 5.8 2.89 5.0 13.4 12.9 3.4% Mgmt.6 49 1.2 2.4 14.81 12.63 0.8 1.305 1.2 22.22 0.bancopine.1 65.8 50.2 1. Noberto Nogueira Pinheiro Junior (CEO) and Norberto Zaiet (CFO) Web: www.8 50.5 167.1 29.8% Fee income 8.447 6.BANCO PINE Financial Highlights: P&L and Balance Sheet.9 52. who holds about 70% of the total shares. including its headquarters in São Paulo.4 0.00 2014E 0.350 2011A 63 3.2 22. with a focus on middle and uppermiddle cap companies.34 0.44 1.5% Loan Portfolio Breakdown.3 2. 5.6 PER SHARE DATA EPS BVPS DPS Adj EPS Adj BVPS Surplus Capital per Share Unrealized Cap.599 0 0 404 3.0 2011A 4.8 2.7 3.4 17.389 2.8 50 1.87 5. Banco Pine also offers a range of credit products in both local and foreign currency.7 1.0 MARKET RATIOS Adj P/E Adj P/BV Div Yield (%) 2011A 8.23 11.326 0 0 792 7.3 1.107 1.42 1.379 4.21 0.7 3.61 0.095 4.2 33.972 4.0 2012E 4.981 1 6.7 1.7 26.7 0.0 2012E 6.6 157.206 1.1 2013E 5.4 1.49 1.2 2013E 5.8 32.3 2.4 2011A 5.89 5.6 74.00 2012E 0.0 16.6 6.84 2.876 1 6.666 1.8 47.2% Sources for all charts and tables: Company reports and Santander estimates.7 1.0 2014E 4. The bank executed its IPO on the Bovespa in April 2007. 2012E Others 17.885 364 169 0 564 563 2012E 79 2.7 26. 3Q12 Free float 26.44 1.6 13.678 3 10.4 1.5 25 800 2013E 2.9 52.7 1.7 1.7 1.00 2013E 1.0 16.1 50.8 50.831 340 217 0 552 573 2014E 90 2.97 5.292 638 474 0 1.879 10.1 50.33 2.1 2014E 5.0 1.3 184.78 0.40 1.7 0.8 28 781 2014E 2.2 2.5 6.634 5.1 71.251 6.61 3.2 22.9 5.6 1.144 3.9 3.73 9.51 0.8 50.19 12.1 50.8 47.18 1.002 743 474 0 1.03 5.00 2013E 0.751 0 0 344 3.5 5.130 2.493 2. 2012E Guarantees 22.6 67 (262) 2011A 2.92 2.015 1.9 50.1 29.7% Working Capital 43.393 655 304 0 1.4% Norberto Nogueira Pinheiro 68.2 42.2 47.947 5.4 17.3 184.10 0.0 2013E 4.5 55.00 2014E 1.69 10. treasury and investments products – all of which are ways the bank intends to differentiate itself among mid-cap Brazilian banks.5 55.08 0.676 5.7 1.6 13.5 29.115 371 206 0 567 587 LOAN BOOK Companies Total Consumer Mortgages Other Loans Gross Loans Loan Grow th (%) NPL Provisions 2011A 4.com.1 71.2 33.742 12 0 193 2.40 0.707 2014E 6.5 29. Key Personnel: Noberto Nogueira Pinheiro (Chairman).27 1.9 17.06 5.9 2012E 4.3 3. Norberto Nogueira Pinheiro.718 2.00 2012E 1.0 2.0% Shareholder Structure.0 0.80 5.43 3.8 15.177 2 11.117 9.191 1.432 1.1 151.4 43.257 3 12.6 74. Gains/Shr 2011A 1.9 50.52 3.2% Others 23.2 29 (114) KEY RATIOS NIM Risk Charge Operating Revenue / ATAs Cost / ATAs Adj Efficiency Effective Taxes Reported ROE (%) Adj ROE (%) NPL Ratio Adj NPL Ratio Loans / Total Assets Loans / Core Deposits RWA % Total Assets Core Tier I Ratio (%) Dividend Payout (%) 2011A 4.9 17.2% Securities 36.4 12.6 157.0 2012E 4.4 43.4 73.83 1.4 14.864 852 474 0 1. Its network comprises nine branches.19 0.8 41.1 65.5 2.8 1. 2011–14E in Millions R$ Company Description US$ INCOME STATEMENT Net Interest Income NPL Provisions Adj Net Interest Income Non-Interest Income Total Operating Revenue Non-Interest Expense Profit Before Taxes Taxes Net Profit Adjusted Net Profit 2011A 426 (89) 337 296 633 (410) 228 (66) 162 188 2012E 514 (94) 420 181 601 (358) 247 (64) 184 233 2013E 657 (141) 516 196 712 (388) 329 (130) 199 242 2014E 659 (140) 519 191 710 (392) 322 (125) 197 238 2011A 254 (53) 201 177 378 (245) 136 (40) 96 112 2012E 271 (49) 221 95 317 (189) 130 (33) 97 123 2013E 313 (67) 246 93 339 (185) 157 (62) 95 115 2014E 292 (62) 230 85 314 (174) 142 (55) 87 106 BALANCE SHEET Cash and Equivalents Securities Loans (net) Intangible Assets Total Assets Core Deposits Other Financial Liabilities Subordinated Debt Technical Provisions Equity Adjusted Equity 2011A 114 5.8 41.0 2014E 4.5 2.587 2012E 5. besides financial and strategic advisory services.9 0.56 0.9 0. 39 .2 42.8 1.4 73.7 3.864 1 5.8 15.83 11.633 3.936 22 0 347 5.01 0.8 31.855 3 14.6 1.702 0 0 792 6.4 0.7% BNDES onlendings 10.2 47.8 32.901 1 5.0 1.7 1.19 0.1% Loans 38.2 1.br Revenue Breakdown.5 2014E 6.014 2012E 155 4.49 9.252 2014E 208 6.94 0.206 4.0 13.55 0.3 3.003 5.7 3.14 10.086 0 0 792 5.37 1.6 5.305 9.6 1.93 0.2 22.1 151.5 6.00 2011A 0.2 5.610 0 0 362 2.152 2013E 181 5.1 50.

We expect a level double that figure.8.br highly liquid assets such as government bonds.A. +5511-3012-5756 | havieira@santander.com.us Renata Cabral* Brazil: Banco Santander S. Furthermore.A. 5.30  Investment Case: BicBanco posted an uninspiring performance Henrique Navarro* since 2011 due to (1) the need to preserve liquidity by investing in Brazil: Banco Santander S.6% ROAE. REPLACING YE2012 TARGET PRICE OF R$8.3 3-Mth Avg. NPLs worsened across the board during 3Q12. given that this would imply provisioning expense of R$18-48 million for 4Q12.Mn 253 Price Performance (R$) BicBanco capital to face the new Basel 3 requirements.7x P/BV levels.  2013 Outlook: We expect the worst from the high-provisioning season to be over at the beginning of 2013.23 Market Capitalization (US$ Mn) IBOVESPA 80 60 40 20 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet.74 TARGET PRICE: R$6. which is still considerably lower than peers’. but the bank might end 2012 with a poor 7. most notably in the E-H portfolio. but the soft loan growth (14% expected) and some resilient impact from such provisioning should restrain the bank’s ROE to only a near-13% level.com.br then better evaluate if it is the time to come back to the stock. It seems unlikely that the company will achieve its 2012 provisioning guidance of R$350-380 million.28 . The slowdown on its credit activity in the last couple of years (-13% loan growth in 2011 and an expectation of +10% for YE2012) postponed the need for extra 837 Float (%) 25.30.31 Target Price (YE 2013) R$ 6.4 Shares Outstanding . 40 .2013 Latin American Universe Book BRAZIL—FINANCIAL SERVICES BICBANCO HOLD CURRENT PRICE: R$6. it is 120 unlikely to see the main shareholder preparing a follow-on at the 100 current 0. BicBanco stock suffered in 2011 owing to fears of overhang risk (a potential follow-on) and a weak operating performance.74 / US$ 3.30 INTRODUCING YE2013 TARGET PRICE OF R$6. which diluted profitability. we need to wait and see when and if the bank will be back on track to Boris Molina New York: Santander Investment Securities Inc.30 / US$ 2. we maintain our Hold recommendation. therefore. +1-212-350-3977 | bmolina@santander. and (2) the loan portfolio proving to be riskier than expected. Company Statistics Bloomberg BICB4 BZ Current Price (01/03/13) R$ 6.88 52-Week Range (R$)  No overhang risk in the near future. requiring higher provisions. +5511-3012-5731 | rcabral@santander. Daily Vol (US$ Mn) 0. After BicBanco’s quarter-overquarter negative surprises on the provisioning expenses level. Santander estimates and company reports. In addition to that. Current P/E and P/BV levels could be considered attractive.

8 PER SHARE DATA EPS BVPS DPS Adj EPS Adj BVPS Surplus Capital per Share Unrealized Cap. José Bezerra de Menezes (CEO) and Milto Bardini (VP and IRO) Web: www.5 10.9 3.2 1.6 9.90 (0.559 (12.087 98 18.51 0. 41 .19 0.883 100 21.305 6.5 4.8 40.4 1.br Loan Portfolio Breakdown. 2011–14E in Millions R$ Company Description US$ INCOME STATEMENT Net Interest Income NPL Provisions Adj Net Interest Income Non-Interest Income Total Operating Revenue Non-Interest Expense Profit Before Taxes Taxes Net Profit Adjusted Net Profit 2011A 1.5 3.44) 0.170 502 0 1. Gains/Shr 2011A 0.4 2012E 11.8 10.405 2.3 5.6 64.584 10.1 325 (325) 2013E 5.947 13.696 8.7) 739 (565) 2012E 11.8 40.5 6.140 1.544 14.com.952 2012E 252 4.0 2013E 5.5 4. The bank aims to develop strong relationships with its clients and to attain in-depth knowledge of the markets in which these borrowers operate.019 957 2014E 144 2.0 102.1 0.656 6.8 0.266 2011A 131 2.61 8.33) 0.643 5.5 722 (737) 2011A 5.3 43.8 6.634 639 0 149 6.9 0.9 4.57 7.05 8.098 0 2. The bank focuses on SME lending.8 10.8 92.7 314 (320) KEY RATIOS NIM Risk Charge Operating Revenue / ATAs Cost / ATAs Adj Efficiency Effective Taxes Reported ROE (%) Adj ROE (%) NPL Ratio Adj NPL Ratio Loans / Total Assets Loans / Core Deposits RWA % Total Assets Core Tier I Ratio (%) Dividend Payout (%) 2011A 7.5 103.3 177.7 5.0 1.7 10.354 46 9.0 43.298 (492) 806 108 914 (670) 243 (10) 232 167 2012E 1.5% Import / Export / ACC 22.30 3.3 57.724 10.3 7.2 8.2 38.1 636 (636) 2013E 12.180 2.5 2011A 7.4 3.202 1.9 2012E 8.374 2.25) 0.106 (440) 666 107 773 (608) 164 (10) 154 143 2013E 1.2 2014E 5.491 8.6 7.33 0.203 949 0 2.8 5.188 (326) 862 135 997 (670) 327 (37) 290 265 2011A 775 (294) 481 64 546 (400) 145 (6) 139 100 2012E 583 (232) 351 56 407 (320) 86 (5) 81 76 2013E 558 (166) 392 58 450 (305) 145 (15) 129 116 2014E 527 (144) 382 60 442 (297) 145 (16) 129 118 BALANCE SHEET Cash and Equivalents Securities Loans (net) Intangible Assets Total Assets Core Deposits Other Financial Liabilities Subordinated Debt Technical Provisions Equity Adjusted Equity 2011A 236 4.1 40.4 3.20 0.51 4.66 7.6 39.32 4.7% Bezerra de Menezes Financial Group 71.3 5.240 0 380 12.3 57.39 4.7 12.00 2012E 0.4 2.9% Sources for all charts and tables: Company reports and Santander estimates.6 0.3 7.2 46.4 10.5 10.55 4.6 7.0 1.3 43.551 4.264 6.422 (7.996 1.0% Loans 82.7 170.0 7.930 4.5 11.780 1.5% Compulsory 0.6% Fee income 3.17 0.175 50 9.2 2014E 5.171 (348) 823 122 945 (641) 304 (33) 271 243 2014E 1.698 9.6 0.2 91.500 5.45) 0.798 15.110 0 2.0 0.260 483 0 1.672 634 0 194 6.07 8.8 0.5 11.8 43.72 (0.4 0.8 92.4 1.89 0.3 0.125 485 0 1.44 1.BICBANCO Financial Highlights: P&L and Balance Sheet.00 Banco Industrial e Comercial S/A (BicBanco)—founded in 1938 and controlled by the Bezerra de Menezes Financial Group—is one of the oldest private sector banks in Brazil.690 4.757 10.0 0. 3Q12 Free float 25.1 2014E 9.0 173.9 3.0) 411 (314) 2012E 5.376 0 428 14.63 (0.109 1.629 16.2 38.8 4.950 1.9 142.4 1.00 2014E 0.102 2.51 4.6 9.718 4.8 7.064 1.7 64.7 65.7 7.8 0.4 0.41) 0.26 0.16 0.054 985 2013E 134 2.984 45 10.7 9.182 12.6 0.3 177.2 6.8 7.061 867 0 1.2 6.29 (0.00 2013E 1.085 2012E 129 2.6 64.2 91.8 43.3 2014E 8.1 2012E 11.740 1. Key Personnel: José Adauto Bezerra (Chairman).2 8.43 0.00 2011A 0.427 667 0 210 7.15 9.17 0.4 10.1 MARKET RATIOS Adj P/E Adj P/BV Div Yield (%) 2011A 9.4 1.831 630 0 196 6.7 12.00 2012E 0. The bank executed its IPO on the Bovespa in October 2007.511 1.7 5.061 102 24.3% Others / Treasury 2.7 64.557 1.5 6.448 6.46 3.7 170.18) 0.3 11.46 3.090 2014E 332 5.92 7.42 0.103 1. 2012E Securities 14.2 12.96 (3.5 103.6 39.78 (1.0 43.7 65.2 2013E 8.5 3.227 2.8 4.0 0.897 1.3 654 (661) 2014E 14.8 7.2 12.8 6.13 0.00 2014E 1.6 8.8 8.139 1.bicbanco.03 0.3 11.622 53 9.9 0.910 2.1 40.8 8.149 0 269 11.0 173.96 8.5 300 (303) 2014E 6.90 (1. a segment in which it has over 70 years of expertise.12) 0.8 6.2 46.89) 0.2% Revenue Breakdown.6 8.81 0.2 1.1 2011A 7.4 9.0 102.4 2.119 96 17.046 986 LOAN BOOK Companies Total Consumer Mortgages Other Loans Gross Loans Loan Grow th (%) NPL Provisions 2011A 10.4 9.9 4.9 142.0% Shareholder Structure.7 10.145 482 0 1.929 2013E 293 4.00 2013E 0.8 6.0 7.9% Working Capital 54.4% Others 14.9 2012E 8.534 0 483 16.26 (2.38 0.6 0. 2012E Secured 8.0 2013E 5.137 6.7 2013E 8.

we see higher risk to the 110 company’s guidance estimates. We have 80 maintained our flat long-term EBITDA margin estimate. years of underinvestment as a nonprofit company led to a massive ―catch-up‖ capex plan that was Boris Molina New York: Santander Investment Securities Inc. Daily Vol (US$ Mn) 57. in our view.11 TARGET PRICE: R$12. as 70 management expects future margin gains to be shared among 60 market participants.  2013 Outlook: Our base case for BVMF stems from two factors: (i) ongoing direct competition risk.Mn 1.30 13.6 3-Mth Avg. over which the company has little if Brazil: Banco Santander S. Although not a significant Company Statistics change.723 Float (%) 84.980 guidance. Santander estimates and company reports. As the delivery of IT projects intensifies with the Price Performance (R$) BM&F Bovespa company’s clearing integration project. +1-212-350-3977 | bmolina@santander. we believe long-term market estimates are aggressive (which can be cross-checked against the company’s long-term earnings estimates).br announced in 2010 (most of which is scheduled to be completed by 2014.93 Target Price (YE 2013) R$ 12. nonetheless. we note that we as well as the market have been continually Bloomberg reducing long-term estimates for BVMF.30 LOWERING YE2013 TARGET PRICE TO R$12. and (ii) lower-than-expected volume. +5511-3012-5756 | havieira@santander.2013 Latin American Universe Book BRAZIL—FINANCIAL SERVICES BM&F BOVESPA UNDERPERFORM CURRENT PRICE: R$14. We have reduced our EBITDA estimates by ~5% (to R$ 1.781 million. which could lead to downward earnings revisions. in our view.  Cutting estimates—once again.30 / US$ 5.11 / US$ 6. The second factor.A. BVMF has been increasing the amount of IT personnel hours capitalized. is based on the aggressive long-term estimates for 52-Week Range (R$) both cash equity and derivative markets. J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet. is a wait-and-see game.40  Investment Case: BM&FBovespa’s results rely heavily on equity Henrique Navarro* and derivative trading volume.643 million) since our September 27 report. with the integration of the company’s four clearings). the negative news flow associated with it could affect the stock during that year.8 Shares Outstanding . Market Capitalization (US$ Mn) Higher capitalization of personnel hours adds risk to capex 9. +5511-3012-5731 | rcabral@santander.com. The first factor might not reach shore in 2013. The reason behind this  BVMF3 BZ Current Price (01/03/13) R$ 14.10 .us Renata Cabral* Brazil: Banco Santander S.com.30 FROM R$12. BM&F Bovespa: Competition Concerns Eased.63 trend. 100 IBOVESPA 90  Long-term EBITDA margins maintained at 72%.br any control. once BVMF’s investment plans materialize and 50 capex declines.A.14. On the cost side. the YE2013 market consensus is R$1. 42 . In this sense.

7) 948 (322) 626 (3.5 110.1 7.4% Free float 84. On the derivatives side.6 833 4.0 1.8 (279.447) - 2011A 125 (652) - 2012E 129 (600) - 2013E 131 (615) - 2014E 82 (641) - OPERATING RATIOS ADTV ADTC EBITDA Margin 2011A 6.0 2014E 611 506 228 1.33 0.bmfbovespa.3 1.9 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 18.8 4.5 25.4 6.9% Revenue Breakdown. the largest in Latin America.0 49.5 56.1 2011A 576 454 233 1.0 ROAE 5.142 515 3.0 7.2% Cash / CME stake 3.853 4.9 2014E 9.3 BALANCE SHEET Cash and Equivalents Accounts Receivable Intangible and Deferred Assets Tangible Assets Total Assets ST Debt LT Debt Equity Net Debt (Cash) 2011A 2.781 19.9 6.823 7.0% BM&F 37.2) (307.267 3.113) CASH FLOW Changes in Working Capital Operating Cash Flow Capital Expenditures Change in Debt Free Cash Flow to Equity Cash Dividends Capital Increase (Decrease) 2011A 210 (1.32 0. The company offers trading services for equities.7 Effective Tax Rate Net Margin 2013E 1.0 106.8) 2013E 575 475 217 1.4 12.354 357 23.0 95.148 185 11.0 7.291) - 2014E 185 (1.7 26.807) 2012E 1.8) (24.5) (308.652 16.550 3.2 887 4.350 8 565 9.906 64.138) - 2013E 275 (1.076 (3.6 1.0 4.4) (27. settlement.2 - - - - - - - - 1. all in a vertically integrated structure.6 1.378 17 1.4 1.6 8.0 34.3) 1.263 5.343) 2013E 1.9 1.116 0.002 12.7 26.0 34.5 15.8 5.9) (357.3 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 0.3 2.219 9.4 1.699 (1.257 (3.1% CME 4.9) (357.9 17. the Bovespa is the only cash equities exchange in Brazil and responsible for more than half of the total market capitalization of all Latin American exchanges.3 93.5 23.9 25.2) (27.439 66.6 50.53 0. Commodities.397 193 12.9 15.5 108.253) 2012E 3.454 8 630 10.31 0.6) (279.357 2.049 (8. On the equity side.731 (4. Edemir Pinto (CEO).com.9% General Atlantic 4.9 2014E 9.269 (5.0 34.674 19.72 9.345 6.1 12.36 0.5 23.5 1.7 6.437 400 24. revenues 17.6 12.167 11. 2011–14E in Millions Company Description INCOME STATEMENT Equities Derivatives Other Revenue Growth (%) EBITDA Growth (%) Operating Profit Growth (%) Profit Before Taxes Taxes Net Profit Growth (%) 2011A 965 760 391 2. Key Personnel: Arminio Fraga Neto (Chairman). indices.2 942 (327) 615 (1.1 16.30 0. 2012E Other oper.511 29.7 695 (6.8 57.906 64.234 20.092) - 2012E 245 (1.1) 1. and Futures Exchange was created in 2008 after the merger of the Brazilian Mercantile & Futures Exchange (BM&F) and the São Paulo Stock Exchange (Bovespa).055 (544) 1.9 17.0 1.492 2.872 (7.086 198 13.2 4.3 2013E 8.96 10.510) 2014E 1.439 66.5 4.8 15.4 2014E 1.8 57.39 CEPS - - - - - - - - FCFPS - - - - - - - - BVPS 9.660 15.5 23.989 7.701 55.3) (18.br/ Valuation Breakdown.080 (2.40 5.437 426 25.0 1.1) (34.298 (544) 1.193 16.590 34 1.9 15. and foreign exchange futures and spot contracts.550 3.5 Net Debt / EBITDA Net Debt / Equity FCFE / Revenues Payout 95.9 848 8.55 0.3 1.276 (2. registration.036 14.7 34.8% Shareholder Structure.484) 2014E 4.866 8.880 12. securities.139 19.09 4.57 0.5) (308.523 183 11.788 (620) 1.9 2.4 1.0 4.0) (34.0 17.023 66.1 7.234 19. clearing.5 56.801 17 1.088 (13.65 0.9) (23.6 P/CE 19. interest rates.5 5. agricultural commodities.3 2013E 8. financial assets.6% Sources for all charts and tables: Company reports and Santander estimates.060 860 394 2.73 0. the Securities.8 49.2% Bovespa 45.489 27.9 735 13.2 6. BVMF has a fully integrated business model and provides execution.754 16.023 66.082 7 537 9.89 0. BM&F is one of the largest derivatives exchanges in the world per number of contracts traded.018 (241) 777 8.6 95.2) (307. and the only futures exchange in Brazil.6 8.853 4.357 2.6 50.7 18.984 16.31 0.68 4.208 996 456 2.1 10.219 (3. 3Q13 Others 6.58 DPS 0.4 1.8 19.6 5.3) - - - - - - - - ROAA 4.2 797 8.8 FV/EBITDA 13.587) 2013E 3.76 0.234 20.0 2012E 7.0 2011A 6.8) 650 (8.1 18.314 9. and custody services.3) R$ 2012E 1.3% NPV tax credits on goodwill amortization 6.6) (16.1 2. 43 .588 (540) 1.6 4.32 BM&F Bovespa (BVMF).6 10.573 16.8 100.4 978 (259) 720 17.164 (11. Eduardo Guardia (CFO) and Claudio Jacob (IRO) Web: http://ri.492 2.485 17 1.23 10.BM&F BOVESPA Financial Highlights: P&L and Balance Sheet.379 1.6) US$ 2012E 558 453 207 1.701 55.396 28.4 1.437 377 24.1 4. 2013E NPV tax credits on interest on capital 8.159) 2011A 1.0 19.5) 784 12.59 0.2 23.0 2012E 7.105 19 633 10.4 1.6% Firm Value 81.53 5.9 6.3 MARKET RATIOS FCFE Yield (%) P/BV Div Yield (%) PER SHARE DATA EPS 5.

BR Properties is also Price Performance (R$) BR Properties constantly recycling its portfolio. Bloomberg R$ 25. with top-line and margin expansion driven by GLA additions and real increases in average rent/m2. Incorporating a few acquisitions in 2H13 into our model. Through 9M12. .4%. Shares Outstanding . driven mainly by the expected delivery of the lion’s share of BR Properties’ development pipeline in the next six months and by the renegotiation of rental contracts.A.55 . to reach 45% from 3-Mth Avg.  Fabiola Gama* Brazil: Banco Santander S. Moreover.  . We estimate a 48% expansion over 3Q12’s annualized top line in 2013. solid execution.9 34% currently. and interesting upside potential from current levels. as BR Properties‘ balance sheet still supports growth. BR Properties should invest around R$500-600 million in 52-Week Range (R$) new assets in the next two years. .A. selling those properties that have 160 reached maturity.Mn 310 Adding value through portfolio recycling. +5511-3012-5765 | pbalcao@santander. . 44 . . as the company expects the LTV  17.  BRPR3 BZ Current Price (01/03/13) BR Properties may start to gradually increase its dividend payout as early as 2013-14. the aforementioned volume increase should  enable the EBITDA margin to surpass 92% in 2013. according to the company.55 TARGET PRICE: R$31. In our Target Price (YE 2013) R$ 31.  Improvement in earnings momentum is a given.2 ratio. REPLACING YE2012 TARGET PRICE OF R$28.2013 Latin American Universe Book BRAZIL—CEMENT. which we view as highly accretive. .55 / US$ 12. +5511-3012-7414 | fpgama@santander. .br Pedro Balcão Reis* Brazil: Banco Santander S. strong management.50 / US$ 15.com.99 Market Capitalization (US$ Mn) 3.50. top-line expansion is likely to reach 55%. . Daily Vol (US$ Mn) 13.00 opinion.50 INTRODUCING YE2013 TARGET PRICE OF R$31. INFRA & RE BR PROPERTIES BUY CURRENT PRICE: R$25. with an administrative structure already in place to take care of its operations. one of its most important leverage ratios. advancing more Company Statistics than 200 bps YoY. which should improve the company’s consolidated profitability.com. . Santander estimates and company reports. but it can be even stronger .47 . the company sold six assets at an 140 average cap rate of 8.894 Float (%) 58. in our view .00  Investment Case: We maintain BR Properties as our top pick in the Brazilian income properties universe due to the company’s robust growth prospects.br 2013 Outlook: We anticipate a strong 2013 for the company. CONSTRUCTION. IBOVESPA 120 100 80 60 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet.27.

7 2012e CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.9 472 64.9) (84.321 190 3.87 0.5) 1.5 0.1 2. Currently. 5.6 33.1 7.224 3.5 90.64 0.1 12.8 3.2 5.643 379 6.5 19.206.3) 39. 45 .5 10.283 228 3.82 12.357) 0 1.3 P/CE 8.9 7.2% W Torre 8.360 118 1.343 2.4 559 90.0 85.685 4.193 3.32 1.3 1.1 10.10 3.7 472 64.6 85.830 2.118.338 4.3) 97.1 93.4 175.25 1. as of December 2012 BTG Pactual 28.0 2. with a primary focus on office buildings and warehouses.775 2.84 1.915 1.3 9.299 24.969 1.771 15.4 95.9 509 59. which expanded its portfolio by almost 45% in terms of GLA.8 22.044 68.0 10. 2011-14E 1. Balance Sheet and CF Statement.9 564 19.711.4 293 80.211 25.382.45 0.4 1.160 578 2.2 45.9 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 2.3 0.89 1.433 129 1.165 Net Debt/EBITDA 3.3 10.147 7.33 0.2) 39.231 2. 2011–14E in Millions Shareholder Structure.3 13.3 FV/EBITDA 13.1 2011 Financial Highlights: P&L.504 3.2% Free Float 58.27 2014e 2014E 605 18.9 7.23 1.0 35.5 ROE (%) 9.6 FV/Revenue 11.259 6.2 (479) (146) 585 43.033 2.1 2011 P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue R$ 2012E 620 80.932 247 2014E 14 625 15.9 13. As of 3Q12.8 7.3 92.9 205 80.3 3.0 90.0 10.0 1.054 m² in street stores and the remaining in warehouses.2 1.5 175.211 25.80 0.280 2.1 45.1 8.1 93.450 (271) 3.4 1.16 0.3 92.8 12.476 5.3 19.6 0.7 2013E 1.1 2012e 2011A 343 68.181 5.3 21.2 564 19.206.8 69.979 6.958 12.31 0.567 228 2013E 11 523 14.38 658.771 8.39 364.5 1.044 68.4 293 72.3 21.169 2.4 13.1 4.4 968 73.9 5.730.22 12.6 3.5 175 78.2 US$ 2012E 318 55.7 13.919 2.6 12.0 1.645 11.3 3.171 6.219 251 3. In September 2011.2 45.8 1.52 0.2 287 64.3 287 64.1 92.353 Capital Employed 4.28 12.6 FV/EBIT 13.0 0.840) (3.1 13.693 2.2 3.958 13.3 80.50 1.3 1.920 5.4 35.0 4.7 7.938 4.2 (223) (68) 273 36.6 33.975. 114.439 243 2.0 1.2 2013e 2011A 0 0 (59) 277 (326) (50) 0 192 (84) 742 LT Debt 2011A 205 73.7 13.283 114 2013E 5 249 7.259 (139) 1.47 0.128 95 2012E 4 174 7.1 7.034 7.934 7.829 550 7.8 7.1 8.2 559 90.56 25.158. the company acquires.2 Net Debt/Equity 0.1 2013e 2012E 0 0 (144) 941 (7.032 1.BR PROPERTIES Company Description 2014E 0 0 (75) 510 (433) 77 0 242 (146) (170) 2011A 0 0 (35) 165 (195) (30) 0 115 (50) 443 2012E 0 0 (74) 484 (3.88 DPS 0.242 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E Net Debt 1.1 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 8.22 20.3 19.5 5.593 m².803 3.5 93.710 2013E 0 0 (63) 137 (232) (96) 0 178 (50) (31) 2014E 0 0 (35) 238 (202) 36 0 113 (68) (79) BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 1.4 0.6) (2.084 4.2 (217) (360) 558 178.7 1.111.839 4.3 13.8) 97.8 5.8 3.1 18.088 m² in offices.0 2.9) (2.20 2.65 26.7 45.6 0.8 20.5) 1.518 2.5 1.8 1.br/ri Average GLA Evolution (‗000 m2).0 1. with 472.5 1.6 95.293 479 6.03 MARKET RATIOS P/BV FCF Yield (%) Div Yield (%) PER SHARE DATA BVPS Key Personnel: Claudio Bruni (CEO) and Pedro Marcio Daltro dos Santos (CFO and IR) Web: www.9 13.1 2.6 0.5 7. BR Properties announced the acquisition of One Properties.9 7.1 10.174 259 2011A 550 629 2. Gross Rental Revenue (R$ million).001 8.328 FINANCIAL RATIOS 2013E 509 59.278 5.0 2. 2011-14E 1. manages.335 1.5 93. and sells income-generating commercial properties across Brazil.4 620 80.95 1.5 90.3 0.0 9.4 13.6 85.4% Government of Singapore Inv.2% Sources for all charts and tables: Company reports and Santander estimates.0 1.3 7. the company's total GLA amounted to 1.085 223.7 1.5 6.295 14.212 3.8 10.7 85./(Divestments) Change in Debt Dividends Capital Increases/Other 2014E 1.5 7.3 318 55.7 8.425 7.7 (456) (102) 409 (62.1 92. leases.6 0.9 605 18.204 15.7 (223) (50) 200 (64.9 0.0 1.0 343 74.0 (1.043 4.7 968 73.116 178 2012E 8 348 14.4 (224) (174) 335 (58.0 90.559 4.1 14.9 9.29 24.0 (1.8 12.3 10.38 10.9 Capex/Revenue (%) Int Cover (%) Dividend Payout (%) ROCE (%) 5.348 117 2014E 6 285 6.299 24.2 (422) (700) 1.3 10.532) 0 2.6 0.8 22.43 2014e 2013E 0 0 (129) 280 (476) (196) 0 365 (102) (63) BR Properties is a leading company in Brazil’s income property industry that is focused on the corporate real estate markets.473) (6.1 18.com.7) (82.4 (134) (104) 200 (57.brproperties.4 175 87.

We expect adjusted ROE to fall by approximately 220 bps to 17.12 TARGET PRICE: R$45. The bank has BBDC4 BZ / BBD US completed the deployment of the remaining modules of its new IT Current Price (01/03/13) R$ 38.12 Market Capitalization (US$ Mn) 71.00 / US$ 21.38.  Better to stay defensive in Brazilian banks.0 3. driven by secured personal loans (mainly payroll and mortgage lending).0 Ample distribution channels support low-risk growth. which has strong cross-selling potential both for insurance and banking products. which should pave the way for contained cost increases Target Price (YE 2013) R$ 45.  Efficiency gains supported by new IT platform.50  Boris Molina Investment Case: Bradesco remains our top pick among the largecap Brazilian banks. 91.2013 Latin American Universe Book BRAZIL—FINANCIAL SERVICES BRADESCO BUY CURRENT PRICE: R$38.20 and for efficiency and productivity gains in the medium term. with margin contraction offset by lower NPL provisions and fee income growth.com.818 Bradesco IBOVESPA 120 110  Capital ratios less of a concern.00 FROM R$40. which has been strengthening the solvency of the group amid falls in long-term interest rates.5%.12 / US$ 18. as margin pressures should not be fully offset by slower cost growth.  Company Statistics Bloomberg 52-Week Range (R$) 26. We New York: Santander Investment Securities Inc. 70 60 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet. and low exposure to revenue Luis Guzmán challenges in high-margin consumer finance with low exposure to the New York: Santander Investment Securities Inc. +5511-3012-5756 | havieira@santander. We expect the bank to close 2013 100 with a ratio of 9.to low- Shares Outstanding .br channels.00 RAISING YE2013 TARGET PRICE TO R$45. +1-212-350-3977 | bmolina@santander.59 platform.2% owing to the slower growth. The bank has higher relative reliance on more defensive insurance earnings and lower exposure to high-margin consumer lending and the lingering risks in the auto lending segments.Mn income segments of the population enables the bank to pursue a Price Performance (R$) low-risk account/fee-based bancarization strategy. broad product mix. +1-212-297-1367 | lguzman@santander. The bank’s 3-Mth Avg. higher capital surplus 90 at Bradesco’s insurance operations. The bank has one of the largest 80 exposures to lower interest rates in its securities portfolios.88 .us Henrique Navarro* believe Bradesco offers the strongest mix of ample distribution Brazil: Banco Santander S. given the diversification that insurance earnings provide against revenue pressures at its banking operations. 46 .us risk of households’ over-indebtedness in auto lending. Santander estimates and company reports. Daily Vol (US$ Mn) extensive distribution network with solid access to the mid.A.  2013 Outlook: We expect loan growth of 15%.485 Float (%) 60.

614 (19.927) 24.798 51.219 22.87 1.7 2012E 11.535 13.092 142.1 31.7% Free Float 60.993 19.03 2.73 (2.56 (1.346 2014E 35.4 6.483) 14.8 2.958) 2014E 232.803 (18.2 8.87) 3.74) 1.839 364. 47 .8 33.2 33.654) 5.644) 6.671 223.028 10.774 30.15 19.562) 12.2 33.350 761.99 2011A 1.95 2013E 3.973 0 143.094 252.969 (4.051 26.55 22. Gains/Shr 2011A 2.531 70.50 (1.8% Managers 3.0 139.73 7.702 (10.9 2012E 5.867 (21. The bank has a dual shareholding structure.8 29.573 (10.704 0 161. Bradesco boasts a leading market share among its peers in the insurance industry in Brazil.814) 5.987 133.281 (2.574 265.5 3.451 (2.921 32.023 11.9 4.087 (21.4% 4.3 18.804 4.102 27.701 320.6 21.212 0 342.704 53.870 325.288 24.080 407.044 130.2 2.398 48.97 2012E 2.867 14.1 5.271 2014E 10.com.9 3.425 124.2 49.7 1.7 9.6 7.003) 20.271 34.419 3. combined with strong distribution capabilities via its extensive branch and correspondent banking networks.0 16.2 5.0 4.3 1.127 11.122 76.5 4.5 16.9 2012E 5.2 135.9 4.2 80.836) KEY RATIOS NIM Risk Charge Operating Revenue / ATAs Cost / ATAs Adj Efficiency Effective Taxes Reported ROE (%) Adj ROE (%) NPL Ratio Adj NPL Ratio Loans / Total Assets Loans / Core Deposits RWA % Total Assets Core Tier I Ratio (%) Dividend Payout (%) 2011A 5.75 14.2 2011A 11.3 33.4 6.482 7.945 (2.30 1.6 2.259) 11.0 2.2 8.9 2014E 10.049 (40.174) 2013E 95.759) 11.4 33.51 22.99 1. with total assets of approximately US$423 billion as of 3Q12 and approximately a 12.248 0 268.096 36.6 79.6 3.769 76.842 6.3% C.248 27.492 2012E 36.021 119.6 17.64 10.079 144.8 50.61 1. corporate banking and asset management.0 MARKET RATIOS Adj P/E Adj P/BV Div Yield (%) 2011A 13.383 2013E 16.499 (8. The bank has a solid segmentation strategy that gives it ample exposure to all the socioeconomic and product segments in the Brazilian banking industry.459 (4.508 65.9 133.2% Corporate 23.9 71.836) 2011A 86.0 2014E 5.197 (10.046 (6.705 14.537 172.6 7.7 11.8%% in deposits in Brazil.723 7.653 55.27 17.7 6.6 17.90 14.329 85.177 15.9 7.625 156.284) 13.8 35.8 6.403 2011A 18.2 1.575 5.8 50.8 6.8 5.732 5.6 3.699 39.630 (23.598 (19.0 32.728 (10.4 6.512 (5.6 50.8 35.0 139.921 26.2 135.3 18.54) 3.5 9.9 3.3 4.1 1.03 3.99 17.894 86.90 2014E 1.762 24.50 9.6 4.859 15.205 67.3 123.0 35.092 276.795 462.533 216.0 16.1% market share in loans and 13.0 39.30) 1.541) 2012E 179.449 (33.598 11.9 3.7 6.393 129.079) 2013E 203.4% Fees 35.970) 6.076 169.017.5 10.63 10.1% Other 1.1 PER SHARE DATA EPS BVPS DPS Adj EPS Adj BVPS Surplus Capital per Share Unrealized Cap.3 20.19) 1.4 37.65 7.7 2.2% Other 6.498) 11.701 16.225 (5.8 29.9 2.5 16.1 31.125 68.877 32.2 49.53 8.617 53.4 6.6 50.091 151.0 4.272 56.0 2013E 5.0 2013E 5.663 2013E 9.0 7.23 20.5 6.719 (5.362) 8. Key Personnel: Lázaro de Mello Brandão (Chairman).521) 9.726 38.6% Revenue Structure.524 29.4 78. 2013E Personal Mortgage 5.445 26.777 60.8 16.448) 22.891 2014E 16.953 (37.995 0 180.133) 8.705 10.659 123.0 20.23 3.240 2012E 8. with control of the bank held largely by the bank’s management and the founding Aguiar family via a series of cascading holding companies and foundations that own the majority of the bank’s voting shares.br Loan Portfolio.bradescori.Card Payroll 6.220 11.8% 7.0 2014E 5.190 128.7 3.6 21.246 276.7 9.788 (18.910 103.14 (2.4% Shareholder Structure.52 1.1 2.8 6.0% Sources for all charts and tables: Company reports and Santander estimates.8 16.5 3.434 14.919 8.0 2011A 5.425) 11.358) 2014E 105.5 6.789 829.013 12.004 36.8% SMEs 35.3 20.582 56.64 (2.91 2013E 1.6 4.0 39.5 3.26) 2.834 402.459 107. 2013E Fundaçao Bradesco 29.452 2012E 17.952 (20.56 1.521 434.4 78.6 3.401 6.7 3.267 6.3 4.383 183.935 116.59 2012E 1.7 33.548 920.668 16.5 1.842 126.459 10.9 13. Luiz Carlos Angelotti (CFO) and Paulo Faustino da Costa (IRO) Web: www.427 2011A 12.0 32.54 9.79 (3.57 1.6 3.114 76.869 299.144 (38.415 55.723 249.373 285.82 Bradesco is one of Brazil’s leading private sector banks.325) 26.3 123.125 1.53 1.590 6.6 1.303 0 297.404 14.43 0.8 6.829 107.3 2012E 10.0% Other 4.180 27. with strong positions in private pension fund management.173 400.80 0.415) 13.904 239.883 0 143.126 (4.381) 16.9 7.415 12.328 10.0 2.8% Auto 10.23) 1.549 (10.67 8.7 2013E 11.659 (5.381 12.468) 2012E 86.2 2.385 373.BRADESCO Financial Highlights: P&L and Balance Sheet.09 3.278 12.4 51.6 79.705 26.125 5.0 20.0 7.2% NII 46.278) 25.048) 13.14 0.8 2014E 11.647 148.872 31.7 33.9 71.787 0 396.775 28.29 (1.5 4.672 2013E 2014E 20.991 60.291 LOAN BOOK Companies Total Consumer Mortgages Other Loans Gross Loans Loan Grow th (%) NPL Provisions 2011A 161.53) 4.4 51. 2013E Insurance 14.4 1.341 133.62 0.009) 8.4% Aguiar Family 5.955 58.0 35.9 133.426 (2.609 136.470 2013E 33.485) 17.2 80.2 6.584 4.823 6.451 6. Luiz Carlos Trabuco Cappi (CEO).677 (10.696 99.343 15. 2011–14E in Millions R$ Company Description US$ INCOME STATEMENT Net Interest Income NPL Provisions Adj Net Interest Income Non-Interest Income Total Operating Revenue Non-Interest Expense Profit Before Taxes Taxes Net Profit Adjusted Net Profit 2011A 30.799 (8.6 3.048 255.8 2.8 2013E 11.4 37.917 8.4 33.8 33.3 33.206 BALANCE SHEET Cash and Equivalents Securities Loans (net) Intangible Assets Total Assets Core Deposits Other Financial Liabilities Subordinated Debt Technical Provisions Equity Adjusted Equity 2011A 22.1 12.04 2014E 3.270 2012E 18.421 7.92 (1.5 9.604 168.

br without the ―distraction‖ of the transfer of some of its assets due to the antitrust ruling.9 3-Mth Avg. improvement in the sales mix. Price Performance (R$) Brasil Foods   IBOVESPA 180 Investment concerns: (1) volatility in grain prices and FX. The year 2012 proved to be more Mexico: Banco Santander S. but as we look into 2013.00 INTRODUCING YE2013 TARGET PRICE OF R$47. positively affecting profitability.45 / US$ 21.1% (80%). we expect pressure in the cost of grains to subside.mx challenging than we expected. stemming from price increases. 120 100 Valuation: We are introducing our YE2013 target price of R$47. On the expense side.81 52-Week Range (R$) 27. Santander estimates and company reports. We project an adjusted EBITDA margin expansion of 290 bps YoY. earnings.com. we believe that following the transfer of assets several temporary Company Statistics inefficiencies can be eliminated.74 . Finally.7%.00.2 Shares Outstanding .45 Investment positives: (1) strong projected EPS growth (59% CAGR Market Capitalization (US$ Mn) in 2012-14E). and cash flow generation. CFA that the company will be able to better execute on its growth strategy Brazil: Banco Santander S. Moreover.00  Investment Case: We believe BRF remains a good vehicle to gain exposure to structural changes in income distribution and income growth in the Brazilian market and to take advantage of their impact Luis Miranda*.  2013 Outlook: We expect top-line growth of 11% YoY. Daily Vol (US$ Mn) 38.00.com. REPLACING YE2012 TARGET PRICE OF R$43. and (3) still no clear 140 signs of recovery in export markets. in our view. 80 Our YE2013 target price is based on a 2013E P/E of 18. 48 .0x (20%) 60 and a DCF using a nominal cost of equity in BRL of 11.2013 Latin American Universe Book BRAZIL—FOOD & BEVERAGE BRASIL FOODS BUY CURRENT PRICE: R$43.00 / US$ 10.45 TARGET PRICE: R$47.621 (4) potential to further capture synergies from complete integrated operations. (2) cost of grains expected to decline.  BRFS3 BZ / BRFS US Current Price (01/03/13) R$ 43.com. we believe Tobias Stingelin*. +5255-5269-1900 | areynal@santander.A.mx Ana Gabriela Reynal* on consumption patterns. driven mainly by strong performance in the domestic market (+14% YoY). We project 45% growth in adjusted EBITDA in 2013 YoY.A. (3) strong Float (%) 59. We maintain our Buy rating. 160 (2) stronger competition in the domestic market.Mn 872 momentum in the domestic processed foods market.43. We expect EPS to more than Bloomberg double. to 12. J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet. +5511-3553-0699 | tstingelin@santander. we believe that the company will be able to focus fully on delivering more synergies from the merger that created the company. and 18. CFA Mexico: Banco Santander S. +5255-5269-1926 | lmiranda@santander.A. and further capture of synergies.32 Target Price (YE 2013) R$ 47.

829 12.057 22.363 (15.2% Float 59.468 6.3 1.5 11.583 (1.5 11.9 10.2 11.77 0.303 1.1 20.7 13.966 4.9 2014E 15. industrialized meats.7 3.0 FV/Revenue 1.054 3.1% 4.023 15.8 9.3 0.717 33.697 6.936 13.8 2.392 9.3 1.314 6.2) 3.850 17.5 27. pork and beef.30 0.195 41.520 15.5 MARKET RATIOS FV/EBITDA 12.482 10.7 10.7 8.122 2.160 3.9 2014E 35.904) 397 0 0 (263) 0 2014E (1.493 (1.7 10.983 7.5 5.2 45.825 9.425 (2.887 24.7) (1.6 19.419 34.088 20.002 23.140 7.5 (443) (462) 2.3 US$ 2012E 14.841 2012E 1.94 8.615 28.044) 2.2 P/BV 2.9 (0.068 (440) 0 2013E (1. pizzas and frozen vegetables as well as being one of the leading milk collectors and dairy product processers in Brazil.734 75. BRF also has 19 overseas commercial offices and a portfolio of clients across the five continents.6 20.7 5.186 6.753 48.3 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 1.018 2.4 0.331 21.6) 8.550 8. two in Europe (Plusfood) and. Leopoldo Viriato Saboya (CFO) and Edina Biava (Investor Relations Manager) Web: www.8) (2.3% Other Sales 2.4 0.3) (4. margarines.3 2.522 4. It operates 61 plants in Brazil.051 2.4 0.110 8.8 2.0) 5.107 21.561 (22.3 R$ 2012E 28.79 0.57 0.875 2.289 (25.973 9.93 18.9 2011A 15.7 11.2 32.9 1.1 13. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 25.293 1.8 6.3) (4.1 1.126 5.727 10.730 11.143 23.057) (378) 0 546 (225) 0 2013E (466) (2) (239) 1.723 26.50 0.659 16.16 2.BRASIL FOODS Financial Highlights: P&L.654 2014E 2.4 1.0 5.5 (302) (79) 418 (48.8 1.1) Dividend Payout (%) 62.458 15.2 2.5 10.4) 1.960 10.5 1.4 1.0% 5.15 0.1 12.3 P/CE 14.1 0.4 7.5 (591) (155) 819 (40. five in Argentina.523 (12.9 1.468 6.054 1.3 2.706 13.7% Previ 12.98 0.7) (2.8) (3.130 LT Debt FINANCIAL RATIOS Net Debt 2013E 31.962 6.5 12.702 9.5% Domestic Market 59. by the end of 2012.084 (841) 144 0 0 (370) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 2.17 16.5 5.888 130.988 7.9 4.7% Sales by Region.6 7.57 0.453 3.3 2.1 11.124 18.477 2.452 2012E 2.5 1.6 3.5 0.252 2013E 1.526 7.0) 1.7 41.9 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.179 2014E 1.7 13.460 5. live animals and milk.1% Tarpon Investments BlackRock Others 8.6 1.516 4.8 (480) (157) 1.4 0.5% Dairy Products 9.757 Capital Employed 21.8 7.288 5.37 DPS 0./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (886) (785) (1.001 34.934) 332 0 0 (851) 0 2011A (529) (468) (610) 267 (836) (128) 0 508 (299) 0 2012E (492) 157 (339) 728 (1.448 15. 2012E Exports 40.5 13.886 14.9 10. September 30.5 5.1 65.3 1.5 25.651 3.654 2013E 2.720 4.8 11. It operates in the segments of poultry meats.305 5.2) 8.0 ROE (%) 9.498 4.264 Net Debt/EBITDA 1.0 0.9 8.3) 5.645 14.8) 2.6 30.1 3. Its principal raw material inputs are grains.46 1. 49 .3 6.398 6.1) (1.6 27.4 12.8) (3.3 6.28 0.229 16.1) 2.6 1.6 (493) (359) 1.400) (215) 0 851 (502) 0 2012E (963) 307 (663) 1.2 ROCE (%) 8.4 7.285 5.0 11.2 0.548 37.4 5.258 4.2 1.8 5.5 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 23.654 2011A 1.6 15.3 6.8 45.4 9.5 2.753 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 5.9 4.8 (286) (93) 816 78.860 29.1 45.6 1.8 17. pastas. Key Personnel: Nildemar Secches (Chairman).1) 2.833 3.724 12.9% Processed Products 47.551 (5.2 11.com/ri/ Sales by Product Category.724 30.5% Shareholder Structure.052 32.976 22.8 1.3 3.768 9.5% Poultry 30.0 5.94 2.958 14.3 16.7) (1.5 1.2 8.5 15.662 11.6 (225) (164) 864 106.122 2.110 11.726 11.2) 3.9% Sources for all charts and tables: Company reports and Santander estimates.601 6.60 7.3 1.7 12.3 2.204 7.0 10.379 (1.018) (5) (522) 2.31 9. 2012 Petros 10.4 32.0 9.4 1.8 FV/EBIT 18.984 3.468 2.416 9.0 20.367 70.749 2.619 7.112) (5) (1.4 0.883 1.8 6.06 1.9 2013E 14.25 0.79 20.2 1.5 2.4 6.1 5.286 4.740 11.5 (192) (201) 1.251 56.7 2.12 FCF Yield (%) Div Yield (%) PER SHARE DATA BVPS BRF is one of the largest food companies in the world and is the result of the merger between Perdigão and Sadia.522 (0.1 (0.6 1.7 2.089 (871) 182 0 0 (120) 0 2014E (483) (2) (454) 1.930 10.3 1.911 10. is expected to unveil a processed products plant in the Middle East.546 7.9 797 (33.5 13.8 1.4 6.1 15.4 Net Debt/Equity 0.8 9.23 10.443 18.4 Capex/Revenue (%) 5.8 11.0 8.2 2.070) (740) 0 1.6 2. 2012E Pork / Beef 9.432 28.2) 1.022) 448 (1.48 16.347 19.7 5.4 8.7 9. José Antonio do Prado Fay (CEO).5 Int Cover (%) (1.4 0.1 2.984 4.122 2.054 15.5 19.811 11.739 10. Its operational structure is supported by 42 distribution centers of refrigerated and frozen products supplying 98% of the country as well as consumers in 140 countries.5 15.7 16.156 10.996 24.932 12. Balance Sheet and CF Statement.345 3.brasilfoods.

We continue to Float (%) 65.6% even after dilution.34 . Its dividend 100 yield of approximately 5.A.98 half of 2012. Brasil Insurance has a pipeline of 85 insurance brokers under analysis. our YE2013 target price would increase around 15%. one of the leading insurance Henrique Navarro* brokers in Brazil.2013 Latin American Universe Book BRAZIL—INSURANCE SERVICES BRASIL INSURANCE BUY CURRENT PRICE: R$20. Brazil: Banco Santander S. However.10 / US$ 9.br Acquisitions could improve valuation.4% is among the highest in our coverage 90 universe.com. +5511-3012-5731 | rcabral@santander. +5511-3012-5756 | havieira@santander. if the company is successful in acquiring 30 insurance brokers (out of the 20-40 planned). These acquisitions were partially paid in stock.21. these acquisitions are value accretive.br multiple earnings growth drivers for the company.30 auto insurance premiums helped to improve the profitability level of Market Capitalization (US$ Mn) 947 the industry. In the second Current Price (01/03/13) R$ 20. as they increase the company’s EPS by 0. result in a three-year CAGR of 10%.  Organic growth is supportive.Mn 96 to 15% due to cross-selling as well as to operating leverage. operates in a very fragmented market. Brasil Insurance’s strong cash flow generation and high expected payout ratio of around 80% Brasil Insurance IBOVESPA 120 110 make the company suitable for dividend-play strategies. based on our assumptions. resulting in stock dilution. 50 .00  Investment Case: Brasil Insurance. New York: Santander Investment Securities Inc. +1-212-350-3977 | bmolina@santander.87 Target Price (YE 2013) R$ 24.5 believe in the company’s ability to maintain commission fees at close 3-Mth Avg. as such ventures are difficult to predict. Daily Vol (US$ Mn) 2.A. We see Brazil: Banco Santander S. and Brazil Insurance is a beneficiary.9 Shares Outstanding . Brasil Insurance acquired 43 insurance brokers. However. both organically   Boris Molina and via acquisitions.com. Price Performance (R$)  A dividend-play company.00 / US$ 10. price readjustments in health plans and better pricing of BRIN3 BZ 52-Week Range (R$) 16. Bloomberg where we estimate 2011-14 three-year CAGR of 10%. We do not include future acquisitions in our valuation. 80 70 60 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet.10 TARGET PRICE: R$24.us 2013 Outlook: Our 2011-14 EPS estimates. The main organic driver we see Company Statistics relates to our scenario for growth in insurance premiums in Brazil. Since its 2010 IPO. In our view. Santander estimates and company reports. which do not include Renata Cabral* potential future acquisitions.

3% Others.9 6.0 80.4% Free float 63. Brasil Insurance is a holding company that consolidates a group of insurance brokers.4% Sources for all charts and tables: Company reports and Santander estimates.11 1.00 15.3 80.4 26.70 13.18 5. 51 .65 0. its insurance portfolio mainly encompasses corporate health.0 5.58 2.66 0.65 0.24 1.3 80.8 27.64 0.0 80. auto.65 4.4 5.35 1.2 5.0 80.0 80. Treasury 6. 2010A–14E 15.brasilinsurance. 3Q12 Controlling Group 30.0 MARKET RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E Adj P/E - - - - - - - - Adj P/BV - - - - - - - - 5.00 15.47 2.5 5.56 0.3 26.9 27. 2012E P&C 15.0% Life 8.66 0.4 5.0% Auto 16. having grown organically and through acquisitions.94 0.4 26.49 0.BRASIL INSURANCE Financial Highlights: P&L and Balance Sheet.24 1.80 2010A 2011A Industry Breakdown. 2011–14E in Millions) Company Description INCOME STATEMENT Net Interest Income NPL Provisions Adj Net Interest Income Non-Interest Income Total Operating Revenue Non-Interest Expense Profit Before Taxes Taxes Net Profit Adjusted Net Profit 2011A 77 130 (20) 107 107 R$ 2012E 113 160 (37) 121 121 BALANCE SHEET Cash and Equivalents Securities Loans (net) Intangible Assets Total Assets Core Deposits Other Financial Liabilities Subordinated Debt Technical Provisions Equity Adjusted Equity 2011A 339 190 604 446 - 2012E 257 226 618 471 - 2013E 250 220 596 497 - 2014E 243 214 582 525 - 2011A 189 106 336 248 - 2012E 131 115 316 241 - 2013E 114 101 273 227 - 2014E 106 93 253 228 - LOAN BOOK Companies Total Consumer Mortgages Other Loans Gross Loans Loan Growth (%) NPL Provisions 2011A - 2012E - 2013E - 2014E - 2011A - 2012E - 2013E - 2014E - KEY RATIOS NIM Risk Charge Operating Revenue / ATAs 2011A - 2012E - 2013E - 2014E - 2011A - 2012E - 2013E - 2014E - Cost / ATAs - - - - - - - - Adj Efficiency - - - - - - - - Effective Taxes 2013E 140 169 (37) 130 130 2014E 167 188 (41) 143 143 2011A 46 78 (12) 64 64 US$ 2012E 59 84 (19) 64 64 2013E 67 80 (18) 62 62 2014E 74 83 (18) 63 63 - - - - - - - - 27.8 27.0 84.08 1.9 Adj ROE (%) - - - - - - - - NPL Ratio - - - - - - - - Adj NPL Ratio - - - - - - - - Loans / Total Assets - - - - - - - - Loans / Core Deposits - - - - - - - - RWA % Total Assets - - - - - - - - Reported ROE (%) Core Tier I Ratio (%) - - - - - - - - Dividend Payout (%) 84.52 0. followed by life.64 0.99 1. The company is one of the largest and most diversified insurance brokerage companies in Brazil.52 0.3 Div Yield (%) PER SHARE DATA 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 1.53 Adj EPS 1.0% Others 16.19 0.0% Shareholder Structure.11 1. Its main revenue line comes from the commission its subsidiaries charge on insurance premiums. The company is one of the leaders in the very fragmented market of insurance brokers.1 5.37 2. Key Personnel: Tuca Ramos (CEO) and Luis Fishman (CFO) Web: http://ri. Gains/Shr - - - - - - - - Brasil Insurance was founded in 2010 by the investment fund Gulf and was IPOed in the same year.com.3 26.00 2012E 2013E 2014E 14.38 DPS 0.br Commissioning Level.0% Health 45.51 2.66 BVPS 4.35 1. In fact.66 Adj BVPS - - - - - - - - Surplus Capital per Share - - - - - - - - Unrealized Cap. P&C and others.49 0.91 5.

valuation to 120 remain lackluster.4 3-Mth Avg. and lower electricity prices) has mostly been priced-in.94 TARGET PRICE: US$16. +5511-3012-6042 | vneto@santander.44 nationwide. an increase in import tariffs for PE. While in the short term. +1-212-350-3991 | caudi@santander.00  Christian Audi Investment Case: In our opinion.19.5x target) could increase further in 4Q12.Mn 401 Price Performance (US$) affected by global resin spreads than by domestic demand. Santander estimates and company reports. likely not 80 declining to desired levels until the end of 2013. The 60 stock is trading in-line with its historical average but at premium to international peers. GAS & PETROCHEMICALS BRASKEM HOLD CURRENT PRICE: US$13. we are concerned about the competitiveness of naphtha as Braskem’s main feedstock. Braskem continues to face a challenging outlook in terms of the global petrochemical cycle.br expect this scenario to improve significantly in 2013. Market Capitalization (US$ Mn) 5. the equalization of VAT taxes Current Price (01/03/13) US$ 13. Braskem’s high net/debt to EBITDA level of 3.1 Shares Outstanding . we conclude that Braskem’s fundamentals are more significantly 37.  Domestic stimulus package expected to aid fundamentals in 2013. 40 j-11 m-11 a-11 d-11 a-12 a-12 d-12 Sources: FactSet. in our view. mostly driven by a volume increase (gains in market share).00 / R$ 16. However. we do not New York: Santander Investment Securities Inc.us Vicente Falanga Neto* Brazil: Banco Santander S. Based on several sensitivity analyses we ran.54 .com. but we believe they are mostly priced-in. The federal Company Statistics government’s announcement of a series of domestic measures to Bloomberg BAK US / BRKM5 BZ support the chemical sector (e. sustainable pricing power.5x 100 (above its 2. Moreover. 52 . which prevents the company from having significant.2013 Latin American Universe Book BRAZIL—OIL. Braskem has raised significantly its level of indebtedness. the federal government’s stimulus measures should aid the company’s results.g. in our view. an excessive appreciation of the BRL could hurt Braskem’s earnings in the short term. which should be monitored carefully.  2013 Outlook: We expect the company to post a significant improvement in EBITDA. Daily Vol (US$ Mn) 4.. which is in part a reflection of the government’s stimulus measures in 2012. Given the current lackluster global economy. in the very long term.A.94 / R$ 13. Braskem IBOVESPA 140  Indebtedness levels expected to remain high.50 52-Week Range (US$) 10.91 Target Price (YE 2013) US$ 16.585 Float (%)  Global scenario still outweighs domestic pick-up in Braskem‘s fundamentals.

232 10.371 2011A 1.633 10.501 10.041 (46.657 10.8 4.0 10.072 4.781 5.7 10.3% Sales by Segment.5) 3.327 2014E 4.5 Net Debt/Equity 1.945 4.8 11. 2013E Basic Petrochemicals 49.4 23.5 0.1 4.6 11.048 3.30 (00.902 9.1 7.805) 357 (517) (127.557 1.310 (0.866) 0 (1.016 2.9 7.742 (23.960 (1.313 23.0 0.7 4.285 2013E 2.0 2.858 (5.1) 19.4% Odebrecht 9.5) (24.648) 1. 53 .2 (5.178 21.5 11.1) 6.8 (5.470 31.0 (32.073 18.1) 2.2 854 60.32 12.939 6.6 P/BV 1.56) 0.0 4. as well as in Latin America.1 3.28 13.4) 3.BRASKEM Financial Highlights: P&L.3 5.73 1.692 18.7 (793) (537) 1.8 7.717 5.6) 9.braskem.3 1.6 Dividend Payout (%) 0.0 5. with integrated first.6 0.1 9.4 2.826 7.br Sales by Geography.156 (35.188 6.0 10.3 1.3) 2013E 19.9 Int Cover (%) 1.737 12.2 Div Yield (%) 0.5 (1.2) (22.885 19.9) 5. 2012 Free Float 37.9 6.419 23.273 9.2 4.931 (39.5 2.3 2.937 8.252 (780) 528 (39) 121 (73) 47 2014E (891) 0 0 1.51 12.849 662 2012E 807 5.8) 2.7% Sources for all charts and tables: Company reports and Santander estimates.1 2.271 19.6 0.428 8.65) (00.273 18.3 1.2 11.236 638 LT Debt 13.800) (1.com.974 5.5 2014E 19.377 (767) 624 (38) 128 (121) 46 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 3.4) 2.027 22.0 0.9) 6.9) 19.6 0.2 1.6 4.7) (1.2 7.4) 1.2 6.916) 0 1 2.611 11.5) 43.26 12.424 5.5 1.72 12.897 6.011 9.0) 9.1 2.1 3.9 2.338 Capital Employed 22.193 11.031) 1 608 1.669 (25.29 11.049 8.1 2.221 (2.6% Polymers 50.029 0 (711) 2012E (1.282 1.and second-generation petrochemical production facilities throughout Brazil and the US.7 0.3) CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.498) 0 (456) 11.025 39.914 11. polypropylene.122 11.241 (19.429 (7.2 1.033 1.544 25.2) 5.1 3.845 14.1 9.8 7.1 FV/EBIT 11.244 2012E 1.754 Net Debt/EBITDA 3.834) (424) (1.379 12.8 (1.343 (82) 275 (261) 99 2011A (1.911 6.053 11.001 4.513 13.8 6.5 2.268 9.3 1. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 33.2 4.940 7.669 40.8 (1.1 534 (53.1 5.1 5. Marcela Drehmer (CFO) and Guilherme Mélega (IR Officer) Web: www.2 1.752 68.567 (1.4 5.839 15.0 (31.06 13.9 (768) 0 (234) 24.8 MARKET RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E ROE (%) (20.1 1.8 (2.1 1.02 BVPS Braskem is the largest chemical company in Brazil and Latin America in terms of production capacity.4% Shareholder Structure.685 7.598 9.7) 9.07 11.1 11.600) 1.186 7.28 DPS 0 0 0.2) 1.63) (00.955 14.070 5.082 (80) 249 (150) 97 2014E (1.6 4.9) 43.1 1.580 7.757 1.57) 0. Key Personnel: Carlos Fadigas (CEO).237 7. PVC) in the country.4) 11.779 21.6 1.478 5.988 9.1 4. Balance Sheet and CF Statement.902) 0 65 2.0 4. More specifically.7 4.0 4.078) 733 (728) 2.1 22.372 35.797 22.6 0.707 6.968 38.951 16.1 1.762 11.176 30.000 22.2 6.9 10.6 1.6 6. the company is the leading producer of thermoplastic resins (polyethylene.165 13.6) R$ 2012E 35.5) 11.2 7.19 0.0 0.7 (369) (250) 485 65.526 5.9 (17.277 632 2014E 1.7 0.5 (844) (309) 599 n/m 1.5 2014E 41.103 29.33 0 0 0.2 PER SHARE DATA 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS (00.4 4.268 23.645 6.5 (412) (151) 292 n/m 1.5 11.1 5.866 37.5 2011A 19.5 P/CE 8.244) 439 (436) 1.1 1.938) (85) 276 0 95 2013E (1.621 15.598 FINANCIAL RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E Net Debt 11.156 28.263 12.604 10.9 (1.5 13.403 41.670 19.043 74. Braskem has shares listed locally and ADRs listed on the NYSE.75 1.330 (1.258 18.797 10.224 (16.454 2.2) (1.7% Other 50.0 5.5 (18.545 11.634 15.215 0 (426) 2012E (957) 0 (941) (217) (923) (994) (44) 142 0 49 2013E (928) 0 32 1.1 Capex/Revenue (%) 6.9 4.1 5.0 1.9 10.0 0.8 4.0 4.1 3.2 1.389 15. 2013E Brazil 49.7 3.155 10.721) 1 1.774 24.4 1.0 1.8) (5.8 4.333 627 2013E 1.079 14.645 23.8 ROCE (%) 2013E 39.2 1.5 5.653 (28.1 1.3 1.5) 9.254 (13.0 FV/Revenue 0.3 1.748 13.8 5.3 2.073 5.1 FV/EBITDA 5.1 2.3 5.680) 214 (310) (129.3 1.654 10.6) US$ 2012E 18.2 0.1 5.18 0.1 2.8 (18.1 1.303 5.7 0.1 FCF Yield (%) 6.3 3.9% BRK (Odebrecht and Petrobras) 52.6 6.9 3.592 11.6 14./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (1.3) (4.

 A highly leveraged player . However.  Pedro Balcão Reis* Brazil: Banco Santander S. INFRA & RE BROOKFIELD BUY CURRENT PRICE: R$3. that will likely continue to consume cash next year.90 FROM R$4.6x Brazil: Banco Santander S.com. the company’s focus remains on the upper-income and commercial segments (respectively accounting for 50% and 30% of its operations).Mn 570 Price Performance (R$) sales value) distorts the company’s consolidated profitability due to its Brookfield IBOVESPA 120 100  Stepping in the 0-3 MWs income segment. 40 20 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet. as the construction of the projects launched in 2010-11 accelerates.73 TARGET PRICE: R$4.90 / US$ 2.044 Float (%) 48.20 Market Capitalization (US$ Mn) 1.73 / US$ 1. Santander estimates and company reports. with gross margin ranging from 28% to 30% by YE2013. +5511-3012-7414 | fpgama@santander.70 .br 2013E P/BV.A. Daily Vol (US$ Mn) 6. Bloomberg  . We also expect Brookfield to generate positive cash flow only from 2014 onward. . Brookfield’s ND/E rose 121% in 3Q12 (from 76 % in YE2011). .A.7 billion in potential BISA3 BZ Current Price (01/03/13) R$ 3.  Long-term landbank divestment is positive. In order to benefit from 80 its shorter cash cycle.33 52-Week Range (R$) 2. . +5511-3012-5765 | pbalcao@santander. Acknowledging that ongoing projects with lower-than-expected profitability could continue to hurt margins until they are completed.2013 Latin American Universe Book BRAZIL—CEMENT.50  Investment Case: Even factoring in conservative assumptions.7. Company Statistics should reduce the company’s leverage to a still-high 92.83 Target Price (YE 2013) R$ 4.90 UPGRADING RATING TO BUY FROM HOLD RAISING YE2013 TARGET PRICE TO R$4. In our opinion.br 2013 Outlook: Although we forecast that Brookfield will improve its results. 35% below the sector average) leading us to upgrade the stock to Buy from Hold. the conclusion of its R$400 million capitalization. we expect the company’s earnings momentum to remain uninspiring.  Uninspiring earnings momentum ahead. We expect Brookfield to continue cash consumption throughout 2013. 54 . which had been scheduled to take place in 4Q12. Fabiola Gama* Brookfield’s shares look excessively discounted (trading at 0. Brookfield’s excessively large land bank (R$17.8 3-Mth Avg.com.4%. Brookfield plans to launch ~R$700 million 60 worth of projects in the 0-3 MW income segment in the short term. . Burning an average of R$280 million per quarter in 2012. we still expect the company to lag its peers in terms of profitability. CONSTRUCTION. Nevertheless.8 Shares Outstanding .

181 159 2013E 93 4.6) (36.405 3.115 3.8) (30) (108.176 3.7) 9.022 3.094 3.0) 8 (97.8 10. 2011-14E 4.1 6.brookfield.5) 0.0 1.2 11.6 8.5) (20.7 9.54 3.0 FINANCIAL RATIOS Int Cover (%) 1.488 Net Debt/EBITDA 4.539 3.846 192 2011A 511 2.1) 352 (63.com/ri/ Launches (R$ billions).007 186.739 385 Company Description 2013E 1.7 302 n/m 16.2 ROCE (%) 10.04 3.732 4.7 P/BV 0.465 1.4 371 (1. The company has historically been focused on the upperincome segments in Rio de Janeiro’s and São Paulo’s metropolitan areas.9 2014E 3.945 197 2014E 92 4.360 5.511 1.139 4.9) 16.1 4.07 BVPS 6.105 15.1 7.216 1.525 11.8 (80.6 (51.20 3.754 1.852 3.8 2011A 2.40 2.7 2.0 Dividend Payout (%) 23.532 (3.8 12.61 6.5 (141) (80) (298) (191.018 3.3 R$ 2012E 2.324 2.4 (0.3 491 171.790 16.7 5.1 (10.3 6.0 (78.1) 9.670 1.85 Brookfield is an integrated real estate developer operating in the residential and commercial segments.131 2.7 (5.BROOKFIELD Financial Highlights: P&L.591 80 2013E 44 2.1) 1.0 1.2) 17.1 FV/EBIT 7.2% Shareholders Agreement 6.047 3.0 (22.390 7.4 621 (4.0) 9.6 1.8 MARKET RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 6.4) 34.5 (5.262 723 LT Debt 2013E 3.2 1.3 (39.5 (73) (41) (153) (178.519 3.5 1.285 3.2 (19.3 9.8) (59) (110.1 3.824 1.669 22. 55 .32) 0. the most important Brazilian markets. Following the acquisition of MB Engenharia (in April 2008) and the subsequent merger with that company (October 2008).2 1.4 1.2 340 12.4 (0.8 2012E (9) 0 (222) (366) (67) (433) 0 (171) 38 121 2013E (10) 0 (487) (353) (19) (371) 0 397 (31) 5 2014E (11) 0 (84) 89 (17) 72 0 (34) (40) 2 2012E 47 2.6 1.5 20.9 327 4.3 620 n/m 16.9 671 4.547 1.2 579 2.1 (298) (61) 347 36.11 0.1 (139) (29) 162 30.7 20.3 971 (1.7 363 10.8 10.3 (146) (22) 124 n/m 6.354 1.4 8.120 11.3) 16.654 1.280. Balance Sheet and CF Statement.2 346 (1.2) 8.303 3.6) 3.1 9.8 9.0 1.6 5.359 4.994 (15.7 1.878 94 2014E 43 2.8 (9.3 (300) (45) 255 n/m 6.1 24.7% Treasury 1.73 (00.076 2.2) (35.1 0. Brookfield increased its regional footprint and expanded its scope for more affordable housing segments.0) (52.067 3.7 0.964 3.7) 6.699 6.5 0. 2011–14E in Millions P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 3.088 3.4 8.824 777 2.7 2.7) 7.524 5.1) 9.539 (26.049 2.16) 0. Key Personnel: Nicholas Reade (CEO) and Sérgio Leal Campos (CFO and IR Director) Web: www.6 (0.768 Capital Employed 5.470 4.8 (80.8 (5.0 (52.2 5.93 3.3) 8.242 1.1 22.6 0.0 1.635 5.6 (126) (113) 327 (8.03 5.4) (9.500 4.2 ROE (%) 10.15 0.0 (78.2 P/CE 6.7) (2.05 0.646 (8.1) 7.737 10.01 2.8) (21.67 2.808 779 2.8 FV/EBITDA 7.6) 7.070 2.7 18.785 1.539 777 2.0) 522 6.096 1.834 1.6 0.8) 7.64 6. as of December 2012 Brookfield Brasil 43.4) 8.6 (75) (67) 195 (4.63) 0.3) 579 (5.2) 8.7 (4.1 5.9) 2012E (17) 0 (432) (712) (130) (843) 0 (332) 74 235 2013E (20) 0 (997) (723) (38) (761) 0 814 (64) 10 2014E (23) 0 (180) 191 (37) 155 0 (72) (87) 3 2011A (8) 0 (481) (277) (183) (460) 0 558 (49) 37 2012E 93 4.3 US$ 2012E 1.693 4.038 3.3) 9.4 1.609 1.0 1.553 4.3) 9.1 1./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (14) 0 (805) (464) (307) (771) 0 935 (82) 62 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 959 4.228 1.08) 0.1) (9.45 0.6 8.7) 1.650 5.60 3.9) 181 (68.6) 7.6 0.7) 3.079 1.br.3) 6.5) 34.1 4.1 7.9) CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.811 91 2.3% Free Float 48.18 (00.113 1.7 0.28 DPS 0. 2011-14E 3.7 4.2 18.2 (4.9 2014E 1.6 (35.102 2.0) 15 (97.377 1.8) 7.939 9.5 1.431 3.1 Capex/Revenue (%) 8.40 2012e 2013e 2014e Shareholder Structure.22 0.8% Sources for all charts and tables: Company reports and Santander estimates.44 (00.2 3.8 5.231 7.2 729 17.39 2011 3.564 1.4 (0.5 0.546 3.2) (53.0 8.9 1.718 10.0 (5.1 FV/Revenue 1.1 6.3 1.30 3.690 9.1) 1.0 FCF Yield (%) Div Yield (%) PER SHARE DATA 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 0.8 1.721 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E Net Debt 2.2 Net Debt/Equity 0.61 0.0 4.9) 0.6 1.11 (00.90 2011 2012e 2013e 2014e Contracted Sales (R$ billions).057.747 3.7 4.6) 17.9 22.1) (2.7 779 16.544 1.

Diniz (Chairman).). REPLACING YE2012 TARGET PRICE OF R$78. which could be good long-term but negative near-term. and that there is significant potential to expand margins at ViaVarejo. +5511-3553-0699 | tstingelin@santander. and (5) sale of ViaVarejo at a 160 premium could unlock value. 140 IBOVESPA 120 Investment concerns: Our negatives include (1) concerns about 100 potential block trades from Mr. as: (1) the food business is Brazil: Banco Santander S. corporate Ronaldo Kasinsky* Brazil: Banco Santander S.40 / US$ 43. a stable EBITDA margin. We have no visibility on share sales. Company Statistics Bloomberg PCAR4 BZ Current Price (01/03/13) R$ 89.e.2013 Latin American Universe Book BRAZIL—RETAIL & CONSUMER GOODS CBD BUY CURRENT PRICE: R$89. (2) the reduction in interest rates should continue to have a positive impact on CBD’s earnings (27% CAGR 2012-14E).com.  Valuation: Our YE2013 target price of R$108 is based on a SOTP exercise supported by blended DCFs and target P/Es. are additional large share sales from Mr. we expect top-line growth of 11% YoY.  2013 Outlook: In the food business. Santander estimates and company reports. Also. despite higher competitive pressures. etc. valuation remains attractive (20% discount to direct peers).e. 56 . and (4) competition seems to 80 be intensifying.40 TARGET PRICE: R$108.br Bruno Soares Taveira* Brazil: Banco Santander S. sale of assets).Mn 263 Price Performance (R$) CBD company’s heavy expense structure. security.19 Market Capitalization (US$ Mn) 11. we believe underlying fundamentals remain strong and justify our Buy rating. (2) the shareholder ―saga‖.br evolving well. +5511-3553-2396 | rkasinsky@santander. (3) some ―low hanging‖ cost-cutting opportunities (i.com.58 .2 Shares Outstanding .00  Investment Case: We are maintain our Buy rating on CBD and Tobias Stingelin*. Diniz’s. +5511-3553-9602 | btaveira@santander.00 52-Week Range (R$)  Investment positives: Our positives include (1) strong projected EPS growth (27% CAGR 12-14E). and (3) we expect CBD to continue to announce measures to enhance value (i.00. following some acceleration in sales area expansion (+7%) and a rise of ~7% in SSS. (3) returns (ROIC) remain low. Daily Vol (US$ Mn) 20.91 Target Price (YE 2013) R$ 108.541 Float (%) 33. marketing. we project 12% top-line growth but 34% EBITDA growth stemming from lower expenses.br governance.A. CFA believe that fundamentals remain solid. (4) the change in management at ViaVarejo provides an opportunity to address  66. planes.00 INTRODUCING YE2013 TARGET PRICE OF R$108. The key risk to the story and which increased substantially recently.A.. 60 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet.com.98. However. which combined with lower interest rates could more than double Via Varejo’s EPS YoY.. For ViaVarejo.00 / US$ 48.4 3-Mth Avg.A. and 16% EPS growth based on lower interest rates. and eventually believe that this risk could weigh on share performance. (2) beneficiary of the interest-rate reduction cycle.

046 9.00 4.954 11.8 11.093 2.921 21.2 1.187 26.3 2.gpari. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 46.6 0. supermarkets (Pão and Extra).4 11.3 2014E 27.655 2012E 6.163 Net Debt/EBITDA 1.3 1.876 4.002) 731 (481) 2.818 52.3 7.61 0.183 17.219 17.86 1.07 6.347 17. the company also managed 84 gas stations and 155 drugstores as well as a real estate business (GPA Malls and Properties).7) 5.800 (1.8 2.19 0.0 0.0 11.6 R$ 2012E 51.065 4.996 6.770 13.1 13. Balance Sheet and CF Statement.327 3.6 (0.0 21.946 9.246 (468) 2.8 2. 57 .1 5.1 0.6 7.32 2.32 26.1 3.9 7.062 9.425 54.9 18.302 20.727 24.098 16.797 3.198 (1.148 2013E 2.594 45. 2012E Via Varejo 35.4 16.7 21.4 3.331 4.1 1.397 14.198 6.7 17.02 2.704 16.0 9.8 1.179 17.384 33.8 9.617 10.8 11.1 1.415 2012E 2.408 6.58 15.6 1.3 (602) (223) 529 19.108 6.337 29.4 16.5 1.9 6.434 2013E 6.3 6.769) 713 215 (416) 0 2011A (406) 744 (279) 1.003 7.612 7./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (680) 1.1 24.2 ROCE (%) 11. 3Q12 Diniz Family 13.056 2.0 18.6 3.0 5.072 10.4 3. The company is controlled by French retailer Casino.7 4.278 16.2 8.6 13.1% Free Float 33.559 69.917 (1.831 55. Key Personnel: Abilio Diniz (Chairman).4 1.9 11.524 14.3 (1.7 5.9 31.485 2. electronics.6) 1.9 31.00 Cash&Carry 4.2 2.8 10.650 9.9 10.6 2011A 27.1 7.7 0.52 29.916 8.3 billion sales).341 4.386 (1.268 Hypermarket 3.1 3.2) 6.2 7.068 48.036 LT Debt 2013E 56.249 Mini Mercado 4.2 1.1% market share. CBD is also the largest white goods. positioning the company as the second largest player with a 19% share.29 PER SHARE DATA BVPS 370.79 DPS 0.9 2.982 16.9 10.502 12.00 63.3 14.805 10.5 0.7 10.029 1.569) (141) 1.455 5.406 3.193 16.9 7.387 46.495 10.1 1.8 1.187 7.636 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E Largest Brazilian multi-brand multi-channel retailer with sales of R$53.673 1.4% Sources for all charts and tables: Company reports and Santander estimates.684 13.9 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 23.6 14.241 8.9 2.762 2.71 0.7) 6.035 40.050 8.610 (170) 0 2012E (811) 984 (795) 2.1 21.8 3.665 24.743 1.3 3.318 22.643 7.434 2014E 6.2 12.5% CBD Food Retail 64.4% Casino 27.2 17.276 12.919 1.1 2.8 15.6 US$ 2012E 26.36 0.040 (802) (72) 812 (95) 0 2013E (421) 329 (270) 1.4 billion sales) was the second largest food retailer in the country with an estimated 14.706 14.1 (1.3 billion in 2011.0 0.6 0.6 1.062 10.00 138.946 1.661 61.757 4.5 5.6 ROE (%) MARKET RATIOS FV/EBITDA 8.301 7.96 5.7 2.6 1.8) 1.445 19.092 (753) 115 127 (118) 0 2014E (436) 318 (209) 1.1) 6.2 5.646) 252 278 (258) 0 2014E (1.659 7.226 4.6 23.926 Capital Employed Supermarkets Net Debt Via Varejo FINANCIAL RATIOS Shareholder Structure.054 17.5% Stores by Format.6 0.874 10.3 24.67 13.035 (1.8 Int Cover (%) 1.5 2.3 3.977 2. As of 3Q12 this business operated a total of 640 units including hypermarkets (Extra).543 3.6 1.1 (796) (51) 442 7.169 14.747 13.6 6.843 6.834 7.6 (0.0) 1.9 1.7 2.2 Dividend Payout (%) 23. and proximity stores (Minimercado Extra). CBD Food (R$28.086 (6. cash & carry (Assaí).701 3.0 17.2 10.3 3.9 6.0 2.8 10.9 2.505 4.9 2.8 7.457 15.34 14.179) (437) 1.4 10. and furniture retailer in the country.0 2013E 26.911 42.5 1.9 FV/Revenue 0.5 0.36 0.129 35.9 10.00 33.6 3.210 6.312 (835) 60 961 (102) 0 2012E (414) 503 (406) 1.CBD Financial Highlights: P&L.750 11.954 (8. with an estimated market share of around 30% in 2011 (R$24.826 10.5 15.348 7.com.8 Net Debt/Equity 0.269 (769) 310 93 (181) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 4.0 12.6 0.9 (387) (354) 724 18.602 18.6 (985) (667) 1.00 102. In addition.082 2014E 2.896 2.5% Treasury Shares 0.6 0.740 4. Enéas Pestana (CEO) and Vitor Fagá (Executive Director of Corporate Affairs and Director of Investor Relations) Web: www.5 3.713 13.0 2.0 7.5 9.6% Wilkes 25.398) 101 1.3 12.5 0.342 6.3 2014E 62.434 2011A 2.9 2.8 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 3.0 8.2 1.6 2.398 8.br EBITDA by Segment. Sales in e-commerce reached R$3.164 3.7 FCF Yield (%) 0.6 P/BV 2. 2012E 965.0 3.1 12.0 11.6 23.87 30.54 3.9 1.4 8.386 (2.4 11.783 1.776 6.5 0.245 3.1 FV/EBIT Div Yield (%) 1.898 (0.611 10.625 8.1 2.6 (451) (305) 612 15. Through its 53% stake in ViaVarejo.9 1.328 8.886 10.7 0.39 0.5 billion.0 3.993 39.5 3.0 2.9 (891) (815) 1.5 0.7 5.224 10. ViaVarejo operated a total of 950 stores in 3Q12.42 2.970 17.8 P/CE 12.0 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.589 (187) 0 2013E (920) 718 (590) 2.5 25.6) 1.864 8.7 14.11 2.1 0.9 10.066 (0.333) (85) 740 2.6 0.0 0.63 12.706 13.5 Capex/Revenue (%) 3.2 3.9 10.3 4.7 5.7 0.2 10.1 1.1 8.

8 3-Mth Avg.A. and three LatAm airports. Barcas.00 / US$ 10.Mn 1.00.5% average in 2012). REPLACING YE2012 TARGET PRICE OF R$19.19. J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet. 58 . with 81% of total debt linked to the Selic. and lower Selic rate (we estimate a 6.00 INTRODUCING YE2013 TARGET PRICE OF R$21.45 16. (2) EBITDA will grow 18%. +5511 3012-6535 | rmanda@santander.br Renan Manda* Brazil: Banco Santander S. we reiterate our positive stance on CCR.A.1 Shares Outstanding .5% average versus 8. (2) a disciplined investment track record.52 1Q12. Santander estimates and company reports.4% in 2Q12. 0.50 . We estimate a 200-basis-point drop in the average Selic rate 100 in 2013. Price Performance (R$) CCR IBOVESPA 180 160  Over 80% of total debt linked to Selic.766 penalized by ViaQuatro. We estimate about 4% traffic growth in 2012. EBITDA. most of their debt is floating rate. we expect a positive impact from lower financing 120 costs.br continues to be very positive for Brazilian infrastructure players. We estimate (1) the top line will grow 14%. Market Capitalization (US$ Mn) Ramp-up of new businesses. we expect another very strong set of results in 2013. as CCR has (1) the Brazil: Banco Santander S. and (3) significant investment opportunities in Brazil over 2013 (including new concession auctions and amendments to existing ones).com. CCR’s 2012 EBITDA margins were 11.A. Traffic grew 2. and 3. based on the expected acceleration in GDP 52-Week Range (R$) growth from 1% to 3%. Over 80% of 60 CCR’s debt is CDI linked.00  Investment Case: Although we now see limited upside to our target Pedro Balcão Reis* price.1% in  Company Statistics Bloomberg CCRO3 BZ Current Price (01/03/13) R$ 19. and EPS growth in the sector. we expect traffic growth to accelerate to 6%. as unlike 80 their European peers. For 2013.2013 Latin American Universe Book BRAZIL—TRANSPORTATION & INFRASTRUCTURE CCR BUY CURRENT PRICE: R$19.26 in 4Q12. and airports). and (3) net profit 24%.39 / US$ 9. Barcas.br highest top-line. Daily Vol (R$ 000) 27. We expect these new businesses to improve profitability during 2013 in a significant way. +5511-3012-5765 | pbalcao@santander.39 TARGET PRICE: R$21. and (4) the highest exposure to falling interest rates.8% in the first nine months of the year (5. +5511-3012-6016 | bamorim@santander. (2) decreasing interest rates.816 Float (%) 48. (3) continuing margin expansion due to the ramp-up of new businesses and stronger traffic growth.1% in 3Q12) and we expect 6% growth Target Price (YE 2013) R$ 21.com. Moreover. we believe the environment Bruno Amorim* Brazil: Banco Santander S.com. with (1) accelerating GDP growth.  2013 Outlook: Following stronger GDP growth in 2013E (3% versus 1% in 2012E). This is important for Brazilian toll-road operators. the ramp-up of new businesses (such as ViaQuatro. In addition to CCR’s positive 140 EBITDA growth.  Stronger traffic growth.

4 39.713 12.2 FCF Yield (%) 4.349 6.067 3. Renato Alves Vale (CEO).56 DPS 0.0 12.0 2014E 3.434 5.13 1.3 69.982 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 6.1 MARKET RATIOS FV/EBITDA FV/EBIT Div Yield (%) 3.090 2014E 1.704 1.8 17.4% Toll Revenue (% of Total Revenue).6 11. ViaOeste./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (657) (222) (415) 2.0 2014E 6.788 8.931 29.3 Net Debt/Equity Capex/Revenue (%) Int Cover (%) Dividend Payout (%) ROCE (%) ROE (%) 2.882 2012E 1.099 1.1 2.3 64.299 1.169 6.5 148.4 3.7 8.7 8.5 21.780 1.51 0.9 46.6 1.5 70.1 7. In addition.8 5.256 2.4 6.709 3.8 6.0 8.29 2.6 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 24.332 1.084 18.8 29.621 0 (184) (1.7 19.650 23.075 0 101 (846) 0 2014E (445) (111) (4) 1.007) 1.9 19.046 170 88 (803) 0 2012E (709) (220) (40) 2.A.7 (551) (265) 537 40.4 1.7% Rodoanel Oeste 18.0 1.7 (923) (444) 899 33.5 9.9 20.9 16.359 40.0 3.7 10.450 6.4 45.4 16.br/investor Traffic Breakdown.295 3.3 2.6 55.0% Free Float 48.2 40.204 6.0 25.147 948 2011A 407 736 4.036 8.133 5.285 2.183 2.094 16.97 1.0 25.007 11.566 (415) 1.7 4.1 12.9 4.8 1. 2012E Other Revenues 9.153 12.7 11.5 29.250 3.1 4.650) 0 2014E (878) (220) (8) 3.2% Andrade Gutierrez 17.634 14.27 0.6 31.069 1.5% NovaDutra 21.0 70.994 3.0 14.2 1.9 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.5 8.6 R$ 2012E 5.48 0.439 456 LT Debt FINANCIAL RATIOS Net Debt 2013E 5.1 8.065 6. Currently.068 12.14 PER SHARE DATA Companhia de Concessões Rodoviárias (CCR) is the largest toll-road operator in Latin America by revenues. the company holds a 40% stake in Renovias (toll road concession with 346 km).230 13. Rodonorte.39 0.45 0.9 118. the company controls eight toll-road concessions—AutoBan.402 13.6 10.5 8.7 8.664 14.30 0.1 5.655 14.11 0.4 4.9 (405) (436) 846 21.096 0 198 (1.306 2.2 FV/Revenue 6.9 13.201 2.1 34.39 0.9 13.117 8.8 16.6 P/CE 13.9 5.057 (1.3 12.9% Others 6.7 118. 59 .352 (562) 698 0 31 (695) 0 2013E (408) (113) (4) 1. CCR was the first listing in the Bovespa’s Novo Mercado segment.CCR Financial Highlights: P&L.004 2012E 563 917 4.357 12.9 4.228 (598) 625 101 52 (479) 0 2012E (371) (115) (21) 1.0 11. RodoAnel.6 39. Key Personnel: Eduardo Borges de Andrade (Chairman).760 559 2014E 628 1.8 20.733 27.4 3.4 5.0 1.031 32.6 49.0 1.686 17.960 16.6 126.242 6.370 14.839 995 5.955 18.400 km.3 35.4 2.3 (726) (683) 1.215 2.331) 0 2013E (796) (220) (8) 3.75 0.93 1.5 125.9 6.56 BVPS 1.690 (1.067 879 6.750 36.7 2011A 2.5 21.8 1.2 33.6 1.777 14.9 6.9 1.6) 2.8 118.3 20. 2012E ViaOeste 16. NovaDutra.4 2.4 2.5 7.883 14.3 14.104 6.5 3.0 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 0.700 3.851 1.1 2.844 2.622 16.8 8.149 12.381 7.309 7.9 12.1 7.8 67.5 3.8 1.947 1.463 (689) 2.5 53.331 10.277 33.744 20.4 10.8% Shareholder Structure.578 21.2% Toll Revenue 90.82 2.8 8.273 1.8 3.8 3.019 3.6 US$ 2012E 2.grupoccr.169 2.4 6.8 P/BV 6.8% Sources for all charts and tables: Company reports and Santander estimates.0 8.578 5.— which extend over 2.8 10.8 57.044 4.4 10.9 2013E 3.6 1.4 25. Via Lagos.1 5.5 31.0 2. Arthur Piotto Filho (CFO and IR officer) Web: www.0 123.8 46.1 1.9 28.7 5.658 363 2013E 659 1.134 708 2013E 1.11 0.885 12.17 1.888 7.2 3.331 48.438 3.648 11.0 6.0 119.2 1.196 7.6 28.289 19.48 0.148 4.9 6.145 3.8 1.38 0.7 10.6 12.327 0 (93) (990) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 763 1.5% AutoBAn 36. Balance Sheet and CF Statement.93 1.4 (412) (510) 990 17.199 2.2 6. December 2012 Camargo Correa 17.8 5. and a 58% stake in the consortium ViaQuatro (that operates the São Paulo City Subway Line 4).4 (814) (1.1 69.4 57.070 3.8 49.939 3.036 7.6 1.075) 1.955) 0 2011A (392) (132) (248) 1.172 11.002) 1.804 3.0% Soares Penido 17.75 0.5 2.1 67.956 Capital Employed 10.1 5.9 55.4 5.5 53.5 28.589 (1. Ponte S.912 9.402 26.7 3.053 (809) 2.5 25.8 6.3 (379) (357) 695 29.9 (789) (850) 1.3 4.030 4.2 3.578 11.336 0 60 (1.356 Net Debt/EBITDA 2.8 14.205 6.0 29.6 34.5 21.9 40.6 2.645 5.912 13.5 14.453 17.7 1. and SPVias.7 5.018 4.428 7.729 5.6 1.426 6.552 5.7 2.7 64.4 45.20 2.753 (349) 1.851 2.6 11.017 12. a 45% stake in Controlar (concession for vehicles inspection services in Sao Paulo).463 11.338 6. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 4.7 4.com.188 1.9 20.

30 UPGRADING RATING TO HOLD FROM UNDERPERFORM INTRODUCING YE2013 TARGET PRICE OF R$25.06 / US$ 12. Santander estimates and company reports. +5511-3012-6682 | macarneiro@santander. but Bloomberg operational inefficiency remains a major risk. In its last conference call. multiples are not expensive.80 Target Price (YE 2013) R$ 25.  Urgent cost improvements. REPLACING YE2012 TARGET PRICE OF R$32.A. generating a lukewarm 5% dividend yield. the current dividend payment practice (25% 3-Mth Avg. putting in risk Float (%) 51. 60 .A.2013 Latin American Universe Book BRAZIL—UTILITIES CELESC HOLD CURRENT PRICE: R$26. as Celesc is currently implementing several measures Brazil: Banco Santander S.4 Shares Outstanding .50  Investment Case: We are upgrading our rating to Hold from Marcio Prado* Underperform. while Maria Carolina Carneiro* Brazil: Banco Santander S. it has not been successful in reducing costs and continues to underperform the regulatory target (reference cost) established by Aneel.30. We believe the main trigger for Celesc could be the acceleration of its restructuring program. Although Celesc has improved its corporate governance. which could improve efficiency and costs. we continue to believe that the company’s dividend policy is not particularly attractive.  2013 Outlook: We forecast flat EBITDA growth.8x CLSC4 BZ 52-Week Range (R$) 23.Mn 39 payout. Daily Vol (US$ Mn) 0. once in a year) is not particularly attractive.30 EV/EBITDA and 5. +5511-3012-5751 | mprado@santander.com.06 TARGET PRICE: R$25. management highlighted that the company is accelerating new processes to improve efficiency that might buffer the tariff revision impact.43. we note that the company Market Capitalization (US$ Mn) 494 continues to underperform regulatory targets. Although Celesc Current Price (01/03/13) R$ 26.24 trades at multiples which are not outwardly expensive (3. Price Performance (R$) Celesc IBOVESPA 120 110 100 90 80 70 60 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet. Company Statistics  Dividends not compelling.br MP579 terms have limited the strategy to increase capacity for its older small hydros.3x P/E 2013). In addition.br to improve its performance. reflecting positive volume growth (3% YoY) and the June tariff adjustment.9 profitability.60 . following the third regulatory revision for discos set by Aneel.com. On the negative side.30 / US$ 11.

its main business.3) 6.7 3.191 3.8 2.7 336 14.5 (8) (97) 188 (5.465 1. Celesc’s concession area is located in the state of Santa Catarina that is responsible for 4.8 0 (114) 222 17.0 15.4 0.7 5.2 4.0 257 (31.66 0.25 63.096 2.3) 4.5 3.6 2.9 1 (53) 102 (47.0 10.9 2 (104) 199 (38.1% 2.2 8.4 P/CE 2.400 3.3 4.6 0.CELESC Financial Highlights: P&L.3 6.293 207 2014E 655 2.4 0.01 2.219 8.6 1.081 2.013 947 509 1.39 5.4 134 (12.44 1.861 1. 61 .4 FCF Yield (%) 6.126 1.7 US$ 2012E 2.4 0.710 (4.288 2.1 783 2.4 0.1 5.10 1.0 3.6 8.0 ROCE (%) 7.9 4.5 (4) (44) 86 (15.187 4.4 0.1 18.0% Industrial 35. Welson Teixeira Júnior (CFO) and André Luiz de Rezende (IR Manager) Web: www.6) 4.431 3.8 4./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (154) 53 (101) 430 (475) 87 193 10 0 5 2012E (171) 44 (4) 409 (334) 74 0 0 (49) 2 2013E (179) 0 6 373 (245) 147 0 0 (50) 11 2014E (191) 0 4 416 (260) 177 0 0 (47) 21 2011A (92) 32 (61) 256 (284) 52 115 6 0 3 2012E (87) 22 (2) 209 (171) 38 0 0 (25) 1 2013E (82) 0 3 171 (112) 67 0 0 (23) 5 2014E (83) 0 2 181 (113) 77 0 0 (20) 9 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 442 2.113 3.9 9.147 1.520 4.3 7.0 5.324 1.3 0.079 2.0 4.8 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 8.0 25.940 4.9 7.5 1.903 920 483 1.7) 873 (18.153 8.1 1.4 0.0 6.087 2.64 2.132 1.38 60.4% Free Float 51.6) 6.2 2014E 2.7 3.101 4.321 241 2012E 428 1.8 349 50.2 229 6. 9M12 Generation Gas 4.5 3.22 1.22 30.1 FV/EBIT 5.9 FV/Revenue 0.6 4.2% Tarpon 13.7 5.2 25.0 585 43.3 0.7 0.0 24.50 2.9 153 (40. Company’s current generation capacity.3 7.celesc.648 GWh.7 1.6) 241 (30.5) 4.069 (6.9 4.4 5.904 8.4 5.16 4.0 14. through the operation of 12 small hydro power plants.873 914 466 1.4 293 (2. On 2010 Celesc served over 2.2 14.096 584 509 483 466 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 878 847 769 660 475 400 342 281 Capital Employed 3.3 15 (130) 324 18.1 14.62 56.5% Santa Catarina State 20.2) 10.3 11.4) 6.314 219 2011A 239 1.9 9.120 559 93 LT Debt FINANCIAL RATIOS Net Debt 2013E 4.631 1.9% Distribution 93.345 million clients.9 300 (30.0 ROE (%) MARKET RATIOS Div Yield (%) PER SHARE DATA EPS DPS BVPS 0.0% Rural 7.673 (2.5 0.796 15.1 4.8 5.0% Shareholder Structure.4 0.0 4.3% of the country’s population.209 (11.6 1.6 6.2 1.25 0.6 526 11.7 15.6) 10.5 0.4 2. Key Personnel: Derly Massaud de Anunciação (Chairman).23 2. distributing 16.2 Net Debt/Equity 0.6 10.3 Int Cover (%) 10. is reduced and amounts 81 MW.487 4.0 13.8) 472 (19.289 9.7 2.7 Dividend Payout (%) 0.0 7.6 0.1 9.0 0.0 4.9 4.9 4.7 2.096 575 92 2014E 279 977 1.6 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.485 1.5) 6.7 10.4 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 4.4 FV/EBITDA 3.5 2011A 2.0% Sales by Segment (DisCo).1 4.3 0.7 5.6) 10.2 7.9 8.2 2014E 4.3 7.5 1. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 4.6 2013E 2.080 2.1 9.080 1.175 1.800 7.935 1.7 5.3) 10.8 1.6 9.1 4.079 1.288 2.3 P/BV 0.096 601 92 2013E 233 939 1.9% Sources for all charts and tables: Company reports and Santander estimates.0 431 (34.29 1.51 28.4 0.0% Residential 31.142 584 1.87 5. Balance Sheet and CF Statement.132 3.42 28.6 7.4) 4.6 8.5 1. The company is controlled by the State of Santa Catarina Government.9 2.4) 216 (10.8 5.4 16.999 8.2 5.4 1.1 5.04 Celesc is a holding company in Brazilian electricity sector operating through its subsidiaries in the distribution and generation of electricity.3 9.2 14.0 25.com.8 1.007 1.966 3.295 3.7 6.508 2. Antonio Marcos Gavazzoni (CEO).087 1.4 0.0% Public Sector 8.7 R$ 2012E 4. 9M12 Commercial 19.7 146 9.275 196 2013E 525 2.4 0.177 715 131 2012E 202 927 1.324 3.8 5.6 17.br EBITDA by Business.3 7.4 0.7 5.2) 10.098 2.072 20.8 0 (50) 96 12.4) 766 (12.111 1.7 2.4 0.3 Capex/Revenue (%) 11.9) 10.782 2.40 29.9 5. 9M12 Previ Pension Fund 14.56 0.5 1.3 9.2% of Brazilian GDP and concentrates 3.071 1.502 9.2) 472 (0.2 3.4 0.75 5.3 5. On distribution.3 9 (78) 193 24.8 3.3 6.623 4.825 Net Debt/EBITDA 1.3 0.3 1.91 68.

60  Investment Case: We are maintaining our Buy rating for Cemig.03 TARGET PRICE: R$27. and (ii) new revenue for transmission business. a decline of 1. as it currently has more information about the 120 risks (investments.19 . +5511-3012-6682 | macarneiro@santander. positively Company Statistics affecting dividend payments (a 17% yield already announced for Bloomberg 2012). Daily Vol (US$ Mn) 44. We revised our estimates to include: (i) the CRC payment still in 4Q12 (a R$1. Cemig will likely continue to dispute the right to continue running this plant. While the government could decide to auction this plant following the end of the concession term.03 / US$ 11.4 billion post-tax gain). after the company decided to accept MP579 terms only for this segment.30 Market Capitalization (US$ Mn)  São Simão/Jaguara/Miranda—not giving up.com. will end by August.31 Target Price (YE 2013) R$ 27. We see upside risks to our base-case scenario (the full implementation of the announced R$600 million cost-cutting program). (Cemig sold energy in the free market.A. operational and environmental) and opportunities 100 (possible technical improvements) related to the plants. CMIG4 BZ Current Price (01/03/13) R$ 23. one of the power plants for which Cemig has not renewed its contract under MP579 terms.  2013 Outlook: For 2013. if the 180 government decides to re-auction these assets at the low operating 160 tariffs proposed by MP579. In any case.  New estimates. the Jaguara concession contract. +5511-3012-5751 | mprado@santander. counting on supply from these units.747 million.2 3-Mth Avg. with a balanced asset portfolio.Mn 852 risks.70 / US$ 13.641 Float (%) 54. as Marcio Prado* we see it as a player with a reasonable dividend yield (a sustainable Brazil: Banco Santander S. as it would imply operating 9.) We believe Cemig will continue to pursue the right to Price Performance (R$) Cemig continue to explore these concessions.19 52-Week Range (R$) 22.br 6% per year) and increasing cash flow generation. we estimate Cemig will post EBITDA of R$5. Santander estimates and company reports. Cemig has opted not to renew concessions for these plants.70 LOWERING YE2013 TARGET PRICE TO R$27. IBOVESPA 80 60 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet.br with the CRC receivable) will be a short-term trigger. Also. we believe that Cemig would most likely 140 win such an auction. We consider the multiples at which it trades attractive and believe the payment of extraordinary dividends (positive gain Maria Carolina Carneiro* Brazil: Banco Santander S.A.70 FROM R$30.2013 Latin American Universe Book BRAZIL—UTILITIES CEMIG BUY CURRENT PRICE: R$23.3 Shares Outstanding .2% YoY based on the tariff revision for its disco unit and the new revenue terms for its transmission assets.com.49. 62 .

1 14.279 0.6 11.9 10.344 9.589 4.412 23.717 3.006 18.655 4.4 FV/Revenue 2.261 9.4 (1.875 Net Debt/EBITDA 2.761 (474) 695 0 21 (651) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 3.3 5.6 1.817 8.2 3.com.7 10.9 5.2) 32.8 1.1 19.845 40.64 0.8 5.3 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 2.223 2012E 2.7 6. it has implemented several pro-market clauses in its by-laws guaranteeing protection to minority shareholders.656 11.1 5.845 13.9 124.1 1. Although it is a state-run company.9 P/CE 21.318 14.6 6.6 Capex/Revenue (%) Int Cover (%) MARKET RATIOS 2013E 17.2 2.054 11.750 (3.075) (1.822) 2.3) 10.4 1.2 6./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A 939 0 628 3.925 MW.1 27.3) 11.1 6.4 1.630 12.0 5.4 13.4 13.842 (516) (291) 0 18 (641) 0 2014E 482 0 (23) 1.828 6.4) 5.7 (747) (1.53 1.4 1.0 Net Debt/Equity 1.167 2014E 6.1) 27.2 7.3 11.060) (1.070 24.714 9.8 1.2% Others 9.433 13.411 (936) 1.876) 1.6 P/BV 2.104) (48) (91) 4 (614) (1) 2012E 501 0 (60) 1.7 7.998 37.846 (1.517 6.875 3.3 1.0 (1.2) 2.1 4.9 5.4 1.441 29.301 1.949 14.1) 26.3 6.1 4.6 10.0) 7.754 (1.810 12.1 2.1 17.9 7.018) 1.6 (0. a part of Rio de Janeiro State.8 10.3 10.964 25.147 9.066 7.43 15.2 3.979 5.3 18.629 39.2) 26.8% Rural 7.6 ROE (%) 19.3 34.367 11.358 12.4 (415) (612) 1.139 7.7 2.8 28.172 4.61 7.8 FCF Yield (%) Div Yield (%) PER SHARE DATA EPS DPS BVPS 2014E 3.7 1.288 11.6 17.885 (17.938 1.169 13.631 4.706 27.21 3.655 13.4 11.5 3. having a 7% share in the Brazilian generation market.849) (80) (153) 7 (1.1 11.536 Capital Employed 25.8 1.609 18. through Light.3 2.3% Commercial 22.9) 5.7 (348) (621) 1.648 27.9 2.7 3.300) (1) 2013E 1.780 (1.361 6.8 69.344 9.1% Sources for all charts and tables: Company reports and Santander estimates.57 0.435 21.793 19.5 8.839 18.4 14.4 14.8) 10.982 12.0 66.366 4.9 7. Cemig currently has an installed capacity of 6.3 14.177 9.4 (850) (1.814 22.3 FV/EBIT 9.185 FINANCIAL RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E Net Debt 14.205 10.316 6.8 2.50 1.1% Shareholder Structure.074 (9) 51 (1.156 (2.4 (552) (964) 969 (28.583 2013E 2.311 9.br EBITDA by Business.7 53.5 14.397) 0 2011A 561 0 375 2. Key Personnel: Dorothea Fonseca Furquim Werneck (Chairman).0% TransCo 36.4 US$ 2012E 9.370 4.254) 2.332) 2.745 18.1 47.4 2.407 19.6 Dividend Payout (%) 45.294 18.029) (1) 2012E 976 0 (116) 2.0 25.097) 2. Luiz Fernando Rolla (CFO) and Antonio Carlos Velez (IR Manager) Web: www.282 32.723 6.1 9.7 2011A 9.271 (1.6 28.9 6.842 1.7 2014E 18.8) 32.676 6.21 7.2 2.0% GenCo 41.279 (10.793 6.0 4.8 (3.8) 31.6 144.6 5.6 2.011 0 137 3.9 3.3 18.221 7.910 11.916 6.0 (633) (655) 1.6% Residential 45.0 2.747 (1.cemig.76 13.11 1.08 3.859 15.7) 25.058) (597) 0 37 (1.8 11.314) 0 2014E 1.089 (18) 100 (3.830 4.620 24.908 11.3) 10.3 19.2 12.922 2012E 5.815 39. 63 .7 2014E 8.655 15.3 (0.0 0.9 3.989 (6.735 (2.7 7.4 1.914 6.408 4.488 7.761 24.3 5.296 (1.841 9.7 2011A 2012E 2013E 2014E 2011A 2012E 2013E P/E 12. 9M12 DisCo 20.0 11.4 R$ 2012E 17.4 1.0 6.0 2.365 2014E 2.951 12.197 27.4 13.443 11.7 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.9 4.4 10.209 24.1 1.6 13.319 11.245 4.6 11.78 14.6 5.34 1.54 1.7 2013E 8.3 5.488 (6.1 (3.177 5.14 1.2 21.1) 7.3) 2.4 5.35 7.177 9.035 0 (49) 3.4 7.4 15.6 1.0% Gas 3.876 (8.5 7.655 12. 9M12 Industrial 15.9 1.910 2.145 9.60 1.491 5.0 4.375 18.392 33.8 53.167 2011A 1.8 5.6) 5.6 21. Balance Sheet and CF Statement.8 11.3 2.0 0.550 6.344 9.822 (5.3 34. distribution and transmission assets in Brazil.60 8.7 10.03 Cemig is a holding company that operates generation.9 20.75 0.696) (1) 2013E 493 0 67 1.803 (6.435 6.745 (1.930 7.517 5.181 LT Debt 10.9 FV/EBITDA 8.9 14.331 18.2) 32.3 5.167 6.167 2013E 4. controlled by the government of the State of Minas Gerais.97 17.777 (1.8 1.491 0 44 (1.5 6.073 (3.310 (7.693 5.861 39.955 5.480 8.4 2. Djalma Bastos de Morais (CEO).1) 2.033 13.5 2.844 8.28 1.067 2.735 4.9% Free float 62. 9M12 Minas Gerais State 23.0% Sales by Segment (DisCo).67 2.2 18.1 2.7 6. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 15.6 16.CEMIG Financial Highlights: P&L.80 0.0% Andrade Gutierrez Energia 14.3 ROCE (%) 13.6 15.037 13. Cemig has a 12% market share of the distribution market in Brazil and comprises the Minas Gerais State concession and.972 26.8 31.2 32.5 3.2 5.

82 Target Price (YE 2013) R$ 22.  2013 Outlook: We see 2013 as a transformative year for Cesp.8 Shares Outstanding .6 3-Mth Avg.38.  CESP6 BZ Current Price (01/03/13) 26. 64 . but no triggers ahead.A. the dividend outlook is not 15. Payment of dividends is not clear. Despite the Bloomberg apparent inexpensive multiples. In our opinion.  Reaching the bottom.03  Investment Case: We maintain our Hold rating for Cesp based on Marcio Prado* the shares’ limited upside potential. Moreover.82 . Two of Cesp’s reserves will contribute with R$200 million. we believe that cost cuts will be mandatory—just to maintain cash flow sustainability.Mn 328 Price Performance (R$) Cesp 160 dividend payments: one is related to past due FX gains and the other 140 is related to IFRS adjustment to fixed assets. as the company could adopt a new strategy for the future— investing in auctions.2013 Latin American Universe Book BRAZIL—UTILITIES CESP HOLD CURRENT PRICE: R$20.45 IBOVESPA 60 40 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet.00 TARGET PRICE: R$22. In any case. We forecast EBITDA to grow 9. +5511-3012-6682 | macarneiro@santander. 3. given that the current FX.br dividend inflow and cash flow sustainability after the main concession contracts expire in 2015.br Also. while the company will have to start a significant costcutting program. in our opinion.9% YoY in 2013. note that Cesp will have to R$ 20. thus. it will simultaneously continue to fight for higher indemnification from the federal government for its old generation assets. short-term earnings should be depressed. to gain new assets.A. following price adjustments in existing contracts. reducing possible dividend payments. Santander estimates and company reports. Cesp’s stock price Company Statistics declined significantly after the announcement of MP579. we see lower likelihood of a privatization. Maria Carolina Carneiro* Brazil: Banco Santander S.com. The Três Irmãos concession contract has ended. After the sharp stock price correction seen in the last two months. Although the FX gains 120 might not be distributed in the event that the USD remains strong 100 against the BRL. and we have no clear visibility for Brazil: Banco Santander S.03 / US$ 10. although the Market Capitalization (US$ Mn) company is consistently amortizing debt.00 / US$ 9.49 consistently reduce costs (a difficult task for a state-owned player) in 52-Week Range (R$) order to maintain operations after 2015. so the federal government might decide to re-auction this plant during 2013. the IFRS adjustment reserve should contribute with 80 clear after the impacts from MP579. Daily Vol (US$ Mn) 7. for instance.217 Float (%) Dividend and reserves. +5511-3012-5751 | mprado@santander.com.

0 54.521 14.118 3.3 9.356 6.7 1.0 R$ 2012E 3.2 5.9 4.4 (0.4 44.0 2014E 1.5 4.1 4.945 6.1 40.1) 66.0 US$ 2012E 1.0% Shareholder Structure.0 2.0 0.7 4.6 0.24 1.6 44.0% EBITDA by Business.4) 1.2 0.125 19.cesp.2 3.90 16.150 (65) 673 0 0 - 2014E (300) 2 (4) 1.3 3.968 18.66 30.53 15.539 10.5 Int Cover (%) 3.9 FV/Revenue 4.674 1.984 550 3.412 1.1 (0.528 10.1 2.3 8.6 2. 9M12 Others 21.1) 4.6 27.7 3.56 0.9 1.7 9.665 0.9 2011A 1.2 7.9 7.894 2.4 8.118 6.810 2.6 0.6 5.466 22.7 (257) (609) 984 19.4 74.com.237 (57) 372 (242) 0 - 2013E (329) 0 1 1.849 18.0 0.9 2.575 658 2014E 4.1 FV/EBIT Div Yield (%) 3.030 4.800 MW in firm capacity.139 7.4 25.3 4.8) 40.2 1. 9M12 Others 39.4 22.0 0.168 1.441 1.0 0.007 1.6 2.0) 0.8 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.4% Free Market 28.0 2014E 3.156 (1.4 8.8 7.1 (0.5 715 2.045 (373) 1.0 18.853 7. The company has been put up for sale three times.703 (3.2 7.4 1.5% of Brazil’s total installed capacity.993 15.8 25.4% BNDES 5.667 307 3.234 573 3.013 2.442 9.838 1.9 2.3 994 5.3 0.3 6.6 2.3 (229) (480) 620 419.8 11. The company has 3.9 ROE (%) 1.4 0.CESP Financial Highlights: P&L.7 9.264 14. Balance Sheet and CF Statement.360 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 3.0 2.6 FCF Yield (%) 2.7 56.3 (407) (77) 71 (39.6 10.500 0 (1.917 2.0 0.298 (0.643 18. 9M12 Generation 100.5 1.5 8.7 6.160 (58) 699 0 (544) - BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 445 979 15.6 (149) (263) 407 27.4 21.0 0.469 9.629 (4.4 6.139 12.7 (120) (284) 458 12.215 10.1) Net Debt/Equity 0.9 3.0 54.3 9.389 1.727 853 3.2 1.2 11.141 2.7 189.9) 1.0 0.528 7.935 5.063 1. with a total installed capacity of 7.19 0 0 3.6 1.59 34.179 2.9 10.5 11.0 74.9 890 18.0 18.075 2.530 2.644 7.386 15.205 1.276 1.40 DPS 1.4 (0.702 313 2014E 1.784 9.8 LT Debt FINANCIAL RATIOS Net Debt Dividend Payout (%) MARKET RATIOS FV/EBITDA 2013E 3.46 PER SHARE DATA BVPS Cesp is the second largest generation company in Brazil.8 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 0.0 142.2 2. Cesp is a state-owned company.644 0.36 1.4 27.815 1.656 673 2011A 237 522 8.449 9.3 0.6 0.5 4.1 3.403 (110) 723 (470) 0 - 2013E (667) 1 1 2. controlled by the State of São Paulo.3 P/CE 12.404 2.9 66.6 (302) (533) 824 32.4 1.969 (1.3 (118) (247) 319 347.197 (2.0 10.3 6.052 378 2012E 599 711 7.307 17.2 2.71 33.232 1.444 634 2013E 2.4 8.219 5.5 1.8 2.0) Capex/Revenue (%) 4.3) 2.183 3.436 11.489 (124) 1.366 3.154 6.167 498 (170) Capital Employed 16.89 32.br/ Sales by Segment.2 24.2 0.47 16. Almir Martins (CFO) and Gildázio Pimenta (IR Director) Web: http://ri.021 5.1) 1.2 1.674 3.8 2013E 1.9) 67.9 18.0 3.138 Net Debt/EBITDA 1.9 5.0 56.983 1.9 10. Key Personnel: José Anibal Peres de Pontes (Chairman).9 932 4.3 (682) (129) 119 (42.959 7.1 7.246 1.073 1.1 74.9 1.3 8.474 1.975 (2.9 1.456 MW (hydro-based).4 6.802 23. but all privatization attempts failed.89 2.9 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 90. 65 .5 80.4 18.328 (131) 1.3 6.1 0.7% São Paulo State 54.4 3.600 6.0 1.652 8.9 1.2) 4.52 3.9 74.3 4.98 1.0 3.480 5.22 0.6 199.7) 1. Mauro Guilherme Jardim Arce (CEO)./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (778) (97) (67) 1.179 18.6 0.187 5.8 4.766 325 2013E 1.2 8.310 6.3 2.1 0.973 8.167) - 2011A (464) (58) (40) 922 (87) 164 (147) (233) - 2012E (402) 3 148 1.345 11. representing 7.0 141.772 3.8 1.6% Regulated 50.9 755 5.394 2.0 2.9% Sources for all charts and tables: Company reports and Santander estimates.71 16.8 3.849 709 2012E 1.7 67.7 P/BV 1.71 0 0 1.0 0.00 0.6 0.5 ROCE (%) 6.3 1.001 11.607 15.4 4.102 3.866 1.1 3.5 4.362 0 0 - 2014E (643) 4 (8) 2.9 4.9 3.8 2.4 23.9 7. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 2.8 8.751 14.246 13.308 11.544 (146) 274 (246) (391) - 2012E (781) 5 287 2.

as we understood the company’s stock has suffered recently due to (1) fears of lower-thanexpected operating volume (mainly on the stalled vehicle financing performance).A.09 . making a prolonged period with real interest rates very close to zero. and (2) increasing fear of competition from BVMF in certain segments. in our opinion. Therefore.A.243 Float (%) 58. ―Gravame‖ (liens) represent approximately 20% of Boris Molina New York: Santander Investment Securities Inc. 66 .70 FROM R$36.99 TARGET PRICE: R$34. in 2013 and remaining at that level through 2014. the 26% potential upside would still be strong enough 140 for us to maintain our Buy recommendation on the stock. inflation-linked and recurring revenue).com.80. Santander estimates and company reports. We conducted sensitivity analysis to assess the potential impact of this likely competition on Cetip.4 Shares Outstanding . our valuation model incorporates this. Cetip is a high-growth name with Henrique Navarro* defensive characteristics (i.30 Market Capitalization (US$ Mn) 3.. with the Selic reaching 6. Brazil: Banco Santander S.25% p. +5511-3012-5756 | havieira@santander.88 52-Week Range (R$)  Potential impact of BVMF intensifying competition.33. our  21.99 / US$ 12.70 / US$ 15. The continued rollout of GRV Real Estate gives us confidence in Cetip’s ability to create new sources of 80 revenue.a. Thus. Company Statistics Bloomberg CTIP3 BZ Current Price (01/03/13) R$ 25. If the company loses 20% of its revenue (owing to a loss of market share and lower fees) in the OTC derivatives and fixed income markets that BVMF is targeting. we expect further monetary easing.2013 Latin American Universe Book BRAZIL—FINANCIAL SERVICES CETIP BUY CURRENT PRICE: R$25.70 LOWERING YE2013 TARGET PRICE TO R$34. We view competition as a long-term issue and we do not believe the impact will be as hard as the drop in the stock price could indicate. +1-212-350-3977 | bmolina@santander.  2013 Outlook: The continued disappointment with the lackluster growth in Brazil will probably trigger a more aggressive economic policy response.50  Investment Case: In our view. 60 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet. +5511-3012-5731 | rcabral@santander.br We continue to be very positive on Cetip.us Renata Cabral* Brazil: Banco Santander S.br the company’s operating revenues. 120 IBOVESPA 100 New sources of revenue.77 Target Price (YE 2013) R$ 34.e.com. Daily Vol (US$ Mn) 19.9 3-Mth Avg. so we believe the final impact is not as much as the market has priced in. 160 Nonetheless.Mn 254 Price Performance (R$) Cetip YE2013 target price would decline around 14% to R$29. This scenario shall favor Cetip on both fixedincome and OTC derivatives sides. with the company regaining its former fast-growing characteristics. we expect to see above-15% net revenue growth.

6 24.215 12. Key Personnel: Edgar da Silva Ramos (Chairman).6) Company Description 2011A 3.493 22.929 4.0 36.CETIP Financial Highlights: P&L and Balance Sheet.77 3.817 (0.5 17.5 15.562) 2011A 163 1.325 1.52 1.cetip. or ―DETRANs‖) in conjunction with motor vehicle financing.6 28.65 1.550 (1.0 (62.081 ST Debt LT Debt Equity 1.845 11.1 21.2 13.0 70. Luiz Fernando Fleury (CEO).0 6.8) - - - - - - - - ROAA 41.3 1.708) - 2011A (734) - 2012E (851) - 2013E (813) - 2014E (757) - 2013E 35.450 2.4% Others 11.304 (805) 2014E 1.678 2.737 0.47 2.870 (654) 1.1 4.52 3.77 1.2 Payout 67. collateral management.019 Intangible and Deferred Assets Tangible Assets Total Assets 5. 67 .br Main Revenue Lines.484 7.2 30.242) 2. and clearing and settlement activities) designed to suit the Brazilian regulatory mandate to have central registration of all fixed income securities and OTC derivatives.2 6.8 (9.12 1.4) 2014E 3.7 2014E 7.151 3.2 43.40 DPS 1. trading.9 1.4 13.081 (510) 2013E 805 1.1) INCOME STATEMENT Revenue Grow th (%) EBITDA Grow th (%) Operating Profit Grow th (%) Profit before Taxes Taxes Minorities Net Profit Grow th (%) OPERATING RATIOS EBITDA Margin Effective Tax Rate Net Margin Net Debt / EBITDA Net Debt / Equity FCFE / Revenues 2011A 5.4) 1.8 (9.704 (887) 1.1 4.085 4.0 2013E 7.3) (49.7 6.6% FEMCO 9.1 P/CE 16.1) 1.2% Free Float 66.5 10.2 US$ 2012E 3.5 16.3) (47.0 (25.8) (20.4 3. the leading provider of an electronic system that maintains and processes motor vehicle liens (―gravame‖) for financial institutions and Brazil’s regional DMVs (Department of Motor Vehicles.106 (4.114 2.74 CEPS - - - - - - - - FCFPS - - - - - - - - BVPS 2.92 1.3 98.5 FCFE Yield (%) 6.8) 2014E 2.708) - 2014E (1.573 (1.0 2013E 3.882 11.780 3.162 (4.6 3.1 9.21 1.9 16.8) (22.4 MARKET RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 14.8 130.621 2.99 2.9) 2012E 35.74 1. 2012E GRV 36.4% Custody 20.5 3. The company was founded in 1986 by the largest financial institutions in Brazil.293 9.8) (70.3 131.849 1.344) 2.0) (61.823 791 (163) 2012E 510 1.8) (70. 3Q12 ICE Overseas Ltd.160 15.2 4.0) (61.943 32.314) 2.30 1.5 3.2 ROAE 138. 12.3 BALANCE SHEET 2011A Cash and Equivalents 293 Accounts Receivable 3.2 15.3) 1.5 27.1 3.077 16.88 2.0 3.5 37.5% Transactions 32.1 77.783 (4.66 1.61 2.0 (25.7 2.618 (2.6 7.894 1.123 4.743 5.849 (1.0 (62.056 8.497 2.702 (596) 1.24 1.4 7.9 16.8 23.7 19.076 2.2 4.2 10.2 1.6 17.549 29.8) 2011A 32. 2011–14E in Millions R$ 2012E 6. custody.7) 1.7 6.6 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 2.230) Capital Increase (Decrease) - 2012E (1.21 P/BV Div Yield (%) PER SHARE DATA EPS Cetip is one of the largest fixed income depositories in the world and the largest in Latin America in terms of assets under custody.425 Net Debt (Cash) (293) 2012E 998 3.634 5.3 3.9 6.215 9.6 37.4 1.2 88.86 1.0 70.4) 2013E 35.8% Sources for all charts and tables: Company reports and Santander estimates. The company has a vertically integrated business model (encompassing registration.72 3.615 (530) 1.2 2.114) 2013E (1.4 36.117 (998) 2013E 1.885 3.975 1.0 (44.5 18.869 14.787 (626) 1.2 15.9 FV/EBITDA 10. In 2010 it acquired GRV Solutions.7 2.615) 2012E 35.23 4.806 (5.3% Cetip 63. GRV is the sole consolidator of this data in the country.721 (3.8 3.7% Shareholder Structure.1 71.998 1.753 (1.8 1.4 1.3% SNG Vehicles Lien 20.2 2.3 77.4 4.776 6.35 5.7 3.4) 2014E 35.420 8.5 24.6) 1.9 9.3 98.562 4.8 15.8) 2011A 32.8) 2014E 35.0 70.760 4.2 15.904 (8.1% Registration 11.760) CASH FLOW 2011A Changes in Working Capital Operating Cash Flow Capital Expenditures Change in Debt Free Cash Flow to Equity Cash Dividends (1.1 4.7% Revenue Breakdown.9 74.307 27.17 3.2 146.3 28.7 15.com.841 (1.0 (44.5 4.439 5.476 3. 2012E Monthly Utilization 15.360 (1.0 10.7 3.9 15.9 9. Francisco Carlos Gomes (CFO) and Bernardo Garcia (IRM) Web: www.6 76.6 17.

) We continue to believe that Hering’s Tobias Stingelin*. which also affects income Company Statistics taxes. CFA Brazil: Banco Santander S. HERING HOLD CURRENT PRICE: R$44. and more importantly. Daily Vol (US$ Mn) 24. Shares Outstanding .br business model is strong as evidenced by (1) decent near-term Bruno Soares Taveira* earnings growth (10% EPS CAGR 2012E-14E). (4) 160 competition.A. (2) high returns 52-Week Range (R$) (52% ROIC). 3-Mth Avg. Santander estimates and company reports.71 Investment Positives: In our view. Bloomberg R$ 44.Mn 164 Investment Concerns: In our view. (3) solid cash flow generation (4% FCFE 2013E) and dividend outlook (4% dividend yield 2013E). we expect the impact on EPS to be muted (only +6% YoY) by a  reduction in tax incentives on imports. because we expect share volatility to persist in the near term as the Street works to incorporate more bearish assumptions.00 from R$52. however.00 DOWNGRADING RATING TO HOLD FROM BUY LOWERING YE2013 TARGET PRICE TO R$50.40 .A.com.6 of 3Q12).A.0x (20%) and a DCF 60 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet.20 / US$ 21.561 Float (%) 77. investment positives include (1) Target Price (YE 2013) R$ 50. investment concerns include (1) Price Performance (R$) Cia Hering SSS trends that remain subpar.9% (80%).49. (Our 2013 EPS estimate is 12% below consensus. (2) lower earnings growth than 180 peers. +5511-3553-0699 | tstingelin@santander.22 still-double-digit EPS growth (10% CAGR 2012-14E). we believe a more attractive entry point to increase exposure might present itself in the next few months. (2) high returns Brazil: Banco Santander S.20 TARGET PRICE: R$50.  2013 Outlook: We expect top-line growth to slightly accelerate to 12% in 2013 from 11% in 2012 on the back of a recovery in SSS (+6%) and still-solid sales area expansion (we expect HGTX to release some updated guidance shortly) despite lower tax incentives.br Ronaldo Kasinsky* Brazil: Banco Santander S. +5511-3553-2396 | rkasinsky@santander.00 based on a 2013E P/E of 20.6%) and solid FCFE yield (4%).2 and (5) no credit exposure. and (5) our belief that 140 Hering needs to adapt its internal structure to cope with the recent 120 explosive growth.49 Market Capitalization (US$ Mn) 3.com. (3) volatility related to discussions on tax incentives. However.br (ROIC 52% 2013E). (3) rock-solid balance sheet (R$279 million net cash as  HGTX3 BZ Current Price (01/03/13) 34. +5511-3553-9602 | btaveira@santander. using a nominal cost of equity in BRL of 10. We expect margins to be positively affected by the recently announced price increase and by some operating leverage. 68 . (4) good dividend yield (3. and (4) no credit exposure.2013 Latin American Universe Book BRAZIL—RETAIL & CONSUMER GOODS CIA. as well as by an increase in bonus provisions. which seems to be intensifying.00  Investment Case: We are downgrading Hering to Hold from Buy owing to relatively limited TSR.00 FROM R$52.00 / US$ 22.com. 100 IBOVESPA 80  Valuation: We are tweaking our YE2013 target price to R$50.

8 3.3) (0./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (29) (3) (26) 298 (47) 231 0 (19) (146) 0 2012E (34) 9 (21) 347 (67) 243 0 4 (227) 0 2013E (39) 0 (42) 340 (64) 260 0 (20) (262) 0 2014E (45) 0 (52) 389 (77) 282 0 0 (187) 0 2011A (18) (2) (16) 178 (28) 138 0 (11) (87) 0 2012E (18) 5 (11) 177 (34) 124 0 2 (116) 0 2013E (18) 0 (19) 156 (29) 119 0 (9) (120) 0 2014E (20) 0 (23) 169 (33) 123 0 0 (82) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 200 801 307 1.497 10. PUC.60 1.5% Exports 1.6 17.5 3.4 8.90 1.6 2011A 808 40.7 20.4 34.9 229 11.6% Shareholder Structure.ciahering.208 441 423 439 514 Net Debt/EBITDA (0.96 1.2 21.09 2.0 32.7% Store Breakdown.1 FV/EBITDA 13.73 2.5 656 30.3 22.4 27.6) 21.0 448 14.6) Net Debt/Equity (0.2 29.6 3.5 8.2 35.8 573 17.5 4.14 0.0 Div Yield (%) 2.0 (11.9 29.98 5.2 918 14.8 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 17.4 80.2 35.6 29.50 BVPS 4.5 P/BV 7.680 12.6) 28.8 3.4 426 8.2) 26.3) 3.4% 2.8 39. Hering is a publicly traded company in the Bovespa’s Novo Mercado segment.0 US$ 2012E 765 (5.9 19.0 30 (98) 297 40.7 29.3 26.4 3.3 392 37.5 14.6 3.1 ROE (%) 41.41 1.3) (0.4 4.918 14.1 37.8 4.71 0.6% Sources for all charts and tables: Company reports and Santander estimates.5 17.5) (0.investor-relations. 2011A Owned and Franchised stores 46.5 366 2.8 FV/Revenue 3.2 19.2% Blackrock Lone Pine Capital 5.6 15.7 54.1 249 11.05 DPS 0.1 218 51.7 4.4 200 (8.0 76.9 P/CE 16. Hering distributes its products through two main distribution channels: (1) owned and franchised stores for its different brands.0 15.8 4.9 527 17.1 32.0 18 (58) 178 47.106 19 19 2011A 107 427 164 591 150 62 379 19 6 2012E 121 419 153 572 150 38 385 19 18 2013E 112 429 157 586 147 40 399 9 8 2014E 160 509 166 675 160 44 471 8 8 LT Debt FINANCIAL RATIOS Net Debt 2013E 1.4 8. Hering is a Brazilian vertically integrated apparel wholesale/retail company manufacturing (80% of total production in 9M12) and distributing textile products sold under its four main brands: Hering.8 21. September 30.5 77.5) (0.1 27.5) (0.43 2. 2012 Inpasa 7.3) (0.9% Multibrand Retail 52.8 46.585 377 103 1.6 3.8 38.7 72.5 29.6) (17.5 8.6 7.CIA.5 20.3) 20.9) 218 (7.98 2.5 65.46 6.4 392 7.1 21.7 698 6.3) 357 (8.5) (0.6 2.5% Webstores 0.2 26.3 3.2 18.09 1.br Sales by Format.3) (15.53 0.0 28. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 1.6 FCF Yield (%) 4. HERING Financial Highlights: P&L.1 3. 69 .39 1. 2011A Hering Kids 9.000 points of sale.319 331 90 897 19 19 2014E 376 1.2) (0.0 3.6 487 14.8 29.6) (13.1 4.8 FV/EBIT 14. with a free float of 79%.4 29.35 4.6) (17. Hering Kids.1 17.0 15.1 19 (53) 166 (6.4) (0.2) Dividend Payout (%) 69.3% Ivo Hering 7.0 16.1 3.1 365 44.5 399 9.4 14.196 389 1.35 2.5 19 (76) 172 9.0% PUC 7. and Dzarm.01 0.7 2.4 12. Fabio Hering (CEO).7 18.6) (0.5 4.1 12.4 3.0 205 2.32 2.3) (0.4 2014E 834 8.7 10 (58) 157 (5.6 3. Balance Sheet and CF Statement.7 15.5 4.2 22.6 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 1.1 11.4 54.2 3.5 16.5% Hering 72.8 ROCE (%) 32.9 27.6 41.3) (15.3) (0.3 236 49.7 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.1 6.73 0.0 R$ 2012E 1.7 2013E 769 0.6 20.6 23 0 0 0 12 0 0 0 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E (165) (218) (232) (357) (88) (103) (103) (152) Capital Employed 827 896 987 1.5 44 (176) 396 15.6 223 2.7 38.9 3.82 1.7 20.108 281 116 711 35 12 2012E 257 889 324 1.9% 2.6) (13.3 15.1 38 (105) 325 9.7 394 42.5% Others 77.2) (11.3) (0.0 11.7 13.2 19.4 2014E 1.8% Dzarm Others 5.4 26.3 29.com.87 Capex/Revenue (%) Int Cover (%) MARKET RATIOS PER SHARE DATA Cia.7 22 (127) 343 5. totaling 581 stores as of 3Q12 and (2) the multi-brand channel with nearly 17.3 3.9 4.8 27.353 33.1 6.2 12.2 800 14.213 317 80 816 39 39 2013E 251 966 353 1. Key Personnel: Ivo Hering (Chairman). Frederico de Aguiar Oldani (CFO) and Patricia Salem (Investor Relations Manager) Web: www.6 14.8 4.4) (0.4 32.7 14.

‖ (2) clear long-term visibility. Cielo’s broader network is a legacy of the geographical distribution capabilities of its main shareholders’ branch networks. the card industry should be among the fastest-growing sectors in Brazil. which helps support our favorable view on this stock. while old 18. is the strongest franchise under Henrique Navarro* the ―bankacquiring‖ business model we espouse for acquirers in Brazil: Banco Santander S. Santander estimates and company reports.00 / US$ 29. In this regard. On the other hand.29 52-Week Range (R$) 39. MDR. +5511-3012-5731 | rcabral@santander.br 2013 Outlook: We believe changes in the levels of market share. +5511-3012-5756 | havieira@santander. newcomers (e. By our estimates.g. resulting in a 14% three-year CAGR for Cielo’s net income through 2014.75 .78 / US$ 28. expanding volumes by a rate of 20% over the next couple of years.com.  Boris Molina New York: Santander Investment Securities Inc. CIEL3 BZ Current Price (01/03/13) R$ 58.914 Float (%) 42.5 3-Mth Avg.63. Daily Vol (US$ Mn) 53. 50 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet..  One of the best industries in which to be.00 FROM R$62. At the same time.78 TARGET PRICE: R$64.60 Market Capitalization (US$ Mn)  Competition—more of the same. 70 .br Brazil.us Renata Cabral* Brazil: Banco Santander S.2013 Latin American Universe Book BRAZIL—FINANCIAL SERVICES CIELO HOLD CURRENT PRICE: R$58. either locally or abroad.00 RAISING YE2013 TARGET PRICE TO R$64. as the combined power of its shareholders’ banks 200 Bradesco and Banco do Brasil (CEF–Caixa Economica Federal could also be added to this group due to its cross-ownership in Elo) could allow Cielo to capture the most successful of the surging 150 100 Brazilian middle class. This is slightly superior to what we see among other financial companies.87 Target Price (YE 2013) R$ 64. Santander-GetNet) continue to gain market share.com.Mn 655 competitors (such as Redecard. we believe that few other sectors in Company Statistics Brazil (if any) can claim (1) main revenue drivers growing as fast as Bloomberg that of the ―bankacquirers..A. we expect strong growth in card transaction volumes for both credit and debit cards. in our view. now under the 100% control of Itaú) could fight for a higher share. +1-212-350-3977 | bmolina@santander. we continue to see Cielo as the bank that could benefit most from the ―bankacquiring‖ Price Performance (R$) Cielo IBOVESPA 250 structure. which we believe represent an important competitive advantage that favors Cielo over other incumbents and newcomers to the industry.1 Shares Outstanding . in our view. and prepayment volumes will be mostly cosmetic for Cielo in 2013.60  Investment Case: Cielo. On one hand.e. i. we do not believe declines in such levels are likely to be material. and (3) little impact from macroeconomic turbulence.A.

6) 1.92 1.8 (9.162 (4.106 (4.894 1.0 3.4 1.7% Sources for all charts and tables: Company reports and Santander estimates.5% Credit card 62.1% Debit Card 16.081 ST Debt LT Debt Equity 1.6 32.085 4. That exclusivity has ended.2 146.4) 1.65 1.3 28.3 3.35 5.5 35.8 15.23 4.780 3.6 35.817 (0.9 1.975 1.8 1.998 1.4 36.562 4.1) INCOME STATEMENT Revenue Grow th (%) EBITDA Grow th (%) Operating Profit Grow th (%) Profit before Taxes Taxes Minorities Net Profit Grow th (%) OPERATING RATIOS EBITDA Margin Effective Tax Rate Net Margin Net Debt / EBITDA Net Debt / Equity FCFE / Revenues 2011A 5.4 3.2 15.549 29.0 2013E 3.360 (1.1) 1.1 9.493 22.6 37.845 11.2 4.076 2.3) (47.3 1.3 131.2 10.0 10.7 19.9) 2012E 0.4) 2014E 3.7 2014E 7.3% Others 7.1 4.885 3.2 Payout 67.743 5.615) 2012E 0.1 21.9 15.2 15.6 17. but Cielo has already started to affiliate with other brands such as MasterCard and Elo.4) 2013E 0.9 74.8) (20.5% Revenue Breakdown.056 8.21 1.21 FCFE Yield (%) P/BV Div Yield (%) PER SHARE DATA EPS Cielo is the leading acquirer in the Brazilian credit and debit card industry.117 (998) 2013E 1.72 3.618 (2.3 98.7 6.904 (8.019 Intangible and Deferred Assets Tangible Assets Total Assets 5.929 4.849 (1. Cielo also operates some complementary products and services.br Share of Transactions.615 (530) 1.325 1.5 16.8) (70. such as processing service and food vouchers.17 3.8 (9.7 3.6 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 2.425 Net Debt (Cash) (293) 2012E 998 3.5% Shareholder Structure. hybrid privatelabel cards and corresponding banking transactions. The company is responsible for the affiliation of new merchants to accept credit and debit cards as means of payment.2 88.550 (1.5 37. 2012E Debit card 37.5 3. the latter on behalf of the low-income banking customers of its main shareholders.634 5.344) 2.8) 2014E 2.5 18.2 1.7% Credit Card 42.5 27.160 15.2 ROAE 138.CIELO Financial Highlights: P&L and Balance Sheet.47 2.870 (654) 1.3) 1.476 3.678 2.2 15.0 (44.215 12.6% Free Float 42.4 1.8) - - - - - - - - ROAA 41.0 6.5 10.0 (25.5 3.77 3.30 1.4 MARKET RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 14.6 7.6 35.cielo.77 1.497 2.8 3.9 16.9 6.776 6.5 17.4 13.66 1.943 32.86 1. and captures.420 8.12 1.6 3.6 28.562) 2011A 163 1.7 15.8) 2011A 0.2 6.787 (626) 1.242) 2. 2012E Prepayment 12.849 1.6) Company Description 2011A 3.0) (61.9 FV/EBITDA 10.450 2.869 14.24 1.077 16.0 (25.3 77.1 4.760 4.8) 2014E 0.307 27.806 (5.081 (510) 2013E 805 1.7 2.1 3.2 43.6 24.484 7.8 23.5 35.6 35.8) 2011A 0. Clovis Poggetti (CFO) and Roberta Noronha (IR Manager) Web: www.737 0.760) CASH FLOW 2011A Changes in Working Capital Operating Cash Flow Capital Expenditures Change in Debt Free Cash Flow to Equity Cash Dividends (1.314) 2.6 32.3) (49.74 1.7) 1.2 2.114 2.882 11.7 6.8 130.573 (1.4% POS Rental 21.7 3.52 1.8) (70.708) - 2011A (734) - 2012E (851) - 2013E (813) - 2014E (757) - 2013E 0. processes and settles credit and debit card transactions in Brazil.com.4 4.61 2.6 35.8) (22.2 US$ 2012E 3.0 70.9 9.6 17.704 (887) 1.0 36.721 (3.823 791 (163) 2012E 510 1.151 3. 3Q12 Bradesco 28.215 9. transmits.9 9.3 BALANCE SHEET 2011A Cash and Equivalents 293 Accounts Receivable 3.304 (805) 2014E 1.74 CEPS - - - - - - - - FCFPS - - - - - - - - BVPS 2.1 4.0 (44.230) Capital Increase (Decrease) - 2012E (1. Formerly.0 70.753 (1.123 4.114) 2013E (1. 2011–14E in Millions R$ 2012E 6.5 24.293 9.2 4. Cielo rents the point of sale (POS) machines.5 15.0 (62.2 2.0 70.1 P/CE 16.3 98.40 DPS 1. Cielo had exclusivity for the affiliation of Visa-branded cards.0 (62.52 3.439 5.621 2.7 2.841 (1.0 2013E 7.5 4.6% Banco do Brasil 28.9 16.1 77.708) - 2014E (1.1 71.2 13. 71 .2 30.702 (596) 1.6 76.4 7.4) 2014E 0.783 (4.99 2.0) (61.5 6. Key Personnel: Rômulo de Mello Dias (CEO).88 2.

54 TARGET PRICE: R$46.1 Shares Outstanding . increasing 3. Current Price (01/03/13) R$ 43. 140 120 100 80 60 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet. Boosted by the continued strength of its market demand.   Coelce could be valued at R$45-50 per share.Mn 78 level.1 Price Performance (R$) 2013 Outlook. We forecast Coelce IBOVESPA 180 160 EBITDA of R$732 million. According to Enersis’s capital increase plan. Despite the 52-Week Range (R$) 32. we are maintaining our Hold rating as the company’s Brazil: Banco Santander S.com.  Maria Carolina Carneiro* Brazil: Banco Santander S. Enersis’s capital increase and the potential impacts for Coelce should be the focus for investors.5% YoY. REPLACING YE2012 TARGET PRICE OF R$34. Volume in Coelce’s region continues growing (up approximately 10% YTD) and has been the main driver behind the company’s capacity to offset part of the tariff revision process-related losses. +5511-3012-5751 | mprado@santander.br A strong performance even after the tariff revision. For 2013.40  Investment Case: Despite Coelce’s strong last six-month operating Marcio Prado* performance.35 One of the most attractive dividend plays in Brazil. 72 .99 .45.665 negative impact from the tariff revision process. as a result of higher volume and the tariff adjustment.  COCE5 BZ 41. Enersis will seek to delist minorities at an implicit P/E of 9-10x. Coelce’s operating results quickly recovered from the tariff revision process that it faced in 2Q12. Daily Vol (US$ Mn) 2.2013 Latin American Universe Book BRAZIL—UTILITIES COELCE HOLD CURRENT PRICE: R$43.54 / US$ 21.94.A.A.  Coelce to be delisted? Coelce’s controller Enersis has publicly acknowledged the possibility of delisting some of its listed subsidiaries in Latin America. Santander estimates and company reports. +5511-3012-6682 | macarneiro@santander.39 Target Price (YE 2013) R$ 46. If we use Enersis’s guidance of delisting its subsidiaries at a 9-10x P/E.94 INTRODUCING YE2013 TARGET PRICE OF R$46.com. we still project that Float (%) Coelce will be able to sustain an almost double-digit dividend yield 3-Mth Avg. implying a Company Statistics valuation for Coelce (considering a conservative normalized net profit Bloomberg of ~R$380 million) of R$44-48 per share.94 / US$ 22.br stock performance reflected this strong performance and the possibility of a minority buyout by Coelce’s controller Enersis.59 Market Capitalization (US$ Mn) 1. We estimate a sustainable dividend yield of ~9% going forward.

6) 18.366 1.471 1.7 6.2 929 835 841 848 495 417 401 387 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 838 848 789 835 447 424 376 381 Capital Employed 2.5 5. serving over 2.2 FV/EBIT 5.2) 313 1.4) 310 (16.2) 23.3 29.1 6.94 2.4 (3.102 3./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (149) (0) (139) 631 178 224 (341) (68) 0 - 2012E (104) (52) (112) 550 194 (131) (136) (75) (277) - 2013E (90) (84) (9) 638 178 67 0 (78) (315) - 2014E (94) (68) 0 579 187 (37) 0 (101) (329) - 2011A (89) (0) (83) 377 106 134 (204) (40) 0 - 2012E (54) (26) (58) 283 100 (67) (70) (39) (142) - 2013E (44) (41) (4) 311 87 33 0 (38) (154) - 2014E (44) (31) 0 270 87 (17) 0 (47) (153) - BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 328 1.9 FV/EBITDA 4.9 7.5 (6.524 1.0 1. 9M12 Public Sector 14.6 6.com.294 1.7 million clients.070 1.8 2013E 1.2 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 5.5 5.0 58.507 1.721 1.8) 621 (6.8) 2.0 5.8) (6. The company is controlled by Endesa group.5% Low income 19.coelce.1) Capex/Revenue (%) Int Cover (%) 7.166 2.7 310 (16.1 1.627 (7.9 US$ 2012E 1.0 70.0) 21.603 1.0) (6.7 80.3 (3.6 10.5) 23.2 23.4 732 3.0 5.0 357 (1.9 R$ 2012E 2.0 (1.3 1. Key Personnel: Mário Fernando de Melo Santos (Chairman). with more than eight million people.5 1.05 4.03 4.787 508 495 784 621 126 2012E 98 535 1.7 602 (3.1 1.2 7.3 371 (1. with operations in 13 countries worldwide.5 1.8) 18.341 1.6 0.6 0.3 Net Debt/Equity 0.4 4.6) 29.2) 258 (17.5 17.3 1.8) 24.2 5.1 Dividend Payout (%) 0.7 8. Abel Alves Rochinha (CEO).49 BVPS Coelce is a pure distributor with the concession for the State of Ceará (in the Northeast of Brazil) that includes an area of 148.5 0.2 6.0 50.281 1.4 1.3 621 (6.22 3.0) 24.4 22.166 236 2012E 197 1.156 2.620 1.1) 371 (1. one of the 10 largest electric utilities in the world. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 2.6 (42) (41) 229 13.0) (6.55 19.60 2.1 6.38 0.1) Div Yield (%) 0.5 5.8 2.0) 13.062 214 2011A 175 617 1. 9M12 Dsitribution 100.0 28.0 3.7 7.152 2.2 2.4 7.0) 12.8) (6.83 3.0 6.253 3.22 9.690 2.053 212 2014E 227 1.569 (3.36 20.6 6.231 1.5 0.2 1.825 Km2.1 (1.06 1.0 0.241 Net Debt/EBITDA 1.4 20.5) 460 0.3 1.6 0.71 2.2 1.6 0.8 25.432 (1.2) 24.5 24.5) 21.073 1.3 76.2 1.973 4.8 2.20 4. 9M12 Free Float 33.8) 647 (11.7 17.856 8.0 0.121 1.2) 770 (4.7 602 (3.7 (27) (63) 281 4.1) 9.1 9.678 565 401 718 502 101 2014E 104 525 1.2 2.1 6.6 2.5% Rural 9.8 5.8) (6.6 641 6.06 6.070 2.6 P/CE 4.7 8.7 (45) (106) 471 (0.07 8.186 841 1.6 6.5) 363 (21.6) 21.61 2.9 9.6 (87) (84) 470 19.6) 301 (15.1) (6.COELCE Financial Highlights: P&L.8 10.346 3.0 21.8 8.5 0.4 19.7) 2.083 1.89 17.5) 21.8 5.4 6.670 575 417 683 522 105 2013E 126 555 1.0 1.353 952 929 1.0% Shareholder Structure.08 2. 73 .81 10.8 70.309 2.0 (51) (31) 175 (23.3 7.9 7.2) 17.1 1.0 FCF Yield (%) 8.8 2014E 3.7 30.2 2011A 1.1 8.1 641 6.3 18.8) (6.4 21.8 31.4% Commercial 21.0 23.1 7.643 522 387 739 484 98 LT Debt FINANCIAL RATIOS Net Debt 2013E 2.1 (42) (65) 203 (28.146 848 1.9 17.045 210 2013E 264 1.9 6.3 FV/Revenue 1.77 9.1 15.0 258 (17.2 35.2 31.6 2. Balance Sheet and CF Statement.074 3.1 15.587 2.8 2014E 1.0 553 (13. Endesa is also the third largest private group within the Brazilian electricity sector. Marcelo Schmidt (CFO) and Luiz Carlos Bettencourt (IR Manager) Web: www.4% Industrial 16.0) 707 (8.1% Endesa 59.57 18.0 8.8 ROCE (%) ROE (%) 32.1 7.5 20.4) 13.br EBITDA by Business.1% Residential 19.7% Eletrobras 7.6) 12. with a diversified asset portfolio that includes distribution and generation assets.0 7.0 (110) (68) 376 (20.0 8.2% Sources for all charts and tables: Company reports and Santander estimates.7 8.166 3.4 553 (13.450 (1.3 1.25 DPS 1.468 (6.05 5.8 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.151 835 1.0% Sales by Segment (DisCo).2 MARKET RATIOS PER SHARE DATA 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 6.1 (82) (126) 394 (16.6 313 1.3 P/BV 1.

scheduled for mid-2013 and applicable by May 2014.5% for industrials. although expected.38 / US$ 35.1% for 52-Week Range (R$) the commercial segment and 6.A.4 Shares Outstanding . Comgas usually pays 70% of profit as 120 dividends.246 million. we view this additional increase favorably.80 Target Price (YE 2013) R$ 63. We believe the main challenges/opportunities for 2013 will be: (i) the industrial segment’s performance. respectively.br increasing cash flow generation and stable regulatory framework. sustaining a good average 6% yield. REPLACING YE2012 TARGET PRICE OF R$57. previous Bloomberg costs of R$0.br payouts and a solid operating performance.Mn 120 Price Performance (R$) Comgas IBOVESPA 160  Good dividend policy and reasonable multiples considering 140 solid regulatory framework. Santander estimates and company reports.com. the continuity of a stronger USD against the BRL could pressure margins in the short term.72% for the residential segment.  2013 Outlook: After the last tariff increase approved by ARSESP.com. Arsesp 3 Company Statistics updated gas costs (with transport) to R$0. Market Capitalization (US$ Mn) natural gas will increase 7.4x and 7.2013 Latin American Universe Book BRAZIL—UTILITIES COMGAS BUY CURRENT PRICE: R$58. despite some recovery. (ii) FX variations.80  Investment Case: We are maintaining our Buy rating for Comgas Marcio Prado* based on its good dividend yield (a sustainable 6% per year). Thus. which currently has been mild.64 / US$ 28.50 3.3x. This will translate into an Current Price (01/03/13) R$ 58. We see the company trading at attractive multiples and profitability ratios.64 TARGET PRICE: R$63.451 Float (%) 21. Daily Vol (US$ Mn) 1. CGAS5 BZ 40. and believe the new controlling shareholder will maintain attractive Maria Carolina Carneiro* Brazil: Banco Santander S. 74 . we forecast Comgas will be able to recover margins.38 INTRODUCING YE2013 TARGET PRICE OF R$63.8 3-Mth Avg.21 average tariff increase of 2. We believe its higher 100 regulatory WACC (versus electric and water utilities) justifies our 80 2013 estimated P/E and EV/EBITDA multiples of 12.  New tariff increase and some margin recovery for 4Q12. 60 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet.38. we estimate EBITDA of R$1.82 per m vs. thus. +5511-3012-5751 | mprado@santander.55 .59. We forecast a regulatory WACC of 8.76 per m3 included in tariffs. and (iii) the beginning of discussions on the next tariff revision. a sharp increase versus 2012 (easy comps due to FX variation). +5511-3012-6682 | macarneiro@santander. For vehicles. We also recall that FX variations point to a stronger USD versus BRL. we could still observe costs pressure if FX remains at current levels.00%. despite obligatory recovery through tariffs. partially hurting margins as a consequence.5%.A. Brazil: Banco Santander S. 2.

COMGAS Financial Highlights: P&L.1 12.3) 17.6 572 6.359 Net Debt/EBITDA 2.4 11.4 8.6 18.4 1.01 1.874 1.0% Shareholder Structure.0% EBITDA by Business.1% Shell Bz (Integral BV) 11.246 1.8 488 15.24 3.167 569 2013E 178 902 3.1 38.741 4.12 1.243 2.3) 11.6 13.7 692 41. 9M12 Others 28.423 692 1.9 18.7 1.148 8.3 7.905 35.4 23.246 1.6 67.218 2.666 8.1% Sources for all charts and tables: Company reports and Santander estimates.4 184.559 3.8 FV/EBIT 14.7 1.9 14.37 11.047 24.4 4.9 10.1 10.0) 421 (37./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (232) (25) 576 (462) 178 0 (388) 0 2012E (255) (43) 598 (486) (326) 0 (438) 0 2013E (281) 11 939 (522) 180 0 (236) 0 2014E (307) 11 1.53 10.2 474 (51.55 7.292 339 LT Debt 2013E 5.6 7. 75 .7 1.0) 706 (40.2 1.0% Industrial 80.0 9.3 1.0 70.6 8. The company is controlled by the BG Group.3 7. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 4.0 2013E 2.08 5.3 10. representing 37% of Brazil’s piped gas distribution network.904 9.205 1.8 1.5 (109) (52) 121 (63.041 690 1.9 Int Cover (%) n/m n/m n/m n/m n/m n/m n/m n/m Dividend Payout (%) 67.01 1.078 2.993 5.5 70.5 1.5 14.3 2.6 1.9 11.82 4.3 6.0 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.2 18.948 1.3 839 (17.7) 2.8 23.0 4.5 (183) (87) 203 (64.129 296 2012E (2) 374 1.103 0.4 1.9% Cosan 60.530 3.4 348 22.1 70.2 2.011 (559) 55 0 (397) 0 2011A (138) (15) 344 (276) 106 0 (232) 0 2012E (140) (24) 329 (267) (179) 0 (241) 0 2013E (156) 6 521 (290) 100 0 (131) 0 2014E (171) 6 562 (311) 31 0 (220) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 323 905 3.85 DPS 3.9 1.76 6.1 ROCE (%) 10.4 19.2 3. The company owns and operates 7.961 4.204 6.888 878 1.4 FINANCIAL RATIOS MARKET RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 25.9 10.8 965 52.4 11.4 633 33.580 2.4 6.1 (83) (79) 185 52.6 5.7 1.4 FCF Yield (%) 3.6 0.8 1.1 40.2 (85) (146) 341 8.3 Capex/Revenue (%) 11.6 10.7 1.118 556 2012E (3) 673 3.8 2014E 5.8 8.2 283 (48.8) 11.5 1.0 US$ 2012E 2.168 6.1 10.6 FV/EBITDA 10.6 5.655 8. 9M12 Gas Distribution 100.9 7.0 4.795 2.6 1.8 12.3 6.742 2.0 215.8 1.4 23.204 316 2013E 99 501 2.9) 5.0% 3.5 1.5 18.6 1.338 7.324 743 972 608 1.7 18.09 1.br/investidores/ Sales by Segment. Comgas’s concession area comprises 177 cities in São Paulo State.0 10.150 1.4 (4.1 38.3 10.326 611 2011A 172 483 1.8 28.3 6.201 2.360 1.70 2.268 4. Roberto Lage (CFO) and Paulo Polezi (IR Manager and Treasury) Web: http://www. and Shell is a major shareholder.228 8.170 2.449 5.657 1.2) 5.4 5.3 10.8 1.5 (155) (243) 567 68.123 887 1.0 10. as well as the coastal area around Santos and the Paraiba Valley.692 km of pipelines.248 328 2014E 129 562 2.5 9.977 2.499 4.6 888 25.597 2.395 1.4 1.2) 17.8 2011A 2.474 1.127 7.011 3.com.4 1.141 2.55 2.405 (21.1 11.833 17.022 1.0% Vehicles Residential Others 4.comgas.93 2.31 1. 9M12 Cogeneration 7.8 536 54.598 1.247 590 2014E 233 1.8 12. Luis Augusto Domenech (CEO).73 5.5 2.0 21.198 1.8 27.413 2.3 7.716 833 888 921 953 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E Net Debt 1.030 6.6 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 1.9 1.8 18.66 1.0% 6.082 785 1.6 P/BV 4.8 Div Yield (%) 7.4 2.8 2014E 3.4 40.8 8.9 13.4 P/CE 12.9 FV/Revenue 1.0 9.1 ROE (%) 17.6 0.0 8.3 23.4 23.7 9.63 2.3 10.8 20.8 3. Balance Sheet and CF Statement.094 957 1.9 743 7.6 5.0 12.824 1.1 (151) (145) 337 65. Campinas.070 2.7 18.882 1.33 5.6 2.2 18. Key Personnel: Nelson Luiz Costa Silva (Chairman).79 13.5 7.2 MM m3 per day).3 14.2 18.2 (153) (263) 614 8.0 70.6 Net Debt/Equity 1.4 5.40 PER SHARE DATA Comgas is a distributor of piped natural gas in São Paulo State with over 1 million customers.163 Capital Employed 3.9 13.686 819 1.5 1.8 (4.246 40.562 1.9 1.4 8.5 1.028 6.0 R$ 2012E 4.9 13.7 18.835 1.5 (86) (135) 315 69.6 5.97 3.7 1. distributing more than 5 billion cubic meters per year (13.944 2.3 3.362 1.6) 2. including the metropolitan areas of São Paulo.84 BVPS 9.

68 2.31 / US$ 22. +5511-3012-5751 | mprado@santander.A.53 INTRODUCING YE2013 TARGET PRICE OF R$49.br see the uncertainty on the regulatory front as a significant risk to future returns on investment in a sector that is deeply capital intensive. We forecast EBITDA of R$1. We 140 estimate Copasa trades at 6. Company Statistics  Pressure from capex to cash flow and small dividends.5%. REPLACING YE2012 TARGET PRICE OF R$33. we Maria Carolina Carneiro* Brazil: Banco Santander S.3 Shares Outstanding . Santander estimates and company reports. meager 35%.9 3-Mth Avg. In fact. dividends are not appealing—payout reaches a 80 60 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet. as it implies that returns on current investments will remain uncertain for some time to come. especially considering the regulatory 100 risk given the lack of a definitive tariff revision formula (as the company still does not have a proper regulatory framework defined for the tariff revision). and we do not expect it to be completed in 2013. We consider this delay a negative for the stock. Brazil: Banco Santander S.53.com. While Copasa continues to post robust results due to new connections and municipalities added to its contract portfolio.285 million.40  Investment Case: We maintain a cautious view on Copasa given Marcio Prado* the lack of a proper tariff/regulatory framework for the company.655 Float (%) 46.2013 Latin American Universe Book BRAZIL—UTILITIES COPASA HOLD CURRENT PRICE: R$45. +5511-3012-6682 | macarneiro@santander. Moreover.52.com. we believe that Copasa will be able to maintain its 35% dividend payout ratio.  2013 Outlook: We believe the main driver for the stock is still the final decision by ARSAE regarding Copasa’s tariff revision methodology. a 10% YoY increase. which are not a bargain. Daily Vol (US$ Mn) 5.26 Target Price (YE 2013) R$ 49.60 . we 52-Week Range (R$) believe Copasa will continue to receive tariff adjustments that fall Market Capitalization (US$ Mn) short of the company’s needs to remunerate its investments. With a declining FCF and uncertainty on the return of its marginal capex. mostly reflecting good volume growth especially for the sewage segment and tariff adjustment to cover inflation pressure to non-manageable costs. and we estimate a dividend yield of ~3. we see Copasa’s FCF to equity yield declining to a mere 2% in 2013. This process is taking longer than we had expected.31 TARGET PRICE: R$49.2x EV/EBITDA and 10. 76 .59 Gerais) postponing its decision on the regulatory framework. 33.A.br which operates a capital intensive business and has an aggressive capex plan. With ARSAE (the Sanitation Regulatory Agency for the state of Minas Bloomberg CSMG3 BZ Current Price (01/03/13) R$ 45.Mn 119 Price Performance (R$) Copasa IBOVESPA 180 160  Multiples are not a bargain while regulatory risk remains.53 / US$ 23.7x P/E multiples 120 for 2013.

00 4.8 23.2 5.3 19.7 778 (20. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 3.495 393 2011A 129 434 3.305 4.282 Net Debt/EBITDA 2.1 2.411 516 1. The company is in the process of expanding its activities to the sewage sector primarily in areas with existing water concessions.0 5.0 10.211 (0.5 6.3 1.1 2011A 1.199 8.9 10.10 21.2) 408 (12.7 36.9) 15.031 909 3.4 (78) (92) 257 4.7 35.403 1.7 444 4.6 10.583 2.3 35.7 FINANCIAL RATIOS Net Debt/Equity Capex/Revenue (%) Int Cover (%) Dividend Payout (%) ROCE (%) 0.1) 24.594 179 LT Debt 2013E 3.516 942 3.339 6.9 1.1 871 9.6 444 4.1 5.0 1.0 1.7 9.7 425 4.8 9.8 1. mainly in the water supply segment.0 793 1.2 465 (16.959 3.6 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 4.7 9.0 1.6 3.8 37.0 1. Paula Vasques Bittencourt (CFO and Investor Relations Officer) Web: www.4) 34.1 2.349 3.42 1. The company charges its clients for water treatment and distribution and for sewage treatment and collection.5 10.8 4.7 27.05 4.1 9.3 952 9.2 627 4.4 9.903 6.443 5.6 10. 9M12 Sewage 34.8 4.42 2.379 3.245 1.2 2.8 34.9 10.8 19.72 0.482 1.698 7.7 4.3 2. 77 .613 2. serving more than 12 million people.8 2.1 5.3 19.5 0.0 408 (12.5 6.48 1.570 2.516 455 1. 9M12 Free Float 46.5 7.9 1.7 (78) (84) 246 0.0 425 4.7 5.7 (160) (173) 505 5.132 Capital Employed 6.805 4.56 44.7 465 (16.9 2013E 1.8 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 8.412 2. Ricardo Augusto Simões Campos (CEO).2 (134) (152) 477 (1.3 37.4) 33.070 982 3.8 Div Yield (%) 6.3 7.400 1.2) 13.165 7.5 9.412 1.5 4.3 3.3 24.7 0.7 5.5 0.com.2) 1. Copasa is listed in the Novo Mercado (CSMG3).8 13.7 6.4 10.049 10.415 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E Net Debt 2.7 5.0 2.714 2.083 (13.495 2.2 6.4 648 3.6 P/CE 5.5 9.6 9.0 0.1 5.0 US$ 2012E 1.31 47.3 FV/EBITDA 6.197 3.761 (8.11 20.6 0. Key Personnel: João Antônio Fleury Teixeira (Chairman).7 15.2 23.565 2.339 3.5 2.502 2.868 9.62 0.0) 33.23 4.1 6.75 37.0 R$ 2012E 3.823 2.4 24.391 8.15 DPS 1.279 4.285 10.4 (168) (197) 552 9.1) 647 (9.3 10.4 4.5 10.0 5.copasa.103 1.5 FV/EBIT 8.215 4.8 19.4 4.559 9.1% Sources for all charts and tables: Company reports and Santander estimates.917 4.1% ownership) and operates in 611 municipalities.COPASA Financial Highlights: P&L.012 7.6 3.852 7.1 2.4) 15.670 7.955 544 2012E 596 1.8 7.8) 778 (20.447 1.7 4.1 1.2 2.9 5.0 871 9.br Revenue by Business.286 1.6 34.9 5.85 0.9 21.1 9. 9M12 Commercial and others 15.9 2.590 178 2013E 336 713 3.06 2.319 372 2014E 1.72 0.287 5.8 2014E 3.2 8.2 2.4 14.8 36.1 1.9 1.58 ROE (%) MARKET RATIOS PER SHARE DATA BVPS Copasa is one of the largest sanitation water distribution companies in Latin America.3 14.532 449 1.8% Public Sector 10.0 1.3 2.7 793 1.1 2.4 0.6 9.818 1.0% Sales by Segment.163 4.479 1.3) 23.496 6.8% Shareholder Structure.9 10.9) 13.2% Residential 67.274 968 2.7 15.6 9.287 3.5 0.0 FCF Yield (%) 4.2 35.271 4.9 23.73 41.646 3.5 0.014 1.9% Minas Gerais State 53./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (304) 33 (367) 453 (683) 164 (22) 131 (251) - 2012E (372) 54 13 915 (677) 355 (24) 59 (134) - 2013E (414) 45 (53) 911 (724) 109 0 95 (173) - 2014E (439) 52 (51) 993 (620) 308 0 124 (189) - 2011A (182) 20 (219) 270 (408) 98 (13) 78 (150) - 2012E (191) 28 6 470 (348) 182 (12) 30 (69) - 2013E (202) 22 (26) 445 (353) 53 0 46 (84) - 2014E (205) 24 (24) 463 (289) 144 0 58 (88) - BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 242 815 6.2 3. It is controlled by the State of Minas Gerais (53.5 6.06 2.6 7.426 6.947 3.4 38.32 20.7 952 9.2) 24.339 6.5 9.5 23.8 2.518 1.5 9.1 FV/Revenue 2.2 (89) (178) 483 (29.0 8.78 21.4 21.575 1.3) 599 (7.582 2.2 (53) (107) 288 (25.0% Water 66.575 290 2012E 298 669 3.8 2014E 1.9 10.1 6.9 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest. Balance Sheet and CF Statement.62 2.4 13.2% Industrial 6.8 11.291 1.593 448 1.7 4.790 1.4 35.581 177 2014E 462 845 3.40 1.7 9.2 2.2 (69) (78) 245 (14.0 P/BV 0.2 2.179 356 2013E 706 1.

3 3-Mth Avg.48.2013 Latin American Universe Book BRAZIL—UTILITIES COPEL HOLD CURRENT PRICE: R$31.  2013 Outlook: UHE Mauá finally started operations and will improve generation results.80 / US$ 17. is not compelling in the short term. as Marcio Prado* although the company trades at reasonable 2013E multiples Brazil: Banco Santander S.9% YoY as we do not foresee significant improvements in operations or cost cuts to offset the thorough regulatory parameters of the tariff revision or to buffer the lower revenue in the transmission unit. Daily Vol (US$ Mn) 7. in our view. but Bloomberg the pace of an operating improvement is not so clear (it could CPLE6 BZ Current Price (01/03/13) R$ 31.A.40 .218 Float (%)  Exposure to MP579 and long-term expectations.2 Shares Outstanding . We see upside risks to our base-case valuation if Copel is able to reduce costs significantly to meet regulatory targets and prepare for potential revenue decline Company Statistics in the future.7x and P/E of 9. The dividend payout remains at 35%. About 6% of 44.Mn 274 Copel’s generation business is exposed to MP579 in the short term.41 Target Price (YE 2013) R$ 35.  Improvement on the way but pace unclear. +5511-3012-6682 | macarneiro@santander. We forecast EBITDA to decline 1.7x) and is currently investing in new transmission and generation assets. In any 100 case. Price Performance (R$) Copel The company has not accepted the conditions of renewal for 120 generation under MP579.com. contributing to offset the full negative impact of the tariff revision (set last June 2012) on the distribution unit. in 52-Week Range (R$) our view.29 4.A. results will be negatively affected by the decline in RAP (guaranteed revenue).38 TARGET PRICE: R$35. 78 .38 / US$ 15. Also. +5511-3012-5751 | mprado@santander. it maintains a mild payout policy (35% with no guidance to increase it) and continues to underperform Maria Carolina Carneiro* Brazil: Banco Santander S.br regulatory targets at its disco unit. but this should not bring major problems to 110 cash flow given limited impact in the short term. the larger block of concessions it currently holds will end after 2023. given that Copel accepted to renew transmission contracts under new MP579 terms. Market Capitalization (US$ Mn) 26. Copel will have to be quick in reducing costs and adapting 90 investments to offset lower revenue.com.05 materialize in 2H13).80  Investment Case: We maintain our Hold rating for Copel. It is already implementing its redundancy program. Santander estimates and company reports.br (FV/EBITDA of 5. which. 80 IBOVESPA 70 60 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet.

0 1.279 11.432 2.3 0.6 21.7 0.1% Free Float 44.757 (1.214 1.1 P/BV 0.1 0.3 2.653 4.993 11.6 5.8 16.857 25.7 P/CE 6.4 38.2 FV/EBITDA 6.2 5.8) 10.79 22.8 225 (407) 1.079 (12.0 3.939 822 2014E 1.7 10.1 0.2 118 (487) 972 10.047 2.2 6.9 0.789 773 2013E 1.2 14.179 (1.238 1.69 49.7) 13.9 1.2 9.4 16.9) 20.018 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 541 1.643 153 2012E 1.924 9.827 2.6 0.6 0.516) (348) 18 62 (221) 0 2013E (612) 0 (272) 1.735 4.9 US$ 2012E 4.320) (140) 0 28 (309) 0 2014E (645) 0 (45) 1.1 15.059 4.81 1.467 (960) 507 0 33 (340) 0 2011A (330) (233) 59 711 (1.0) 22. In the generation segment.740 21. Lindolfo Zimmer (CEO).874 3.28 3.0) (1.1 5.279 14.9 7.41 0.606 14.580 12.117 2.1 0.1 4.13 1.4 9.1 3.0 FCF Yield (%) Div Yield (%) PER SHARE DATA 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 4.194 1.438 17.com/hpcopel EBITDA by Business.425 20.0 1. distribution.9) 16.6 1.418 400 LT Debt FINANCIAL RATIOS Net Debt 2013E 8.0 0.6 7.7 Capex/Revenue (%) Int Cover (%) 5.722 9.399 391 2014E 754 1.168 (1.5 0.9% Sources for all charts and tables: Company reports and Santander estimates.964 4.7) 6.04 22.938 2.5 8.1% of total capital).105 0.191 (1.6 59 (216) 430 (6.976 1.9 R$ 2012E 7.915 (6.8 2011A 4.093 Net Debt/EBITDA 0.977 1.8) 10.7% Residential 32.950) (759) (193) 184 (136) 0 2012E (567) (147) (127) 1.8 7.1 8.008 1.313 977 288 512 625 446 Capital Employed 13.682 13.3 0.3 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.7 4.5 2014E 8.634 3.188 15. Copel currently has an annual installed capacity of 4.146 3.937 6.99 23.9 559 (14.0% Paraná State 31.662 6.9 6.0% Industrial 29./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (553) (390) 99 1.7 13.7 4.5% Shareholder Structure.247 14.9 1.717 20. The distribution business accounts for around about 35% of the group’s consolidated EBITDA.7 0.476 2.717 19.5 5.8 8.9 778 46.274 (2.717 6.1 10.22 3.394 387 2013E 546 1.8 134 (243) 691 23.186 7.038 (23.6 655 (15.6 1.1) (1.24 0.copel.1 19.8 5.7 8.049 2.2 1.2) 11.2 55 (227) 453 5.4 1.71 22.5 2014E 4.1 19.650 22.1) (4.907 (0.6 4.109 877 2011A 871 1.1 1.1 5.57 1.9 FV/EBIT 8.974 6.093 4.6 5.1% Sales by Segment (DisCo).926 (1.232 7.53 1.7 5.5 Net Debt/Equity 0.50 0. and transmission assets and sells electricity in Brazil.7 0.328 1.7 4.702 12.1 0.5 14.6 122 (442) 882 (1.9 1.1) 920 (17.108 32.186 2.553 7.6% of common shares and 31.145 (10.1 0.58 43.6 5. Copel is a state-run company controlled by the government of the State of Paraná (58.5 3.0 37 (232) 462 (33.7 9.5 5.1 7.1 25.1 5.0 73 (451) 899 (22.4 2. 9M12 Commercial 21.140 4.691 6.122 2.779 10.3) 16.550 MW and partnerships in several power plants.4 2.240 1.232 1.7 0.859 10.7 14.6 ROCE (%) 6.30 0.776 12. Ricardo Portugal (CFO) and Solange Gomide (IR Manager) Web: www.1 5.6 (7.409 81 2012E 643 1.80 BVPS Copel is a holding company that operates generation.2 23.016 2.1) 2.4 32.2 9.8 4.22 45.6 0.229 6. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 7.9 5.7 5.966 (10.6) 5.2 10.3 5.491 2.23 3.869 9.797 13.1 10.2 1.681 3. 79 .303 39.2 1.9 38.1% GenCo & TransCo 53.7 7.55 2.7 25.COPEL Financial Highlights: P&L.023 1.7 19.2 14.0) (4.55 0.5) 22.7 14.9) 20.286 3.7 8.4) 897 4.098 2.6) 1.7 5.4) 11.9 8.59 47.290 6.3 5.9 (8.1 0.372 15.3 1. 9M12 Other 12.0) 857 (6. Balance Sheet and CF Statement.3 5.5 1.008 1.5 6.414 6.9 0.1) 13.1 Dividend Payout (%) MARKET RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 9.412 2. 9M12 BNDESPAR 24.1 34.4 596 6.791 (3.6 7.8% DisCo 34.164) (453) (115) 110 (81) 0 2012E (292) (75) (65) 600 (779) (179) 9 32 (114) 0 2013E (298) 0 (133) 575 (644) (68) 0 14 (151) 0 2014E (301) 0 (21) 683 (447) 236 0 15 (158) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 1.69 1.8 7.3 2013E 4.4 FV/Revenue 1.8 5.188 6.382 13.951 2.2 1.023 1.305 1.6 4.158 17.4 5.8 7.8 2.8 7.7 0.643 18.5 21.6 5.079 7.8 23.0 1.7 16.0 1.65 DPS 0.1 ROE (%) 9.9 5.985 6.7 10.9 5.367 2. Key Personnel: Mauricio Schulman (Chairman).6 3.2 1.7 0.0) 1.1 15.

Daily Vol (US$ Mn) 17.  2013 Outlook: We believe Raízen Combustíveis’s results will continue to contribute positively to Cosan’s consolidated numbers. we expect Cosan’s ROE levels to improve. Santander estimates and company reports. REPLACING YE2012 TARGET PRICE OF R$43.  CSAN3 BZ 27.2013 Latin American Universe Book BRAZIL—AGRIBUSINESS COSAN BUY CURRENT PRICE: R$42. Add to this list higher dividends and a potential improvement in corporate governance via a collapse of shares.00 / US$ 23. +5511-3012-6042 | vneto@santander.A. Christian Audi Cosan New York: Santander Investment Securities Inc.50 8. possibly reaching 17% in the long term. Even with the leveraged 52-Week Range (R$) acquisition of Comgás. and a sound deleveraging Vicente Falanga Neto* Brazil: Banco Santander S.com.00  Investment Case: With the acquisition of Comgas completed. +1-212-350-3991 | caudi@santander.0 Shares Outstanding . we believe that Cosan will be able to maintain Market Capitalization (US$ Mn) its indebtedness at a healthy level. in our opinion.00.8x in a five-year period.6x.A. higher returns. Cosan could increase Bloomberg its dividend distributions.  Improving levels of return. stronger capital discipline. Current Price (01/03/13) R$ 42. volumes for next year should continue to grow at a healthy pace.10 . 140 unifying CZZ shares under Cosan S.90 Indebtedness level under control.Mn 407 Price Performance (R$) Cosan IBOVESPA 160 Improvements in corporate governance around the corner? We believe that Cosan could soon change its ownership structure. continued growth. falling back to 1.br plan. With Raízen Combustíveis and Comgás gaining importance in the company’s results. In our view.24 / US$ 20.42. The result: increased earnings stability. net debt/EBITDA levels should increase to 2. 80 60 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet.   Increased dividend distributions? We believe that due to Company Statistics improving results and cash generation stability.445 Float (%) 26. this would be 120 seen as an improvement in the company’s corporate governance 100 and would be well received by the market. 80 . and we believe the company will continue to post an improvement in its profitability levels (we look for an average of R$71/m3 for FY2014). migrating from the typical 25-30% to 50%.7 3-Mth Avg. We estimate that immediately after the consolidation of Comgás’s numbers. and you see why we reiterate Cosan as our top pick in the sector.24 TARGET PRICE: R$49.75 Target Price (YE 2013) R$ 49.00 INTRODUCING YE2013 TARGET PRICE OF R$49. In our view.us has added another key element to its continued metamorphosis into an energy and infrastructure powerhouse.

fuel distribution under its JV with Shell.850 2.818 (1.2 7.946 16. Key Personnel: Rubens Ometto Silveira Mello (Chairman).com.1 5.9 4.76 0.667 22.1 4.1 0.4 1.2 1.5 6.8) 2.591 7.br Sales by Segment. Marcelo Eduardo Martins (CFO) and Guilherme Machado (IR Officer) Web: www.35 1.8 6.235 22.500 1.399 2.5 3.244 (1.9 20.477 8.971 2014E (851) 3 (121) 1.755 295 2013E 856 3.60 1. 2014E Comgas 15.3 14.532 178.75 2.296 10.8 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.356 1.507 4.4 (578) (119) 711 (72.98 BVPS Cosan is an integrated energy company and is active in the following business: sugarcane crushing with a capacity of 65 million tons.218 22.2 3.6 8.9% Cosan Ltd.9 0.5 1.4 11.570 56.86 15.5 3. Balance Sheet and CF Statement.187 (21.280) (383) 1.757 22.4 6.3 FV/EBIT PER SHARE DATA 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 2.4 6.5 5.123 76.547 (8.2 5.3 1.4 2.0 3.5 2014E 34.5 17.3 10.686 2.412 562 2012E 940 2.5 802 96.8 8.486 1.7 1.062) 213 (886) (1. and most recently the gas distribution businesses with the acquisition of Comgás.0 11.1 9.35 13.295 5.507 62.381 26.5 FCF Yield (%) 1.395 82.3) 8.275 4.191 9.3 24./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (1.508 2.231 Net Debt/EBITDA 2.8 5.59 1.197 (334) 1.6 8.6% Logistics 9.6 11.3% Shareholder Structure.6 1.359) 3 933 859 (2.68 0.288) 6.457 3.6% Sugar & Ethanol 12.3 24.366 15.0) 8.664 31.5 5.2 2.7% Rezende Barbosa 10.3 10.3 R$ 2012E 24.4) 4.8 11.58 1.492 10.5 3.792 3.304 9.095 11.7 14.606 172.0 4.4 0.6 1.550 11.7 3.7 5.67 27.098) 25 (1.649 11.097 33.7 12.0 100. 81 .4 FV/Revenue 0.74 0.4 (279) (653) 1.1 99.2 16.696 49.35 0.643 6.6 8.8 2.320 3.478 33.4 (296) (61) 365 (76.5 21.9 24.3 68.27 1.331) (406) (5) 0 (349) 86 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 1. 2012E Free Float 26. 62.133 5.0 25.8% EBITDA by Segment.070) (47) (6.9% Logistics 2. It has two types of shares: CSAN3 is listed on the Brazilian stock exchange and complies with Novo Mercado rules.568) 176 (798) 1.6 2.455 2011A 885 2.9 7.6 7.94 0.6 6.90 1.5 2. and CZZ (the holding company).124 2.3 4.617 5.8 4.2 7.5 14.6 2. railway logistics under its subsidiary Rumo.5 637 (74. which began trading in the NYSE in 2007 and is also controlled by Mr.455 2014E 927 5.3% Comgas 31.5 1.142 2.5 1.2 1.6 9.3 22.166 5.381 13.2 1.204 21.749 3.464 207.9 8.6 0. Cosan was founded in 1936 and went public in February 2005.5 5.1 4.187 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 5.0 30.164 36.460 4.7 (349) (278) 512 40. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 18.7 (98) (234) 550 4.74 12.6 6.124 7.152 5.5 1.191 200.9 0.1 2011A 10. Our annual forecasts account for Cosan's fiscal year.7 (170) (407) 958 (3.9 P/BV 1. 2014E Distribution 22.6 1.0) 5.623 51.9 0.32 1.5 6.050 47.447 (2.3 1.8 3.7% Distribution 68.283 5.5 Net Debt/Equity 0.302 5.8 26.715 13.729) (832) (10) 0 (716) 176 2011A (781) 2 536 494 (1.844 2014E (1.951 38.5 2.8) 1.063 17.303 85.8 6.263 12.49 26.0 LT Debt FINANCIAL RATIOS Net Debt Capex/Revenue (%) Int Cover (%) Dividend Payout (%) ROCE (%) ROE (%) MARKET RATIOS P/E P/CE FV/EBITDA 2013E 27.5 3.7 1.9 14.198 2014E 441 2.0 4.442 3.509 11.4 4.5 2014E 16.8 0.4 1.7 (716) (569) 1.8 2.6 11.1 4.745) 6 (248) 2.962 4.156 1. which ends in the month of March.0 6.8) 1.5 1.4 4.527 1.5 5.552 6.8 2.807) 362 (1.242 (70.9 0.476) 101 (459) 721 (138) 959 2012E (569) 2 (267) 2.9 5.COSAN Financial Highlights: P&L.3 US$ 2012E 14.048 52.254 (239) 1.687 2013E (1.591 4.7 13.0) Div Yield (%) 2. Rubens Ometto.700 16.179 3.247 2.996 2.586 8.0 0.815 4.157 11.0 0.4 0.8 0.4 17.177) (652) 2.180 15.078 4.028 2.563 23.7 5.2) 4.306) 5 (1.508) (2.580 2013E (670) 3 (549) (24) (3.0 14.668 2012E (968) 4 (455) 3.233 (652) 3.7 4.4 2.7% Sugar & Ethanol 36.1 6.3 69.332 1.8 28.5 13.4 (474) (1.194 (1.872 23.5 21.488 33.6 3.4% Sources for all charts and tables: Company reports and Santander estimates.041) 50 (3.730 18.686) 3.9 1.4 14.2) 2.970 16.3 5.4 2.6 9.6 1.34 0.197 11.630 4.3 7.0 16.459 7.26 DPS 0. Marcos Marinho Lutz (CEO).372 10.87 22.269 64.01 12.7 2.975 44.462 11.1 10.7 3.755 6.854 11.9 9.3 8.3 (5.4 6.745 2.289 4.9 0.632 (10.169 6.247 2.cosan.332 2.8 1.8 2.191 916 2012E 1.6 6.8 2013E 14.019 (23.0 4.6 1.792 8.26 9.1 21.209 7.110) 2.711 4.0 23.014 537 2013E 1.0 23.3 (4.5 7.914 Capital Employed 13.5 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 10.7) 2.897 4.

00 INTRODUCING YE2013 TARGET PRICE OF US$22. 120 100 80 60 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet. Cosan should be able to maintain its 4. Shares Outstanding .767 Float (%) 26. lean holding company structure. stronger capital discipline.00. Daily Vol (US$ Mn) 15. We estimate that 52-Week Range (US$) 11. Santander estimates and company reports.7 3-Mth Avg.  Improving levels of return. this would be seen as an improvement in the company’s corporate governance and would be well received by the market. With Raízen Combustíveis and Comgás growing in importance in the company’s results. and you see why we reiterate Cosan as our top pick in the sector. higher returns. Add to this list higher dividends and a potential improvement in corporate governance via a collapse of shares.59 TARGET PRICE: US$22. Cosan Limited IBOVESPA 140 unifying CZZ shares under Cosan S.59 / R$ 42.2013 Latin American Universe Book BRAZIL—AGRIBUSINESS COSAN LIMITED BUY CURRENT PRICE: US$17. net Market Capitalization (US$ Mn) Indebtedness level under control.50  Investment Case: Cosan Limited (CZZ) is the best way to play Christian Audi Cosan SA’s (CSAN3) attractive fundamental story given its discount New York: Santander Investment Securities Inc. falling back to 1. possibly reaching 25% in the long term.6x. REPLACING YE2012 TARGET PRICE OF US$21.Mn 271 Improvements in corporate governance around the corner? We Price Performance (US$) debt/EBITDA levels should increase to 2.17. and a sound deleveraging plan. in our view. +5511-3012-6042 | vneto@santander.00 / R$ 46. continued growth.A. Even with the leveraged acquisition of Comgás. we expect Cosan’s ROCE levels to improve. 82 .71 immediately after the consolidation of Comgás’s numbers.br process.8 five-year period. We believe CZZ’s current 7% discount to CSAN3 is not warranted given CZZ’s share liquidity.24 Target Price (YE 2013) US$ 22.us to CSAN3.00 indebtedness at a healthy level. in our view. +1-212-350-3991 | caudi@santander. Cosan has added another key element to its continued metamorphosis into an energy and infrastructure powerhouse.  Bloomberg CZZ US / CZLT11 BZ Current Price (01/03/13) US$ 17. and Cosan SA’s attractive transformation Vicente Falanga Neto* Brazil: Banco Santander S.com.28 . The result: increased earnings stability. In our view.A.8x in a  Company Statistics believe that Cosan could soon change its ownership structure.  2013 Outlook: With the acquisition of Comgas completed.

0 25.247 2.062) 213 (886) (1.4 17.4 0.532 178.395 82.962 4.3 22.191 200.914 Capital Employed 13.com.242 (70.0 4.124 7.412 562 2012E 940 2.5 9.3 1.8 2.1 21.9 0.6 2.11 BVPS Please refer to Cosan SA’s company description and financials.8 2013E 14.6 8.1 7.169 LT Debt 2013E 27.4 (279) (653) 1.6 1.9 5.4 6.4 0. Marcos Marinho Lutz (CEO).204 21.7 (170) (407) 958 (3.2 1.0 7.9 0. 2012E Gávea 14.807) 362 (1.65 2.686 2.477 8.1 2011A 10.142 2.041) 50 (3.289 4.729) (832) (10) 0 (716) 176 2011A (781) 2 536 494 (1.757 22.687 2013E (1.197 11.745) 6 (248) 2.048 52.0 2.3 68.280) (383) 1.2 1.5 6.9 0.850 2.05 40.3 69.5 2.7% Distribution 68.3% Shareholder Structure.191 916 2012E 1. Cosan Limited was created as a holding company for Cosan SA in August 2007 to raise capital to grow and expand its operation through acquisitions.711 4.4 2.1 99.6 8.9% Logistics 2.632 (10.331) (406) (5) 0 (349) 86 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 1.79 0.9 0.70 16.5 5.500 1.552 6.283 5.5 637 (74.180 15.295 5.177) (652) 2.509 11.209 7.0 3.5% Free Float 43.8 26.7 (98) (234) 550 4.4 1.7 0.755 6.460 4.4 4.6 4.1 9.32 1.4 0.304 9. 2014E Distribution 22.5 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 5.5 (8.1 4.078 4.9 0.5 FV/EBITDA 4.0 11.3 14.9 2.8 9.486 1.3) 2.29 0.014 537 2013E 1.8 1./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (1.8) 1.br Sales by Segment.1 4.6 13.4 1.6 6.263 12.5) Div Yield (%) 4.5 21.0 30.8 0. 2014E Comgas 15.818 (1.65 0.1 9.8 3.6 6.975 44.815 4.6 2.019 (23.231 Net Debt/EBITDA 2.844 2014E (1.7 (716) (569) 1.6 9.7) 2.8 2.488 33.447 (2.5 802 96.897 4.306) 5 (1.3 1.2 1.508 2.5 FV/EBIT 8.67 20.7 5.4) 4.792 3.9% Sources for all charts and tables: Company reports and Santander estimates.2) 4.6% Logistics 9.951 38.442 3.563 23.971 2014E (851) 3 (121) 1.399 2.332 1.6% Rubens Ometto 41.7 0.cosan.570 56.8) 2.5 5.5 21.6 7.668 2012E (968) 4 (455) 3.550 11.7 5.3% Comgas 31.6 FV/Revenue 0.591 4.5 2014E 16.0 FINANCIAL RATIOS Net Debt Capex/Revenue (%) Int Cover (%) Dividend Payout (%) ROCE (%) ROE (%) 5.7 14.198 2014E 441 2.86 23.187 (21.070) (47) (6.9 9.7 7.372 10.381 13.457 3.296 10.366 15.9 0.1 10.492 10.3 9.5 17.5 7.197 (334) 1.568) 176 (798) 1.356 1.7 0.COSAN LIMITED Financial Highlights: P&L.5 (8. Cosan SA’s Chairman Rubens Ometto owns 100% of Class B shares.3 7.730 18.60 1.6% Sugar & Ethanol 12.166 5.715 13.623 51.1 5.2 3.617 5.8 13.233 (652) 3.302 5.3 P/CE 2.8 0.0 14.1 4.1 6.8 28.9 0.2 7.6 1.2 8.124 2.476) 101 (459) 721 (138) 959 2012E (569) 2 (267) 2.4 2.7% Sugar & Ethanol 36.254 (239) 1.667 22.5 5.3 0.247 2.8 2.478 33.3 US$ 2012E 14.9 0.320 3.244 (1.83 33.98 0.94 11.097 33.303 85.6 3. class A shares (1 vote) and class B shares (10 votes).09 2.5 1.3 MARKET RATIOS PER SHARE DATA 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 2.872 23.547 (8.6 0.7 5.6 11.0 100.269 64.332 2.3 R$ 2012E 24.8 5.580 2013E (670) 3 (549) (24) (3.9 0.7 (349) (278) 512 40.8 2.098) 25 (1.527 1.5 1.970 16.8 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.191 9.9 24.2 3.4 4.3 10.4 6.0) 8.5 0.2) 2.288) 6.696 49. 83 .179 3.77 40. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 18.586 8.359) 3 933 859 (2.462 11.649 11.095 11.854 11.606 172.44 1.5 16.23 6.9 0.4 2.6 3.464 207.110) 2.156 1.20 DPS 0.664 31.9 5.455 2014E 927 5.5 14.5 2014E 34.3 5.028 2.4 (296) (61) 365 (76.235 22. Marcelo Eduardo Martins (CFO) and Guilherme Machado (IR Officer) Web: www.686) 3.459 7.507 62.8 0.76 0.4 (578) (119) 711 (72.58 19.0) 5.7 3.4 6.5 Net Debt/Equity 0.700 16.9 20.9 4.8% EBITDA by Segment.9 14.133 5.6 6.4 2.9 FCF Yield (%) 3.06 1. Balance Sheet and CF Statement.275 4.5 3.157 11.749 3.2 7.050 47.643 6.164 36.7 9.4 (474) (1. Key Personnel: Rubens Ometto Silveira Mello (Chairman).5 5.6 P/BV 0.591 7.996 2.5 2.8 6.5 3.6 17.946 16.187 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 5.4 8.063 17.194 (1.5 2.9 6.381 26.508) (2.3) 8.8 0.81 1.9 9.59 1.4 2.218 22.745 2.755 295 2013E 856 3.6 9.455 2011A 885 2.630 4.792 8.123 76. CZZ is listed on the NYSE with two types of shares with different voting rights.507 4.5 6.152 5.5 3.4 14.

84 .673 million. We have a positive view on this strategy.22 adjusted to include (i) the most recent data on the discos’ revision 52-Week Range (R$) parameters. Our CPFL Renovaveis model shows Company Statistics Bloomberg CPFE3 BZ Current Price (01/03/13) R$ 21.br (iii) is unexposed to concession renewal risk.0 3-Mth Avg. +5511-3012-5751 | mprado@santander.7 Shares Outstanding . and (iv) pays attractive Maria Carolina Carneiro* dividends.40 FROM R$27.29.com.40 LOWERING YE2013 TARGET PRICE TO R$27.40 / US$ 15.com.br 2013 Outlook: We expect a slight EBITDA decline in 2013. (ii) offers  Marcio Prado* unique competitive advantages for developing its renewable portfolio.30 Market Capitalization (US$ Mn) 10. CPFL Energia has been developing a large portfolio (~4.636 MW) of renewable assets. (ii) recent results and (iii) new macroeconomic data.A. Santander estimates and company reports.28 . we see as a short-term overhang the possibility of an equity offering to help finance M&A-driven and/or green projectdriven growth.78 an equity value in the range of R$4. partially offset by the operation of new renewable assets (Renovaveis). CPFL has entered a joint venture to acquire Grupo Rede (ex Celpa).80  Investment Case: We believe CPFL is a premium company as it (i) should benefit from the M&A wave in the distribution sector.95 / US$ 10. Brazil: Banco Santander S.95 TARGET PRICE: R$27.Mn 962 Price Performance (R$) CPFL Energia IBOVESPA 160 140 120 100 80 60 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet. +5511-3012-6682 | macarneiro@santander. reflecting the tariff revision in the Paulista unit. Daily Vol (US$ Mn) 6. Our model was Target Price (YE 2013) R$ 27. 21. Brazil: Banco Santander S. with generation share to increase to 50% of CPFL’s consolidate EBITDA by 2015E.375 Float (%) 21. As the company operates with high leverage.  M&A: Grupo Rede.706-7.2013 Latin American Universe Book BRAZIL—UTILITIES CPFL ENERGIA BUY CURRENT PRICE: R$21.  CPFL Renováveis.A. The completion of the transaction is still pending minority shareholders’ approval and Rede’s creditors accepting a certain level of haircut.

640 MW of installed capacity and should increase it to 2.361 7.768 7.420 (1.9 8.349 5.6% Sources for all charts and tables: Company reports and Santander estimates.7 11.755 1.219 7.912 3.5 3.721 15.914 14.0% Sales by Segment (DisCo).465 14. Lorival Nogueira Luz Junior (CFO) and Eduardo Takeiti (IR Director) Web: www.5 Int Cover (%) 2.2 2.3) 2.815 6.6 Capex/Revenue (%) 2013E 15.545 5.89 0.3) (0.876 3.2 7.049 (3.4) 10.8 1.0 3.688 11.81 3.3 10.7 4.2 3.6 25.9 (3. the company has a 21% market share.0% Residential 34.1 2014E 9. distribution represents 68% of consolidated EBITDA.7 30.7 2.7 1.0 3.2 P/BV 3.416 5.7 24.576 7.2 ROCE (%) 11.0 3.2 3.7 FV/EBITDA 10.4 6.167 3.831 FINANCIAL RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E Net Debt 10.7) 4.660 2011A 1.br EBITDA by Business.1 4.72 6.7 (492) (370) 811 2.658 2014E 1.186 7.858 2.5 77.294 1.351) 0 2011A 478 158 69 666 (3.094 (10) 3.460) 0 2013E 1.734 8.974 MW by 2013 .5 2.398 8.543 n/m 3.5 3.1 2014E 16.1 FCF Yield (%) 4.115 (6.0 Dividend Payout (%) n/m 95.3) (0.2% Commercial 20.602 6.395 13.066 12.5 11.5 13.746 10.139 920 2013E 1.497 921 2014E 975 2.4 PER SHARE DATA 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 1.8 2.5 13.88 CPFL is a holding company that operates through its subsidiaries in distribution.9 2.7 1.8 FV/Revenue 3.439 2.8 6.7 (885) (665) 1.5 67. On the generation segment.637) 653 (6) 2.515 (1.289 (5.674 11.769 n/m 29.5 21.0 US$ 2012E 8.536 n/m 12.5 11.636 14.82 0.8 2.4 3.594 7.885 8.369 12.917 (1.407 16.2 67. 85 .694 2012E 2.8) 19.338 (876) 0 2012E 582 37 313 (1.6 2.387 11.0 4.9) 9.283 15.4 2.908 11.7 3.48 1.6 14.413 4.98 3.4 11.5) 19.6% Shareholder Structure.322 Capital Employed 19.3 4.6 9.57 1.591 15.688 15. 9M12 Trading 7.7 10.6 2.669 16.964) (147) 1.764 n/m 6.004 8.3 14.662 8.3 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.497 903 2012E 1.1 42.374 29.CPFL ENERGIA Financial Highlights: P&L.380 5.2 6. 9M12 Bndespar 8.4 2.5 P/CE 34.816 23.com.8 6.6 47. its main business.289) (382) 858 (826) 0 2013E 616 82 256 (1.3 (445) (363) 790 (7.5 ROE (%) 21.874 16.109 147 460 (2. Wilson Ferreira Junior (CEO).620 n/m 3.4 22.0 29.673 (8.051 n/m 23.2) 26.91 0.860 22.150 9.091) (82) 789 (751) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 2.9 7.067 14.5 9.418 21.5 1.7 11.592 8.4 41.7 1. Regarding to electricity trading company. leading the segment through its subsidiary CPFL Brasil.9 (411) (465) 917 n/m 12.9 14.5 14.68 0.5 3.4 11.2 24.439) 0 2014E 1.4) 4. holding 13% of total market share in Brazil through its 8 discos.1 29.4 21.1 8.3 10.0 n/m 81.52 1. In EBITDA terms.6 21.6) (0.5 77.917 8.6 Net Debt/Equity 1.313 9.159 2.2 2.596 27.326 6.410 7.6 8.7 1.025 4.9 14.7 2.32 1.828 0.120 (3.6 2.7 23.0 (587) (694) 1.0% Generation 31.5 2.095 6.7 MARKET RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 16.4% Bonaire 12.6 2011A 7.3 13.85 6.258 13.753 922 LT Debt 12.650 1.525 5.460 2.9 22.5 21.0 1.8 8.8 1.4 1.0 2.34 6.75 0.0) 26.188 65 337 (1.906 n/m 2.656 3.4% Previ 31.5 9. The company is the leader in the distribution segment.655 2013E 1.5 3.125 2.995 13.4 4.8 12.6 25.718 22.5 3.6) (0.011 (6.5 FV/EBIT 13. Balance Sheet and CF Statement.193 15.310 28. Key Personnel: Murilo Cesar Lemos dos Santos Passos (Chairman).445 11.288 (1.501 6.192 Net Debt/EBITDA 2.401 6.376 5. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 12.838 20.4 7.230 5.399 7./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A 801 265 115 1.6 8.1) 9.700 12.422 (6.9 (689) (780) 1.700 5.056 2.2% Industrial 26.5 1.091) 1.755 4.859 9.6% Free Float 22.4 (3.1 6.821 n/m 23.4 91.169) (69) 870 (800) 0 2014E 660 36 187 (1.2 3.cpfl.756 5.4 10.92 3.60 1.0 95.0% VBC 25.6 7.234 30.3 2013E 8.9 2.2 3.6 47.5) 10.0 18.104) (124) 1.3 (801) (654) 1.1 8.0 (332) (393) 857 (6.7 15.499 14.22 1.84 DPS 1.278) (675) 1. 9M12 Others 19.7 1.614 2.352 12.487 2.813 21.1 3.73 3.1 11.358 6.363 18.23 0.0 R$ 2012E 14.063 1.676 13.515 (1.7) Div Yield (%) 5.042 6.1 2.52 0. generation and sale of electricity in Brazil.5 13.668 4.2 12.95 0.902 4.250 n/m 29.7 3.5 12.7 3.028 65 552 (2.6 13.68 BVPS 7.1 7.0% Distribution 62.566 (1.352 16.0 18.556 3.7 15.467) 0 2012E 1.403 3.4 12.0 95.0 95.161 5. the company currently has 2.

with high costs and several problems in its iron ore operations. CSN’s stock-light technical position. with low-cost financing. that CSN could capture synergies by using its own iron ore at CSA.br help protect CSN’s products from import competition could generate momentum for the stock. considering the stock’s Brazil: Banco Santander S. CSN would only consider buying CSA at a distressed value.A. CSN’s margins should recover somewhat in 2013.com.24 .19.458 announced by 1Q13 and could include galvanized coils (28% of CSN’s steel sales to the local market in 2013E).167 48. In our view. Round two of higher trade tariffs is expected to be 9. or 25% of EBITDA versus 20% in Bloomberg 2011 and 30% in 2010.2013 Latin American Universe Book BRAZIL—METALS & MINING CSN BUY CURRENT PRICE: R$12. CFA Brazil: Banco Santander S.Mn 1. We estimate that CSN will distribute R$972 million in Company Statistics dividends related to fiscal 2012. In our view. +5511-3012-5758 | ffreis@santander. After a problematic 2012. Santander estimates and company reports. we see a potential opportunity.29 Target Price (YE 2013) R$ 14. Price Performance (R$) CSN  IBOVESPA 120 2013 Outlook. in our view.2 3-Mth Avg. and (3) the significant capex yet to be disbursed by CSN on organic growth (mining expansion + port + Transnordestina railway + long steel + cement). in our view. considering higher flat steel prices 100 80 (we estimate a 4% price increase in R$ terms in the local market 60 valid from 1Q13 onward) and a richer sales mix of steel (with higher 40 YoY sales of tin plate and galvanized coils. In addition.00 / US$ 6.6% by April 2013.com. and additional government measures to Alex Sciacio*.br strong underperformance versus local peers.8 Shares Outstanding . attractive estimated dividend yield (to be captured until April 2013). CSN is not the strongest candidate to acquire ThyssenKrupp’s CSA mill due to (1) the company’s already-significant financial leverage.A.80 / US$ 6. +5511-3012-5870 | azsciacio@santander.  Investors could garner an attractive dividend yield of 6. CSNA3 BZ Current Price (01/03/13) R$ 12. J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet. in our view.80 TARGET PRICE: R$14. 86 . Daily Vol (US$ Mn) 23.43 Tailwinds from government‘s protective measures on the way? Market Capitalization (US$ Mn) A new list of products to be protected from import competition should Float (%) benefit CSN. (2) the unlikelihood.67 52-Week Range (R$)  9.00  Investment Case: Although CSN has been off the radar for most Felipe Reis* investors. both high-margin 20 products for CSN).  Playing the CSA acquisition risk.

863 20.7 7.1) 23.985 1.255 3.CSN Financial Highlights: P&L.8 3.2 5.7 FV/EBITDA 5. 2012E Others/Free Float 22.451 8.5 2.7 2.2 28.378) 0 (95) 2. home appliance.1) (7.2 28.5 million tons per year.1 2.189 49.9 1.5 (244.1 2.335 14.8% Sources for all charts and tables: Company reports and Santander estimates.889 0 2012E 13.8 48.0 2.1) 15.5 5.8 7.41 0.7 2.2 14.1) (1.1) (1.5 2. and distribution sectors with a broad variety of products (e.3) 15.com.8% of its voting stock. with approximately 51.43 2. Vicunha Siderurgia and other vehicles owned by the Steinbruch family control CSN.888 (35.9 4.3 2.049 (2.520 14.628) (13) 0 0 (716) 0 2012E (617) 0 (126) 186 (1.5 Dividend Payout (%) 46.335 0 2013E 5.1 4.50 (00.br Revenue by Division.6) (0.52 (00.428 (14.10 5.csn.7 8.2 1.903 0 2013E 11.34 0.540 14.2 19.5 11. Balance Sheet and CF Statement.6 9.364 14.5) 2.2 1.165 20.299) (1.7 6.833 11.746 17.377 46.011 4.108 7.699 9.82 0.2 3.0 10.3) 4.3 2.9 8.2 10.667 42.0 9.564 24.057 22.9 1.010 (43.489 38. David Salama (IR Director) and Luis Fernando Martinez (Commercial Director) Web: www.2 5.1 2.618 14.037 4.322 7.2 19.5% Vicunha Siderurgia 51.868 0 2012E 6.1 P/BV 2.1 4.695 387.40) 0.6 7.7) 138.082 Net Debt/EBITDA 2.795 34.243 50.4 34.977 15.437 9.14 0.2 2.7 7.3 2.6 2.826 11.035 3.1) 3.513 (3.6 (7.868 15.5 5.3 8.0) (0.042 9.870 3.0 30.3% Steel 54.7 2.1 14.1 (432) (207) 1.300) (20) 0 0 (1.987 2.853 9.618 0 2014E 4. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 16.779 Capital Employed 16.731 18.2 21.0% Shareholder Structure.091 12.99 1. with steel revenue representing 65% of the company’s total sales.6 7.6) 2013E 8.2 3.6 2.2 1.709 18.9 3. galvanized and tin plate products). 9M12 Exports 40.7) 16.9 FV/Revenue 2.758 10.601 48..06 3.5 2.566) 714 (590) (116.6) CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.3) 36.193) 0 (243) 361 (3.4 7.264 24.5 2.944 17.8 (2.200) 0 2012E (1.7 (234.903 30.688 17.1) (0.0 2.9 2.26 5.8) 139.305 (1.023 18.2 5.538) (138) 0 0 (777) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 15.49 0.417 (0.889 29.107 (4.6 20.376 18.940 10.6 (456) (189) 750 26.8 4.6 22.1 2.9 26.8 672 (88.576 8.9 21.8 14.g.5 (0.3 3.228 (1.5 2.0 22.809 23.21) 0.610 33.31 Companhia Siderúrgica Nacional (CSN) is the second largest flat steel producer in Brazil.698 (30.2 5.487 14.5 (8.8 22. CSN also is expected to produce 32.828 10.6 34.9 6.698 0 2014E 9.6) 5.219 11.49 0.8 6. In 9M12.698 31.2 2.687 10. CSN is listed on the Bovespa and has ADRs listed on the NYSE.648 8.398 3.8 28.2% Revenue by Market.630) (10) 0 0 (713) 0 2014E (736) 0 (315) 1.0 5.1 FV/EBIT 6.9 Capex/Revenue (%) Int Cover (%) 2013E 17.335 7.579) 0 (676) 2.9 26.575 (1.224 FINANCIAL RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E Net Debt 12.1) 2.3 P/CE 4.700 39.989 21.7 8.224 0 LT Debt 27.988 (6.3 6. slab.755 9.1 (213) (102) 594 n/m 7. 87 .0% Domestic 60.210) 0 0 (972) 0 2013E (1.2 1.5 30.172 19.8 Net Debt/Equity 1.174 24.838 5.257 3.417 21.1 8.6 5.433 30.7 2011A 9.3 50.7 49.3 6.633 1.4 17.3 3.2 US$ 2012E 8.1% Iron Ore 37.5) 2.3) 4.7 million tons of iron ore in 2012.326) 369 (305) (113.934 3.5 2.51 DPS 0.376 31.0) 16.53 BVPS 5.6 14.661 18.1 3.6 (979) (406) 1.1) (3.300) (296) 0 0 (1.8 (1.030 3. construction. exports generated 37% of consolidated net sales.0 50.7 ROE (%) 43.523 49.674 29.1 2014E 8.189 14.1 (1.431 410.171 (1.9) 4.134 22.719 (0.445 7.8 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 6.735 24.1 MARKET RATIOS FCF Yield (%) Div Yield (%) PER SHARE DATA 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 2.065) (84) 3.658 8.439 15.252 37.935 15.401) (22) 0 0 (1.8 347 (89.6% ADR's 25.233) (50) 2.4 17.635 10.6 ROCE (%) 33.471 16.589 9.9) (3.1) (7.300 8.4 20.8) 23.10 1.9 4.7 37.1 21.667) 0 2011A (555) 0 305 3. 9M12 Logistics Other 6.557 15.6 2. The company is a leading supplier to the steel packaging sector and also serves the automotive.70 2.1 5.82 1.769 20.0 11.428 (39.7 26. with a crude steel production capacity of approximately 5.2 2.705) (626) 0 0 (502) 0 2013E (681) 0 (47) 1.5 7.08 2.1) 36.67 0.1 1.598 2.7 28.9 20.4% 2.7 8.6 11. Key Personnel: Benjamin Steinbruch (Chairman & CEO).725 23./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (929) 0 511 5.0 (29.456 1.8 3.580 9.1 (2.485 (3. hot and cold rolled coils.6 2.202 n/m 7.443 6.977 22.2 R$ 2012E 16.2) 5.443) 0 2014E (1.5 2.1 2014E 18.757 4.476 4.189 0 2011A 8.3 21.0 5.417 27.5 2.6 20.668 19.77 5.3 (29.

50 RAISING YE2013 TARGET PRICE TO R$19. scheduling.  CYRE3 BZ Current Price (01/03/13) R$ 18.br Pedro Balcão Reis* Brazil: Banco Santander S. a sign. Cyrela has been focusing on expanding its responsibility in managing project construction sites (from 28% in 2007 to 70-75% in 2011 and about 90% of new launches).com. with gross and EBITDA margin expansion (respectively driven by the delivery of less profitable projects and the centralization of some operating activities that should further reduce G&A) as well as positive cash flow generation that we expect the company to use to reduce leverage. .706 Float (%) 64. leading us to maintain our Hold rating for the Fabiola Gama* Brazil: Banco Santander S. that the worst is behind us.50 FROM R$18. Although we expect Cyrela to continue working through partnerships with developers in several regions. After bottoming in 2Q11. 80 70 60 50 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet. . Santander estimates and company reports.11 TARGET PRICE: R$19.A.50  Investment Case: We believe Cyrela is on the right track to successfully conclude the turnaround of its operations. Nevertheless.50 / US$ 9. +5511-3012-5765 | pbalcao@santander. with launches growing from 10% to 15% in 2013. .20 . Cyrela’s ROIC has been improving quarter by quarter. Company Statistics Bloomberg  .2 Shares Outstanding .  More significant improvement in earnings is likely to take place in 2013. +5511-3012-7414 | fpgama@santander. 88 . which we believe should enable the company to have development projects that are more in-line with its original capital budgeting.11 / US$ 8. in our view.  New strategy favors organic projects over projects managed by partners . . Daily Vol (US$ Mn) 21. INFRA & RE CYRELA BRAZIL REALTY HOLD CURRENT PRICE: R$18. . . in our view. etc. . the bulk of the aforementioned earnings recovery is already embedded in stock price.A.2013 Latin American Universe Book BRAZIL—CEMENT. CONSTRUCTION.90 Target Price (YE 2013) R$ 19. which should gradually translate into higher profitability ratios.29 52-Week Range (R$) 13. .Mn 417 Price Performance (R$) Cyrela Brazil Realty IBOVESPA 110 100 90 .  2013 Outlook: We expect sustainable results going forward.48 Market Capitalization (US$ Mn) 3.com.19. We expect Cyrela to close 2012 with a gross margin of 33%—a 220-basis–point expansion since 2Q11.4 3-Mth Avg.br stock.

85 6.28 5.300 115 2011A 974 5.5 10.7 2013E 3.26 10.440 3.174 4.658 29.5 2014E 5.7 1.55 0.5 1.7 (63) (128) 387 33.028 2.80 4.2 14.0 16. Cyrela has 200 construction sites in operation in 16 Brazilian states and the Federal District.7 11.23 0.347 1.1 US$ 2012E 3.417 4.271 1.8 11.7 8.3 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 12.0 FINANCIAL RATIOS Int Cover (%) 2.5 0.3) 570 (11.170 3.4 8.3 8.1) 20.7 2.008 1.800 6.27 5.172 4.0 1.9 14.com.4 2.418 71 2014E 72 4.755 13.012 Capital Employed 7.148 1.2 1.02 DPS 0.8 17.5 8.9 2.00 4.393 8.6 1.3 8.8 Net Debt/Equity 0.0 14. The company’s main focus is on the development of residential apartments in prime locations.946 2.70 0.365 1.0 2.472 1.6 0.1) 530 (12.3 12.153 2.829 2.1 (86) (112) 297 (14.26 6.9 1.0 17.8 1.7 (129) (262) 794 40.0) 1.063 3.71 13.4 33.1) 4.277 3.045 15.186 159 2013E 163 9.107 3.830 8.6 0.7 28.7 3.3 Capex/Revenue (%) 3.1 12.387 2.0 8.3 1.1) 4.65 5.1 13.4 0.343 9.046 0.7 9.9 9.9 641 21.446 609 2012E 79 4.3 0.715 1.0 16.8 15.4% Sources for all charts and tables: Company reports and Santander estimates.CYRELA BRAZIL REALTY Financial Highlights: P&L.0 2.5) 1.399 1.486 1.596 1.0 3.60 2011 2012e 2013e 2014e Shareholder Structure.1 FV/EBITDA 9.011 12.554 1.7 1.6 1.0 1.2 1.4 13.223 (6.314 27.545 4.6) (0.4 2011A 3.3 11.5 1.764 (10.600 12.7 0.7 641 19.5 0.337 4.746 5.0 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 1. The company also operates in the economic segment through Living.3 8.17 0.0 15.7) 999 (8.0 2.702 2.7 FV/Revenue 1.4 3.1 (143) (188) 498 (17.9) 17.3 1.6 537 (13.6 1.4 1.593 80 2013E 77 4.143 (4.806 13.2 10.0 11.000 (13. 2011-14E 6.869 (4.513 1.1) 8. 89 .4 1.6 (3.0 12.216 2.423 2.083 54 LT Debt 2013E 6.1 2.4 3.8 12.1 1.6 13.185 1.445 3.192 3.0 1.514 1.4 9.233 14.588) (142) 71 2013E (22) 0 (440) 375 (66) 309 0 (172) (198) 66 2014E (26) 0 (76) 862 (62) 801 0 (639) (228) 56 2011A (20) 0 (315) 2 (123) (121) 0 690 (74) (94) 2012E (10) 0 (292) 9 (14) (5) 0 (816) (73) 36 2013E (11) 0 (215) 183 (32) 151 0 (84) (97) 32 2014E (12) 0 (35) 402 (29) 373 0 (298) (106) 26 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 1.4 1.9 2.14 14.1 1.1) 9.827 10.8 1.784 2.340 1.6 13.2 (3.345 8.9 14.314 25.223 (6.815 2.2) 17.3 1.95 PER SHARE DATA BVPS Cyrela Brazil Realty is among the largest homebuilders in Brazil both in terms of market cap and the value of developments launched in past years.20 4.7 10.0) 8.9) 20.089 8.5 1.5 1.155 3.412 4.5 12.7 8.578 3.788 7.143 2012E 158 8.5 2014E 2.016 (17.3 20.5 1.7 21./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (34) 0 (528) 4 (206) (202) 0 1.489 1.70 0.90 2.339 3.9 2.8 (71) (112) 291 (2.6 1.095 3.40 3.1 10.0 10.979 3.3 12.35 1.3 14.473 3.837 1.812 6.9 17.br/ir Launches (R$ billions).8 2.5 20.60 11.157 4.8 ROCE (%) 12.561 1.6% Treasury 2.8 P/BV 1.977 149 2014E 152 9. Key Personnel: Elie Horn (CEO) and Jose Florêncio Rodrigues Neto (CFO and IR) Web: www.5) 2.5 28.4 10.761 3. Balance Sheet and CF Statement.48 0.7 1.5 MARKET RATIOS FCF Yield (%) Div Yield (%) 2.7 1.945 1.18 1.150 24.364 3.4 0.4 35.2) 1.354 13.4 3.6 8.75 5.459 1.0 17.031 2.9 2.29 0.0 28.027 2.8 604 16. targeted mainly at upperto middle-income customers.7 6.167 1.0 20.2 12.4 Dividend Payout (%) 20.156 (125) (157) 2012E (20) 0 (569) 17 (28) (10) 0 (1.6 1.5 8.34 0.892 5.0 1.6 570 (11.1 R$ 2012E 5.289 1.7 1.6 0.8 24.312 2.19 0.6 (3) (83) 425 9.7 20.5 FV/EBIT 9.70 2011 2012e 2013e 2014e Contracted Sales (R$ billions).8 13.0 ROE (%) 11.962 Net Debt/EBITDA 2.0 8.4 P/CE 11.1% Free Float 64.8 9.7 6.057 6.029 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E Net Debt 2.3 8.926 20.6 (6) (179) 913 15.4 2.588 1.6 3.769 6. At present.932 (6. 2011-14E 5.cyrela.095 2.5 8.1 8.5 624 19.7 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.9) 20.2 9. as of September 2012 Elie Horn 32.8 (138) (218) 566 13.1) 20.93 1.9% Executives 0. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 6.2 11. created in 2006.127 25.2) (0.18 0.

Given that we now expect DASA’s success 70 in dealing with these challenges to take longer than we previously 60 50 forecasted.02 .  What‘s Changed: Given the delay in the company’s turnaround.Mn 311  No pain. 3-Mth Avg. combined with quality and efficiency) and financial performance (ROIC and cash flow generation) is still in place. with Daniel Gewehr* Brazil: Banco Santander S.33 growth and profitability. Santander estimates and company reports.50 / US$ 7. and 41%.4 Shares Outstanding .com.104 new imaging equipment in 2012 (consolidated capex 2012E to Float (%) 100.50  Investment Case: We believe that DASA’s strategy of balancing long-term business sustainability (potential double-digit top-line growth. which is lower than the multiples of the Brazilian diagnostics’ mid-large M&A transactions (12. we have adopted a more conservative outlook.0 reach R$240 million).50 LOWERING YE2013 TARGET PRICE TO R$16. EBITDA and adjusted net income estimates by 4%. 40 j-11 m-11 a-11 d-11 a-12 a-12 d-12 Sources: FactSet.2013 Latin American Universe Book BRAZIL—HEALTH CARE DASA BUY CURRENT PRICE: R$13. CFA Brazil: Banco Santander S. Overcoming 90 these challenges is necessary for the sustainability of DASA’s 80 business. no gain. 13%. respectively.77 (especially in 2H13) will represent a turning point in terms of Target Price (YE 2013) R$ 16. 90 .  Investor Day highlights: Heading in the right direction. EBITDA and adjusted net income. in our view. we expect 2013 to be a turning point in terms of sales.A. those related to the company’s: (1) call center. +5511-3012-5787 | dhgewehr@santander.50 FROM R$17.17. We are 18% below the sell-side consensus for EBITDA in 2013. We estimate growth rates of 9%. and 30%.com. respectively.A. We believe DASA has many challenges to Price Performance (R$) overcome in the short term.8x EBITDA). +5511-3012-5914 | bgiardino@santander. DASA’s management team showed that it is taking the right long- Company Statistics Bloomberg DASA3 BZ term sustainable strategy direction and believes that 2013 Current Price (01/03/13) R$ 13.  2013 Outlook: After the company posted a poor performance in 2012.4x. DASA is trading at an FV/EBITDA multiple of 10. after investing more than R$50 million in 52-Week Range (R$) 11.79 TARGET PRICE: R$16. we are lowering our net sales. Daily Vol (US$ Mn) 10.79 / US$ 6. and (4) working capital.br the new management. (2) front-end system. specifically. 18%.45 Market Capitalization (US$ Mn) 2.br Bruno Giardino*. (3) brand DASA IBOVESPA 110 100 perception in São Paulo.

3 0.020 4.2 15. 91 .4 8.3) 18. Net sales in 2011 totaled R$2.8% Imaging (PSC & Hospitals) 35.4 29.9 1.4 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.0 (104) (85) 233 44.6 6.6 17.6 9.000 types of tests for clinical analysis and imaging diagnostic services.6 1.4 5.5 11.4 4.610 1.156 4.7 8.0 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 0.610 2.28 0.1 8.5 1.9 0.7 US$ 2012E 1.2) 373 (20.6 1.1 6.470 2.6) 420 (24.1 781 40.2 3.003 3.1% Lab-tolab 9.13 0.3 900 1.3 2011A 1.7% HMOs 17.99 Diagnósticos da America (DASA3) is the largest private provider of medical diagnostic services in Latin America and the fourth largest in the world.1) 4.9 15.4 15.9 25.6 21.9 10.6 18.3 2.4 20. 3Q12 Hospitals 9.240 608 128 LT Debt 2013E 2.2 million medical diagnostic tests in 2011.1) 374 0.5 466 47.2) 4.6 0.1 1.36 3.0 6.0% Dulce Bueno 11.3 15.3 226 5.2 2.23 (00.0% Free-float 66.6) 2.4% Lab-to-lab 9.4 0.18 8.4 5.3 25.3 (1.345 3.5 17.2 3.5 273 (27.4 21.0 331 21.1 25.1 FV/EBITDA 10.4 0.6 37.0 5.4 (113) (57) 161 61.9 10.429 301 2011A 155 535 1.br Sales by Segment.2 1.473 9.182 5.4 0.8 13.403 2.0 25.7 3.3 0.0) 12.6% Petros 10.dasa.19 0.5 3. Founded in 1965.9 0.4% Payment Sources.4 224 34.0 152 8.6 183 20.180 million.2 12.4 2013E 1.616 1.0 1.669 1.0 494 17.283 568 1.2 10.3 960 17.32 0.52 0.8 2. Balance Sheet and CF Statement.8 16.5 7.5 (1.176 3.8 1.6 4.06 0.3 6.601 1.6 1. all located in Brazil.0 (45) (37) 101 37.6 6.1 Net Debt/Equity 0.817 1.1 6.2 8.737 1.3 7.156 (11.com.9 1.542 1.591 3.5 21.03) 0.7 8. Key Personnel: Dickson Tangerino (CEO).2 4.0) 214 (35.02) 0.0 2.0 10.75 0.1% Public Segment 7.0 28.4% Selfinsurers 14.3 ROE (%) 5.2 (98) (39) 87 55.4 0.5 13. It is listed in the Novo Mercado.1 11. 3Q12 Public Segment 7.5 2014E 1.6 4.355 2. DASA can perform over 3.4 12.24 0.4 2.1 17.7 20.5 14.8 18.2) 18.4 8.4% Shareholder Structure.374 2.7 R$ 2012E 2.3 0.5 140 (37.6 418 11.81 9.8 5.7 FV/Revenue P/BV FCF Yield (%) Div Yield (%) PER SHARE DATA 1.1 ROCE (%) 9.6 605 22.2 13.7 331 45.7 1.6 2.529 539 1.7 7.2 7.0 P/CE 17.0 0.92 3.9 8.113 4.8) 2.469 2.97 3.4% Clinical (PSC & Hospitals) 47.128 480 529 500 480 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 866 922 865 698 462 435 385 297 Capital Employed 3.5% Insurers 19.2 0. with 525 units (or patient service centers). 3Q12 Edson Bueno 12.2 14.0 MARKET RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 33.4 375 27.1 FV/EBIT 15.538 3.0 10.2 1.134 269 626 1.0 15.37 4.9 25.8% Individuals 8.47 0.180 45.8 10.3 817 12.536 Net Debt/EBITDA 1. DASA processed more than 37.DASA Financial Highlights: P&L. Cynthia Hobbs (CFO) and Paulo Bokel (IR Officer) Web: www.232 333 2012E 412 1.602 3.6 9.1 (62) (27) 51 (41.217 633 133 2014E 275 677 1.125 1./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (126) 8 (218) 282 (325) (77) 337 (27) 0 2012E (146) 41 (86) 333 (243) 90 162 (36) 0 2013E (163) 0 (72) 422 (206) 194 0 (25) 0 2014E (184) 0 (53) 553 (210) 311 0 (40) 0 2011A (75) 5 (130) 168 (194) (46) 201 (16) 0 2012E (75) 21 (44) 170 (124) 46 83 (19) 0 2013E (75) 0 (33) 193 (94) 89 0 (11) 0 2014E (80) 0 (23) 240 (91) 135 0 (18) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 291 1.6) 12.1 26.408 3.355 657 177 2012E 195 555 1.08 BVPS 8.218 7.14 (00.6 7.3 10.013 631 1.419 299 2013E 475 1.136 254 648 1.5 2014E 2.742 591 1.301 52. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 2. the highest classification in terms of corporate governance in Brazil’s Bovespa stock exchange.33 DPS 0.1 (121) (52) 100 (31.0 1.2 18.132 (2.107 263 628 1.42 8.2 9.8 6.9 8.234 669 141 2013E 211 598 1.1 11.2 41.912 1.4 4.5 555 38.4 (52) (26) 74 44.3 25.414 2.7 263 16.8 729 (6.6 421 27.173 2.16 0.6 0.6 1.4% Sources for all charts and tables: Company reports and Santander estimates.283 303 625 1.3 7.263 3.5 23.425 300 2014E 646 1.3 25.6 1.6 13.6 1.9 15.6 2.7 3.4% Others 1.7 FINANCIAL RATIOS Net Debt Capex/Revenue (%) Int Cover (%) Dividend Payout (%) 27.801 13.120 1.5% Medical Cooperative s 12.6 2.2 (164) (66) 145 48.

00 / US$ 8. CFA Brazil: Banco Santander S. 92 . we Market Capitalization (US$ Mn) note that MDP and MDF prices were up approximately 12% and 6%.5x in 1H13E and R$850 million cash on hand. Daily Vol (US$ Mn) 8.78 TARGET PRICE: R$17. and concerns about wood panel Bloomberg overcapacity are overstated. Float (%) respectively. With its net debt/EBITDA peaking at 1.14 (Berneck and Arauco) are ramping up without pressuring prices.7 3-Mth Avg.A. Santander estimates and company reports. based on (i) positive structural domestic demand drivers.10 at nearly 90% of effective capacity. Federal tax cuts and other incentives for the civil construction.com.00  Investment Case: We maintain our positive view on Duratex’s story Felipe Reis* for 2013. furniture.26 Target Price (YE 2013) R$ 17. in 2012.br with the financial ability to add further growth (organic + M&A).  Unleveraged balance sheet at peak of investment cycle = further growth opportunities ahead. Alex Sciacio*.2013 Latin American Universe Book BRAZIL—PULP & FOREST PRODUCTS DURATEX BUY CURRENT PRICE: R$14.br (ii) a benign supply-demand balance for the wood panel industry after solid growth and price gains in 2012. we believe Duratex can afford a new cycle of acquisitions and/or organic expansion without putting its financial health at risk. and (iii) maturation of its current investment cycle (15% capacity growth at wood and 22% at Deca).78 / US$ 7.  2013 Outlook: We believe domestic demand fundamentals should Company Statistics remain positive in 2013. Price Performance (R$) Duratex IBOVESPA 110 100 90 80 70 60 50 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet. Brazil: Banco Santander S. as the government remains firmly committed to boosting domestic economic activity.com. We expect 8% YoY volume growth and flat 4. +5511-3012-5870 | azsciacio@santander. and new supply additions DTEX3 BZ 52-Week Range (R$) 8. +5511-3012-5758 | ffreis@santander.  We see upside risk from additional government stimuli.Mn 556 wood panel prices (in real terms) for 2013. and building materials sectors have been helping demand amid sluggish GDP growth and were recently extended.4 Shares Outstanding .A. The industry should end 2012 running Current Price (01/03/13) R$ 14.036 39.94 .15.

2 42.4% Shareholder Structure.933 4.3 36.6 849 17.8 319 (7.3 1.6 12.3 (134) (148) 445 12. 93 .0 12.42 DPS 0.9 2014E 1.9 12.6 1.9 2.6 19.0% Sources for all charts and tables: Company reports and Santander estimates.4) 18.967 1. Ligna 20.8) 571 (5.7 124.3 0.5 2.229 4.17 BVPS 7.5) 486 1.8 2.384 634 775 715 631 Capital Employed 5.9 2014E 4.000 hectares of planted forest area.6 18.633 242 1.915 2.250 1.37 0.0% Others/Free Float 40.4 (0.970 8.765 283 1. Henri Penchas (CEO) and Flavio Donatelli (CFO) Web: www.7 5.5 1.4 2.150 3.024 4.983 8.072 0 2014E 395 1.181 3.501 1.4 1./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A 274 88 (105) 632 (636) 110 0 273 (159) 0 2012E 331 143 (62) 809 (973) (26) 0 277 (139) 0 2013E 344 (5) (117) 667 (450) 50 0 0 (168) 0 2014E 369 (6) (98) 764 (450) 117 0 0 (197) 0 2011A 164 52 (63) 377 (380) 65 0 163 (95) 0 2012E 170 74 (32) 416 (500) (13) 0 142 (72) 0 2013E 168 (2) (57) 326 (220) 24 0 0 (82) 0 2014E 172 (3) (46) 356 (210) 55 0 0 (92) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 726 1.550 1.6 28.0 2.5 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 0.8 10.3 10.1 28.110 9.548 8.379 2.026 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E Net Debt 1.8 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 12.255 620 3.6 US$ 2012E 1.5 16.78 PER SHARE DATA Duratex is the a top ten manufacturer of wooden panels in the world and the biggest player in the Southern Hemisphere.6 19.689 1.9 7.033 6.13 0.007 4.125 0 2013E 357 1.5) 12.74 0.2 13.0 1.5 81.90 0.1 Net Debt/Equity 0.440 2.0 10.0 28. The company is also a leader in the domestic bathroom and kitchen vitreous china and metal fittings segments through its Deca division.0 12.8 FCF Yield (%) 2.6 1.773 13.4 1.218 14.0 344 (14.9 6.028 2.030 2.7 13.141 3.5 353 10.br Sales by Division.2 19.4 29.6 1.0 1.2 11.0 10.814 454 2.668 3.0) 801 (9.250 0 2014E 867 2.4 11.990 3.024 4. Duratex is selfsufficient in wood.20 0.3 39.2) 19.6% Domestic 95.5 10.250 0 2013E 750 2.2 3. The company is controlled by Itausa (one of the largest financial conglomerates in Latin America) and the Ligna Group (composed of former Satipel shareholders). 9M12 Exports 4. holding 230.256 13.9 28.9 (119) (104) 397 5.0 2.4 ROE (%) MARKET RATIOS 10.012 (6.607 2.3 (66) (72) 217 6.1 10.4 (73) (48) 224 (13.284 10.050 1.34 7.6 4.3) 12.2 11.3 9.074 3.125 1.6 FINANCIAL RATIOS Capex/Revenue (%) Int Cover (%) 3.9 6.1 2.9 40.000 pieces per year of metal fittings.2 2.9 31.3 10.5 1.893 560 3.0 1.305 2.72 0.3 1.67 3. as of December 2012 Cia.8) 12.512 2.4 29.3 9.000.44 0.3 1.6) 27.duratex.5 Div Yield (%) 3.826 8.4 (122) (80) 375 (17.7 1.7 FV/EBIT 9.6 21.9 1.2 521 7.7 1.3 21.32 7.504 4.3 0.25 0.2 9.2 28.3) 478 (5.9 6.561 505 3.4 11.1 7.6 1.800.8 11.5 1. 9M12 Deca Division 35.129 Net Debt/EBITDA 1.2 606 6.8 604 (1.69 3.30 0.422 1.5 723 16.1) 19.7 945 18.5 19.3) 0.915 0 2012E 700 2.6 R$ 2012E 3.91 million m3 in five production units located in the states of São Paulo.15 0.9 15.124 3.90 3. with annual capacity of 3.688 (4.250 0 2011A 387 1.560 6.759 267 1.250 2.0 FV/EBITDA 7.021 0 2012E 350 1.5 18. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 2.6 671 10.9 121.7 2.4 ROCE (%) 10.9 (66) (100) 233 7.0 20.0% Itausa 40.8 620 7.439 15.3 11.8 62.2 11.283 6.8 15. Minas Gerais and Rio Grande do Sul.0 1.33 0.1 FV/Revenue 1.243 11.026 0 LT Debt 2013E 3.7 2. Balance Sheet and CF Statement.6 12.2 P/BV 1.061 2.072 1.3 0.7 63.1 1.0% Sales by Destination.0 576 (18.000 pieces per year of vitreous china.0 8.781 253 1.5 11.6 2.7 20.6 396 12.4 0.362 7.1 37.1 79.80 0.9 (142) (214) 499 12. with 100% voting shares and tagalong rights for minority shareholders.021 1.608 6.744 14.3 8.128 3.6 4.2 2. Key Personnel: Salo Davi Seibel (Chairman).468 7.024 4.4 0.1 P/CE 44.4 0.DURATEX Financial Highlights: P&L.8 1.3 0.1 2013E 1.6 568 9.0% Wood Division 65.9 11.9 1.7 5. which together hold 58% of the company’s stock.1 11.0) 27.250 2. with installed capacity of 17.2 Dividend Payout (%) 35.067 12.101 1.9 3.9 1.189 1.1 28.74 8.7 2011A 1.5 44.5 10.1 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.3 10.3 10.29 3.3 10. and 9.com.0 18.3 44.9 (61) (54) 204 (8.862 2.004 2.7 (0. Duratex is listed in the Bovespa’s Novo Mercado.014 1.0 16.35 0.3) 0.39 0.8 1.142 2.4 4.

(3) We continue to see overhang risk resulting from the stake in Impregilo. We estimate Ecorodovias would 52-Week Range (R$) have to generate R$40 million per year in synergies and be able to Market Capitalization (US$ Mn) renew the concession contract under current conditions to reach the R$1.18.br the container terminal Tecondi (acquired last May).13 . mainly through Bruno Amorim* Brazil: Banco Santander S.15 IBOVESPA 120 as unlike their European peers. we estimate that in 2013 (1) the top line will grow 12%. We estimate a 200-basis-point drop in the average 140 Selic rate in 2013.74 under more demanding conditions. (2) We estimate total return for the company of just 12%.br (1) accelerating GDP growth. However.  ECOR3 BZ Current Price (01/03/13) Over 70% of total debt linked to Selic. and (3) significant investment opportunities (including new concession auctions and amendments to existing ones). Daily Vol (US$ Mn) 9. (2) EBITDA will grow 15%. Our valuation does not Bloomberg include any synergies and includes a renewal of the concession R$ 17.com. +5511 3012-6535 | rmanda@santander.3 Shares Outstanding .  2013 Outlook: On the back of stronger GDP growth in 2013 (3% versus 1% in 2012). better margins on logistics ex container terminal and lower Selic rates (about 70% of Ecorodovias’ debt is linked to Selic).62 Target Price (YE 2013) R$ 19.00 / US$ 9.Mn 559 Price Performance (R$) Ecorodovias positive EBITDA growth. on which we have a very negative view. Company Statistics while our appraisal stands at R$708 million. 100 80 60 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet.com.A.  Negative view on port acquisition.2013 Latin American Universe Book BRAZIL—TRANSPORTATION & INFRASTRUCTURE ECORODOVIAS HOLD CURRENT PRICE: R$17.816 Float (%) 25.4 billion. we expect a positive impact from lower 160 financing costs.A. we maintain our Hold rating on Ecorodovias for the following reasons: (1) It has an increasing exposure to logistics (35% of revenues). +5511-3012-5765 | pbalcao@santander.00  Investment Case: We reiterate our conviction that the environment Pedro Balcão Reis* for Brazilian infrastructure players continues to be very positive.com. Santander estimates and company reports.4 billion for the acquisition of the container terminal Tecondi. with Brazil: Banco Santander S.55 / US$ 8.55 TARGET PRICE: R$19. most of the debt is floating rate. (2) decreasing interest rates. Ecorodovias paid R$1. In addition to Ecorodovias’ 4. 12. at Santos Port. Over 70% of Ecorodovias’ debt is CDI-linked. +5511-3012-6016 | bamorim@santander.A. This is important for Brazilian toll-road operators.8 3-Mth Avg. 94 . and (3) net profit 47%.br Renan Manda* Brazil: Banco Santander S.

040 1.2 34.782 2.4 89.2 14.5 3. 95 .0% Sources for all charts and tables: Company reports and Santander estimates.4 58.1) (14.8 620 26.07 1.34 0.832 2.9 3.9 57. and Ecosul.681 4.1 3.6 10.6 44.40 0.885 2.610 2. Key Personnel: Marco Antônio Cassou (Chairman).351 30.9 5. Ecorodovias listed shares in the Novo Mercado.353 9.2 1.6 17. as of November 2012 Free Float 29.1 1.1 2.8 22.216 459 1.3 (156) (167) 308 44.5 3.646 2.9 1.31 BVPS 3.3 ROCE (%) 33.2 63. Ecopistas.645 256 2013E 325 483 1.2 554 17.5 2.3 5.6 58.1 0.1 11.40 Ecorodovias Infraestrutura e Logística S/A—the Ecorodovias Group—is a large integrated infrastructure logistic firm.3 46.0 2.2 5.7 1.755 3. which should be fully operational between 2012 and 2015.7 ROE (%) 20.4 43.061 34. Currently.73 1.9 0.324) 0 1.638 11.7 16.7% Ecovias dos Imigrantes 28.59 DPS 0.0 43.9 3.156 862 3.95 2.9 (223) (127) 213 (6.660 1.7 4.7% Shareholder Structure.4 58.0 7.630 5.80 1.3 8.280 411 1.2 9.6 FV/EBIT FCF Yield (%) Div Yield (%) PER SHARE DATA 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 0.7 1.780 540 2012E 392 669 3.5 1.888 2.146 2.8 471 (14.004 11.8 10.0 1.4 22.4 MARKET RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 20.2 23.7 9.9 23.0 3.8 FV/EBITDA 8.4% Ecopistas 40.273 4.8 1.3% Ecorodovias (exTecondi) 75.9 936 28.2 5.1 50.2 14.234 26.0) 48.5 1.148 3.7 1.829 566 4.295 1.3 9.0 58.4 4.60 0.1 23.263 2.5 1.7 2.55 0.547 14.2 11.1 22.7 2014E 1.0 7.98 1.1 57.869 1.782 3.8 7.75% stake in STP (a company that provides electronic toll collection services).21 0.2 66.4 Net Debt/Equity 0.0 8.402 611 1. 2012E Rodovia das Cataratas 12.0 46.1 729 28.2 4.3 24. Marcelo Guidotti (CFO) and Raquel Turano (IR Manager) Web: www.869 1.7 1.6 4.34 4.7 23.7) (13.3 826 4. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 1. In addition.1 4.9 (427) (242) 408 6.0 1.088 1.301 1.26 0.6 1. Ecorodovias holds a 12.0 Capex/Revenue (%) Int Cover (%) 5.0 3.6 9.221 15.770 5.7 69.80 4. The company’s businesses include three intermodal logistic assets.5 2011A 972 36.7 23.1 63.2 11.4 11.2 16.4 14.7 1.0) 3.403 3.2 19. In March 2010.209 499 2013E 634 942 3.6 42.5 4.8 44.926 1.055 2.134 2.0 7.338 1.792 46.922 Net Debt/EBITDA 1.5 5.361 45. Ecocataratas.38 0.9 645 3.756 1.ECORODOVIAS Financial Highlights: P&L. a segment of the Brazilian Stock Exchange with the highest corporate governance standards.816 2.5 (3.2 56.3 5.7 4.918 5.0 2.272 490 4.424 3.4 15. the company’s operations include five highway concessions: Ecovias dos Imigrantes./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (250) (80) (28) 694 (382) (286) (10) (147) (192) 0 2012E (670) (60) (56) 696 (2.450 km.4 706 13.7 1.6 4.2% Revenue Breakdown.9 46.1 18.7 2014E 2.339 1.8 788 (19.5 US$ 2012E 1.320 1.970 604 1.0 (141) (177) 329 7.7 794 12.1 0.4 89. Ecovia.6 8.544 66 1.114 3.221 22.5 58.8 2.028 9.7 36.087 4.4 (183) (218) 383 (35.5 23.0 (278) (350) 651 8.4 19.2 9.1 4.3 (304) (327) 600 46.5 7.0 23.2 24.ecorodovias.186 1.476 290 2.8) 48.572 4.3 4.br Traffic Breakdown.3 2. The total highway network under control extends over 1.8) 23.3 2.5 R$ 2012E 2.9 39.106) (1.882 1.4 (109) (130) 229 (31.6 5.2 FV/Revenue 5.003 949 288 2012E 201 343 1.536 236 2.37 3.51 0.3 P/CE 12.5% CR Almeida Group 64.6 10.16 0.20 0.1 46.com.209 138 2011A 338 468 1.392 (225) 2 2013E (689) (60) (1) 854 (374) 305 0 0 (283) 0 2014E (542) (65) (10) 999 (525) 304 0 0 (337) 0 2011A (149) (48) (17) 414 (228) (170) (6) (88) (114) 0 2012E (350) (31) (29) 364 (1.69 0.6 Dividend Payout (%) 32.7) 3.3 23.574 2.446 802 3. Marcelino Rafart de Seras (CEO).4 1.429 LT Debt FINANCIAL RATIOS 2013E 2.2 P/BV 4.870 2.4 2.2 19.243 1.5 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E Net Debt 1.7 1.996 1.3 1. 2012E Tecondi 24.472 1.5 42.645 122 2014E 388 552 1.1 8.121 3.1 3.628 29.4 2.6 7.155 Capital Employed 3.5% Impregilo 6.444 1.100) (692) 0 727 (117) 1 2013E (353) (31) (0) 438 (192) 156 0 0 (145) 0 2014E (275) (33) (5) 506 (266) 154 0 0 (171) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 635 878 3.2 56.9% 7.6 1.41 0.3 2013E 1.9% Ecosul Ecovia Rodovias do Caminho do Sul Mar 10.7 626 12.645 2.7) 17.209 238 2014E 807 1.038 20.1 (4.23 2.7 20.644 3.8 40.1) 23. Balance Sheet and CF Statement.3 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.

) Price Performance (R$) Eletrobras Eletrobras proved (once and for all) to be more of a speculative type 120 of investment. The Market Capitalization (US$ Mn) company’s future will depend on two issues: (1) how it invests the Float (%) indemnification/cash it will receive. the company should continue paying ELET6 mandatory dividends. we continue seeing value destruction policies for ELET3 shareholders.49 fact. and (2) if it is able to implement its 7.441 23.69 R$5. 96 .69/R$5.com.43 52-Week Range (R$) 7. Thus. 60 40 20 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet. given that the Brazilian federal government clearly 100 gave a message that Eletrobras’s shareholders come second to IBOVESPA 80 government policies. Santander estimates and company reports. Daily Vol (US$ Mn) 13.A.43 FOR PN/ON (FROM R$9.2013 Latin American Universe Book BRAZIL—UTILITIES ELETROBRAS UNDERPERFORM/BUY CURRENT PRICE: R$11.com.br Maria Carolina Carneiro* Brazil: Banco Santander S.69 / R$ 5. In ELET6 BZ / ELET3 BZ Current Price (01/03/13) R$ 11. we estimate an asset write-off of R$10-15 billion for Eletrobras. in our view. While Eletrobras will be entitled to receive R$20 billion in indemnification from MP579.53 RAISING YE2013 TARGET PRICE TO R$16. +5511-3012-6682 | macarneiro@santander.br funds will not flow back to common stock (ELET3) shareholders and will continue being used in risky and low-return investments such as Belo Monte.353 cost-cutting program to avoid running with a negative EBITDA. Therefore.Mn 1. we expect it will look more like a bank with a power genco.98 Target Price (YE 2013) R$ 16.30 . we believe these Marcio Prado* Brazil: Banco Santander S. If Eletrobras’s estimates of an indemnification value of R$20 billion is correct (we think it is).4 3-Mth Avg. If the write-off wipes out profit reserves.20 / R$ 6. Eletrobras will be a very different company in 2013.A. thus supporting our Underperform rating.20 TARGET PRICE: R$16. Company Statistics Bloomberg  2013 Outlook: With EBITDA falling and the cash balance rising.69)  Investment case for ELET3: We are maintaining our Underperform rating for ELET3 given the sharp revenue and EBITDA reduction stemming from MP579 implementation.48 (15% yield).  Investment case for ELET6: We are upgrading ELET6 to Buy from Underperform given that we believe preferred stock (ELET6) shareholders will continue receiving their bylaws’ guaranteed annual dividend per share of approximately R$1. (We believe that part of the cost-cutting program is implemented.27. This write-off will not wipe out Eletrobras’s R$20 billion profit reserves. +5511-3012-5751 | mprado@santander. We estimate an 82% YoY reduction in EBITDA in 2013. the dividend payment could be interrupted.1 Shares Outstanding .

2 0.6 0.6 78./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (1.137 8.1 23.593 26.5 0.294 10.9) (8.5 386 (34.7 8.155 57.461 (14.572 111.873 4.232) 0 (1.4 8.6% Regulated Market 47.8 FV/EBIT 7.417 (12.898 12.727 (15.8) 13.605) (1.3 34.2 0.074) 1.5 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.2 0.0) (0.388) (2.eletrobras.000 31.760 2014E 17.31 0.035 2011A 10.8 0.250 13.646 23.546 5.9 P/CE 6.9 2.298 (1.2) (13.284 10.4 5.5 0.9 22.9 2014E 13.8 1.4) 15.632 15.0 17.730 FINANCIAL RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt Net Debt 2013E 26.05 PER SHARE DATA BVPS Eletrobras is a state-owned holding company.28 59.0) (0.393) 0 (2.27 0.763 5.6 0.15 DPS 1.748 86.62 0.0 4.3 0.933 (3.2) FV/Revenue 1.8) 1.753 14.6) 8.3 FV/EBITDA 4.049 (22.439 2013E 7.9 7.2) Net Debt/Equity (0.3) 1.13 56.2 0.886 27.188 (1.948) 0 515 4.072 23.229 52.773) 0 2012E (1.4 5.2 1.6 1.533 10.341) (547) 0 2013E (941) 0 359 935 (1.17 59.5 12.874 60.1 4.194 0 2.4) (0.855) 0 3.041 28.4 436 (90.7 13.300 (18.069 30.5 0.2 0.0) Capex/Revenue (%) 24.1) (0.7 12.4 11.2 17.0 Int Cover (%) 1.002 17.415 108.681 11.243) 4.76 3.522 12.5) (0.269 (7.6 814 (124) 426 (17.1 2.221 (8.4 0.2 FCF Yield (%) 3.398 2012E 16.029) 0 1.2 546 (640) 2.223) 713 0 1.0) (0.4 3.667 76.3) 1.6 0.5 3.0 (20.7 22.31 1.790 165.1) 15.ELETROBRAS Financial Highlights: P&L.2 4.0) (0.184) (1.5 0.7 829 (30.247 34.044 1.124 (172) 0 2011A 19.5 (5.349 113. 97 .3 82.733 23.665 10.7 ROCE (%) 3.5 0.7) 1.9 12.033 LT Debt 43.5 3.3 71.3 6.19 0.543 2012E 8.9 13.927 31.894 21.6 0.844 54.1% Eletronorte 23.3) 587 (82.6 18. Eletrobras also acts as bank for the electricity sector.719 (1.1) (0.5 16.2) 2.518 41.32 30.738 10.8 176 (59.352 75.34 28.7 20.905) 0 726 1.8 82 (61.27 0.5 Dividend Payout (%) MARKET RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 9.2) (0.142 26. 9M12 Furnas 21.228 74.572) (638) 0 (96) (182) 0 2014E (908) 0 240 2.81 59.6 379 (58) 198 (22.2 234 (1. with a total of 3 million customers.3 1.5 2013E 13.3 0.9) 1.000 km in lines.969 3.3) 1.7 3.7 12.7 4.7 4.4 35.352 111.13 0.602 23.495) (2.411 13.2) 16.108 (12.971 38.103 (5.3 0.181 27.9) 1.2 140 (656) 2.1 4.329 23.5 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 2.854 31.636 1.0 12.972 13.3 6.597 (2.937 (4.14 0.5 6.078 57.6) 3.2) (0.78 0.79 0. 9M12 BNDES / BNDESPAR 21.0 24.7 16.6 531 (151) 517 (87.5 7.261 18. distribution.018 5.966 28.199 (18.124 2014E 7.8) 9.6% Federal Government 45.645 108.23 27.3 6.236 58.4 5.098) 3.7) (0.888 27. Eletrobras controls 6 distribution units.829) (1.624 (1.628) 670 0 1. Eletrobras has 59.3 28.125 59.6 262 (75) 255 (88.7 2.418 83.9 28.060 (1.3 (16.159 10.643 16.892 (3.438 0 2.2 0.7% Installed Capacity per Subsidiary.798 14.317 22.562 29.5) 9.535) (107) (89) Capital Employed 107. with 38GW in installed capacity (including the 50% stake in Itaipu).177 50.926 77.6% Sources for all charts and tables: Company reports and Santander estimates.200 114.0) 10.861 58.4 0.0 (21.4) 6.7 21.9 24.189 (82.781 (0.2) (0.5 2011A 17.738 80.0 8. having R$5 billion in loans to companies and minority equity participation in 30 utilities.550 36.6) 0.7% Others 32.0) (13. around 60% of the Brazilian transmission market.292) 0 (194) (369) 0 2014E (1.994) (225) (196) (2.244 162.65 1.506 6.599 3.107 21.0 ROE (%) 4.876 9.8% Chesf 27.606 2013E 15.1 2.865 20.353 (24.8) (0.895 52.408 80.9 5. and transmission assets in Brazil.2 0.059 45.872 5.4 11.412 (369) 0 2011A (1.0 3.7 3.2 17. In the transmission segment.5 P/BV 0. Balance Sheet and CF Statement.031 55.8 0.510 80.894 18.761 45.4 215 (91.5 2.059) 0 2012E (955) 0 2.6 R$ 2012E 31.264 55.com Sales by Segment.40 0.8% Others 27.1 0. controlled by the Brazilian federal government (FedGov).062) 0 2013E (1.5 3.179 56.329 3.7 71.0) (0.29 30.9) 0.4 2.6) 6.7% Itaipu 35.872) (1.9) (8.3 29.809 40.1) 4.38 0.3) 21.2% Shareholder Structure. Key Personnel: Márcio Pereira Zimmermann (Chairman).5 8.535 59.188 9.5 2.724) 0 3.0 6.9 2014E 29.9 0. José da Costa Carvalho Neto (CEO).325 163.996 109.5 5.495) 1. 9M12 Free Market 16.977 47.976 53.7 3.0 17.8) 4.7 Div Yield (%) 4. Eletrobras has nearly 40% of participation in Brazilian generation market. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 29.5 2.9 12.695 Net Debt/EBITDA (0.2 0. which operates generation.3) 2.469 57.733 66.6 US$ 2012E 16.965 163.7 (16. Armando Casado de Araujo (CFO) and Arlindo Soares Castanheira (Head of IR Division) Web: http://www.

 2013 Outlook: We estimate EBITDA to decline to R$735 million.2013 Latin American Universe Book BRAZIL—UTILITIES ELETROPAULO UNDERPERFORM CURRENT PRICE: R$16. in our view. Daily Vol (US$ Mn) 7. and (4) the implementation of the cost-cutting program.A.2 3-Mth Avg.29 / US$ 4. In addition. Therefore. we forecast no dividend payments for 2013.29. we expect updates on Eletropaulo’s ongoing legal dispute with Eletrobras. Market Capitalization (US$ Mn) 13. Most recently.55  Investment Case: We maintain our Underperform rating on the Marcio Prado* name based on the harsh tariff revision process approved by Aneel Brazil: Banco Santander S. the latter of which we do not expect to fully benefit the company until 2014. (3) negative effects from Parcel A. Santander estimates and company reports. The court’s initial verdict held Eletropaulo responsible for this debt. REPLACING YE2012 TARGET PRICE OF R$20.387 Float (%)  New estimates. 98 . Company Statistics Following the tough parameters released by Aneel. pressure to invest more in order to improve quality of service and negative Maria Carolina Carneiro* Brazil: Banco Santander S. +5511-3012-6682 | macarneiro@santander.39.02 1.com. We believe Eletropaulo will continue to suffer from depressed margins. the company is appealing.A. +5511-3012-5751 | mprado@santander.  Still on the tariff revision. the regulatory Bloomberg agency has not decided yet if it will charge retroactively the higher net ELPL4 BZ Current Price (01/03/13) R$ 16.87 / US$ 8.br effects from the implementation of a redundancy and early retirement program. (ii) new investment and costs guidance.br and the lack of visibility on dividend payments.Mn 167 (i) recently released results.12 .6 Shares Outstanding .com. We have revised our estimates to include: 56.3 billion. some negative news flow ahead.29 Target Price (YE 2013) R$ 9. the total disputed amount is R$1. resulting from: (1) the full impact of the tariff revision.87 TARGET PRICE: R$9. (2) the first reimbursement parcel for the delay in the tariff revision process.29 INTRODUCING YE2013 TARGET PRICE OF R$9.42 RAB for the entire second revision cycle—a significant downside risk 52-Week Range (R$) for Eletropaulo. Price Performance (R$) Eletropaulo IBOVESPA A-11 A-12 140 120 100 80 60 40 J-11 M-11 D-11 A-12 D-12 Sources: FactSet. (iii) new macroeconomic assumptions. and (iv) an updated contingency provision for the Eletrobras dispute.

1 7.648 3.134 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E Net Debt 3.737 1.8) (1.0 5.2 1.824 1.1 (30) (751) 1.036 4.5 15.034 4.7 92.7 4.4 3.7) 2.61 0.0 0.357 281 2012E 787 2.307 3.9 (0.375 (9.0) 477 (64.624 193 2013E 241 1.307 (14.247 387 2013E 507 2.252 5.4 571 (59.7 0.9 1.09) (00.7 (56) 7 (14) (115.6 (96.2 2.54 0 0 3.3 5.528 387 2014E 294 2. Rinaldo Pecchio Junior (CFO).149 1.843 10.99 10.br EBITDA by Business.6 2.9 8.6) FINANCIAL RATIOS MARKET RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 3.6 4.248 1.535 1.3) 22.2) (48.4 1.2) (9. 9M12 Industrial 15.9 1.766 3.38 9.9 93.0% Free Float 61.0% AES Group 31.5 4.017 1.5) 6.170 10.28 0 0 23.5 ROE (%) 39.677 3.577 Net Debt/EBITDA 1.1 1.78 FCF Yield (%) Div Yield (%) PER SHARE DATA BVPS Eletropaulo is a pure distribution operating company with the concession for the metropolitan area of the city of São Paulo.18) (00.184 1.664 1.009 1.7 0.0 7.6 7.0 7.836 1.5 5.637 1.8) 11.2 (93.1 (18) (448) 939 22.7) 927 (58.747 4.998 2.0) 362 0.694 6.3 376 (34.5 11.35) 5.067 (13.0 1.1 8.648 3.4) 24.809 1.8 0.1) 1.9% Others 7.1) 1.0 2.0 US$ 2012E 5.2 9.7 0.825 9.872 6.1 7.680 184 2014E 134 1.39 1.9) (47.921 1. 9M12 National Treasure 8.591 9.1 7.1 (0.4 8.495 3.4 6.9 4.279 10.648 3.2 5.686 7.1 1.508 1.486 5.6 0.295 (0.6) 43.7) 22.5) 9.9) (7.797 1. Eletropaulo is forbidden by regulation to acquire other distribution companies or invest in other segments (such as generation).1 Int Cover (%) n/m n/m n/m n/m n/m n/m n/m n/m Dividend Payout (%) 8.1 1.7 16.5 0.8 (162) 30 (59) (99.1 2.0% Sources for all charts and tables: Company reports and Santander estimates.892 10.487 1.4 21.3% Shareholder Structure.741 387 2011A 741 1.77 10.069 (5.739 1.4 9.8) 735 (20.7) 7.370 3.7 3.912 (3.386 4.5 0.8 3.3 0.80 21.643 (1.5) (9.734 3. Key Personnel: Andrew Martin Vesey (Chairman). As an operating company.838 1.67 0.1 1.141 5. Balance Sheet and CF Statement.4 5.4 7.544 3.860 0.320 4.3) 2014E 4.431 3.5) (0.7 (115) 14 (29) (116.7 0.279 3.0 8.0 6.585 1.8 1.0 6.4 5.0 94.9 7.9 15.223 3.6 P/BV 1.034 4.138 1.2 14.5 0.7) (0.8 0.8 0.706 176 LT Debt 2013E 10.3 723 (6.2 0.4 8.519 3.7) 7.0 R$ 2012E 9.com.2 0.6 FV/EBIT 6.9 0.3) 2014E 10.0 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 9.96 21.7) 1.704 4.737 1.14 0.9 2.9 7.5) 1.175 3.487 2.ELETROPAULO Financial Highlights: P&L.1) 359 (24.3 (59) (36) 93 (90.8 2013E 4.971 10.8) (1.156 2.5) 2.034 1.1 Capex/Revenue (%) 7.8% Commercial 30.1 1.7) (13. 99 .647 3.0 ROCE (%) 18.2 5.7 FV/EBITDA 4.170 3.7) 1.795 4.260) (978) (729) (163) 0 (218) (111) 0 2012E (456) (157) 734 577 (794) (370) 0 (101) (233) 0 2013E (501) 0 (32) (32) (700) (274) 0 (115) (7) 0 2014E (541) 0 (15) (15) (650) (213) 0 (162) 0 0 2011A (301) 169 (752) (584) (435) (97) 0 (130) (66) 0 2012E (234) (81) 377 296 (408) (190) 0 (52) (120) 0 2013E (244) 0 (15) (15) (341) (134) 0 (56) (3) 0 2014E (252) 0 (7) (7) (303) (99) 0 (75) 0 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 1.110 (53.3 337 (10.391 3.6% of the country’s population.55 (00.391 (36.3 8.5) 2011A 5.3 (116) (70) 180 (88.4 8.1) P/CE 2. Britaldo Pedrosa Soares (CEO).8 5.8) 24.7 5.6 16.2 4.4 1.344 (8.5) 7.5) (3.3) 6. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 9.414 5.0% Residential 46.8 (75) 14 (27) (90.187 3.1 Net Debt/Equity 0.8) 9.0) 7.840 Capital Employed 8.6 0.2 1.572 16.2 2.707 (25.070 2.16) DPS 6.7) (7.5 0.8 0.45 12.805 2. Clarissa Sadock (IR Director) and Roberta Tenenbaum (IR Manager) Web: www.08 (00./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (503) 283 (1.0% Sales by Segment (DisCo).252 (12.418 (4.5) 777 5.2) 3.243 1.8 3.2) 11.4 10.0) (13.3) (0.983 1.602 7.687 4.3 771 (30.97 21.5 96.8 (2.eletropaulo. The São Paulo metropolitan region represents 15.8 8.589 3.9 2.8 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.0 8.6 12. 9M12 Distribution 100.5 21.5% of Brazilian GDP and concentrates 9.2 FV/Revenue 1.0 22.256 150 2012E 394 1.487 2.862 6.125 (19.010 2. Eletropaulo’s concession area is located in the State of São Paulo and covers the metropolitan region of the city of São Paulo.7) (0.

and (3) adjusted net income to drop 3%.br We expect Embraer’s backlog to fall US$3.  2013 Outlook: Embraer stated that it expects 2013 revenue to approximate that of 2012.S. With Bruno Amorim* Brazil: Banco Santander S. +5511 3012-6535 | rmanda@santander.5-10% EBIT margin versus 9-9. Daily Vol (US$ Mn) 23.50.50 E-Jets).br the stock trading at over a 11x 2013E P/E and with no significant new orders expected over the next six to nine months.29 +20% in 2012). Moreover. Commercial Aviation (57% of 2012E revenues).  New guidance in February. note that Embraer is usually conservative in its guidance and that our estimates include a 10. The positive performance from the Defense division is not enough to compensate for the weakness of its core business.35. 100 . it is a fact that 110 after Delta.06 . (2) an approximate 15% increase in Defense (on top of 52-Week Range (US$) 23.S.br Renan Manda* Brazil: Banco Santander S.0 3-Mth Avg.5% for 2012. and implying a book to sales of less than 2x.A.00  Investment Case: Embraer continues to face a very difficult Pedro Balcão Reis* environment in its two most important markets: the U. companies to follow these two.com. REPLACING YE2012 TARGET PRICE OF US$30. the lowest level since 2005. Market Capitalization (US$ Mn) We expect the company to guide for a 9. For 2013E.com.6 billion. in our view. As with every year.6 billion during 2012.com. Santander estimates and company reports.A. we expect other 80 U. (2) EBITDA to fall 2%. achieving this target will be very challenging. +5511-3012-5765 | pbalcao@santander. 70 IBOVESPA 60 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet. and Europe. and (3) high-single-digit growth in Executive Aviation. While we expect no 120 new significant orders over the next couple of months. we are downgrading the stock to Underperform.198 Float (%) 50.  ERJ US Current Price (01/03/13) 5.8 billion. which implies a significant order 90 could be placed in six to nine months.A.72 TARGET PRICE: US$27. with (1) an Bloomberg approximate 15% fall in Commercial Aviation (with deliveries of 85-95 US$ 28. With Embraer’s loss of the Delta order to Bombardier at the beginning of December. +5511-3012-6016 | bamorim@santander.50 DOWNGRADING RATING TO UNDERPERFORM FROM HOLD INTRODUCING YE2013 TARGET PRICE OF US$27. However. United Airlines also reached an agreement with the 100 syndicates regarding scope clauses. We expect the company to Company Statistics guide for a revenue level of about US$5.9 Shares Outstanding .5% EBIT margin. Brazil: Banco Santander S.Mn 181 Price Performance (US$) Embraer Better prospects in the medium/long term.72 Target Price (YE 2013) US$ 27. we expect (1) revenues to fall 7%. Embraer will disclose its 2013 guidance in February.2013 Latin American Universe Book BRAZIL—TRANSPORTATION & INFRASTRUCTURE EMBRAER UNDERPERFORM CURRENT PRICE: US$28. reaching US$11.

2 2015E 6.7 2.802 8.437 9.1 24. 2006.9% Sources for all charts and tables: Company reports and Santander estimates.9 1.4% Commercial Aviation & Defense and Govern 54.2 589 (2.6% Shareholder Structure.1 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.007 1.899 3.1) (0.7 8. The Brazilian government holds 0.3 (6.0 6.0 15.2 11.9 7.2 FCF Yield (%) - - 13.3) 15.5 (10) (116) 459 (3. José Filippo (CFO and IR officer) Web: www. 101 .066 10. including one golden share.1 14.301 2.460 3.540 14.4 FV/Revenue - - 0.127 4.6 6.2 ROE (%) - - 10.embraer. 2012E Defense 13. 2012E Executive Aviation 45.80 24.257 5.0) (10.0 12 (241) 473 164.9 11.8% Deliveries (Commercial + Business Jets).81 2.2 2.5 556 (8.958 2.362 1.219 6.9 6.934 2.02 PER SHARE DATA Embraer is one of the largest manufacturers of commercial aircraft in the world and has a wellestablished global presence.3 1.74 BVPS - - 16. On June 5.894 3.6 1.391 2.842 2.406 1.62 0.315 2.1) (0.606 9.7 7. Balance Sheet and CF Statement. executive aviation.2 7.7 P/CE - - 9.25 17.085 364 - - 1.1 673 14.0 15.374 14.0) 8.066 611 11.983 1. 2010-15E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2008A - 2009A - 2010A 5.6 2008A 2009A 2010A 2011A 2012E 2013E 2014E 2015E EPS - - 1.3 ROCE (%) - - 12.2 FV/EBITDA - - 7.1) MARKET RATIOS Div Yield (%) - - 3.2 14.3 10.4 26.3 12.496 2.1 Int Cover (%) - - 3.1 11.48 0.1 9.1 9.3) (2.4% 6.0% Other 58.7 6. The company manufactures aircraft and aeronautical equipment for the commercial aviation sector.012 5.7 13.0 6.281 6.9 7.8) (0.EMBRAER Financial Highlights: P&L.349 (6.721 1.7) 849 (2.6 869 56. Embraer was listed both in the Novo Mercado segment of the Bovespa and on the New York Stock Exchange (ADRs).8 2013E 5.2 2014E 6. which allows it to approve/veto projects in the military segment.9 0.0) Capex/Revenue (%) - - 3.96 DPS - - 0.3 8.6 12.4 604 90.658 252 2012E 2.2) 5.8 1.97 2.8 7.894 3.4 8.5 26.016 Net Debt/EBITDA - - (1.894 4.035 2.0) (0.2 10.5 7.com.9 6.6 (16) (132) 521 13.085 364 2013E 2.3% Previ 9.0) 5.1 2008A 2009A 2010A 2011A 2012E 2013E 2014E Net Debt - - (692) (446) (172) (337) (196) (134) Capital Employed - - 3.748 5.2 7.8 0.8 0.300 2.0% Commercial Aviation 56.1) 3.0 14.7 Dividend Payout (%) - - - 60.4) (0.5 1.1 1.9 12. and the defense and government segment.721 1.3 49.48 2.085 364 2015E 2.442 2.5 5.1) (0.3 28.757 10.587 (7.630 5.3 (11.085 364 2014E 2.169 2.4 4.4 378 7.3) 1.9 1.5 65 (127) 179 (41.4 8.644 2. September 2012 Thornburn Bozano Investments Group BNDESPar BlackRock 7.74 16.741 4.1 15.028 1.68 0.0 5. Key Personnel: Frederico Fleury Curado (CEO).0 14.2 9.1) (0.104 5.6 1.70 0.917 8.6 318 (16.1% Oppenheimer 8.1) Net Debt/Equity - - (0.3% 5.6 10.721 1.2) (0.1 18 (56) 304 5.6 (21) (138) 548 5.357 1.0 3.8 P/BV - - 1.6% Executive Aviation 11.457 3.89 0.894 4.943 3.7 7.2) (0.926 3.422 5.6 14.7% Aviation Services and Others 18.5) 10.0% 5.3 1.8 8.83 19.307 22.99 0.832 5.3 2008A 2009A 2010A 2011A 2012E 2013E 2014E 2015E P/E - - 17.3% of Embraer’s shares.9) 9.858 2.9 1.1 713 5.245 4.4 7.56 2.4 2.446 2.9 9.9 1.9 0.2) (0.721 2015E LT Debt FINANCIAL RATIOS 2012E 6.7 US$ 2011A 5.br Revenues Breakdown by Segment.871 3.797 3.514 2.445 10.029 3.389 2.018 6.1 960 13.543 6.4 6.2 FV/EBIT - - 12.435 73 2011A 2.2 7.69 21.259 8./(Divestments) Change in Debt Dividends Capital Increases/Other 2008A - 2009A - 2010A (233) 334 871 (166) 706 (608) (162) 0 2011A (239) (162) 256 (552) (296) 223 (183) 0 2012E (265) (409) 329 (448) (118) 427 (88) 0 2013E (260) (11) 708 (429) 279 0 (115) 0 2014E (287) (380) (146) (438) (584) 0 (130) 0 2015E (305) (163) 80 (615) (535) 0 (137) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2008A - 2009A - 2010A 2.9 10.9 0.

com.  No exposure to MP579 and balanced asset portfolio. price adjustments to generation contracts.33 52-Week Range (R$) 12.03 . we believe the balance between generation and distribution segment will pay off during 2013: the impact of the  tariff revision process will be offset by the start-up of the Pecém Company Statistics thermal plant (an additional R$200 million to EBITDA).6 3-Mth Avg.br portfolio.A.78 / US$ 6.28 Target Price (YE 2013) R$ 14. and (iii) new macroeconomic assumptions.br 64% by YE2013. Bloomberg New estimates.A. Price Performance (R$) Energias do Brasil IBOVESPA 120 110 100 90 80 70 60 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet.30 / US$ 7. In 2013. Also. Energias do Brasil has contracted energy in the long term and is not directly exposed to MP579.14. based on our view that EdB has: (i) a balanced Brazil: Banco Santander S. from 50% currently. sustaining solid cash flow generation over the next years and supporting the dividend stream.30. and (iii) reasonable multiples.2 Shares Outstanding . Daily Vol (US$ Mn) 10.com.67 announced results. We forecast that the contribution of the generation segment to consolidated EBITDA will increase to Maria Carolina Carneiro* Brazil: Banco Santander S. +5511-3012-6682 | macarneiro@santander.30 INTRODUCING YE2013 TARGET PRICE OF R$14. (ii) new regulatory parameters for the third Market Capitalization (US$ Mn) revision cycle and tariff revision for Bandeirante recently released by Float (%) 37. due to the start-up of the Pecém thermal plant.80  Investment Case: We are maintaining our Buy rating for Energias Marcio Prado* do Brasil (EdB).2013 Latin American Universe Book BRAZIL—UTILITIES ENERGIAS DO BRASIL BUY CURRENT PRICE: R$12. REPLACING YE2012 TARGET PRICE OF R$15. which hurt 2012 results. We forecast a 2. we expect Bandeirante to still suffer from compensation for the postponement of the tariff revision process. Santander estimates and company reports. We updated our models to include: (i) recently ENBR3 BZ Current Price (01/03/13) R$ 12. and the recovery from Parcel A costs and declining volumes. +5511-3012-5751 | mprado@santander.Mn 476 Aneel.  2013 Outlook: We estimate that EdB’s 2013 EBITDA will increase 28% YoY.991 decent 2011-2014E EBITDA CAGR of 4%—positive growth considering that it includes the tariff revision period for Bandeirante (one of EdB’s distribution units).78 TARGET PRICE: R$14. 102 . (ii) a good dividend policy (average dividend yield of 6% per year).

9 20.5 22.184 3.8 6.433 2. Miguel Amaro (CFO) and Maytê Souza Dantas de Albuquerque (IR Manager) Web: www.0% Sources for all charts and tables: Company reports and Santander estimates.1 (283) (213) 491 (9.4 2014E 6.211 7.3 Net Debt/Equity 0.342 5.7) 58.8 (0.ENERGIAS DO BRASIL Financial Highlights: P&L.7 10.9 10.0) 22.9 7.32 5.605 1.8 10.665 1.745 13.454 3.9 8.28 1.0 24.4 2013E 3.9) (2.9% Residential 41.3 4.6 60.146 7.153 2.8 683 1.365 3.1) 3.1 12.5 2.195 7.2% Shareholder Structure.2 849 26.4 11.3) (0.319 36.128 3.6) 16.010 2.48 0.2 28.082 325 2012E 392 1.906 610 2012E 765 2.3 1.6 9.8 22.1 19.8 6.909 11.2 1.0% Distribution 34.483 5.192 2.0) (0.198 1.6 0.7 6.5 712 7.5) 1.6 22.7 (82) (187) 334 6.4 2014E 3.319 8.714 9.651 523 2014E 1.616 6.2 1.2 (3.447 5.1 1.199 4.536 1.5 19.4 25.605 3.0 2.346 10.1 8.1 858 1.359 (7.870 2.67 10. both in southeastern region of Brazil.9 10.945 3.2 1.490 10.0 501 (29.1 (0.1) 22.5 6.6 1.8 10.2 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 13.70 DPS 0.5 7.1 US$ 2012E 3.58 5.9 7.055 3.7 8.035 13. Balance Sheet and CF Statement.6 6.5 1.1 (169) (127) 293 (5.40 0.688 4.9 8.6 0.919 11.4 0. António Manuel Barreto Pita de Abreu (CEO).0 8.45 5.7 6.4 22.61 0.4 (205) (250) 374 (23.0 8.4 1.0 7.866 8.2 7.9 Capex/Revenue (%) Int Cover (%) Dividend Payout (%) ROCE (%) ROE (%) MARKET RATIOS P/E P/CE FV/EBITDA 9.277 5.5 1.1 2.40 0.283 1.9 8.734 535 2011A 478 1.325 2.6 2.1 1. 103 .5 24.3 10.energiasdobrasil.42 BVPS 9. 9M12 Free Float 48.9 3.0 918 8.6 8.229) (231) 0 227 1 (440) 2012E (325) 24 187 483 (614) (131) (2) (401) 4 0 2013E (337) 29 75 794 (463) 331 0 0 (227) 0 2014E (348) 29 191 836 (517) 319 0 0 (370) 0 2011A (206) 11 280 596 (734) (138) 0 135 1 (263) 2012E (169) 12 97 251 (319) (68) (1) (208) 2 0 2013E (173) 15 39 407 (237) 170 0 0 (116) 0 2014E (174) 15 95 418 (259) 160 0 0 (185) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 896 2.4 (101) (178) 312 60.7 12.310 1.891 10.0) 670 (27.3 2. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 5.2 8.4 4.0) (0.2 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 1.640 10.5 1.6 9.4 1.415 3.049 1.047 (5.655 28.5) (2.24 0.6 2.03 0.78 0.872 268 2014E 692 1.7 6.5 1.5 7.4 6.320 1.88 11.567 1.7 25.6 11.5 2.2) 5.br EBITDA by Business.268 1.0 60.225 11./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (346) 19 470 999 (1.5 0.4 5.59 PER SHARE DATA Energias do Brasil (EdB) is a holding company that controls the energy distribution companies Bandeirante and Escelsa located in the State of São Paulo and Espírito Santo.6 3.5 6.41 0.565 511 2013E 1.7) 6.4 (197) (347) 609 62.801 2.049 7.516 5.191 2.1 R$ 2012E 5.122 2.301 2.828 262 2013E 562 1.4 15.757 1.1 9.917 6.3 11.5 8.0% Generation 62.7 12.9 3.4 5. 9M12 Commercial 22.7 20.7 (163) (374) 667 9.274 2.0 965 (19.563 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 3.497 10.0 15.053 4.825 262 LT Debt FINANCIAL RATIOS Net Debt 2013E 6.105 5. Also the company holds generation and energy trading companies.3 4.538 3.2) 5.456 5.6 P/BV 1.5 (0.296 3.2 8.4 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.289 (16.79 1.555 2.427 Net Debt/EBITDA 2.4 1.38 10.1) 3.4 FV/EBIT FCF Yield (%) Div Yield (%) (0.622 5.9 1.7 1.3 1.2 1.272 5.528 2.2 1.9% Industrial 23.741MW of installed capacity.83 0.66 0.8 7.4 5.334 2.5 9.25 0.2 11.6 2011A 3.9 9.9 8.455 2.426 4. Key Personnel: António Mexia (Chairman).com.330 14.1) 16.746 2.5 7.7 1.8) 9.9 10.1 (3.7) 6.604 1. 9M12 Trading 4.4 4.6 1.9 1.9 1.162 14.319 1.7 2.595 5.0% Sales by Segment (DisCo).9 1.8% EDP GROUP 51.5 0.711 4.4 6.447 24.462 4.2 7. EdB is controlled by Energias de Portugal.7 0.658 1.3) (0.6 1.2) 9.7 7.5 8.402 6.133 Capital Employed 10.461 31.602 4.40 0.714 3.8 1. EdB intends to leverage on its controller experience to bolster its expansion strategy in Brazil.436 1.9 11.15 5.0 9. Its strategy is to expand its generation operations which currently have 1.319 10.4 (107) (130) 194 (33.360 2.8) 60.7 1.4 28.7 0.4 7.538 4.096 2.6 676 34.472 10.662 2.0 1. which has broad experience in operating wind and thermal plants in Spain and Portugal.9 FV/Revenue 2.9 3.

Daily Vol (US$ Mn) 8.com. we believe that the Bloomberg program’s potential to control drop-out rates bodes well for Estacio. +5511-3012-5787 | dhgewehr@santander. to 18. CFA rating on Estacio to Hold. we continue to like the company’s investment case.20 / US$ 19.  2013 Outlook: We expect Estacio to deliver a strong 40% EBITDA growth rate in 2013. thus accelerating the company’s M&A 140 activity.br Apart from DCF upside. We believe that the company’s follow-on offering.70 assuming 40% of FIES. which offers a double-alpha potential: a combination of the strong 47% EPS CAGR we forecast in 2012-14 and a narrowing of its multiple vs. thanks to an estimated 17% increase in net revenue and a 300-bp EBITDA margin. which should happen by the end of January.619 Float (%) 80. We are downgrading our Bruno Giardino*. We also estimate R$103 million in FCFE. Shares Outstanding .000/student.1% (the second largest among its peers). +5511-3012-5914 | bgiardino@santander.72 1. to R$300 million.5%. Assuming 52-Week Range (R$) FIES represents 40% of on-campus students in the long run (less Market Capitalization (US$ Mn) than 50% of Anhanguera’s). Despite Company Statistics management’s careful approach to FIES.2013 Latin American Universe Book BRAZIL—EDUCATION ESTÁCIO HOLD CURRENT PRICE: R$40. R$ 40.70. which so far has consisted of small assets in new regions to 120 serve as a platform for organic growth (―accelerated greenfields‖).02 .A. our YE2013 TP goes to R$47. We see upside for our estimates if the company deploys the potential share offering’s funds into accretive M&A: assuming the acquisition of 50.00.41. implying a yield of 3.75 Target Price (YE 2013) R$ 44.000 students at a valuation of R$7.00 / US$ 20. Santander estimates and company reports.A. could represent a better entry point. 40 j-11 m-11 a-11 IBOVESPA d-11 a-12 a-12 d-12 Sources: FactSet. 100 We believe that Estacio could acquire institutions in São Paulo.4 to R$53. following the 133% appreciation in 2012 Brazil: Banco Santander S.  ESTC3 BZ Current Price (01/03/13) 17.br that reduced the expected total return implied by our DCF model to 10%. Management expects to deploy roughly R$362 million Price Performance (R$) Estácio (75% of primary funds to be raised in the company’s follow-on 160 offering) in new acquisitions. 104 .00 DOWNGRADING RATING TO HOLD FROM BUY  Double-alpha potential partly priced in.com.Mn 82 M&A Activity. its peers’ multiples.0 3-Mth Avg.20 TARGET PRICE: R$44.95 as it has had the largest drop-out ratio among its peers. as it 80 seeks to reinforce its presence in Brazil’s largest postsecondary 60 education market. Daniel Gewehr* Brazil: Banco Santander S. our YE13 target price increases by 23%.  YE2013 target price of R$53.

3 11.9 23.0 10.7 0.2 11.0 25.0) 10.33 12.92 5.7 23.2 2013E 791 11.7 FV/EBIT 18.148 13.0 8.3 (0.148 million.9 (16) (2) 59 40.4 18.2 0. respectively.425 234 344 847 308 30 2014E 347 855 793 1.0 8. Virgilio Gibbon (CFO) and Flávia Menezes de Oliveira (IR Manager) Web: www.9 Capex/Revenue (%) Int Cover (%) Dividend Payout (%) ROCE (%) ROE (%) MARKET RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 21.6% Treasury 0.3 10.1 P/CE 13.0) 0.4 2.648 272 344 1.400 students enrolled in a total of 74 campuses and in 52 distance learning centers in 20 states.3 6.4 20. the company had 284.9 (32) (5) 114 62.35 0.4 337 9.9 368 23.6 13.6 10.3 214 52. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 1.4 (38) (9) 186 63.5 6.85 1.0 16.1 US$ 2012E 713 4.5 2014E 858 8.3) (17.0 136 19.6 13.0 11.51 0.0% Board and Mgmt.58 4.7 18.6 2.3 4.7 10.2 FV/EBITDA 11.6) 6.1 R$ 2012E 1./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (42) (12) (118) 23 (119) (174) 240 (38) 4 2012E (56) (17) (20) 195 (102) 11 20 (17) 5 2013E (62) 0 (40) 260 (105) 146 0 (29) 0 2014E (71) 0 (37) 332 (110) 210 0 (47) 0 2011A (25) (7) (70) 14 (71) (104) 143 (23) 2 2012E (29) (9) (10) 100 (52) 6 10 (9) 3 2013E (30) 0 (19) 127 (51) 71 0 (14) 0 2014E (33) 0 (17) 155 (51) 98 0 (22) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 169 498 571 1.1) Net Debt/Equity 0.9 0.5 0.7 8.9 20.1) 6.0 307 15.0 15. As of September 2012.5 110 31.5 13.3) (18.032 308 30 2011A 90 265 304 570 68 171 330 141 5 2012E 74 270 355 624 99 172 354 154 15 2013E 106 320 359 679 111 164 403 147 14 2014E 158 390 362 752 124 157 471 141 14 LT Debt FINANCIAL RATIOS Net Debt 2013E 1.53 8.7 11.3% Revenue by Segment.7 FV/Revenue P/BV 2.069 128 321 619 264 9 2012E 149 539 710 1.249 197 344 708 308 30 2013E 223 672 753 1.8 (33) (12) 247 32. 105 .4% On-Campus 92. Balance Sheet and CF Statement.1) 0.2 17.1 (0.0 1.0 1.9 12.8 29.4 141 32.1 1.3 13.4 11. 3Q12 GP Investments 19.5 20.0 383 18.4% Free -float 80.11 1.8 229 24. Key Personnel: Rogerio Melzi (CEO).9 10.6 0.4 84 39.3) (18. 0.2 50 46.5 2014E 1.8 3.7 0.0 17.2 0.3 12.9 3.5 114 46.1 22.7 13.6 0.9 630 21.6 16. and R$70 million.2 20.57 0.2 84 39.3 16.72 1.4 7.3 (0.3 (3) (3) 42 (8.8 3.br Students by Segment.7 172 17.4 15.340 471 508 550 611 Net Debt/EBITDA 0. In 2011.4 4.1 14.3 (6) (5) 70 (13.4 (13.3) 47.9 1.7% On-Campus 81.016 1.4 4.01 0.7 14.4 15. 9M12 Distance Learning 7.5 233 54. The company is listed on the Bovespa’s Novo Mercado. EBITDA.3 8. R$141 million.6) (25. 3Q12 Distance Learning 18.6) (25.7 23.2 13.74 FCF Yield (%) Div Yield (%) PER SHARE DATA Estacio is one of the largest postsecondary player in the education market in Brazil.6% Shareholder Structure.1 (0.622 16.2 15.4 20.6 300 39.2 7.0 19.841 13.5 23.387 20.4 146 32.9 1.5 2.estacio.31 4.9 3.9 21.01 4.12 0.9 11.4 (19) (4) 91 54.3 6.4 77 53.2 (11.0 9.0 291 25.8 19.4 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 0.9 14. focused on the underpenetrated working-adult segment (mainly the class C socioeconomic group of the population).5 0.8 18.5) (16. offering 100% tag-along rights to all shareholders.0 20.7 25.1 15.4 2.4 6.0 49.75 0.63 10.7) 0.4 2011A 686 18.5) (16.155 1.2 16. and net income reached R$1.2 2.2 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.7 0.0 14.0 12.3 4.8 10.4 151 78.28 0.2 7.39 2.1) 0.35 BVPS 7.8 (15) (5) 115 26.7 11.5 6.8 518 35.8 14.2 0.5 2.18 0.ESTÁCIO Financial Highlights: P&L.8 1.2 16.4 7.5 723 14.0 266 16.5 11.0% Sources for all charts and tables: Company reports and Santander estimates.0 (17.1 30.2 2.5 6.0 23.3 24. the company’s net revenue.20 0.27 3.0 25.2 0.3 19.40 DPS 0.4 256 279 279 279 136 139 133 127 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 95 160 85 (38) 51 80 41 (18) Capital Employed 883 1.0 10.

90 .  Pedro Balcão Reis* 2013 Outlook: We expect the company’s profitability to slightly Brazil: Banco Santander S.  On the way to value creation. INFRA & RE EVEN BUY CURRENT PRICE: R$9.4%. attractive Fabiola Gama* valuation.4 Shares Outstanding .  Reliable execution.57 TARGET PRICE: R$11. In our opinion. CONSTRUCTION. Thus.80 FROM R$10. in our view. Even IBOVESPA 110 100 90 80 70 60 50 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet.80 RAISING YE2013 TARGET PRICE TO R$11. we believe competition should increase in Even’s 91. paves the way for sustainable positive cash flow generation. As a result. the improvement in the company’s Current Price (01/03/13) R$ 9. EVEN3 BZ 52-Week Range (R$) 5. we do not rule out future delays in project approval and further increase in land prices. 106 .A. As the most geographically diversified players plan to concentrate their operations in fewer markets. and a favorable growth outlook. the adoption of a stricter creditrisk assessment that has reduced sales cancellations.9. Even has been able to keep leverage under control (52.com.70 profitability has been closely monitored by investors and should Target Price (YE 2013) R$ 11. Growing at a moderate pace. Even is among our Brazil: Banco Santander S. Relying on an integrated platform. Santander estimates and company reports.2013 Latin American Universe Book BRAZIL—CEMENT.57 Market Capitalization (US$ Mn) 1. +5511-3012-5765 | pbalcao@santander. +5511-3012-7414 | fpgama@santander.30  Investment Case: Even combines solid execution.5% net debt/equity as of September 2012) and simultaneously generate cash. Even has been able to control its costs without experiencing significant deviations to cost budgets. 100 basis points ahead of the cost of equity we Bloomberg estimate.A.57 / US$ 4.62 continue setting the tone for the stock. Daily Vol (US$ Mn) 7.  Healthy financial position.0 3-Mth Avg.com. Moreover. coupled with a well-organized collection process and a larger number of units.br improve over time with the delivery of less profitable projects and G&A expenses dilution.80 / US$ 5.br preferred names in our coverage universe. We expect Even to close 2013 with a Company Statistics ROE of 15.Mn 233 Price Performance (R$) most important markets (SP and RJ states).097 Float (%)  Deterioration in competition landscape.

25 3.9 14.4 20.4% Directors 2.9 362 2.0 3.2 419 17.6 3.1 P/CE 6.2 1.6 3.7 870 17.9 7. 2011-2014E 2.7 R$ 2012E 2.4) 0.230 843 2.0 215 1.1 1.5 1.96 0.323 661 2014E 75 3.553 1.2 213 (10.1 15.1 (38) (32) 172 25.4 13.60 2.1 4.2 12.647 213 1.5 2.3 32.711 480 321 892 551 276 2013E 30 1.006 1.6 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (6) 0 (568) (339) 46 (293) 0 236 (56) 11 2012E (11) 0 (229) 11 (5) 6 0 (331) (57) 19 2013E (14) 0 (437) (142) (24) (166) 0 227 (70) 10 2014E (18) 0 (458) (71) (28) (99) 0 184 (92) 19 2011A (3) 0 (339) (202) 28 (175) 0 141 (33) 7 2012E (6) 0 (118) 6 (3) 3 0 (170) (29) 10 2013E (7) 0 (213) (69) (12) (81) 0 111 (34) 5 2014E (8) 0 (213) (33) (13) (46) 0 86 (43) 9 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 427 3.0 (20.2) 11.0% Sources for all charts and tables: Company reports and Santander estimates.134 1.1 15. Although it is primarily focused on the mid-high/high-income segments.4 1.0 22.3 438 19.8 Dividend Payout (%) 21.3 551 20.3 9.9 7.3 1.4) (4.3) 0.6 2011A 1.1 (82) (68) 369 31.165 13.7 20.500 750 2011A 228 1.6) 18.6% Free Float 91.2 (61) (61) 223 (12. and Rio Grande do Sul.57 0.0 FV/Revenue 1.2 19.4 2.876 1.6 2013E 1.6) 19.448 263 1.2 4.271 1.6 8.262 3.6 8.1 2014E 2.4) 0.3 742 8.30 0.3 (7.1 15.5 1.089 400 3.040 1.8 FV/EBITDA 6.7 30.7 6.1 2014E 1.0 6.4 14.56 2.2 1.3 7.1 16.80 LT Debt 812 551 661 750 433 276 315 353 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E Net Debt 1.3 21.685 717 4.6 0.20 1.40 2.6 Even is a vertically integrated real estate developer. Key Personnel: Carlos Eduardo Terepins (CEO) and Dany Muszkat (CFO and IR) Web: www. as well as commercial).62 2011 1.7 366 (12.897 525 3.8 23.0 6.0 8.6 0.325 7.0 7.6 6.48 3.6 7.0 1.5 2.5) 10.14 0.24 0.7 218 (9.103 551 2013E 64 3.1 14.6 0.9 2.6 (2.4 14.64 3.6) (4.even.6 0.7 US$ 2012E 1.8 2.4 19.784 1.402 1.264 11.2 (53) (32) 118 (11.5 14.1 20.8 7.0 257 15.6) 18.917 3.8 10.8 9.6 0.36 FCF Yield (%) Div Yield (%) PER SHARE DATA 2.90 4.20 9.51 0.7) 0.2 1.8 7.1 ROE (%) 14.8 2.3 573 20.2 1.0 3. the company has been expanding its operations to Rio de Janeiro.1 7. involved in construction and brokerage operations.6) 19.908 (2.0 1.6 0.3) 353 0.0 (2.5 (98) (52) 281 22.259 1.073 579 397 1.8 FV/EBIT 7.9 ROCE (%) 13.0 8. December 2012 Executive Board Board of 6.7 2.2) 357 (13.567 1. 107 .593 2.069 707 353 2013E 2.0 0.13 0. the company already operates in various income segments (from affordable and emerging to high-income.994 1.728 Net Debt/EBITDA 2.7 476 8.2 1.5 687 16.8 2.7 3.0 15. Brazil’s largest markets in terms of GDP.40 0.2 (103) (62) 229 2.735 338 2.0 16.58 0.2 15.4 5. As it is one of the largest residential developers and building firms in the metropolitan region of São Paulo.29 8.3 12.4) 3.5 1.6 2. Minas Gerais.7 19.5 1.3) 11.3 225 3.5 (48) (25) 137 16.6 32.139 0.083 752 1.7 0.5 9.9 20.5 2.53 7.7 232 3.1 1.3 267 14.1 5.1 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 0.0 20.25 0.15 0.74 DPS 0.6 5.9 13.4 P/BV 0.6) 591 (2.8 6.8 7.5 2.07 2011 2012e 2013e 2014e Contracted Sales(R$ billions).669 1.1 4.5 405 12.5 12.425 536 520 599 671 Capital Employed 2.422 959 641 1.382 1.3 7.98 1.551 294 1.3 (7.6 Net Debt/Equity 0.5 223 3. Balance Sheet and CF Statement.59 0.846 516 358 950 630 315 2014E 35 1.714 16.113 (2.77 2012e 2013e 2014e Shareholder Structure.0 458 9.0 29.258 618 3.18 BVPS 6.9 1.9 21.9 25.433 621 2012E 63 2.489 998 897 1.1 19.18 1.9 1. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 1.860 532 478 836 764 331 2012E 32 1.7 6.8 5. 2011-2014E 2.3 13.8 353 1.2 (36) (36) 133 (9.2 FINANCIAL RATIOS Capex/Revenue (%) Int Cover (%) MARKET RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 6.EVEN Financial Highlights: P&L.com.4) (22.2 7.6 3.0 2.459 1.2 20.br/ri/ Launches (R$ billions).3 2.

A. .2 billion). EZTec’s projects are concluding two months ahead of schedule.05 .07 three to six months at a minimum gross margin of 50%.917 33. driven by solid execution .5% versus a sector average single-digit ROIC).com. . Target Price (YE 2013) R$ 31.4% above the original budget. Holding a net cash position for quite a long time. We believe that 2012E’s P/E seems high.  2013 Outlook: We expect earnings and profitability to pick up with Pedro Balcão Reis* Brazil: Banco Santander S.61 Market Capitalization (R$ Mn) 1. and a comfortable liquidity position to support growth. at least partially. Company Statistics   Earnings momentum to pick up in 2013. EZTec has consistently delivered the highest profitability of the sector (LTM ROIC of 21.2 3-Mth Avg. Daily Vol (R$ 000) 4.com. in our view. . This project should affect 2013 and 2014 earnings and thus. Santander estimates and company reports.27. . 108 . with cost overruns as low as 3. INFRA & RE EZTEC BUY CURRENT PRICE: R$25. +5511-3012-5765 | pbalcao@santander.4 Shares Outstanding .90 the company’s operating result is likely to expand by over 70% in 52-Week Range (R$) 2013. in our opinion. we view 2013E and 2014E P/Es EZTC3 BZ 16.70 / US$ 13. superior profitability. On average. CONSTRUCTION.00 / US$ 15. EZTec. the value of the EZTower project (PSV of R$1. as it reflects.  . We expect EZTec to sell Bloomberg one of the commercial towers of the EZTower project in the next Current Price (01/03/13) R$ 25.70 TARGET PRICE: R$31.2013 Latin American Universe Book BRAZIL—CEMENT.Mn 147 Price Performance (R$) EZ Tec IBOVESPA 200 as better references for EZTec’s valuation.  . and solid execution. . . 150 100 50 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet. Float (%) Inexpensive valuation for a premium execution. +5511-3012-7414 | fpgama@santander.br the sale of one of the towers of the EZTower project in 1H13.  Stands out for first-class profitability . in our view.br into 2013. . . which looks compelling. is well positioned to grow moderately (from 10-15% per year) with its own internal cash flow generation.00  Investment Case: EZTec remains our top pick in the Brazilian real Fabiola Gama* estate sector given the company’s compelling earnings momentum Brazil: Banco Santander S.A. by our estimate. As a result.

8 3.108 168 35 891 0 0 2013E 203 769 655 1.101 1.9 377.3 5.0 2011A 444 21.1 40.5 FCF Yield (%) 4.8) (0.5) Net Debt/Equity (0.88 0.7 15 (29) 207 4.5 Int Cover (%) 21.8 1.16 1. Key Personnel: Silvio Zarzur (CEO) and Antonio Emílio C.86 17.678 0 0 2011A 161 479 467 946 132 59 745 33 0 2012E 118 565 544 1.499 1.8 177 30.398 61 0 2012E 231 1.4 8.6 42.1 4.1 2.1 25.4 42.4 5.2 8.8 3.5 3.060 2.8 26.5 0.0 366 64.1 FV/EBITDA 7.776 473 72 2.4 27.653 243 37 1.5 296 26.7 34.472 3.9 42.700 69.7 2.149 Net Debt/EBITDA (0.1 6.0 P/BV 1.40 0.8 35.80 1.3 8.0 6.1) 39.5 5./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (3) 0 (241) 92 0 92 0 27 (83) 73 2012E (2) 0 (397) 3 3 6 0 17 (100) 5 2013E (3) 0 (386) 234 (9) 225 0 89 (154) 6 2014E (5) 0 (480) 163 (10) 153 0 (38) (159) 9 2011A (2) 0 (144) 55 0 55 0 16 (49) 43 2012E (1) 0 (206) 2 1 3 0 9 (52) 2 2013E (2) 0 (198) 120 (5) 115 0 46 (79) 3 2014E (2) 0 (240) 82 (5) 77 0 (19) (80) 5 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 302 899 875 1.5 39.5) (0.0 9.1 23.7 4.1 38.4 24.9 377.8 35.5 42.2 9.3 6. mainly in the metropolitan region of São Paulo.80 5.9 28.34 0.2) (0.1 61 (22) 331 35.0 5.1 37 (13) 198 40.1) (0.3 9.9 Div Yield (%) 3.0 42.5) (0.3 2014E 1.8 3.0 21 (110) 617 54.7) (0.357 0 0 LT Debt FINANCIAL RATIOS 2013E 1.8 1.6) (0.8 832 55.2 1.001 34.8 MARKET RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 7.5 6.2 22 (57) 319 0.2) (0.6 4.3 6.5 535 40.9 381 23.18 DPS 0.1 6.5 0.2 5.com. Although EZTec already operated in all different income segments (from low to high income).68 1.EZTEC Financial Highlights: P&L.128 0 0 2014E 183 908 746 1.792 1.2 716 0.7 39.194 1. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 744 16.7 25.05 1.1 2.2 44 (113) 638 3.br/ri Launches (R$ billions).6 44.8 44.2) (0.1) (0.2 358 (2.21 4.2 30.7 26. 109 .5 US$ 2012E 520 17.5 (0.8 299 25.0 2.6 2.5) (0.3 6. 2011-14E 2.35 1.0 36.20 2011 2012e 2013e 2014e Contracted Sales (R$ billions).2 5. September 2012 Free Float 33.8 2013E 872 67.4 39.1 227 27.1) (0.3 30.5 366 64.5 1.90 2011 2012e 2013e 2014e Shareholder Structure.6 27.2% Zarzur Family 66. Balance Sheet and CF Statement.0 39.737 0 0 2013E 396 1.9 9.16 2.200 0 0 2014E 361 1.2) (0.2 1.0 11 (56) 317 53.774 247 110 1.0 4.6) (0.5 R$ 2012E 1.6 2.6 2.11 8.0 5.5 713 66.0 43.8 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.0 713 67.0 43.7 427 53.3 6.0 61 0 0 0 32 0 0 0 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E Net Debt (241) (231) (396) (361) (129) (118) (203) (183) Capital Employed 1.264 479 73 2.0 PER SHARE DATA 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 2.2 P/CE 6.1) 358 (2.8 222 24.1) (0.54 0.7 30 (55) 398 20.3) 0. the company is currently focused on the mid-high/high-income segments.41 2.5 428 44.0 23.01 10.9 36.570 2.3 35.1 8.0 4.277 2.0 42.1 FV/EBIT 7.7 25.1) Capex/Revenue (%) (0.7 22. 2011-14E 1.8 37.5 42.4 6.0 2.8 178 30.3 6.7 40.8 422 (1.09 0.91 13.60 7.54 BVPS 9.2 n/m 21.0 278 22.4 843 1.0 0.8 427 43.0 5.3 5.3 716 0.20 1.3 6.003 2. as well as commercial buildings.35 1.7 42.9 ROCE (%) 24.9 4.2 222 25.9 30.162 328 68 1.26 2.eztec.0 28.1 6.4 ROE (%) 23.424 243 37 1.4 39.825 7.3) 0.35 0.1 FV/Revenue 2.01 4.2 n/m Dividend Payout (%) 33.62 EZTec is a vertically integrated real estate developer (from construction to brokerage operations) with more than 30 years of experience.1) 39.5 0.56 0.1) (0.80 1. EZTec has being able to deliver such growth without decreasing its very high profitability level since its IPO back in June 2007.8% Sources for all charts and tables: Company reports and Santander estimates.4 34.268 636 805 1.0 5.027 1.3 2014E 913 4.72 4.7 2. Fugazza (CFO and IR Director) Web: www.4 39.

Mn 554 in our view.com. Price Performance (R$) Fibria IBOVESPA 110 100 90 80 70 60 50 40 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet. we do not expect Fibria to deliver capacity  expansion before 2015 due to both leverage and market-related Company Statistics reasons.07 / US$ 11.2 3-Mth Avg. in our opinion.50  Investment Case: Following Fibria’s recent outperformance.20 of the Losango forest base in September.com. we Felipe Reis* recommend that investors take profits on the stock.30 52-Week Range (R$) 12. there are few potential Market Capitalization (US$ Mn) short-term catalysts that would warrant building positions in the stock.37 . We believe that large capacity additions coupled with cyclical demand weakness could pressure prices in the medium term.50 / US$ 9. Santander estimates and company reports. Fibria is currently trading at 8. which is unwarranted.2013 Latin American Universe Book BRAZIL—PULP & FOREST PRODUCTS FIBRIA UNDERPERFORM CURRENT PRICE: R$24.98 Target Price (YE 2013) R$ 19. Float (%) 40.545 on improvements in exogenous factors (pulp prices and the R$/US$ FX rate).br still cautious outlook on medium-term pulp prices and the limited growth triggers we see for Fibria compared with its sector peers. 110 .3 million tonnes of new BHKP capacity through YE2013 (Eldorado in 4Q12. as high-cost capacity closures should not completely offset the entrance of new capacity.  Valuation looks fair at this point of the cycle. +5511-3012-5758 | ffreis@santander. and (ii) the lack of growth prospects. +5511-3012-5870 | azsciacio@santander.07 TARGET PRICE: R$19. With the sale FIBR3 BZ / FBR US Current Price (01/03/13) R$ 24. Montes del Plata in 2Q13.6x 2013E FV/EBITDA—7% above historical midcycle valuations.5 Shares Outstanding . and Maranhão in 4Q13). as earnings upgrades remain largely dependent 6.  Alex Sciacio*. We expect the start-up of 4.24. considering our Brazil: Banco Santander S.br 2013 Outlook: large pulp supply additions coming onstream.A. CFA Brazil: Banco Santander S. increasing global hardwood pulp supply by 15% (or 26% if looking at BEKP supply standalone). Daily Vol (US$ Mn) 13. Bloomberg We do not anticipate triggers for the stock ahead. due to (i) downside risk to BEKP prices in 2013-15 on new supply.A.

5 7.829 13.8 31.457 3.5 1.7 4.167 Net Debt/EBITDA 4.78) (00.0) 9.943 7.1 21.09) DPS 0.7) 1.9 562 48.672 (1.3 2.2 4.6 8.4 2.397 14.9 FCF Yield (%) 1.0 (85.3 9.3) Capex/Revenue (%) Int Cover (%) Dividend Payout (%) ROCE (%) 1.2 17.151 48 2.6) 2014E 6.369 516 LT Debt 10.060 4.211 5.30 BVPS Fibria.2) (137.043 Capital Employed 25.6 1.9 40.6) (6.048 3.30) (00.305 1.761 469 681 7.300 6. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 5.8 9.7) (2.6 2.7 307 6.60) (00.3 8.3 36.8 0.168) 279 (331) 62.0 0.286 5.br Revenue by Product.971 2.313) 0 1.9 (1.715 3.325 1.173 (25. 2012 Votorantim Group 29.835 4.15) (00.157 14.015 0 0 0 0 2014E (1.5 (1.2 million hectares of certified forest area.1) 1.964 (29.7 0.379 10.872 (3) 1. Currently.146 9.496 (13.2% Sources for all charts and tables: Company reports and Santander estimates.0 0.524 947 1. 111 .9) (81.110 26.826 (54) 1.839) 2.1 2.4 (1.376 (1.65 27.594 12.905 11.6) 33.4) 9.055 12.4 8.3 1.7 630 12. Marcelo Castelli (CEO).6 FV/EBITDA 8.4 (355) 15 (45) 44.305 6.736 6.511 11.3) (1.0% Shareholder Structure. exports represented 83% of the company’s total sales.5 0.856 834 1.3 7.886 14.66 13.515 7.0% Revenue by Destination.174 10.6 0.131 2011A 1.1 633 30.5 16.641 5.2) 33.0 2.100 7. which hold 30% and 29% of the company’s stock.6 0.5 (1.5 4.2 2.262 474 715 7.FIBRIA Financial Highlights: P&L.1 PER SHARE DATA 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS (01.3 32.9 16.242) 150 0 (392) (165) 0 2012E (1.749) 1. 9M12 Pulp 100.13 26.7 7.1 27.95 13.845 4.383 539 2014E 2.9 2.672 4.163 1.9 36.3 2.098) 1.2 2.853 FINANCIAL RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E Net Debt 2013E 6.5 4.3 (5.869) 258 (871) (242.2 3.9 16.070 (12.4 2.3 31.5) 2013E 3.7 (852) 55 (166) 49.752 27.0 3.670 10.083) 941 0 0 (141) 0 2011A (1. with 5.9 P/BV 0.7 36.7 (416) 27 (81) 52. the company resulting from the merger of Aracruz Celulose and Votorantim Celulose e Papel (VCP).430 15.3 9.7) 730 (59.2 7.643 2. respectively.103 (5.4 (1.620 15.284 29 1.8 35.067) (118) 0 (1.3 0.939 3.801 1.019 1.1) (140.899 985 1.0 8.9 9.15 0 0 0.0 2.363 (1.5 2.164 3.9 0.0 0.400 566 2013E 2.0 1.1 0.6 633 0.677 13.0 0.3% BNDESPar 30.6 0.9 2.0 (84.0) 1.0 943 29.9) 35.2) 6.1 9.5 379 (65.131 2014E 5.3 3.037 604 2012E 1.3 35.6) 436 (57.35 26.070) 1.30) (00.393 14.571 6.161 5.9) 7.098 2.1) 622 (1.8) (8.5 8. Fibria has only voting stock and is listed on the Bovespa’s Novo Mercado as well as on the NYSE.5 2.30 0 0 0.8 (2.336 2.57) (00.772 1.770) 1.9 0. Fibria accounts for some 10% of the world’s white pulp market capacity and 35% of eucalyptus bleached hardwood market pulp.4 (600) 144 (170) 67.886 (157) 1.7 Net Debt/Equity 0.2 3.4 8.430 14.3) 36.786 28.142 11.1 ROE (%) MARKET RATIOS P/E FV/EBIT Div Yield (%) 2.240 29.6) 2014E 3.4 (6.7 9.4 2.0% Exports 90.1 2.4 (761) 32 (96) 42. As of 2011.850 445 617 7.941 13.5) CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.3 (2.463 8.6 2.145 (1.235 (1.51 13.005 6.301 465 652 6.8) 28.6 31.0 0.430 15.5 0.8) P/CE 8.6 1.773 13.419 (742) 90 0 (234) (99) 0 2012E (910) 970 (81) 859 (549) (61) 0 (675) 0 691 2013E (853) 913 (1) 665 (522) 495 0 0 0 0 2014E (850) 851 (25) 576 (505) 438 0 0 (66) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 2.6) 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E (9.657 13.8 0.2 17.0 1.4% Free Float 40.1) (0.335 3.447 26.824) 1.5) (14.1 2.298 37.com. 9M12 Domestic 10./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (1.9 2.0 2.2 million tons/year capacity and over 1.9 (0.9) 7.9) 6.5 16.3) (14.4 1.6 295 (4.1 (0.5 0.25 0.4 0.132 2012E 3.129 (1.0 (5.2) (1.2) 485 11.7 8.8) (79.4 0.758 3.0) (2.92 12. The company is jointly controlled by BNDESpar and the Votorantim Group.9 0.309 10.5 226 (64.4 21.038 13. Guilherme Cavalcanti (CFO) and André Luiz Gonçalves (IR Manager) Web: www.2) (38.798 5.836 26.4) 2011A 3.344 2013E (1.2) (37. Key Personnel: José Luciano Penido (Chairman).3 2.326 3.116) 154 (520) (249.9) R$ 2012E 5.5 7. Balance Sheet and CF Statement.265 7.8 7.2 4.5 9.9) US$ 2012E 3.855 (17. is the world’s largest market pulp producer.192 9.2 FV/Revenue 3.fibria.433 4.980 28.4 3.654 5.2 36.7 3.5 0.9 289 27.0 45.17) (00.131 2013E 4.1) (0.3 9.6 3.486 8.21 27.

100 Brands: Fleury in the spotlight in 2013. The 2013E adjusted P/E of 17. Our 2013 EBITDA estimate is 4% below consensus.35 / US$ 10. which we see as an upside risk to our earnings estimates. which reached its highest level in 3Q12 since the integration of Labs) should lead to a 120-bp YoY EBITDA margin expansion to 22. Daily Vol (US$ Mn) 2. We expect FLRY3 Daniel Gewehr* shares to benefit from the combination of continued double-digit top- Brazil: Banco Santander S. which weighs corporate and individual goals. we cut our 2012 EPS by 6% to account for the lower-than-expected cash generation in 9M12.  What‘s changed? While our net revenue and EBITDA estimates remained almost unchanged.6x seems fair considering the 28% adjusted EPS CAGR we forecast for the 2011-14 period.00 / US$ 12.  2013 Outlook: We expect Fleury to continue to deliver strong topline growth (net revenue +16%). so as to account for Bloomberg lower cash taxes. CFA Brazil: Banco Santander S. 1.  Price Performance (R$) Fleury management has focused on cash generation.com.com. Also. +5511-3012-5914 | bgiardino@santander. Management expects these investments to speed up the 60 maturation of recently opened PSCs.715 Float (%) 32. We trimmed Company Statistics our adjusted EPS estimate. and it aims to have 110 80% of EBITDA converted into operating cash flow in the long run.35 TARGET PRICE: R$28. We acknowledge that Fleury is a step ahead in management efficiency versus DASA. however. The maturation of stores opened recently (evidenced by the level of sales per square meter indicator.4x at the end of 2012) and the successful integration of Labs D’Or should open room for new acquisitions. The deleveraging of the company’s balance Bruno Giardino*.2%.Mn 156 All decisions are supported by the company’s Balanced Score Card (BSC).A.br sheet (net debt-to-EBITDA to reach 1. Santander estimates and company reports.00 UPGRADING RATING TO BUY FROM HOLD  Upgrading to Buy on positive momentum.26.98 Target Price (YE 2013) R$ 28.A. with the opening of new and larger 70 PSCs.74 Market Capitalization (US$ Mn)  Internal efficiency drives positive momentum.44 52-Week Range (R$) 21.0 3-Mth Avg.41 .5 Shares Outstanding . Following the initial ramp- 90 up of a+ brand and the integration of Labs. 112 . IBOVESPA j-11 m-11 a-11 d-11 a-12 a-12 d-12 Sources: FactSet.2013 Latin American Universe Book BRAZIL—HEALTH CARE FLEURY BUY CURRENT PRICE: R$22. We also forecast adjusted net income of R$199 million. +5511-3012-5787 | dhgewehr@santander. FLRY3 BZ Current Price (01/03/13) R$ 22.br line growth and margin expansion. we expect management 80 to focus on the Fleury brand. by just 2%.

266 2.38 0.3 12.967 300 930 1.126 million.3 1.3 0.9 3. acquired in July 2011.2 P/CE 21.8) 12.66 12.5 ROCE (%) 5.1 6.6 FV/EBITDA 18.4 (27) (30) 77 12.44 0.7 1.2 (65) (50) 151 29.9 12.0 2.999 15.8 18. The company was founded in 1926.2 265 24.8 2013E 794 3.9% D'Or Shareholders 8. Balance Sheet and CF Statement.1 8.2 1.9 12.5 30.5 6.6% Patient Services Centers 83. 9M12 Imaging 44.21 0.15 0.2 561 14.716 716 145 2013E 275 807 2.0 6.9 9.3 453 17.0 212 (9.515 203 499 870 489 138 2012E 131 340 919 1.126 29.8 22.345 134 418 828 305 59 659 571 574 577 351 269 255 246 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 432 438 446 335 230 207 198 143 Capital Employed 2.2% Lab to lab and Clinical Trials 1.632 918 259 2012E 278 721 1.6 197 11.7 314 57.9 2011A 672 35.4 5.0 8.5 7.9 R$ 2012E 1.0 15.9 22.8 15.4 37.7 35.2 (30) (23) 69 15. mainly located in the Southeast region. is the second largest private medical diagnostic services provider in Brazil.9% Preventive Medicine 1.13 0.319 133 413 809 320 65 2014E 162 419 873 1.4 2.3 1.280 1.29 0.8 (14. 113 .2 1.2 57.5 35.9 US$ 2012E 766 14.8 200 (1. representing close to half of its revenue the year it was acquired.3 119 4.3 9.3 20.8 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.2 19.30 BVPS Fleury S.016 1. the highest level of corporate governance classification of the BM&F Bovespa stock exchange. and net income of R$1.18 5.5 14.6 FCF Yield (%) Div Yield (%) PER SHARE DATA 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 0.0% Integritas (Founders + Bradesco) 52.57 5.7 225 6.09 0. 9M12 Free-float 34.0 2.4% Founders (Direct Ownership) 4.4% PSC Revenue per Type of Exam. In 2011.6 8.5 7.4 23. Since 2002.9 7.5 38.9 1.9 11.9 10.9 10.34 0.1 20.2 30.318 134 414 809 338 68 2013E 122 359 905 1.9 6.6 20. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 1.96 1.2 8.7 2.7% Sources for all charts and tables: Company reports and Santander estimates.5 22. offering more than 3.4 244 8.154 2.9 1.9 17.007 971 Net Debt/EBITDA 2. with 6 brands and 190 patient service centers (PSC).4 9.6 15.3 24.9 14.com.159 316 982 1.2 (16.9 1.2 9.9 6.7 134 10.1 1.500 33.6) (3.1 Dividend Payout (%) MARKET RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 33.9 8.5 (8) (33) 101 (22.842 380 936 1.2 (32) (18) 60 (0.1 0.64 0.1 1.7 2014E 1.7 2014E 869 9.0 8.7 28.7 Net Debt/Equity 0.4% Clinical 55.5 ROE (%) 6.3 12.8 2.1 1.4 57.2 6.7 84 (12.6 12. It is listed on the Novo Mercado.4 LT Debt FINANCIAL RATIOS Net Debt Capex/Revenue (%) Int Cover (%) 2013E 1.891 2.736 15.8 491 18.3) 2.2 (62) (35) 117 15.2 0.4 9.3 0.br Sales by Segment.0) 17.2 121 11.4 1.3 24.948 2.9 P/BV 2.2 0. and it processed more than 28 million requisitions for medical diagnostics in 2011.8 9. respectively.50 DPS 0.6) 12. it has acquired 27 companies – Labs D’Or. the company posted net revenue.793 283 878 1.2 0. and R$101 million.5 2.7 22.9 1.000 different tests.45 10.5 0.945 716 138 2011A 259 447 1.3 0.9 213 51.6) 3.15 10. 9M12 Operations in Hospitals 13.8 8. was the most sizable acquisition in Fleury’s history.6% Shareholder Structure.5 10. EBITDA.38 0.5 19.7 308 16.064 2.9 109 29.7 234 13.4 (62) (69) 178 18. R$200 million.0 2.051 3.18 5.FLEURY Financial Highlights: P&L.5 10.8 1.5 10.2 8.11 0.008 1.8) 7.4 0.0 15.3 FV/EBIT 26.1 FV/Revenue 3.5 14.0 17.6 22.0) 8.7 141 (16.2 0.3 1.4 385 22.1 35.3 9.5 (5) (20) 60 (19.75 0.4 5./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (59) 63 (89) 111 (645) (497) 468 (27) 0 2012E (100) 93 (163) 151 (364) (120) (23) (36) 2 2013E (120) 0 (73) 312 (208) 102 0 (45) 0 2014E (145) 0 (48) 405 (168) 218 0 (53) 0 2011A (35) 38 (53) 66 (385) (297) 279 (16) 0 2012E (51) 47 (83) 77 (186) (61) (12) (18) 1 2013E (55) 0 (33) 143 (95) 47 0 (21) 0 2014E (63) 0 (21) 176 (73) 95 0 (23) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 486 839 1.8 18.A.45 5.2 415 5.3 1.98 11.8 15.4 21. Key Personnel: Omar Hauache (CEO).1 6.0 176 9.2 393 7.3 12.036 2.9 7.4 16.0 8.9) (3.4 12.100 1.3 0.3 8.0 1.14 0.4 14.6 29.2 8.821 720 146 2014E 381 984 2.0 16. Celso Marciniuk (CFO) and João Patah (IR Officer) Web: www.fleury.6) 160 34.9 23.0 8.9) 8.

The major trigger for the stock continues to be the sale of part of Alphaville.21 around 20% of the company’s consolidated land bank (R$4 billion in 52-Week Range (R$) PSV). but the acquisition of the remaining 20% remains under arbitrage. markets where the company used to operate profitably. execution is key. 60 40 20 0 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet. in our view. .  Pedro Balcão Reis* Brazil: Banco Santander S. INFRA & RE GAFISA HOLD CURRENT PRICE: R$4. REPLACING YE2012 TARGET PRICE OF R$4. Thus. paving the way for Gafisa to deleverage.  Deleveraging is not trivial. Daily Vol (US$ Mn) 20.com.A. Santander estimates and company reports. Alphaville offers one of the best risk-return prospects in the real estate sector. .89 TARGET PRICE: R$5.com. divesting from nonstrategic regions implies the sale of  Bloomberg GFSA3 BZ / GFA US Current Price (01/04/13) R$ 4.2013 Latin American Universe Book BRAZIL—CEMENT. significantly reduces the risk of cost overruns in the projects that are being launched. Despite Gafisa’s improved earnings outlook and Fabiola Gama* lower cash consumption. in our view. 114 . The concentration of Gafisa’s launches in Sao Paulo and Rio de Janeiro.9 3-Mth Avg.Mn 432 Price Performance (R$) Gafisa IBOVESPA 120 100 80 .50  Investment Case. As a result.7 Shares Outstanding . we believe it still has significant challenges Brazil: Banco Santander S. .30.066 Float (%) 99. CONSTRUCTION. . Moreover.A. With net margins expanding to 25% in 2011 (from 10% in 2007) and the potential to launch as much as R$4.br ahead.30 / US$ 5. Gafisa closed 3Q12 with one of the highest leverage levels of the sector (111% versus the sector average of 69%). we maintain our Hold recommendation on the stock.  Divesting from nonstrategic regions. in our opinion.39 1. Acknowledging that Gafisa’s improvement in profitability also depends on Alphaville.79 Target Price (YE 2013) R$ 5.13 .5 billion in the cities in which it is currently present. +5511-3012-5765 | pbalcao@santander.5.89 / US$ 4. we view this dispute as negative for the company. Market Capitalization (US$ Mn) Alphaville is the crown jewel . it should still lag peers in terms of profitability. +5511-3012-7414 | fpgama@santander.  Company Statistics 2. in our opinion.br 2013 Outlook: Even though we forecast Gafisa to improve margins. as the completion of the units under construction coupled with the collection of the related receivables must materially accelerate the company’s cash inflow.30 INTRODUCING YE2013 TARGET PRICE OF R$5.

21 8.694 2.0) 0.1 0.910 1.1) 1.8 8.4 1.907 8.255 2012E 100 6.1 1.483 1.5) 15.8 0.4) 308 0.042.0 9.412 2.9) 1.463 3.1) (32.6) US$ 2012E 2.01 0.036 1.7 0.063 153 2013E 92 6.7) 285.com.3 1.7 0.2 (9.7) (32.1 613 23.9) 1.8) (157) (149.85 (02.4) (9.9 FCF Yield (%) Div Yield (%) (13.6 16.6 1.709 7. Balance Sheet and CF Statement.488 (5.310 944 2014E 2011A 2012E 2013E 2014E 2011A 2012E 2013E Net Debt 3.6 5.9 7.6 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.145 1.12 6. Gafisa also boasts an in-house sales force named Gafisa Vendas.677 3. focusing on residential property development.7) 0. although it operates with a multi-segment strategy through its subsidiaries Tenda (acquired in September 2008) and Alphaville.8 0.359 1.8 (0.0 16.7 10.350 1.0 16.3) 0.571 79 2013E 47 3.132 7.8) (0./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (83) 0 (90) (951) 231 (720) 0 534 236 (267) BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt LT Debt FINANCIAL RATIOS 2013E 3.7) 8.5 3.09 6.573 7.492 1.1 2.599 3.8 0.2) 17.8) 382 (63.2 6.15) 0.6 496 n/m 12.253 4.7) 1.GAFISA Financial Highlights: P&L.373 1.1 549 140.9 0.30 3.br/ir Launches (R$ billion).257 978 4.899 1.255 1.9) 81.2) 8. 115 .4 1.6 MARKET RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E (1.735 2012E 51 3.8 7.220 876 4.40 3.2 1.9 450 n/m 11.057 176.54) 0.9) (13.6) 273.378 69 2014E 47 2.9 9.8 307 31.53 2011 2.9% Sources for all charts and tables: Company reports and Santander estimates.4) 15.8 11.1) (279) (142) (945) (457.2 P/BV 0.3 16.944 2.16 0. 2012E Shares in Treasury 0.4 36.596 1.507 4.3) 581 5.983 1.6 (39.7 2014E 3.6 4.7 17.447 2.7) 11.567 1.06 0.2 0.3 (45.7) 80. 2011-14E 3.816 1.1 614 2.192 9.2 (14. 2011-14E 3.994 797 3.2 8.19) 0.6 5.2) 6.0 8.520 1.6 2011A 1.84 DPS (00.0 1.900 (5.00 3.3 1.751 6.2 1.10 6.7 2014E 1.890 2.007 16.5) 13.738 3.gafisa.6 2012E (57) 0 231 313 (3) 310 0 (1.8 (11.400 Net Debt/EBITDA (8.5 (177) (57) 284 1.35 3.8) (263) (147.4) 12.5) (13.1 1.258 1.705 (4.03 6.19 BVPS Gafisa is one of Brazil’s premier and most traditional homebuilding companies.6) R$ 2012E 3.1) (167) (85) (564) (469.9 234 n/m 11.5 13.730 1.9) 0.0 (7.100 2.3 3.3 (1.55) 0.6 (8.6 6.8 11.9 FV/EBIT (10.729 (10.6 258 n/m 12.867 2.6 (99) (71) 368 29.3 1.10 2011 2012e 2013e 2014e Shareholder Structure.2 17.7 6.0 Net Debt/Equity Capex/Revenue (%) Int Cover (%) Dividend Payout (%) ROCE (%) (0.169 5.554 Company Description 2013E 1.to high-income segment.1% Free Float 99.10 2012e 2013e 2014e Contracted Sales (R$ billion).6 308 (2.7 0.0 (4.1 314 22.583 3.910 2.987 1.4 FV/EBITDA (12.3 FV/Revenue 1.8 7.1 7.66 0.2 PER SHARE DATA 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS (02.46 7.2 6.6 1.3 1.6 (50) (36) 184 26.6 10.1 598 33.16 0.028.6 614 0.791 733 1.3 17. respectively.7) (9.0 (5.0 (8.21 (00.4 35.961 98 974 2.1) 573 (1.4 6.1 11.1 1.3 3.8 1.6 5.1 2.3 3.2 18.64 0.604 993 50 1.0 P/CE (2.3 4.228) (6) 41 2013E (44) 0 110 437 (38) 399 0 (375) (71) 40 2014E (39) 0 418 825 (36) 789 0 (727) (92) 32 2011A (50) 0 (53) (568) 138 (430) 0 319 141 (160) 2011A 984 7.096 750 1.57 7.166 1.865 33.9 (1.8 0.867 1.5 11.4) 11.4 (93.4 18.7 32.331 946 Capital Employed 6. The company’s core operations are focused on the mid.2) (400) (172.863 519 1.1) 6.5 4.963 2.6 32.6 ROE (%) (35.8) 24.6 2012E (30) 0 120 163 (2) 161 0 (638) (3) 21 2013E (22) 0 56 224 (20) 204 0 (192) (36) 21 2014E (19) 0 209 413 (18) 395 0 (364) (46) 16 2011A 524 3.8 (89.9) (239) (175.278 1. 2011–14E in Millions P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 2.482 1.5 (91) (29) 146 1.688 134 2014E 94 5.3) (0. Key Personnel: Alceu Duílio Calciolari (CEO) and Andre Bergstein (CFO) Web: www.05 6.8 (292) (41) 25 n/m 0.9 7.896 (13. in the low-income and luxury lots segments.068 2.90 3.684 3.9 0.01 0.3 3.648 4.0 1.746 (8.245 2.0) 0.1) 24.7 (40.782 1.3 8.5 3.045 5.475 2.3 4.8 (152) (21) 13 n/m 0.229 3.7) 228 (61.9) 1.5 7.314 2.7 13.06 0.235 812 1.

com.20. (4) the company’s unappealing valuation. by 2016.A.Mn 1. Santander estimates and company reports. from 18 million tons/year. Considering that real estate Market Capitalization (US$ Mn) companies expect to reduce launches by 37% YoY in 2013 and that Float (%) infrastructure investments continue to be sluggish. Daily Vol (US$ Mn) 47.) and Ternium (LatAm).2013 Latin American Universe Book BRAZIL—METALS & MINING GERDAU UNDERPERFORM CURRENT PRICE: R$19.71 expansion of long steel demand. we note that Gerdau’s story is ―crowded‖ (i.05 Residential civil construction has been the main pillar supporting the GGBR4 BZ 52-Week Range (R$) 15.S.118 56. Long term.com. Price Performance (R$) Gerdau IBOVESPA 110 100 90 80 70 60 50 40 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet. the company says it could reach volume of 24 million tons/year by 2020.  Gerdau recently announced the end of the search for a partner for the mining business and it will expand production on its own. 116 . and (5) our projection of decelerating long steel demand in Alex Sciacio*. Moreover.30 TARGET PRICE: R$19. (3) its weak earnings momentum.e.9x is in-line with its last three-year average and more expensive than Nucor (Not Rated) (U..00  Investment Case: The reasons underpinning our October rating Felipe Reis* downgrade included (1) Gerdau’s strong outperformance in 2012.br (2) the disappointment with respect to its iron ore asset transaction.48 Target Price (YE 2013) R$ 19. +5511-3012-5758 | ffreis@santander. we are now more 16.00 / US$ 9.A. and another R$500 million in the construction of a rail terminal.40 . +5511-3012-5870 | azsciacio@santander.5 Shares Outstanding .30 / US$ 9.6 3-Mth Avg. Brazil: Banco Santander S. CFA Brazil: Banco Santander S.  2013E EV/EBITDA at 7. Company Statistics  2013 Outlook: Can long steel demand in Brazil continue to Bloomberg expand with the strong support of residential civil construction? Current Price (01/03/13) R$ 19. we see marginal buyers as having limited interest in the stock). Gerdau said it will invest R$500 million to increase output to 12 million tons/year.700 conservative about Gerdau’s growth outlook in Brazil and more conservative than consensus.br Brazil in the medium term.

020 18.7 2. Gerdau also operates in the U.285 8. Key Personnel: Jorge Gerdau Johannpeter (Chairman).657 2012E (1.643 14.734 29.2 (590) 338 2.1) 7.0 4.050 (2.3 0. Tarcisio Beuren (IR Manager) and Harley Scardoelli (Financial Director) Web: www.197 (1.982 5.585 (839) 1.0 11.791 (8.3 15.4) 5.1 1.828) 672 (2.0 8.01 1.772) (450) (1.70 16.834 10.8 6.0 1.06 0. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 35.1 36.822 27.454) 0 2011A (1.7 6. New York.588 (10.3 (906) 624 3.245 63.S. Metalúrgica Gerdau is a listed holding company controlled by the Gerdau family.4 0.8 1. India.9 11.7 5.176 13. drawn.260 51.7 Int Cover (%) 4. 9M12 Latam (ex-Brazil) 10..462 30.678 8.7 (563) 938 5. Gerdau shares are listed on the stock exchanges in São Paulo.40 14.1 1.7 31.527 58.371 14. and Spain.998 (889) 1.3 10.3) (7.1 8.803 9.319 17.9 2014E 48.977 0 LT Debt 13.578 17.2 3. Mexico.1 1.0 1.733 5. Gerdau is controlled by Metalúrgica Gerdau.0 0.3 37.9 9.3) 13.426 18.4 42.7% North America 22. offering a broad range of long steel products such as rebars.548 (1. merchant bars.4 0.2 (304) 175 1.9 3.8) 13. profiles.549 7.2 12.1 11.949 9.57 0.297 0 2011A 2.594 28.0 1. blooms.1 3.1 4.23 0.800) 2. Argentina.697 6.7 2011A 21.203 44.0 2.0 4.57 18.235 18.9 11.1% Metalurgica Gerdau 40.84 8.667 (2.4 7.549 0 2013E 2.868 (600) 0 (1.0 4.046 (1. Besides Brazil.8 14.0 9.1 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 12.5 15. Uruguay.441) (1.666 15.898 2.812 21.0 (528) (253) 2.7 2.4 9.7 7.441 9.2 6.676 9.2 1.050 14.206 21.496 (11.4 7.977 FINANCIAL RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 9.817 20.0 (315) (151) 1.172 14.225 21.1) 8.442 24.6 14.br Revenue by Division. 9M12 LatAm (ex-Brazil) 14.771 22.173 13.1 1.50 8.8 4.3 (447) 308 1.2% Shareholder Structure.9% Gerdau Family 3.886 20.34 0.251 (296) 0 (478) 0 2014E (970) 0 (810) 2.5 7.70 0.1 12.4 Net Debt Dividend Payout (%) MARKET RATIOS P/E P/CE FV/EBITDA FV/EBIT FV/Revenue P/BV FCF Yield (%) Div Yield (%) 2013E 44.082 4.9 0. Andre Pires (CFO).9% North America 33.605 18.433 22.006 (6.1 6.0 5.4 1.7 US$ 2012E 20.0 (1.1 ROE (%) 8.7 5.295 7.6 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.822 2.010 10. and Madrid. which owns 76% of the company’s voting shares and 45% of its total capital.020 13.4 11.599 18.425 41.3 11.721 15.9 4.467 20.505 23.2 6.800) 3.9 2.4 11.183 2012E (953) 0 (1.708 54.4 0.314 5.997 13.9 12.407 12.114) (387) 0 (384) 0 2013E (978) 0 (690) 1.04 20.801 21.GERDAU Financial Highlights: P&L.3 9.291 11.6) 11.216 25.033) 954 (1.0 8.0 2.321 28. billets.281 8.890 4.082 15.806 5.977) 347 (1.417 15.8 5.2 Capex/Revenue (%) 5.6 6.854 5.9 7.0) 8.362 Net Debt/EBITDA 2.7) 5. December 2012 ADR's 17.791) (2.04 3.526 19.5 7.5 5.1 1.486 10.0 2.59 9.690 19.7 8.583 12.2 Net Debt/Equity 0.4% Brazil 36.739 (6.0 42.082 0 2014E 7.9 1. André Gerdau Johannpeter (CEO).447 7.981) 0 (1.908 18.23 PER SHARE DATA BVPS Gerdau has a total annual crude steel production capacity of 26 million tons and an annual rolling capacity of 22 million tons (including recent acquisitions).8 (1.651 19.8) 2.3 ROCE (%) 6.5 6.802 (280) 0 (677) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 4.845) 0 (3.7 7.597 28.9 1.295 49.2 7.816 (21. Venezuela.9 11.4 7.7 9.0 12.896 3.205 50.0) 7.5 9.8 6.0 0.8 35.1 7.9 10.21 0.2 7.196 6.86 0.7% Free Float 38.8 3.681 (18.1 7.250 30.9) 8.233 9.533 (600) 0 (967) 0 2014E (2. mainly to the civil construction and manufacturing segments.686 Capital Employed 40.105 11.0 1.157) (750) 0 (744) 0 2013E (1.5 6.5 3.7 27.623 10.326 7.696 9.182 6.com.4 0. Toronto.800 34.832 13.684 14. 117 .721 0 2013E 4.0 2.3 3.gerdau.6 2013E 21.7 8.1 3.7% EBITDA By Division.9 9. and specialty steel products.655 32.7 5.4) 4.4 2.5 6.7 11.7 4.7 (262) 437 2.5) (7. Canada.9 1.0% Specialty Steel 15.0 1.8 1.4 2.0 9.0 28.659 9.3% Sources for all charts and tables: Company reports and Santander estimates.082) 0 (1./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (1.791 13.397) 4.109 (7.2 0.6 9.731) 1.220 26.449 (10.684 0 2012E 3.139 18.9 2014E 22.4 2.105 2.18 1.646 2.0 4.0 11.4 6.0 12.7 9.81 1.295 0 2012E 1.7 R$ 2012E 40.739) 5.743 3. Colombia.768 2.603 7.963) (320) 0 0 (586) 3.3 11.2 14.172) (191) 0 0 (350) 2.4% Specialty Steel 22.404 47.710 24.24 7.297 7.9 6.1 1.44 0.43 DPS 0.9 5.5 3.8 4.56 2.182 0 2014E 3.597 (1.7% Brazil 44.2 8. Balance Sheet and CF Statement.4 7.658 4.058) (268) (1.5) 2.2 15.8 1.7 5.4 1.28 0. which makes the company the largest long steel producer in the Americas and the eleventh largest steelmaker in the world.286 10. Chile.3 0.5 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 1.404 5.8 1.1 8.5 7.0 6.670 26.486 15.8 2.2) 2.

3% in 2012E to 73.00 / US$ 7.2013 Latin American Universe Book BRAZIL—TRANSPORTATION & INFRASTRUCTURE GOL HOLD CURRENT PRICE: R$13. Moreover. from -6% in 2012E to +3% in 2013.  Company Statistics 1. The 13% increase in RASK combined with a 4% increase in CASK (CASK ex fuel +4% and CASK fuel +3%) implies a 9 p.19 IBOVESPA 80 market consensus for EBIT margin stood at 6-8% for 2013E. Daily Vol (US$ Mn) 8. 118 . with the stock trading at over 8x 2013E EV/EBITDAR.2% in 2013E). 40 20 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet. We Market Capitalization (US$ Mn) expect the company to address this concern via a combination of asset sales (Smiles IPO) and a capital increase in the next 12 months.  Bloomberg GOLL4 BZ / GOL US Current Price (01/03/13) R$ 13.00 UPGRADING RATING TO HOLD FROM UNDERPERFORM INTRODUCING YE2013 TARGET PRICE OF R$14. REPLACING YE2012 TARGET PRICE OF R$9.00. +5511-3012-5765 | pbalcao@santander. The net result should be a 9% increase in revenue and a 113% increase in EBITDAR.50  Investment Case: We are upgrading Gol to Hold from Underperform Pedro Balcão Reis* on the back of the very strong November operating data (PRASK Brazil: Banco Santander S.com. However.Mn 281 Price Performance (R$) Gol Demanding valuation. which is also being followed by Gol’s main competitor.01 / US$ 6. Santander estimates and company reports.15. which is a direct result of the current price of jet fuel and Bruno Amorim* Brazil: Banco Santander S. We believe the Brazilian market has too much capacity for the current level of demand. needs cash proceeds. in our view. the 60 current 2013E consensus is approximately 5%.br USD/BRL.73 .A.br Renan Manda* Brazil: Banco Santander S. when the 7. LATAM.1x 52-Week Range (R$) and 5. according to our estimates.A.com. we find it puzzling that GOL’s 100 current market EV is significantly above its year-ago level. GOL. we believe the current market price already reflects the expectation of a very significant recovery in the near future. +5511 3012-6535 | rmanda@santander. We estimate the stock is trading at over 8x 120 2013E EV/EBITDAR.796 Float (%) 35.com. from 70. +5511-3012-6016 | bamorim@santander. thus preventing us from becoming even more positive on the stock.p. we estimate a load factor increase of 4% (or 240 bps. we agree with management’s strategy of reducing capacity. which together with a 9% increase in yield implies a 13% increase in RASK.01 TARGET PRICE: R$14. At a 2012E adjusted net debt/EBITDAR of 12.45 Target Price (YE 2013) R$ 14.  2013 Outlook: Due to management’s consistent strategy of reducing capacity (we expect ASK to fall 4% in 2012E).0 3-Mth Avg.A. increase in the EBIT margin. Moreover.br +17% YoY) released by the company on December 21.8x in 2013E.0 Shares Outstanding .00 Too much debt.

7 1.5 3.138 280 LT Debt 2013E 8.A.674 10.1 (245) (119.3 1.0 PER SHARE DATA 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS (01. Uruguay.98 3.474 3.1 7.6 FV/EBIT (51.5) (11.4) 7.3 1.1 0.176 4.881 9.5 422 (51.4 6.6 Capex/Revenue (%) 8.940 7.0 0.749 1.7) 2014E 10.5 Dividend Payout (%) 16.7 0.0% Net Revenue Breakdown.2 3.388 2.552 2012E 2.0 (492) 76 (67) 87.04 1.655 3.GOL Financial Highlights: P&L.8 FCF Yield (%) Div Yield (%) 1.5 0.832 3.004 5.1 16. Volluto 62.373 3.7) 2014E 4.522 2. The company also provides cargo transportation and charter flight services.0 ROCE (%) (4.19 0 0 0 0.206 8.138 5.017 7.5 1.8 128 n/m 3.com.3 1.1 (245) (13) 65 n/m 1.8 3.7 12.5% Passenger 88.178 8.4 2011A 4.749 9.6) (23.053 11.7% Sources for all charts and tables: Company reports and Santander estimates. Balance Sheet and CF Statement.987 9.4 14.9 P/CE 39.8) (362) 32 (276) (52.1 FINANCIAL RATIOS Int Cover (%) 1. Paraguay.4) (5.024 1.1) (6.470 1.399 467 5.893 3.679 1.8 3.9 FV/Revenue 1. 2012E CASK fuel 43.0 (234) 36 (32) 88.670 1.5) 2013E 4.8) (707) 63 (539) (77.059 8.4) 24.64 1. Brazil.9) 13.50 (00.6 15.8 11.348 3. em Part.546 828 2012E 992 1.946 Net Debt/EBITDAR 8.4 3./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (389) 292 (319) (614) (516) 399 851 (51) 183 2012E (495) 87 (632) (607) (522) 338 228 0 1 2013E (509) (27) 334 (640) (184) 121 315 0 0 2014E (536) 15 605 (709) 28 132 245 0 0 2011A (232) 174 (191) (367) (308) 238 508 (30) 110 2012E (253) 44 (324) (311) (267) 173 117 0 1 2013E (242) (13) 159 (305) (88) 58 150 0 0 2014E (248) 7 280 (327) 13 61 113 0 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 2.5 (0.3) (6.059 2.9 1.6 (76.8 4.755 4.1 (531) (28) 141 n/m 1.054 2.4) 44.4) (4.961 2.0 17.277 1.917 3.5 8.6 3.2 FV/EBITDAR 13. Venezuela.824 5.11 0 0 0 BVPS 8.br CASK Breakdown.4 283 121.942 5.9 5.316 6.2 ROE (%) (13.3 675 97.487 3.419 112.0 1. Chile.2 1.8 7.0 20. 2012E Cargo and other 11.0 0.4) (4.185 3.0 707 (53.772 1.340 6.5% Fundo de Invest.978 2.157 6.1 5.5) (6.16 3.92) (00.5 (15.7% Wellington 5.8 4.019 Capital Employed 6.2 3.619 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E Net Debt 6.9) (6.2 (9.0 1.1) 6.539 8. September 2012 Free Float 26.1% Delta Airlines 3. 119 .261 540 4.4 7.2) 25.24) 0.46 3.8 (17.8 MARKET RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E (11.1) 8.026 11.038 971 10.0 0.8) (48.8 7.0) R$ 2012E 8.244 9.23 DPS 0.0 0.87 2.2 8.1) (6. Key Personnel: Paulo Kakinoff (CEO).6) 9.7) (2.409 3.8 (15.5 2.4 667 (5.0 6.7 15.2 P/BV 1.2 (4.1) (2.053 10.0 0.5% Shareholder Structure.4 614 127.7 1.666 2.7 12.2 (45.458 3.1 5.5 2.2) 342 (19.757 4.2) (6.5) (751) 228 (304) (197.67) (00.2) (15.0 0.5 8.11) 0.7 6.6 (0.516 6.913 288 2014E 1.5 1.1 7.2) 0.7 Net Debt/Equity 2.0) 43.3 1.9) 9.69 Gol Linhas Aereas Inteligentes S.3) 0.5 8.7 3.0) 8.119 1.833 2.5) (448) 136 (182) (202.5 3.3 0.6 856 26.5 17.886 297 2013E 1.98) (00.9) (5.5 8.4 19.252 1.1 7.4 14.300 455 4.4 (187) (126.9) (12.364 2.777 4. and the Caribbean.5 8.501 13.527 1.8 (81.0 0.118 10.290 615 2011A 1.379 3. Edmar Prado Lopes (CFO) and André Carvalho (IR Officer) Web: www.3) (52.0) US$ 2012E 4. It offers approximately 900 daily flights to several destinations connecting the various cities in Brazil.917 6.888 4.439 4.378 5. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDAR YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 7.13) (01.65 4.474 2.6 18.025 5.1 1. Barbados.1) (24.7) 6.voegol.2 6.293 8.9) 13.7) (53. operates as a lowcost low-fare airline in Latin America.3) (14.1 8.1 (479) (156.4) (50.3) (5.1 7.520 2.114 615 2013E 2. as well as destinations in Argentina.294 3.4 5.4) (5.478 615 2014E 2. The company was founded n 2001 and is based in Sao Paulo.596 7.673 3.3 35.755 1.7 18.409 2.0% Fidelity 2.643 8.974 2.0% CASK ex-fuel 57.8 269 n/m 3.223 (6.6) 8.4 (111) (128.4 1.763 1.7 3. Bolivia.852 30.0 0.5) CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.1 7.680 1.4 7.

The company’s activities in the past two years include (i) acquisition of a controlling stake in Sascar in March 2011.40 INTRODUCING YE2013 TARGET PRICE OF R$7.Mn 194 Price Performance (R$) highest in our universe of coverage. (v) commencement of fundraising activity for Company Statistics a real-estate-dedicated fund. REPLACING YE2012 TARGET PRICE R$6.2013 Latin American Universe Book BRAZIL—FINANCIAL SERVICES GP INVESTMENTS BUY CURRENT PRICE: R$4. we could see the price-to-NAV multiple expand significantly.0x multiple.  2013 Outlook: We expect new acquisitions.br Boris Molina will happen only after the first is delivered.4 Shares Outstanding . GP Investments IBOVESPA 110 100 90 80 70 60 50 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet. 120 . +5511-3012-5731 | rcabral@santander. We also believe the former Brazil: Banco Santander S. (iii) divesting its stake in BR Properties in April 2012.77x price/NAV. which in turn Bloomberg acquired 1. to do successful exits. Santander estimates and company reports. which we consider a very attractive level. Daily Vol (US$ Mn) 0. Its upside potential is among the GPIV11 BZ 52-Week Range (R$) 3.us operational triggers are related to the company’s ability to continue to Renata Cabral* deploy its cash position.40. and (vii) acquisition of a significant stake in the retailer company Centauro. (vi) creating BR Towers.0x‖ era. We believe likely New York: Santander Investment Securities Inc. as our target price indicates it could trade at a near 1.5.  A compelling valuation. which could support continued fundraising activities.80  Henrique Navarro* Investment Case: We believe the company needs a combination of an operational trigger and market visibility to make the price-to-NAV discount return to the ―above 1.com. (ii) merger of San Antonio International’s operations into Lupatech in January 2012. (iv) acquisition of full ownership of Fogo de Chão.  Recent activity.9 3-Mth Avg.com.91 .A.99 TARGET PRICE: R$7.A. The stock trades at a 0.99 / US$ 2.79 Market Capitalization (US$ Mn) 476 Float (%) 76. followed by fully divesting it in July 2012.29 September 2012. +1-212-350-3977 | bmolina@santander. We have little doubt that if the company continues to announce progress on these fronts.40 / US$ 3.912 mobile telephony towers from a telecom operator in Current Price (01/03/13) R$ 4. +5511-3012-5756 | havieira@santander.br its fundraising activity.45 Target Price (YE 2013) R$ 7. and to continue with Brazil: Banco Santander S.

together totaling US$540 million. 3Q12 Partners Holding 23. Antonio Carlos A.4% GPCP V 41.7% Magnesita 14.4% Cash / NPV fees / Others 27. The company is controlled by its top management. 3Q12 GPCP III 9. Key Personnel: Fersen Lamas Lambranho (Chairman). 3Q12 in USD Millions (Target Prices for YE2013) Company Description GP Investments.5% Shareholder Structure. having raised more than US$ 5 billion from private equity investors since 1993. Ribeiro Bonchristiano (CEO).0% Other nonlisted 35. GP was the first private equity firm to go public in Latin America. in 15 industrial sectors.0% Sources for all charts and tables: Company reports and Santander estimates. and a follow-on primary equity offering in 2008. 2013E Other listed 10.GP INVESTMENTS Net Asset Value Table. In 2007 the company also issued publicly traded perpetual debt. (GP) is one of the leading private equity firms in Latin America. Ltd.4% Estacio 12.gp-investments. with a 100% primary IPO on the Bovespa in 2006.com Current Investment Vehicles. raising US$190 million. João Junqueira (CFO) and Leonardo Corrêa (IRM) Web: www. 121 .5% GPCP IV 49. With a focus primarily on Brazil.0% Free Float 77. the company seeks above-average returns by acquiring mid-sized companies with high value-creation potential. completing 48 investments and 40 sales (or ―exits‖ in private equity industry language).1% Valuation Breakdown per Company.

Daily Vol (US$ Mn) 10.  2013 Outlook: 2013 should be a decisive year for HRT in its pursuit for oil.A.br oil that has significantly consumed its cash position and should continue to do so until 2014. 122 .2013 Latin American Universe Book BRAZIL—OIL. We have slightly adjusted our estimates to account for HRT’s efforts Company Statistics to save on costs and expenses. We also expect HRT to announce a monetization plan with Petrobras to potentially sell the recently discovered gas in the Solimões. +1-212-350-3991 | caudi@santander. +5511-3012-6042 | vneto@santander. the company re-structured Bloomberg its work force and has most recently announced the spin-off of its air Current Price (01/03/13) R$ 5. HRT has been on an unsuccessful quest for New York: Santander Investment Securities Inc. and potentially a couple of other wells.com. together with its partner Galp.us Vicente Falanga Neto* Brazil: Banco Santander S. In 2012. We recall that HRT has already farmed-out 15% of part of its acreage in Namibia to Galp. and recent comments 100 management made to the media (e.80 FROM R$4.Mn 318 Price Performance (R$) have to continue to sell part of its assets to proceed with its HRT IBOVESPA 150 exploratory campaign.02 Market Capitalization (US$ Mn) 816 Float (%) 45. which should help it to save cash.73 . 0 j-11 m-11 a-11 d-11 a-12 a-12 d-12 Sources: FactSet. drilling HRT-10. which we do not expect to bear fruit in the short to mid-terms. in our opinion.80 / US$ 2. If HRT does not succeed in finding oil in Namibia or the Solimões.0 3-Mth Avg.60  Christian Audi Investment Case: We have a cautious view on HRT due to the company’s delicate cash situation and its exploratory campaign.  Adjusting our estimates to account for cost-saving programs.14. HRT-11. and we believe the discovery of economically viable reservoirs could act as a significant catalyst for the stock. GAS & PETROCHEMICALS HRT HOLD CURRENT PRICE: R$5. We expect the company to continue to carry out its exploratory campaign in the Solimões at very low speed (to save cash). we believe it will HRTP3 BZ 52-Week Range (R$) 3. Agencia Estado) indicate that HRT might be considering farming out more of its acreage in the 50 Solimões. The company plans to drill three wells in Namibia. Santander estimates and company reports.57 Target Price (YE 2013) R$ 5.80 RAISING YE2013 TARGET PRICE TO R$5.23 / US$ 2.  Lack of a successful exploratory campaign could imply continued dilution in assets participation.5 Shares Outstanding .23 TARGET PRICE: R$5.g. We recall that since its IPO..76 logistics business (still subject to regulatory approval).

0 0.1) 133 88 (20) (13) (367) (227) (20.7 12.9) (8.5 2.216 2.3) (0.3 (0.8 49.3% Free Float 44.500.1) (247) (147) 15.8 (0.1) 130 (13) (175) (116.3) (5.4 0.375 0 0 2012E 582 1.0 0.6 6.3 14 135.2 (2.106 1.872 0 0 2012E 1.1) (6.242 789 1.364.20 BVPS HRT is an independent E&P company with concession rights over twenty-one on-shore blocks in the Brazilian Solimões Basin.8) (1.7 1. The company is also engaged in providing geological services via its subsidiary.2) n/m n/m n/m 0.6) (3.972.5 (480) (301) 5. Key Personnel: Marcio Rocha Mello (Chairman).543 4.5 3 3 859.1) 68 43 (10) (6) (189) (111) (8.500.381 769 1.060.4) (1.970 Capital Employed Net Debt/EBITDA Net Debt/Equity Capex/Revenue (%) Int Cover (%) Dividend Payout (%) ROCE (%) ROE (%) MARKET RATIOS P/E 2.0 0.2) (1.219.491 2.5 (3.1 (308) (2.142) 985 0 0 2012E (485) 0 0 (367) (340) (646) 0 0 0 60 2013E (308) 0 2 (225) (154) (379) 0 0 0 0 2014E (323) 0 1 (291) (161) (450) 2 0 0 0 2011A (292) 1.0 0.484.8 FV/EBIT FV/Revenue P/BV FCF Yield (%) Div Yield (%) 0.6) (2.237 0 0 2011A 915 1.93 13.531.4 12.542 3.423 4.1) 0.4 0.5 (1. 123 .531.8) (6.4 37.5) (5.3) (291) (167. IPEX.2) (0.364.012 6.201 4.8 (152.1) (308) (2.588 3.2) (7.4) (0.0 0.7) (4.35) (00.1) (480) (301) 5.024 1. thirteen off-shore blocks in Namibia (Walvis and Orange Basins).6 7 124.1) 0. Marcio Rocha Mello (CEO).4 12.521 6.2) (1.972. Balance Sheet and CF Statement.br Production by Basin.4) 21.8 (0.98 6.0 2.0 2.157.1) (507) (164.2) (0.63 6.4 0.1) 2.106 0 0 2014E 188 1.40 14.0) Company Description US$ 2012E 2013E 7 7 22.7) (5.0 0.8) (507) (164.531.2 (3.9) (7.9 2.8 54.1) 226 (23) (304) (113.8 1.484.972 (835) 833 0 (323) (2.219.060.0 (0.4) (23.424 0 0 2014E 404 2.390 596 923 3.7) (4.717 3.701.hrt.6 55.86 6.0) (43. The company is part of the Novo Mercado.0 0.31 13.374 2.3) (3.7 20.0 1.231) 566 0 0 2012E (250) 0 0 (189) (175) (333) 0 0 0 31 2013E (150) 0 1 (110) (75) (185) 0 0 0 0 2014E (150) 0 0 (135) (75) (209) 1 0 0 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 1.2) 41.217 0 0 2013E 397 1.006.8) 2014E 25 65. 2012 Pre-IPO Shareholders 42.866 2.5 (2.161 4. 2013E Solimões Gas 100.4 37.0 20.0) 9 (2) (136) (22.1 (143) 2.0 1.9) (8.3 0.7) (4.8) 2014E 12 57.2) (12.86) (01.6) (2.1) (419.1 49.5 (15.5) (5.0 0.1 40.0% EV by Basin. 2014E Solimões Gas 100.0) (22.193 2.8) (1.1) 3.7) 38.9% Founders/ Management 12.0 PER SHARE DATA 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS (47.972.0% Shareholder Structure.4) (1.0 0.307 365 566 2.7) (4.514 5.0) (3.3 3.9) 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E (5.6 (1.764 6.0 (0.3 12.34 373.5 5 6 969.43) DPS 0 0 0 0 0 0 0 0 609.92) (27.5 (247) (147) 15.4 2.0 0.8% Sources for all charts and tables: Company reports and Santander estimates.101.4 (448.0 0.149 366 566 2. complying with the highest corporate governance levels.6) 0 (56.903 367 566 1.0 (11./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (507) 1.220. and four other on-shore blocks inside Brazil.751 1.3) (27.1 0.0 0. which is listed in the Brazilian stock exchange.0) (5.4) 2011A 6 (35.3) (0.101.6) (2.1 6.5 0.1) 3.71) (00.101.193) (834) (404) (915) (582) (397) (188) 3.491) (1.9) (1.039 366 566 2.1 55.0 0.0 0.1) (0.133 (480) 479 0 (186) (1.233 1.6) (9.1) P/CE 0.217 4.0 638.1 FV/EBITDA 2.8) (27.7) (0.970 0 0 LT Debt 0 0 0 0 0 0 0 0 FINANCIAL RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E Net Debt (1.0) R$ 2012E 2013E 14 15 36.701.545 0 0 2013E 834 2. Carlos Tersandro Fonseca Adeodato (CFO) and Fabio Bueno (Manager) Web: www.972.1) (9.792 3.1 2.5 (3.4) CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.2) n/m n/m n/m (15.455 749 1.2) (4.8) 22.1) (5.2 (3.531.6) (2.7) (5.0) 20 (4) (292) (28.1 40.4) (0.9) (1.870 4.1) (143) 2.157.7) (45.0 638.1) (7.8) (6.235 2.3 0.006.220.906 3.7) (0.16) (00.51) (00.3) 1 (56. 2011–14E in Millions P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 10 (36.1) (142.4) (1.7) (8. HRT held its IPO in October 2010 and has only one type of share (HRTP3).6 52.7) (5.0 0.101.854 2.1) (291) (167.7) (5.189 4.418 1.60) (00.1) (6.0 0.HRT Financial Highlights: P&L.4) (1.com.

com. in our opinion. REPLACING YE2012 TARGET PRICE OF R$20.26. +5511-3553-2396 | rkasinsky@santander. operating leverage. brand portfolio and geographic exposure. resulting in R$ 26. but its exposure to other markets is growing fast. We project IMC’s EBITDA margin to expand by 33 bps following lower labor cost pressure. Leveraging on its size (the store base went from 214 stores in 2010 to 332 stores in 9M12). becoming positive in 2014. and the outlook is promising (Colombia. (3) its unmatched portfolio of brands.6 benefit from several world-class sporting events in Brazil.  Investment positives: In our view.24 Target Price (YE 2013) R$ 31. 124 .78 operating leverage. which might be bolstered by M&A activity (the Bloomberg company is analyzing three deals). Shares Outstanding . +5511-3553-9602 | btaveira@santander. know-how.A. We project cash flow Ronaldo Kasinsky* Brazil: Banco Santander S. Daily Vol (US$ Mn) 2.br about 80% of sales. Mexico.A. investment positives include (1) Company Statistics fast organic growth. (2) changes in the regulatory environment. good management of food costs.2013 Latin American Universe Book BRAZIL—RETAIL & CONSUMER GOODS IMC BUY CURRENT PRICE: R$26.95 TARGET PRICE: R$31.br generation to accelerate materially during 2013. etc. while earnings are set to grow 76% in 2012-14. and (4) low returns due to substantial acquisition goodwill.com.br Bruno Soares Taveira* Brazil: Banco Santander S.  2013 Outlook: We expect IMC to continue opening around 60 stores within its different formats while we project SSS of 8%.95 / US$ 13. which could also  IMCH3 BZ Current Price (01/03/13) 12.00 / US$ 13. Brazil still represents Brazil: Banco Santander S. Based on our assumptions. and (5) solid underlying traffic trends.). (2) critical mass.00 INTRODUCING YE2013 TARGET PRICE OF R$31.00.0 3-Mth Avg. 100  Valuation: Our YE2013 target price is based on 2013E P/E of 30.75 . which 52-Week Range (R$) provides flexibility.com. and some remaining benefits from its cost-cutting program. we expect solid organic growth to persist. (4) its diversified country exposure (―some Market Capitalization (US$ Mn) hedge‖).1% 50 M-11 (80%). reflecting strong underlying traffic and pricing trends.00  Investment Case: IMC is an attractive vehicle to gain exposure to Tobias Stingelin*. J-11 N-11 M-12 J-12 O-12 Sources: FactSet. Santander estimates and company reports.A.95 1.Mn 84 Investment concerns: In our view.106 Float (%) 51. CFA captive markets in Latin America.0x (20%) and a DCF using a nominal cost of equity in BRL of 11. EPS could more than double YoY in 2013. +5511-3553-0699 | tstingelin@santander. investment concerns include Price Performance (R$) (1) frequent renewal of concessions in airports (five to seven years in IMC IBOVESPA 200 Brazil). This combined with store maturity could yield 25% top-line growth. (3) constant pressure from the Brazilian government to increase competition in 150 airports.

2 Company Description 2013E 678 11.531 229 346 956 224 40 2014E 64 268 1.01 0.8 19.7 1. 2011A Caribbean 12.7 56.2 (4.4 104 13.2 1. Key Personnel: Juan Carlos Torres (Chairman).1% Malls 24.0 0.9 0.0 25.0 0.0 10.4 13.2 8.3 2.32 FCF Yield (%) Div Yield (%) PER SHARE DATA BVPS International Meal Company (IMC) is a leading.2% Brazil 80.9 35.0 0.6 28.2 3.2 0.6 1.3) (0.5 6.447.9 8.5 156 11.0 1.9% Roads 32.5) 0.5 15.9 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.2 19.2 36 76.1 7.3 10. The company focuses mainly on high-traffic.6 61 20.1 ROCE (%) 1.5 15.0 (6) (9) 46 32. September 30.7 4.9 25.0 10.6 20 (39.5 530 19.8 5.4 2.10 0.23 0 0 0. 2011–14E in Millions P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 899 19.internationalmealcompany.1 31.1 0.5 51 43.9 8.6 6. and Mexico.2 0.3 11.228 1.02 0.23 5.7 16.405 632 579 579 598 0.8 17.9 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 0.1) 0.9 159 17.7 92 14.49 5. and malls.1 5.6 230 13.9 266 11.039 1.0 0.756 18.64 11.0 13.8 5.0% Sales by Segment.2 508.6 13.6 1.0 2.2 11.5 14.1 LT Debt 2013E 1.8 1.82 10.55 DPS 0 0 0.9 200 28.8) 0.482 24.4 2.9 (5.9 0.1 8.5 15.7 1.1 2011A 537 25. motorways.183 1.9 203 13.4 4.1 2012E (38) (23) 4 37 (69) (5) 0 (9) 0 0 2013E (37) 0 (4) 68 (74) 0 0 0 (4) 0 2014E (39) 0 4 89 (68) 19 0 0 (8) 0 2011A 74 125 554 712 80 194 438 129 20 2012E 27 94 558 673 93 160 419 106 19 2013E 16 94 562 681 102 154 425 100 18 2014E 27 114 567 709 111 154 444 95 17 184 109 87 82 78 2013E 2014E 2011A 2012E 2013E 2014E 188 160 56 78 83 68 1. 125 .7 140 16.5 11.044 224 40 204 184 184 2011A 2012E 104 166 Capital Employed 1. multibrand.0 0.3% Airports 37. Javier Gavilan (CEO).0 10.5 112 60. but with operations also in the Caribbean.com Sales by Region.8 2.2 0.8 (9) (10) 1 (86.4 4.2 0.7 0.2 7.9 8.9 8.9 19.2 10.44 12.21 0.0 0.0 179 12. 2011A Others 5.42 0.41 0.6 13. the company operates 332 stores (133 in airports.3 4.9) 3.9 13. 149 in malls and 25 in other locations).9 10.2 R$ 2012E 1.8 5.1 US$ 2012E 606 13.4 Dividend Payout (%) 0.3 10.2 21.6 34 (42.0 7.4 84 22.187 32.5 7.708.1 7.0 0.3 2.3 FINANCIAL RATIOS Net Debt Capex/Revenue (%) MARKET RATIOS P/E P/CE FV/EBITDA FV/EBIT FV/Revenue P/BV 2014E 1. 25 in motorways.0 23.6 7.27 0.2 70 105.303 1.6 80 (4.0 25.9 1. Colombia.0 13. As of 3Q12.4 1.5 13.2 7.6 ROE (%) 0.9 444 26.8% Mexico 7.7) (0.3 239 19.335 150 364 821 242 38 2012E 58 199 1.8% Shareholder Structure.2 0.6 141 26.2 1.2 0.3 1.10 9.09 5.9 11.0 18.0 350 31. 2012 GIC 15.2 16.7 0.6 12.9 (17) (18) 35 1.5 8.264 1.4 2.185 Net Debt/EBITDA Net Debt/Equity 2014E 764 12.7 61.9 13.0 0.3 29. Julio Millan (CFO) and Gonzalo Cardoner (Investor Relations Manager) Web: www.332 1.7 13.5 (8) (9) 35 97.7 1.4 14.4 0.9 Int Cover (%) 4.4 30.8 9.8 (15) (17) 2 (86.5) 0.2 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 569.0 (15) (20) 106 39.05 0.IMC Financial Highlights: P&L.0% Sources for all charts and tables: Company reports and Santander estimates.0 0.1 0.2 11.6 21.7 20.8 2.3 1.1 8.02 5.8) 3./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (63) 255 15 335 (172) (51) 0 (164) 0 0 2012E (74) (44) 8 73 (134) (10) 0 (18) 0 0 2013E (81) 0 (8) 149 (162) 1 0 0 (9) 0 2014E (89) 0 9 204 (157) 43 0 0 (19) 0 2011A (37) 152 9 200 (103) (30) 0 (98) 0 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 138 235 1. quick casual restaurant (QSR) operator mostly in Brazil (80% of sales).1 0.665 260 361 1.7 21.5) 13.91 1.9 (9) (9) 18 1. Balance Sheet and CF Statement.6 1.5 (16) (19) 76 120. high-margin and growing captive markets such as airports.0% Float 51.8 0.0 7.0% Advent 34.4 0. Sales in airports represented nearly 40% of sales in 9M12 followed by sales in service plazas in motorways (31% of sales).4 2.426 198 340 889 224 40 2013E 36 212 1.2 32.

operations and Brazil light Bloomberg vehicles. in our view. +5511-3012-5787 | dhgewehr@santander. +5511-3012-5734 | jonoronha@santander. we reduced our EBITDA and net income estimates by 8% and 31% following the higher cost of debt in Brazilian reais and the delay in the market recovery.br  2013 Outlook: We expect Iochpe to post sales and EBITDA growth of 10% and 50% in 2013.327 63.3 Shares Outstanding .03 Target Price (YE 2013) R$ 34. (Management’s target for 2013 is to 60 invest less than R$200 million. We gained a positive view of the level of automation (about five times more than Brazil’s operation on wheels per man hour) from our visit to the Hayes Lemmerz 1.7%) in two to three years.25 12. CFA Brazil: Banco Santander S. respectively.com. Daniel Gewehr* Brazil: Banco Santander S.br Bruno Giardino*. backed mainly by the recovery in Brazilian truck production.00 / US$ 15.) j-11 m-11 a-11 d-11 a-12 a-12 d-12 Sources: FactSet.00 LOWERING YE2013 TARGET PRICE TO R$34. Iochpe aims to invest one- 80 third of EBITDA per year.37. above our 12.com. below that ratio.00  Investment Case: Iochpe.A. Float (%)  On the way to automation.  What‘s changed? While our 2013 sales estimate remains unchanged.11 margin of 14% (~150 bps synergies from the 2011 pro forma MYPK3 BZ 52-Week Range (R$) 20.00 FROM R$36. In our view. 126 .56 TARGET PRICE: R$34.7 3-Mth Avg.S. Daily Vol (US$ Mn) 4. The German plant (about 90 robots in 140 operation) is the most automated plant of the Iochpe group. +5511-3012-5914 | bgiardino@santander. CFA Brazil: Banco Santander S.  Europe road show highlights. offers investors (1) exposure to the global automotive market through its leadership in the wheels (globally) and chassis (in the Americas) segment. Management expects to reach a consolidated EBITDA Current Price (01/03/13) R$ 28.br Joao Noronha*.2013 Latin American Universe Book BRAZIL—CAPITAL GOODS IOCHPE-MAXION BUY CURRENT PRICE: R$28. Our 2013 net income estimate is 13% below sell-side consensus.A. There is currently an integration team working 100 in automation opportunities worldwide. and (2) Brazilian indirect exposure to infrastructure growth— wheels and chassis for heavy vehicles—and railway equipment (together represent 85% of the transportation matrix).A.31 . Santander estimates and company reports.6% long-term Market Capitalization (US$ Mn) estimate.Mn 95 Price Performance (R$) Iochpe Maxion IBOVESPA 160 plant in Germany.56 / US$ 14.com. backed mainly by Brazil’s potential 18-20% truck production Company Statistics growth and GDP growth for the U. Management is estimating lowdouble-digit consolidated 2013 sales growth (we estimate +10%). there are opportunities to import some of these best 120 practices to Brazil.

71 9.2 FV/EBITDA 7.91 0.286 437 1.6 12.4 15.8 20.134 2.7 R$ 2012E 5. The external market accounted for 20% of Iochpe’s sales last year.5 3.1 Capex/Revenue (%) 6.54 0.3) 8.910 1.75 5.9 13.7) 12.0 (175) (53) 25 (88.738 1.6 3.69 12.6 6.087 169 1.3 5.0 460 11.6 9.3 7. and the company sells its products in over 40 countries.943 816 2013E 305 2.5 690 50.3 35.7 2.809 3.848 3.55 0.3% BNDESPar 6.8 2. and (2) railroad equipment.0 1.9 FV/Revenue 1.7 Div Yield (%) 2.3 Dividend Payout (%) 38.7 2.1 10.388 385 2013E 136 1.162 2.3 7.25 0.734 37.47 2. Oscar Fontoura Becker (CFO) and Luis Fernando Abreu (IR Manager) Web: www.725 927 2.2 27.1 (219) (100) 140 448.3 1.931 816 2014E 442 2.311 9.493 1.25 5.9 2.4 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.1 2.8 8.14 0.1 8.9 0. The company has a leading position in both markets.047 Capital Employed 1.8 0.6 2. 127 .3 978 18.2 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E MARKET RATIOS P/E 10.4 2011A 1. manufacturing railcars.40 BVPS 9.2 3.4 6.1 5.329 566 274 490 457 288 2012E 103 1.283) (1.015 2.8 2.4 37.999 3.1 7.22 PER SHARE DATA Iochpe-Maxion operates in two main business sectors: (1) automotive (supplying components such as wheels and chassis) and auto parts for light and heavy vehicles (which comprised 81% of the company’s total consolidated revenue of R$2.6 12.5 19.1 3.626 2.0 40.7 13.8 425 12.7 2.303 362 2014E 188 1.8 11.0 316 34.0 (90) (27) 13 (90.362 5.732) 1.91 billion in 2011).888 (1.3 1.936 69.9 0.8 12.iochpe-maxion.3 3./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (53) 101 (201) 211 (197) 28 108 (65) 0 2012E (173) (248) (604) (145) (1.3 FCF Yield (%) 1.714 1.1 11.128 2.380 5.9 508 77.586 2. Balance Sheet and CF Statement.3) 12.206 451 1.4 552 32.654 906 1.41 0.056 1.9 3.3 5. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 2.6 LT Debt FINANCIAL RATIOS Net Debt Int Cover (%) 2013E 6.686 1.6 7.4 12.4) 235 (4.200 1.1 12.9 37.063 1.6 6.3 8.748 97.9) 5.903 816 2011A 180 640 605 1.2 (87) (64) 102 59.8 591 7.3 billion).1 10.6) 377 25.003 940 889 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 519 2.3 (15) (120) 223 31.710 1.061 513 919 857 540 2012E 219 2.2 2014E 6.3 2.1 8.9 3.8 360 13. 9M12 Structural Component s 23.6 9.7 411 32.7 20.7 827 19.239 3. In October 2011.4% Wheels 69.1 20.2 (66.1 2.8 P/BV 2.1 0.707 909 1.6 0.143 495 1.5 7.67 1.9 19.77 10.7 2.0 275 18.2 2014E 2.0 147 (31.3 0.6% Sales by Region.2% North America 24.6 2.7 3.0 6.724 2. Iochpe acquired two companies—Hayes Lemmerz (a manufacturer of aluminum and steel wheels in European) and Galaz (a Mexican producer of steel-based side rails for commercial vehicles)— doubling its revenue (2011 pro forma of R$6.134 1.6 3.5 10.4 9.115 2.3 1.0 633 24.6 3.9 233 58.4) 5.1 15. Iochpe is listed in the Novo Mercado.3 3.5 11.6 13.4 11.6) 0.5 38.3 2.4 1.9% Sources for all charts and tables: Company reports and Santander estimates.6 8.4 2013E 2.3 P/CE 8.8% Free-float 65.4 33.236 347 317 2.3 (72. Key Personnel: Dan Ioschpe (CEO).1% Europe 27.0 287 (19.4 5.27 1.47 1.2 214 44.07 DPS 0.0 1.3 6.4 12.2 6.5% Shareholder Structure.2 358 37.IOCHPE-MAXION Financial Highlights: P&L.435 6.8 FV/EBIT 8.236 2.2 (199) (148) 234 67.1 18.0 37.2 18.5 94.05 0.2) 0.3% South America 41.com.6 9.4 6.9 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 2. wheels.393 3.92 0.1 (100) (46) 64 391.br Sales by Segment.627 878 1.18 4.36 0.6 2.8 22.3 302 (8.974 2.4 245 38.502 2.6 8.896 9.61 4.3 (9) (71) 133 38.9 3.3 11.438 3.6 2.8 3.905 30.0% Others 7.5 8.869 (87) (2) 2013E (182) 0 (63) 628 (200) 327 (0) (9) 0 2014E (193) 0 (15) 811 (248) 416 0 (52) 0 2011A (32) 60 (120) 126 (118) 17 64 (39) 0 2012E (88) (127) (309) (74) (655) (885) 955 (44) (1) 2013E (83) 0 (29) 287 (92) 150 (0) (4) 0 2014E (84) 0 (7) 353 (108) 181 0 (22) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 337 1.797 1.663 3.10 0. 3Q12 Ioschpe Family 27.7 2.167 1.883 767 1. and castings (accounting for the remaining 19%).9 0.7 US$ 2012E 2.1 2.3 1.7 12.8 824 39.2 2.6 2.6 3.0 14.285 1.5 10.0 0.127 2.1 8.927 2. 9M12 Asia + Others 7.7 101.8 22.653 Net Debt/EBITDA 1.5 ROE (%) 24.462 2.9 0.461 277 1.1 329 39.9 Net Debt/Equity 0.2 3.7 14.1 ROCE (%) 16.8 12.

02 . and SME businesses while simultaneously 80 launching a major IT renewal plan. We have upgraded our target price for Itaú to R$41.6 48.Mn Price Performance (R$) Itausa NPL provisions.00. the Great Spread Compression).A. the highest weight among financials. Brazilian Banks. +5511-3012-5756 | havieira@santander. as the valuation discount lowers downside risks and provides a more attractive valuation for the underlying bank assets. Santander estimates and company reports.35 TARGET PRICE: R$13. keeping the Hold rating unchanged after we upgraded the stock from Underperform in a recent note (see our November 26.00 INTRODUCING YE2013 TARGET PRICE OF R$13. We believe that Itausa is an attractive vehicle to gain exposure to Itau. which is approximately 20% financials (constituting the largest sector representation in the Ibovespa).  Itau—the main driver of Itausa. in terms of Company Statistics Bloomberg Current Price (01/07/13) Target Price (YE 2013) ITSA4 BZ R$ 10. 2012 report. Daily Vol (US$ Mn) Shares Outstanding .847 IBOVESPA 70 bank will achieve its objectives in the medium term.8%. Itaú is in the midst of re-engineering its consumer 90 finance.6 4. +1-212-297-1367 | lguzman@santander. we believe the bank will face 110 a steep revenue slump. card acquiring. In our view. which Boris Molina New York: Santander Investment Securities Inc.us compares with the one-year historical average of 17. Itaú and Itausa comprise more than onequarter. amounting to a combined weight within the Ibovespa of around 5%.  2013 Outlook: We expect no material change in the valuation discount that Itausa trades relative to Itau in the short to medium term.us Luis Guzmán New York: Santander Investment Securities Inc. +1-212-350-3977 | bmolina@santander. as we believe that the worst. which could lead to limited upside potential.12. 100 in our view.50. We believe Itausa (including Itaú) is an attractive vehicle to play a rebound in Brazilian equities (if such a rebound occurs).58 24. While we are confident that the 8.  Itausa + Itau = the strongest financials concentration in the Ibovespa.08 R$ 13. 128 . However.644 65. as this company represents Brazil: Banco Santander S. investors seeking to gain exposure to the Brazilian equity market should focus on the Ibovespa. Itausa is currently trading at a near 19% discount to its NAV.35 / US$ 5. is behind us. Of that 20%.90  Investment Case: Our target price for Itaúsa is derived from our Henrique Navarro* YE2013 target price for Itau Unibanco. 60 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet. thus our reason for not currently recommending long/short trades between Itausa and Itaú stocks.80 52-Week Range (R$) Market Capitalization (US$ Mn) Float (%) 3-Mth Avg.00 from R$35.00 / US$ 5.br 94% of Itausa’s NAV and is the main driver for the valuation of Itausa.com. we believe it is too early to call a recovery in the bank’s growth path. REPLACING YE2012 TARGET PRICE OF R$13.2013 Latin American Universe Book BRAZIL—FINANCIAL SERVICE ITAUSA BUY CURRENT PRICE: R$10.

Alfredo Egydio Arruda Villela Filho (CEO) and Henri Penchas (IRO) Web: ww13.A. 3Q12 Companhia Esa 34.4% Free float 65.0% 35.9% From Companies' TP 2013 75. The company is controlled mainly by the Setubal and Villela families and is based in São Paulo. electronics.00 3.6% 6.944 Book Value of Investments 29.00 68. in R$ Millions Ticker ITUB4 Total shares in Mn Itausa's stake Current price per share . 2013E From Discount to Narrow 24.701 15% Tax on Capital Gain -6. one of Brazil’s leading financial institutions.518 36.8% 32.1% Shareholder Structure.00 Itausa-Investimentos Itaú S. Key Personnel: José Carlos Moraes Abreu (Chairman).134 DTEX3 548 35.ITAUSA Summary Valuation Parameters (YE2013) and Net Asset Value (3Q12).R$ At Market Target price Value in R$ in R$ per Mn share Company Description At Target Price in R$ Mn 4.9% Source: Company reports and Santander estimates.com.243 Capital Gain 42.474 41. information technology and the internet.br/itausa NAV Composition.895 71.itau.1% Target Price Upside Composition. 3Q12 Duratex / Others 5.316 Adj Net Asset Value 63. accounting for approximately 94% of Itausa’s net asset value. real estate.01 383 383 Other Assets/Liabilities Net Asset Value -79 -79 57. chemicals. 129 . consumer goods.78 54.921 17.5% 15.Mn 4.00 2. The company owns approximately 36% of Itau Unibanco.6% Sources for all charts and tables: Company reports and Santander estimates. (Itausa) is a pure holding company with subsidiaries operating in sectors such as financial services.847 Target Price in R$ 13.527 4% Discount on Holding Company status -2. Itau Unibanco 94.41 195 195 ITEC3 12 94.102 Num ber of shares . ceramic and metal sanitary products.311 ELEK4 31 96.

New York: Santander Investment Securities Inc. to 10. The bank is in the midst of a completely re-engineering of its consumer credit. card acquiring. when we expect the Bloomberg bank’s severe revenue slump to start to turn around. 60 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet.00 FROM R$35.1 Price Performance (R$) going forward. in our view.00 RAISING YE2013 TARGET PRICE TO R$41. Santander estimates and company reports.60 Market Capitalization (US$ Mn) 79.35 ITUB4 BZ / ITUB US New strategies for new times.  Itaú V2. as Itaú’s old business model. we expect it to decline only slightly.51 / US$ 17. loan growth at Itaú should start to recover in 2013. New York: Santander Investment Securities Inc. and in 2013. requiring IT-driven efficiency gains to contain the ROE erosion from the lower margin environment 27. Itaú’s recent entry to the payroll 52-Week Range (R$) lending market and the launch of its IT revamp plan (moves that track Float (%) Bradesco’s with several years’ lag) are an acknowledgement that the 3-Mth Avg.571 old consumer credit model is defunct.Mn 4.05 .us we believe it is too early to call the full recovery of the bank’s growth path.51 TARGET PRICE: R$41. with a sustainable ROE of 19% thereafter.0. 100  Profitability to converge to sustainable ROE of 19% in 2014. +1-212-297-1367 | lguzman@santander. 70 based on lower credit losses.50  Boris Molina Investment Case: While the worst in terms of NPL provisions appears be behind us.00 / US$ 19.us Henrique Navarro* The bank is in the midst of re-engineering its business model while Brazil: Banco Santander S. limiting the upside potential of the shares. Current Price (01/03/13) R$ 35.  2013 Outlook: According to our estimates. after posting the slowest growth among large cap banks under coverage in Brazil in 2012. half the time it took Bradesco). Daily Vol (US$ Mn) 113.com. The bank targets concluding the IT revamp by mid- Itaú Unibanco IBOVESPA 110 2016 (or approximately four years. based on high-margin consumer finance.41 Target Price (YE 2013) R$ 41. we believe that Itaú Unibanco will face a steep revenue slump in upcoming quarters. and SME strategy. driven by margin contraction. +1-212-350-3977 | bmolina@santander.2 Shares Outstanding .br simultaneously launching a major IT renewal plan. While we are Luis Guzmán confident that the bank will achieve its objectives in the medium term. We expect relatively strong margin contraction at Itaú.2%.728 55. exhausted  itself after the 2006-2011 credit boom in Brazil. 130 . 90 Year-to-date adjusted profitability has been boosted by strong mark- 80 to-market gains.38. We believe that the Company Statistics fruits of these efforts will start to appear in 2H13.A. +5511-3012-5756 | havieira@santander. given its increased exposure to higher-margin lending categories.2013 Latin American Universe Book BRAZIL—FINANCIAL SERVICES ITAÚ UNIBANCO HOLD CURRENT PRICE: R$35.

0 9. Caio Ibrahim David (CFO) and Alfredo Egydio Setubal (IRO) Web: www.7 18.269 (27.877 28.3 6.071 (3.7 46.29 (0.929 136.423 234.8 22.483 17.14 22.511 6.79 3.38 1.715 9.6 34.619) 20.5% Other 4.5 7.203) 9.0 9.8 8.6 165.495 32.155 190.403) 31.8 2.5 2013E 11.106 15.1 70.506 50.1 16.29 2014E 3.3 7.170 263.947 48.651 7.690 2012E 23.322 940.979 88.365 15.470 9.328 2011A 29.410 20.5 4.882 129.13 17.49 (0.1 18.0 32.136 2013E 43.71) 0.1 5. 131 .8% Individuals 37.3 1.140 34.1 9.2 172.711 8.56) 0.519) 18.59) 0.1 PER SHARE DATA EPS BVPS DPS Adj EPS Adj BVPS Surplus Capital per Share Unrealized Cap.163) 14.3 179.409 15.825 (4.9 3.2 1.7 4.058 46.508 38.9 14.688 19.65 (0.066 29.878) 2013E 212.909 199.545 41.737 7.46 10.1 70.2 45.0 9.528 88.467 129.36 (0.98 1.6 6.917 21.0 70.0 171.629 26.60 1.918 (9.594) 14.29 2013E 2.829) 14.129 404.303 15.7 2013E 6.868 132.9 3.2 1.6% Shareholder Structure.65) 0.0 70.304 176.731 (18. Roberto Egydio Setubal (CEO). The shares trade on the Bovespa and as ADRs listed on the NYSE.53 0.067 32.079) 14.435 2012E 2013E 2014E 14.332 240.6 3.568 4.17 3.7 18.220 851.693 54. 2013E SME 21.7 4.com Loan Book.4 2013E 11.524 14.2 45.854) 27.2 2014E 11.449 9.0 2.502 97.879 22.030.177 (7.844 301.91 8.727) 30.746 2014E 7.140) 12.9 21.ITAÚ UNIBANCO Financial Highlights: P&L and Balance Sheet.3 71.13 Itaú is Brazil’s leading private sector bank.255 7.672 39.09 0.806 288.974 73.135 43.3 9.3 2014E 10.791 155.035 (42.9 7.3 1.805) 2012E 92.633 187.5% Free Float 55.1 9.20 0.097 BALANCE SHEET Cash and Equivalents Securities Loans (net) Intangible Assets Total Assets Core Deposits Other Financial Liabilities Subordinated Debt Technical Provisions Equity Adjusted Equity 2011A 10.565 10.9 7.0 9.9 46.9 3.5 9.101 LOAN BOOK Companies Total Consumer Mortgages Other Loans Gross Loans Loan Grow th (%) NPL Provisions 2011A 178.8 1.067 9.013 270.68 8.247 23.8 2.321 7.9 4.9 44.183 38.262 23.20 1.44 1.5 4.947 (6.4 35.268 14.4 45.14 2013E 1.6 44.260 345.0 45.004 10. which could lead it to seek to acquire banks in Latin America.96 20.005 2011A 5.866 (25.747 2013E 20.019 (29.2 17.050) 20.859 (13.809 113.52 2012E 3.772) 2012E 191.204 92. Key Personnel: Pedro Moreira Salles (Chairman).416 62.4 2011A 7.844 339.565 238.904 2.480 (14.815 311.299 18.0 32.1 19.455 177.0% Corporate 31.107 82.1 2012E 10.696 100.22 (1.9 4.317 185.098) 2014E 113.20 15.9 18.445 (5.647 (13.82 15.897 (16.5 9.513 (5. the largest among private sector banks and second only to Banco do Brasil .60 8.9 21.41 9.802 2012E 6.0 70.582 15.82 2012E 1.1 42.0 70.289 124.1 20.4 15.426) 19.868 2012E 46.7 5.783) 2011A 95.823 37.648 (19.056 21.027 163.395 485.5 20.278 (2.80) 0.438 64.161.578 13.871 (39.9 3.035 (13.930 127.1 6.035) 8.6 2012E 10.18 (1.725) 6.2 4.6 165.1 6.149 338.3 4.6 34.2 172.0 171.752 12.16 19.6 25.2 9.472) 7.61 0.8 2.167 121.693 528.667 154.753 56.424) 35.5 7.52 1.453 6.643 171.949 13.6 2014E 5.8 22.106 70.450 19.9 1.51 9.8% Fees 38.5 29.9 2012E 7.459 2014E 47.55 9.712) 13.7 2013E 6.138 44.6 6.2 2011A 9.9 3.768) 2014E 248.31 17.69 8.3 179.143 13.0 3.219 38.4% IU Part 25.3 7.3 71.082 16.577) 10.487 78.716 28.355 (27.38) 0.550) 14.0 3.7 3.29 2011A 1.633 376.74 2. 2013E Insurance Other 6.878 39.9 2012E 7.6% 0.347 72.315 101.3%% in deposits in Brazil.630 134.1 20.564 366.708 17.146 (13.989 57.171 1.038 128.3 6.6 25.7% Mortgages 5.itau.4% market share in loans and 14.857 7.912 49.283) 21.616 267.85 (1.7 46.1% Sources for all charts and tables: Company reports and Santander estimates.453 17.0 45.68 0.9 18.838 469. The bank is in the initial stages of a regional expansion plan.406 1.2 4.1 4.621 12.9 8.908 114.4 45.547 24.236 439.202 213.995 55.1 5.650) 14.4 MARKET RATIOS Adj P/E Adj P/BV Div Yield (%) 2011A 12.630 (37.407 104. Gains/Shr 2011A 3.6 24.811) 9.1 4.8 22.2 2.194 17.6 44.0 4.9 25.3 8.413 42.6 2014E 5.262 4.899 2014E 22.695 58.5 29.678 37.7 5.1 42.688 71.743 136.9 3.8 5.984 (19.398 13.754 71.3 9.9 1.540 64.903 2013E 7.921 136.316) 6.3 4.691 28.10) 1.80) 0.6 24.904 (13.752 (7. 3Q12 Itausa 19.14 2014E 1.403 456.8 5.9 46.0% NII 54.089 (22.089 (18.635 (2.456) 2013E 100.880 319.0% Revenue Structure.4 15.045 (37.258 (3.540) KEY RATIOS NIM Risk Charge Operating Revenue / ATAs Cost / ATAs Adj Efficiency Effective Taxes Reported ROE (%) Adj ROE (%) NPL Ratio Adj NPL Ratio Loans / Total Assets Loans / Core Deposits RWA % Total Assets Core Tier I Ratio (%) Dividend Payout (%) 2011A 7.0 4.5 20.072 141.177 28.13 (0.772 27.607 8.9 44.13 3.571 247.568 (8.36 0.9 25.8 22.205 10.35 21. with total assets of approximately US$474 billion as of 3Q12 and approximately a 14.9 14. 2011–14E in Millions R$ Company Description US$ INCOME STATEMENT Net Interest Income NPL Provisions Adj Net Interest Income Non-Interest Income Total Operating Revenue Non-Interest Expense Profit Before Taxes Taxes Net Profit Adjusted Net Profit 2011A 49.020 453.4 35.

 Positive on beef with pressures in poultry.9% in 2013. although we find JBS’s valuation compelling.Mn 2. Daily Vol (US$ Mn) 8.  2013 Outlook: We expect 2013 to benefit from solid domestic demand in Mercosul operations (55% of EBITDA 2012E). Santander estimates and company reports.com.11 52-Week Range (R$) 4. net debt to EBITDA should decline sequentially in the coming 7. +5511-3553-0699 | tstingelin@santander. At the consolidated level. benefiting from a favorable base of comparison.com.05 Target Price (YE 2013) R$ 7.00 INTRODUCING YE2013 TARGET PRICE OF R$7. However. we maintain Ana Gabriela Reynal* Mexico: Banco Santander S.S.A.00 / US$ 3. +5255-5269-1926 | lmiranda@santander.7x in 3Q12). with EBITDA +15% in 2013E.S. Therefore. CFA growth.A.8 Shares Outstanding . +5255-5269-1900 | areynal@santander. After reaching 4. Price Performance (R$) JBS IBOVESPA 120 100 80 60 40 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet. we expect a 2011-2014E EBITDA CAGR of 29% in reais.3x in 2Q12.8 3-Mth Avg.A. operations.com. a weaker real and capacity expansion. with 36% in 2013.493 quarters (3. Mexico: Banco Santander S. We Company Statistics also expect improvements in poultry from a very low base of Bloomberg comparison. JBSS3 BZ Current Price (01/03/13) R$ 6. 132 .50  Investment Case: We expect JBS to deliver attractive EBITDA Luis Miranda*. we believe that market sentiment will remain negatively affected by potential cost pressure (especially in the poultry operations).mx Tobias Stingelin*. high leverage and export market volatility. CFA Brazil: Banco Santander S. we believe this debt remains high. beef operations (partially offset by higher cost of grains). supported by favorable conditions in the beef cycle in Brazil. a favorable exchange rate and improvement in profitability in U. REPLACING YE2012 TARGET PRICE OF R$6.mx improving domestic demand in Brazil. with EBITDA growth of 22%.00. while for U.br a cautious approach on the stock and reiterate our Hold rating.96 . by our estimate.8.591 Float (%) 22. This should lead to an EBITDA margin of 6.2013 Latin American Universe Book BRAZIL—FOOD & BEVERAGE JBS HOLD CURRENT PRICE: R$6. However. we expect 75% EBITDA growth. We anticiapte that Mercosul (domestic and exports) will be a key driver for growth.20 / US$ 3.20 TARGET PRICE: R$7.35 Market Capitalization (US$ Mn)  Debt declining but remains a concern.

091 12.2 6.798 12.267 7.245 19.3 6.2 1.865 60.600 49.0 2. 2012E Free Float 22.6) 2.4 4.2 (0.28 0.215 41.736 13.605 2014E 6.9 (1.452 5.9 1.7% Mercosul 24.493) 39 (847) 2.14 0. Key Personnel: Joesley Batista (Chairman).8 2.84 9.499 0 0 (567) 0 2011A (771) 755 (1.019 37.503 12.214 6.944 10.6% Mercosul 60. the United States.6 6.41 4.1 1.5 0.5 0.433 20.1 16.3 3.10 8.193 16.7 11.117 5.045 27.5 9.7 5.003 5.252 11.812 LT Debt 13.32 4.7 0. Jerry Ocallaghan (IRO).6 0.213 11.7 2011A 36.969 4.7 12.5 10.6 5.361 13.050 8.307 0 4 2012E (1.9 3.033 2.5 6. 18.6% Pork US 9.605 2011A 2.0 2.9 3.7 0.8 1.396 15.8 6.345 10.4) 6. Beef (including Australia) 12% of EBITDA.421 55.7 FINANCIAL RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E Net Debt 13.9 (869) (324) 699 n/m 1.2 Int Cover (%) 1.015 37.8 1.9% Treasury 3.4 0.7 0.9 12.5 2.100 heads of swine.3 2.959 18.797 12.2 2.3% Chicken US 21.8 8.8 2.2 9.6 0.466 37.8) 5.9 6.42 0.3 5.542 8.S.648 8.297 3.466 11.0 25.1 3.057 51.031 18.275 5.227 11.4 14.8 5. 44.9 2.057) 2. and U.0% Beef US 45. 2012E Pork US 9.872 6.508 5.7 4.824 0 0 (342) 0 2014E (1.8 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.0 8.7 9.com. Eduardo Galvao (IR Manager) and Eliseo Fernandes (Executive Director of Administration and Control) Web: www.730) (1.5 (778) (520) 1.7 0.29 8.819 9.1 1.388 2.1 2.2 5.880 25.277 (1.S.3 0.6 5.8 2013E 39.872 6.8 9.201 39.963 52.9 (1.266) (93) (76) 75.2 2.7 2014E 94.329 14.45 0 0 0.7 5.896 27. U.5 0.06 0.506 24. Argentina.568) 40 (668) 3.720 5.267 12.0 25.3% FB Participações S. 8.55 0.667 9.872 5. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 61.8 6.530 12.881 (11.5 2.668 5.0 0.9 6.714 23.03) 0.916 24.7 11.871 18. Balance Sheet and CF Statement.674 28.033 6.549) 1.219 22.698) (633) 1.3 FV/Revenue 0.6 (0.264 (1.7 (0.27 4.9 4.9 12.br Sales by Division.063 (26.6 0./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (1.781 (29.7 Net Debt/Equity 0.697 (0.9 3.8 3.664 18.jbs.23 0 0 0.269 66.227 13.958 10.422) 37 (1.7 0.0% EBITDA by Division.267 12.926 6.8 16.288 17.568 13.525 (881) 1.238 6.3 million poultry.02) 0.4 5.089 Capital Employed 37.9 MARKET RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E (200.5 Capex/Revenue (%) 1.6 2.5 (1.800 heads per day of cattle.7 2.026) 2.722 6.9) 3.6 5.597 10.627 12.507 (2.180 19.789) (1.1 7.196) 2.0 0.039 19.5 5.337 25.087 0 0 (247) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 5.998 4.428 23.1 1.0) 2.954 (1.4 0.4) 6.306 19.0 (178.8 7.151 (16.0 4.733 18. Australia and Italy and a presence in 100 countries.2% Chicken US 18.2 6.265 heads of lamb and 86.3 0.7 2014E 40.9 10.0 2.7 4.6 0.367 n/m 1.8 3.827 35.3 9.8 2.605 2013E 6.3 P/BV 0.889 24.846 2012E 2.958 18.583 Net Debt/EBITDA 4.4 0.118) 362 (421) (24) 0 780 0 3 2012E (727) 19 (793) 653 (675) 286 0 0 0 0 2013E (695) 18 (394) 1.936 2014E 2.5 5.0 0. 133 .3) 3.7 0.03 (00.0 24.072 13.872 6.870 11.91 1.9 Dividend Payout (%) 0.334 51.567 9.0 (0.9 (0. Poultry (Pilgrim’s) 19%.7 PER SHARE DATA 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS (00.8% BNDESPAR 29.0% Sources for all charts and tables: Company reports and Santander estimates.7 2. Pork – 11%.222 2014E 2013E 84. 2012E Beef US 11.016 10.2) 10.747 15.0 0.3 3.931 27.242 6.3 6.4 8.1 1.559 14. For 2012.3 0.235 3.1 6. U. with a slaughter capacity of 81.781 9.2 2. It has 134 plants (including dairy and leather premises).1) R$ 2012E 74. Wesley Batista (CEO).8) 10.320) 558 0 0 0 0 2013E (1.2 2.098 23.1) 5.42 4.5 9.0 2.7 0.339 2012E 5.934 8.6 ROE (%) (0. 50.3) 3.0 5.0 25.429 17.873) 607 (704) (40) 0 1.6% Shareholder Structure.2 2.61 10.300 hides of leather for tanning.5 5.921 14.A.8 2.880 2.2 3.291) 1.5 9.7 5.1) US$ 2012E 37.376 (865) 850 0 0 (159) 0 2014E (682) 17 (291) 1.8 6.061 2.6 0.875 14.002 22. we estimate that the Mercosul operations will represent 58% of consolidated EBITDA.729 30.584 13.5 0.8 2.1 5.1 (806) (492) 1.0 ROCE (%) 4.894 17.7 5.9 3.2 1.5 0.4 4.43 P/CE FV/EBITDA FV/EBIT FCF Yield (%) Div Yield (%) DPS BVPS JBS is the largest protein company in the world.103 11.277 23.0 0.856) 1.4 9.151 5.287 36.2 6.1 1.1 1.1 3.3 5.411 10.9 (756) (55) (45) 73.232 2013E 2.533 12.956 7. throughout Brazil.JBS Financial Highlights: P&L.8 1.2 8.4 16.1 (1.S.911 47.5 4.204 17.

(2) maturing of new contracts recently signed. Bruno Amorim* Brazil: Banco Santander S.2013 Latin American Universe Book BRAZIL—TRANSPORTATION & INFRASTRUCTURE JSL BUY CURRENT PRICE: R$13. the stock trades at a free cash flow yield of 11%.com. and (4) an appealing valuation.90 TARGET PRICE: R$16. (3) Its   complete range of services offered implies strong cross-selling Company Statistics potential. but JSL only buys assets after signing a long-term contract with a client.com. (2) Its sales network enables JSL to sell over 40% of light vehicles and almost 100% of heavy vehicles directly to final consumers.90 / US$ 6. Daily Vol (US$ Mn) 2. in our view. the company is highly diversified in terms of clients and economic sectors. Logistics division revenue could grow 16% in 2012E and 18% in 2013E. the logistics market in Brazil is still JSLG3 BZ Current Price (01/03/13) R$ 13.00  Investment Case: In our view.480 25. but this is explained by JSL’s strong growth.A. New contracts signed in 1H12 should lead to minimum growth of 11% in 2013. Main competitive advantages follow: (1) As Brazil’s biggest buyer of heavy vehicles.3 Shares Outstanding . The stock trades at rich multiples. +5511-3012-6016 | bamorim@santander.14.com.A.00 very fragmented and underpenetrated (just 10% of logistic costs are Market Capitalization (US$ Mn) outsourced). 1.Mn 217 Price Performance (R$) JSL IBOVESPA 130 120 110  Strong value. JSL is Brazil’s biggest logistics provider and its only one-stop-shop player.A. Moreover. Bloomberg Strong growth potential. Its business model is asset-heavy.83 Target Price (YE 2013) R$ 16. (2) strong growth potential. 134 .br Renan Manda*  2013 Outlook: We expect the company to keep growing at a strong Brazil: Banco Santander S. JSL has (1) an advantageous Pedro Balcão Reis* competitive position. Also. +5511 3012-6535 | rmanda@santander.62 52-Week Range (R$) 7. +5511-3012-5765 | pbalcao@santander.  An advantageous competitive position. excluding new contracts. (3) high cash flow Brazil: Banco Santander S.00 / US$ 7. the company has significant bargaining power with OEMs. implying strong long-term growth potential. Santander estimates and company reports. and we estimate 100 negative FCF until 2014. 90 We estimate a 2013 FCF yield of 11% if we exclude contracts signed in LTM.br pace through the (1) acquisition of new contracts. 2013E P/E and EV/EBITDA would be 14x and 6x. Float (%) Low risk.1 3-Mth Avg. and (3) increase in revenues from same contracts. If we exclude the impact of contracts the company has signed over the last 12 months.34 . respectively. 80 70 60 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet.br generation potential.

5 (145) (28) 57 (38.022 1.6 2.084 44.599 3.2 48.647 1.4 23.261 2.8 6.com.24 0.4 (45.21 0.4 9.8 8.0 3.8 1.8 396 15.1 849 20.037 1.2 6.3 612 42.940 549 2013E 609 1.3 6.956 Net Debt/EBITDA 4.482 261 2014E 280 777 1.053 3.1 48.3 18.918 2.4 (97) (26) 46 36.8 235 16.715 4.2 2./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (200) 368 (33) 592 (876) (845) 0 812 (22) 0 2012E (270) 287 (96) 552 (987) (310) 0 500 (30) 45 2013E (357) 325 (62) 728 (946) (218) 0 173 (24) 0 2014E (408) 376 (63) 877 (968) (91) 0 149 (53) 0 2011A (119) 220 (19) 353 (523) (505) 0 485 (13) 0 2012E (139) 148 (49) 284 (507) (159) 0 257 (15) 23 2013E (174) 159 (30) 355 (461) (106) 0 84 (12) 0 2014E (190) 175 (30) 409 (451) (42) 0 70 (25) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 443 1.8 137 0.9) 2.065 2.5) (10.5 Dividend Payout (%) MARKET RATIOS P/E FV/EBIT 16.716 5.26 2.207 Capital Employed 3.4 12.4 12.131 1.4 11.4 (188) (51) 90 58.670 15.1 2.2 15.564 2.11 BVPS 4.9 12.451 560 1.7 51.07 0.5 8.2 FV/EBITDA 8.054 68.4 36.120 3.2 806 8. 3Q12 Trucks 13.34 DPS 0.290 1.7 961 19.5 7.2 13.278 9.2) (7.6 448 13.63 PER SHARE DATA JSL operates four primary business lines: Dedicated Supply Chain Services.3 3.11 0.72 0.4 (185) (46) 108 19.6 FV/Revenue 1.9 17.7) 9.113 549 2014E 614 1.7 7.9 ROCE (%) 9.2 2013E 2.4 2.2 2.221 1.6 2.8 2.2 2.030 1.br Revenue Breakdown.195 1.263 12.159 4.9 381 62.1 176 28.703 3.8 230 (4.890 533 1.4 (90) (23) 53 13.4 15.4 (205) (67) 157 45.695 2.06 0.2 2.4 8.23 4.4 6.8% Fleet Breakdown.932 2.780 1.1 169 (3.4 26.9 429 31.3 741 88.440 2.488 250 LT Debt 2013E 4.1 1.0 0.30 5.7 15.192 1.5 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 32.368 436 2012E 678 1.127 841 2.6% Shareholder Structure.438 24.8 2.4 7.8 704 15.408 18.6 3.504 2. November 2012 Others and Free Float 27.0 3.41 0.3 20.3 1.7 1.268 4.8 27.8 3.8 14.0 15.858 1.8 28.0 3.702 3.7 394 10.8 2.0) (50.9 44.470 275 2013E 290 761 1.452 7.262 232 2012E 339 784 1.956 571 1.6 3.390 2.6 33.3 1.6 17.532 5.2 1.7 8.4 R$ 2012E 4.3 1.JSL Financial Highlights: P&L.0 2.8% 3.9 27.474 552 1. Key Personnel: Fernando Antonio Simões (CEO).1 441 27.07 0.3 2014E 2.0% Remaining Simões Family 30.4 (95) (31) 73 38.2 1.1 315 22.2) (3.901 1.0 1.2 13.78 2.2 8.0 11.0 2011A 1.922 547 1. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 2.2 29.jsl.6 3.5) (7.1 8.0 19.2 1.7 7.076 2.2 2. Public and Private Passenger Transportation.8 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 0.041 4.196 1.91 5.0 8.7 3.24 0.2 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.17 0.5 3.9 8.8 9.5 5.46 2.1) FCF Yield (%) Div Yield (%) 1.9% Sources for all charts and tables: Company reports and Santander estimates.8 24.4 US$ 2012E 2.148 3.9 2.682 2.4 2.5 256 38.9) (10.29 0.3 393 3. Balance Sheet and CF Statement.5 8.3 2. 135 .8 8.4 24.6 6.5 (86) (17) 34 (35.5 2.6 1.237 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E Net Debt 1. Denys Marc Ferrez (CFO and IR Officer) Web: http://ri.14 0.2 2.924 1.484 1.050 383 1.845 718 3.667 449 1.52 2.4 ROE (%) 6.6 3.568 3.4 1.50 0.2 343 9.5 12.628 1.252 3.1 36.289 1.8 P/CE 7.4 2.2 16.4) (3.1 206 21.0 0.1 9.4 24.8) 2.6 16. and General Cargo Transportation.6) 7.7 15.5 15.3 18.9% Logistic services 66.2 32.8 12.6 12.501 545 1.5% Trailers 14.0 2.3 18. 2012E Asset Sales 6.1 P/BV 2.713 1.2% Light vehicles 61.3 20.6 15.1 FINANCIAL RATIOS Net Debt/Equity Capex/Revenue (%) Int Cover (%) 2.5 3.1 2.1 4.4 10.1% Fernando Simões 42.8 1.634 2.2 2.194 4.1 342 48.1 15.3 2014E 5.8% Machines and Equipments Busses 6.1 347 1. Management and Outsourcing of Fleets and Equipment.5 7.262 549 2011A 236 574 1.11 0.4% Dealerships 26.3 5.

87 / US$ 6. in our opinion. should continue to present the best fundamentals and the highest earnings visibility among Brazilian pulp and paper stocks. owing to its domestic exposure and the maturation of its operating turnaround process.br order to incorporate the new recycled paper project announced in October (+R$0.com.612 Float (%) 56.66 . and updated macro assumptions. Daily Vol (US$ Mn) 13.32 Target Price (YE 2013) R$ 12.20) in Brazil: Banco Santander S. in our view.10/share to our target price.12. 136 . stronger-than-expected 3Q12 results.57 TARGET PRICE: R$12.87 Market Capitalization (US$ Mn) 5. Company Statistics  Despite the strong improvement in Klabin‘s operating margins. since (1) a partnership has not yet been secured (Klabin may need to increase its equity stake). and (3) we expect higher earnings volatility (poorer risk profile versus current operations).1 3-Mth Avg.  2013 Outlook: Klabin.50/share). Bloomberg we highlight that returns on capital have not improved as much Current Price (01/03/13) R$ 12. +5511-3012-5870 | azsciacio@santander.60 (from R$10.Mn 888 Price Performance (R$) Klabin IBOVESPA 250 15% YoY top-line and EBITDA growth.br Investors should take caution with the pulp project.2013 Latin American Universe Book E BRAZIL—PULP & FOREST PRODUCTS KLABIN HOLD CURRENT PRICE: R$12.60 RAISING YE2013 TARGET PRICE TO R$12.) We also see no room for further expansion of multiples at this point due to a more limited outlook for earnings upgrades. Santander estimates and company reports.00 due to higher capex (in-sourcing of activities) and working capital commitments. CFA Brazil: Banco Santander S.6 Shares Outstanding . (We model an EBITDA/ton CAGR of 5% in 2013-15E versus 17% in 2010-12E. in our view. respectively.A.A.  Valuation is expensive. 200 150 100 50 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet. +5511-3012-5758 | ffreis@santander.20  Investment Case: We are maintaining our Hold rating on Klabin and Felipe Reis* increasing our YE2013 target price to R$12.60 / US$ 6.com. We expect 7% and KLBN4 BZ 52-Week Range (R$) 7. We estimate the project would add R$1.60 FROM R$10. Klabin is currently trading at an all-time high valuation (10x 2013E FV/EBITDA) and there is little upside to be captured from cost-cutting initiatives.  Alex Sciacio*. (2) returns on capital are unattractive.

1 15.075 307 3.072 284 3.2 1.8 37.1 9.5 15.079 (470) 574 0 0 (249) 0 2011A (327) 84 (50) 471 (527) 17 (256) 88 (116) 0 2012E (287) (4) (57) 639 (308) 360 (48) 276 (116) 0 2013E (276) 0 (33) 492 (341) 157 (62) 0 (115) 0 2014E (281) 0 (68) 503 (219) 267 0 0 (116) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 2.9 5.036 4.2 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 38.098 6.8 11.6 3.038 2.4 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest. roughly 34% of total volume sold and 22% of net revenue were captured abroad. 137 .4 2. with roughly 60% of voting capital.2 2.5 20.70 0.253 4. 2012 Klabin/Mont eiro Aranha Families 27.5 48.7 8.7 33.0 4.1 2.98 3.560 1.829 (16.350 12.3 1.781 3.7 1.13 0.6 2.850 596 8.7 8.735 3.954 2.2 26. with current nominal production capacity of 1.277 3.5 2014E 2.07 3.7 14.047 3.0 P/CE 9.4 10.7 million tons per year.177 4.322 4.510 14.727 2.297 910 2012E 3.9% Kraftliner 13.46 0.0 (385) (263) 511 (36.9 2. Fabio Schvartsman (CEO).0% Domestic 76. 9M12 Exports 24.4% Coated Boards 33.5 22.4 (158) (149) 290 16. In 2011.212 7.076 5.162 1.2 7.0% Treasury Stock 3.014 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 2.5 FV/Revenue 2.8 31.8 26.835 9.1 FV/EBITDA 9.9 10.com.6 476 7. with 70% tag-along rights for minority preferred shareholders.1) 26.036 7.083 7.4 8.6% Wood/Other s 8. industrial bags.7 R$ 2012E 4.2 8.6 0.010 (700) 322 (127) 0 (237) 0 2014E (603) 0 (146) 1.5% Revenue by Destination.824 3.512 674 8.450 4.004 2013E 3.5 795 5.7 123. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 3.7 14.5 935 4.442 Capital Employed 10.0 0.161 284 4.0 2.2 19.275 10.243 (600) 700 (93) 537 (226) 0 2013E (567) 0 (68) 1.1 Div Yield (%) 2.572 2.7 11.2) 1.87 2.0 34.2 48.5 15.6 105.563 96.7 804 68.4 2013E 2.069 6.2 562 (30.236 15.1 2.13 BVPS 5.824 9.0 2.131 (8.849 12.5 3.7 (439) (349) 802 339.7 9.6 0.725 6.7) 737 9.22 0.5 (286) (68) 109 (63.121 4.3) 26.145 6.6 0. The Klabin family controls the company.4 18.5 3.6 0.9 Net Debt/Equity 0.12 0.21 0.3 10.3 ROCE (%) 6.4 1.297 4.151 (26.6) 11.br Revenue by Product.4 2.9) 4.322 11.klabin.6 20.513 6.422 6.07 3.8 11.1 22.7 2.5 3.643 2.135 3. Antonio Sergio Alfano (CFO) and Vinicius Campos (IR Manager) Web: www.8 26.8 9.608 861 2011A 1.2 2.348 7.9 34.8 21.4 2. Key Personnel: Daniel Miguel Klabin (Chairman).881 5.1 2.086 3. The stock is listed in Bovespa’s Level 1 of corporate governance.4 34.2 31.1 2.6 33.1 10.4 6.047 416 2014E 1.518 2.2 1.0 4.6 9.6 0.1 4.0 12.2 7.8 9.007 9.8 38.725 3.4 6.7 1.3 3.373 9.1 4.90 0.925 5.6) 4.4% Sources for all charts and tables: Company reports and Santander estimates.4 2.9 594 5.0 1.5 2014E 4.25 0.125 41.8 9.3 12.1 37.7 1.456 11.6 0.9 5.6 2.5 10.2 4.790 14.3 9.562 4.8 26.458 1.45 6.6 797 2.398 874 2014E 3. Balance Sheet and CF Statement.395 7.640 8.13 0.303 5.4) 11.574 5.934 5.7 22.131 14.366 2.899 Net Debt/EBITDA 2.14 6.567 1.8 764 3.4 7. The company’s product portfolio includes kraftliner paper.3 3.58 0.1 2.9 Capex/Revenue (%) Int Cover (%) Dividend Payout (%) 36.824 485 2012E 1.2 7.KLABIN Financial Highlights: P&L.4 9.889 6.486 2.157 1.2 1.9 1.5 29./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (548) 141 (83) 789 (882) 28 (428) 147 (195) 0 2012E (559) (9) (110) 1.3 2. 9M12 Sack Kraft 12.7 (226) (179) 413 278.28 0.13 0.9 11.0 (188) (128) 249 (39.33 DPS 0.014 392 LT Debt FINANCIAL RATIOS Net Debt 2013E 4.7 14.13 MARKET RATIOS P/E FV/EBIT PER SHARE DATA Klabin is the largest integrated manufacturer of packaging paper in Brazil.9 14.4 (340) (321) 622 21.189 64.8 28.2 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 0.726 3.0 9.742 592 6.4 2.5 12.1 1.086 502 2013E 1.6 3.398 6.9 1.4 3.7 8.4 ROE (%) 3.0% Shareholder Structure.0 1.2 11.6% BNDESPar 10.3 2.2 19.297 6.9 2011A 2.6 13.9 10.2 892 (20.958 5.991 4.171 6.4) 1.451 6.59 6.1 2.323 569 8.793 316 3.27 0.446 5.9 FCF Yield (%) 0.171 1.0 P/BV 1.8 18.633 12.4 10.7 US$ 2012E 2. and corrugated boxes.9 7.7 13.5 676 9.8 5.645 8.315 26.608 2.3 8.4 619 13.882 2.2 3.5 0.5 (479) (113) 183 (65.7 2.332 0.28 0.9 12.7% Corrugated Boxes 31. coated boards.0% Free Float 59.

We Bloomberg believe that. 138 . Acquisitions of on-campus institutions with good reputations. +5511-3012-5787 | dhgewehr@santander. Santander estimates and company reports.A. which is trading at an attractive 2013E P/E Brazil: Banco Santander S. KROT3 BZ Current Price (01/03/13) R$ 44.00) among its peers. the largest among its peers. and a 120-bp increase in its EBITDA margin.  YE2013 target price of R$59.br of 18x (on an adjusted basis).0 3-Mth Avg. Daily Vol (US$ Mn) 14. boosted by 13% growth in the number of Kroton’s postsecondary students.br company’s migration to Novo Mercado.40 TARGET PRICE: R$51.00 under our FIES exercise.2013 Latin American Universe Book BRAZIL—EDUCATION KROTON BUY CURRENT PRICE: R$44. +5511-3012-5914 | bgiardino@santander.Mn 134 important than asset profitability. in our view). to 28. large cities with a competitive advantage.46. and financial leverage could 200 reach 2.40 / US$ 21.com. the lower the extra upside we find for Kroton (+18%. We reiterate Bruno Giardino*. among its peers. fueled by the 35% increase in EBITDA (to R$475 million). an indicator management considers to be much more 2. CFA our Buy rating on Kroton.81 Target Price (YE 2013) R$ 51.0x we expect for the end of 2013).com. the highest level of corporate governance of the BM&F Bovespa stock exchange.A.919 Float (%) 70. Our 2013 adjusted EPS estimate is 14% ahead of consensus and implies 27% YoY growth. We believe that new acquisitions could be financed with debt.00 RAISING YE2013 TARGET PRICE TO R$51. the 1.0 Shares Outstanding . Kroton could benefit the most from a potential extension of FIES to distance-learning courses in 2013. as Kroton Price Performance (R$) Kroton IBOVESPA 250 presents robust cash flow generation.5% previously). 150 100 50 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet.63 .00  Solid fundamentals + attractive valuation: top-pick. We also expect Kroton’s trading volume to improve following its inclusion in the MSCI Standard Index and the Daniel Gewehr* Brazil: Banco Santander S. due to the company’s relatively lower share of campus students in Company Statistics the revenue pie (which is not necessarily negative.00 FROM R$50.29 52-Week Range (R$) 17. Since our FIES exercise considers only campus students. to R$59. We expect an operating cash flow of R$343 million (72% of EBITDA).5x EBITDA (vs. and offers a 2013E FCFE yield of 4%.00 / US$ 24.50 Market Capitalization (US$ Mn)  M&A Strategy.  2013 Outlook: We forecast net revenue to increase by 20%. Large acquisitions would be a way to enter into new.7% (from 27.

3 17.6 122 440.0 (49.377 87.8 406 22.7 5.0 20.1 2013E 806 14.1 23 n/m 5.75 1.34 8.4 11.8 2.7 352 264.0 13.0 24. 9M12 Distance Learning 27.7 0.1% K-12 12.1 21.26 0.3 19.7 162 32.1 0.475 1.4 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 0.3 3.1 US$ 2012E 708 61.4 Net Debt/Equity 0. Frederico Abreu (CFO) and Carlos Lazar (IR Officer) Web: www.6 19.9 Int Cover (%) 3.0 383 16.0 0.6 25.8 31.966 584 1.5 19.7 20.3 57.5 15.862 413 1.353 2.8 29.3 5.5 13.0 0.0 3.9 0.9 25.8 3.0 13.9 P/CE 19.7 3.1 38 n/m 5.35 16.0 25.1 (14) (10) 138 38.com.27 DPS 0 0.581 311 648 787 548 225 2012E 98 281 351 1.45 8.03 1.4 21.9 3.3 0.9 21.7 17.7% Shareholder Structure.029 421 2012E 196 562 703 3.405 2.0 28.0 FV/Revenue 3.2 0.1 17.116 431 52 2013E 182 381 349 1.0 4.1 18.4% Founders 11.br Post-Secondary Students by Segment.0 13.0 0.45 2.8 189 16.3 (44.7 17.5% Sources for all charts and tables: Company reports and Santander estimates.254 1.1 5 (5) 37 n/m 5.4 327 127. December 2012 Advent 17.44 1. replicable.6 0.7 61.8 3.557 807 104 2011A 81 244 219 1.9 19.7 3.4 (16) (24) 366 29.3 607 757 730 702 324 379 348 320 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 877 666 452 259 468 333 215 118 Capital Employed 2.0 16.6 237 528.0 0.1 2.579 primary and secondary students (K-12 education) from 771 associated private and public schools.9) 4.4 0.9 1.8 9.7 264 13. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 735 18. the company’s net revenue.9 96.0 0.6 1.1 2014E 886 9.0 0.64 17.10 9.1 29.9 14.25 8.6 9.449 1.8 6.8 2.19 0.130 397 50 2014E 250 466 350 1.0 50.5 8.6 8.2% PostSecondary 60./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (44) 34 (111) (30) (711) (693) 549 0 359 2012E (89) 61 (47) 236 (848) (491) (25) 0 591 2013E (114) 0 (13) 384 (149) 293 0 (49) 0 2014E (125) 0 (14) 477 (170) 357 0 (142) 0 2011A (27) 21 (66) (18) (424) (414) 328 0 214 2012E (46) 32 (24) 122 (436) (252) (13) 0 304 2013E (55) 0 (6) 187 (73) 143 0 (24) 0 2014E (58) 0 (7) 222 (79) 167 0 (66) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 151 458 410 2.022 768 4.8 0.901 15.900 enrolled students. As of September 2012.5 8.1 6.1) 5.3 1.8 FV/EBITDA 25.2 (37) (6) 194 420.931 206 757 1.5 13.653 20.2 (19) (3) 100 347.9 6.9 144 36.1 1.3% Distance Learning 65.kroton.2 17.7% Revenue by Segment.7 28.KROTON Financial Highlights: P&L.0 8.1 (29) (20) 283 45.8 2.4 8.6 ROE (%) 2.9 566 19.9 232 28.0 12.826 2.6 11.8 20.7 332 39.1 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest. it had 410.5 11.7 11.8 15.4 (7) (11) 171 23.0 22.515 2. 139 .108 545 1.7 61.4 3.6) (8.0 785 23.3 15.7 FV/EBIT 64.956 260 695 1.2 475 35.9 13. respectively. operating through an integrated platform from K-12 to postsecondary education and a standardized.8 6.1 10.982 286 641 1.3 19. Balance Sheet and CF Statement.7% Treasury 0. 3Q12 On Campus 34.1 2014E 1.215 1.2 14.898 2.8 2.9 428 11.3 0. In 2011.5 2.1 2.0 918 16.5 2.2 0.0 8.1 R$ 2012E 1. Kroton is the largest player in DL postsecondary education.284 Net Debt/EBITDA 9.52 0.232 862 104 2013E 382 801 733 4.4% Free Float 70.3 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 41.9 241 30.73 19.1 Capex/Revenue (%) MARKET RATIOS FCF Yield (%) Div Yield (%) 0.0 11.3 2011A 439 24. and R$38 million.2 P/BV 1.4 Dividend Payout (%) 0.7 5.346 1.7 58 388.7 14.1 28. with 242. Key Personnel: Rodrigo Galindo (CEO).996 postsecondary students and over 288.6 9.374 834 104 2014E 548 1.0 0.816 1.0 0.9 181 213.5 637 164.1 21.74 0.2 37.3 2.166 368 48 LT Debt FINANCIAL RATIOS Net Debt 2013E 1. and scalable business model.1 ROCE (%) 1.37 0 0.346 628 1.6 28.1 11.36 1.9 14.1 96 364.1 1.12 2. R$111 million. EBITDA and net income reached R$714 million.0 50.2 14.4 31.3) (7.06 1.1 96.68 17.8 15.460 2.8 21.1 3 (3) 22 n/m 5.71 PER SHARE DATA BVPS Kroton is one of the largest education companies in Brazil.

42 / US$ 13. However. Light will likely intensify investments (to 90 improve quality). however. a strong YoY increase. loss reduction and grid maintenance).70 TARGET PRICE: R$24.858 million.70 / US$ 10. we have a positive view on the company’s increased 52-Week Range (R$) exposure to the renewable energy segment.42 INTRODUCING YE2013 TARGET PRICE OF R$24. We estimate 110 Light will pay a dividend yield of 7%. The tariff revision will affect profit by 2014.A.Mn 204 Price Performance (R$) Light IBOVESPA 120  Decent dividend yield but tariff revision on the way. Santander estimates and company reports. As for dividends. in our view. given the tariff revision 100 scheduled for November. we expect margins to recover and possibly better cash flow generation.A. we Company Statistics believe it will take longer than expected for these measures to Bloomberg translate into real gains and for Light to achieve Aneel’s regulatory LIGT3 BZ Current Price (01/03/13) R$ 21.62 2.174 Float (%) 47.br adjustment.60  Investment Case: We are maintaining our Hold rating. we still expect negative pressure from Maria Carolina Carneiro* manageable costs (as Light operates below regulatory parameters). with the full impacts affecting 2014 results.7 Shares Outstanding . Brazil: Banco Santander S. Daily Vol (US$ Mn) 5. the launch of renewable project operations by Renova (in which Light holds a 35% share) and the price adjustment to generation contracts. final capex for Belo Monte and new target for losses released by Aneel).com.br We also expect negative pressure from the tariff revision and higher capex (to improve quality parameters) to remain a challenge.6x P/E.  2013 Outlook: We estimate EBITDA of R$1. 20. set for November. will be the tariff revision for the disco unit. thus. Also.66 Target Price (YE 2013) R$ 24. Although we view favorably Light’s investments to reduce losses.  Improvements at slow pace and with some uncertainties ahead.2013 Latin American Universe Book BRAZIL—UTILITIES LIGHT HOLD CURRENT PRICE: R$21. after the tariff reset announced by Aneel. reflecting a very weak comparison base derived from the pressure from Parcel A costs and weak volume during 2012.8 3-Mth Avg. which might potentially negatively affect dividend 80 payment. while returns still depend on several pending variables (new regulatory asset base. +5511-3012-5751 | mprado@santander. REPLACING YE2012 TARGET PRICE OF R$25. in our view. 70 60 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet. Light will trade at 5. as we expect a slight improvement to cash flow generation given the operation of new plants from renewable assets and Aneel’s recent tariff Marcio Prado* Brazil: Banco Santander S. after revision. However. The main challenge of 2013. which should translate into a reasonable 7% yield.7x EV/EBITDA and 11.com. we note that Market Capitalization (US$ Mn) Light has already committed to several investments (Belo Monte.30. not a bargain. 140 . +5511-3012-6682 | macarneiro@santander. multiples.57 targets.42.50 .

852 3.6 7.0 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E Net Debt 4.595 (14.9 32.light.1) 21.6 7.50 1.987 5.br EBITDA by Business.8 Net Debt/Equity 1.717 2.4 4.0 32.0 4.5 3.6% Others 23.0 Dividend Payout (%) 93.617 6.2 1.993 2.4) 17.4 (5.7 4.327 2.2 1.741 4.0% BNDESPAR 15.9% Commercial 30.6 FV/EBIT 6.4 16.66 1.2 1.54 0.151 5.2 1.2 1. 9M12 Luce 13.773 3.117 0.6 4.3 1.067 2.1 1.472 5.330 3.416 5.319 6.5 1.00 1.4 10.0 98.982 1.0 2.5 3.52 1.09 15.078 1.42 9.017 8.4 10.4 6. its main activity.2 11.0 1.6) 10.747 4.36 0.8 10.8 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 18.858 40.9 4.5 6.4 6.987 1.5 5.0 2. Jerson Kelman (CEO).195 6.8) 886 (14.5 3.2 7.4 748 1.5 4.4) 5.059 3.251 2.0 23.727 4.596 11.LIGHT Financial Highlights: P&L.14 10.4% Residential 38.80 16. Key Personnel: Sérgio Alair Barroso (Chairman).8 5.8 1. 9M12 Trading 2.09 DPS 0.5 R$ 2012E 7.388 4.2 2013E 4.438 2.192 2.389 11.8) 1.861 5.664 6.0 3.95 1.238 (22.015 4.115 10.7 11.0 1.2 17.437 1.2 0.723 LT Debt FINANCIAL RATIOS 2013E 7.929 302 2013E 542 2.9 2.83 1.25 18.1) 24.0 (273) (63) 185 (43.9 Div Yield (%) 9.842 5.6 2.08 1.3 5.272 544 2013E 975 4.000 3.0 40.2 (438) (315) 611 57.0 9. Balance Sheet and CF Statement.2 (243) (175) 339 54.699 1.363 550 2014E 1.814 4.6 11. In electricity distribution.3) 22.065 (615) 450 0 (347) (194) 0 2014E (558) 429 (63) 682 (643) 39 0 (337) (306) 0 2011A (218) 213 298 707 (554) 153 0 (185) (321) 0 2012E (236) 281 (134) 310 (455) (145) 0 (196) (42) 0 2013E (274) 243 35 592 (342) 250 0 (193) (108) 0 2014E (310) 239 (35) 379 (357) 22 0 (187) (170) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 781 3.7 963 (3.3 20.9 16.9 22.8 996 (2.456 555 2011A 416 2.2 1. is an integrated company operating in the Brazilian electricity market. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 6.300 2.31 10.045 3.980 305 2014E 564 2.9 11.8 2014E 4.2 34.0 (239) (115) 223 (34.7 1.4 36.6 4.2 3.8 3.5 3.599 2.4 1.628 4.898 2.293 5.2 1.663 1.9 10. The generation segment.2 13.014 6.4) 17.668 (7.454 7.854 1.550 6.8 (451) (202) 389 25.274 3.5 1.1 P/BV 1.25 8.260 519 2012E 525 3.0 3.4 2.0 4.8 5.9 (5.7 1.7 3.8 7.0 2011A 4.7) 10.4 1.7 1.9 50.100 14.5 1.4 1.601 6.680 (15.0% RME 13.067 3.1 ROCE (%) 35.479 4.031 308 4.2) 4.4 7.2 1.682 3. currently representing 11.1 1.0 13.1) 21.947 (4.2 FCF Yield (%) 4.5 5.6 FV/EBITDA 8.8 8.0 4.0% Free Float 32.195 3.A.901 2.8 1.388 2.4) 24.555 Net Debt/EBITDA 3.373 3.7 50.0 50.441 2.203 1.97 0.5 23.721 5.2 1.3 47.5% Distribution 67.511 11. with an installed capacity of 852 MW represents roughly 15% of the group’s consolidated EBITDA.2) 20. also operates the generation and commercialization of electricity through its subsidiaries Light Energia and Light Esco.032 38.979 16.9 4.3 FV/Revenue 1.6 17.8 2014E 7.8 3. the company holds a concession to operate in part of the State of Rio de Janeiro.3 1.97 0.2 3.4 10.674 2.945 6.2 5.721 5.230 3.3 1.5 2.1% Shareholder Structure.6% Generation 29.527 2.365 4.184 (929) 256 0 (311) (538) 0 2012E (417) 496 (237) 546 (802) (256) 0 (345) (74) 0 2013E (494) 438 63 1.563 2.939 3.0 933 (15.75 18.0 16.225 1.804 277 2012E 292 2.6 3. 9M12 Industrial 7.2) 20.14 Capex/Revenue (%) Int Cover (%) ROE (%) MARKET RATIOS P/E PER SHARE DATA BVPS Light S.91 3.9% Sales by Segment (DisCo).558 14.515 1.8 23.727 2.505 (4.9 11.1 1.571 2.4 2.A.2 25.2 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.3 1.0 P/CE 8.0 (429) (207) 401 (34.9% Cemig 26.5 1.2 5.2 35.9 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 1.4 10./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (365) 356 499 1.3 3.637 2.0) 4.221 5.8 1.8 7.2 11.0 7.5 7.0 (458) (105) 311 (46.com.2 0.22 0.8 (256) (115) 220 18.7 7.1% Sources for all charts and tables: Company reports and Santander estimates.1 739 (18. João Batista Zolini Carneiro (CFO) and Gustavo Werneck Souza (IR Manager) Web: www.218 1.467 Capital Employed 4.7 5.626 2. Light S. 141 .2 1.260 5.7 5.91 1.357 3.146 12.1 2.5% of national GDP.8 1.8 8.5 4.4) 5.5 25.5 US$ 2012E 4.046 1.613 4.837 6.8 32.7 5. The company distributes more than 26GWh of energy to over 4 million clients.1 1.766 3.5 5.

as there are still some challenges to overcome.A. the government has announced the concession of some assets.50 / US$ 1. +5511-3012-5765 | pbalcao@santander. and (iii) the conclusion of Anglo Ferrous Brazil’s pipeline project. of which R$85 million from the take-or-pay contract with Anglo and R$100 million from 5 contracts for the renting of 784 thousand square meters. LLX can now build a new container terminal inside the port for instance. as we forecast revenues of only R$166 million in 2013. LLX is still a startup.  LLX Minas-Rio. We estimate that only R$185 million of revenues are guaranteed for 2014. (ii) defining a connection between the port and the railway network. Therefore we estimate that a potential delay would have a very limited impact in the net present value of the project.A. REPLACING YE2012 TARGET PRICE OF R$3. among others. The ports package announced by FedGov in December last year brought new opportunities for LLX.74 .50  Investment Case: We are upgrading LLX to Buy from Hold given the stock’s strong depreciation this year. the signing of binding contracts with potential customers.2013 Latin American Universe Book BRAZIL—TRANSPORTATION & INFRASTRUCTURE LLX LOGISTICA BUY CURRENT PRICE: R$2. we think it is too early to price it fully in. LLX Minas-Rio has a takeor-pay contract with Anglo Ferrous Brazil that implies a guaranteed 15% IRR. The pipeline project that will transport iron ore to the Açu port is likely to be delayed.50.4. while we consider the Açu Superport a promising project. Moreover.0 3-Mth Avg. additional opportunities. 80 60 40 20 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet. in US$ nominal terms.94 52-Week Range (R$) 1. +5511-3012-6016 | bamorim@santander.  2013 Outlook: We expect LLX to present significant advances toward the completion of the project: the construction of the onshore terminal (TX2).br Renan Manda* Brazil: Banco Santander S.com. Pedro Balcão Reis* Brazil: Banco Santander S. +5511 3012-6535 | rmanda@santander.br Company Statistics Bloomberg LLXL3 BZ Current Price (01/03/13) R$ 2. 142 . Daily Vol (US$ Mn) 8.50 UPGRADING RATING TO BUY FROM HOLD INTRODUCING YE2013 TARGET PRICE OF R$3. Private ports are now authorized to handle third party cargo. However. While we believe the project has great potential. and LLX could bid for them.br Bruno Amorim* Brazil: Banco Santander S. in our view. the definition of a feasible railway connection to the port. LLX is still in a pre-operating phase and the project has many uncertainties. Overall.Mn 693 Price Performance (R$) LLX Logistica IBOVESPA 120 100  Ports package.28 Target Price (YE 2013) R$ 3.com.1 Shares Outstanding . Nevertheless. namely: (i) securing binding contracts with key customers.05 Market Capitalization (US$ Mn) 889 Float (%) 46.61 TARGET PRICE: R$3.61 / US$ 1.  Promising but risky.com. we believe it remains a high-risk investment.A. for the iron ore handling services for Anglo Ferrous Brazil. Santander estimates and company reports. which might be delayed.

09) (00.4% Coal 33.5 0.4) 5.632 899 888 399 2012E 50 198 1.4) (13.02 1.0 MARKET RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E (39.8) (4.243 611 1.06 0.1) (16.4) 0.194 441 804 60 2013E 28 120 1.4 1. Key Personnel: Eike Fuhrken Batista (Chairman).9% Own cargo 60.3 3.496 360 1.1 2.1 (88) (34) 66 n/m 16.0 0.7) 11.5 2.3) 15.5) 2.9) (22.4 (6.0 0.3) (36.2 1.1) 9.0 5.7) (4.4) (5.794 737 2.0 0.0) US$ 2012E 26 1.8 (19.7 380.762 2.8 3.8) (79) (62.655 159 1.441 2.21) 0.888.4) (46.1 2.5 (12.5 822.1) 2013E 166 254.5 (37.0 0.0 1. Balance Sheet and CF Statement.3 3.7) (9.5 FV/EBITDA (20.0 1. LLX announced the spin-off of the Sudeste port.379 230 2.0 5.0) (134) (2.0 0.7 514 860.5) 15.3) (36.285 1.126 1.4) 34 9 (36) (121. LLX’s main asset is the Açu port that should start operations in 2H12 and will mainly consist of handling services for iron ore and oil.1) 9.9 (19.1) 9.382.7) (47.9 FV/Revenue 866.5) (131) (53.363.5) (68.4) (131) (53.7) (1. the Açu project will include the rental of a total area of nearly 7.2) (60) 18.8 338 n/m 46.9) (224.12) 0.282 349 933 514 507 228 2012E 28 110 1.9) (36.7 380.8 3.1 18 476.1% Açu Revenue Breakdown.9 (33) 43.552 410 1.6 2.30 1.888.142.0 7.214 88 2014E 28 153 1.0 (7.7 (224.142.8 188 n/m 46. with shares listed in the Novo Mercado (New Market).979 286 2. 143 .1) (26) 54 (105) (75.05) (00.1) 9.1) (14) 30 (58) (60.64 0. Eike Batista.9) (19.4) (0.186 1.247 2./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A 0 0 51 (46) (250) (296) 18 529 0 0 2012E (29) 0 (88) (147) (640) (787) (29) 558 0 0 2013E (50) 0 (11) (32) (633) (665) 0 738 0 0 2014E (71) 0 (52) 243 (151) 92 0 43 (30) 0 2011A 0 0 31 (28) (150) (178) 11 318 0 0 2012E (16) 0 (48) (81) (352) (433) (16) 307 0 0 2013E (28) 0 (6) (18) (352) (369) 0 410 0 0 2014E (40) 0 (29) 135 (84) 51 0 24 (16) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 526 673 1.9) (29.0 (20.3) (62) 41 (80) (38.099 1.9 (224.5 (1.0% Sources for all charts and tables: Company reports and Santander estimates. Eugenio Figueiredo (CFO) and Felipe Jansen (IR Manager) Web: www.1 2011A 2 (69.2% Oil 35. In mid-September 2010.09 DPS 0 0 0 0. controlled by Mr.446 109 2013E 50 215 2.8) (12.1 66.15 0.5) 2.94 1.1 10 427.027 2.120 326 2.149 794 1.891.9 30 195.321 128 1.3 0.039 279 743 1.6 ROE (%) P/BV FCF Yield (%) Div Yield (%) PER SHARE DATA 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS (00.8) (4.256.134 2.1) Company Description 2013E 92 257.942 734 1.0) (285.7) (87.7) (68.6) (13.1) (21.3) (22.338 2.8 2.6 0.400 1.1 (159) (61) 118 n/m 16.184 158 2014E 50 276 2.6 24.3 (37.978 2.0 (20. 2008.04 0 0 0 0.5) 15.A.74 0. 2014E Third-party cargo 39.1 0.7 (35.7% Others 6. to provide logistics services through the development of two major port systems (Sudeste and Açu) in the Southeast region of Brazil.521 3.396 2.6 2.4) 5.2) (109) 18.8) (13.6) (1.4 66.9) (23.4) (79) (62.032 1. as a subsidiary of the EBX Group.br Minas Rio Revenue Breakdown.7) (19.6 (1.177 207 776 1.7 (285.891.6 7.8 FV/EBIT (20.4) (36.com.142. 2011–14E in Millions P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 3 (71.1 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.0 0. November 2012 Free Float 46.8) 5.7 54 193.7) (4.0) (74) 6.9) (87.8) 5.8 (65.1 (13.635 Net Debt/EBITDA (2. Currently.0) 2014E 734 340.8 227 n/m 55.0) 2014E 408 340.535 1.7) (13.7) 11.142.8) (9.5) 3 (71.0) R$ 2012E 47 1.0 0.llx. 2014E Steel 24.LLX LOGISTICA Financial Highlights: P&L.3 P/CE (39.52 0.3) (111) 75 (145) (37.17 (00.2 (59) 44.4 1.5 2.5 (105) 19.1) (1.356 1.0% Eike Batista 54.210 LT Debt FINANCIAL RATIOS Net Debt Capital Employed 1. Marcus Berto (CEO).2 (35.4) 57 15 (60) (108.5 (58) 26.1) (5.3) 16.9) (29.3) (36.733 181 1.227 188 2011A 300 385 712 1.0) (15. In addition.5 thousands hectares.0 0.4 (14.9) (224.0) (12.3) 16.6% Shareholder Structure.2 1.3) 15.8) 2 (69. where an industrial complex will be developed.8 409 n/m 55.0 0.363.1 20.693 649 2.5) Net Debt/Equity Capex/Revenue (%) Int Cover (%) Dividend Payout (%) ROCE (%) (13.7 286 860.8 2.6) (1.08) (00.237 105 489 1.15) (00.—LLX—was created in March 2007.0) (21.1) (36.4) (0.0 24.133 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 362 1. The company’s IPO was held on July 28.1 20.9) (23.59 BVPS LLX Logistica S.3 (2.858 2.1 (65.

38. Daily Vol (US$ Mn) 11. long-term.30 TARGET PRICE: R$46. growth potential.55 IBOVESPA 120 business to almost double by 2016. We believe that Localiza is not expensive and is a strong Brazil: Banco Santander S.5% average in 2012). and (2) decreasing interest rates.00 / US$ 20.81 Target Price (YE 2013) R$ 46. (2) strong.com. it has a unique position Market Capitalization (US$ Mn) suggesting important competitive advantages. Santander estimates and company reports.5% average versus 8. with a unique. (2) EBITDA 14%.0 3-Mth Avg. (2) investment grade rating by Moody’s and Fitch.A.44 fleet rental market. Moreover. We estimate (1) the top line will grow 19%. Company Statistics  Strong.br Renan Manda* Brazil: Banco Santander S. with (1) accelerating GDP growth. we believe the economic environment continues to be positive for Localiza. 52-Week Range (R$) and (3) 73-store network for used car sales. With Localiza’s (1) almost 40% market share in the car rental market and 13% in the RENT3 BZ Current Price (01/03/13) R$ 38.com.729 Float (%) 66. and consistent business model. We reiterate our very positive stance on Localiza based on its (1) fast growth—after 9% adjusted net profit growth in 2Q12 we expect ~20% growth in both 2H12 and 2013FY. by our estimate. and (c) has lower financing costs. and (3) unique vertical integration that allows Localiza to sell approximately 80% of its used cars directly through its own store network. We expect Localiza’s car rental 25.  2013 Outlook: Based on stronger GDP growth in 2013E (3% versus 1% in 2012E). 80 60 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet. +5511 3012-6535 | rmanda@santander.A.2013 Latin American Universe Book BRAZIL—TRANSPORTATION & INFRASTRUCTURE LOCALIZA BUY CURRENT PRICE: R$38. leadership position with almost 40% Bruno Amorim* Brazil: Banco Santander S. (b) incurs lower costs for selling its used cars.59 .com. We believe the Brazilian car 160 rental and fleet rental markets still have strong growth potential and 140 have room for further consolidation. and (3) net profit 21%. leadership position. undisputed. undisputed.30 / US$ 18. a lower expected Selic rate (6.Mn 198 Price Performance (R$) Localiza Strong. clear. 144 . we Pedro Balcão Reis* disagree.  Bloomberg 3. and lower depreciation per car. The fleet rental should increase 100 by 65% over the same period.7 Shares Outstanding . It (a) receives a greater-than-average discount from OEMs.br market share in the car rental market and 13% in the fleet rental market.00  Investment Case: The market views Localiza as expensive.A.br growth story. we expect another strong set of results in 2013. +5511-3012-6016 | bamorim@santander. as well as strong competitive advantages. +5511-3012-5765 | pbalcao@santander.

1 596 23.3 18.8 9.LOCALIZA Financial Highlights: P&L.048 0 LT Debt 2013E 3.5 2013E 1.8 11.0 1.2 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 17.93 1.750 193 933 623 804 0 2013E 235 442 169 2.348 (191) 556 (384) 172 0 (370) (60) 0 2013E (310) 1.6 29.241 10.9 25.5 5.010 547 2.5 15.978 1.1 17.6 4.0 11.7 0.6 18.0 R$ 2012E 3. In addition.1 356 29.0 27.5 20.6 4.8 20.2 2. totaling 454 car rental branches (it owns 253 and franchises 201 in Brazil).5 FINANCIAL RATIOS Net Debt/Equity Capex/Revenue (%) Int Cover (%) 1.A.213 845 1. fleet management/rental.445 1.6% Eugenio Pacelli Mattar 7.5) 14. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 2.6 0.5 470 (21.4 1.0 28.9 18.048 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E Net Debt 1.2% Car Rental 63.8 9. Roberto Mendes (CFO) and Nora Lanari (IR Manager) Web: www.3 17.121 25.5 1.04 2.867 727 593 691 795 Capital Employed 2.03 3.8 15.4 4.048) (93) 0 380 (120) 0 2011A (135) 770 (9) 375 (310) 65 0 225 (47) 0 2012E (213) 689 (97) 284 (196) 88 0 (189) (31) 0 2013E (142) 770 22 389 (438) (49) 0 173 (46) 0 2014E (156) 903 6 415 (456) (40) 0 165 (52) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 711 1.0 2.0 22.4 1.106 0 2012E 211 389 114 1.414 578 2.0 26.4 2.26 BVPS 5.6 1.7 887 8.6) 27.48 1.0 1.2 10.064 165 4.67 8.8 FV/EBITDA 7.6 1.5 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.4 2.682 48 849 (957) (108) 0 378 (101) 0 2014E (359) 2.8 29.8 11.190 17.8 FCF Yield (%) 2.8 28.985 2.5 (1.5 6.9 1.0 1.24 0.2 29.4 1.4 (179) (125) 292 16.0 (62) (90) 209 11.012 14. The company ended 2Q12 with a fleet of around 89.321 1.9 1.2) 2.561 512 2.9 361 12.6) 634 (5.15 3.40 0.671 Net Debt/EBITDA 1. Balance Sheet and CF Statement.0 733 12.0 8.7 1.1 10.7 2014E 4.918 16.43 0.2 8.424 1.5 5.3 34.2 10.027 228 1.5 2.8 10.652 3.7% Sources for all charts and tables: Company reports and Santander estimates.1 26.5% Jose Salim Mattar Junior 8.076 14 955 (1.074 1.7 653 3.6 17.0 P/BV 4.7 29.3 24. and used car sales (Seminovos).2 24.625 2.4 9.0 1.0 0.900 vehicles.9 830 18.2 10.1 821 26.121 2.2 26.251 1.1 463 2.742 22.3 10.localiza. Localiza has 48 franchised branches in other countries in Latin America.br EBITDA by Segment.4) (1.704 2.135 513 5.850 1.1 2.082 0 2014E 594 1.082 2.9 28.5 20.1 12.9 25.074 0 2012E 446 824 241 3. 2012E Fleet Rental 36.com.2) 14.4 6.5 13.342 1.257 1.4 703 49.9 25.2 FV/Revenue 2.6) 10.7 25.6 11.02 3.1 18.8 3.61 0.3 21.1 10.645 (5.834 19.926 1.461 0 2011A 379 567 88 2.8 17.5 P/CE 9.4 6.67 6.64 4.0 8.8 9. November 2012 Antonio Claudio Brandao Resende 10.106 804 925 1.547 2. 145 .2 517 11.54 0.6 10.289 (14) 628 (520) 109 0 377 (79) 0 2012E (418) 1.1 2.5 6.6 3./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (226) 1. Localiza’s IPO was held on May 20.—was founded in 1973 and is currently the main car rental company in Brazil.8 18. 2012E Fleet Rental 40.3 1.51 0.9 28.6 (138) (90) 339 16.3 23.88 0.0 US$ 2012E 1.6 Dividend Payout (%) 31.358 1.20 10.4 1.1 18.5 25.26 MARKET RATIOS P/E FV/EBIT PER SHARE DATA Localiza—Localiza Rent a Car S.3 33.0 9.8 1.4 322 34.3 (1.9 1.9 669 31.2 1.2) Div Yield (%) 1.252 3.0 0.0 22.138 292 1.4 (107) (75) 174 22.5) (1.8 10.4 2. The company has the largest car rental network in the country.7 3.3 (57) (79) 188 8. franchising.1% Flavio Brandao Resende 6.6 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 1.22 2.9 7.3 ROCE (%) 31.3 1.9% Average Operating Fleet.7 9.704 0 2013E 528 996 381 4. 2005.5 1.2 10. Key Personnel: Salim Mattar (CEO).427 15.5 1.710 410 1.5% Car Rental 51.077 722 925 0 2014E 253 483 218 2.8% Shareholder Structure.0 7.7 2.4 4.8 4.6 (70) (46) 173 (0.4 2011A 1.1% Free Float 67.5 9.7 29.363 1.6 28.0 (144) (206) 481 17.5 20.755 6.0 1. It operates under four business units: car rental.23 0.3 2.3 ROE (%) 26.5 240 (32. and the company’s shares are listed in the Bovespa’s Novo Mercado (New Market).8 7.1 1.221 10.0 25.601 20.9 15.9 17.3 (125) (173) 411 21.62 0.7 2014E 2.248 597 1.6 25.0 24.305 246 1.001 14.4 28.4 490 32.05 DPS 0.27 0.685 18.7 3.554 1.461 1.3) 453 (7.

which should lead to increased cost efficiency. fuel (bunker) costs should remain at high levels as a result of current oil prices. although we expect results to improve during coming years as a result of the renewal of Log-In’s fleet (higher cost efficiency). Daily Vol (US$ Mn) 0. Although we anticipate some increase in cabotage revenue (up 13% YoY).br results of the ports package announced in December by the government effectively improving the level of services provided within Brazilian ports. +5511-3012-6016 | bamorim@santander.A.2013 Latin American Universe Book BRAZIL— TRANSPORTATION & INFRASTRUCTURE LOG-IN HOLD CURRENT PRICE: R$8. Moreover. TVV.75 Market Capitalization (US$ Mn) 367 Float (%) 68. REPLACING YE2012 TARGET PRICE OF R$6.  2013 Outlook: On the positive side.72 TARGET PRICE: R$9. we believe TVV remains Log- 50 In’s cash cow in the short term. +5511-3012-5765 | pbalcao@santander.com. we anticipate a ramp-up both in volumes and margins. 52-Week Range (R$) Coastal shipping: Over the next two years. Log-In’s container terminal. as we anticipate the company will finish the implementation of its fleet plan by 2015. to become more constructive on the stock.8.A. However. we expect 2013 to be another challenging year for Log-In from an operating standpoint. 146 .br coast and (2) the fact that most of the Brazilian population lives near the coast.A.com.28 competition from other ports due to the normalization of the ICMS Target Price (YE 2013) R$ 9.6 Shares Outstanding . Despite the challenging outlook. +5511 3012-6535 | rmanda@santander. Santander estimates and company reports. On the other hand. should not be concluded before 2015. 5. This increase in both volumes and average capacity per vessel should lead to fixed cost dilution.00 tax.Mn 86 Price Performance (R$) Log-In IBOVESPA 110 100  Terminal of Vila Velha (TVV): The container handling business 90 80 should face a challenging scenario due to the normalization of the 70 ICMS tax across the country.00  Investment Case: We have a positive outlook for the cabotage Pedro Balcão Reis* business in Brazil in the long term given (1) the length of the Brazilian Brazil: Banco Santander S. costs should remain pressured. leading to a potential loss of market 60 share.7 3-Mth Avg. we need to see the Bruno Amorim* Brazil: Banco Santander S.00 / US$ 4.com. in 2013 the government could announce a ―cabotage package‖ that contains measures to stimulate maritime transport along the Brazilian coast. The renewal of its fleet.72 / US$ 4.65 . 40 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet.00.br Renan Manda* Brazil: Banco Santander S. should face tougher  Company Statistics Bloomberg LOGN3 BZ Current Price (01/03/13) R$ 8. as the so called ―ports war‖ is expected to end in the near future. Therefore. the lack of proper infrastructure translates into higher costs and low pricing power for Log-In.00 INTRODUCING YE2013 TARGET PRICE OF R$9.

0) 46 21.9 15.91 2.5 8.1 2. which manages and operates a container port terminal in the State of Espírito Santo.2 4.5 22.0 Net Debt/Equity 1. Balance Sheet and CF Statement.730 129 1. November 2012 Petros 12.7 10.1 2.5 156.4 11.9 (16) (14) 28 238.3 1.2 3.23 DPS 0 0.5 49.9 3. and (2) Coastal Shipping.3 5.7) 138 1.5 158 14.6 168 (3. which includes cabotage.5 16.0 ROCE (%) 0.8 4.0 18.3 9.0 1.54 0.8 2014E 334 (1.A.1) 88.2 81 (1.9 (7) (7) 13 203.01 0.6 4.2) 1.8 15.1 1.6 5.6 Dividend Payout (%) 0.A.600 123 933 539 858 32 2013E 87 253 1.1% Other 34.4 1.4 7.2) (11.6 9.7 7 (84.04 0.5) 7.9) 38 32.30 6.0 3.3) (1.0 0.0 7.5 20.5 7.32 2.336 1.2 174 10.9 131 30.4) 1.6% Vale S.0 5.7) 21.1 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 0.6 58 87.10 0.9 44.5 1.5 22.1 1.8 3.9) (10. Mercosul.6 1.1 (1.12 6.9 2.3 1.6 5.7 20.1 26.com.9) 23.7 4 (83.6% Coastal Shipping 70.739 129 1.0 9. joining the Bovespa Novo Mercado (New Market) segment. 2012E TVV 26.7% Shareholder Structure.4 31 326.1 0.021 583 949 36 2011A 33 115 607 794 64 446 284 404 15 2012E 36 109 582 755 58 440 254 405 15 2013E 39 112 597 769 58 460 249 429 16 2014E 42 114 569 740 55 434 248 404 15 LT Debt FINANCIAL RATIOS Net Debt Capital Employed 2013E 739 9.6 81.3 5.6 27 68.6% Coastal Shipping Revenue by Division.2 20.7) 81.0) 23. LogIn signed a 20-year contract with Alunorte to provide bauxite cabotage transportation in the State of Pará.2) 84.5 1.8 8.6 (19) (4) 8 n/m 1.81 3.8) 8.15 0.9 27.5 8.2 5.5 23.2 2.9 MARKET RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E (88.9 3.5 11.490 120 836 533 758 28 2012E 75 231 1.7 7.3 0.02 0.3) 1.3 8.8 48.9) 82 6.0 5.8 18.0% Cabotage 52.2 49. 147 .1 80 (1. 5.1 1.1 5.7 74 54.2% Banco Fator S.138 1.33 0.2 2.0) R$ 2012E 675 1.3% Sources for all charts and tables: Company reports and Santander estimates. 31.loginlogistica. Key Personnel: Vital Jorge Lopes (CEO) and Gustavo Freitas (IR Manager) Web: www.8 2014E 768 3.8 38 40.213 1.6% Mercosul 14.5 6.7% Feeder 7.1 0.9 (1.5 1.9 Capex/Revenue (%) ROE (%) P/CE FV/EBITDAR FV/EBIT FV/Revenue P/BV 9.3 5.2 20.3 1.1 0.8 10.9 48 (46.8 0.7 23.8 86 47.5 6.5 6.1 (28) 2 (4) (138.3 25.5) (10.27 0 0.1 13.2 (78.8% Fama Invest.424 646 618 634 606 Net Debt/EBITDAR 5.3 1.0 82.310 1.2 2013E 338 (2.233 1.4) 1.4 7.3) (10.0 2011A 396 12.55 6.3 100 35.342 1. 2007.5 4. and feeder operations on the Brazilian and South American coasts.3 29 (43.0 7.2 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest. 16.1 1.2 Int Cover (%) 5.3 1.3 9.0 729 826 928 914 389 390 412 389 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 696 783 877 851 371 369 390 362 1.23 6.6 8.05 0.6 27.4 16 265.2 7.6 10.4) (1.2) 57 24.6 (9) (2) 4 n/m 1.16 0.3 (17) (24) 46 63.6 8.1 73 (8.9) 21.3 (51.90 FCF Yield (%) Div Yield (%) PER SHARE DATA BVPS Log-In provides intermodal services focused on containers logistics and comprises the following business units: (1) TVV (Terminal of Vila Velha).7) 81.0) US$ 2012E 345 (12. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDAR YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 664 6.7 2.5 8.97 2.LOG-IN Financial Highlights: P&L. LogIn held its IPO on June 21.1 4.0 (26.br Revenues by Segment.5 5.5 1.9 9./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (45) (26) 23 (328) (305) 354 0 - 2012E (55) (2) 73 (150) (77) 101 (2) - 2013E (41) (8) 72 (150) (78) 106 (7) - 2014E (46) (4) 99 (40) 59 (15) (23) - 2011A (27) (15) 14 (196) (182) 211 0 - 2012E (28) (1) 38 (77) (39) 52 (1) - 2013E (19) (4) 33 (69) (36) 48 (3) - 2014E (20) (2) 43 (17) 26 (7) (10) - BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 62 217 1.427 1.035 560 964 36 2014E 98 268 1. 2012E Bulk and other revenues 25.1 (47) 3 (7) (136.4 6.08 0.5 3.7 11.9 (58.10 0.3 (7) (10) 20 55.0 (31. In May 2008.4 1.3 175.0 0.6 1.9 5.

We are upgrading the stock to Buy. +5511-3553-0699 | tstingelin@santander. Daily Vol (US$ Mn) 13. However. J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet.19.798 Float (%) 54. +5511-3553-9602 | btaveira@santander.78 Investment positives: Our positives: (1) highest EPS growth in our 52-Week Range (R$) universe (44% CAGR 12-14E).00 / US$ 9.00 is based on a SOTP 70 exercise. Santander estimates and company reports.  90 80 Valuation: Our YE2013 target price of R$22.80 / US$ 9.com. (4) a beneficiary of interest rate reduction. we project 25% top-line growth.com. Moreover. CFA the best positioned Brazilian retailers to capture the expected growth Brazil: Banco Santander S.00  Investment Case: We believe that Lojas Americanas is still one of Tobias Stingelin*.  Company Statistics Bloomberg LAME4 BZ Current Price (01/03/13) R$ 18. as we increased our growth outlook beyond 2013. and (6) early signals that B2W’s business might be smoothly improving.80 TARGET PRICE: R$22. (3) significant additional store expansion potential across Brazil (+2. and a change in sales mix and tax incentives.A.  2013 Outlook: In the B&M business. 148 .2013 Latin American Universe Book BRAZIL—RETAIL & CONSUMER GOODS LOJAS AMERICANAS BUY CURRENT PRICE: R$18. a 47% EBITDA increase due to operating leverage.‖ from a strategic perspective.8 3-Mth Avg. and (2) substantially 110 100 higher trading multiples versus peers. we understand the importance of owning the leading e-commerce business in the country. although we do not believe Ronaldo Kasinsky* Brazil: Banco Santander S. we estimate top-line growth of 15% YoY due to expectations of another 15% YoY increase in the sales area and a rise in SSS of close to 8%. and (5) high returns (36% at B&M level).64 . a 20-bp increase in the EBITDA margin.A. 11. +5511-3553-2396 | rkasinsky@santander.000 on top of current base). (2) product diversification (no single category represents more than 10% of sales).00 UPGRADING RATING TO BUY FROM HOLD INTRODUCING YE2013 TARGET PRICE OF R$22. (3) limited credit exposure. with positive implications for the DCF part of our blended-valuation methodology. (4) resilient business (average ticket ~ R$40). we still project a R$40 million loss and that cash flow generation will remain negative.22 8.00.A.br that B2W is ―out of the woods. and 60% EPS growth based on lower interest rates. supported by blended DCFs. and target multiples for both 60 LAME’s B&M business and B2W. For B2W.br Bruno Soares Taveira* Brazil: Banco Santander S.br in the industry due to its (1) proven track record in opening stores of different sizes across Brazil. REPLACING YE2012 TARGET PRICE OF R$17. (2) decent consolidated returns (21% Market Capitalization (US$ Mn) ROIC 12E) despite B2W.23 Target Price (YE 2013) R$ 22.6 Shares Outstanding .Mn 953 Price Performance (R$) Lojas Americanas IBOVESPA 130  Investment concerns: Our concerns: (1) the possibility of LAME 120 having to further capitalize B2W down the road. (5) discretionary sales mix.com.

2) 1.6 894 14.4% Sales Mix (Traditional Retail).3 R$ 2012E 11.9 14.091 2.8 1.777 (6.701 22.7 12.091 14.0 2.05 0. with a nationwide presence.1 1.3 37.985 5.0 12.2 32.3) (3.9 5. and a credit business.7 3.246 3.0 19. chocolates & candies. represented by B2W Companhia Global do Varejo.2 17.7 865 12.08 1.13 0.686 764 2012E 1.1 (5.06 0.893 13.1 2.158 1.9 FV/EBITDA 14.4 25.6 (710) (382) 781 33.4 1.2 26. lingerie and CDs.8 12.3 2.378 21.034 15.959 22.331 1.889 3.9 25.0% Others 40.414 1.6 2.610 1.3 29.8 12.0% Clothing 10.3 2013E 6.449 6.8% Southeast 66.826 691 5.1 2.7 897 10.305 6.4 4.474 1.6 1.8 2.551 1.1 Int Cover (%) 2.644 6.0 8.69 0.3 1.18 0.871 2.8 2.2 16.162 4.9 1.479) (655) (506) 31 895 (89) - 2012E (206) (236) 459 807 (882) (487) (503) 120 (96) 0 2013E (258) (63) (175) 605 (808) (43) 159 0 (128) 0 2014E (323) (36) (217) 851 (824) 189 162 0 (175) 0 2011A (95) (982) (200) (883) (391) (302) 18 534 (53) - 2012E (105) (121) 234 412 (451) (249) (257) 61 (49) 0 2013E (118) (29) (80) 277 (370) (20) 73 0 (58) 0 2014E (141) (16) (94) 370 (358) 82 70 0 (76) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 2.827 8.4 12.2 19.985 11.2) 1.9 0.9 14.28 0.296 1.607 2014E 1.487 5. In activity for more than 80 years.418 Capital Employed 4.793 486 2.9 38.7 30.07 0.1 3.7 2.6 4.158 1.436 5.0) 1.7 1.8 1.8% Sources for all charts and tables: Company reports and Santander estimates.49 0. catalogs.845 (4.675 1.578 1.4 Net Debt/Equity 3. and also operates in electronic commerce.0 1.56 2.216 9.40 0.6 3.3 1.924 20.241 1.922 1.3 15.6 0.000 different companies.1 14.253 3. Balance Sheet and CF Statement.5 P/CE 21.8 13.879 5.10 0.2 1.0 30.com.202 8.0 1.36 DPS 0.398 2.1 ROCE (%) 23.100 4. The chain sells more than 60.8) 3.441 12.12 0.4 14.4 (341) (120) 268 38.645) (335) (1.LOJAS AMERICANAS Financial Highlights: P&L.975 7.4 2.6 29.850 1.7 22.5 P/BV 15.5 12.8 39.0 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 0.0 42.0 8.20 0.2 12.2 770 10.551 3.20 0.7 5.4 (744) (262) 585 54.458 2.9 4.306 1.388 7.9% Mid-West 8.7 28. in São Paulo. José Timótheo de Barros (CFO) and Fabien Picavet (Investor Relations Manager) Web: www.512 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E Net Debt 2.3 14.6 1.093 5.3 36. the company has 729 stores in major cities of Brazil and 3 distribution centers.1 MARKET RATIOS FV/Revenue Div Yield (%) 0.9 21.272 3.3 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 31.0% Electronics 10.079 13.657 2.8 3.0 4.6 Capex/Revenue (%) 6.373 12. 2010A South 10.46 0.3 2014E 16.764 2.1 25. 149 .7 5.8 0.7 1.4 Dividend Payout (%) 28.7 1.416 2.1 30.2 1.9 28.210 5.008 2.679 19.2 1.7 1.6 FCF Yield (%) (4.br Stores by Region.0 0.2 26.4 23.181 5.567 3.3 US$ 2012E 5.8) 13.087 3.3 14.414 1.0% North 1. LAME is the largest discount chain store in Brazil.055 20.8 14.534 2.0 12.772 2.1 1.4 7.6 4.0% Personal Care 10.433 758 2013E 878 3. so that Lojas Americanas has a major share of Brazilian trade in toys.513 1.3 778 9.664 891 2.lasa.94 PER SHARE DATA Lojas Americanas (LAME) is a multi-channel retailer integrating physical stores.0 12. Rio de Janeiro and Recife.5% Treasury Shares 3.3 2014E 7.4 4.605 3./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (160) (1.0 2.9 3.6 1.7) (2.3 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.8) 12.2 37. TV. Internet operations.8 2011A 6.5 12.382 2.82 0.6 10.6 15.268 5.0% Toys 10.607 2011A 1.9 2.195 684 LT Debt 2013E 13.51 0.1 FINANCIAL RATIOS ROE (%) 49.6 22.2 1.5 11.594 10.8) (0.6 (428) (72) 203 15.1 1.0% Media (CDs/DVDs) 10.853 3.038 1.551 3.701 6. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 10.ri.3 30.172 8.2 33.61 0.6 3.5 17.6 15.1 6.158 1.7 15.93 1.801 1.182 3.5 1.4 7.105 18.5 4.27 0.6 (717) (120) 340 9.08 BVPS 0.030 5. Miguel Gutierrez (CEO).478 9.278 19.908 2.6 (309) (166) 340 26.1 26.550 4.6 0.040 368 2.327 5. Key Personnel: Carlos Alberto Sicupira (Chairman).1 2.463 10.434 2012E 2.0) (0.0% Shareholder Structure.0 13.000 items from 4.1 (397) (74) 193 (4.8 2.9 5.260 7.385 6.9 1. 2011E Food 10.434 2.0 2. 3Q12 Controlling Group 41.2 16.723 Net Debt/EBITDA 1.2) 814 (5.8 1.6 20.5 17.292 714 2014E 778 3.1 (776) (145) 379 11.1 FV/EBIT 16.653 2.2 24.0 10.607 2013E 1.7% Free Float 54.0 2.3 54.659 1.289 5.9 709 (7.566 3.5 39.8 12.9% Northeast 12.6 12.0 14.2 3.141 14.3 46.0 27.5 3.346 1.711 661 2.

00 from R$83. as we see a relatively limited TSR over the next 12 months. 150 .2013 Latin American Universe Book BRAZIL—RETAIL & CONSUMER GOODS LOJAS RENNER HOLD CURRENT PRICE: R$80.00 / US$ 40. We expect near-term momentum to remain strong. (4) new logistics structure.0 new stand-alone brand concept opens another growth venue.54 Target Price (YE 13) R$ 92.br EPS growth through 2Q13.A. although still decent and expected to increase.1%) and its fast sales area expansion (+17% YoY). with high-double-digit Ronaldo Kasinsky* Brazil: Banco Santander S.7% (80%).com. and (6) 50.) to manage continuous growth. cost of equity in BRL of 11. systems.50 TARGET PRICE: R$92.80.00 based on 2013E P/E of 20.884 finally expected to improve from break-even.  2013 Outlook: We expect top-line growth to remain at high double digits (+17% YoY).Mn 124 well equipped (people.50 / US$ 39.00 FROM R$83. (3) store refurbishment cycle. and (5) focus on streamlining expenses.br returns to gradually improve (26% ROIC 2013E).A.00 RAISING YE2013 TARGET PRICE TO R$92.00  Investment Case: We expect Renner’s EPS growth to accelerate Tobias Stingelin*. and (3) 120 returns (ROIC) below some peers. CFA meaningfully through 2014 (16% EPS CAGR 2012E-14E) and Brazil: Banco Santander S. 100 80  Valuation: We are raising our YE2013 target price to R$92. (2) very easy comps in 4Q12-2Q13. +5511-3553-2396 | rkasinsky@santander.A. driven by SSS (7. Company Statistics  Investment positives: Our positives: (1) solid double-digit EPS Bloomberg growth (16% CAGR 2012-14E).com. Renner remains a core holding in the LatAm consumer space and we remain impressed with the company’s strategy.89 LREN3 BZ (3) aggressive investments in store expansion/refurbishment and in 52-Week Range (R$) logistics expected to start to pay off. as the company starts to reap the benefits of its (1) aggressive store expansion project. Current Price (01/03/13) R$ 80. (2) acquisitions (Camicado). (2) the stock is trading above historical multiples. (5) successful launch of Float (%) 100. +5511-3553-0699 | tstingelin@santander. +5511-3553-9602 | btaveira@santander.6 Shares Outstanding . (4) Camicado’s profitability is Market Capitalization (US$ Mn) 4.27 .50 3-Mth Avg. Daily Vol (US$ Mn) 24. Santander estimates and company reports. We expect a 51-bp expansion in the EBITDA margin to 19. Our current EPS estimates call for 15% YoY growth in 2013 following modest 9% growth in 2011 and 5% in 2012. Price Performance (R$)  Investment concerns: Our concerns: (1) decline in interest rates expected to negatively impact credit business at some point (17% of Lojas Renner IBOVESPA 160 140 EBITDA). Our Hold rating is based on valuation.0% on the back of some operating leverage and a modest retail gross margin expansion despite the currency depreciation.0x (20%) and a DCF using a 60 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet.com.br Bruno Soares Taveira* Brazil: Banco Santander S. etc.

3 20.0 1. The company ended 3Q12 with 176 Renner stores.572 2.4 15.3 479 16.446 1.2 18.3% Retail Operations 78.4 9.3 0.5 17. which represented 21% of EBITDA in 2011.933 23.9 9.1 19.0 650 17.2 74.2 1. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 3.9 5.3 Dividend Payout (%) 75.4 US$ 2012E 1.9 10.250 1.446 1.88 2.0 782 20.5 594 17.9 9.7 10. 2011A Other Cards 21.9 359 1.7 13.7% Shareholder Structure.3 Net Debt/Equity (0. 2011A Financial Operations 21.5 9.767 624 493 650 359 76 2014E 259 1.3 9.319 808 171 2013E 544 2.2 1.4 20.2 10.1 28.7 1.4 R$ 2012E 3. The stock trades on the Novo Mercado.69 11.110 1.6 355 23.0 18.4 446 15.948 0.60 5.3 19.9 3.8 FV/EBIT PER SHARE DATA 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 2.8 3 (139) 338 9.1 20. targeting middle.3 20.4 13.94 BVPS 9.3 (73) (213) 483 17.1 7.195 19.039 4.2 0.0% Aberdeen 14.5 6.3% 5.7 1.0 8.7 16.3 14.3 27.6 (48) (179) 411 15.3 14.6 2.6 2. Adalberto Pereira dos Santos (CFO) and Paula Picinini (Investor Relations Manager) Web: www.3 0.4) 1.2) 0.7 1.4 2.6 18.9 65.4 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.2 2014E 2.3 28.1 75.8 FV/EBITDA 9.70 DPS 1.404 1.6 18.4 282 (1.2 0.298 10.526 4.7 20. 151 .087 597 1.03 2.0 P/BV 5.3 2.34 3.239 17.6 14.1 ROCE (%) 17.com.7) 9.4% Sources for all charts and tables: Company reports and Santander estimates.2 7.6% Schroders 5.233 Net Debt/EBITDA (0.2 2.455 16.548 1.4) 0.143 1.3 (1.898 1.5 6.2 (1.8 5.75 2. September 30.lojasrenner.5 (18) (77) 182 (9.0 16.155 363 41 2012E 692 2.6 14.730 590 519 622 381 81 2013E 242 1.6 15.036 804 2.2) 0.3 9.1 28.065 763 1.9 Capex/Revenue (%) 9.984 1.7 2.4 2.8 2.3 Div Yield (%) 3.1 Int Cover (%) 14.5 23.2 14.000 sqm) and Compact stores (average selling area of 1. with 100% free float.04 0.668 1.40 10.0 297 5.3 (32) (92) 210 11.9 FCF Yield (%) 1.6 27.977 1.175 4.918 2.224 9.0 79.6 18.04 5.1 1.and upper-middle-income consumers (mainly women between 18 and 39 years of age) selling several different third-party-produced private label brands based on a ―lifestyle‖ concept.9 3.025 21.4 2011A 1.2 (0.3) 0.7 ROE (%) 29.8 FV/Revenue 1.1 7.2 10.1 10.343 3.4 553 15.8 2 (83) 202 15.8 2.5 71.1 0.8 2.6 19.5 14.220 1.115 14.7 18. including Traditional stores (average selling area of 2.2 2014E 5.7 1.000 sqm).8 12.1 P/CE 13.6 13.91 1.2) 14.89 3.6 28.br/ir EBITDA Breakdown.4 2013E 2.0 845 20.7 25.0 63.17 2.2 9.085 429 1.1 14.8 2.1 703 18.3 286 22.141 1.1 12.5 2.1 0.023 1.7 16.64 1.8 8.7 2.2 12.4 9.6 24.5 (34) (151) 357 5.99 0.3 18. Besides the traditional retail operations.7 4.01 5.1 7.8 MARKET RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 17.27 5.17 1.6 15.130 526 1./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (97) (71) (89) 275 (297) 70 (173) 315 (231) 0 2012E (134) 131 (258) 365 (414) (130) (30) 444 (250) 0 2013E (176) 0 (63) 524 (404) 184 0 0 (267) 0 2014E (221) 0 (67) 636 (404) 319 0 100 (267) 0 2011A (58) (42) (53) 164 (177) 42 (104) 188 (138) 0 2012E (69) 67 (132) 186 (212) (67) (15) 227 (128) 0 2013E (80) 0 (29) 240 (185) 84 0 0 (122) 0 2014E (96) 0 (29) 277 (176) 139 0 43 (116) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 578 2.4 18.099 1.86 13.463 808 171 2014E 608 2.892 659 519 714 386 73 LT Debt FINANCIAL RATIOS 2013E 4.9 9.LOJAS RENNER Financial Highlights: P&L. Renner also offers financial services.2 12.53 1.8 8.568 17.704 1.151 650 1.13 1.8% Renner Card 54.678 908 171 2011A 308 1. Key Personnel: Claudio Thomaz Lobo Sonder (Chairman).1 10.0 340 14.1 11.2 0.2 9.0 28.8 387 7.6 (22) (82) 188 3.4 15.395 1.8 2.3 (0.6% Others 67. 2012 BlackRock T.0 65.9 2.3 19.0 15.8 5. Price 7.5% Cash 23.79 Lojas Renner is one of the largest Brazilian apparel retailers.7 20. José Galló (CEO).842 19.121 1.2 0. 3 Blue Steel stores and 35 Camicado stores.7% Sales by Payment Type.48 1.418 2.984 16.3 10.100 25.3) 1.8 32.114 3. Balance Sheet and CF Statement.5 16.591 568 407 616 194 22 2012E 326 1.7 9.4 322 637 637 737 172 300 283 314 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E Net Debt (215) 115 263 299 (115) 54 117 127 Capital Employed 1.813 17.9 14.9 10.

us Vicente Falanga Neto* Brazil: Banco Santander S. we expect a considerable improvement in results (with EBITDA estimated to jump from R$20 million to R$109 million). moving away from the focus of the Big Market Capitalization (US$ Mn) 124 Four on larger projects.50  Investment Case: Despite Lupatech’s recent private equity offering. that the company Float (%) 63.86 and medium projects (especially in the services segment where LUPA3 BZ 52-Week Range (R$) 1. We still believe. Price Performance (R$)  Strengthening of Capital Structure Remains a Major Challenge. 100 80 60 40 20 0 j-11 m-11 a-11 d-11 a-12 a-12 d-12 Sources: FactSet. with negative shareholders’ equity and R$200 million in interest expenses per year compared with our 2013 EBITDA estimate of R$109 million.Mn 143 landscape being fueled by the pre-salt potential that Brazil offers.  2013 Outlook: Although Lupatech has incorporated San Antonio Brasil into its private offering. We are therefore maintaining our Underperform rating due to the continually challenging nature of this Christian Audi New York: Santander Investment Securities Inc. we believe the company still has a long way to go to improve its results and capital structure.  Unattractive Valuation.0x.6. its peers’ average of 7.5 will be subject to an increasingly more challenging competitive 3-Mth Avg. In its integration with SABR.0x 2013E EV/EBITDA vs.80 FROM R$3.77 TARGET PRICE: R$1.A. +5511-3012-6042 | vneto@santander.77 / US$ 0. Company Statistics  Change in Strategic Positioning Still Subject to Challenging Bloomberg Competitive Landscape. Lupatech now plans to operate in small Current Price (01/03/13) R$ 1.48 ROCE levels are higher). however.87 Target Price (YE 2013) R$ 1.80 / US$ 0. the company’s delicate situation remains.br turnaround story. Lupatech’s shares are trading at an expensive 15. 152 . Santander estimates and company reports. +1-212-350-3991 | caudi@santander. results ended up improving below our estimates on a weak EBITDA margin in the services segment.59 . yet we do not expect it to be significant enough for Lupatech to exit its delicate cash situation. in our view. Daily Vol (US$ Mn) 0.2013 Latin American Universe Book BRAZIL—OIL. In 2013.2 Shares Outstanding .com. the consolidated backlog suggests results might not improve in the short term. and we are cutting our estimates to reflect the lower-than-expected contribution to results coming from San Antonio Brasil.80 LOWERING YE2013 TARGET PRICE TO R$1. Lupatech IBOVESPA 120 Lupatech has approximately R$450 million in debt maturing in the short term. as it still has a long way to go to improve its capital structure. In our opinion. GAS & PETROCHEMICALS LUPATECH UNDERPERFORM CURRENT PRICE: R$1.

5 4.7) P/CE (1.It has only one type of share (LUPA3).6) (3.4) 2014E 1.2 109 440.8 13.7 5.6) (5.7 (110) 0 (46) 84.9) (2.0 11.8 4.7) (46.0 1.9 70 30.20) (00.612 416 2014E 96 836 1.8) (0.6) (5.5 12.0 16.4) 0.0 (2.0 PER SHARE DATA 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS (05.1) R$ 2012E 623 8.7 100 20.2) Capex/Revenue (%) 16.7 2.0) 6.42) (00.62) (00.1 (0.002 19.0 (116) 0 (5) 88.2) 5. 153 .7) (16.0 0. Lupatech.0 10.0 (0.3 15.109 700 1.0 0.4 30 0.9 14.8) (1.3 FV/EBITDA 20.2) (19.7 10.220 1.6) (46.2 (19.9) (0.2) (21.7 580.7) (109) (22) (150) (3.0 0.7 272 35.1 (199) (20) (242) (230.4 706.6) 69.8 51.7) 0.2 126 28.7 (0.3 (9) (149.3 13.0% Other 51.6) 9.0) (12.4 18 5.8 FV/EBIT 36.0% Sources for all charts and tables: Company reports and Santander estimates.6 53 413.4 (2.4 1.1 64 n/m 7.9 15.6 128 (23. and also manufacturing products (valves and synthetic fiber ropes for anchoring offshore oil and gas production platforms).00 0 0 (00.4) 2014E 466 14. 3Q12 Short Term (1 Year) 32.530 469 680 678 712 Capital Employed 774 861 975 936 413 420 464 436 FINANCIAL RATIOS Net Debt/EBITDA Net Debt/Equity 16.394 1.30) (00.078 681 1.6 11.01 0 0 0 0.0 0.7) (212) (43) (292) (20.9) 70.83) (00.1) US$ 2012E 320 (6.8) 26.0 0.8) (2.3 68.7 (53) 0 (22) 85.7) (42.2) (2. 15.2) (16.0 (36.8) (1.2 (5.31) FV/Revenue P/BV FCF Yield (%) Div Yield (%) BVPS Lupatech is increasingly involved in the oil and gas services sector.16) (00. which is listed on the Brazilian stock exchange and began trading on May.041 2.02) DPS 0 0.3) 168 14.6) (3. 2006) and provides 100% tag-along rights.7 54 (20.2 5.66) (00.483 (89) 1. and also a recently launched ADR level I (LUPAY).07) (02.9 1.0 110 72.3) (42.1 (119) (12) (144) (247.0) (16.9) (0.7) (0.6 0.6 0.6) (1.1 31 n/m 7.0% Products 60.503 865 682 (46) 904 679 2012E 14 591 1. Balance Sheet and CF Statement.2) (19.8) (18.2 11.0 0. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 574 (1.4) 0.1) (33.9 2.6 (91.0 11.0 0.2) (5.9) 2013E 408 27.9 13.0% Sales by Segment.408 417 2013E 189 846 1.lupatech.0% Long Term 68.6 11.5 2.6) 10 (67.8 72.9) (2.0 76.3 201 57.5) 605 1.4 (7.5 32 (16.7 (36.5 65.500 (94) 1.7 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E (0.97) (00.5) 2011A 343 3.016 1.8 1.0 (0. It has one type of share (LUPA3).2) 5.5 4.0% Fundação Petros 12.234 323 496 581 574 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E Net Debt 880 1.626 416 2011A 13 262 479 801 461 364 (25) 482 362 2012E 7 288 533 926 323 623 (21) 687 203 2013E 90 403 480 989 324 706 (42) 768 198 2014E 45 389 484 981 326 697 (44) 756 193 LT Debt 2013E 837 34.516.6 (87. 2012E Lupapar 16.8 17.8 98 49.8) (2.0 0.4) 25.52) (00.0% GP Investimentos 21.277 (43) 1.4) (46.2 14.7) (4.3) 7.009 2.0) (32. founded in 1980.32) (00./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (25) 0 250 33 (95) (34) 0 (89) 0 12 2012E (37) 0 (406) (661) (28) (10) 0 504 (1) 305 2013E (45) 0 (62) (62) 60 175 0 204 0 0 2014E (40) 0 (63) (28) (50) (93) 0 14 0 0 2011A (15) 0 149 20 (57) (21) 0 (53) 0 7 2012E (19) 0 (208) (339) (14) (5) 0 259 (1) 157 2013E (22) 0 (30) (30) 29 85 0 99 0 0 2014E (19) 0 (29) (13) (23) (43) 0 6 0 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 24 491 898 1.0) (16.8) 20 (62.1) 6.0 Dividend Payout (%) ROCE (%) ROE (%) MARKET RATIOS 4.2) (5.3 (0.br Backlog.LUPATECH Financial Highlights: P&L. 15.9) CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.7) (16.0 (54) 0 (3) 88.0 51 64. Alexandre Monteiro (CEO) and Ricardo Mollo (CFO) Web: www.04) (03.1 1.8 (4.8 521.7) (46.3 5.8) 0.1 32.com.6) 9.45) (00.4 16.7 15.898 662 1.8) 3.3 (17) (157.0 Int Cover (%) (0.6) 3.0 674. which is listed on the Brazilian stock exchange and began trading on May.8) 66 (34.7) (1. went public in 2006.093 1.2 150 37.9 11. 2013E Services 40.7) (0.423 1.4 (7.4 (5.553.0) (12.03) (01.3) 7. Key Personnel: Ronaldo Iabrudi dos Santos Pereira (Chairman).0% Shareholder Structure. 2006) and provides 100% tag-along rights.7 51.0) (0.2) (2.6 5.0 16.

68 .  Vertical integration projects on track = results set to maintain recovery trend. we believe Brazilian steel production and demand could grow 6-8% in 2013.com. remains a point of concern. which we believe should allow start-up by 1H14.14 Target Price (YE 2013) R$ 11. a key market for the company) has been hit by the economic crisis in the region.br execution risks. +5511-3012-5758 | ffreis@santander. 154 .43 / US$ 4. Santander estimates and company reports.3 Shares Outstanding . MAGG3 BZ Current Price (01/03/13) R$ 8.br 2013 Outlook: We recently lowered our 2012-15 CAGR estimate for Magnesita’s refractory sales volume to 2% per year (from 4%) to reflect a weaker outlook for the global steel industry.209 Float (%) 51. CFA Brazil: Banco Santander S. continued pressure from imports. 80 Magnesita IBOVESPA A-11 A-12 70 60 50 J-11 M-11 D-11 A-12 D-12 Sources: FactSet. in our opinion.8. We Price Performance (R$) assign R$1.000 tons/year) was granted in September. however.45 Market Capitalization (US$ Mn)  De-risking of graphite project should improve investor sentiment and help attract partners for expansion. (ii) higher vertical integration levels.Mn 292 licensing for the first phase (40. We highlight that Magnesita could more than double its 100 graphite output (likely through a partnership) in the future.2013 Latin American Universe Book BRAZIL—METALS & MINING MAGNESITA BUY CURRENT PRICE: R$8.43 TARGET PRICE: R$11. the recent expansion of Bloomberg Brumado sinter production (concluded in July) and the start-up of the graphite project by 2014E. and depressed export prices. and (iii) mediumterm upside potential to unlock further value from mining assets—a free option at current levels. as the 90 demand outlook for the commodity continues to look positive to us.24 52-Week Range (R$) 5.8 3-Mth Avg.65 value per share for the project (15% of our target 110 price). Environmental 1. Daily Vol (US$ Mn) 1.com.A.00  Investment Case: We reiterate our Buy rating on Magnesita and Felipe Reis* favor the stock over steelmakers due to its (i) margin gains with lower Brazil: Banco Santander S. Europe. as weak steel production (particularly in stainless. Despite a still challenging macro environment for the steel industry. we expect Magnesita’s EBITDA to expand R$90 million a year through 2014 (+22% from 2012E levels) with the Company Statistics delivery of upstream projects: namely. +5511-3012-5870 | azsciacio@santander.  Alex Sciacio*. After a tough year in 2012 due to weak domestic economic growth.A.00 / US$ 5.

9 (11.8 2. two private equity investors.2 9.1 18.8% Sources for all charts and tables: Company reports and Santander estimates.S.1 2. Octavio Lopes (CEO) and Jose Roberto Beraldo (CFO) Web: www.2 (44) (37) 75 29.1 6.0 174 (10.6 533 12.0% North America 21.4 248 5.8 0.4 0.940 91 2011A 411 1.2 26.319 1.8 Net Debt/Equity 0.4 1.2 Dividend Payout (%) 0.5 1.712 5.7 8.384 7.5 415 5. with roughly 75% market share in refractories in the steel sector market.1 3.4 9. roughly 50% of Magnesita’s revenues came from the export market and from its operations abroad.861 556 2.0% Revenue by Destination.510 2.2 6.080 589 2.1 25.503 7.1 1.8) 3.0 7.6 (121) (71) 98 5.144 523 2. 2012 Europe 20.012 1. Steel producers are Magnesita’s main customers.5 5.6 18.0) 17.903 91 2014E 965 2.5 16.0 436 (1.0 8.2 7.419 885 42 LT Debt FINANCIAL RATIOS Net Debt 2013E 2.14 0. Magnesita’s common shares are listed in the Bovespa’s Novo Mercado.4 13.4 8.9 186 6.6 (129) (68) 154 5.332 1.312 1.6 0. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 2. having 100% tag-along rights for minorities.3 0.5 6.3 4.5 8.3 0.02 0.508 1.111 1.87 4.791 265 1.6 305 4. and Argentina).603 1.512 2.8 0.198 5.20 0. 2012 GP Investments 34.2% Others/Free Float 58.638 1.7 12.407 921 67 2012E 426 1.65 4.0 917 9.3 14.2 2.3 1.463 Net Debt/EBITDA 2.070 1.105 5.1 P/CE 8.206 2.9 3.1 1.5 3.3 MARKET RATIOS P/E FV/EBIT 9.7 5.63 0.75 10.6 1.0 15.4) 236 (5. 155 .5 27.2 (62) (37) 85 12.844 301 1.2 (85) (71) 146 49.1 16.9 6.3) 12.26 0.26 0.8 7.2 1.7 6.110 526 2.0 5.0 13.8 8.5 475 14.287 (0.249 2.0) 12.3 Capex/Revenue (%) 7.4 15.1 5. Germany.0% Others 9.1 6.4 2.7 6.108 513 2.04 9.8 7.0% Mining 4.4 5.007 2.2 5.06 9.4 16.7 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 0. 2012 Services 6.2 13.3 7.475 2.334 564 2.2 235 9.1 11.14 0 0.773 1.401 2.82 4.100 479 2.5 9.6 7.666 523 2.848 855 886 863 843 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 957 1.7 6.4 1.020 975 510 506 486 444 Capital Employed 4.728 125 2012E 852 2.9 ROCE (%) 6.6 (72) (43) 58 10.846 1.5 2011A 1.1 837 6.8 2.2 2.4 2.2 5.5) 17.1 3.4 0.7 5.4 6.8% Refractory Solutions 89.com Revenue by Product.9 4.3 0.8 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.8 0.4) 16.9 2014E 1.0% Shareholder Structure.7 14.4 1.1 5.864 91 2013E 883 2.4 6.83 4.773 269 1.8 0.2 US$ 2012E 1. and currently operates 14 plants (5 in Brazil and the others in the U. share control of Magnesita with 43% of voting stock.103 1.0 9.964 1.021 5./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (103) 45 132 378 (171) (178) 0 (385) 0 279 2012E (109) 23 (77) 202 (208) 91 0 97 (9) 0 2013E (120) 42 (46) 271 (200) 71 0 0 (40) 0 2014E (133) 40 (59) 297 (175) 122 0 0 (40) 0 2011A (62) 27 79 226 (102) (106) 0 (230) 0 166 2012E (56) 12 (40) 104 (107) 47 0 50 (5) 0 2013E (59) 21 (23) 134 (99) 35 0 0 (20) 0 2014E (62) 19 (28) 138 (82) 57 0 0 (19) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 770 2.8 0.812 1.07 0.9 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 17.0 0. The company owns some of the largest and highest-quality magnesite and dolomite reserves in the world.9) 404 (7.7 1.9 730 (6.5 3. China.0% Rhone Group 7.217 1. GP Investments and Rhone Capital.9 18.6 4.607 4.43 million tonnes per year.1 6.025 5.8 2013E 1.071 1. Belgium.6 (64) (33) 76 1..4 9.MAGNESITA Financial Highlights: P&L.6 FV/EBITDA 6.1 10.4 ROE (%) 3.1) 413 2.0 1.8 (10. Key Personnel: Fersen Lambranho (Chairman).5) 3.3 6.1) 395 (9.2 P/BV 0.0 0. Magnesita enjoys a leading market position in Brazil. In 2011.53 0.15 10.8 18.2 5.0% South America 49.4 2.6 8.2 16. Balance Sheet and CF Statement.3 7.4 FV/Revenue 1.86 FCF Yield (%) Div Yield (%) PER SHARE DATA BVPS Magnesita is a vertically integrated Brazilian refractory producer.0 7.2 (133) (80) 183 18. with an aggregate nominal capacity of 1. accounting for nearly 80% of sales.0 25.064 898 5.1 8.044 1.3 1.2 R$ 2012E 2.2 355 16.magnesita.289 3.289 (6.6 0.6 0.0 0.9 400 12.833 261 1.0 8.4 8.1 2.29 DPS 0 0.815 8.7) 12.9 9.3 1.2 Int Cover (%) 2.9 785 7.2) 214 (9.423 932 46 2013E 421 1.8 0.33 0.9 427 3.03 0.50 0.2 7.5 13.9 2014E 2.8 7.9 4.4 0.2 175 11.411 906 43 2014E 440 1.4 0.1 5.1 1.147 6.0 291 (14.6 157 (9.

Daily Vol (US$ Mn) 6.  What‘s changed? We have increased our sales estimate by 3%.A. management is focusing primarily on revenue expansion instead of margin expansion. 27% and 22%.13. We are 9% above sell-side consensus in Current Price (01/03/13) R$ 13. supported by the government’s School Bus Program and Bus Rapid Transit Project. This strategy make sense. as well as ramp-up in India and Mexico. We believe that the EBITDA margin in the domestic market should be higher than in international markets based on the higher degree of vertical integration domestically. respectively. CFA believe Marcopolo is an attractive way to play the growth in the bus Brazil: Banco Santander S. arising from a premium positioning). Nevertheless.A.40 TARGET PRICE: R$14. in our view.58 Target Price (YE 2013) R$ 14.50 FROM R$12.  2013 Outlook: We expect an improved year for Marcopolo. 50 j-11 m-11 d-11 a-12 d-12 Sources: FactSet. but in- 3-Mth Avg.16 .   POMO4 BZ 52-Week Range (R$) 7. in our view. and (4) good visibility for 1H13 backlog. as it Marcopolo IBOVESPA a-11 a-12 200 believes that an EBITDA margin of +14% can attract competition. (2) an attractive ROE (2013E of 27%). we believe that the midterm positive scenario is partially priced in (DCF upside of 8%). substantially lower than Marcopolo’s 27%. Shares Outstanding .40 / US$ 6. as company’s competitors. in our view. respectively. +5511-3012-5914 | bgiardino@santander. a bold plan. +5511-3012-5787 | dhgewehr@santander.Mn 447 72. we Joao Noronha*. The company is trading at a 2013E P/E of 15. have ROEs of 17% and 5%. +5511-3012-5734 | jonoronha@santander.50 DOWNGRADING RATING TO HOLD FROM BUY RAISING YE2013 TARGET PRICE TO R$14.00  Daniel Gewehr* Investment Case: With (1) a high and stable market share (approximately 45% in Brazil.br Bruno Giardino*. is justified by the company’s higher ROE versus the other capital goods companies that we cover (2013E 16% for automotive players).943 Marcopolo‘s strategic plan calls for R$6 billion in sales by 2016.45 Market Capitalization (US$ Mn) 2. Santander estimates and company reports. with 5% and 10% price discounts (assuming the same cost 150 100 structure).50 / US$ 6. in our view). 156 . CFA management profile (based on CFROGI—cash flow return on gross Brazil: Banco Santander S. Float (%) implying a 2011-16E CAGR of 12%.2x.br transportation market. dollar (a positive for Bloomberg Marcopolo. EBITDA and net income of 14%.com. In our view. (3) a return-oriented Brazil: Banco Santander S.44 terms of net income.A.com. which.com. Company Statistics mainly due to the appreciation of the U.0 Price Performance (R$) Management strategy.S.3 line with Marcopolo’s 10-year (2001-2011) CAGR of 12.2013 Latin American Universe Book BRAZIL—CAPITAL GOODS MARCOPOLO HOLD CURRENT PRICE: R$13. We anticipate that the company will post attractive growth in sales.br investment metrics).3%.

9 50.7 4.861 10.4 15.0 25.0 431 5.467 594 585 613 624 Net Debt/EBITDA (0.5 67 (152) 344 16.0 4. Key Personnel: José Rubens de La Rosa (CEO).5 14.9 12.7 403 (4.6 3. R$456 million.7% market share.295 453 3. 9M12 Brazil 59.503 1.0 (0. Marcopolo is the market leader of busbody manufacturing in Brazil.320 668 3.9 554 8.2% Shareholder Structure.45 0.1 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.marcopolo.226 1.1 2013E 2. and R$344 million.849 14.6 6.9 262 13.194 626 2011A 482 1.5 12.7 2. EBITDA.1 13. It is also one of the world’s largest manufacturers.9 12.5 7.001 1.2 5.9 10.0% Urban 31.4 FV/Revenue 0.0 15.0 (0.4 24.2 0.9 8.7 1.5 451 (1.62 1.7 2014E 4.1 513 27.20 BVPS 2.41 1.9 273 3.384 13.60 2. Marcopolo has four plants in Brazil and eight plants abroad.0) 0.6 2.18 0.162 1.967 (2.3 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 0.8% Mexico Egypt 4.0) 8.5 420 17.1) 0.91 0.3) 11. Carlos Zignani (IR Officer) and Thiago Deiro (IR Manager) Web: www.061 360 1. as well as a bank (Banco Moneo.321 888 1.4% Treasury 0.3 11.3 797 7.114 5.2 6.5 7.37 billion.200 629 2014E 698 2.223 241 1.0) 10.636 646 1.711 1.39 0.3 8. Balance Sheet and CF Statement. which finances sales in the domestic market.652 762 307 578 570 299 2013E 262 1. 157 .1 7. the company’s net sales.3 1.2 9.9 241 2.br Sales per Product.7 3.3% Shareholders in Brazil 39.1 12.9 8.5 1.0 28. with a market share of 8% in passenger mass transit solutions.6 742 17.208 634 2013E 589 2.1 33.605 882 4.0 50.2% South Africa 0.7 4.0 (0.0 4.9 1.9 25.4 6.3 Int Cover (%) 10.3) Net Debt/Equity (0.39 DPS 0.7% Controlling Foreign Shareholders 34.1) 2. respectively.8 36.369 13.3 627 9.2 14.6% FV/EBITDA 6.5 4.54 PER SHARE DATA India 28.9 8.0) (0.7% Micros and Minis 10.2 8.0 (0.com.3 573 27.2 18.22 0.17 3.3 10.7 2.6 3.4 13.5 Shareholders P/CE 8.7 FCF Yield (%) 7.7 26.3 10.417 1.2 3.1 7.5% Parts and Others 9.0 2.5 7.4 11.0) 230 (15.3 2.3% 0.5% 2. with a 45.5 26.1) (0.0) 11.094 315 1.0 ROE (%) 29.0 13. The company has a global presence.5 10 (61) 160 (22.1 235 13.7 10.7 2014E 2.7 11.8% Intercity 31.2 3.0 52.7% Sources for all charts and tables: Company reports and Santander estimates.4 11 (173) 406 6.6 5. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 3.9 943 18.9 11.2 6.1 10.0) (0.2 17.8 26.39 1.0 LT Debt FINANCIAL RATIOS Net Debt Capex/Revenue (%) 2013E 4.2 FV/EBIT 7.74 3.109 375 1.5 9.35 0. posting sales to more than 100 countries throughout the world.1 ROCE (%) 24.724 644 1.46 0.378 1.77 0.649 727 287 630 533 280 2014E 297 1.8 2.37 0.8 47.1 22.6 27.9% Argentina Colombia 2.1 MARKET RATIOS Founded in 1949.4 1. 9M12 Volare 17.8 12.3 8.011 19.5 13.7 4.8) 10.3) (0.006 2.0 11.1) (0.8 8./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (36) 36 (23) 433 (75) 243 137 (149) 0 2012E (48) 139 (147) 305 (230) 94 (274) (148) 0 2013E (60) 13 (32) 541 (201) 210 0 (157) 0 2014E (73) 15 (28) 599 (146) 295 0 (191) 0 2011A (21) 22 (13) 259 (45) 145 82 (89) 0 2012E (24) 71 (75) 156 (118) 48 (140) (76) 0 2013E (28) 6 (15) 248 (92) 96 0 (72) 0 2014E (32) 6 (12) 261 (63) 128 0 (83) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 904 2.1) 0.1 Dividend Payout (%) 50.388 809 3.8 3.4 272 22.7 13.0 50.5 20 (119) 314 (8.43 0.3 16.6 1.2 US$ 2012E 1.3 2011A 2.240 1.8 13.20 0.2 R$ 2012E 3.9 10.8 1.7 13. and net income reached R$3.MARCOPOLO Financial Highlights: P&L.4 443 23.0 26.1) (0.5 40 (91) 205 22.7 14.8 26.2) 407 (8.703 734 274 689 508 267 870 575 571 568 464 271 254 242 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E (58) 3 (51) (166) (31) 1 (23) (71) Capital Employed 1.2 25.9 1. with equity of R$159 million).29 1.4 448 3.2 8.7 4.031 9.4 5 (75) 176 0.7 12. In 2011.4 12.7 1 (66) 175 9.4 14.5 251 23.70 0.5 456 16.114 1.0 Div Yield (%) 4.9 26.8) 8. offering 100% tag-along rights in ON shares and 80% in PN shares.2 P/BV 2.86 0.4 1.7 206 (17. 9M12 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 9.1 11.616 650 1.2 43.0% Production Volume per Country.1) 0.36 0.381 1.2 10.6 25.6 3.620 1. Marcopolo has been listed on the Bovespa’s Level 2 since 2002. José Antonio Valiati (CFO).482 613 2012E 543 2.7 1 (144) 382 21.803 704 474 620 790 327 2012E 256 1.1 11.6 3.

Brazil: Banco Santander S. we remain concerned about the sequential delays in project start-ups and budget overruns.4 billion capital increase in our model. Our MMXM3 BZ 52-Week Range (R$) 3.45 / US$ 2.117 Price Performance (R$) MMX IBOVESPA 120 100 80 60 40 20 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet. Execution will be key from now on.com.47 . as announced by the company.0 3-Mth Avg.A. Bloomberg benefiting from a more defensive cash flow profile (inflation and FX Current Price (01/03/13) R$ 4. Santander estimates and company reports. +5511-3012-5870 | azsciacio@santander.70 LOWERING YE2013 TARGET PRICE TO R$4. CFA Brazil: Banco Santander S.97 estimates point to an IRR of 14% in real U.1 billion in financing for the project (66% of capex).Mn 969 2. 158 .  2013 Outlook: We continue to believe that royalty-based Company Statistics securities are a better risk-reward vehicle to play MMX‘s story.br particularly considering the recent trough in iron ore prices. Float (%) 23. We are also delaying the start-up of the Sudeste Port to 4Q13 from 2Q13. The dilutive effect of the capital increase was partially offset by lower WACC assumptions in our DCF valuation.br We are incorporating the recently announced R$1. we Felipe Reis* see more limited downside risk for the stock from current levels.2013 Latin American Universe Book BRAZIL—METALS & MINING MMX HOLD CURRENT PRICE: R$4.S. Management is confident that BNDES will approve R$3. which would be positive due to subsidized interest rates charged.  Alex Sciacio*. dollar terms at current Market Capitalization (US$ Mn) market prices.com. Daily Vol (US$ Mn) 11. We believe MMX should be able to nearly fully fund the expansion of Serra Azul with BNDES loans and the aforementioned capital increase.00  Investment Case: After MMX’s steep underperformance in 2012. +5511-3012-5758 | ffreis@santander.19 Target Price (YE 2013) R$ 4.6 Shares Outstanding .24 hedge with zero capex commitment) than common equity.A.9.70 / US$ 2.  BNDES funding for Serra Azul likely to be granted in 2013.45 TARGET PRICE: R$4.70 FROM R$5.

4 1.0 (13.8 11 (88. which holds directly and indirectly 46% of the company’s stock.8 1.108) Other Invest.454 7.4 9.6 208 886.119.3 4.6 0.0) (15.0 93 59.4) (2.1 0.475 673 1.3 19.0 12.600 2.2 0.6 197 58.0 P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue R$ 2012E 911 (12.6) US$ 2012E 455 (20.341 8.6 (0.669 4.451 5.1 1.0 21.0% SK Networks 14.8) (148.1 (51.8) (11.489) (2. 2012 WISCO 16.2 121. MMX is listed on Bovespa’s Novo Mercado.268 1.6 3.7) (3.847 696 2014E 32 1.0 0.9) (2.2 33.465) (9) 1.2 710 79.2 (259) 104 (27) (148.7 4. MMX’s current project portfolio comprises MMX Sudeste (Serra Azul.9) 213 (39. 2011–14E in Millions 2013E 1.02) (00.806 696 1.2 0.0 13.6 100 849. Balance Sheet and CF Statement.8 21 (87.6 19.6) P/CE 2.7) 44.5 1.mmx. along with mining rights to develop iron ore production in Chile.112 52.665) (5) 921 0 657 2014E (101) (946) (254) (1. and its shares are part of the main stock indexes in Brazil (Ibovespa.6 33.3 1.5) MARKET RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E (154.4 1.6 84.77 MMX is a mining company with interests in the production and development of iron ore projects.9 7.04) (00.414 948 1.7 Net Debt/Equity 0.814 317 2.403 348 2013E 762 1.352 1.20) (00.178 4.7) 9.171 696 2011A 400 591 976 3.2 358 302.3 Dividend Payout (%) 0.5 221 28.9) (42.9 FV/Revenue 4.108 1.8 (185) 22 (42) (62.3 (415) 28 (382) (1.6) 2014E 1.239) 256 (1.3 (207) 14 (191) (1.262 Company Description 2011A 575 34.272) (7) 550 0 0 2013E 1. Key Personnel: Eike Batista (Chairman).525 2.39) (00.535 2.720 7.1) (80.357 474 1.7 1.848) (11) 914 0 0 2013E (151) (1.9 261 25.89 1.239) Capital Expenditures (870) Free Cash Flow (2.6 0.5) (1.1 109 49.423) (6) 457 0 0 2013E (72) (747) (78) (779) (886) (1.171) 64 (52) 0 0 2012E (34) (619) 128 (649) (774) (1.4 (13.392 12.0 170.546 2.2 21.1) (42.130) (2.371 5.03) (00.5) (11.com.247 6.0 0.151 5.0 FCF Yield (%) Div Yield (%) PER SHARE DATA 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS (00.1 36.581 928 255 2012E 52 300 1.833 2.765 529 1.1 482 34.497 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 991 2.3 101. Pau de Vinho and Bom Sucesso mines) and MMX Corumbá (which.MMX Financial Highlights: P&L.2 19. 159 .4 (3.1 1.1 23.2) 44 (59.520 67.525 3.621) (1.7) 44.8 36.7 24.7 Int Cover (%) 2.2) 9.5) 2.3) (79. MMX is controlled by Eike Batista (owner of the EBX Group).8) (1.4 2.977 2.7 350 39.2 39.703 3.2 121.139 528 1.8 335.187./(Divestments) 115 Change in Debt (94) Dividends 0 Capital Increases/Other 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt LT Debt FINANCIAL RATIOS Net Debt Capex/Revenue (%) ROCE (%) 3.4 2.5 1. Cleveland Cliffs.0 0.9 10.0 4. 9M12 Exports 15.927 2.0 0.1 16.0 30.315 5.0 0.417) Changes in Working Capital 176 Operating Cash Flow (1.7 4.9 120 20.800 Capital Employed 4.147 10.5) (3.706 5. and IBX-50).0% Shareholder Structure. Guilherme Escalhão (CEO) and Ricardo Assef (CFO) Web: ri.10) (00.3 2.5 1.0% Domestic 85.8 (403) 48 (92) (70.4 2.4 2.678 237 763 1.1) (46.662 432 696 1.955) (15) 1.126 252 726 1.0 0.9 4.5 40.6 FV/EBIT ROE (%) 30.1 28.966 1.727 3.0 168 69.0) (66.110 4.4) (2.4) 89 (54.6) 2014E 2.04) DPS BVPS 0 0 0 0 0 0 0 0 4.425 59. Wuhan Steel. IBX.696 9.0 0.8) 2012E (68) (1.549 88.757 6.6 (290) 28 (54) 85.0) 2011A 1.0 0.7 19.1) (1.8 30.6 79.06) (00.31 1.200 0 0 2011A (16) (787) 98 (688) (483) (1.4 1.0 0.97 3. 9M12 Iron Ore 100.033.1 1.368 2011A 750 1.2 (144) 58 (15) (146.3 101.8 1.0% Revenue Breakdown.1 0.055 1.3 1.036 42.62 3.1 10.7 23.550) (2.0) 2013E 730 60.78 2.0 334.4 16.0% Sources for all charts and tables: Company reports and Santander estimates.7 84.298) (1.9) (53.1) (66.7) 2.102 2.1 21.7 5.332.1 12.1) (2.849 4.0 0. while the free float amounts to 28%.713 2.8) (46.615 2.1) 426 (32.8 172 286.554) (163) (1.741 479 2012E 103 600 3. MMX became listed in 2006 and has successfully built a track record of developing iron ore projects and JVs with strategic partners such as Anglo American.9 630 47.1 21. and SK Networks.465) (4.7 7.4 9.844) (3.8 13.3 P/BV 1.3) (79.0 170.7 1.0 0.0 0.141) (1.0) (81.0 0.342 2.55 1.4) (114.0% Eike Batista/EBX Group 46.334 140 715 1.6) 0.2 FV/EBITDA 25.88 2.831 6.8) 2014E (221) (2.064) (555) (2.6 0.0 0.6 396 85.3 1.918 0 1.4 2.0% Free Float 24.308 331 2014E 14 784 3.253 263 1.1) (115.6 (139) 14 (26) 86.7 79.br Destination of Iron Ore Sales. should produce 36 million tons of iron ore per year by 2015).9 (3.525 3.552 Net Debt/EBITDA 5.0 824 93. together.6) CASH FLOW 2011A Depreciation & Amortization (29) Other Noncash Items (1.9) (15.

69 LOWERING YE2013 TARGET PRICE TO R$12.br delays in the Pecem-Itaqui projects.A.29 52-Week Range (R$) 9. Santander estimates and company reports. we forecast EBITDA of R$944 million for 2013  Chilean Castilla project looks more uncertain. and we expect full operational status in 1Q13. 160 .0 Shares Outstanding . MPXE3 BZ Current Price (01/03/13) R$ 11.Mn 476 create negative news flow in 1Q13. +5511-3012-6682 | macarneiro@santander. but a more uncertain scenario. With MP579/591 and weak demand lowering energy prices in the short term and more depreciated FX increasing capex. higher financial costs related to EPC contract for these plants.br Bertin projects. While we still see the Chilean market as very attractive for MPX.23 TARGET PRICE: R$12. MPX acquired the EPC for these projects.07  Investment Case: We are maintaining our Hold rating on MPX Marcio Prado* while slightly decreasing our 2013 target price to reflect additional Brazil: Banco Santander S. Daily Vol (US$ Mn) 5. despite the lack of an environmental license.23 / US$ 5. the exclusion of the Chilean Castilla project from our target price calculation. Given the little time MPX has had to Float (%) implement these projects. (We had considered Company Statistics it partially in our previous target price.8 3-Mth Avg.628 25. we decided not to  exclude this project from target price calculation.01 we expect delays. reopening growth opportunities for MPX.  2013 Outlook: The Pecém-Itaqui projects have been delayed for about one year compared with initial guidance.78 . until a more definitive start-up date is set by MPX Price Performance (R$) MPX Energia IBOVESPA 250  Still a unique portfolio. we expect some delays that we think could 2. As a consequence. we believe 200 150 marginal RoIC will decline in the short term for MPX projects. that energy prices will spike. 50 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet.69 / US$ 7. and expected delays in the Maria Carolina Carneiro* Brazil: Banco Santander S. thus allowing the company to support faster implementation of the projects.18.com. MPX’s Bertin projects are expected to start Market Capitalization (US$ Mn) operations in January 2013.52 Target Price (YE 2013) R$ 12. +5511-3012-5751 | mprado@santander.69 FROM R$13. We 100 expect in the medium term. In July 2012.2013 Latin American Universe Book BRAZIL—UTILITIES MPX ENERGIA HOLD CURRENT PRICE: R$11.A.com. The Pecem and Itaqui turbines are already partially operational. The Chilean Supreme Court cancelled the Castilla project’s environmental license in August.) Bloomberg Bertin projects are slated to start operations in January 2013.

br EBITDA by Segment.4 15.9 4.3 (6.4) 63.4 10.6 (218) (108) 209 147.046 3.3 (177.0) (9) 93.2) (56.2 4.0 0.040 98 2014E 541 1.1 1.9 2014E 3.249 10.853 (2.3 535 47.8 7. an EBX Group energy company.618 1.9% Sales by Segment (GenCo).424) 207 0 878 0 788 2012E (101) 0 (249) 542 (918) (377) 0 538 0 0 2013E (175) 0 (241) 424 (339) 85 0 126 0 0 2014E (199) 0 (464) 209 (74) 135 0 (60) 0 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 1.3 936 47.0 0.42 3.com. 9M12 Regulated Market 100.780 4.5 FV/EBITDA (624.3 1.734 2.6 (382) (188) 366 147.462 17.0 734 36. and power generation.964 15.729 5.512 4.4) 2.0 0.6 1.0 2. 2013E Gas 9.613 3.5 FV/EBIT (624.0 n/m 173.7) 10.068 (61) 2013E 705 2.3 ROE (%) FV/Revenue - 10. Rudolph Ihns (CFO) and Flavia Heller (IR Manager) Web: www.3 (628.129 5.mpx.5 38.9 - 10. 161 .3 636 140. Eduardo Karrer (CEO).0 0.109 2.4 4.33 6.0 ROCE (%) 1.419 168.318 8.4 1.9 3.607) (659) 0 942 0 0 2013E (307) 0 (423) 742 (593) 149 0 221 0 0 2014E (349) 0 (812) 366 (130) 236 0 (106) 0 0 2011A 0 0 (26) 1.8 7.0 P/BV 2.2 2011A 0 (100.818 2.394 17. which are being developed to supply its own plants and international markets.438 Capital Employed 6.0) (16) 93.1 (16) 93.192 4.558 4.7 25.8) (3.ON 11.1 39.0 0.1) (3.3 (6.3 1.6 23.7 1.867 31.0 3.074 7.379 2012E (177) 0 (436) 948 (1.663 8.8% Generation 79.585 5.0 0.593 2.1 n/m (150) 54 (105) 28.428 8.3% Eike Batista 54.9 (12.6 23.64 7.289 10.6 (40.0) 4.630 (1.0 1.3 n/m R$ 2012E 926 n/m 264 n/m 442 n/m 47.637 1.1 (9) 93.6 1.536 0 1.0 28.2 1.2 11.673 2.951 3.0 0.2 10.5 n/m (16) 93.126 0 2012E 557 1.0 0.44 PER SHARE DATA EPS - - 0.418 1. MPX has four ventures with about 2.9 (12.534 5.584 4. Furthermore.979 4. MPX has one of the largest portfolios of energy projects in development in Brazil and Chile.0 0.981 2.4) 37.7 P/CE (40. is engaged in the exploration and trading of natural resources (coal and natural gas).1 n/m (262) 95 (184) 28.4 14.6 (232) 28 (53) 49.226 1.926 7.5 9.5 9.1) 2013E 1.7 4.4 1.184 203 2011A 699 1.635 2.763 4.4 1.2 (10.5 38.2) 63.9 3.9 6.372 0 2012E 320 1.289 171 2014E 941 2.7 10.2 14.548 8./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A 0 0 (46) 2.8 6.2% Minning 10.5 1.MPX ENERGIA Financial Highlights: P&L.911 4.8) 22.5 (628.6 7.0% Sources for all charts and tables: Company reports and Santander estimates.583 3.3 364 140.6 10.216 2.2) 36.310 7.3 n/m US$ 2012E 529 n/m 151 n/m 253 n/m 47.328 4.0% Shareholder Structure.492) 362 0 1.136 861 3.7 151 n/m 28.4) 22.268 31.4 10.676 896 2.13 7. logistics to carry these fuels.10 4.1 39.1) 4.3 10.6 (406) 48 (93) 49.8) 37.8 4.761 5.3 MARKET RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E (40.3) 2.4 11.1 15.948 2.5 (40.941 2.8 4.7% Free Float 34.372 2.118 4.2 4.9 2014E 1. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 0 (100.395 5.0 0.107 4.3 4.0 0.624 Net Debt/EBITDA (176.2 FINANCIAL RATIOS Net Debt/Equity 1.6 (413) (76) 148 n/m 5.1) CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.0 Int Cover (%) n/m n/m n/m n/m n/m n/m n/m n/m Dividend Payout (%) 0.0 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 0.556 3.5 n/m (9) 93.4) (57. Key Personnel: Eike Fuhrken Batista (Chairman).031 2.979 117 LT Debt 2013E 2.163 5.862 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E Net Debt 2.486 3.414 10.6 535 47.0 0.284 36. with more than 11 GW licensed.585 994 3.6) 10.0 364 140.0 28.5 7.209 1.012 3.6 11.818 1. Balance Sheet and CF Statement.5 FCF Yield (%) 4.7 1.6 (236) (43) 84 n/m 5.3 Capex/Revenue (%) n/m 173.2 3.0 0.0 636 140.18 DPS 0 0 0 0 0 0 0 0 6.913 (35) 2013E 405 1.410 3.6 936 47.484 168.64 3.6 4.497 5.4 Div Yield (%) 0.126 5.4 11.31 0.4 1. 9M12 E.2 (10.018 4.7 944 113.240 1.7 264 n/m 28.7 25.560 MW of projects with PPAs in Brazil and seven greenfield projects in Brazil and in Chile.2 3.0 0.77 - - 0.243 1.26 BVPS MPX.680 18. MPX owns coal and natural gas assets in Colombia and Brazil.097 1.7 539 113.8) 36.9 4.5 2.82 4.0 1.

launches targeted at the 3-10 MW income bracket have been decelerating. should enable MRV to further improve profitability.  Competition is losing steam. enabling Pedro Balcão Reis* Brazil: Banco Santander S. negative economic profit. strong Brazil: Banco Santander S.br profitability and favorable growth outlook. on average. Daily Vol (US$ Mn) 19. We estimate MRV’s 70 quarterly sales speed to range between 20% and 25%. Nevertheless. 3-Mth Avg. That said. . MRV expects to reduce its cash cycle in 2013 mainly due to the following factors: (1) a material Bloomberg Horizonte.A.  2013 Outlook: We expect launches to grow moderately.20 / US$ 7. 162 .  Still one of the best among its peers.89 .0 during the construction phase (vs.85 TARGET PRICE: R$15. +5511-3012-7414 | fpgama@santander.792 be able to transfer approximately 85-90% of its clients to banks Float (%) 66. (2) the enhancement of its relationship with Banco do Current Price (01/03/13) R$ 11. .82 Brasil.7 Shares Outstanding . in our opinion. whereas the sector delivered. the company has been displaying one of the largest ROIC-WACC spreads in the industry. is likely to drop by over 500 basis points in 2012. MRV’s Price Performance (R$) ROE.com. CONSTRUCTION. 50 40 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet. INFRA & RE MRV ENGENHARIA BUY CURRENT PRICE: R$11. After peaking in 2010.20  Investment Case: We continue to place MRV among our preferred Fabiola Gama* names due to the company’s above-average execution. as the 60 company launches larger projects and increases prices. and (3) the use of an electronic platform by CEF to grant Target Price (YE 2013) R$ 15.A. .79 construction and client financing. MRV Engenharia IBOVESPA 110 100 90 80  Lower sales speed ahead—not a bad thing. 70-80% currently).85 / US$ 5. +5511-3012-5765 | pbalcao@santander.Mn 480 . Santander estimates and company reports.  Shortening the cash cycle . senior management expects profitability to bounce back in 2013. hurt mainly by lower margins.15.32 Market Capitalization (US$ Mn) 2. The weakened competition has not only helped MRV acquire more preferable land but also at better prices.2013 Latin American Universe Book BRAZIL—CEMENT. Benefiting from its favorable execution.com. the company expects to  Company Statistics speed-up in the credit analysis process since its centralization in Belo MRVE3 BZ 52-Week Range (R$) 7. moving toward 20%.br the company to generate positive cash flow that should be used primarily to reduce leverage. .

8 666 29.968 2.8 3.9 1.577 2.628 units.7 (93) (84) 424 31. Leonardo Guimarães Corrêa (CFO) and Mônica Freitas Simão (IR Director) Web: www.5 0.0 0.015 32.5 18.8 1.1 1.95 0.6 4.8 22.4 1.7 1. 2011-14E 5.88 1.4 6.2 6./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (19) 0 (1.198 1.412 1.1 601 31.5 2014E 3.6 14.006 26.4) 514 (14.2 (123) (86) 760 19.8 1.394 (0.6 9.9 US$ 2012E 2.3 15.9 FV/EBITDA 7.8 6. During its 30 years of experience in the industry.78 9.0 1.993 4.1 25.1 6.843 2.887 9.3 5.62 5.5 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.9 6.40 3.3) (4.9 20.1 6.3 16.1 6.2 5.99 0.5) 21.5 0.7 (181) (164) 826 33.7 712 6.3) 1.7 5.885 2.0 6.6 1.0% Treasury 1.0 9.161 2.2 5. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 4.5 0.MRV ENGENHARIA Financial Highlights: P&L. Rubens Menin.58 1.5 15.113 2.6 2.945 1.047 52 2013E 78 3.1 2.240 5.041 102 2013E 152 6.1 MARKET RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 6.60 4.5 2013E 2.3 14.3 5.2 1.7 20. equivalent to 173.5 18.332 2.379 26.72 1.7 24.7 3.266 63 2011A 596 3.4 7.1 972 22.5 2014E 6.4 0.1 (14.2 712 6.299 31.001 2.174 6.665 3.2 (139) (189) 955 15.br/ri Launches (R$ billion).458 1.7 3.25 BVPS 6.0 P/CE 6.358 4.147 7.6 824 31. The company is controlled by its founder.422 9.6 25.198 5.727 2.63 3.5 0.67 0.131 7.690 3.931 22.992 1.4 1.7 ROE (%) 22.8 1.397 37.0% Free Float 66.0) 13.7 5.7 1.4 22.4 1.32 0.6 2011A 2.3 FV/Revenue 1.6 1.707 Net Debt/EBITDA 1.7 2.3 28.145 1.7 (93) (50) 322 (29. Balance Sheet and CF Statement.1 581 27.4 1.30 5.468 6.4 1.4) 13.8 18.0 (16.5 17.2 6.50 0.842 3.8 3.27 MRV is the largest Brazilian real estate developer and builder in the low-income residential segment in terms of number of units developed.1) 762 (7.8 9.075 54 2014E 82 3. who has 33% of the company.2 18.286 1.909 1.2 1.3 6.4 989 (1.0 1. the company has developed strong capabilities that enable it to profitably operate in the low-income segment.2 (69) (94) 478 12.030 (64) 966 0 (816) (239) 98 2011A (11) 0 (885) (420) (18) (438) 0 477 (113) 45 2012E (11) 0 (373) (40) (90) (130) 0 (277) (81) (25) 2013E (12) 0 (368) 68 (31) 37 0 37 (106) 41 2014E (13) 0 24 515 (32) 483 0 (408) (120) 49 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 1.6 1.29 1.8 Net Debt/Equity 0.9 6.9 1.17 0.7 (179) (96) 620 (18.5 1.9 8.9 21.021 609 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E Net Debt 1.mrv.069 4.2 8.4 520 (10.0 18.2 Capex/Revenue (%) 0.930 2.4 33.2 3.677 532 2012E 132 5.939 1.1 billion.825 1.7 666 28.1 18.9 31.5 1.202 1. as of September 2012 Rubens Menin Teixeira de Souza 33.515 1.00 DPS 0.8 5.4) 1.22 0.015 1.4 7.99 4.2 6.63 2011 2012e 2013e 2014e Contracted Sales (R$ billion).436 7.0 1.8 23.266 1.8 1.758 3.5 1.2 4.9 1.990 7.0 24.5 0.482) (704) (31) (734) 0 799 (190) 76 2012E (21) 0 (718) (77) (173) (250) 0 (534) (155) (47) 2013E (24) 0 (718) 132 (60) 73 0 73 (207) 81 2014E (26) 0 48 1.50 2011 2012e 2013e 2014e Shareholder Structure.4 8.5 31.503 1.560 1.097 105 2014E 161 6.1 24.577 4.4 23.368 10.0 8.6 15.423 2.5) 21. the potential sales value of MRV's land bank was R$21.918 1.649 2.1 17.884 1.2 1.3 1.3 5.7) 21.5 18.105 831 979 997 560 Capital Employed 5.9 R$ 2012E 4. As of 3Q12.2 FCF Yield (%) Div Yield (%) PER SHARE DATA 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 1.308 10.3 1.6 4.261 2.3 8.2 1.8 17.60 5.9 29.2 (74) (51) 454 24.2 P/BV 1.333 1.32 4.01 10.117 5. 2011-14E 5.668 641 32 LT Debt 2013E 5.4 0.3 17.8 18.514 1. 163 .143 994 1.318 2.422 9.8 1.183 5.90 5.2 0.508 2.609 14.911 1.7 3.520 2.8 1.299 29.4 952 24.0% Sources for all charts and tables: Company reports and Santander estimates.40 4.2 22.7 16.7 3.9 5.3 5.0 ROCE (%) 18.965 4.5 1.81 7.162 9.com.550 2.301 3.715 24.8 22.43 0.999 3.8 15.7 996 4.8 23.427 284 2012E 68 2.461 2.2 Dividend Payout (%) 29.2 FV/EBIT 7.24 0.686 4.848 3.40 0.2 15.8 3. Key Personnel: Rubens Menin Teixeira (CEO).0) (4.4 23.501 1.5 0.856 26.0 FINANCIAL RATIOS Int Cover (%) 3.

As a result.A. Multiplan’s high-quality malls are able to attract solid customer traffic and. we did not find much room for further appreciation in the stock price. the stock is trading at a 2013E and 2014E P/FFO of 24x and 18x.3 Shares Outstanding .60 .  Earnings momentum to pick up. it counts on stable (87% of rents are fixed) and 3-Mth Avg.br in 4Q12 and another two in 3Q13) and a real increase in rental prices.29 52-Week Range (R$) 35. 5. Santander estimates and company reports.63. tenants.br prospects. we forecast Multiplan’s EBITDA to rise over 20% in 2013. Moreover. 120 100 80 60 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet. 164 .com.8 Price Performance (R$)  Organic growth offers the best risk-return proposition.60 DOWNGRADING RATING TO HOLD FROM BUY INTRODUCING YE2013 TARGET PRICE OF R$63. +5511-3012-5765 | pbalcao@santander. The consolidation process in the mall industry over the past few years not only fueled the assets’ prices but also left few good alternatives for Multiplan IBOVESPA 180 160 140 potential buyers. INFRA & RE MULTIPLAN HOLD CURRENT PRICE: R$59. as Float (%) opposed to retailers. and Park Shopping Campo Grande—and a commercial tower (Park Shopping Corporate). Company Statistics Bloomberg  Well positioned to face a lower GDP.18 consequently.com. we expect the company's earnings momentum to pick up in 2013.Mn 179 inflation-protected cash flow.60 / US$ 30.248 38.  Priced to perfection. Village Mall. This enables the company to sustain better Market Capitalization (US$ Mn) rents and lower vacancy rates simultaneously. Following a 60% surge in the last 12 months. CONSTRUCTION. players with solid development track records and an interesting project pipeline such as Multiplan have an important competitive advantage.30 TARGET PRICE: R$63. Even reducing WACC in light of the monetary easing and incorporating greenfield projects on top of the company’s current pipeline in our model.20  Investment Case: In our view.A. With Multiplan expanding its GLA base by 25% in 4Q12 with the delivery of three malls—Jundiai Shopping. respectively. +5511-3012-7414 | fpgama@santander. MULT3 BZ Current Price (01/03/13) R$ 59. in our opinion.60. In our opinion.30 / US$ 29. Daily Vol (US$ Mn) 6. REPLACING YE2012 TARGET PRICE OF R$48. which does not look attractive. Multiplan’s current valuation already Fabiola Gama* reflects the company’s healthy fundamentals and positive growth Brazil: Banco Santander S.29 Target Price (YE 2013) R$ 63. in our opinion.2013 Latin American Universe Book BRAZIL—CEMENT.  2013 Outlook: Benefiting from a busy delivery pipeline (four projects Pedro Balcão Reis* Brazil: Banco Santander S.

89 575.0 FV/Revenue 11.2 8.533 227 591 1.6 115.00 716.5 32.056) (534) 0 250 (81) (186) 2013E (83) 0 (65) 381 (420) (39) 0 (36) (91) 169 2014E (89) 0 (34) 554 (314) 240 0 (355) (125) 242 2011A (36) 0 (108) 106 (459) (352) 0 270 (45) (14) 2012E (37) 0 64 268 (542) (274) 0 129 (42) (95) 2013E (40) 0 (32) 186 (205) (19) 0 (17) (44) 83 2014E (41) 0 (16) 258 (146) 112 0 (165) (58) 113 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 558 1.8 44.4 10.7 (44) (100) 233 31.1 32 (118) 298 38.8 11.992 393 20 LT Debt 2013E 998 8.8 1. 2012E 647.99 9.0 44.124 4.7 734 28.0 9.2 63.1 19 (70) 178 42.1 5.5 55.2 29. 2012E 911.311 2.4 512 19.1 R$ 2012E 918 35.7 19.89 9.9 0.3 9.2 24.4 21.93 0.83 22.49 487.9) (0. and operators of shopping centers in Brazil.6 67.3 298 10.1 13.2 271 32.7 11.7 9.607 4.8 7.082 m2.1 67.1 1.622 4.548 Net Debt/EBITDA 1.0 18.4 20.248 25.7 20.156 819 476 595 550 373 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 444 1.2 16.0 2.1) (0.4 0.6 115.42 0.923 2.1 1.707 4.3 0.2 10.8 0.291 1.06 2011 534.2 3.8 10.2 17.81 2.752 427 1.6) (5.8 FV/EBITDA 16.565 5.66 1.2 453 28.30 DPS 0.7 (95) (214) 499 37.8 377 10.384 2.3 342 14.0 393 28.2 113.3 27.4 10.1 5.3 427 13.7 64.283 2.1 13. As of 3Q12.4 23.9 1.9 14.0 18.0 33.9 (100) (155) 363 11.3 23.846 354 1.4 17.99 1.1 US$ 2012E 472 16.245 1.4 8.217 61 2014E 13 588 5.9 P/CE 19. 165 .9 FINANCIAL RATIOS Net Debt Net Debt/Equity 0.109 3.258 5.0 12.1 11.79 0.4) 2.0 1.9 9.6 12.8%.9 9.3 701 20.647 534 58 2012E 4 179 2.0 2. GLA Evolution (‗000 m2).0 42.6) (4.3 63.512 334 1.3 1.976 2.25 0.2 618 21.8 7.2 71.0 35.3 2014E 1.7 0. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 676 11.99 0.0 894 1.1 25.9 2.44 10. Balance Sheet and CF Statement.3 2014E 581 19.9 2.4 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.2 0.089 1.5 70.4 (23) (71) 167 (6.2 302 15.099 25.006 5.2 14.6 9.1 581 28.8% Multiplan S.4 2013E 487 3.4 Dividend Payout (%) 34. with their own GLA of 420.06 2012e 2013e 2014e Shareholder Structure.666 161 513 1.61 2011 2012e 2013e 2014e Gross Rental Revenue (R$ million).4 Capex/Revenue (%) Int Cover (%) ROE (%) MARKET RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 23. The company is listed at the Level II of Bovespa and presents a free float of 38.2 3.6 36.8 0.99 17.0 2011A 404 15.8 876 19.3 509 29.25 0.368 862 43 2011A 298 557 1. boasting an average stake of 71% in its mall portfolio.3 0.7 20.1 27.23 0.8 64.02 2.3 2.980 267 1.0 58.4 61.2 113./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (60) 0 (180) 178 (769) (590) 0 452 (75) (24) 2012E (72) 0 125 522 (1.9 20.4 11.4 2.4 40.0 234 33.1% Free Folat 38.9 376 24.0 71.2 0.06 8.multiplan.7 11.190 1.5 58.1% Sources for all charts and tables: Company reports and Santander estimates.5 55.044 3.5 27.4 0.252 63 2013E 11 506 5.9 11.4 (46) (137) 325 9.7 70.2 0.7 0.79 19.6 40.002 109 2012E 8 357 4.9 2.398 2.3 26.588 1.434 3.32 16.173 5.3 17.9 (49) (76) 177 5.7 17.2 1.5 ROCE (%) 10.4 36.4 (8.70 0.490 134 711 1.3 11.51 0.9 808 30.49 P/BV FCF Yield (%) Div Yield (%) PER SHARE DATA BVPS Multiplan Empreendimentos Imobiliários S/A is one of the leading developers.2 (9.3 28.744 1.MULTIPLAN Financial Highlights: P&L.45 0.3 2.0 12.8 14.7 34. + Peres 32.2) 35.422 3.4 897 28.205 849 237 622 574 387 Capital Employed 3.6 FV/EBIT 19.2 13. the company held interest in 14 malls.625 159 683 1.0 42.36 381.1 25.4) 2.645 626 31 2013E 5 241 2.3 261 11.com.6 61.463 2. owners.A.2 10.br/ri Avg.8 342 17.9 36.9 573 13. 29. Key Personnel: José Isaac Peres (CEO) and Armando d’Almeida Neto (CFO and IR) Web: www.1 26.28 446.783 579 29 2014E 6 268 2.2 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 1.1 0.4 9.1 0.8 418 22.9 34. as of March 2012 Ontario Inc.2 23.0 9.2 23.

2013 Latin American Universe Book

BRAZIL—FINANCIAL SERVICES

MULTIPLUS

BUY
CURRENT PRICE: R$48.46
TARGET PRICE: R$56.00

RAISING YE2013 TARGET PRICE TO R$56.00 FROM R$53.00
 Investment Case: Multiplus is a market leader with a unique
business model that offers a number of positives, which, in our view,
justify its high P/E multiples. Positives include (i) strong drivers for its
top-line revenue, (ii) low capex and capital needs, (iii) scalable
business favoring operating leverage, (iv) cash cow company with
high margins and returns, (v) the loyalty service segment in Brazil is
still in its early stages, and (vi) these factors lead to high dividend

Henrique Navarro*
Brazil: Banco Santander S.A.
+5511-3012-5756 | havieira@santander.com.br

Boris Molina
New York: Santander Investment Securities Inc.
+1-212-350-3977 | bmolina@santander.us

Renata Cabral*
Brazil: Banco Santander S.A.
+5511-3012-5731 | rcabral@santander.com.br

payout ratio.

2013 Outlook: We do not view the LanPass deal as a threat. We
expect the Multiplus Lanpass deal to happen in 2013 at a reasonable
price for minorities. Multiplus is piling cash and under the current low
level of interest rates in Brazil; this reduces the value of the company
for valuation purposes (i.e., the return on invested portfolio is below
WACC). Lan Airlines lost its investment grade after it acquired TAM
Airlines and formed LATAM Airlines. A partial sale of its Multiplus
stake would, we believe, help the company strengthen its balance
sheet and regain its investment grade.

Prismah could add great value to the firm. Prismah (the JV with

Company Statistics

AIMIA) is believed to have scale to efficiently serve clients during

Bloomberg

2013-14. Although not offered as official guidance, management

MPLU3 BZ

Current Price (01/03/13)

R$ 48.46 / US$ 23.80

Target Price (YE 2013)

R$ 56.00 / US$ 25.63

stated that it believes this JV could come to represent, in a best-case

52-Week Range (R$)

scenario, around 10-15% of net revenue (gross billings of points) in

Market Capitalization (US$ Mn)

the long term for Multiplus. We believe this could be an additional
source of revenue that is not currently in investors’ radar.

 Bill PL 4015/2012 poses regulatory risk. The bill would forbid the

3,839

Float (%)

26.9

3-Mth Avg. Daily Vol (US$ Mn)

7.5

Shares Outstanding - Mn

161

Price Performance (R$)
Multiplus

expiration of loyalty program points and is currently under

160

consideration by different commissions. Multiplus’s argument against

140

the bill hinges on two points: (i) allowing points to expire is done by

30.07 - 50.25

IBOVESPA

120

all of its international peers; and (ii) ending the practice will lead to
100

higher costs being transferred to clients. Nevertheless, we believe
that if the bill is passed, Multiplus will try to pass through the loss in
breakage revenue to its pricing structure (i.e., requiring more points
from banks, which in turn might pass this through to clients).

80
60

J-11

M-11

A-11

D-11

A-12

A-12

D-12

Sources: FactSet, Santander estimates and company reports.

166

MULTIPLUS
Financial Highlights: P&L and Balance Sheet, 2011–14E in Millions
INCOME STATEMENT
Revenue
Grow th (%)
EBITDA
Grow th (%)
Operating Profit
Grow th (%)
Profit before Taxes
Taxes
Minorities
Net Profit
Grow th (%)

2011A
1,373
315
310
405
(131)
274
-

BALANCE SHEET
2011A
Cash and Equivalents
890
Accounts Receivable
147
Intangible and Deferred Assets
Tangible Assets
1
Total Assets
1,308
ST Debt
LT Debt
Equity
259
Net Debt (Cash)
(890)
CASH FLOW
Changes in Working Capital
Operating Cash Flow
Capital Expenditures
Change in Debt
Free Cash Flow to Equity
Cash Dividends
Capital Increase (Decrease)

2011A
(861)
-

OPERATING RATIOS
EBITDA Margin
Effective Tax Rate
Net Margin
Net Debt / EBITDA
Net Debt / Equity

2011A
0.2
32.3
(282.2)
(343.3)

FCFE / Revenues

-

R$
2012E
1,553
13.1
266
(15.5)
259
(16.5)
371
(127)
245
(10.8)

Company Description

2013E
1,882
21.2
367
37.7
358
38.1
466
(159)
307
25.6

2014E
2,248
19.4
472
28.9
462
29.1
571
(195)
377
22.6

2011A
820
188
185
242
(78)
164
-

US$
2012E
818
(0.2)
140
(25.5)
136
(26.3)
196
(67)
129
(21.3)

2012E
1,207
149
2
1,578
66
(1,207)

2013E
1,289
150
2
1,637
66
(1,289)

2014E
1,369
150
2
1,708
66
(1,369)

2011A
494
82
1
727
144
(494)

2012E
617
76
1
806
34
(617)

2013E
590
69
1
749
30
(590)

2014E
595
65
1
743
29
(595)

2012E
(245)
-

2013E
(307)
-

2014E
(377)
-

2011A
(514)
-

2012E
(129)
-

2013E
(146)
-

2014E
(167)
-

2012E
2013E
2014E
0.2
0.2
0.2
34.1
34.1
34.1
(453.3)
(351.7)
(289.8)
(1,818.3) (1,942.3) (2,062.8)

2011A
0.2
32.3
(282.2)
(382.5)

-

-

-

-

2013E
897
9.6
175
24.5
170
24.9
222
(76)
146
13.5

2014E
996
11.1
209
19.9
205
20.1
253
(86)
167
14.1

2012E
2013E
2014E
0.2
0.2
0.2
34.1
34.1
34.1
(453.3)
(351.7)
(289.8)
(1,904.7) (1,930.3) (2,062.8)
-

-

-

ROAA

20.2

17.0

19.1

22.5

21.2

17.0

19.1

22.5

ROAE

53.9

150.3

462.7

567.4

55.0

146.1

462.5

567.4

Payout

-

89.2

125.6

122.6

-

76.4

120.5

123.4

MARKET RATIOS

2011A

2012E

2013E

2014E

2011A

2012E

2013E

2014E

P/E

19.0

31.5

25.4

20.8

17.7

30.5

24.5

20.4

P/CE

19.3

32.4

26.2

21.3

18.0

31.4

25.2

20.9

FV/EBITDA

28.6

33.9

24.6

19.1

28.6

35.5

25.1

18.6

2.2

3.2

2.5

3.3

2.2

1.9

2.6

3.4

34.9

34.9

34.9

34.9

34.9

34.9

34.9

34.9

9.5

2.7

3.4

4.2

9.5

2.6

3.2

4.2

2011A

2012E

2013E

2014E

2011A

2012E

2013E

2014E

FCFE Yield (%)
P/BV
Div Yield (%)
PER SHARE DATA
EPS

1.70

1.52

1.90

2.34

1.02

0.80

0.91

1.03

CEPS

-

-

-

-

-

-

-

-

FCFPS

-

-

-

-

-

-

-

-

BVPS

1.61

0.41

0.41

0.41

0.89

0.21

0.19

0.18

DPS

5.34

1.52

1.90

2.34

3.19

0.80

0.91

1.03

Multiplus was created in 2009 as a business unit of Tam
Group, having as its backbone the Tam Fidelidade loyalty
program, which was created in 1993. Multiplus became
independent in 2009 and held its IPO in 2010. The
company operates as a loyalty program coalition network
and has 207 partnerships through which its 10.1 million
members (as of 2Q12, which makes it the leading loyalty
coalition network in Brazil) may accrue points. The
company is still a subsidiary of Tam Group, which owns
73% of its shares.

Key Personnel: Eduardo Campozana Gouveia (CEO),
Sandoval Martins Pereira (CFO) and Ronald Domingues
(IRM)
Web: http://multiplus.riweb.com.br/Multiplus/

Revenue Breakdown, 2012E
Points Sale
- TAM
Others
13.9%
0.0%

Breakage
14.7%

Points Sale
- Others
71.4%

Costs Breakdown, 2012E
Other
redemptions
3.6%

Air tickets
96.4%

Shareholder Structure, 3Q12

Free float
26.8%

Others,
Treasury
0.0%

Controlling
Shareholder
- TAM
73.2%

Sources for all charts and tables: Company reports and Santander
estimates.

167

2013 Latin American Universe Book

BRAZIL—RETAIL & CONSUMER GOODS

NATURA

HOLD
CURRENT PRICE: R$59.40
TARGET PRICE: R$65.00

RAISING YE2013 TARGET PRICE TO R$65.00 FROM R$61.00

Investment Case: Natura’s business momentum remains strong, as

Tobias Stingelin*, CFA

the company continues to successfully execute its plan to drive

Brazil: Banco Santander S.A.
+5511-3553-0699 | tstingelin@santander.com.br

productivity, and consequently top- and bottom-line growth (16-17%
CAGR 2012-14E), even in a more challenging competitive
environment. The turnaround in its international operations is
happening fast, and we believe that the Biosphera project is
transformational and could further reinvigorate growth. Our Hold

Ronaldo Kasinsky*
Brazil: Banco Santander S.A.
+5511-3553-2396 | rkasinsky@santander.com.br

Bruno Soares Taveira*
Brazil: Banco Santander S.A.
+5511-3553-9602 | btaveira@santander.com.br

rating on the stock is solely based on a relatively lower expected TSR
versus some of its consumption peers.

2013 Outlook: We expect Natura’s focus on productivity to continue
to pay off, resulting in 4% YoY growth in 2013 (in Brazil). This,
combined with nearly 10% channel growth, should result in 14% topline growth domestically. Internationally, we anticipate 30% top-line
growth, as the company’s operations continue to mature. Some
operating leverage is expected to drive a modest 50-bp EBITDA
margin expansion, ultimately driving 18% EPS growth YoY.

Investment positives. In our view, investment positives include (1)
solid double-digit EPS growth (17% CAGR 2012-14E), (2) high

Company Statistics

returns (48% ROIC), (3) high dividend yield (close to 4%), (4)

Bloomberg

international operations maturing quickly, (5) benefits of investments

Target Price (YE 2013)

R$ 65.00 / US$ 28.89

52-Week Range (R$)

Biosphera project, whose successful implementation could be

Market Capitalization (US$ Mn)

36.90 - 59.40
12,493

Float (%)

39.3

3-Mth Avg. Daily Vol (US$ Mn)

22.0

Shares Outstanding - Mn

428

Investment concerns. In our view, investment concerns include (1)
competition, which remains fierce, including that from Boticário,

Price Performance (R$)
Natura

whose presence in the direct sales channel increased substantially,

130

(2) the stock trading well above historical multiples, (3) possible

120

changes in taxation (i.e., the government tried twice already to

110

change the industry’s tax structure), and (4) a secondary offering.

R$ 59.40 / US$ 29.18

in logistics and in systems as they continue to mature, and (6) the
transformational in the medium term, in our view.

NATU3 BZ

Current Price (01/03/13)

IBOVESPA

100
90

80

Valuation. We are raising our YE2013 target price to R$65 from

70

R$61 based on a 2013E P/E of 20.0x (20%) and a DCF using a cost

60

of equity in BRL of 9.5% (80%).

J-11

M-11

A-11

D-11

A-12

A-12

D-12

Sources: FactSet, Santander estimates and company reports.

168

NATURA
Financial Highlights: P&L, Balance Sheet and CF Statement, 2011–14E in Millions

Company Description

P&L ACCOUNT
Total Revenue
YoY change (%)
Gross Profit
YoY change (%)
EBITDA
YoY change (%)
As % of Revenue
Operating Income
YoY change (%)
As % of Revenue
Financial Results
Taxes
Net Profit
YoY change (%)
As % of Revenue

2011A
5,591
8.9
3,925
9.6
1,424
13.3
25.5
1,314
12.6
23.5
(77)
(407)
830
11.6
14.9

R$
2012E
6,415
14.7
4,565
16.3
1,598
12.2
24.9
1,455
10.7
22.7
(75)
(440)
941
13.3
14.7

CASH FLOW
Depreciation & Amortization
Other Noncash Items
Changes in Working Capital
Operating Cash Flow
Capital Expenditures
Free Cash Flow
Other Invest./(Divestments)
Change in Debt
Dividends
Capital Increases/Other

2011A
(110)
(151)
(66)
1,025
346
429
495
(763)
0

2012E
(142)
(138)
(77)
1,145
348
709
1,021
(854)
0

2013E
(181)
(19)
(141)
1,168
447
749
150
(904)
0

2014E
(189)
(79)
(160)
1,389
514
847
0
(943)
0

2011A
(66)
(90)
(40)
612
207
256
296
(455)
0

2012E
(73)
(70)
(39)
585
178
362
521
(437)
0

2013E
(83)
(9)
(65)
535
204
343
69
(414)
0

2014E
(82)
(34)
(70)
604
224
368
0
(410)
0

BALANCE SHEET
Cash and Equivalents
Current Assets
Fixed Assets
Total Assets
Current Liabilities
Long-Term Liabilities
Shareholders' Equity
Total Financial Debt
ST Debt

2011A
516
2,203
963
3,793
1,275
1,268
1,250
1,187
169

2012E
1,410
3,283
1,158
5,242
2,387
1,468
1,387
2,207
1,136

2013E
1,338
3,465
1,424
5,798
2,238
1,968
1,592
2,357
786

2014E
1,112
3,560
1,749
6,355
2,457
1,968
1,930
2,357
786

2011A
275
1,175
513
2,022
680
676
666
633
90

2012E
665
1,549
546
2,473
1,126
692
654
1,041
536

2013E
595
1,540
633
2,577
995
875
708
1,048
349

2014E
473
1,515
744
2,705
1,046
838
821
1,003
334

1,018

1,072

1,572

1,572

543

505

698

669

2011A

2012E

2013E

2014E

2011A

2012E

2013E

2014E

671

798

1,019

1,245

358

376

453

530

Capital Employed

2,518

2,855

3,560

3,898

1,342

1,347

1,582

1,659

Net Debt/EBITDA

0.5

0.5

0.5

0.6

0.4

0.5

0.5

0.6

Net Debt/Equity

0.5

0.6

0.6

0.6

0.6

0.6

0.6

0.6

(6.2)

(5.4)

(6.0)

(6.0)

(6.2)

(5.4)

(6.0)

(6.0)

LT Debt
FINANCIAL RATIOS
Net Debt

Capex/Revenue (%)
Int Cover (%)

2013E
7,446
16.1
5,298
16.1
1,894
18.5
25.4
1,713
17.7
23.0
(69)
(535)
1,110
17.9
14.9

2014E
8,569
15.1
6,095
15.0
2,156
13.8
25.2
1,966
14.8
22.9
(76)
(610)
1,281
15.4
14.9

2011A
3,338
14.4
2,343
15.2
850
19.1
25.5
785
18.3
23.5
(46)
(243)
496
17.3
14.9

US$
2012E
3,277
(1.8)
2,332
(0.5)
816
(4.0)
24.9
744
(5.3)
22.7
(38)
(225)
481
(3.0)
14.7

2013E
3,408
4.0
2,425
4.0
867
6.2
25.4
784
5.5
23.0
(31)
(245)
508
5.7
14.9

2014E
3,726
9.3
2,650
9.3
937
8.1
25.2
855
9.0
22.9
(33)
(265)
557
9.6
14.9

7.1

7.3

10.8

12.3

7.1

7.3

10.8

12.3

102.6

102.9

96.1

85.0

107.8

88.2

92.2

85.5

ROCE (%)

52.2

51.0

48.1

50.4

58.1

53.4

47.8

50.4

ROE (%)

66.4

67.8

69.7

66.4

74.0

71.1

69.3

66.4

Dividend Payout (%)

MARKET RATIOS

2011A

2012E

2013E

2014E

2011A

2012E

2013E

2014E

P/E

18.7

26.7

23.0

19.9

16.7

24.7

22.3

19.5

P/CE

16.5

23.2

19.8

17.3

14.7

21.4

19.2

17.0

FV/EBITDA

11.4

16.2

14.0

12.4

10.2

15.0

13.6

12.1

FV/EBIT

12.3

17.8

15.5

13.6

11.0

16.5

15.0

13.3

2.9

4.0

3.6

3.1

2.6

3.7

3.5

3.1

12.4

18.1

16.0

13.2

12.4

18.1

16.0

13.2

FCF Yield (%)

2.8

2.8

2.9

3.3

3.1

3.1

3.0

3.4

Div Yield (%)

4.9

3.4

3.5

3.7

5.5

3.7

3.7

3.8

FV/Revenue
P/BV

PER SHARE DATA

2011A

2012E

2013E

2014E

2011A

2012E

2013E

2014E

EPS

1.84

2.19

2.59

2.98

1.10

1.12

1.18

1.30

DPS

1.78

1.99

2.11

2.20

1.06

1.02

0.96

0.96

BVPS

2.91

3.23

3.71

4.50

1.55

1.52

1.65

1.91

Natura Cosméticos S.A. is one of the leading Brazilian
companies in the cosmetics, fragrances, and toiletries
market as well as in the direct sales sector, with a 23.2%
market share in its target market during the first half of
2012 (37.6% share in cosmetics and fragrances and
11.5% in toiletries). Founded in Brazil in 1969, the
company launched operations in Argentina, Chile, and
Peru in 1994. Natura currently operates in six Latin
American countries and France. As of 3Q12, the
company had a consolidated direct sales channel of
1,518,000 consultants. Shares are listed on the Novo
Mercado and the free float stands at 39%. The company
is also well known for its sustainability efforts.

Key Personnel: Antonio Seabra, Guilherme Leal &
Pedro Passos (Chairman), Alessandro Carlucci (CEO),
Roberto Pedote (CFO) and Fabio Cefaly (Investor
Relations Manager)
Web: www.natura.infoinvest.com.br

Sales by Region, 2011A
Consol.
Op.
6.0%

Implement
Op.
2.7%

Brazilian
Op.
91.0%

Industry Sales by Product, 2011A

Cosmetics
9.1%

B&S
9.0%

B&C Sun Care
5.1%
3.5%

Hair Care
22.1%

Men's
9.7%

Deodorants
11.0%

Skin Care
11.8%

Fragrances
16.6%

Shareholder Structure, 3Q12

Free Float
39.3%

Controlling
Group
59.9%

Sources for all charts and tables: Company reports and Santander
estimates.

169

2013 Latin American Universe Book

BRAZIL—HEALTH CARE

ODONTOPREV

UNDERPERFORM
CURRENT PRICE: R$11.21
TARGET PRICE: R$11.50

RAISING YE2013 TARGET PRICETO R$11.50 FROM R$10.50

Investment Thesis: We maintain our Underperform rating due to
ODPV3’s stretched valuation. Trading at a 2013E P/E of 26.1x and

Daniel Gewehr*

an implied FV of R$980/member, we believe positive fundamentals

Brazil: Banco Santander S.A.
+5511-3012-5787 | dhgewehr@santander.com.br

are priced in, and we recommend investors take profits. We continue

Bruno Giardino*, CFA

to view OdontoPrev as a premium player in the healthcare space,

Brazil: Banco Santander S.A.
+5511-3012-5914 | bgiardino@santander.com.br

combining a high return (2013E ROE of 32%), cash-flow generation
(2013E FCFE yield of 4%) and undisputable leadership in the fastgrowing Brazilian dental care industry (32% market share).

2013 Outlook: We expect OdontoPrev to post 15% YoY net revenue
growth in 2013, still more tilted to membership growth (+9% YoY)
than to the average ticket, although the contribution of the latter has
increased. We forecast EBITDA to increase 22%, also helped by a
150-bp margin expansion, to 27%. We are not including the jointventure with Banco do Brasil (BB) into our estimates, as we prefer to
see it as a free-option.

What‘s changed? Our estimates reflect the tougher economic
scenario, which results in less net formal jobs creation (as evidenced
by the lower-than-expected net addition in 3Q12). Consequently, we
cut our 2013E membership to 6.45 million (5% below consensus),
which resulted in a similar drop in our net revenue and EBITDA

Company Statistics
Bloomberg

ODPV3 BZ

estimates.

Current Price (01/03/13)

R$ 11.21 / US$ 5.51

What‘s embedded in the R$980/member multiple? Assuming a

Target Price (YE 2013)

R$ 11.50 / US$ 5.11

member reaches a 28% EBITDA margin, it should be worth R$445

Market Capitalization (US$ Mn)

(perpetuity of R$30 FCF/member). The remaining R$535 means, in

Float (%)

our view, that ~55% of OdontoPrev’s current valuation is based on

3-Mth Avg. Daily Vol (US$ Mn)

6.7

Shares Outstanding - Mn

531

52-Week Range (R$)

9.03 - 11.92
2,925
48.0

membership growth. Our YE2013 target price implies OdontoPrev
will grow membership at an average rate of 9% from 2012 to 2023,
and will achieve an EBITDA margin of 28% in the long term.

JV with BB: the next chapter‘s scenes. We believe that the IPO of
BB’s insurance arm could accelerate the JV’s settlement. We note,
however, that the outcome of this agreement carries an asymmetric

Price Performance (R$)
OdontoPrev

IBOVESPA

160
140

120
100

risk. In the event that the JV is cancelled (which we do not view as
80

likely), ODPV3 could potentially fall at a greater level than the
increase it would see if the JV is successfully settled.

60

j-11

m-11

a-11

d-11

a-12

a-12

d-12

Sources: FactSet, Santander estimates and company reports.

170

ODONTOPREV
Financial Highlights: P&L, Balance Sheet and CF Statement, 2011–14E in Millions

Company Description

P&L ACCOUNT
Total Revenue
YoY change (%)
Gross Profit
YoY change (%)
EBITDA
YoY change (%)
As % of Revenue
Operating Income
YoY change (%)
As % of Revenue
Financial Results
Taxes
Net Profit
YoY change (%)
As % of Revenue

2011A
835
19.7
419
18.8
208
35.9
24.9
180
45.8
21.6
18
(51)
145
20.1
17.4

R$
2012E
960
14.9
500
19.4
244
17.3
25.5
233
28.9
24.2
14
(69)
174
19.9
18.1

CASH FLOW
Depreciation & Amortization
Other Noncash Items
Changes in Working Capital
Operating Cash Flow
Capital Expenditures
Free Cash Flow
Other Invest./(Divestments)
Change in Debt
Dividends
Capital Increases/Other

2011A
(6)
21
24
213
(9)
174
0
(86)
0

2012E
(5)
10
42
282
(13)
211
0
(225)
0

2013E
(7)
(7)
1
294
(13)
211
0
(228)
0

2014E
(9)
(8)
2
354
(17)
256
0
(272)
0

2011A
(4)
13
14
127
(5)
104
0
(51)
0

2012E
(3)
5
21
144
(6)
108
0
(115)
0

2013E
(3)
(3)
0
135
(6)
97
0
(104)
0

2014E
(4)
(4)
1
154
(7)
111
0
(118)
0

BALANCE SHEET
Cash and Equivalents
Current Assets
Fixed Assets
Total Assets
Current Liabilities
Long-Term Liabilities
Shareholders' Equity
Total Financial Debt
ST Debt

2011A
208
285
528
993
152
78
763
0
0

2012E
195
286
534
989
176
106
706
0
0

2013E
190
295
541
1,004
191
106
706
0
0

2014E
184
306
548
1,022
209
106
706
0
0

2011A
111
152
281
530
81
41
407
0
0

2012E
92
135
252
466
83
50
333
0
0

2013E
84
131
240
446
85
47
314
0
0

2014E
78
130
233
435
89
45
300
0
0

LT Debt
FINANCIAL RATIOS
Net Debt

2013E
1,104
15.0
587
17.4
298
21.8
27.0
286
23.1
26.0
11
(62)
228
31.1
20.7

2014E
1,284
16.3
689
17.4
357
20.1
27.8
343
19.7
26.7
10
(73)
272
19.1
21.2

2011A
499
25.8
250
24.8
124
42.8
24.9
108
53.3
21.6
11
(31)
87
26.2
17.4

US$
2012E
490
(1.7)
255
2.2
125
0.4
25.5
119
10.3
24.2
7
(35)
89
2.6
18.1

2013E
505
3.0
269
5.2
136
9.1
27.0
131
10.3
26.0
5
(29)
104
17.4
20.7

2014E
558
10.5
300
11.6
155
14.1
27.8
149
13.7
26.7
5
(32)
118
13.2
21.2

0

0

0

0

0

0

0

0

2011A

2012E

2013E

2014E

2011A

2012E

2013E

2014E
(78)

(208)

(195)

(190)

(184)

(111)

(92)

(84)

Capital Employed

556

512

518

523

297

242

230

223

Net Debt/EBITDA

(1.0)

(0.8)

(0.6)

(0.5)

(0.9)

(0.7)

(0.6)

(0.5)

Net Debt/Equity

(0.3)

(0.3)

(0.3)

(0.3)

(0.3)

(0.3)

(0.3)

(0.3)

1.1

1.3

1.2

1.3

1.1

1.3

1.2

1.3

Int Cover (%)

24.6

4.2

2.4

2.5

24.6

4.2

2.4

2.5

Dividend Payout (%)

70.9

154.8

131.1

119.1

74.5

132.6

125.6

119.3

ROCE (%)

23.2

32.0

43.3

51.6

26.9

34.2

43.2

51.6

ROE (%)

19.1

24.7

32.3

38.5

21.2

25.8

32.3

38.5

Capex/Revenue (%)

MARKET RATIOS

2011A

2012E

2013E

2014E

2011A

2012E

2013E

2014E

P/E

10.8

32.7

26.1

21.9

9.6

30.2

25.3

21.4

P/CE

10.4

31.8

25.3

21.2

9.3

29.4

24.6

20.7

FV/EBITDA

6.6

22.6

19.4

16.2

5.9

20.8

18.9

15.8

FV/EBIT

7.6

23.7

20.2

16.9

6.8

21.9

19.6

16.5

FV/Revenue

1.6

5.7

5.2

4.5

1.5

5.3

5.1

4.4

P/BV

2.1

8.1

8.4

8.4

2.1

8.1

8.4

8.4

11.1

3.7

3.5

4.3

12.4

4.0

3.7

4.4

FCF Yield (%)
Div Yield (%)

5.5

3.9

3.8

4.6

6.1

4.3

3.9

4.7

2011A

2012E

2013E

2014E

2011A

2012E

2013E

2014E

EPS

0.82

0.33

0.43

0.51

0.49

0.17

0.20

0.22

DPS

0.90

0.19

0.43

0.51

0.54

0.10

0.20

0.22

BVPS

4.31

1.33

1.33

1.33

2.30

0.63

0.59

0.57

PER SHARE DATA

Founded in 1987 by a group of dentists, OdontoPrev is
the largest dental-care plan provider in Brazil, with a
membership of 5.839 million, leading to a 32.4% share in
of Brazil’s dental market. OdontoPrev’s network consists
of more than 25,000 dentists operating in more than
2,000 cities, and its main product is a risk-based plan
(pre-paid plan). In 9M2012, net sales, EBITDA, and net
income reached R$707 million, R$178 million, and R$122
million, respectively. In August 2010, the company
announced a joint venture with Banco do Brasil that aims
to serve dental plans to the bank’s employees and their
dependents, as well as to explore dental plan sales
through the bank's distribution channels.

Key Personnel: Randal Luiz Zanetti (CEO) and José
Roberto Borges Pacheco (IR Officer)
Web: www.odontoprev.com.br/ir

Membership (000 Beneficiaries), 2008-3Q12

5,533

5,929

4,978

2,460

2008

2,711

2009

2010

2011

3Q12

Market Share Beneficiaries, 3Q12

Amil
9.4%

Interodonto
7.2%

OdontoPrev
32.4%

Others
51.0%

Shareholder Structure, 2012E

Free-float
48.1%

Mgmt.
0.8%

Controlling
Group
51.1%

Sources for all charts and tables: Company reports and Santander
estimates.

171

2013 Latin American Universe Book

BRAZIL—OIL, GAS & PETROCHEMICALS

OGX

HOLD
CURRENT PRICE: R$4.90
TARGET PRICE: R$5.40

LOWERING YE2013 TARGET PRICE TO R$5.40 FROM R$9.50

Christian Audi

Investment Case: We maintain our cautious view on OGX, and
highlight the following challenges: (i) improving execution in order to
deliver production growth; (ii) advancing its development campaign to
prove the commerciality of several fields, and therefore booking

New York: Santander Investment Securities Inc.
+1-212-350-3991 | caudi@santander.us

Vicente Falanga Neto*
Brazil: Banco Santander S.A.
+5511-3012-6042 | vneto@santander.com.br

reserves; and (iii) demonstrating capital discipline to preserve its cash
and guarantee funding for the development of new ventures.

2013 Outlook: We expect intensive newsflow in 2013 for OGX, with
the company aiming to reach the following milestones: (i) conclude
the drilling of wells in the Carambola and pipeline regions, declaring
the commerciality of several areas within the Campos basin;
(ii) successfully advance its development campaign by starting
production in the Tubarão Martelo field on time (expected by 4Q13);
(iii) certify its reserves/resources once again in order to earmark its
assets (expected by mid-2013) and increase investors’ confidence;
and (iv) make advancements in other exploratory campaigns using
capital discipline, preserving availability of sufficient funds.

More conservative premises adopted. Our price-target adjustment

Company Statistics

takes a more conservative approach; we reduced average

Bloomberg

productivity per barrel estimates from 6 kboepd to 5 kboepd in all

Current Price (01/03/13)

R$ 4.90 / US$ 2.41

fields. We also excluded Vesuvio from our valuation given OGX’s

Target Price (YE 2013)

R$ 5.40 / US$ 2.57

lack of disclosure on a development plan for that region. We expect

Market Capitalization (US$ Mn)

average production of 22 kboepd in 2013, ending the year with an

Float (%)

estimated 34 kboepd.

Keep an eye on cash balance. OGX believes it will reach year-end

OGXP3 BZ

52-Week Range (R$)

the company would run out of cash in 2014, according to our

7,781
38.0

3-Mth Avg. Daily Vol (US$ Mn)

77.7

Shares Outstanding - Mn

3,233

Price Performance (R$)

2013 with a cash position of around US$300-400 million, a very tight
situation in our view. If Santos’s development campaign advances,

4.25 - 18.21

OGX

IBOVESPA

120
100

estimate, for which we expect three main sources of funding:

80

(i) securitization of future oil barrels; (ii) exercise of a US$1 billion put

60

against the controlling shareholder; and (iii) a potential farm-out.

40
20

J-11

M-11

A-11

D-11

A-12

A-12

D-12

Sources: FactSet, Santander estimates and company reports.

172

OGX
Financial Highlights: P&L, Balance Sheet and CF Statement, 2011–14E in Millions

Company Description

P&L ACCOUNT
Total Revenue
YoY change (%)
Gross Profit
YoY change (%)
EBITDA
YoY change (%)
As % of Revenue
Operating Income
YoY change (%)
As % of Revenue
Financial Results
Taxes
Net Profit
YoY change (%)
As % of Revenue

2011A
0
n/m
0
n/m
(734)
(76.1)
n/m
(734)
(76.1)
n/m
6
218
(510)
(227.8)
n/m

R$
2012E
252
n/m
169
n/m
(967)
(31.7)
(384.0)
(995)
(35.6)
(395.4)
(627)
0
(1,623)
(218.2)
(644.6)

CASH FLOW
Depreciation & Amortization
Other Noncash Items
Changes in Working Capital
Operating Cash Flow
Capital Expenditures
Free Cash Flow
Other Invest./(Divestments)
Change in Debt
Dividends
Capital Increases/Other

2011A
0
2,356
(49)
1,826
(2,715)
828
(2,533)
4,252
0
(1)

2012E
1
0
27
(1,167)
(2,936)
(1,111)
18
2,910
0
0

2013E
24
0
(317)
(550)
(1,602)
(2,197)
57
0
0
0

2014E
97
0
91
1,301
(1,494)
(176)
156
0
0
0

2011A
0
1,407
(29)
1,090
(1,621)
495
(1,512)
2,539
0
(1)

2012E
0
0
14
(602)
(1,513)
(573)
9
1,500
0
0

2013E
12
0
(155)
(269)
(781)
(1,072)
28
0
0
0

2014E
45
0
42
605
(695)
(82)
73
0
0
0

BALANCE SHEET
Cash and Equivalents
Current Assets
Fixed Assets
Total Assets
Current Liabilities
Long-Term Liabilities
Shareholders' Equity
Total Financial Debt
ST Debt

2011A
5,459
5,964
7,686
14,350
719
4,762
8,815
4,772
22

2012E
4,778
5,263
11,463
17,490
722
8,292
8,349
8,279
0

2013E
2,645
3,268
13,301
17,352
542
8,494
8,290
8,481
0

2014E
2,532
2,941
14,858
18,601
416
8,696
9,601
8,683
0

2011A
2,904
3,172
4,088
7,633
383
2,533
4,689
2,539
12

2012E
2,331
2,567
5,592
8,532
352
4,045
4,073
4,039
0

2013E
1,259
1,556
6,334
8,263
258
4,045
3,947
4,039
0

2014E
1,178
1,368
6,911
8,652
194
4,045
4,465
4,039
0

LT Debt
FINANCIAL RATIOS
Net Debt

2013E
1,290
412.6
914
441.5
220
n/m
17.1
53
n/m
4.1
(453)
0
(400)
75.3
(31.0)

2014E
3,315
156.9
2,258
147.1
2,396
988.1
72.3
1,930
3,556.4
58.2
(611)
(574)
745
n/m
22.5

2011A
0
n/m
0
n/m
(438)
(84.9)
n/m
(438)
(84.9)
n/m
4
130
(304)
(244.4)
n/m

US$
2012E
130
n/m
87
n/m
(498)
(13.7)
(384.0)
(513)
(17.1)
(395.4)
(323)
0
(836)
(174.7)
(644.6)

2013E
629
385.1
446
412.5
107
n/m
17.1
26
n/m
4.1
(221)
0
(195)
76.6
(31.0)

2014E
1,542
145.0
1,050
135.6
1,114
937.5
72.3
898
3,386.3
58.2
(284)
(267)
347
n/m
22.5

4,750

8,279

8,481

8,683

2,527

4,039

4,039

4,039

2011A

2012E

2013E

2014E

2011A

2012E

2013E

2014E

(686)

3,501

5,836

6,151

(365)

1,708

2,779

2,861

Capital Employed

13,587

16,628

16,636

17,947

7,227

8,111

7,922

8,347

Net Debt/EBITDA

0.9

(3.6)

26.5

2.6

0.8

(3.4)

25.9

2.6

(0.1)

0.4

0.7

0.6

(0.1)

0.4

0.7

0.6

n/m

1,166.2

124.1

45.1

n/m

1,166.2

124.1

45.1

(0.3)

(0.9)

0.3

3.2

(0.3)

(0.9)

0.3

3.2

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0
6.4

Net Debt/Equity
Capex/Revenue (%)
Int Cover (%)
Dividend Payout (%)
ROCE (%)

(3.8)

(6.0)

0.3

6.4

(4.4)

(6.3)

0.3

ROE (%)

(5.8)

(19.4)

(4.8)

7.8

(6.4)

(20.4)

(4.8)

7.8

MARKET RATIOS

2011A

2012E

2013E

2014E

2011A

2012E

2013E

2014E

P/E

(86.4)

(8.7)

(39.6)

21.3

(77.0)

(8.3)

(38.6)

21.3

P/CE

(86.4)

(8.7)

(37.3)

24.5

(77.0)

(8.3)

(36.4)

24.5

FV/EBITDA

(59.4)

(18.5)

98.7

9.1

(53.0)

(17.5)

96.4

9.1

FV/EBIT

(59.4)

(18.0)

411.6

11.3

(53.0)

(17.0)

401.8

11.3
6.6

FV/Revenue

-

71.0

16.8

6.6

-

67.2

16.4

P/BV

5.0

1.7

1.9

1.7

5.0

1.7

1.9

1.7

FCF Yield (%)

1.9

(7.8)

(13.9)

(1.1)

2.1

(8.3)

(14.2)

(1.1)

Div Yield (%)

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

PER SHARE DATA

2011A

2012E

2013E

2014E

2011A

2012E

2013E

2014E

EPS

(00.15)

(00.37)

(00.08)

0.34

(00.09)

(00.19)

(00.04)

0.16

DPS

0

0

0

0

0

0

0

0

2.73

2.58

2.56

2.97

1.45

1.26

1.22

1.38

BVPS

OGX is the largest non-government controlled upstream
player in Brazil (measured by exploratory campaign), with
an exploration portfolio composed of 34 blocks in the
Campos, Santos, Espírito-Santo, Pará-Maranhão,
Parnaiba and Colombia basins. According to DeGolyer
and MacNaughton’s (D&M) latest report, OGX’s
resources are estimated at 3 billion boe for 3C contingent
resources, 5.5 billion for risked prospective resources, 0.5
billion for risked delineation resources and 1 billion for
potential resources. OGX held its IPO in June 2008 and is
controlled (62%) by Centennial Asset Mining Fund LLC.
OGX is a part of the EBX group, led by the Brazilian
entrepreneur Eike Batista, who is also the controller of
MMX, MPX, LLX and OSX. It has only one type of share
(OGXP3), which is listed in the Brazilian stock exchange.
The company is part of the Novo Mercado, complying
with the highest corporate governance levels.

Key Personnel: Eike Batista (Chairman and CEO),
Roberto Monteiro (CFO and IR Officer)
Web: www.ogx.com.br

Productivity per Well (kboepd), 2013E
5.00

5.00

Waikiki

Waimea

Oil Production by Field, 2013E
Tubarão
Martelo
7.0%

Tubarão
Azul
93.0%

Shareholder Structure, 2012E

Free Float
37.9%

Centennial
Asset
Mining Fund
LLC
62.1%

Sources for all charts and tables: Company reports and Santander
estimates.

173

Our expectation Company Statistics is mainly due to Oi’s potential announcement of nonrecurring assets Bloomberg disposal (towers and real estate).7 Shares Outstanding . Daily Vol (US$ Mn) 12.46 TARGET PRICE: R$9. Results in 9M12 were mostly in-line with management guidance. 174 . while operating cash generation remains highly under pressure. MEDIA & TECHNOLOGY OI HOLD CURRENT PRICE: R$8.com. one of the most expensive level among its peers. in our opinion.  2013 Outlook: We still expect Oi to announce R$1 billion in dividends (a 7% yield) in 1Q13.com.br taking a large toll on the industry) and increased competition.12.73 Market Capitalization (US$ Mn) 7.2% top-line growth in full-year 2013 (vs. In addition. we remain uncomfortable with Oi’s intention to increase leverage to distribute dividends. +5511-3012-5759 | brmendonca@santander. After that. and we believe that a medium-term sustainable dividend yield (and stock performance) will depend on material improvements in the company’s top line and cash flow generation. +5511-3012-5747 | jvalder@santander. we are still skeptical about 2012-15 Brazil: Banco Santander S.Mn 1.797 Price Performance (R$) OI IBOVESPA 140 120 100 80 will grow consistently toward its 2015 guidance (13% CAGR). even considering the positive operating figures in 3Q12.5% estimate. our 9. especially under the current economic backdrop (which seems to be Bruno Mendonca* Brazil: Banco Santander S.46 / US$ 4.9x.  Despite our cautious view on a turnaround for the company.00  Investment Case: Although we see improvements in management Valder Nogueira* focus and corporate governance. We currently see Oi being on the edge of its auto-imposed leverage cap of 3.A.52 .10 Target Price (YE 2013) R$ 9. but we believe it is still too soon to call it a turnaround. Even if we assume Oi’s EBITDA OIBR4 BZ / OIBR US Current Price (01/03/13) R$ 8. but with a much higher execution risk. Our estimates point to 1. in-line with its peers. which could strengthen its cash position and support 2013’s guided R$2 billion dividend disbursement (for a 14% dividend yield vs.  Risky story and rich valuation: We currently see OIBR4 trading at 4. 60 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet.468 Float (%) 52.0x net debt/EBITDA. we see upside risk to our estimated dividend yield. is not enough to justify a Buy rating for OIBR4/OIBR at current prices. Santander estimates and company reports. in our view.6x 2013E EV/EBITDA and 23. the stock would still be trading at a 2013E P/E of 10.30 52-Week Range (R$) 7.br guidance. in-line with management guidance.A.5x 2013E P/E.4 3-Mth Avg.-1. This perspective.00 / US$ 4.2013 Latin American Universe Book BRAZIL—TELECOM. not yet incorporating those non-recurring items).4% in 2012E). we expect top-line growth to be the main driver for the stock’s performance.

0 Div Yield (%) 8.9 217.758 (9.228 51.2) 8.4 1.789 2. Key Personnel: Francisco Valim (CEO).2 9.5 4.9 P/CE 1.257 2013E 5.359 14.980 19.489) 1.6) 31.8 21.0 216.029 (43.5 FV/EBIT 8.5 n/m 317.9% Portugal Telecom 22.12 0.79 0.901 16.520 13.9 (19.636 28.7 1.2 4.825 (3.036 (6.17 0.537) (289) 429 92.289) (331) 642 0.341 7.028 26.843 1.7 4.7 1.7 4.2 million being residential clients.9 2.8) 0.573 (5.8 n/m 332.4) 4.8 22.4 1.699 31.5 0.4 1.698 2.583 7.5 2.240) 757 4. only mobile).893 3.685) (121) 223 (87.8 0.36 0.6 2013E 13.253 45.1) 4.31 5.5 23.8 million corporate clients and 45.355 1.4 2.com.692 19.8% Corporate 30.568) 0 2013E (2.4) 6.448 31.807 Net Debt/EBITDA 2.9 Net Debt/Equity 0.53 5.670 2013E 2.4) 11.960) 4.0 1.6 1.200 18.4 28.6 million mobile subscribers.7 4.8 22. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 27.907 (5.OI Financial Highlights: P&L.934) (3) 6.9) 31.4 17.3 2014E 28.2 1.647 6.8 US$ 2012E 14.127 6.5 2.187 1.7 0.980) 159 0 (703) 0 2014E (2.2% Other Handsets 2.987 14.9 2.6 FV/Revenue 0.8 FCF Yield (%) 70.4 1.035 40.7) 32.6 12.629 43.38 11.2 2.060 8. 8.3 2.4 1.548 45.835 12.3 1.551 2014E 2. whose main shareholders include groups Andrade Gutierrez (construction) and La Fonte (shopping centers).0) 31.6 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.4% Sources for all charts and tables: Company reports and Santander estimates.456) (2.1 3.750 (4.257 2011A 7.39 0.4) 13.12 0.5 32.7 2.383) 0 2011A (3.7 (2.460 24.8 1.542 8. with the exception of the state of São Paulo (no fixed line operation.6 4.865 26.158 40.4 1.2) 8.0) 7.8 (2.893 3.520 (5.1 4.9 7.662 20. is controlled by TmarPart.372 16.3 2011A 15.7 0.801) 2.1 2.279 Capital Employed 38. had 73.975 3.066 (10.591 85.843) 400 (3.1 5.4 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 0.3 9.493 4.063 (2.3% Shareholder Structure. (OIBR3 and OIBR/OIBR4) is one of Brazil’s largest integrated telecom operators.387 (8.520 (1.9 20.607 (5.9% AG Telecom 7.486) 209 (1.528 14.140 11.066) (154) 299 (5.3 17.2 3.7 21.6% 0.965 (10.1 3.0) 11.4 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E Dividend Payout (%) MARKET RATIOS P/E 29.792 14.7 12.331 (334) (460) 2012E (2.0 14.7 9.852) (1.000) 0 2013E (5.744 11.2 12.393 21. 3Q12 Post-Paid 15.1 (19. Balance Sheet and CF Statement.738) 1.A.685 (2.788) 274 0 (644) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 13.225 31.766 (14.2 FV/EBITDA 2.6 (2.A.8 4.4 20.7 4.2 1.765) (1) 3.3) 2.129) (163) 316 40. Oi’s operating footprint covers the entire country.9 2.3 1.9 75.11 PER SHARE DATA BVPS Oi S.6 2.144 14.8 2.6 (1.424) 0 2014E (5.5 1.358 (591) (814) 2012E (5.8 0.710 (0.2 13.3 3.1 2.775 24.337 52.7 (1.6 4.257 15. As of 3Q12.700 20.2 12.5 9.279) (2.397 42.9 1.570 45.9% LF Telecom 7.3 3.1 2.8 R$ 2012E 27.2) 2.0 2.36 0.38 11.710 (45.A.130 26.550 23. and BNDES (the Brazilian development bank).849) 3.821 2.0 32.432 (2.0 ROCE (%) 5.67 0.319 20.7 6.5 P/BV 0.77 0.351 20.18 DPS 0.950 (18.443 12.3 0.356 (6.196 2.8 9.4 3.485 LT Debt 26.82 0.231 25.254 (0.oi.3 1.206 21.060 2013E 27.4 23.6% Sales Breakdown.980 10.825) (2) 3.48 0.9 2.541 85.9% Free Float 52.7 ROE (%) 1.3) 0.636 28.587 (3.034) 322 0 (1.4 35.102 (4.82 10.1) 31.615 9.33 1.984) 589 0 (1.701 (0.9 1.9 (2.40 16.120 1.553 (8.254 7.227 84.4 1.100 25.262 0.645 2012E 3.756 18.7) 4.101 50.8 21.720) (4) 6.496 45.653 1.1% Residencial 37.516) (68) 126 (87.9 1.656 10.5) 11.5 2.286) (329) 639 48.326) (151) 224 78.285 (3.924 9.3 Capex/Revenue (%) Int Cover (%) - - - - - - - - 33.8 0. Alex Zornig (CFO) and Bayard Gontijo (IR Director) Web: www.7 21.512 39.0 12.5) 11.8 9.4) 4.969 24.4 4.77 5. Portugal Telecom (PT).3 0.3 2014E 13.3) 13.4) 10. Oi S.3 1.7 3.7) 6.257 2014E 4. 18.545 1. 2012E Other 8.1 33.649 12.763 79.5 11.301 (4.2 12.885 (13.9 (1.3 8.6 22./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (5.746 20.636 13.801 15.7) 7. three Brazilian pension funds.6 3.531 28. 2011 Mobile Services 29.557 40.3 million revenue generating units.6) 2.539 24.266 11.305 40.282) (1.516 (3.7 22.24 0.622 20.8 (1.2 11.2 3.br/ri Mobile Subscriber Base.2) 10.139 (2.25 10.122 (2.3 FINANCIAL RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E Net Debt 18.2 4.685 13.8 34.348 3.4% Pre-Paid 84.636 14.605 38.763 25. Oi S.893 3.439 31.961 2012E 6.3) 32.18 0.8 2. 175 .

targeted income segments. As a Brazil: Banco Santander S. In our opinion. we expect PDG to continue burning cash and displaying weak margins. we believe it is critical for the company to speed 80 up the collection process in order to maintain healthy leverage levels 60 IBOVESPA 40 20 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet. 23% and 28%.Mn 1.20  Investment Case: Even factoring in conservative post-dilution Fabiola Gama* assumptions.81 . 120 considering that cash consumption should remain high in 4Q12 and 100 potentially in 1Q13. PDG’s shares look inexpensive. factoring in weak operating performances for the next three quarters (gross margins of 17%.  New business plan ahead. in our opinion.6 Shares Outstanding . the definition of the company’s geographical footprint. pick-up in margins and cost controls.com. among others.61 / US$ 1. Company Statistics Bloomberg  Current Price (01/03/13) R$ 3.8.09 Market Capitalization (US$ Mn) contrast. CONSTRUCTION. .com. likely triggering movements in the stock.  Even factoring in conservative assumptions for PDG due to the reduced visibility in earnings . the risk of margin disappointment persists.61 TARGET PRICE: R$5. Nevertheless. Having not 52-Week Range (R$) 2. Daily Vol (US$ Mn) Challenging financial management.7 35. .  2013 Outlook: The company is expected to make an announcement Pedro Balcão Reis* Brazil: Banco Santander S. +5511-3012-7414 | fpgama@santander. 3-Mth Avg.340 Price Performance (R$) in 2012 launching guidance and the R$796 million capitalization PDG Realty materially improved the PDG’s financial outlook.375 97. 176 . In our opinion. Overall.2013 Latin American Universe Book BRAZIL—CEMENT.67 rule out the possibility of further cost overruns going forward. we are reiterating our Buy recommendation for the stock.br in March (along with 4Q12 results) detailing its new business strategy. the integration of its subsidiaries’ operations and the lower Float (%) volume of launches pave the way for PDG to reduce G&A expenses. . size of operations. see our September 2012 report. We slashed PDG’s launches by 50% (for details.20 / US$ 2. respectively) for conservativeness. INFRA & RE PDG REALTY BUY CURRENT PRICE: R$3. the 50% drop 2. we do not Target Price (YE 2013) R$ 5. . In  PDGR3 BZ .A.br result.77 concluded the revision process of its projects’ budgets. Santander estimates and company reports. could be an important positive catalyst for the stock.A. +5511-3012-5765 | pbalcao@santander. Superior Execution Pays Off: EZTec and Even are Our Top Picks).

4 FV/EBITDA 8.6 12.03) 0.945 3.4 857 6.4 22.3 ROE (%) 10.504 17.312 13.5 4.227 1.704 787 2014E 141 8.5 4.5) 10.968 2.3 (182) (72) 392 n/m 12.0 0.424 (28) 2.8) 8.20) 0.3 13. Key Personnel: Carlos Augusto Piani (CEO).420 6.916 323 2.6 FV/Revenue 1.3) 22.7 1.6 1.198 2.6 (1.048 3.10 2011 2012e 2013e 2014e Shareholder Structure.1 463 (67.6 0.1 241 (72.213 (14) 1.2 1.422 3.9) 5.396 0 (2.5 2. its primarily focus is the middle-to-low income segments.186 456 133 2011A 918 6.8 2011A 4.2 (52) (78) 429 9.7 (8.599 (17.5) 3.7 P/CE 9.488 1.9) CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.0 1.226) (214) 26 2011A (22) 0 (1.151 1.6 3.713 (16.942 6.9 (4.57 0.48 6.077 1.2) 6.8 4.4 21.1 10.2) 22.6 (10.544 315 2.6) (4.1 12.334 680 2013E 82 4.3 0.2) 22.6 1.5 0.326 2013E 160 9.5 40.0 0.027 (17) 1.355 192.075 78.7 1.352 13.64 0.284 7.6) 3.5 5.010 0 (938) (98) 26 2014E (28) 0 755 1.2 1.187 6.749 4.80 4.261 587 4.3 8.574 2.5 11.6 0.7 0.7% Treasury 0.1 21.3) 8.05) 0.8 0.8) (4.257 12.3 5.7 4.064 76.0 21.3 695 194.32 DPS 0.436 2.14 0.01 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 1.9 0. TGLT.088 3.0) 6.7 (3.239) 36 312 2013E (33) 0 602 1.2 1.5 22.162 (49.5 Capex/Revenue (%) Int Cover (%) MARKET RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 9.6) 604 (55.868 1. 177 .9 4. Balance Sheet and CF Statement.7) 1.1 6.722 12.3 (294) (49) (142) (134.80 3.2 ROCE (%) 12.5) 8.341 15.969 0 (1.6 3.29 0.2 (104) (156) 858 12.781 7.0 0.7% Sources for all charts and tables: Company reports and Santander estimates.566 4.823 17.4 2.0) (69.253 1.3 19.211 7.6% Free Float 97.3 3.6 21.6 0.355 198.908 (28.92 3.5 1.00 FCF Yield (%) Div Yield (%) PER SHARE DATA PDG is a real estate investment firm engaged in the development of housing projects through its portfolio of subsidiaries and the co-development of projects with other players in the sector in Brazil./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (37) 0 (1.2 5.4 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 0.11) 0.019 1.226 7.0 2014E 2.059 2012E 82 5.7 0.0 3.086 3.5 40.195 4.304 160 Capital Employed 11.823 (12.2 602 (13.8 5.6 15.970 4.203 (11.253 5.882 2.5 1.4 21.07 0.7 48.94 5.0 P/BV 1.9 0.793 6.3 Net Debt/Equity 0.1) 10. Although it operates in all income segment.1 9.880) (1.0 2014E 5.9) 3.363 11.073 21.5 9.3 0.7) 912 (14.3 (356) (140) 764 n/m 12.6 1.6 21.0 1.3 21.2 (20.593 2.6) 0.543 2.3 7.853 Net Debt/EBITDA 3.797 2.15 (00.0 1.174 2.2) 3.9 2.61 (00.0 (6.7) 236 (72.9 0.04 2.5 7.3 5.1 (333) (99) 410 (14.5 1.606 12.7 49.5) (66.834 11.5 Dividend Payout (%) 20. REP and Brasil Brokers.6) 10.699 2.581 6.16 0.267 10.pdgrealty.4) (0.com.6 0.441 1.633 4.199 0 (1.799 3.90 5.552 1. Marco Racy Kheirallah (CFO) and Guido Lemos (DRI) Web: www.4 5.0) 8.8) 28.6 (10.9) 2013E 3.8 5.37 (00.5 0.1 6.7 4.3) 602 (13.2 19.305 2.1) 454 (68.063 4. The main companies comprising PDG’s portfolio are AGRE.1 US$ 2012E 2. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 6.617 1.PDG REALTY Financial Highlights: P&L.494 4.785 1.2 12.0 860 5.60 2012e 2013e 2014e Contracted Sales (R$ billion).53 2.6) 0.655 983 164 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 5. 2011-14E 5. 2011-14E 7.147 231 67 2011 LT Debt FINANCIAL RATIOS Net Debt 2013E 6.1 R$ 2012E 5.420 (14.3 (566) (94) (274) (139.387 404 2014E 71 4.6 8.510 2.000 units delivered across 14 Brazilian states including the Federal District (Brasília) and Argentina.940 2.3 1.4 FV/EBIT 8.1) 1.8) 28.4 2.2 (20.5 (6.4) (0.843 1.2 21.09 (00.6 0.4 12.7 1.156) 436 (720) 0 889 (172) (63) 2012E (62) 0 331 119 34 154 0 (2.393 2. The company boasts a portfolio of over 100.1 10. CHL.08 BVPS 5.291 5.002 (33) 1.5 (12.00 4. Goldfarb.46 5. as of September 2012 Executives 1.6 (16.2 5.385) 68 600 2013E (64) 0 1.114) (107) 13 9.4 3.3 15.986 2012E 160 11.854 9.558 1.20 5.829) (191) 51 2014E (57) 0 1.br Launches (R$ billion).122) (690) 261 (430) 0 531 (103) (37) 2012E (32) 0 172 62 18 80 0 (1.5 1.9 (1.6 1.426 3.70 4.6 (16.5 1.9 4.1 21.7) 5.741 2.9) 10.067 6.1 (557) (166) 687 (17.203 (11.158 8.7 0.3 695 188.537 4.401 9.678 3.9) 1.3) 22.024 5.

 2013 Outlook: With production growth still lagging.97 TARGET PRICE: US$23. especially with further depreciation of the BRL a possibility.12 (34. trading at 40% and 70% premiums vs.2 Shares Outstanding . etc.2013 Latin American Universe Book BRAZIL—OIL. price increases. Our new base case Company Statistics shows Petrobras missing the first target almost as early as 2013 Bloomberg PBR US / PETR3 BZ Current Price (01/03/13) US$ 19.32.  Stress test uncovers breach of self-imposed targets as early as 2013-14. Daily Vol (US$ Mn) 237.00 / R$ 23. with significant premiums to international peers.com.248 51.us production growth should continue to lag. short-term New York: Santander Investment Securities Inc.  Higher multiples. We also expect the bottom line to remain pressured. 178 .  Sensitivity analysis identifies potential but improbable solution. capex cut. +1-212-350-3991 | caudi@santander. peers. Thus.Mn 6.58 Target Price (YE 2013) US$ 23.00  Investment Case: We continue to expect a challenging scenario for Christian Audi Petrobras in terms of fundamentals.5x net debt/EBITDA throughout the five-year strategic plan at least. GAS & PETROCHEMICALS PETROBRAS HOLD CURRENT PRICE: US$19.A. Petrobras’s ability to finance its ambitious capex and presalt plans depends upon the company maintaining a self-imposed target on average of 35% net debt/net cap and 2. and we would Vicente Falanga Neto* Brazil: Banco Santander S.2x). a combination of many of them—although unlikely—could significantly improve our outlook for the company. profitability should continue to be lackluster. with the main platforms becoming fully operational only by 2014.97 / R$ 20.2%) and the second in 2013 (3. and the balance sheet outlook remaining challenging.64 . asset sales. 60 40 j-11 m-11 a-11 d-11 a-12 a-12 d-12 Sources: FactSet. we don’t expect key costs such as lifting costs to fall. with the company’s return on capital employed remaining lower than its cost of capital. Our lower earnings and weaker leverage outlook result in Price Performance (US$) Petrobras IBOVESPA 120 100 80 Petrobras’s 2013 P/E and EV/EBITDA multiples looking rich. Its ambitious capex program could also decrease cash and increase indebtedness.6 3-Mth Avg. higher oil 130. In our view. Market Capitalization (US$ Mn) While none of the potential measures (a cut in ON dividends.522 prices. with refining costs remaining flat. +5511-3012-6042 | vneto@santander.) can individually change this challenging leverage position.br like to see Petrobras maintain a healthy balance sheet.50 52-Week Range (US$) 17. which Float (%) is our base case. Santander estimates and company reports. respectively.

785 267.60 30.512) 366 (1.9 0.5 38.7 6.788 56.225 6.8 (6.672 206.6) 15.5 7.6% Sources for all charts and tables: Company reports and Santander estimates.3 10.697 (11.7 4.9 28.52 0.0) 38.605 21.4 7.7 (4.305) (17.249 (40.244) 29.3 32.9 8. Almir Guilherme Barbassa (CFO) Barbassa (IR Officer) Web: www.7 (0.8 3.3) 29.558 (9.088 2012E 18.786 238. 2013E Natural Gas 11.246 3.5 7.864 18.06 2.7) (2.714 329.7 P/BV 0.89 0.7) 15.71 25. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 244.488 79.8 (3.9) (4.5 Net Debt/Equity 0.8% Others 20.966 2012E 38.492) (7.035 25.5% Shareholder Structure.041 Capital Employed 445.886 232.334 16.107) (7.663) (3.4 P/CE 6.575 124.060 (72.196) (7.560 644.6 75.4) (0.6) (7.262) 328 2014E (13.813 (43.805) 19.982) (1.8 44.138 2013E 12.1) 37.436 (86.021 (8.9 12. 2012 Brazilian Government 31.104) 179 (552) 23.955 64.212 198.311 (8.699 175.0 7.617) 26.1% BNDES 13.086 317.241) 33.7 2011A 145.9 6.6 27.622 10.960 261.708 18.8 20.1) 20.898 609.5 54.894 145.4 0.6 10.0 9.6 12.7 1.363) (5.5 1.6 7.4 28.5 5.4 28.7% Diesel 39.846 338.4 21.306 110.0 FV/Revenue 1.588 169.532 381.439 205.791 15.6 0.4) 7.059 11.686) (1.9% Free Float 51.609) 10.5 39.5 23.470 8.petrobras.6) 5.653 82.699 37.966) 2012E (5.908) 44.78 2.9 20.51 0.0 8.7) 12.0 3.594 40.7 1.1 34.8 2.653 97.363) (6.132 (4.3 2.5 0.7 0.393 (9.55 1.1 13.51 1.737 141./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (10.355 (29.7 0.618 536.745 7.29 28.3 5.0 74.2 Dividend Payout (%) 32.0 4.4 7.2 29.0 FV/EBITDA 6.460 236.6) 62.749 Net Debt/EBITDA 1.157 36.446 84.5 17.167) (4.6 7.6 R$ 2012E 280.222) 75.231 522.490 (82.8% Brazil 90.044) 13.131 373.4 23.7 0.451 (26. Balance Sheet and CF Statement.741 37.84 28.017 11.9 28.9 5.280 46.10 29. Key Personnel: Maria das Graças Foster (CEO).4 0.518 253.449 232.572 1.50 1.0 85.7 5.515 (41.2 (7.1 6.225) (2.0 23.9 122 (11.139 359.697 36.2 Int Cover (%) 25.855 76.5 4.3 8.810 10.889 (0.185 682.784 693.1 6.6 Capex/Revenue (%) 29.4 7.1 3.5 56.830) 304 2013E (12.508 131.417) 388 392 56.7 37.369 78.2 5.323 79.342 118.02 DPS 0.591) 32.9 5.8 12.654 (40.543) 12.4) 14.8 3.825 254.9) (4.6 1.7 2.9 7.7 17.2 25.515 (49.921 12.340 318.693 819.353 (11.799 599.6 3.397) 23.582) 9.47 1.5 11.176 14.3 3.2 12.1 12.4 7.132) 48.7) 2.2 12.488 19.978 20.4 4.5) (6.4% Sovereign Fund 3.313 (5.069 194.321 313.6 US$ 2012E 2013E 144.918 20.4 10.766 276.356 (6.3 11.367 8.406) (984) 15.383) 355 2011A (6.5 14.788 97.839 277.4 7.900) 26 4.87 0.283 105.3) 13.017) 31.8 34.1 21.686 53.2 8.5 0.9 12.306 21.740 (21.839 159.5 5.8) (4.162 181.154 30.164 436.599 397.781) (12.521) 157 2013E (6.888 156.150 68.7 0.784 2013E 25.5 1.4 25.363) (9.63 0.109 11.356 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E Net Debt 106.0% LPG 8.269) (930) 10.7 1.2 25.742) (3.2% Sales Volume by Segment.779 20.3) (4.451 13.964 22.497 424.4 1.298) (1.985 95.714 189.240) 181 182 26.1 5.177 86.6 27.416 72.735 111.905) (13.6) 13.3 5.6 12.395 2014E 14.6 3.012 2011A 27.218 (15.0 8.72 0.4 0.0 7.745) (13.671 (4.566 (40.618 290.692 13.421 583.1 63.7 5.com.228 (23.425 98.132) (2.046) (3.62 0.4 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 2.97 31. 2013E Other 9.030) 160 2014E (6.711) 19.566) (23.813 197.3 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 9.050 (3.245 239.6 40.8 34.1 14.0% Gasoline 20.2 3.164) (945) 5.4) FCF Yield (%) Div Yield (%) 3.3 39.1 2014E 308.850) 19.0 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.920 116.469 110.827 49.6 7.5 2.4 7.393) 2012E (11. 179 .360 1.81 2.3 11.635 10.6 8.1 2014E 143.7 0.4 20.446) 50 7.885 299.9 0.810 13.br and Almir Guilherme Sales by Country.5 12.9 FINANCIAL RATIOS ROCE (%) ROE (%) MARKET RATIOS 2013E 290.555 121.4 8.9 73 (6.5 42.206 38.884 (0.50 32.443 18.291 (4.0 6.497 (6.188 2014E 6.364) 165 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 52.111 10.5 1.4 (10.3 0.9 6.1 73.57 24.4 (4.PETROBRAS Financial Highlights: P&L.162 8.863 3.3 FV/EBIT 10.238 LT Debt 136.6 11.0 39.598 (78.99 PER SHARE DATA BVPS Petrobras is Brazil’s integrated oil and gas company created in 1954 as a wholly owned government entity responsible for all hydrocarbon activities in the country.323) 19.889 (19.527 36.291 755.

Mn 328 also shine a spotlight on the Brazilian insurance sector.br volumes (management’s goal is to originate 20% of premiums at Itaú branches (it is currently 5%). we have not taken New York: Santander Investment Securities Inc. Daily Vol (US$ Mn) 5. +5511-3012-5756 | havieira@santander.50 RAISING YE2013 TARGET PRICE TO R$26. Its size Float (%) (potentially that of Sul America and Porto Seguro combined) could 3. we are confident that management has the ability to extract value from Brazil: Banco Santander S.00  Henrique Navarro* Investment Case: We are very positive about the insurance sector due to its continued underpenetration characteristics. makes the solvency margins very 70 rich. moreover. Our dividend payout ratio estimate of 50% for 2012 onward 60 results in dividend yields in the vicinity of 5%. competitive pressure has been reduced. and (iii) potential operating leverage from benefits of scale.  Price Performance (R$) Porto Seguro IBOVESPA 110 100 A dividend-play company. combined with the moderate (but sustainable) growth 80 we expect in insurance premiums. In addition.23.50 FROM R$23. in our view.1 3-Mth Avg. The company has substantial excess 90 capital. Investors can take those factors as a valuation bonus. Previous turbulence.50 / US$ 12. such as declining local interest rates. boosting average trading volume due to pair trades possibilities. trading at multiples Market Capitalization (US$ Mn) above those of the listed insurance companies in Brazil. which.A.us those factors into account in our valuation.com. is already priced-in. +5511-3012-5731 | rcabral@santander.A. J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet. 180 . However.2013 Latin American Universe Book R BRAZIL—FINANCIAL SERVICES PORTO SEGURO BUY CURRENT PRICE: R$23.  BB Seguridade—a new listed company to unlock value Company Statistics perception. and unlocking value perception.45 .90 become the new star of the insurance sector.13 during 2013.90 TARGET PRICE: R$26.74 Target Price (YE 2013) R$ 26. (ii) loss ratio improvements due to better credit selection criteria at branches. but better than 2001-2012. such as (i) strong ramp-up of premium Brazil: Banco Santander S.br Boris Molina its association with Itaú in the long term. and therefore we consider our long-term estimates to have upside risk. attracting interest. Santander estimates and company reports. as we would rather wait Renata Cabral* for the first signals to appear.com.  2013 Outlook: We expect 2013 to be a challenging year.90 / US$ 11. We believe this company has all the strengths to PSSA3 BZ 52-Week Range (R$) 16. +1-212-350-3977 | bmolina@santander. Banco do Brasil expects to go ahead with the IPO of its Bloomberg insurance-capitalization-pension plan company BB Seguridade Current Price (01/03/13) R$ 23. which could attract the 50 attention of dividend-play funds.846 30.9 Shares Outstanding .

45 PER SHARE DATA EPS DPS Porto Seguro S.950 8.193 9.972.3 92.8 19.9 89. The company also offers health insurance.5 0.2 0.703 2012E 1.640 4.694 5.1 4.1 8.1 90.9 98.PORTO SEGURO Financial Highlights: P&L and Balance Sheet.05 1. among others.2 4.49 0.0 ROAE Payout MARKET RATIOS Company Description US$ 2012E 2013E 4.6% Premiums per Segment.9 11.9 99.br Invested Portfolio.1 (3.411 10.3 12.921 9.5 20.2 21.7 18.5 20.596 4. 2012E Corporate bonds 15.5 0.228 9.5 11.04 0.portoseguro.7 18.3 92. is Brazil’s leading insurance company in the Auto segment.5 (4.6) 1.2 (10.4 1.92 0.0 2013E 59.7) 2014E 4. which raised funds to help it consolidate its presence in the Brazilian market.2 10.217.6 11.615 4.1 4.666 (6.1 0.9 89.331 2.0% Shareholder Structure.97 1.0% Inflation linked 23.184 2. The company launched its IPO in 2004.0% Equities 1.0 4.9 99. In 2009.808 5.180.9% Health 10.5 P/CE 12.1 0.9 9.856 4.390 8.7 0.0% Fixed rate 18.841 4.82 7.02 0.0 2014E 59.4 0.6 11.0 0.03 0.1% PSIUPAR 69.9 99.2 4.77 2.613 2012E 563 1.9% Porto Seguro Auto 36.6 0.0 2012E 59.714 11.01 1.3) 14 336 114 398 (102) 296 (1.4% P&C 7.513 9.8 100.999 2.3 4.3 94.1) 0.608.6 8.499 2013E 542 1.5 P/BV 1.9 98.399.3 (7.479. which gave Porto Seguro exclusive distribution rights for the Auto insurance products (Porto Seguro and Azul brands) in Itaú Unibanco’s branch network.3 22.7 0.6 20.5 0.216 9.5 1.0 4.7 0.A.7 8.3 13.8 18.156 11.0 (4.556 2. 3Q12 Others 30.1) (9.641 (6.4 2011A 4.3 94.5 1.5 4.8 9.378 2014E 551 1.1) 28 503 10 460 (125) 335 (6.6 1.98 7.4 Div Yield (%) 4.5) INCOME STATEMENT Written Premiums Growth (%) Retained Premiums Growth (%) Earned Premiums Growth (%) Commissions and Expenses Underwriting Results Financial Result Equity Income Profit Before Taxes Taxes Net Profit Growth (%) 2011A 8.8 11.3) 0.1 9.1% Others 14.171. Marcelo Picanço (CFO) and Samy Hazan (IRO) Web: www.5 9.1 0.5 0.5 0.02 1.1 0.1 (8.7 0.1 0. who indirectly owns approximately 40% of the company.511 2011A 847 1. 181 .09 2.334 4.6 1.412 8.9 11.3 9.0) 48 870 18 796 (216) 580 (6.397 2012E 59.1 0.266 3.8 11.86 16.4) 33 778 263 919 (236) 683 3.4 20.6 10.613 2.6 18.246 19.36 14.272 9.394 9.195 2014E 1.5 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 12. The company is controlled by Jayme Brasil Garfinkel.721 17.0 2011A 59.42 CEPS - - - - - - - - BVPS 14.7 20.9 4.0% Floating rate 43.0 11.5 0.6 0.9 99.357 (8.84 1.892 OPERATING RATIOS Claims Ratio Sales Ratio Admin Ratio Combined Ratio Amplified Combined Ratio Effective Tax Rate Excess Solvency Margin ROAA 2011A 59.591 7.1% Itau Auto 17.0 11.1) (4.3 4.9% Sources for all charts and tables: Company reports and Santander estimates.6 11.5 0.7 0.31 0.795 4. as well as home and life.6 11.5 1.6 20.524 2.283.1 0.6) 2013E 1.1 90. 2011–14E in Millions R$ 2012E 2013E 9.7) 54 79 930 682 158 247 994 854 (309) (193) 685 661 18.103 2.5 (4.5) 27 36 458 310 78 112 490 388 (152) (88) 338 300 0.9) BALANCE SHEET Cash and Equivalents Financial Assets Premiums Receivable Intangible Assets Tangible Assets Total Assets Current Liabilities Technical Provisions Other Provisions Debt and Financial Liabilities Minority Interest Equity 2011A 1.791 9.46 0.93 15.322 10.0 2013E 59.1 0.1 0.8 18.1) 2014E 11.5 11.5 1.532 4.1 0.4 4.26 7.com.3 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 1.6 4.7 (11.3 19.0 2014E 59.478 9.3 0.7 20.1 0.5 0. 3Q12 Azul 13. Itaú Unibanco and Porto Seguro announced an agreement to merge their Home and Automobile insurance operations.6 18.3 23.4 20.2 11.969 18. with more than 60 years of experience in this sector. Key Personnel: Jayme Brasil Garfinkel (CEO).63 7.6 0.1 0.359 8.4 4.8 19.510 16.8 100.52 0.3 11.563 8.2 11.

00 / US$ 2. PC sales in the retail market were. POSI3 BZ Current Price (01/03/13) R$ 5. which we view as challenging. games) is still limited. Based on our midterm 100 EBITDA margin estimate of 5.A.67 Yet. which is the main reason for our downgrade to Hold. we do not expect any major relief in 2013. games.2%) for the PC retail market.00  Investment Case: Although we applaud Positivo’s initiatives to gain Valder Nogueira* efficiency and to reduce its dependence on the tight-margin and Brazil: Banco Santander S. +5511-3012-5747 | jvalder@santander.g.5%. in general.g.56 Target Price (YE 2013) R$ 6.Mn 88 Price Performance (R$) Positivo Informatica Unattractive value creation. but our visibility on the timeframe Bruno Mendonca* Brazil: Banco Santander S. Even incorporating further working capital efficiencies (to 28% 70 of net revenues versus approximately 33% by YE2012).A. we estimate 60 ROIC at 12.91 . We also reduced our 2011-2014E CAGR to 7. we see Positivo’s 2013 ROIC at 90 IBOVESPA 80 10.00 DOWNGRADING RATING TO HOLD FROM BUY INTRODUCING YE2013 TARGET PRICE OF R$6. Positivo was able to sustain its leadership in units sold (closely 52-Week Range (R$) followed by Samsung) and market share (~18%). On the positive side.7.br and effectiveness of Positivo’s diversification strategy (e.00. tablets. but at a cost of putting additional pressure on working capital. REPLACING YE2012 TARGET PRICE OF R$9. Daily Vol (US$ Mn) 0.0% (from 9. in the coming years.com. digital convergence. We see upside on the newly launched smartphone production and also in the Argentinean PC operation. We do not see Positivo’s ROIC 110 surpassing our WACC in the near future. tablets.7% in 2012).3 point to zero growth for the PC retail market in Brazil in full-year 2012 versus 10% previously. a major disappointment in 2012.2013 Latin American Universe Book BRAZIL—TELECOM.4%. bearing better marginal returns than the PC business. J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet.6x (slashing R$4. we will be looking for evidence that alternative sources of revenue could..br volatile PC market. 50 Future value generation will depend on material margin expansion 40 and/or additional capital efficiency. Company Statistics  Reducing estimates for the PC market. 182 ..0% versus 4. Santander estimates and company reports.21 / US$ 2.com. we expect capital employed to remain high and returns to remain low. Strong government backlog may improve the EBITDA margin (we expect 6. MEDIA & TECHNOLOGY POSITIVO INFORMATICA HOLD CURRENT PRICE: R$5. +5511-3012-5759 | brmendonca@santander. In the short term.  2013 Outlook: We expect strong top-line growth (up 22% YoY) but at limited return rates (ROIC of 10. still below our WACC estimate of 14. mainly retailers. continue gaining relevance (e.  Bloomberg 4.00 from our previous target price).4 Shares Outstanding . leading to a still-high net debt/EBITDA of 2.21 TARGET PRICE: R$6. smartphones).1%.7% by 2015. Our numbers now Market Capitalization (US$ Mn) 225 Float (%) 27.4%).60 3-Mth Avg.

9 301 12.5 0.142 181 817 501 370 2011A 93 679 108 836 417 88 330 216 154 2012E 25 732 121 902 515 76 310 201 149 2013E 34 707 103 855 452 79 325 216 160 2014E 38 776 92 911 486 77 348 213 157 LT Debt 2013E 2.4 (11) (11) 39 23.3 9.4 4.1) (179.0 7.1 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 0.08 2467.6 2014E 1.0 5.7 7.9 4.07 0. Positivo has recently announced that will start producing smartphones.br/ri Total PCs Units Sold (000).3 39 (68.3 7.4 0.7 6.2) 1.0 (73.174 (14.3 0.8) 268 (5.16 0.8 0.4 12. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 2.4 (26) (25) 89 29.46 2009 2010 Segment Breakdown (Units Sold).0% Retail 75.7 5.8 0.com.924 1.positivoinformatica.0) 502 (21.8) (169.8) 69 (51.8) 39 (53. Balance Sheet and CF Statement.5 1.36 0. Positivo is also present in the government (20% of units sold) and corporate (5% of units sold) segments.8 1.76 3.017 178 730 487 360 2014E 89 1.1 4.9 6.6 2.674 22.3% market share in official PC sales in Brazil.1 6.0 3. targeting mostly Class C households.377 12.7 8. 9M12 Government 20.6 0.1 7.094 (6.6 0.9 4.140 1.5 2.0 3.1 FV/Revenue 0.5 6.2 7.8 116 111 127 131 62 53 56 56 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E Net Debt 231 374 411 412 123 176 183 175 Capital Employed 807 979 1.0 40.4 10.6 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.822 215 2.7 64 65.273 202 1.8 0.5) 3.0 0.0 5.0 113 76.81 1778.1 535 6.089 1.3 4.3 5.1 6.6 0.30 3.7 10.9 10.4 0.5 5.8 - - - - - - - - Dividend Payout (%) 0.6 5.7 0.0 0.912 1.3 P/BV 0.1) 1.0 0.7% Sources for all charts and tables: Company reports and Santander estimates.6 63.3 0.4 0. 2012 Free Float 27.0 38.8 140 23.0% Shareholder Structure.093 162 657 427 315 2013E 76 1.6 0.8) 7.4) 1.3 3.167 18. and the free float is currently 27%.4 11.0 0.078 (11.48 8.1 2.3 0.0 10.0 (78.9 161 58.70 3.3 10.3 22 (69.1) 6.2 3.8 2011A 1.3 2.1 (12.5 2.31 0 0 0.3 3.POSITIVO INFORMATICA Financial Highlights: P&L.1 4.1 4.0 52 61. bearing 100% tag-along rights.9 (30) 1 35 47. 183 .1 6. a 18.5 6./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A 30 291 345 (31) 320 (1) 0 0 2012E 37 (117) (45) (40) (53) 22 0 0 2013E 47 (135) (1) (22) 32 60 (14) 0 2014E 43 (104) 53 (27) 34 14 (27) 0 2011A 17 164 195 (17) 181 (0) 0 0 2012E 19 (59) (22) (20) (27) 11 0 0 2013E 22 (62) (0) (10) 15 28 (6) 0 2014E 19 (45) 23 (12) 15 6 (12) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 174 1.5 Capex/Revenue (%) 1.4 658 22. POSI3 shares are listed in the Novo Mercado.5 1.2 9. including production in Argentina (via a 50%-50% joint-venture with local producer BGH).2 (26) (19) 68 95.14 7.1 20.0% Corporate 5.0 12.7 0.8 4.44 0 0 0.568 783 166 619 405 288 2012E 53 1.3 80 8.9 (11) 2 13 (76.1 ROCE (%) 5.0 40.0% Controllers 70.2) 1.7 32 46.2 (12) (9) 31 79.05 7.9 FINANCIAL RATIOS Int Cover (%) ROE (%) MARKET RATIOS P/E 3.0 12.4 4.6 0.8 0.2 11.6 0.0 0.4 1.5 2.4 0.9 7.01 0.5 812 23.185 5.3 40.552 257 1.8 2.6 P/CE FCF Yield (%) Div Yield (%) PER SHARE DATA EPS DPS BVPS 0.8 0.7 FV/EBITDA 10.3 2.7 6.4) 283 (24.9 (15) 0 17 30.6) 3.9 6.20 0.9 (19) 4 24 (75.6 2013E 1.7 10.53 3.6 9.7 6.6 0.6 FV/EBIT 19.2 Net Debt/Equity 0.27 0.4) 51 30.4 74 44.8 (12. at the end of 2Q12.7 102 47. Key Personnel: Helio Rotenberg (CEO).4) 21.176 430 462 484 501 Net Debt/EBITDA 3.9 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 21.96 With 1.1 US$ 2012E 1.3% Treasury 2.70 million PCs sold in 9M12.0 0.1 1.224 11.6 353 17.9 2.1 R$ 2012E 2.3 0.4 11.32 9.7 2.590 232 1.8 5.5 66.78 1. Ricardo Fernandes Pereira (CFO) and Lincon Lopes Ferraz (IR Manager) Web: www.40 0.2 18.6 2014E 3.8) 21.3 5.8 0. 2009–2012E 2405.4 0. The largest portion of Positivo’s sales (75% of units sold in 9M12) was geared toward the retail market.4 183 14.28 2011 2012E 1979.15 0.8 61 17. Positivo Informática held.

with most of maturities ranging between 2016 and 2023).  We expect an attractive 6% dividend yield for 2013 (cash basis).30.S. meaning that the company is somewhat hedged to rising inflationary pressures in Brazil and should be able to maintain its margin levels. Providencia’s volume shipped is growing at a 16% clip in 2012. a pace we expect to be maintained throughout 2013 as new production lines both in Brazil and the U. 100 80 60 40 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet.com. a new investment cycle (not considered Float (%) 32. as we Alex Sciacio*. REPLACING YE2012 TARGET PRICE OF R$10.S.1 in our model) could be announced in 2013. Daily Vol (US$ Mn) 0. reflecting the ramp-up of its new U.3 Shares Outstanding .30 / US$ 4.Mn 80 Price Performance (R$) Providencia IBOVESPA 120 Alegre lines. significantly lower capex disbursements (R$24 million in 2013E versus R$161 million in 2012E). +5511-3012-5870 | azsciacio@santander. in our opinion.95 main supplier (Reinheuser Reicofil) and. CFA believe the company continues to offer a rare blend of earnings Brazil: Banco Santander S. Company Statistics Bloomberg  New growth cycle could be announced in 2013. and Pouso 3-Mth Avg.  PRVI3 BZ Current Price (01/03/13) 2013 Outlook: We expect Providencia to deliver 18% sales and EBITDA growth.87 / US$ 4. Cash flow generation should improve materially after a capex-intensive year in 2012. reach full capacity.br Demand growth drivers remain solid.00  Investment Case: We reiterate our Buy rating on Providencia. with limited inflationary pressure on the cost side. +5511-3012-5758 | ffreis@santander.30 INTRODUCING YE2013 TARGET PRICE OF R$10. The company has the option to buy two additional nonwoven machines from its R$ 8.com. supported by improved operating performance.36 Target Price (YE 2013) R$ 10. 184 .87 TARGET PRICE: R$10. We highlight that only 15% of Providencia’s costs are fixed (including labor). and a very favorable debt profile (77% long term.2013 Latin American Universe Book BRAZIL—RETAIL & CONSUMER GOODS PROVIDENCIA BUY CURRENT PRICE: R$8.  Felipe Reis* Brazil: Banco Santander S. Santander estimates and company reports. considering the positive Market Capitalization (US$ Mn) 349 demand outlook we foresee.A.90 52-Week Range (R$) 5.br growth (EBITDA up 18% YoY. boosted by supportive demand fundamentals and the ramp-up of new capacity) and steady dividend payout (74% of earnings in 2013E).60 .8.A.

4 8.br Revenue by Product.7 0.6 1.7 6.7 3.7 134.4 2014E 876 17.1 64 15.28 0.6 6.4 6.3 20. Providência uses spunbond technology in ten production lines in the states of Paraná and Minas Gerais.9 8.8 1.0% Installed Capacity per Region.0 96 4./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (32) 5 (27) 40 (76) (146) 0 (97) (22) 0 2012E (36) (14) (8) 66 (161) 48 0 148 (44) 0 2013E (38) 0 (33) 53 (24) 48 0 0 (38) 0 2014E (39) 0 (23) 80 (20) 77 0 0 (64) 0 2011A (19) 3 (16) 24 (46) (87) 0 (58) (13) 0 2012E (19) (7) (4) 34 (83) 25 0 76 (23) 0 2013E (19) 0 (16) 26 (12) 23 0 0 (19) 0 2014E (18) 0 (11) 37 (10) 36 0 0 (30) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 81 356 681 1.9 14.59 4. 185 .8 6.0) 6.6 3.2 2.9 (33. The company is controlled by a group of private equity investors (Pinebridge. Nonwovens are synthetic fabrics made from mechanically.6 13.9 8.8 P/CE 8. respectively.1 152 18.7 1.5 127.6 R$ 2012E 632 20.providencia.8 20.7 0.37 BVPS 8.1 8.0 176 16.60 0.1 5. Balance Sheet and CF Statement.9 11.8 7.5 10. 9M12 Other 9.7 54 10.5) 6.6 1. chemically or thermalbonded filaments.9 82 11.3 P/BV 0.5 0.2 20.9 13.4% Shareholder Structure.1 15.83 8.3 8.0 8.0 2.6 20 (14) 27 51.4 7.1 12. with 100% voting shares and tag-along rights.9 6.4 2014E 408 12.0 20.6 7.0 1.3 41 (25) 48 (7.7 LT Debt FINANCIAL RATIOS Net Debt Capex/Revenue (%) Int Cover (%) Dividend Payout (%) 2013E 746 18. Eduardo Feldmann (CFO) and Gabriela Las Casas (IR Manager) Web: www.1 138 21.4 7.7 70.7 40 (33) 64 34.0 13.6 12.2 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.3 21.37 DPS 0.5) 6.0 57 (16.6 15.3 114 23.4 10. BES.0 34 (12.1 4.0% Nonwovens 91.276 1.3 20 (12) 23 (12.0% Treasury Stock 0.7 1.22 0. Providência’s main clients are Kimberly-Clark.9 5.5 25. G&G.4) 90 4.5 25.1 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E MARKET RATIOS P/E 16.3 260 16.3 9.391 84 472 707 586 127 2011A 43 190 363 675 30 238 367 225 39 2012E 43 188 413 662 32 218 349 275 63 2013E 45 205 387 650 36 216 337 271 60 2014E 49 216 362 634 39 215 322 267 58 348 423 442 459 186 211 210 209 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 341 464 473 478 182 232 225 218 Capital Employed 1.293 592 624 607 590 Net Debt/EBITDA 3.2 7.1 ROE (%) 4.8 6.48 0.23 0.0 191 18.7 19 (15) 30 28.9 1. 9M12 USA 28.4 72.8 9.21 4.2 2013E 364 12.9 6.5 3. Nonwovens are primarily used in the manufacture of personal hygiene products (such as diapers and feminine care) and disposable medical products.9 7.3 14.4 6.2% Controlling Group (Asas.4 2.7 0.8 20.8 9.2 17. Pineb 67. Asas.0 8. Herminio de Freitas (CEO).6 128 43.9 46 (14) 29 (6.3 98 2.4 FV/Revenue 1.5 5.8 11.1 109 11.1 FCF Yield (%) Div Yield (%) 4. 2012 Free Float 32.3 7.7 0.266 57 446 689 422 74 2012E 85 376 827 1.2 7.3 5.3 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 0.3 92 61.9 28 (8) 18 (1.4 3.8 10. with roughly 50% and 40% market share.3 6.03 PER SHARE DATA Cia.6% Brazil 71.9) 5.com.55 0.4 20.8) 10.8% Sources for all charts and tables: Company reports and Santander estimates.33 0.1 74 12.8 FV/EBITDA 9.2 161 (0.2 7.1 4.7 0.1 4.4 9.6 40 (27) 52 76.3 48 38.3 14.7 ROCE (%) 3.0 8.2 2.6) 10.37 0.8 134.1 224 17.71 8.2 20.4 1.80 0. BES and G&G). and is listed in Bovespa’s Novo Mercado.247 1.9 15.7 8. P&G and J&J.5 9.1 8.0 (29.16 0.0 1.1 121 10.3 1.3 8.8 14.1 66 23.0 149.27 0.2 20.4 14.1 6.PROVIDENCIA Financial Highlights: P&L.5 3. Providência Indústria e Comércio is the leading nonwoven manufacturer in Brazil and Latin America.6 US$ 2012E 325 3.83 4.0 0.4 1.36 4.111 1.5 3.7 14.8 3.9 7.61 8.0 1.1 2.4 2.7 Net Debt/Equity 0.29 0.0 1.65 0.365 77 455 707 569 127 2014E 108 474 794 1.325 65 436 697 550 127 2013E 95 431 813 1.0 15.6 0.9 17. Key Personnel: Renan Bergmann (Chairman).6) 5.3 56 16.1 73.2 15.4 2011A 314 22.5 1.3 21.8 10. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 527 16.4 69.7 1.80 0.8) 6.6 FV/EBIT 14.

60 / US$ 10.40 . indicates that there is strong market demand for the company’s shares.882 Paulo and Rio de Janeiro. and  Price Performance (R$) Qualicorp (d) new business segments (i..33 52-Week Range (R$) 14. We believe that the price stability of QUAL3 shares during the 100 two recent block trades. maintaining profitability stable at ~35%.50 FROM R$24. benefiting from: (a) increasing 15% penetration of Float (%) 74. has not sold his 120 stake.A.90 Large addressable market implies attractive 2011-2014E sales Market Capitalization (US$ Mn) CAGR of 27%.  Company Statistics Bloomberg QUAL3 BZ Current Price (01/03/13) R$ 21.e.25 billion).4 Shares Outstanding . but at the expense of flat margins.3% and 35. Our adjusted net income estimate of R$314 million implies 20% YoY growth. which we expect to materialize in the coming years.A. +5511-3012-5787 | dhgewehr@santander. (c) the penetration of public sector employees (1.br (~80% EBITDA to FCFF conversion.com. We expect a slowdown in NPL provisions (despite still higher-than-historical levels).60 TARGET PRICE: R$25. and (c) first-mover advantage: scale (more than 10 Bruno Giardino*. in our view.8 million market) through its Aliança acquisition.7x.50  Investment Thesis: Qualicorp has a differentiated business model. better than for most listed peers) and ~90% recurring revenue.  2013 Outlook: We expect Qualicorp to deliver a strong top line of 25% in 2013.50 RAISING YE2013 TARGET PRICE TO R$25. which together moved 23. as the founder.  What‘s changed? Our estimates remained almost unchanged and still reflect the company’s strong growth potential. with strong cash generation Brazil: Banco Santander S. (b) geographical expansion outside São 2.7% and 38%). Seripieri.61 Target Price (YE 2013) R$ 25.22. CFA Brazil: Banco Santander S. PBM and PPO). Mr. Our 2013-14 EBITDA margin estimates of 35.com.8% are below consensus (36.br times larger than the next largest competitor) and long-term relationship (more than 400 associations).2013 Latin American Universe Book BRAZIL—HEALTH CARE QUALICORP BUY CURRENT PRICE: R$21. (b) high margins (35% EBITDA margin in 2013E).Mn 272 current professional groups. +5511-3012-5914 | bgiardino@santander. QUAL3 shares are trading at a 2013E adjusted P/E of 18. IBOVESPA 80 60 j-11 o-11 f-12 j-12 o-12 Sources: FactSet. Santander estimates and company reports.4% of the company’s capital (R$1. Daniel Gewehr* backed by: (a) an asset-light profile.50 / US$ 11. 160 Carlyle‘s full divestment implies no change in Qualicorp’s daily 140 operations.4 3-Mth Avg. Daily Vol (US$ Mn) 23. which seems fair considering the 20% adjusted EPS CAGR we forecast for 2012-14 and the 2013E FCFE yield of 4%. 186 . possibly offset by investments in marketing campaigns.

2% TPA & Others 34.3 322 28.0 0.9 4.1 215 15.7 0.2 Capex/Revenue (%) Int Cover (%) Dividend Payout (%) 0.3 357.0 387 12.4) Net Debt/Equity 0.5 16.9 6.246 3. The company serves 1.2 400.2% Corporate Health 25.0 R$ 2012E 922 36.6 (2. 187 .5% Affinity Health 29.qualicorp.13) 0.180 1.0 0.7 11.8 ROE (%) 10.031 1.105 219 60 2014E 317 561 2.0 0.1 186 13.8 345 16.8 150 51.4) 0.3 P/CE 14.2 2014E 1.0 10.5 0.2) (0.8 13.44 3.4 5.5 0.8 (1.2 7 (47) 163 13.7 1.0 0.3 2.8 28.1 16.7 20.8 265 45.23 3.com.1) 2.0 0.9 2.8 31.0 0.br Membership per Segment.3 20.28 DPS 0 0 0.1 35.7 3.0 0.1 296 48.41 0.10 0.736 million lives in the affinity Segment (associations).4 27.5 29.0 13.9 13. Brasília.3) 1.8 2.1 11.0 4.126 1.4 7.9 2.1) 29.6 31.9 6.181 284 798 2.0 10. Qualicorp delivered 2011 net sales.2) (0.9 6.072 271 570 2.8 3 (73) 314 19.2 407 26.7 6.153 25.3% Affinity 89.0 18.379 19.1 (0.7 13.6 0.0 846 25.3) 3. respectively.037 1.5 (0.05 0.4 16.1 6.2) 1. nonrisk provider of health benefits management services in Brazil.020 299 82 2013E 319 516 2.6 13.8 11.8 115 38. Key Personnel: José Seripieri Filho (Chairman).2 35.1 57.0 ROCE (%) (1.028 889 865 Net Debt/EBITDA 0.8 41.539 3.2 15. Qualicorp is a leading.6 19.4 5. R$251 million.6) 3.086 million lives from corporate clients (brokerage).3 30.3 83 59.4 2013E 528 12.6 13.2 2011A 404 51. and 1.1% Revenue per Segment.236 119 33 2011A 197 248 1.0 0.3 14.3 19.9 102 803.999 2.2 7 (56.5 15.3 182 78.4% Sources for all charts and tables: Company reports and Santander estimates.1) 0.3 31.75 8.5 27.1 (0) (50) 262 24.0 9.8 496 41.4 7.198 1.0 12.1 (0. EBITDA and cash earnings of R$676 million.44 7. and R$210 million.6 21.10 0.1 15.6 35.6 35. José Seripieri Filho (CEO) and Wilson Olivieri (CFO) Web: www.9 16.3 FV/EBITDA 18.2 11 (58.8 28.036 198 40 2012E 63 143 1.6 2.8 12.7 34.8 PER SHARE DATA 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS (00.307 115 243 952 51 14 LT Debt FINANCIAL RATIOS Net Debt 2013E 1. and the Federal District.855 285 626 1. 3Q12 Affinity New Products 11.5 10.7) (4.7 0.7 (12) (33) 210 141.8 2.4 676 36.9 27.5 14. December 2012 José Seripieri Filho 25.0 US$ 2012E 471 16.490 million lives through TPA/other services. 9M12 Corporate & Others 10.112 2./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (101) 18 (9) 272 (201) (124) (40) 0 343 2012E (165) 23 (62) 351 (385) (245) (61) 0 13 2013E (180) 15 (5) 495 (40) 213 (80) (28) 0 2014E (181) 14 (30) 552 (228) 43 (100) (44) 0 2011A (60) 11 (5) 162 (120) (74) (24) 0 205 2012E (84) 12 (32) 179 (197) (125) (31) 0 6 2013E (83) 7 (2) 227 (18) 98 (37) (13) 0 2014E (79) 6 (13) 240 (99) 19 (43) (19) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 370 465 2.9 0.0 FV/EBIT FV/Revenue P/BV 2. Balance Sheet and CF Statement.0 18.7 438 13.5 27.6 251 44.006 19.1 (0) (26) 134 6. Bahia.0 14.466 134 382 953 141 39 2013E 142 230 1.0) (0.64 (00.0 495 21.2 17 (107) 375 19.5 11.0 0.109 283 811 2.2 11.8 41.7% Shareholder Structure.8 MARKET RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 21.4 14.414 126 355 935 97 27 2014E 135 239 956 1.0 9. The company competes in important Brazilian markets such as São Paulo.8 4.83 3.9 52 672.1) 2.7 (3.7% Free Float 74. Espírito Santo.944 371 76 2012E 133 304 2.946 2.7 (7) (20) 125 153.066 1.8 2 (34) 144 7.07 7.2 34. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 676 43.19 0.4 37.9 10. 1.7 0.16 0 0 0.6 22.7 15.0) (0.3 2.7 19.6 5.18 7. full-service.5 14. Rio de Janeiro.6 14.QUALICORP Financial Highlights: P&L.8 37.4 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.51 3.522 152 334 1.399 3.50 FCF Yield (%) Div Yield (%) BVPS Founded in 1997 by José Seripieri Filho.3 53.19 0.2 2014E 600 13.2 296 216 159 86 158 102 70 37 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 2 166 (100) (199) 1 78 (44) (85) Capital Employed 1.3 18.9 16.5 (0.5 11.5 3.0 5.6 165 9.0 0.07) 0.1) (4.7 3.5 16.2 3.

35 Target Price (YE 2013) R$ 15. 188 . however.com.16.14 plan.00 RAISING YE2013 TARGET PRICE TO R$15.br in our model under conservative terms. due to (i) its more tangible portfolio of assets compared with its Brazilian peers. our QGEP3 BZ 52-Week Range (R$) 7.0 3-Mth Avg.00 / US$ 7.09 .2013 Latin American Universe Book BRAZIL—OIL. Daily Vol (US$ Mn) 3. a situation that differs significantly from that of its Brazilian peers. GAS & PETROCHEMICALS QUEIROZ GALVÃO E&P BUY CURRENT PRICE: R$12.20 financial model conservatively assumes production starts in 2019.  Including Carcará in our model. QGEP remains focused on 60 strengthening its portfolio with farm-ins. the company is set to resume its drilling activities in the Jequitinhonha Basin. Carcará is expected to produce first oil in 2018. with the results for JEQ#2 potentially coming out by 3Q13. In addition.A. the development of BS-4 should begin by the end of 2013. Although 120 100 the company’s cash burn is less aggressive and although it is also 80 supported by the Manati field. and (ii) possible upside based on the discovery of the Carcará prospect located in BN-S-8. Price Performance (R$) Queiroz Galvão E&P  IBOVESPA 140 Stronger cash situation than peers. which require careful 40 monitoring. which Float (%) translate to 50 million boe net for QGEP. In Market Capitalization (US$ Mn) terms of volume.92 / US$ 6.Mn 266 EV/boe of US$3. Santander estimates and company reports. being the announcement of the volumetric estimates for Carcará.90.us Vicente Falanga Neto* Brazil: Banco Santander S. QGEP burns much less cash relative to its cash position.00 FROM R$13.9 Shares Outstanding . which we recently included New York: Santander Investment Securities Inc. in our view. We expect this event by the end of the second quarter.687 30. at an estimated 1. Carcará brings R$1. with the main share catalyst. Finally. as the ANP’s approval of the block’s development plan is expected soon.  2013 Outlook: We expect 2013 will be important year for Queiroz Galvão. Compared with its peers. Although no volumetric estimates have been provided yet for Carcará (we expect estimates to be Company Statistics released in mid-2013). +5511-3012-6042 | vneto@santander. we have incorporated Carcará in our financial Bloomberg model under conservative assumptions. 20 f-11 j-11 o-11 f-12 j-12 o-12 Sources: FactSet.92 TARGET PRICE: R$15.50 of value to our target price. We also believe that QGEP’s cash position is very comfortable.50  Christian Audi Investment Case: We continue to have a positive view on Queiroz Galvão. +1-212-350-3991 | caudi@santander. Overall. Under Petrobras’s strategic Current Price (01/03/13) R$ 12. we assume reserves of 500 million boe.

73 11.583) (558) (632) (626) (736) Capital Employed 2.3) 6.6) (3.730 395 159 2.429 2.682.5) Capex/Revenue (%) 1.616 1.5 8.3) (7.1 1.8 76.1 18.6 18.6 ROE (%) 4.4 (0.339 367 120 2.7 42 88.4) 60 (48.1 113.0) 90 (65.315) (1.8) 55.9 10.9 US$ 2012E 227 31.1 363 4.5) (0.5 59.8 161 78.354 (4) 1.919 3.716 178 57 1.0 0.5 42 (39) 132 91.4) 101 (51.5 5.qgep.2 1.295) (1.0 FV/Revenue 11. Jequitinhonha.02 0.6 56.2 1.1 FCF Yield (%) 23.7 51 (17) 55 (34. 2013E BS-4 39.983 352 117 2.514 1.317 1.99 0.1 2.2 76.3 6.0 0.6 129 210.8 7.br EV by Basin.9 2.0 0.2 62.0% Manati 47.0 n/m 9.7 7.9 13.675.3 4.4) Net Debt/Equity (0.0) 76.358 0 0 2014E 704 752 928 1.7 12. Santos.7 7.229 1.A.7 346 114.0 1.3 115 13.9 Div Yield (%) 0.345 1.8 12.1 18. 2013E Manati 100. Key Personnel: Antônio Augusto de Queiroz Galvão (Chairman).5 25.9% Sources for all charts and tables: Company reports and Santander estimates.0 0.0% Shareholder Structure.438 Net Debt/EBITDA (11.2 8.226 0 0 2013E 594 641 914 1.8) (0.9 2014E 474 5.0% 0.5 2.7 4. 189 .514 0 0 2013E 1.0 0.26 0.4 2013E 220 (2.0% FIP Quantum Mgmt 7.3 22 (79.6 18.0 35 (37) 122 (7.8) (0.1% Queiroz Galvão S.316 1.196.61 5.0 0.21 0.11 5.172 1.0 0.3) 54 (63.0 4.3 4.97 4.6 1.3 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E MARKET RATIOS P/E 47.A 62.5 18.6 36.3) 55.3 9.7 101.8) (4.6 264 227.QUEIROZ GALVÃO E&P Financial Highlights: P&L.5) (0.764 3. is controlled (63%) by Queiroz Galvão S.6 6.4 59.3 93 (40) 134 45.5) (0.6 3.4 35.57 P/CE P/BV PER SHARE DATA BVPS Queiroz Galvão is an upstream player in Brazil.8 58.35 4.0 76 (79) 263 (2.1 5.185 1.590 175 57 1.0 7.9 26.7) (4.4 FINANCIAL RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E Net Debt (1.50 0.0 18.405 2. and Campos.46 DPS 0 0 0 0 0 0 0 0 8.5) (0.0 0.1 32.0 ROCE (%) 1.3 2.3) 31.9 30.46 10. Lincoln Guardado (CEO).19 9.9 65.0 0.6) 169 (0.203 2.7 297 158.4 17.480 0 0 52 0 0 0 27 0 0 0 2014E LT Debt 2013E 452 2.0) 12.6 7. Balance Sheet and CF Statement.5) 31.852 0 0 2014E 1.1 140 (3. with an exploration portfolio comprising 8 blocks located within the basins of Camamu.049) (1.4 (0.7 27.4) (10./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A 54 985 223 1.7 FV/EBITDA 36.0 0.4 6.7) 31.4 35.196.0) 12.0 Dividend Payout (%) 0.8 20. Paula Costa (CFO) and Renata Amarante (IR Officer) Web: www.689 383 123 3.7 3. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 289 (25.35 0.5 8.6 26.3 84.027 (415) 92 0 (0) 2012E 81 0 4 218 (155) (27) 17 (107) 0 0 2013E 82 0 (1) 352 (381) (11) 18 0 0 0 2014E 97 0 5 365 (147) 237 19 0 0 0 2011A 32 590 134 811 (2) 615 (248) 55 0 (0) 2012E 42 0 2 112 (80) (14) 9 (55) 0 0 2013E 40 0 (0) 172 (186) (5) 9 0 0 0 2014E 45 0 2 170 (69) 110 9 0 0 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 1.183 0 0 2011A 613 669 747 1.1 Int Cover (%) n/m 9.247 1.0 0.1 42.091 1.5) (0.7 5.4 31.455 172 57 1.157 55 28 2012E 599 643 777 1.258 1.0 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 0.6 9.4 1.9 6.0 0.7 81 119.0) 83 53.2 58.0 300 1.0) (3.3) 6.2 5.9 2014E 221 0.0% Production by Basin.452 210 84 1.5 87 (81) 270 102.0 5.1 FV/EBIT 90.50 1.4 1.2 20.com.3 48 (21) 69 24.8 169 103.0 1. and it is part of the Novo Mercado.5 36.0 80.176 104 52 2012E 1.0 0.1 12.5) (0.9 R$ 2012E 440 52.3 37 (80.682.153 1.3 84. Queiroz Galvão held its IPO in February 2011.4 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.3 24.592 2.4 31.4 13.4) 31.1 59 (2.7 76.6) (8.9 18.5) (0.996 3.0 0.7 13.6 124 (4.6 266 0.0% BM-S-8 14.7 84 (29) 92 (37.8) 145 144.4 2011A 173 (21. 2012 Free-Float 30.675.1 30.1) 56.

Management expects a 2013 capex of ~R$150 million (in-line with Price Performance (R$) Randon our R$160 million estimate). +5511-3012-5914 | bgiardino@santander. respectively.25 Target Price (YE 2013) R$ 14. We like management’s new focus on generating higher free cash flow. which we view positively.0 3-Mth Avg. Daily Vol (US$ Mn) 6.2013 Latin American Universe Book BRAZIL—CAPITAL GOODS RANDON BUY CURRENT PRICE: R$12.00 / US$ 6. +5511-3012-5787 | dhgewehr@santander. attractive long-term EBITDA margins (average of 13. While we recognize that pricing is a concern for the 70 truck trailer segment.3 Shares Outstanding .  What‘s changed? While our 2013 sales and EBITDA estimates remain virtually unchanged. we have reduce our net income estimate by 15% due to the expected higher leverage.506 55.1% through 2023E). and these regions: Alabama and China—in 2013.72 / US$ 6. CFA Brazil: Banco Santander S. improving backlog (four months of backlog according to ANFIR). given that the 120 company is operating at ~70% capacity utilization. 100 IBOVESPA 90  First Truck Trailer Day Highlights: on the verge of improvement.br 2013 Outlook: We expect Randon to post an attractive sales.Mn 241 SAP and Controil.com. 80 Slightly positive. 70% and 240%.br (88% of company sales are in Brazil). and solid ROE (we estimate an average of 16% for the same period). Santander estimates and company reports.A.72 TARGET PRICE: R$14.A. as Randon suffered not only from a truck production decrease but also from operating inefficiencies in its implementation of ERP).98 . we are 9% above sell-side consensus with respect to our net income estimate. based mainly on truck production recovery in Brazil and operating leverage from the Autoparts and Trailer divisions (2012 provides a low base of comparison. we note that companies in the sector have 60 been able to pass through price increases recently given the j-11 m-11 a-11 d-11 a-12 a-12 d-12 Sources: FactSet. CFA Brazil: Banco Santander S.com. EBITDA and net income growth of 19%. Following three years of large investments (in which the company had the lowest RAPT4 BZ Current Price (01/03/13) R$ 12.br Joao Noronha*. Brantech.A.22 52-Week Range (R$) 7. This could lead to 110 FCFE of R$100-150 million. Market Capitalization (US$ Mn) management expects to reap the benefits of this capital inflow— Float (%) namely from investments in these companies: Castertech. backed by the company’s solid vertical integration strategy.  Bruno Giardino*. 190 . Company Statistics Bloomberg  Free cash flow is king: Asia NDR highlights.87 EBITDA to free cash conversion among the names we cover).00  Investment Case: We see Randon as a good way to play the Daniel Gewehr* growth we expect in the Brazilian transportation and logistics industry Brazil: Banco Santander S. +5511-3012-5734 | jonoronha@santander. Still. 1.com.12.

091 1.3 219 (53.2 36.929 1.0 6.5% EBITDA by Segment.0 13.0 2.3 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 1.3 0.3 0.277 437 674 719 317 2014E 470 1.6 102.7 4.6% Treasury 1.0) 330 (40.2 14.017 973 1.2) 9.5 2.141 2.9 10.808 (27.3 10.676 1.3 11.8 21.376 1.662 4. shipping its products to more than 100 countries.1 4.7 1.0 0.6 26.5 220 9.247 707 2.618 712 2014E 1.12 0.0 2.9 6.2) 1.5 0.2 8.3 7. 9M12 Services 2.24 0.2 2.7 1.2 5.2) 390 (35.019 33. Astor Schmitt (CFO).6 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 7.544 1.8 1.3 10.388 4.4) 6.298 426 713 694 303 LT Debt FINANCIAL RATIOS Net Debt 2013E 4.3 1.0 13.8% Sources for all charts and tables: Company reports and Santander estimates.9) 764 (25.124 984 1.2) 2.2 (65) (32) 59 (78.5 6.933 6.5 0.2 13. Randon is listed on Level 1 of the BM&F Bovespa.9 0.3 Capex/Revenue (%) 6.7 13.7 2014E 4.9 4.223 19.4 640 13. The company has an important export base.47 0.398 1.6 52.1 FV/Revenue 0. which represented 11.9% Auto Parts 78.091 2.4 9.7 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.727 1.7 9.41 DPS 0.4 280 7.0 1.3 2.509 2.3 FV/EBITDA 5.7 13.4 563 70.29 6.678 trailers in 2011.8 0.71 6.1% Institutional Investors 29.3% Foreign Investors 19.5 2.101 5.4 6.00 2.057 6.42 0.4 469 2.0 9.9 ROE (%) 19.7) 9. Hemerson Souza (IR Manager) and Geraldo Santa Catharina (Financing Officer) Web: www.9 466 19. 9M12 Services 5.2 2.731 12.4 13.8 97.166 718 1.713 5.3% 0.96 PER SHARE DATA Randon produces a wide range of truck trailers and auto components for heavy vehicles.7 2013E 1.6% Vehicles 15.0 4.28 0.010 900 906 918 538 424 403 391 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 380 633 527 526 202 299 234 224 Capital Employed 2.5 2.25 0.241 2.9 13.156 11.4 (16. It also manufactures off-road dump trucks.9% of 2011 sales.com.5 5.4 (21) (46) 91 205.4 8.83 0.5 MARKET RATIOS FCF Yield (%) Div Yield (%) 4.1 16.0 1. with production of 25.5 8.195 1.4) 1.7 5.4 1.955 2.4 494 5.2% Vehicles 50.538 (14.12 BVPS 5.001 1.3 13.7 2014E 2.8 2.5 R$ 2012E 3.9 34.6 1.8 5.2 10.8 5.RANDON Financial Highlights: P&L.4 557 2.95 0.3 440 101. backhoes and forest harvesters.1 13.3 112 (60.9 0. 3Q12 Randon Family 40.62 5.481 17.3 5.3 6.366 459 649 760 336 2013E 485 1.95 3.2 FV/EBIT 6.7 (24) (51) 99 8.5 506 14.484 474 2012E 979 2.38 0.4 7.1) 6.8 1.516 1.5 13.3 0.8 0.7 2.935 2.2 2.1 7.006 2.3% Auto Parts 47.103 2./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (87) 200 (666) (109) (248) (297) 79 (86) 0 2012E (111) (40) 53 383 (241) 70 82 (72) 0 2013E (122) (13) (49) 514 (159) 242 0 (60) 0 2014E (133) (14) (108) 532 (237) 164 0 (68) 0 2011A (52) 120 (397) (65) (148) (177) 47 (51) 0 2012E (57) (21) 27 196 (123) 36 42 (37) 0 2013E (56) (6) (22) 235 (73) 111 0 (27) 0 2014E (58) (6) (47) 231 (103) 71 0 (30) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 1.559 4.12 0.0 P/BV 1.5% Shareholder Structure.8 1.1 13.1 7.3 ROCE (%) 14.9 17.9 10.8 14.2 (33) (16) 30 (81.9 278 8.8 3.8 48.3 0.80 2.3 22.9% Individuals Corporate 8. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 4. 191 .5 13.8 13.4 (46) (100) 200 240.4 4.356 740 2.5 8. Balance Sheet and CF Statement.0 6.3 0.522 4.8 (14.9 0.8 1.135 11.043 1.5 258 52.0 Int Cover (%) 2.1 332 8.1 20.0 6. It is one of the 10 largest manufacturers of truck trailers in the world.399 5.473 1.8 18.8 2011A 2.2 4.4) 2.2 5.6 9.153 1.8) 169 (49. Key Personnel: David Randon (CEO).630 712 2011A 589 1.155 582 722 791 253 2012E 462 1.5 US$ 2012E 1.2 11.28 0.7 5.3 36 (83) 161 13.2 34.7 (54) (117) 228 14.11 0.183 1.8 1.6 22.1 13. among other items.7 7.2 4.8 1.212 693 1.3 202 80.1 13. such as suspension systems and brake pads.612 712 2013E 1.9 5.5 8.104 2.67 0.0 1.3 10.156 million in 2011.1 5.2 P/CE 5.1 1.69 2. Randon’s sales increased from R$613 million in 2000 to R$4.3 60 (139) 269 7.br Sales by Segment.194 Net Debt/EBITDA 0.8 Net Debt/Equity 0.019 12.2 15.4 608 18.9 13.8 3.82 0.4 1.3 13.354 1.8 Dividend Payout (%) 34.595 2.806 1.017 4.1 1.randon.

 BNDES capital increase at R$28 per unit: While we see as positive BNDES becoming a Renova shareholder.br clearer scenario for demand and transmission lines bottlenecks.30  Investment Case: Our rating downgrade is based on a more Marcio Prado* uncertain short-term scenario for energy auctions.77 / US$ 15.br the BNDES capital increase.  2013 Outlook: During 2013. slight dilution from Brazil: Banco Santander S. 192 . we believe the implicit valuation of R$28 per unit might act as a short-term cap before a clearer scenario for energy prices and an improved FX allow a more aggressive growth strategy to re-emerge. 100 50 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet.com.50 . the transmission lines expected to RNEW11 BZ Current Price (01/03/13) R$ 31.27 / US$ 20. low price caps in recent auctions and stronger USD against BRL increasing capex.27 DOWNGRADING RATING TO HOLD FROM BUY INTRODUCING YE2013 TARGET PRICE OF R$34.1 Shares Outstanding . and lower-than-expected short-term revenue due to transmission line bottlenecks. we believe short-term marginal ROIC will decline for wind projects.8 3-Mth Avg. Renova will start operation of 162 MW (energy sold in LER 2010).com.A.Mn 77 connection to the grid.2013 Latin American Universe Book BRAZIL—UTILITIES RENOVA ENERGIA HOLD CURRENT PRICE: R$31. While Renova is Market Capitalization (US$ Mn) able to receive the base tariff for these parks (even with no Float (%) 4. Company Statistics Bloomberg  Transmission lines‘ bottleneck: While Renova’s LER 2009 wind parks are ready and operational. Thus.40 connect these plants to the grid have not been built.57 52-Week Range (R$) 25. as transmission operators are responsible for 1. We expected Renova would be able to sell 5-10% more volume to the grid than is Price Performance (R$) Renova Energia IBOVESPA 200 implicit in its base contract.34. we await a Maria Carolina Carneiro* Brazil: Banco Santander S.194 the connection bearing such a risk). While our long-term outlook continues to be positive for wind energy in Brazil.A. We expect EBITDA of R$181 million. +5511-3012-6682 | macarneiro@santander. Daily Vol (US$ Mn) 0.27. the company is precluded from selling more energy than its base contract to the grid.61 Target Price (YE 2013) R$ 34.77 TARGET PRICE: R$34. With MP579/591. Santander estimates and company reports. REPLACING YE2012 TARGET PRICE OF R$38. actual revenue for the next few years would be lower than full potential revenue if it were connected 150 to the grid. We believe that medium-term energy prices will spur reopening opportunities for accelerated growth in wind in Brazil. +5511-3012-5751 | mprado@santander.

and Banco Santander as the main minority shareholders (with 24.RENOVA ENERGIA Financial Highlights: P&L.2) (50.4% RR 36.0 0.2 25.0% Sales by Segment (GenCo).48 2.1 425.0 0.867 1.118 1.0 0.3 9.1 (41.065 1.14 0.2 6.519 MW in additional projects (2.777 179 1.3 22.0 0.1 42.036 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 830 1. and 8. with 42 MW in operation.4% of total capital).5) 2014E 185 26.6 8.6 186 97.9 65.0 0.6 26.467 MW in SHPP) in various phases of development.0) (26.9) 67.9 2.5) 2014E 308 24.4 0.0 94 395.0 25.0 0. FIP Ambiental fund.9 126.6 0.1 47. 2013E Generation 100.118 1.3 250.0 26.3 9.6 7.2 3.3 1.6 1.3 FV/EBITDA 303.6) (42.2 44.2) (26.039 114 1.6 45.0 0.063 - 2014E 81 83 1.174 0 1.3 1. Renova has 3.0 0.9) 5.2 (26.4 1.0 ROCE (%) 0.2 57 171.7 (3) (2) 0 n/m 1.97 2.76 1.8%.0 75.9 120.782 1.2 178.4 (51) (3) (34) (9.4 8. 9M12 Regulated Market 100.8 FCF Yield (%) 8.1 38.7 13.4 172.8 0.49 PER SHARE DATA BVPS Renova Energia is a renewable energy generation company that focuses on small hydro (SHPP) and wind energy projects.01 - - 0.1 68.555 227 1.6 2011A 22 9.2 47.1 9 2.8 27.3 (476.247.8 11 3.74 2.8 38.08 1.9 1.4 42.052 MW in wind/1.4 3.0 0.8 (134) (10) (48) 18. 193 .3 65.9 120.0 2.071 286 1. 9.0 0. Currently.9 6.6 R$ 2012E 139 260.7 16.6 US$ 2012E 79 266.9 4.782 621 979 1.357 0 1.1 73.1 54 403.0 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 0. Renova is controlled by RR Participações (with 55.6 7.921 0 1.6) (51.9 20.3 15.6 Dividend Payout (%) 0.br EBITDA by Segment.3) 219. RR Participações belongs to entrepreneurs Ricardo Delneri and Renato Amaral.0 146 52.731 190 1.0 Int Cover (%) 1.063 1.4 26.055 0 920 134 917 - 2013E 51 53 1.0 88 54.0 9 0.4 0. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 38 8.1% Others 19.4 0.065 - 2012E 124 128 1.2 555.550 - 2013E 85 89 1.7 (5) (3) 1 n/m 1.687 1.8 26.6) 2013E 146 84.3 69.783 0 1. who founded Enerbras in 2001 to develop renewable projects in Brazil.2 109 103. Key Personnel: Ricardo Lopes Delneri (Chairman).3 6.7 13.590 461 843 1. Moreover.772 - 2014E 135 139 1.4 8.725 - 2011A 131 133 621 754 0 595 159 592 - 2012E 74 76 979 1.4 2.8 (79) (6) (28) 15.8 9.4 0.1 10.3 21 324.2 P/E FV/Revenue 127.9 (42.4 (19.9 47.5 36.9) (42.0 36. Victor Pereira de Souza (CFO) and Pedro Pileggi (IR Director) Web: www.6 22.8 7.121 1.867 1. and it is implementing 458 MW in wind projects with PPAs— making it the leader in wind project implementation in Brazil.6 12.550 1.2 27.0 5.070 1.070 Net Debt/EBITDA 51./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (7) 0 8 8 (865) 169 0 893 0 0 2012E (54) 0 (5) (5) (590) 40 0 484 0 0 2013E (85) 0 37 37 (298) 1 0 222 0 0 2014E (85) 0 96 96 0 135 0 (46) 0 0 2011A (4) 0 5 5 (486) 95 0 502 0 0 2012E (31) 0 (3) (3) (337) 23 0 277 0 0 2013E (50) 0 22 22 (176) 0 0 131 0 0 2014E (51) 0 58 58 0 81 0 (28) 0 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 235 239 1.0% Shareholder Structure.34 2.0 5 2.6 236 27.6 139 30.0 0.1 10.0) 66.9 142 29.6 0.2 (27.425 1.012 955 Capital Employed 1.5 20.4 73.6 9. Renova has 3 SHPPs.251.214.3 72. Balance Sheet and CF Statement. with InfraBrasil fund.121 1.2 P/CE 253.3 1. Ricardo Lopes Delneri (CEO).9 300.6 69.654 1.9 FV/EBIT 561.8 (19.6 Div Yield (%) 0.5 6.renovaenergia.9 1.6 12.772 1.8 Net Debt/Equity Capex/Revenue (%) MARKET RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 3.247.5 181 100.067 107 1.5 1.0 0.7 107 106.4 (90) (6) (59) (9.036 - LT Debt FINANCIAL RATIOS Net Debt 2013E 247 78.725 592 917 1.9 50.com.00 - - 0.5 (492.507.956 0 1.1 425.6) CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.3 ROE (%) 0.3 231 27.0 0.668.4) 219.8 52 468.2 96 162.9 P/BV 7.9%.6 2.0 19 1. 9M12 Infra Brasil 18.6 1.0 0.9) 5.3% of total capital).3 37 317.0 4.4 44.2% Sources for all charts and tables: Company reports and Santander estimates.4 (119) (16) 11 n/m 3.654 1.3 90 459.153 0 1.7 75.3 0.4 (71) (10) 7 n/m 3. Renova was created in 2006 through a corporate restructuring of Enerbras.0 5.3 16 0.09 DPS - - - - - - - - 3.3% Light 26.40 1. the Serra de Prata complex.

internal controls and growth strategies. thus leaving little room for further disappointment on the operational side. INFRA & RE RODOBENS HOLD CURRENT PRICE: R$12. which we believe should facilitate internal controls and increase synergy gains. bringing some volatility to short-term earnings.92 the company’s consolidated gross margins are likely to fluctuate between 29-30% in the upcoming years.52 in total launches will help margins in the medium term.60 TARGET PRICE: R$13.13. Consolidated launches and margins should gradually expand as well. Rodobens began the restructuring of its execution processes.2013 Latin American Universe Book BRAZIL—CEMENT. As a result.com. +5511-3012-5765 | pbalcao@santander.28 / US$ 6. we believe that the increasing percentage of the Stillo brand Current Price (01/03/13) R$ 13. 9. the limited upside from our DCF model has Brazil: Banco Santander S. At the start of 2011.  Company Statistics by units priced greater than R$200..  Well positioned to continue growing. according to our estimates.br led us to downgrade the stock to Hold from Buy. As a side effect. CONSTRUCTION. +5511-3012-7414 | fpgama@santander.000 (well above average unit New business units. Represented Bloomberg prices). paving the way for ND/E to drop to 41% in 3Q12 from over 100% in 4Q10.4 3-Mth Avg. the 90 80 70 60 company is likely to continue selling specific land plots throughout 2013.  …With a strong balance sheet..A. 50 J-11 M-11 D-11 A-12 D-12 Sources: FactSet. Daily Vol (US$ Mn) 0.  Change in the product mix is a tailwind for margins.br launches to grow in 2013. Rodobens has defined seven regions to concentrate its operations.75 Market Capitalization (US$ Mn) Rodobens IBOVESPA A-11 A-12 110 100  Reducing geographic reach. Target Price (YE 2013) R$ 13.50 DOWNGRADING RATING TO HOLD FROM BUY  Investment Case: Despite the company’s improved operating and Fabiola Gama* financial performance.  2013 Outlook: We expect the Stillo product’s stake in overall Pedro Balcão Reis* Brazil: Banco Santander S. We believe the company has passed the midpoint of this restructuring. Santander estimates and company reports. As the number of units delivered increases and the collection process picks up.30 .Mn 49 Price Performance (R$) Rodobens Urbanismo.com.50 / US$ 6. Rodobens is entering the mall and residential lots segments via its new subsidiaries Rodobens Malls and RDNI3 BZ 52-Week Range (R$) 317 Float (%) 47.5 Shares Outstanding . Rodobens’s cash flow profile has improved. which we view as a compelling way to unlock value from its landbank. 194 .A.

8 R$ 2012E 782 4.4 9.6 8.482 386 1.8 US$ 2012E 406 (8.9 11.70 2012e 2013e 2014e Shareholder Structure.3) (2./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (4) 0 210 272 (60) 212 0 (150) (14) 9 2012E (4) 0 (204) (111) (56) (167) 0 (228) (22) 4 2013E (3) 0 (141) (44) (9) (53) 0 81 (23) 1 2014E (4) 0 (135) (3) (11) (14) 0 48 (32) 1 2011A (2) 0 126 163 (36) 127 0 (90) (9) 5 2012E (2) 0 (106) (58) (29) (87) 0 (118) (12) 2 2013E (2) 0 (72) (23) (5) (27) 0 41 (12) 1 2014E (2) 0 (68) (1) (5) (7) 0 24 (16) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 434 1.24 0.0 7.2 8.6 6.9 7.8 11. 2011-14E 1.91 2. in addition to mid.5 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.083 278 425 380 508 93 2012E 11 760 198 958 201 350 407 341 17 2013E 13 851 207 1.7 13.1 2.0 (27.3 1.5 18.0 1. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 747 5.46 0.128 243 400 486 394 20 LT Debt 2013E 902 15.0 19.5 FINANCIAL RATIOS Net Debt Dividend Payout (%) 20.2 1.1 P/CE 8. with standardized units.2 162 9.5 Net Debt/Equity 0.3) 13.737 295 2.6 204 33.7 779 632 702 739 415 324 360 374 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 519 645 713 749 277 331 365 379 Capital Employed 1.4 3.7 0.0 11.6 1.80 17.6 127 (9.97 8.5 21.3 6.6 17.3 2014E 548 18.4 8.rodobens.5) (8. 2011-14E 1.031 522 796 713 953 175 2012E 21 1.793 434 2.000 inhabitants in the Brazilian countryside.8 0.9 153 10.8 10.7 2011A 446 9.6 9.9 18.2 17.19 1. under two product families (Terra Nova and Moradas).8 7.3 1.6 3.6 5.9 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 1.90 0.6 (60) (23) 128 38.7 0.6 8.0 5.4 1.497 1.868 391 683 794 666 33 2013E 26 1.7 FCF Yield (%) 39.6 (30) (11) 64 34.3) (2.2) (8.1 10.4 6.85 1.095 21.7 6.0 1.10 0.6 FV/EBIT 10. Rodobens Negócios Imobiliários is a Brazilian homebuilder that mainly focuses on affordable housing developments in cities with more than 100.8 0.32 DPS 0.9 9.10 8.0 77 23.058 229 386 443 379 19 2014E 15 908 220 1.62 MARKET RATIOS PER SHARE DATA BVPS Part of Grupo Verdi.5% Sources for all charts and tables: Company reports and Santander estimates.18 0.4 (85) (22) 58 (19.677 701 688 768 849 Net Debt/EBITDA 5.2 33.9 60 (17.5 1.7 18.3 P/BV 0.5 0.316 1.4 17.3 2014E 1.48 2011 2012e 2013e 2014e Contracted Sales (R$ billion).64 2011 0. Balance Sheet and CF Statement.2 9.8 147 7.3) 7.5 4.0 3.4 9.0 10.9 139 38.48 0.9 83 8.8 16.1 11.0 4.2 1.30 0.2 38.6 1.8 11.com.9 72 20.0 7.8 0.3 6.33 14.8 0.5 9.6 4.4% GV Holding S.8 11.2 148 41.8 0.5 4.7 1.8 Capex/Revenue (%) 8.96 0.5 8.8 6.227 479 789 959 778 39 2011A 231 926 157 1.062 447 752 863 738 37 2014E 29 1.00 7.A.4 (51) (13) 35 (16.3 10.7 3.6 ROCE (%) 7.to high-income vertical projects (Stillo). as of December 2012 Verdi Family 22.0) 104 (20.8 ROE (%) 8.0 Int Cover (%) 0.66 0.342 1.5 2013E 463 13.7) 13.1 2.5 176 19.7 13.6 6.2) 7.7 108 29.4 17.7 25.0 8.7 34.9 0.2 16.3 4.6 102 30.2 24.9) 62 (17.4 6.5) 13. 30.5 1.7 8.98 1.3 10.8 0.659 403 2.5 6.4 18.7 0.3 288 9.8 0.3 (27.RODOBENS Financial Highlights: P&L.9 (49) (16) 93 3. 195 .10 1.9) 137 8.9 FV/EBITDA 10.9 212 (13.5) 13.7 (57) (22) 90 54.1% Free Float 47.8 34.95 15.9 78 8.90 0.7 0.9 7.0 8.1) 44.8 0.7 4.8 263 24.8 0.71 0.7 3.9 (25) (8) 48 2. Key Personnel: Marcelo Borges (CEO) and Flavio Vidigal (CFO and IR) Web: www.6 215 33.4 3.2 11.4 4.0 3.7 4.5 2.13 19.9 11.7 FV/Revenue 1.8 19.64 0.6 6.8 8.1 8.24 0.5 8.0 5.78 9.7 1.1) Div Yield (%) 2.4 353 22.7 (29) (11) 47 34. It develops mostly large-scale horizontal projects.00 0.4 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 9.9 100 (20.br/ir Launches (R$ billion).5 2.

based on the expected 27% total return implied by our YE2013 target price. reflecting the lower-than-expected 9M12 results and the tougher environment of low production volume.71 / US$ 2. Bloomberg R$ 4. which we view as a safety margin on our call. thanks to the productive capacity downsizing carried out in 2012. 196 . We cut our 2013 EBITDA estimate by 17% to  R$46 million. capacity utilization is at Shares Outstanding .br signs of increased economic activity in 2013 (although the effect on Joao Noronha*. 60  Hidden value? Romi has property for future rental income and capital appreciation booked at a cost of R$16 million on the balance sheet.br 2013 Outlook: We expect Romi to operate more efficiently in 2013 despite the still-low-production volume. Brazil: Banco Santander S. Santander estimates and company reports.67 capacity utilization as the key variable for operating recovery.com. Although we expect Romi to break even on the bottom line (following a net loss of R$40 million in 2012E).) Currently. and we expect shares to react well to Brazil: Banco Santander S.00 / US$ 2.42 Market Capitalization (US$ Mn) 166 Float (%) 52. CFA industry’s spare capacity). given 52-Week Range (R$) the high level of operating leverage implied by Romi’s integrated 4. We revised our estimates downward.com. Daily Vol (US$ Mn) 0. +5511-3012-5734 | jonoronha@santander.51 .com.71 TARGET PRICE: R$6.Mn 72 suboptimal levels (55% in machinery and 50% in castings).  Main changes.1 altogether have a fixed nature.2013 Latin American Universe Book BRAZIL—CAPITAL GOODS ROMI BUY CURRENT PRICE: R$4. We view Target Price (YE 2013) R$ 6. This has a market value appraisal of R$142 million (40% of market cap). Management has an internal target of running at a 15% EBITDA margin (with no Price Performance (R$) Romi IBOVESPA 120 100 established timeline) and plans to invest more in productivity. +5511-3012-5787 | dhgewehr@santander. (We estimate that about 40% of costs and expenses 3-Mth Avg.A. CFA Romi’s earnings should lag).31 Volume is more important than the currency level.00 FROM R$7.00 UPGRADING RATING TO BUY FROM HOLD LOWERING YE2013 TARGET PRICE TO R$6.A. We now expect Romi to post zero net income in 2013 Company Statistics (down from our R$8 million estimate previously). We believe that shares are already pricing in the low visibility for the operating recovery (given the high level of the  Daniel Gewehr* Brazil: Banco Santander S.7.00  Investment Thesis: We are upgrading our rating on Romi to Buy from Hold.  ROMI3 BZ Current Price (01/03/13) Focus on profitability and cash generation. 40 20 j-11 m-11 a-11 d-11 a-12 a-12 d-12 Sources: FactSet.6 model. while 80 we work with an average of 12% margin to account for cyclicality.br Bruno Giardino*.A. +5511-3012-5914 | bgiardino@santander. we expect the company to deliver operating cash flow of R$43 million thanks to (1) EBITDA in the positive territory and (2) positive working capital generation (backed by the sale of R$30 million in above-normal inventories).

916.0 (6) (0) 0 n/m 0.2 28.5 2.05 (00.1 (1.0) 3.4 27 29. machine tools accounted for 69.5 0. with products sold in over 30 countries.1% Free-float 48.9) 0.9) (3.0) 2.0 0.7) 8.5 21 n/m 7.1 6 n/m 1.6) 12.7 4.2) 0.8) CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.5 0.6% of revenue.05 DPS 0.2 2011A 377 (1.romi.5 Int Cover (%) 1.4) (7.3 0.4) (1.753.0) 13.4 0.6% Shareholder Structure.6 6.1% Sales by Segment.3) 0. 9M12 Plastic Machines 15.7 7. Romi currently has 11 production facilities.4) 2. 9 of which are located in the city of Santa Bárbara D’Oeste (130 km from the city of São Paulo).5 0.5 219 17.7) (59) (432.9 15.0 1.com.4 37.2 3. 3Q12 Romi and Chiti Families 45.9 3.0 (51.3) 2.0 n/m 56. It is also becoming an important player in the rough and machined castings segment.216.4 124.1 (1.8 FV/EBIT FCF Yield (%) Div Yield (%) 7.7 0.br Sales by Region.8 (11) (114.3 6.12 0.9 3.6 0.6 P/BV 0.5% Sources for all charts and tables: Company reports and Santander estimates.3 38.6 (6.4 0./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (29) 48 (86) (54) (17) (43) 0 (17) (35) (0) 2012E (37) 25 34 31 (54) (15) 0 2 (1) (13) 2013E (39) 0 22 61 (25) 43 0 0 0 0 2014E (41) 0 (15) 35 (25) 19 0 0 (2) 0 2011A (17) 29 (52) (32) (10) (26) 0 (10) (21) (0) 2012E (19) 13 17 16 (28) (8) 0 1 (0) (7) 2013E (18) 0 10 28 (11) 19 0 0 0 0 2014E (18) 0 (7) 15 (11) 8 0 0 (1) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 163 950 289 1.3%).1) (1. Luiz Cassiano Rosolen (CFO) and Fabio Taiar (IR Officer) Web: www.5) 103 (25.2 1.7 3. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 631 (6.1) (1) 21 (40) (1.908 124 487 637 246 65 2011A 87 507 154 967 83 265 361 126 60 2012E 44 413 158 781 53 176 298 116 31 2013E 58 427 143 799 52 196 281 109 29 2014E 59 443 130 812 53 207 271 105 28 LT Debt FINANCIAL RATIOS Net Debt 2013E 639 9.4) 2.1 0.8 0.3% Castings 15.3) 173 (28. 9M12 External Market 27.1 3 n/m 1.0 8.7 0.20 0 0 0.9 95 11.2 (7.4 (125.6) 9.7 0.655 112 373 631 245 65 2013E 131 962 321 1.2 0.1) (1) 11 (20) (1. In 9M12.4 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 139.91 3.2 0.2 0.9) (4.0 1.6 5.7 13.2 0.9 (9) (3) 9 7. and castings (15.7) 2.5) 2.2 0.6 15.0) 3.88 4.0 2014E 712 11.9% 4.055.7) (4.56) 0.2 124 180 181 181 66 85 80 77 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 74 152 115 107 39 72 51 46 Capital Employed 754 785 749 746 402 370 333 318 Net Debt/EBITDA 4.8) 11 5 4 (94.2 Dividend Payout (%) 53.5 0.7 13.3) 11 (81.6) (3.16 8.0 2014E 310 5.7 Net Debt/Equity 0.6 US$ 2012E 299 (20.2%).7) (30) (355.3 8.8 (7.9 0.7) (22) (222. 197 .6) (6.7 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 0.8 0.8 0.ROMI Financial Highlights: P&L.7) (10. Exports accounted for 28% of Romi’s R$417 million of total revenues reported in 9M12.0 5.1) 128 (25.797 117 441 631 246 65 2014E 139 1.8 (7) (115.6) 0.88 4.3 21.0 (3) (0) 0 n/m 0.3) 85 30.7 9.5% Fundação Treasury Romi 1.7 9 208.5) 65 (36.1 FV/Revenue 0.8 2.813 155 497 678 237 113 2012E 94 876 336 1.6 2.3 62 36.80 8.6 R$ 2012E 586 (7.8 2.0 187 45.0) (5.0 n/m ROCE (%) (0.15 3.8) 2013E 292 (2.6 ROE (%) MARKET RATIOS P/E P/CE FV/EBITDA 32.8 (115.7 7.7 (6.33 0 0 0.2 3.9% Internal Market 72.9) 18 (82.5 1.8 (8.5 1.2 21.7 4.2) 0.6) (10.03 (00.2 Capex/Revenue (%) 2.041 305 1.5 0.3) 8.02 BVPS 9.835.6 (46.5) (11) (204.3 0.8) 6 3 2 (94.4 (1. followed by plastic molding machines (15.5) 0.7 0.7 46 n/m 7.8 0.78 PER SHARE DATA Romi is Brazil’s largest producer of machine tools and plastic injection molding machines.0 0.4) (6. Key Personnel: Livaldo Aguiar dos Santos (CEO).5 (8.00 0.1 0.7) (5.9 1.9 (4) (1) 4 6. Founded in 1930.285.5 (6. Balance Sheet and CF Statement.3) 10.2% Machine Tools 69.2 0.0 0.7 21 224.6) 69.5 0.7 (9.28) 0.4 (22.80 8.9 (20.2) 71.4 2.0 7.1 1.9) (8.7 9.04 0. Romi is listed under the Bovespa’s Novo Mercado level of corporate governance.00 0.

150 100 50 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet. Santander estimates and company reports. our EBITDA estimates could increase by 10%.5 billion. supports our positive view on the name. 198 .50 / US$ 42. volume growth.com. and we believe that the final RAB could be closer to Sabesp’s.569 will benefit from such a framework.Mn 228 properly remunerates investment is on the way.00 Target Price (YE 2013) R$ 102. During 2013. We believe Sabesp 9.br risks.9 billion.1 Shares Outstanding . which would translate into an additional tariff increase of 4% in 3Q13 for Sabesp (which would add 15% potential upside to our target price).  RAB—promising outlook. as we believe the Marcio Prado* clear tariff revision methodology. Daily Vol (US$ Mn) 19. ARSESP’s preliminary tariff revision leaves SBSP3 BZ Current Price (01/03/13) R$ 85. Market Capitalization (US$ Mn) ARSESP confirmed our view that a sound regulatory framework that Float (%) 49. Company Statistics Bloomberg  More ups than downs: While the actual tariff increase (~2%) was below market consensus.2013 Latin American Universe Book BRAZIL—UTILITIES SABESP BUY CURRENT PRICE: R$85. Sabesp required R$33. A final net RAB will be defined in 2Q13. we expect ARSESP (the Regulatory Agency for Sanitation and Energy) to announce and apply the final terms/parameters of the tariff revision methodology (including the final regulatory RAB).80 . We currently do not include this expense in our tariff Price Performance (R$) Sabesp IBOVESPA 250 200 calculation—if included.7 3-Mth Avg.0% in 2013. with more upside than downside Brazil: Banco Santander S.70 / US$ 48.br 2013 Outlook: We forecast EBITDA growth of 8. More important.A. ARSESP has temporarily recognized a net RAB of R$30.91 52-Week Range (R$) 52.A.50 TARGET PRICE: R$102. +5511-3012-5751 | mprado@santander.92. and additional tariff adjustments to offset the accumulated inflation impacts to parcel A costs in 2013. coupled with recent cost improvement and low multiples.com.48 room for additional tariff increases next year (~4%). which follow the preliminary terms already announced.70  Investment Case: We remain bullish on Sabesp. Also. ARSESP is analyzing the possible inclusion of the expenses with the contribution to the fund for the municipality of SP in the tariff revision. reflecting the tariff revision.  Maria Carolina Carneiro* Brazil: Banco Santander S. +5511-3012-6682 | macarneiro@santander. given its aggressive capex plan.

6 7.5 4.647 1.7 3.543 10.908 3.33 1.5 2. Sabesp is listed in Bovespa’s Novo Mercado (SBSP3.4 FCF Yield (%) 1.060 6.9 13.0 3.br Sales by Segment.8 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 9.7 (378) (297) 730 (21.7 1.68 25.7 10.0 34.590 10.6 8.3 19.978 1.2 7.21 3.408 5.0% Shareholder Structure.29 50.3 5.4 7.206 (4.544 10.4 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 5. Balance Sheet and CF Statement.2 5.6 12.0 33.0 21.2% Residential 76.242 7.130 1.010) (561) 0 120 (579) 0 2013E (830) 154 (156) 737 (1.20 3.624 24.1 P/BV 1.3 FV/Revenue 1.1) 1.4 11.3 8.0 30.035 2013E 1.683 14.942 7.446 6.8 2.54 1. 9M12 Sewage 45.807 4.4 3.643 11.956 24.454 11.5 4.910 47.8 1.4 6.9 40.9 8.97 2.76 3.451 25.931 23.812 4.1 50.173 5.5 2.676 869 2012E 795 1.52 0.591 5.306 5.3 9.1 2013E 5.0 2014E 12. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 9.4 (2.6 Net Debt/Equity 0.958) 263 0 0 (448) 0 2011A (459) 544 12 555 (1.726 20.667 5.895 4.08 46.205 21.4 9.253 Capital Employed 21.611 5.463 12.431 16.9) (0.8 FV/EBIT 7.984 23.4 14.7 (634) (497) 1.4 50.5 1.7 13.659 1.447 17.575 5.4 17.799 1.62 DPS 2.342 11.1 1.8 Capex/Revenue (%) Int Cover (%) 7.1 49.9 20.115) 96 0 135 (64) 0 2012E (395) (6) (82) 107 (1.0 8. 25.476 11.602 10.9) 13.31 27.772 5.6 0.770 2.4 1.8 18.758 2.0) 12.692 11.2 36.0 ROE (%) 11.2 36.4 6.769 18.134 3.8 12.2 1.812 1.9 20.053 2014E 1.SABESP Financial Highlights: P&L.295 11.23 3.sabesp.640 (2.8 1.551 45.0 (404) (438) 824 13.498 3.0 (372) (390) 735 0.6 10. Sabesp charges its clients for water treatment and distribution and for sewage collection and treatment.97 0.3 2.3 R$ 2012E 10.996 7.0 5.941 2.7 9.824 2.68 MARKET RATIOS PER SHARE DATA BVPS Sabesp is one of the largest sewage and water companies in the world.4 Div Yield (%) 0.3 2.6 Dividend Payout (%) 6. Dilma Seli Pena (CEO). The company also sells water in the wholesale market to other municipalities in the state that are not part of Sabesp’s system.492 13.471 7.131 10.9 13.759 9.893 (1.9) 33.1 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.28 6.7 13. 9M12 Other 11.0 14.647 4.37 6.0 6.2 8.668 4.5 47.1 1.0 11.624 9.4 2.1 7.3 1.630 2012E 1.9 49.223 (25.0% Water 55.6% of total shares) and NYSE (SBS. 199 .6 5.26 60.3 30. 24.9 2.3 15.0 2014E 5.7 30.4 17.8 13.5 34.329 517 2013E 713 1.8) (0.0 2.1% of total shares).5) 1.437 3.8 1.513 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 6.929 4.9 1./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (769) 910 21 930 (1.5 18.828 10.5 10.1 6.589 3.9 12.7 5.5 32.1 ROCE (%) 18.4 13.241 6.700 10.1 19.6 2.241 23.985) (93) 0 0 (429) 0 2014E (889) 154 (142) 1.6 0.867) 161 0 227 (107) 0 2012E (769) (11) (159) 208 (2. Rui Affonso (CFO) and Mário Sampaio (IR Manager) Web: www.0 (724) (759) 1.9 2.8 8.648 5.935 13.3 15.6 7.6 7.449 3.7 6.7 0.066 50.277 24.5 7.8% Commercial 9.900 9.2 2.622 5.359 7.151 (1.986 10.2 FV/EBITDA 5.3 6.203 (0.494 4.6 0.5) 32.3% Sources for all charts and tables: Company reports and Santander estimates.2% Industrial 2.231 (0.9) 1.5 1.7 13.496 3.5 0.135 52.7 2.677 Net Debt/EBITDA 2.5 12.0 (866) (940) 1.608 0.3 US$ 2012E 5.955 23.6 0.com.0 9.149 501 2014E 802 1.8 2.0 1.759 3.8 18.704 5.3 2011A 5.1 49.638 11.146 1.6) 5.653 11.56 7.001 489 LT Debt FINANCIAL RATIOS Net Debt 2013E 11.978 8.080 7.398 2.4 6.6 1.6 2.0 8.3 2.1 5.3 (860) (795) 1.3 3. Key Personnel: Edison de Oliveira (Chairman).985 1.496 5.602 (5.007 24.3 1.6 0.221 11.603 11.8 12.67 55.8 18.356 12.9 20.3% ownership) and operates in 366 municipalities in São Paulo State.5 28.970 3.072 2011A 1.7% São Paulo state 50.1 1.116 5.7 7.353 3.2) 49. Sabesp is controlled by São Paulo State (50.8 1.5 11.2) 12.8% Revenue by Business.8 5.5 (2. reaching more than 23 million people.88 1.0 11.69 24.5) 1.96 1.8 P/CE 6.969 10.33 26.6 5.7 1.995 5.1 2.033) (288) 0 62 (297) 0 2013E (405) 75 (76) 360 (968) (45) 0 0 (209) 0 2014E (414) 72 (66) 536 (912) 122 0 0 (209) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 2.2 7.546 10.766 3.3 (419) (388) 729 (0.3 7.1 6.3 21. 9M12 Free Float 49.344 2.2 7.966 1.1 46.150 3.765 (1.017 9.8) 46.

+5511-3012-5765 | pbalcao@santander.com.1 Shares Outstanding . our 1. STBP11 BZ Current Price (01/03/13) R$ 29.A. Santander estimates and company reports. and net profit up 21%. 200 . and (3) no-renewal 100 of the concession—R$16.A.00/share. implying a Brazil: Banco Santander S. We estimate flat Company Statistics prices in 2013 and a 10% and 5% fall in 2014 and 2015.br under a scenario of automatic concession renewal.00  Investment Case: Over the next 12 months.00/share.br Renan Manda* Brazil: Banco Santander S. the valuation would be R$31.com. we expect BTP and Pedro Balcão Reis* Embraport to start their operations at the Port of Santos. J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet. We also believe that regulatory risk is underestimated by the market.95 / US$ 14.00 / US$ 11. Therefore.930 Float (%) 31. at +3% to -46%. The implied valuation of these 80 scenarios.  2013 Outlook: In 2013 we expect just a limited impact from the start of operations of BTP and Embraport (the big impact should be felt in 2014-15) and a positive impact from the ramp-up of Imbituba. indicates an unfavorable risk/reward. +5511 3012-6535 | rmanda@santander.43 52-Week Range (R$) 25. We see three possible scenarios for 140 Santos Brasil: (1) our central case scenario. where the concession is renewed under less favorable conditions—R$24. BTP and Empraport are scheduled to start operations. suggesting a morethan-50% increase in the capacity of Santos Port.Mn 131 valuation includes a renewal of the Tecon Santos concession under less favorable conditions.2013 Latin American Universe Book BRAZIL—TRANSPORTATION & INFRASTRUCTURE SANTOS BRASIL UNDERPERFORM CURRENT PRICE: R$29. capacity utilization at Tecon Santos should fall from 86% in 2013 to 64% in 2015.00/share. (2) a 120 scenario of automatic renewal—R$31. respectively.com. We believe the concession contract of Tecon Santos does not imply an automatic renewal in 2022.19 . in 60 our view. Price Performance (R$) Santos Brasil  IBOVESPA 160 Unfavorable risk/reward. we estimate revenue to increase 10% (3% at Santos plus 7% from Imbituba ramp-up). +5511-3012-6016 | bamorim@santander. with the government focused on increasing capacity as a way to reduce prices and on discussing the possibility of introducing price caps in new concessions. Our YE2013 target price implies 20% downside.95 TARGET PRICE: R$24. EBITDA to increase 11%. just 3% upside. Daily Vol (US$ Mn) 4.br significant fall in volume and prices in 2013-15.60 Market Capitalization (US$ Mn)  High regulatory risk.A.71 Target Price (YE 2013) R$ 24. Over the next 12 months.  Competition is coming. Even Bruno Amorim* Brazil: Banco Santander S. Bloomberg Regarding volumes. Thus.0 3-Mth Avg.00/share.34.

5 2. 2012E Imbituba + CONVICON 5.2 3.284 290 308 685 364 173 2012E 95 181 574 1.3 P/BV 2.4 20.9 498 39.6 283 11.2 40.5% International Market Investments 26.482 459 233 2013E 322 491 1.3 35.3 448 29.6 14.1 2.5 P/CE 10.1 11.22 5.8 (30) (53) 198 46.2 LT Debt FINANCIAL RATIOS Net Debt Net Debt/Equity 2013E 1.78 DPS 1.104 169 191 744 218 111 2014E 174 243 515 1.8 12.4 161 (34.501 807 752 717 685 Net Debt/EBITDA 0.5 9.0 0.7% Free float 34.2 3.0 33.5 9.3 0.2 5.563 459 233 2011A 157 235 604 1.2 (18) (167) 323 21. 201 .5 2.3 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 16.2 9.5 9.3 3.7) 18.9 7.0% Vehicle terminal 6.9 8.1 3.4 634 11.0 35.7 100.4 86.18 0.4 ROE (%) 15.5 43.8 702 11.0 11.0 20.3 FV/Revenue 3.1 Capex/Revenue (%) Int Cover (%) Dividend Payout (%) MARKET RATIOS FV/EBITDA 7.3) 244 (27.91 11.5 7. Key Personnel: Antônio Carlos Duarte Sepúlveda (CEO). in Santa Catarina.2% Brasil Terminais S. and Tecon Vila do Conde.4 8.125 29.5 7.3 2011A 625 22.2) 480 (24.513 1.3 6.3 Div Yield (%) 5.5 FCF Yield (%) 3. in São Paulo.2 126.7 14. Balance Sheet and CF Statement. The company also operates TEV.9 304 7.7) 532 (24.9 (5) (70) 132 20.2 6.8 0. 8.5 2.3 221 15.1 33.9 45.3 0.4 352 (31.7% Revenue Breakdown.3 0.7 5. A.8 3.3 2014E 559 (19.29 11.5 2.7 11.01 1.0 6.3 6.1 22.5) 39.5) 220 (27./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (109) (27) 311 (197) 105 217 (163) 12 2012E (124) (60) 359 (101) 250 (224) (232) 9 2013E (124) 2 463 (76) 373 0 (242) 0 2014E (129) 12 373 (81) 284 0 (224) 0 2011A (61) (15) 173 (109) 58 120 (91) 7 2012E (61) (30) 178 (50) 124 (111) (115) 4 2013E (60) 1 222 (36) 179 0 (116) 0 2014E (59) 6 171 (37) 130 0 (103) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 295 440 1.3 31.8 510 14.1 43.3 10.3 2014E 1.1) 28.5 7.0% Port terminals 77.1 17.1 43.506 1.0 17.6 US$ 2012E 652 4.85 1.055 159 183 713 209 106 359 226 226 226 191 113 108 103 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 388 268 137 77 207 134 65 35 Capital Employed 1.67 5.7 17.4 31.br Port Operations Breakdown.3 2013E 693 6.0 22.1 10.1 0. SB operates three container terminals: Tecon de Santos.319 17.9 0.3) 39.447 9.04 2.3 6.9 11.8 3.84 1.1 17.5 12.8 8.1 9.1 30. A.8 254 36.8) 18.4 43.3 17.6 7.5 571 25.8 (11) (115) 224 (30.71 0.3 6.7 69.4 14.51 2.2 (9) (80) 155 17.69 0.148 2.4 ROCE (%) 30.3 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.0 6.2% 20. 10.71 0.3 7.5 9.2 6.8 456 44.0) 28.9 20.77 1.6 R$ 2012E 1.0% Shareholder Structure.6 347 58.8 244 10.286 683 324 2012E 191 362 1.1 2.3 336 7.130 2.A.3% Santos 94.6 2.6 193 49.6 117. 2012E Logistics 17.78 BVPS 9.4 33.3 41.2 8.119 178 200 741 229 116 2013E 153 234 542 1.8 (16) (30) 110 37.7 14.7 9. Tecon Imbituba.5 2.9 69.4 10. Washington Cristiano Kato (CFO) and Marcos de Magalhães Tourinho (IR Director) Web: www.4 17.4 18.91 5.312 349 401 1.220 (15.238 356 401 1.2 0.0 6.134 2.com.2 0.9 (11) (142) 267 35.5 277 31.318 355 401 1.4% Sources for all charts and tables: Company reports and Santander estimates.1 11.2 30.7 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 1.1 18.7 17.3 7.5 0. July 2012 Multi STS PW237 Participações S.6 7.2 5.2 17.1 0.2 0.24 1.80 11. in Pará.46 1.SANTOS BRASIL Financial Highlights: P&L. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 1. Currently.4 312 12.6 15.6 2.504 1.3 45.3 12.5 40.87 0.89 0. Participações S.65 5.8 (5) (53) 103 (33.3 630 26. one of the largest vehicle terminals in the country.43 FV/EBIT PER SHARE DATA Santos Brasil is responsible for handling approximately 25% of the containers in the country.4 6.563 459 233 2014E 382 533 1.5 0.8 11.6 5.2 90.2 120.4 17.8 12.santosbrasil.139 2.2 20.7 39.409 544 578 1.2 0.6 5.2 0.4 8.0 9.

202 . we project a net increase in its GLA base. +5511-3012-5765 | pbalcao@santander.5 income properties might compete for the same assets. Current Price (01/03/13) R$ 45. They enable income properties to divest from assets that 200 have reached maturity. .com.90 .br reflected in the stock’s price.67 which is consistent with a Hold recommendation.. .46.00 Market Capitalization (US$ Mn) 1.  Not much room for further stock price appreciation. São Carlos’s net GLA variation was close to zero.70..2x). 150 100 50 J-11 M-11 D-11 A-12 D-12 Sources: FactSet. CONSTRUCTION.70 DOWNGRADING RATING TO HOLD FROM BUY INTRODUCING YE2013 TARGET PRICE OF R$49.  Although the development of the Brazilian real estate funds (the SCAR3 BZ 52-Week Range (R$) 23.70 / US$ 23. . In the last three years. which we view as accretive. we believe the company is well positioned to expand its operations and consequently improve earnings momentum. our DCF model points to a single-digit upside potential. which should help EBITDA expand by 14% YoY.00 / US$ 22. INFRA & RE SÃO CARLOS HOLD CURRENT PRICE: R$45.com.1 Brazilian REITs) fuels competition.20  Investment Case: In our opinion. At a time when high singledigit cap rates become compelling as real interest rates are currently pretty low. +5511-3012-7414 | fpgama@santander. São Carlos has managed to deliver double-digit cap rates on acquisitions.A. which could Shares Outstanding .268 Float (%) 46. Taking into account its sound balance sheet (a cash balance of nearly R$420 million and relatively low leverage—ND/EBITDA of 3.2013 Latin American Universe Book BRAZIL—CEMENT. Daily Vol (US$ Mn) 0.  Despite delivering on acquisitions .00 TARGET PRICE: R$49. REPLACING YE2012 TARGET PRICE OF R$29. . São Carlos’s favorable Fabiola Gama* fundamentals and still healthy macroeconomic backdrop are already Brazil: Banco Santander S.br part of its portfolio in 2013.10 Target Price (YE 2013) R$ 49. Even Company Statistics incorporating additional GLA on top of the company’s development Bloomberg pipeline. São Carlos IBOVESPA A-11 A-12 250  .A.Mn 57 potentially raise such assets’ prices and thus undermine buyers’ Price Performance (R$) profitability. In our opinion.  2013 Outlook: Although we expect São Carlos to continue recycling Pedro Balcão Reis* Brazil: Banco Santander S. . FIIs and 3-Mth Avg. Santander estimates and company reports. .  . Earnings profile is pegged to additional investments.

115 907 45 2011A 158 201 726 928 108 427 392 486 73 2012E 1 57 784 840 57 320 464 322 16 2013E 1 61 826 887 63 342 482 346 17 2014E 2 72 916 988 73 406 508 414 21 775 612 690 862 413 306 329 393 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 615 641 723 903 328 321 345 412 Capital Employed 1.1% Marcel Telles. distribution centers.1 3.5 (88) (34) 136 20.9 3.0 112 43.4 11.7 74.4 10.7 0.41 273.6 92.574 1.5 44.1 105 8.3 73.59 8.2 52.0 10.0 86.4 85.4 11.6 14.9) (0.7 126 7.3 11.3 Dividend Payout (%) 26.2) (5.21 2014e 2014E (36) 0 (9) 163 (310) (147) 0 181 (34) 1 São Carlos is one of the main Brazilian commercial real estate companies focused on acquiring.6 300 15.2 152 50.5 83.767 1.7 2.2 12.4 12. São Carlos had a portfolio of properties comprising 388.8 13.2 18.009 2.7 11.7 86.96 1.19 17.1 253 17.42 0.7 0.49 0.2 111 5.6 12.9 15. Jorge Lemann and Carlos S 53.0 2013e 2011A (25) 0 21 142 (210) (68) 0 73 (24) (5) LT Debt 2011A 127 41.3 17.5 Capex/Revenue (%) Int Cover (%) 1.5 2.8 (87) (20) 202 109.2 14.9 12.2 P/BV 1.8 3.8 (44) (10) 104 80.3 1.5 259 13. as of September 2012 Free Float 46.br/ri Avg.6 67.8 45.8 0.167 161 891 1. mainly located in the states of São Paulo and Rio de Janeiro.07 18.0 17.4 (36) (10) 58 8.9 71.3 71. managing.13 8.1 1.8 2011 P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue R$ 2012E 256 20.1 Net Debt/Equity 0.6 73.17 312.362 1.2 ROE (%) 13.7 0.862 132 718 1.4 2013E 290 13.8 3.7 0.2 17.4 135 11.4 83.1 40.8) 39.24 0.5 FV/Revenue 9.2) (5.97 2.3 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 1.73 6.51 1.10 DPS 0.9 2.4 12.7 121 8.95 227.265 1.0 US$ 2012E 131 3.681 114 639 928 644 32 2013E 3 129 1.54 PER SHARE DATA BVPS Key Personnel: Felipe Góes (CEO) and Fábio Itikawa (CFO and IR) Web: www.80 0.1 15.88 0.6 67.1 3.7 105 50.SÃO CARLOS Company Description 2011A (15) 0 13 85 (126) (41) 0 44 (14) (3) 2012E (14) 0 (9) 108 (119) (11) 0 (138) (26) 24 2013E (15) 0 (2) 68 (96) (28) 0 40 (14) 1 2014E (17) 0 (4) 76 (145) (68) 0 84 (16) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 297 378 1.6 22.6 92.25 0.85 408.4 8.8 117 5.96 412.1 1.734 1.1 216 14.28 15.0 27.9 75.5 2.8 177 45.8 2.9 13.2 12.1 10.8) FCF Yield (%) Div Yield (%) 1.8 11.3 14.1 14.1 ROCE (%) 11.4 (59) (17) 96 4.9) (2.7 40.5 (38) (14) 55 (46.5 13.6 P/CE 11.6 85.scsa. renting and selling income properties.2 90.4 140 10. 2011–14E in Millions Shareholder Structure.7 FV/EBITDA 11.973 674 787 842 900 Net Debt/EBITDA 3.4 2012e CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.740 203 802 736 912 137 2012E 3 113 1.4 97 7.9 2.8 11.5 45./(Divestments) Change in Debt Dividends Capital Increases/Other 2014E 335 15.3 78.2 90 56.28 12.2 11.6 12.013 726 36 2014E 4 157 2.3 84.2 187 38.5 74.9 2.5) (0.3 84.8 12.6 2012e 2011A 212 36.2 78.1 21.9 0.3 1.2 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 14.9% Sources for all charts and tables: Company reports and Santander estimates.60 400.8 11.9 2.1 118 11.5 (41) (16) 63 14.5 (79) (28) 113 (43.1 30.4 247 14.8 99.9 3.3 (4. 203 .59 0.28 2014e 2013E (31) 0 (5) 140 (196) (57) 0 83 (28) 3 Net Debt 2014E 156 10.8 0. including office buildings.5 11. Gross Rental Revenue (R$ million).3 13.3 1. Balance Sheet and CF Statement.2 12.7) (5.8) (2.0 1.4 12.8 1.8 22.2 90.6) 39.8 16.6 11.6 229 22. street stores and multiuse.5 30.2 216 22.5 22.4 12.8 FV/EBIT MARKET RATIOS 13.1 2.0 12.8 1.8 2.602 m2 of total gross leasable area.6 2013e 2012E (27) 0 (18) 210 (232) (21) 0 (268) (50) 46 FINANCIAL RATIOS 2013E 142 7.4 189 24.8 2011 Financial Highlights: P&L. As of September 2012.37 1.8 19.00 1.5 14.9 13.com.1 10.45 0.5 3.54 7.0 1.2 75. 2011-2014E 446.0 2.1 11.568 1. 2012E 361.1 3.5 99.68 3.3 14. GLA Evolution (‗000 m2).6 289 17.

both of Company Statistics which would positively impact São Martinho. Its operational and financial prowess.7 million should come from 1.com.) São Martinho  IBOVESPA 120 Increasing participation in Santa Cruz with no cash 110 disbursement.7 million ton Market Capitalization (US$ Mn) increase). (2) the product mix to be driven more toward ethanol. São Martinho expects to increase its crushing capacity from 14. 2.60 TARGET PRICE: R$35.60 / US$ 13.28. especially anhydrous. Bloomberg  Well-defined target growth in crushing capacity. Santander estimates and company reports. +1-212-350-3991 | caudi@santander.7 million in crushing capacity to São Martinho without any cash 70 disbursements. 204 . we estimate (1) crushing volume production to be 5-10% higher. Higher production coming from other countries should be offset by the Brazilian harvest shifting toward ethanol.  Potential catalysts around the corner.5 Shares Outstanding . (See Price Performance (R$) below.Mn 113 an increasing stake in Santa Cruz mill over the next 12 months.A.00  Investment Case: We reiterate our positive view on São Martinho Christian Audi given its ability to deliver continually solid. The acquisition would add another 80 2. owing to the expected increase in the gasoline mix from 20% to 25% by midyear.5 3-Mth Avg.18% stake in 100 Santa Cruz.us results while maintaining solid capital discipline.  2013 Outlook: For São Martinho’s 2013-14 harvest. above-industry-average New York: Santander Investment Securities Inc. São Martinho currently holds a 32. Daily Vol (US$ Mn) 1. +5511-3012-6042 | vneto@santander. Among them.00 currently to 19. 60 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet.00 / US$ 17.82 .07 Target Price (YE 2013) R$ 35.8 million tons SMTO3 BZ Current Price (01/03/13) R$ 26. we could see a reduction on PIS/COFINS taxes and/or an increase in gasoline prices. coupled with an attractive valuation and potential catalysts around the corner. as the payment would be concluded in land. and management expects to increase this participation 90 to 87. Of this.0 million should come from the brownfields in Float (%) Boa Vista and Usina São Martinho and 2. makes this a continually attractive story Vicente Falanga Neto* Brazil: Banco Santander S.07 52-Week Range (R$) 16.5% in the next 12 months.2013 Latin American Universe Book BRAZIL—AGRIBUSINESS SÃO MARTINHO BUY CURRENT PRICE: R$26.br in a difficult sector. and (3) sugar prices to remain flattish.476 35. the federal government might be working on incentives to increase investments in the ethanol industry. In our view.5 million tons in the 2014-15 harvest (4.

037 892 186 LT Debt FINANCIAL RATIOS Net Debt 2013E 1. It has only one type of share (SMTO3).0 221 (9.1 7.4 US$ 2012E 804 8.7 244 71.00 9.8 ROE (%) 6.30 0.3 1.7 8.7 5.177 1.1 P/BV 1.3 0.9 (45) (44) 60 (3.2 7.8 49.681 312 1.6 (48) (35) 62 (16./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (352) 3 198 293 (347) 94 4 (243) (40) 428 2012E (372) 4 37 596 (678) 186 (8) 521 (3) (242) 2013E (442) 5 (146) 238 (442) 477 (5) 639 (60) 106 2014E (433) 6 (49) 532 (363) 138 (1) 0 (31) 0 2011A (202) 2 114 168 (199) 54 2 (140) (23) 246 2012E (219) 2 22 350 (398) 109 (5) 306 (2) (142) 2013E (227) 3 (75) 122 (227) 245 (2) 328 (31) 54 2014E (211) 3 (24) 259 (177) 67 (0) 0 (15) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 225 474 2.27 0.3 18.1 41.7 25.9 24.5 229 (3.4 1.8 5.16 0.1 5.026 1.3 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.3 8.7 (63) (40) 127 (6.6) 6.3 15.235 248 2013E 887 1.4 304 7.0 3.1 Net Debt/Equity Capex/Revenue (%) Int Cover (%) 0.295 9.874 391 2014E 1.0 14.527 3.2 8.9 6.4 FV/Revenue 2.0 41.4 26.473 209 1. which is listed on the Brazilian stock exchange.8 17.977 Net Debt/EBITDA 0. The company is part of the Novo Mercado.046 4.55 0.29 17.232 5.8 49.198 438 86 2012E 226 364 1.5 2014E 1.6 27.0 3.5 2.801 12.7 263 3.1 40.53 0.9 4.6 23.0 145 7.6 17. São Martinho was founded in 1914 and went public in February 2007.0 1.3 FV/EBITDA 6.0 5.27 0. 2012 Free Float 35.5 23.5 16.8 5.234 1.874 391 2011A 138 291 1.1 1.3 5.6 42.2 311 56.3 5.2 25.3% International 57.5 20.61 9.311 5.1 12.780 2.1 2.7 5.84 9.7 4.9 1.6% Other 8.2 2.9) 16.1 1.4 1.0 5.5 1.3 2013E 824 2.367 5.2 (39) (62) 135 45.5 22. The company has a sugarcane crushing capacity of 14. thus complying with the highest levels of corporate governance.09 0.4) 9.0 283 23.1 47.017 914 191 2014E 488 727 1.5 1.5% Ethanol 55.6 377 (11.4 148 2.5 6.2 (22) (36) 78 56.1 ROCE (%) 10.322 4.4 0.4 1.1 10.5 0.3 7.973 1.0% Ometto Family 61.3 746 13.7% Sales by Segment.8 571 985 1.812 1.17 0.4 425 59.4 0.5 135 (0.9 364 7.4 2.4 1.7 4.5 16.8 19.4 338 (1.8 2011A 744 17.481 350 541 722 705 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 489 824 987 848 300 453 481 404 Capital Employed 2.13 17.5 0.17 São Martinho is one of the largest sugarcane groups in Brazil and the second largest publicly traded one.8 24.5 million tons and.0 Dividend Payout (%) 43. 2013E Sugar 35.3 5.0 6.9 (92) (90) 123 1.787 517 2.45 19.2 13.8 41.736 1.606 17. It is located in a highly productive area in the State of São Paulo (two mills) and in Goias (one mill and one greenfield in partnership with Petrobras Biocombustível).4 2.3 0.6 27.3) 341 9.5% Sources for all charts and tables: Company reports and Santander estimates.771 2.28 0.4 6. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 1.9 5.1 2.9 236 111.4 18.7 8.5% Other 3.3 14.065 1.295 3.112 678 136 2013E 433 632 1.92 18.5 20.2 8.1 539 9.2 42.9 P/CE 5.481 1.4) 581 7.4 1.5) 7.3 542 45.2 6.630 284 1.953 714 141 2012E 411 663 3. according to its expansion plan.9 136 127.2 14.4 FCF Yield (%) 3. Key Personnel: Fábio Venturelli (CEO).727 3.8 9.685 684 2.344 1.4 0.3 46.ind.1 5.8 2.14 0.3 6.12 1.707 326 1.2 0.9 5.9% Shareholder Structure.3 5.352 1.3 5. Balance Sheet and CF Statement.152 1.saomartinho.539 2.27 10.025 1.7 (37) (23) 74 (4.0 1.0 1.2 6.3 41.6 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 21.030 341 1.7 15.3) 9.6 3.2 16.6 2.4 12.0 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 1.8 2.495 640 2.69 0.901 4.SÃO MARTINHO Financial Highlights: P&L.1 2.1 658 13.6 5. is expected to reach 19.4 R$ 2012E 1.5 2014E 879 6.823 2. João Carvalho do Val (CFO) and Felipe Vichiatto (IR Officer) Web: www.7 4.20 1.5 253 14.5 million tons in 2014/15.5 1.1 10.66 0.br Sales by Region.07 1.7 MARKET RATIOS P/E FV/EBIT Div Yield (%) PER SHARE DATA EPS DPS BVPS 1.673 1.5 2.1) 41.825 2.6 (93) (69) 121 (4.3 1.298 4.085 1.1 5. 205 .3 1.6 6.0 15.615 2.3 5.1 26.4 20. 2013E Brazil 42.5 494 31.245 2.3 41.1) 16.4 0.3) 7.

We believe that improvements in the bookstore unit’s FCF generation could be a trigger for share performance (so the Daniel Gewehr* Brazil: Banco Santander S. SLED4 shares are trading at a 2013E P/E Brazil: Banco Santander S.00 / US$ 18.Mn 28 discipline (which has come at the expense of lower top-line growth) and its focus on cash generation. to R$100 million.10 . Of note.3%. and pricing control seems to be in the hands of publishers. which stems from management’s commercial 3-Mth Avg.28. which represents ~50% of the company’s EBITDA).20 / US$ 12. CFA on its attractive valuation. Daily Vol (US$ Mn) 1. Santander estimates and company reports.7 positive in 2012.0 Shares Outstanding . We expect the bookstore Market Capitalization (US$ Mn) 365 operation to deliver a FCFF of R$25 million in 2013.com.  What‘s changed? We cut our 2013 EBITDA estimate by 10%. +5511-3012-5787 | dhgewehr@santander. SLED4 BZ Current Price (01/03/13) R$ 26.22 52-Week Range (R$)  19. 206 . we reduced the Company Statistics long-term volume of the National Book Program (PNLD) and the Bloomberg publishing division’s EBITDA margin to ~18% (from ~20%).A.com. The stock also offers a dividend yield of 3.br of 7. REPLACING YE2012 TARGET PRICE OF R$45. We forecast net income will increase 28% YoY.000 books). We do not believe that the entrance of Amazon and Kobo in Brazil will materially change the dynamics of Brazilian book retailing in the short 100 80 term. after turning Float (%) 67.br Street can attribute some value to this operation. +5511-3012-5914 | bgiardino@santander.00. also favored by the balance sheet deleverage (FCFF to amount to R$62 million) and a cheaper debt profile.20 TARGET PRICE: R$41. thanks to retail’s lower top line (we cut our EPS estimate.A. The number of e-books in Portuguese is still low (~13. 60 40 j-11 m-11 a-11 d-11 a-12 a-12 d-12 Sources: FactSet.4x and a FCFE yield of 5. by just 5%). as its ebookstore ranked 32nd in book sales among all 97 physical stores.  2013 Outlook: We expect Saraiva to post EBITDA growth of 18% YoY. Price Performance (R$) Saraiva  IBOVESPA 120 Amazon: No disruptive change expected in the short term. driven by 14% top-line growth and a 50-bp increase in the bookstore operation’s EBITDA margin (to 7%).00 Positive FCF in bookstore operation.00  Investment Thesis: We reiterate our Buy rating on Saraiva based Bruno Giardino*.5%. however. We also adopted more conservative assumptions in the long-term so as to incorporate uncertainties regarding the impact of digital trends into Saraiva’s businesses.87 Target Price (YE 2013) R$ 41.2013 Latin American Universe Book BRAZIL—RETAIL & CONSUMER GOODS SARAIVA BUY CURRENT PRICE: R$26.00 INTRODUCING YE2013 TARGET PRICE OF R$41. Ultimately. Saraiva could benefit from this digital trend.

16 10.1 FCF Yield (%) 2.3 9.9 180 4.7) 9.4 5.9 Div Yield (%) 3.4 PER SHARE DATA 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 2.49 9.8 75 4.4 4.62 23.1 16.com.7 8.9 15.6 9.0 6.5 33.6 MARKET RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 9.6 2.7 6.5 3. and roughly 54.8 3.1 83 25.48 0.4 US$ 2012E 973 (13.4 6.5 141 1.1 1.6 2014E 2.889 million in 2011 and 56% of its EBITDA of R$173 million.5 28.9% Free-float 67.7 ROE (%) 13.0 33.55 8.00 20.54 3.4 R$ 2012E 1.br Sales by Segment.6 2.9 4.8 77 1.7 1.37 1.9% Bookstore 81.4 1.352 8.8 7.9 4.2 3.5 0.1 9.1 2013E 991 1.0 4.6 212 17.2 7.4 (18) (14) 40 3.6 P/CE 6. 207 .5 72 (13.9) 92 (10.4 0.1 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.8 426 0.1 5.321 531 281 509 378 139 2013E 91 1.5 3.3 6.5 (10) (19) 48 4.2 3.8 176 7.008 8.0 3.0 6.9 827 2.5 25. which accounted for 26% of the company’s total net revenue of R$1.29 2. offering 90% tagalong for preferred shareholders.4 Capex/Revenue (%) 3.2 FV/EBIT 6.4 1. Balance Sheet and CF Statement.98 0 0.6 0.3 231 9.6 (25) (39) 100 27.6 2.905 0. is the fourth largest book publisher of educational books in Brazil and the leader in the law book segment.2 6.7 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E Net Debt 274 298 287 241 146 140 127 102 Capital Employed 740 807 871 908 395 381 387 387 Net Debt/EBITDA 1.5 Int Cover (%) 3. João Luis Ramos Hopp (CFO).5 9.6 1.3 5.450 584 281 585 378 139 2014E 137 1.1 9.0 8.1 25.3 7.7 2011A 1.5 1.2 16. 2.889 20.6 2014E 1.3 4.9 4.4 9.3 1.4 12.45 18. Saraiva is listed in the Bovespa’s Level 2 of corporate governance.5 8. The bookstore division is the largest bookstore chain in the country in terms of revenue.2 8.7 12.7% Sources for all charts and tables: Company reports and Santander estimates.1 4.3 5.40 0.7 4.5 14.4 0.4 14.8 480 25.2 6.9 33.5 0. 9M12 Publishing 34.7 3.7) 422 (11.5 0.128 26.2 9.70 DPS 0 0.91 1.5 0.0 14.SARAIVA Financial Highlights: P&L.5 6.78 3.6 (12) (18) 46 14.6 0.1 ROCE (%) 15. which has a fastgrowing e-commerce operation.0 7.0 173 19.4% Shareholder Structure.166 13.1 14./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (33) 42 (123) 49 (61) 12 109 (19) (1) 2012E (39) 28 (66) 114 (58) 62 28 (22) 0 2013E (47) 0 (55) 157 (56) 62 0 (26) 0 2014E (55) 0 (37) 194 (58) 94 0 (25) 0 2011A (20) 25 (74) 29 (37) 7 65 (12) (0) 2012E (20) 14 (34) 58 (30) 32 14 (11) 0 2013E (22) 0 (25) 72 (26) 29 0 (12) 0 2014E (24) 0 (16) 84 (25) 41 0 (11) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 102 970 260 1.7 17. 3Q12 Saraiva Family 28.4 1.42 16.6 15.2 438 2.5 5.6 0.1 7.4 FV/EBITDA 5.1 4.1 140 19.7 4.4 0.7 15. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 1.5% Board and Mgmt.2 3.4 4.4 9.3 7.3 3.4 17.4 14.2 6.2 17.4 3.7 931 12.7 3.1% EBITDA by Segment.2 7.1 2.9 100 3.5 0.1 7.4 (50) (25) 65 6.5 5. Agberto Cavalcante (Planning Officer) and Marcílio Pousada (CEO of Retail Operation) Web: www.5 FV/Revenue 0.5 0.3 1.4 1. Key Personnel: José Luis Próspero (CEO).573 624 281 668 378 139 2011A 54 517 139 713 287 178 249 200 63 2012E 38 440 131 623 250 133 240 178 66 2013E 41 468 127 644 260 125 260 168 62 2014E 58 500 123 669 266 120 284 161 59 258 239 239 239 137 113 106 102 LT Debt FINANCIAL RATIOS 2013E 2.77 8.8 97 5.1 103 25.88 0.93 0.4) 7. 9M12 Publishing 18.4 (30) (15) 39 11.3 1.3 1.6 5.4 P/BV 1.023 3.4 (36) (27) 79 21.1 2.4 9.6 3.02 BVPS Saraiva consists of a publishing division (Editora Saraiva) and a bookstore unit (Livraria Saraiva). with a total of 102 owned stores (as of September 2012).5 4.7 4.8 164 16. Editora Saraiva.2 7.42 1.8 4.3 1.62 1.7 0.0 1.337 538 333 466 376 118 2012E 81 934 278 1.7 Dividend Payout (%) 31.174 289 1.0 Net Debt/Equity 0.saraiva.0 5.7 32.1 8.0 4.054 286 1.7 803 19.6 1.6 7.4 3.0 6.3 4.9% Treasury 0.5 (23) (43) 111 10.500 square meters of selling area.5 0.5 16.6% Bookstore 65.

Sul America IBOVESPA 110  Buy also on valuation. Daily Vol (US$ Mn) 3. 12.00 RAISING YE2013 TARGET TO R$20. thus offering potential for good long-term growth and visibility.90 Market Capitalization (US$ Mn) 2. which is not an aggressive multiple. we believe loss ratios could improve and the company could derive some benefits from operating leverage. thus improving profitability. +5511-3012-5731 | rcabral@santander. Our new YE2013 target price implies a 100 target P/E of 11. +5511-3012-5756 | havieira@santander.2013 Latin American Universe Book BRAZIL—FINANCIAL SERVICES SUL AMERICA BUY CURRENT PRICE: R$17. 80 70 60 50 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet. We believe this company has the strength to become the new star of the insurance sector.9 boosting average trading volume due to pair trades possibilities. but better than 2001-2012.00 FROM R$16.5x.  BB Seguridade—a new listed company to unlock value perception. we see Sul America as the cheapest way to play the insurance sector in Brazil. Banco do Brasil expects to go ahead with the IPO of its insurance-capitalization-pension-plan company BB Seguridade during 2013.10 . Previous turmoil is already priced-in (for example. 208 .  2013 Outlook: We expect 2013 to be a challenging year.br upside than downside risks given recent operating performance.419 Float (%) 37.51 / US$ 8.A. +1-212-350-3977|bmolina@santander.A.00 / US$ 9. which supports our Buy rating. especially after mid-2012.15 Sul America and Porto Seguro combined) could also shine a 52-Week Range (R$) spotlight on the Brazilian insurance sector. Its size (potentially that of Target Price (YE 2013) R$ 20. and the total- 90 return potential is 17%.18. We believe this sector’s penetration levels are far from their saturation point. trading at multiples above those Company Statistics Bloomberg SULA11 BZ Current Price (01/03/13) R$ 17. In this context. one of our most favored groups among financial services companies.com.51 TARGET PRICE: R$20. We see Sul America benefiting from all Shares Outstanding .30  Henrique Navarro* Investment Case: We continue to be very positive about the insurance sector.4 unlocking value perception.60 of the listed insurance companies in Brazil.us Renata Cabral* Brazil: Banco Santander S. and we believe our numbers have more Brazil: Banco Santander S. and 3-Mth Avg. Santander estimates and company reports.br Boris Molina New York: Santander Investment Securities Inc. attracting interest. Therefore.Mn 281 that—and we do not expect BB Seguridade to change Sul America’s Price Performance (R$) current competitive strategy. declining local interest rates) or has calmed down (in the case of competitive pressure).com.

1 0.0) (10.A.4 30.4 2.8 11.4 10.SUL AMERICA Financial Highlights: P&L and Balance Sheet.7) 2014E 13.38 1.6 12.1 100.9 12.0% Others Equities 3.2 0.249 1.635.367 2012E 307 3.7 8.918 1.9 12.016 1.sulamerica.8 97.1 0.6 27.4 P/CE 9. Key Personnel: Patrick Antonio Claude de Larragoiti Lucas (Chairman).6 8.535 2.2) 7 393 47 446 (154) 266 (23.2 5.5 10.1 99.803 2. and life insurance.07 6.8) 2014E 6.83 5.3 12.41 0.4 30.7 13.0 2013E 75.228 2011A 256 3.227 928 66 24 8.4 2.327 544 0 4.9 5.293 295 0 2.3 2.689 1.0 1.4 93.372 1.7 0.7 (12.1 0. 2011–14E in Millions R$ 2012E 2013E 10.3 2.585 OPERATING RATIOS Claims Ratio Sales Ratio Admin Ratio Combined Ratio Amplified Combined Ratio Effective Tax Rate Excess Solvency Margin ROAA 2011A 74.686 2.4 10.636 601 0 4.738 6. the company operates mainly in the health insurance segment.5) (1.5 0.1 96.8 (5.1 0.519 5.2 11.0 1.154 2.2 18.7% 3.075 1.74 0.1 0.1 1.9 9.53 PER SHARE DATA EPS CEPS - - - - - - - - BVPS 10.1 100.7 (5.95 0.419 5.2 0.907 4.0 2013E 75.467 2.3 0.0 0.340 19.2 14.3 5.76 12.7 8.155 1.0% Sources for all charts and tables: Company reports and Santander estimates.6 100.4 13.6 5.283 1. ING became a significant shareholder in the company in 2001.0 0.34 0.206 275 0 2. bonds 68.1% Premiums per Segment.1 10.15 DPS Sul America S.7 5.0 2014E 75.2) INCOME STATEMENT Written Premiums Growth (%) Retained Premiums Growth (%) Earned Premiums Growth (%) Commissions and Expenses Underwriting Results Financial Result Equity Income Profit Before Taxes Taxes Net Profit Growth (%) 2011A 9.6) 11 658 78 747 (258) 446 (27.1 (5.522.2 9.br/ri Invested Portfolio.255 1. 2012E Inflationlinked bonds 27.939 15.053 72 31 7.672 148 53 15.2% Health 70.6 9.274 2012E 76.2 11.318 865 69 25 7.342 2013E 284 3.com.4 93.3 0.1 1.6 29.793 12. 3Q12 Sulasapar (ex-ING) 18.4 P/BV 1.5 12.8 100. currently holding directly and indirectly 36% of the company.7 14.5 95.6 5.1 0.3 12.558 5.22 0.6 13.4) (37) 27 535 417 78 91 575 550 (174) (161) 394 389 (11.330 12. as well as in auto insurance.2 0.9) 2011A 5.2 14.7 10.19 0.0 2011A 74.3) 70 288 103 460 (125) 335 (13.1 0.477 11.6 0.48 0.711 2.1) (11.3 0.256 2014E 276 3.9 5.628 17.0 2.862 551 0 4.945 13.59 6.0 34.9% ING 36.1 96.420 2.125 10.891 150 54 16.455 12.5 10.634 3. is the largest independent insurance company in Brazil.6 5.355.5 0.5 10.2 0.895 130 56 13.037 3. 3Q12 Auto 21. Founded over 110 years ago.838 1.1 0.8 100.1 0.74 13. Sul America became a publicly traded company in October 2007 and has been controlled by the Larragoiti family since its inception.93 11.1 99. Arthur Farme d’Amoed Neto (CFO and Corporate VP) Web: www.5 12.4 0.295.962 4.4 0.455 3.034 306 0 2.8 97.9) 2013E 621 7. property and casualty (P&C).9 (8.599.259 14.448 16.830 17.973 678 0 5.9 (10.640 1.2 14.687 2.685 5.255 3.3 1.1% Free float 37.7 10.6 11.01 5.0) (5.5 10.6 12.5 10.426 11.433 2.5 13.0 34.0% Shareholder Structure.19 0.1) 31 128 46 204 (55) 149 (19.929 2014E 635 7.261 2012E 601 7.6 27.1% Others 8.2 7.6 29.052.1 12.244.0 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 1.660 2.4) BALANCE SHEET Cash and Equivalents Financial Assets Premiums Receivable Intangible Assets Tangible Assets Total Assets Current Liabilities Technical Provisions Other Provisions Debt and Financial Liabilities Minority Interest Equity 2011A 460 6.243 1.80 0.4 2.0 2012E 76.91 0.7 2.088.2 4.189 278 0 2.42 0.9% Life + VGBL Others 4.5 0.0 2014E 75.046 5.9 1.108 4.0% 2.5 95.6 100.2 9. Thomaz Luiz Cabral de Menezes (CEO).8 11.2 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 9.0 ROAE Payout MARKET RATIOS Company Description US$ 2012E 2013E 5. 209 .7 14.5 10.0 2.960 1.6 10.6 11.134 152 55 18.58 1.40 1.3) (20) 13 282 199 41 43 303 262 (92) (77) 208 185 (22.0% Floating Gov.784 12.552 11.258 1.0 0.584 854 75 27 7.482 7.66 0.9 Div Yield (%) 5.

50  Investment Case: We are downgrading Suzano to Underperform Felipe Reis* from Hold following the stock’s rally since mid-September (up 57% in Brazil: Banco Santander S.73 3.595 35.com. Suzano is currently implementing a plan to reduce costs and increase operating efficiency.82 . Our above-consensus estimates for 2013-14 already reflect expectations of cost gains. 60 40 20 D-10 A-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet. we see Suzano trading at an estimated EV/EBITDA multiple of 7. who comes from the Votorantim Group and takes office January 1) could announce further measures to improve the company’s productivity. up from about 5. which is insufficient to improve leverage ratios materially.9 Shares Outstanding .30 DOWNGRADING RATING TO UNDERPERFORM FROM HOLD RAISING YE2013 TARGET PRICE TO R$6. which.A.3 3-Mth Avg.75 / US$ 3.75 TARGET PRICE: R$6. Price Performance (R$) Suzano On the positive side.Mn 1. Furthermore. We project that Suzano’s net debt/EBITDA Market Capitalization (US$ Mn) ratio will reach 5.0x currently.24 Target Price (YE 2013) R$ 6. We Float (%) estimate the company could raise R$415 million with the sale of 3.9x for the two-year forward multiple. 27% above the historical average of 5.2x by YE2013. in our view.5 billion financial package that should allow 100 the completion of investments in Maranhão and the rollover of IBOVESPA 80 maturing debt. was ahead of fundamentals. we actually Alex Sciacio*. 210 .109 noncore assets (an 18% stake in the Capim Branco power plant + land plots). +5511-3012-5758 | ffreis@santander.br find downside for the stock from current levels. with an R$8.5x. Despite assuming 15% higher-than-consensus estimates for Suzano’s 2013-14 EBITDA in our model. in our view.  Valuation is expensive even on a normalized basis. we believe the company’s new CEO (Mr.  2013 Outlook: Cost reductions could be a positive surprise for 2013. Daily Vol (US$ Mn) 11.30 / US$ 3.com.2013 Latin American Universe Book BRAZIL—PULP & FOREST PRODUCTS SUZANO UNDERPERFORM CURRENT PRICE: R$6. +5511-3012-5870 | azsciacio@santander.br domestic currency terms). but visibility is currently low. Looking at 2014 (when Maranhão mill will be fully ramped up). Santander estimates and company reports.  Company Statistics Bloomberg SUZB5 BZ Current Price (01/03/13) R$6. CFA Brazil: Banco Santander S.A.30 FROM R$5.00 Leverage to remain under pressure in 2013 due to investments 52-Week Range (R$) in the Maranhão mill. in our view. liquidity and funding issues were recently 120 addressed. which should start to bear fruit in 2013. Walter Schalka.8.

5) (20.512 11.7 2.8) 14.078 5.7 571 637 (11.8 2.9 5.3 tons of printing and writing paper (P/W) and paperboard.005 25.4 26.657 21.0) 12.546 420 1.0% Revenue by Destination.2 1.052 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 5.1 (2.245) (2.9 2.0 278.546 11.7) (23.264 11.2 1.00 20.2) (10.830 7.0) (24.2 0.513) 792 (83) 1.7) 14.3) 3.135 4.476 12. Alberto Monteiro (CFO) and Andrea Fernandes (IR Manager) Web: www.0 ROCE (%) 3.2) (5.1 (2.4 10.7) 26.9% Suzano Holding 32. 211 .535 2.0 18.0 (775) 128 30 (96.294) 408 (43) 754 (1.134 9.0 2.027 26.1 11.6 0.2 6.745 616 2014E 1.6 0.00 (0.06 0.6 2.000) (2.2 18.8 1.916 3.129 4.0% Shareholder Structure.3 0.0 10.615 7.5 1.643 590 LT Debt FINANCIAL RATIOS Net Debt 2014E 6.933 664 2013E 1.2 (51.7) (22.483 12.2 5.790 38. Key Personnel: David Feffer (Chairman).8) 20.2 3.3) 0.8 10.965 1.5 29.32 0.9) 16.325 8.8 1.1 95.294 2013E 2.03 0.SUZANO Financial Highlights: P&L.8) 1.6 66.626 7.6) 17.7 24.2 5.6) 2014E 3.30 0.404 11.513 13.1) 2.900) (1.372 21.04 0.0 2. with 87.1 0.7 2.8 10.1 10.284 5.408 9.9 million tons per year.2 3.212) 2013E (421) 0 (5) 344 (938) (691) 0 0 0 (594) 2014E (419) 0 (171) 414 (334) 0 0 0 0 80 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 3.6) 26.8 5.279 9.566 24.7 10.302 4.89 5.4 (11.0 (462) 77 18 (96.0 0.269 4.3% Others 49.8 16.00 (0.6 (49.7 0.3 0.0 0.033 5.3 0.289 3.0 (1.154 13.6 4.7 66.1 3.398 3.544.8% Sources for all charts and tables: Company reports and Santander estimates.2 1.463 (2.546 11.200 27.179 1.2 5.072 2.864 11. 2012 BNDESPar 17.784 4.247 24.7 33.42 10.5 0. Suzano’s shares are traded in the São Paulo Stock Exchange. Suzano Papel e Celulose is controlled by Suzano Holding (owned by the Feffer family).16 0.773 (7.7 (82.6 0.3 (662) (89) 355 n/m 5.2 2011A 2.6 US$ 2012E 2013E 2.671 8.3 (309) (41) 165 n/m 5.489 10.646) 2012E (741) 184 (282) 647 (3.4 26.3 0.161 5.04 10.046.06) 0.4 1.157 4.4) (16.076 (22.546 443 1.729 3.9 29.174 11.00 0.9 24.6) (4.2) 21.7 33.2) (23.com.9) (31.8 676 (42.8) (20.470 6.006 34.6 10. 9M12 Domestic 49.suzano.937) (1.848 7.9 10.0% Exports 51.2 8.7 0.491 8.8 2.6 R$ 2012E 2013E 5.7 0.493 Capital Employed 23.5 5.657 832 2.7) 21.2) 11.0 4.894 12.347 12.08 0.3 2.9 5.2 3.0 0.6 1.674 8.240 4.204) 2014E (900) 0 (366) 889 (717) 0 0 0 0 172 2011A (373) 160 (194) 357 (1.993 5.404 489 1.267 1.508 25.201 2012E 1./(Divestments) Change in Debt Dividends Capital Increases/Other Free Cash Flow 2011A (625) 268 (325) 599 (3.7 11.36 10.br Revenue by Product.6 653 737 (16.0 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 0.521 5.15 DPS 0.0 16.106 72.6 Capex/Revenue (%) Int Cover (%) 1.885 3.0 1.1 9.3 7.9 57.658 2.0% P&W Paper (Coated + Uncoated) 47.472 26. with an installed capacity of 1.005 1.7 2.3) 3.279 (2.294 2014E 2.719) 944 (142) 1.555.0 0.294 2011A 1.6) (16.1 16.8 404 (39.779 12.9 11.7) 2.675 2.6) CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Other Invest.6 1.17 10.274 5.545) (1.7 0.3 (92.78 4.0 935 26.1 1.150 2.1 11.7 0.2 5.13) 0.4 (624) (821) 101 36 3 (145) (90.334 456 1.302 (23.9 2.0 (1.264 11. with exports accounting for 58% of Suzano’s net sales in 2010.0% Pulp 41.3) 0.6 516 63.4 (321) (406) 52 18 2 (72) (91.6 6.769 20.247 883 2.9 2.334 12. Suzano is also a market pulp exporter with an annual capacity of 1.8 642 (19.3 2.353) 2013E (852) 0 (11) 696 (1.9 7.8) (31.745 2.619 1.492 (2.108 1.6 271 316 (32.7 834 31.4 2.051 889 2.7) 1.3 0.253 2012E 2. 9M12 Paperboard 12.6 526 640 (22.5% of the voting shares and 30% of total capital.419 24.6) 3.744 2.6 2.3 0. Balance Sheet and CF Statement.9 239.2) 0.534 Net Debt/EBITDA 4. Walter Schalka (CEO). 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 4.1 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 106.017 2.6 0.7 0.8 Dividend Payout (%) MARKET RATIOS P/E P/CE FV/EBITDA FV/EBIT FV/Revenue P/BV 6.195 5.00 0.460 4.7 Net Debt/Equity 0.264 11.1 10.843.3 3.400) 0 0 0 (1.9 1.73 FCF Yield (%) Div Yield (%) PER SHARE DATA BVPS Suzano Papel e Celulose is an integrated Brazilian pulp & paper company and one of the leading players in the domestic paper market.9 57.0) 777 (19.623) 564 (85) 764 (1.4 1.580) 2012E (382) 95 (145) 333 (1.3 ROE (%) 0.661 1.1 0.0) 0.8 3.051 24.7 0.7 0.22 4.00 0.

reflecting the full consolidation of assets acquired and the inflation adjustment to TAESA’s contracts).  Maria Carolina Carneiro* Brazil: Banco Santander S. stability of cash flows (first Brazil: Banco Santander S. with a 9% dividend yield.93  Investment Case: We maintain our positive view on Taesa based Marcio Prado* on its attractive dividend policy.1 3-Mth Avg. Daily Vol (US$ Mn) 4.com.A.731 Float (%) 27.br 2013 Outlook: We forecast strong EBITDA growth in BRGAP terms (26% YoY). expected in 2013—the federal government plans to run at least two additional auctions with direct and indirect lines to connect the Belo Monte plant to the grid. STE.  Incorporation of NTE.35 52-Week Range (R$) 12. Price Performance (R$)  Target price adjusted: Our YE2013 target price was adjusted to TAESA IBOVESPA 250 reflect the 3:1 stock split in December 2012.A. and ATE (which it acquired from Abengoa) at the holding level. +5511-3012-5751 | mprado@santander. Bloomberg Growth opportunities: We believe TAESA will participate in the next transmission auctions. STE.05 TARGET PRICE: R$25. Also. Santander estimates and company reports. and ATE units: TAESA recently approved the incorporation of NTE. These TAEE11 BZ Current Price (01/03/13) R$ 22.2013 Latin American Universe Book BRAZIL—UTILITIES TAESA BUY CURRENT PRICE: R$22. 212 .83 Target Price (YE 2013) R$ 25.50 Market Capitalization (US$ Mn) 3.57 .93 / US$ 12.com. This incorporation will allow for improved capital structure management—benefiting from the fiscal  gains of a highly leveraged balance sheet in an operational holding Company Statistics company. we forecast the payout to remain at the maximum level (95% payout after discounting the Fiscal Incentive Reserve). +5511-3012-6682 | macarneiro@santander. We expect these margins to be upwardly adjusted after operating improvements and synergy gains.05 / US$ 10. 200 150 100 50 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet. protection against inflation (with a large portion of revenue adjusted by IGPM).br concession to end after 2013).24. with a slight decrease in average EBITDA margin (as the assets incorporated have slightly lower margins).Mn 344 two auctions could represent a total investment of up to R$12 billion. and earnings growth following the consolidation of acquisitions (Abengoa and TBE).2 Shares Outstanding .

1 1.7 US$ 2012E 687 15.201 1.2 2.01 5.753 2013E 1.104 1.0 0.4 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 8.8 1.2 n/m 83.6 7.501 4.5 3.7 Capex/Revenue (%) 0.367 Capital Employed 5.0 (205. 9M12 Transmission 100.31 2.619 2.3 7.9 1.9 0.998 1.2 6.5 4.6) 689 (5.7 12.317 Net Debt/EBITDA 3.1 76.8 3.2 2. TAESA currently operates more than 5.taesa.034 4.136 1. 9M12 Free Float 27.252 3.345 41.5 15.8% Shareholder Structure.6 13.2 6.190 1.973 779 2.3 (168) (165) 393 31.6) 627 (5./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (2) 0 0 0 0 0 0 0 2012E (3) (14) (1.132 26.928 2.604 2.4 8.327 1.807 2.5 (320) (361) 793 (0.3 2.727 4.760 1.709 2011A 267 397 2.9 9.7 R$ 2012E 1.3 19.2 71.5 19.3 84.6 (179) (219) 495 n/m 49.7 12.9 114.2 3.1 9.825) 2.1 2011A 595 379 n/m 534 89.1 9.881 4.245 5.3 Dividend Payout (%) n/m 96.1% FIP Coliseu 29. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 997 634 n/m 894 89.3% Services 47.6 12.929 km (proportionally) of transmission lines (13% market share) with annual RAP of R$1.8 43.8 7.88 3.460 884 1.866 1.4 6.7 664 35.346 0.7 45.5) (2.696 3.346 0.550 1.695 2.9 1.074 1.0 19.5 85.9 87.0% Cost Detail.878 9.423 million through long-term concessions.387 3.7 FV/EBITDA 7.327 1. José Aloíse Ragone Filho (CEO).68 2.828 3.194 LT Debt FINANCIAL RATIOS 2013E 1.313 2.com.618 2.330 1.9 1.9 1.0 1. Balance Sheet and CF Statement.49 6.4 9.0) 45.9 7.1 953 50.023 46 315 0 (694) 0 2011A (1) 0 0 0 0 0 0 0 2012E (1) (7) (942) 1.4 8.8 7.2 1.2 FV/EBIT 7.4 24.0 14.4 7.3 19.092 4.722 9.7 2014E 1.6 7.8 0.608 4.87 1.7 379 n/m 63.94 6.421 3.3 (341) (335) 795 37.3) 45. an important competitive edge for TAESA.7 45.6 (309) (243) 578 16.8 7.8 71.6 43.1 3.276 899 2013E 615 766 2.92 2.6 (159) (126) 298 0.377 1.4 7.1 22.39 1.049 4. TAESA is jointly controlled by Cemig and by FIP Coliseu.8 9.4% Sources for all charts and tables: Company reports and Santander estimates.015 2.1 728 24.437 4.501 (248) 0 2013E (2) (8) 468 48 99 (55) (327) 0 2014E (2) (7) 477 22 147 0 (323) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 502 745 5.60 5.5) (2.2 3.658 2.1 1.376 1.741 30.056 6.42 ROE (%) MARKET RATIOS PER SHARE DATA BVPS TAESA is the largest privately owned Brazilian group dedicated exclusively to electricity transmission.6) 0.9 FCF Yield (%) 0.6 (107) (131) 296 n/m 49.422 1.9 9.9 7.2 2.625 3.081 2.069 2.TAESA Financial Highlights: P&L.794 4.9 9.0 (205.7 P/CE 8.71 11.7% Material 1.4 19.265 5.508 1.0 9.5 (149) (168) 369 (6.4 0.314 2012E 1.9 0.2 77.9 1.5 84. We believe Cemig’s operating capabilities coupled with its financial partners’ focus on return. 2012 Others 13.946 2.0 6.727 4.4 8.4 2013E 860 25.474 30.1 8.75 11.064 4.30 0.1 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E Net Debt 2.br EBITDA by Business.6) Int Cover (%) 4.491 1. guarantee capital discipline and operating excellence.7 19.580 1.8 7.247 1.8 584 9.0 627 (5.5) (5.6) 76.6 19.5% Cemig GT 43.72 0.1 3.714 2.685 2.248 4.0 2.9 9.86 0.438 1.1 Div Yield (%) 0.9 13.0 9.3 19.478 0.5 953 50.775 1.925 1.0 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 1.2% Personnel 37.44 1.292 1.4 2.2 1.07 DPS 0 1.9 1.7 1.9 9.908 (480) 0 2013E (4) (16) 948 96 200 (111) (661) 0 2014E (4) (15) 1.1 664 35.9 1. Cristiano Correa de Barros (CFO) and Cristiano Correa de Barros (IR Director) Web: www.1 77.5 9.2 FV/Revenue 7.7 1.0 6. Key Personnel: Djalma Bastos de Morais (Chairman).5 3.3 7.412 362 1.3 6.4 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.320 3.4 ROCE (%) 7. 213 .7 9.0 109.859 1.7 2014E 820 (4.4 492 29.8 0.580 2.9 9.1 492 29.01 0 0.578 1.0 9.137 1.0 Net Debt/Equity 1.14 1.709 2014E 1.5 87.3 14.3 6.0 P/BV 1.2 3.498 2.3 4.6 85.7 634 n/m 63.736 701 2.6 4.2 2.5 9.3 0.526 9.8 0.4) 84.95 0.618 1.5) (5.775 701 2012E 583 737 2.345 41.1 84.3 8.060 814 2014E 707 858 2.331 33.700 1.54 11.292 5.

This coupled with the improved collection process and the increasing number of units to be delivered next year should enable Tecnisa to generate Price Performance (R$) Tecnisa IBOVESPA 120 positive operating cash flow in 2013.br some improvement over past quarters. we expect 4Q12 figures to show Pedro Balcão Reis* Brazil: Banco Santander S. Tecnisa has curtailed cash consumption.1 Shares Outstanding .6 launches by 50% in 2012 and being more selective in land 3-Mth Avg.  2013 Outlook: Although still weak. ROE should move towards 18-20% in the next 18 months.61 . As a result. Santander estimates and company reports.Mn 183 acquisitions.br for the stock. Having slashed Float (%) 51. Considering the abnormally high margins of this project (gross margins of 50-60%) and that the bulk of the cost overruns were already recognized in the last 12 months. Fabiola Gama* helped by the Telefonica project.10.70 Market Capitalization (US$ Mn) 742 Paving the way for cash flow generation.28 TARGET PRICE: R$11.07 Target Price (YE 2013) R$ 11. This led the company to increase the percentage of Bloomberg construction sites under its management from 60% in September Current Price (01/03/13) R$ 8. whose launching is a clear catalyst Brazil: Banco Santander S. in our view.28 / US$ 4. +5511-3012-7414 | fpgama@santander. Daily Vol (US$ Mn) 2. INFRA & RE TECNISA BUY CURRENT PRICE: R$8. we expect the company’s earnings momentum to materially improve in 2013-14.  As a result of cost deviations. 100 80 60 40 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet.com. Tecnisa noticed significant deviations in the costs of certain projects run by Company Statistics partners. CONSTRUCTION.A. margins should gradually recover throughout the year.  TCSA3 BZ 52-Week Range (R$) 6.  We expect the Jardim das Perdizes project (also known as the Telefonica project) to be launched in 1Q13.10 2011 to around 90% at present. In our opinion.com. In 2H11. Tecnisa increased its share in the management of the projects‘ construction sites. picking up with the launching of the Telefonica project.90 / US$ 6.90  Investment Case: We expect Tecnisa’s results to pick up in 2013.A.2013 Latin American Universe Book BRAZIL—CEMENT. +5511-3012-5765 | pbalcao@santander. 214 .

215 .6 603 34.6 1.8 0. being controlled by the local businessman Meyer Nigri.1) 256 (16.3 10.9 2013E 936 12.1 Dividend Payout (%) 18.4 3.58 0.4 528 4.412 1.103 481 714 686 559 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E Net Debt 1.3 2014E 1.com.102 569 663 802 791 311 2012E 28 1. construction.3 816 23.5 12.8 198 (3.50 2011 2012e 2013e 2014e Shareholder Structure.383 758 1. The company participates in all stages of residential real estate development. Balance Sheet and CF Statement.9 19.9 0.4 15.9 11.9 0.0 1.8 332 (6.505 1.9 0.263 3.6 4.9 0.3 307 (11.466 73 2013E 51 3.3 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 12.20 0.6 6.2 0.1 (5.6 1.2) 2.6 5.7 4.9 902 1.0 1.6%.1 4./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (17) 0 (564) (403) 81 (321) 0 178 (36) 315 2012E (21) 0 (337) (222) (47) (269) 0 (32) (24) (48) 2013E (27) 0 (182) 125 (38) 87 0 (39) (70) 19 2014E (31) 0 (80) 374 (42) 332 0 (246) (105) 24 2011A (10) 0 (337) (240) 48 (192) 0 106 (22) 188 2012E (11) 0 (175) (115) (24) (140) 0 (16) (12) (25) 2013E (14) 0 (93) 64 (19) 45 0 (20) (36) 10 2014E (16) 0 (40) 187 (21) 166 0 (123) (53) 12 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 426 2.0) 133 (27.5 5.2) 2.8 1.4% Sources for all charts and tables: Company reports and Santander estimates.059 1.23 4.036 1.10 1.0 1.9 37.194 768 1.604 3.008 7. The company currently has a free float of 51.8) 252 (20.24 9. 2011-14E 2.7 7.761 1.6 13.3 R$ 2012E 1.915 2.4 315 7.248 389 888 903 723 36 2014E 28 1.8 22.8 1.9) 17.12 0.4 (46) (21) 49 (43.5 450 61.944 1.7 24.5 (46) (29) 86 (25.6 7.545 1.13 0.9 3.8 1.63 4.7 29.7 (17.4 3.tecnisa.2) 5.4) 16.681 1.20 0.6 10.5) (18.16 DPS 0.8 14.38 0.5% Executives 2.9 1.7) 5.392 1.6 9.5 231 59.9 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.br/ri Launches (R$ billion).966 1.4 3.6 1.6 1.47 4.7 485 (8.5 0.416 1.6 11.4) 21.014 2.8 3.4 9.9 Net Debt/Equity 0.6 6.4 12.495 1. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 1.27 0. marketing and client service.4 15.538 763 2.9 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 0.7 29.9 20.79 0.9 660 36.7 6.9 11.0 448 74.826 13.1 2.1 1.7 1.3 10.547 13.8) 9. Key Personnel: Meyer Joseph Nigri (CEO) and Vasco Barcellos (CFO and RI) Web: www.4 1.7 6.7 (37) (27) 143 192.6 15.7) 19.6 4.0) 17.0 14.052 588 29 LT Debt 2013E 1.7 ROE (%) MARKET RATIOS FV/EBITDA FV/EBIT FV/Revenue P/BV FCF Yield (%) Div Yield (%) 2.5 (77) (48) 144 (27.7 15.4 (88) (41) 94 (34.8 4.38 8.753 1.83 1.31 0.6 P/CE 11.40 2011 2012e 2013e 2014e Contracted Sales (R$ billion).9 3.2 12.441 710 2.8 2.0 0.9 (25) (39) 211 47.7 0.00 2.9 8.12 1.014 10.151 394 899 795 752 38 2013E 26 1.067 1.1 2.301 402 771 1.5) 16.69 5.53 2.1 5.035 1.15 10.5 (5.7 6.9 29.8 9.3 74.2 0.4 24.731 1.1 15.9 603 33.9 2.6 7. with a focus on upper and uppermiddle income customers mainly in the São Paulo metropolitan region.8 21.1 FINANCIAL RATIOS Capex/Revenue (%) Int Cover (%) 1.5 3.7 4.523 2.5 8.3 2014E 2.5) 5.0 145 (26.TECNISA Financial Highlights: P&L.78 1.339 1.4 3.4 12.485 583 2012E 54 2.07 0.3 14.9 19.8 ROCE (%) 11.8 0. Tecnisa held a land bank with a potential VGV of R$7.4 24.161 58 2011A 227 1.077 1.1 4.3) 9.9 302 30.9 2.6 4.357 1.2 1.0 (19. As of September 2012.4 1.348 4.5 29.809 1.20 2.8 billion.9 (50) (78) 422 50.52 1.30 2.409 70 2014E 56 3.0 2.3 US$ 2012E 833 (9.9 24.8 20.3 15.656 3.1% Meyer Joseph Nigri 52.244 1. Tecnisa went public in January 2007 having raised R$791 million and in February 2011 made a follow-on offer of R$360 million. including land acquisition.3) 5.4 9.1 37.3 20.105 564 724 696 560 Capital Employed 2.9 20.0 16.505 4.6 408 20. 2011-14E 2. as of December 2012 Free Float 45.47 0.429 673 2.4 3.29 BVPS 8.556 691 2.6) 19.7 19.4 5.542 793 1.7 6.6 6.551 1.0 279 (16.7 302 31.384 4.38 PER SHARE DATA Tecnisa is one of the largest developers of residential buildings in Brazil.0 70.502 Net Debt/EBITDA 3.1) 21.9 183 (8.9 0.4 338 34.6) (18.9 2011A 924 17.3 230 72.0 1.7 (73) (52) 279 196.

com. Santander estimates and company reports. or 300 bps higher YoY.143 34.0 3-Mth Avg.  2013 Outlook: We estimate net revenue. Tegma’s cash cow. R$267 million and R$137 million. REPLACING YE2012 TARGET PRICE OF R$31. Pedro Balcão Reis* as we believe the stock’s price does not fully reflect the growth Brazil: Banco Santander S.br logistics unit. +5511-3012-6016 | bamorim@santander.30 / US$ 17. 216 . 100 80 60 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet.com.30 TARGET PRICE: R$39.2013 Latin American Universe Book BRAZIL—TRANSPORTATION & INFRASTRUCTURE TEGMA BUY CURRENT PRICE: R$35. These results should be driven mainly by strong growth and the ramp-up of margins within the integrated logistics division.00.br potential within the integrated logistics business. Daily Vol (US$ Mn) 1.1%.A. The company has already TGMA3 BZ Current Price (01/03/13) R$ 35.  Automotive Logistics: We expect mild volume growth in 2013 (+3%) as a result of (1) the end of the IPI tax incentive and (2) restrictions in financing from banks.35.00 / US$ 17.35 implemented the majority of its investments in this division. mainly within the e-commerce operations.79 . EBITDA. Assuming flat margins in 2013.2 billion. +5511 3012-6535 | rmanda@santander.34 Target Price (YE 2013) R$ 39. and 39% YoY to R$2.33 52-Week Range (R$) 24.A. as well as Price Performance (R$) Tegma EBITDA of R$57 million (up 122% YoY). Market Capitalization (US$ Mn) expanding its distributions centers in order to service a wider Float (%) geographical footprint and greatly increasing its distribution capacity 1. mainly driven by the strong growth of e-commerce related services coupled with an expansion in margins within the integrated Bruno Amorim* Brazil: Banco Santander S. We estimate net revenues 38% higher next year at R$701 million. +5511-3012-5765 | pbalcao@santander.A. implying an EBITDA margin 160 of 8.00  Investment Case: We reiterate our Buy recommendation on Tegma.Mn 66 through the acquisition of new equipment and software. respectively. 26%. and net income to grow by 19%. the automotive EBITDA should grow 12% to R$210 million in 2013. We expect Tegma’s EBITDA to increase by over 50% between 2012 and 2014. Moreover.7 Shares Outstanding .br Renan Manda* Brazil: Banco Santander S.00 INTRODUCING YE2013 TARGET PRICE OF R$39. This improvement in margins should 140 be driven by lower implementation costs as well as a higher IBOVESPA 120 occupancy rate in Tegma’s distribution centers. Company Statistics Bloomberg  Integrated Logistics: We anticipate strong growth in this segment.com. we remain positive on the stable automotive division.

7 0.7 10.br Revenues by Segment.5) 6.95 1.0 13. electronics.5 108 (12.3 (19) (29) 54 (4.2% EBITDA by Segment.3 1.1 10.3 267 25.7 18.284 1.19 0. 2012E Integrated Logistics 26.2 4.5 92 (9.1 23.8 (11) (40) 78 25. Alexandre Brandão (CFO) and Ian Nunes (IR Manager) Web: www.76 0.1 8.5 12.7 0.60 0.TEGMA Financial Highlights: P&L. The company’s IPO was held on July 3.5 4.1 11.2 2.4 4. e-commerce.40 MARKET RATIOS FV/EBITDA FV/EBIT FCF Yield (%) Div Yield (%) PER SHARE DATA Tegma Gestão Logística S.9% Sources for all charts and tables: Company reports and Santander estimates.3 (31) (48) 91 (9.0 24.3 13.2 2014E 2.57 0.0 24.0 P/BV 4.5 11.6 10.7 102 14.38 1. and others.3 (2.4 FV/Revenue 1.4 0.00 0.3 10.6 0.8 16.3 11.0 9.2 2014E 1.6 17.9 4.1 9.2 297 27.A.5 12.0 R$ 2012E 1.326 523 535 547 565 Net Debt/EBITDA 1.6 4.9) 5.007 6.4 1.3 1.6 5.1 2011A 901 35. 2007.5 180 5.1 8. is a highway-based transportation and logistics company.0) 11.2) (0.9 26.9 11.4 ROCE (%) 23. October 2012 Coimex 25.2 5.3 6.4 25.4% Free Float 34.9 16.1 9.9 7.9 122 12.8 Net Debt/Equity 0.3 1.82 0./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (24) (110) (105) 31 (64) (34) 264 (66) 0 2012E (28) 1 (93) 54 (61) (7) 59 (37) 0 2013E (33) 0 (59) 128 (70) 58 0 (9) 0 2014E (36) 0 (60) 173 (73) 100 0 (13) 0 2011A (14) (66) (63) 18 (38) (20) 157 (39) 0 2012E (14) 0 (47) 28 (31) (4) 30 (19) 0 2013E (15) 0 (27) 59 (32) 27 0 (4) 0 2014E (16) 0 (26) 75 (32) 44 0 (6) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 71 420 1.1 212 2.8 0.1 0.14 0.1 1.8 (24) (93) 180 31.1 1.134 1.8 8.5 22.2 5. telecommunications.06 0.69 4.0 13.6 0.5 9.48 2.9 13.7 (40) (41) 98 7.4 0.3 3.7 9.3 3.5% Automotive Logistics 86.4 13.29 0.0 11.5% Shareholder Structure.5 1.4 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 18.tegma.3 7.9 123 16.7 P/CE 14.0 ROE (%) 22.2 2.097 9.3 2013E 1. Balance Sheet and CF Statement.3 12.4 10.522 14.6 21.4 30.5 30.1 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E Net Debt 244 309 302 263 130 146 134 112 Capital Employed 981 1.8 1.2 129 20.27 3.3 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.19 DPS 1.5 9.7% Grupo Itavema 39.230 1.6 (27) (70) 137 39.8 10.3 3.9) 6.0) (0. 217 .8 13.6 23.209 415 255 548 374 221 2014E 111 732 2.6 0. chemical products.7 8.1 234 30.6 12.0 1.0 25.4 1.2 25.7 334 25.3 3. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 1.844 22.3 21.810 953 180 375 404 315 24 2012E 66 552 2.6 4.1 0.4 (2.0 25.8 26.35 3.1 1. which provides services to several different industries.30 10.4 Capex/Revenue (%) 4. including automobiles.9 1.6 0.13 6.509 29.9 13.3) 2.3 3.3) 2. 2012E Integrated Logistics 13.5 7.4 0.2 4.7 7.5 2.8% Automotive Logistics 73.2 1.08 BVPS 6.6 11.75 8.026 1.199 19.5 Dividend Payout (%) 65.3 206 10.7 170 8.2 14.6 (12) (32) 62 24.2 22.0 145 18.6 41.3 11.2 1.8 8.4 68.8 6.138 1.7) 9.9 Int Cover (%) 2.73 0.352 423 255 683 374 221 2011A 38 224 965 508 96 200 215 168 13 2012E 31 260 956 518 192 120 210 176 104 2013E 32 278 950 537 184 113 244 166 98 2014E 47 312 972 576 180 108 291 159 94 291 153 153 153 155 72 68 65 LT Debt FINANCIAL RATIOS 2013E 2.1 13.0 US$ 2012E 942 4.6 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 1.2 10.07 2.com.4 3.2 9.7 (21) (21) 50 (7. and Tegma’s stock is listed in the Novo Mercado segment Key Personnel: Gennaro Oddone (CEO).1 10.3 3.7 0.3 1.1 12.1 107 16.3 1.098 406 255 446 374 221 2013E 72 625 2.7 11.9 35.8 8.18 3.2 16.

com. Santander estimates and company reports.2% YoY in 2013E).0%.127 Price Performance (R$) Telefonica Brasil IBOVESPA 140  We recently reduced our estimates. with Bloomberg TEF Brasil a potential candidate (pending a nontrivial approval from VIVT4 BZ / VIV US Current Price (01/03/13) R$ 50. but dividends remain attractive. we expect a still-strong performance (+7. (2) merge only a selection of 52-Week Range (R$) assets.56. Daily Vol (US$ Mn) 19.92 27. and (4) our cautious view on AMX due to competitive and regulatory struggles in Mexico.Mn 1.br estimated 9. 218 .0% dividend yield until YE2013. leading to a flat YoY 120 100 80 EBITDA margin). will take more than a few quarters to materialize.A. VIVT4 is our Valder Nogueira* top pick. In addition to the aforementioned alternative of listing a LatAm holding Company Statistics company.12 / US$ 24. even if successful (about which we Bruno Mendonca* Brazil: Banco Santander S.00  Investment Case: In a sector lacking positive triggers.  2013 Outlook: The creation of TEF LatAm will likely be the main theme for (and overhang on) TEF Brasil in 2013. offsetting the downtrend in fixed-line and helping to sustain VIVT4’s attractive yield of 9.45 .00 / US$ 27.62 Target Price (YE 2013) R$ 58. with no direct impact to TEF Brasil minority shareholders. since TEF holds about 100% of the assets ex Brazil). but no risk of dilution).60 TEF Brasil’s minorities and ANATEL).com. +5511-3012-5759 | brmendonca@santander. Colombia and Peru. (We see the risk of splitting liquidity with TEF LatAm. which is probably the fastest way to raise cash (negative at the outset. +5511-3012-5747 | jvalder@santander. and (3) do a pure secondary offering of VIVT4/VIV. TEF could (1) merge all assets into one single entity.12 TARGET PRICE: R$58. 60 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet.br are still skeptical). MEDIA & TECHNOLOGY TELEFONICA BRASIL BUY CURRENT PRICE: R$50. We now expect TEF Brasil to pass through part of the Vivo-Telesp synergies on to prices in order to face increased competition (mainly on the fixed-line side. We initially expect the market to see this as positive (no risk of dilution or an unfavorable swap ratio).8 Shares Outstanding . 43.A. although it is still unclear what exactly the impact on VIVT4’s liquidity will be. (3) the perception that Oi’s turnaround. (2) lack of visibility on TIM’s growth in 2013 and its tough regulatory agenda.2013 Latin American Universe Book BRAZIL—TELECOM. with an Brazil: Banco Santander S. Recent news flow points to the alternative of listing of a holding company (in Europe and/or on NYSE). such as Chile. to create (and list) a new Market Capitalization (US$ Mn) ―Andean TEF‖ (probably easier to execute. On the mobile front. mainly because of (1) its appealing carrying cost.754 Float (%) 26.)  Alternatives for TEF to raise cash involving TEF Brasil.2 3-Mth Avg.

3.6 9.5 15.187 34.747 6.866 6.6 4.651 5.3 0.681 48.572 2.481 240 (2.180 3.7 1.894 12.267) 40 11.983 2.1 47.1 96. Carlos Raimar (IR and M&A Director).8 million broadband subscribers.6 1.8 10.4) 11.4 FV/Revenue 1.589 46.9) (17.8% Sources for all charts and tables: Company reports and Santander estimates.330 6.6 12.725 35.96 38.279 3.1 0.223 6. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 33.903 (2.326 6.7 1.4 12.6 12.907 316 2011A 1.066 3.9 8.1 (58) (859) 2.5 64.064 6.682 (5.1 (101) (932) 2.1 12.7 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 4.824 2.913 6.439 6.6 8.983 2.6 8.5 8.0% Mobile Voice 29.802) 0 2011A (2.261 3.com.5 11.327 (2.1 11.761 Net Debt/EBITDA 0.1) (15.6) (15.245 65.1) (15.0% Other Equip.613 4.05 1.0 8.402) 0 2013E (2.276 1.5 10.4 21.2 47.4 5.0 (15.1 (124) (1.2 0.706) 5.2% Telefonica 73.4% Mobile Data 14. Gilmar Roberto Camurra (CFO).98 4.4) 6.254 14.880 5.631 16.646 10.2 1.3 (144) (1.3 9.7 22.021 23.07 1.7 9.3) 6.843) 5.105 1.954 7.002 (1.4 8.223 6.545 22.066 4.0 11.8 P/CE 5.305 13.651) 5. 3.3 8. Key Personnel: Paulo Cesar Teixeira (CEO).2 Div Yield (%) 7.1 FV/EBITDA 5.535 (3.1 46. TEF Brasil is controlled by the Telefonica Group. TEF Brasil had a total of 10.7 11.153 13.541 22.097 3.4 1.274 12.9 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.715 24.837 23.26 1.2 8.898) (375) 4.002 (1.2 0.84 41.8 10.br/ri Subscriber Base.06 0.6) Capex/Revenue (%) Int Cover (%) Dividend Payout (%) ROCE (%) ROE (%) MARKET RATIOS P/E - - - - - - - - 104.2 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 11.9 44.2 14.9 2013E 17.8 4.5 7.2 13.7 4.6 65.7 8.102 18.535 83 (5.568 7.237) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 2.8 4.179 161 (4.535) 0 2012E (2.220) 46 11.296 25.970 2.6 64.37 9.6 8.4) 64.2 22.6 41.9) (17.8 million mobile subscribers. 2011 Interconnect ion 13.6% Broadband 10.459) 5.213 68.1 4.2 FCF Yield (%) 8.613 4.0 65.7 1.099 5.6% Sales Breakdown.4 23.417 156 2013E 2.7) 6.386 3.9 4.578) 23 5.7 22.3 12.926 4.175 2.879 75 (2.0 45.3 1.339 3.5 8.359 6. 2012 Free Float 26.999 6.703 5.649 48.28 PER SHARE DATA BVPS Telefonica Brasil is the largest telecom operator in Brazil in terms of revenue and subscribers. 3Q12 Post-Paid 23.740 1.438 6.531 3.146 (3.4% Pre-Paid 76.213 5.812 2.368 33.419 43.689 1. At the end of 3Q12.640 2.454) 18 5.08 4.489) 0 2012E (5.490 12.3 5.3 12.712 46.7 11.6 P/BV 1.4) 14.9 11.3 15.0 15.03 1.7 36.1 0.911 6.066 4.674) (165) 5.792 5.2 (116) (763) 2.0 10.643 12.0 0.8 94.5 11.1) 35.1 Net Debt/Equity 0.4 5.254 21.016 24.009 44.4 11.9% Pay TV 2.264 2.103 5.3 1.19 10.4% F.1 10.1 0.6 36.5 6.115) (315) 10.3 (71) (843) 2.696 262 (2.521 (4.2 7.959 22.5 5.026 6.350 2.012 (2.9 8.86 9.2 (221) (1.2 0.48 4.187 582 Capital Employed 46.8 34.976 23.5) (16.8 21.1 (180) (1.853 2.8 4.53 5.150 144 LT Debt FINANCIAL RATIOS Net Debt 2013E 35.663 305 2013E 4.7 5.vivo.5 47.514) 0 2014E (2.2) 35.19 1.132) (664) 7.0) 11.7 million fixed lines.9 94.1) 14.294 6.3 90.6 1.724 13.098 2.5% Shareholder Structure.52 4.640 6.457 2012E 3.3% 2.91 39.2 11.685 5.4 FV/EBIT 8.719 47.1 0.631 4.940 11.810 47.495 3. 219 . Line Voice 24.13 1.4 US$ 2012E 17.444 2.3 64.644 70.5 2014E 36.9 1.0 22.637 (8.5) 14.841 (1.059 6.403 47.164 33.6 2011A 18. 0.260 4./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (5.5 9.5) (16.567 6.8 11.740 9.6 15.204 1.667 6.5 4.5 2014E 16.6 77.746 459 (4.543 49.190 (9.8 10.045 (1.8 1.43 38.1 0.6 million pay-TV users and 76.7 10.2 45.1 100.432 5.087 3.463 1.4 R$ 2012E 33.791 2.4) 11.13 DPS 3.7) 65. which holds 74% of TEF Brasil’s total capital.535 (3.146 (3.9) 34.3 1.8 35.1 109.9) 35.3 5.591 2.573 21.0 11.091) 0 2014E (5.53 4.4 1.754 43.733 41 (2.2 5.774 464 (4. Luis Plaster (IR Manager) and Maria Tereza Pelican (IR Manager) Web: www.1 0.12 9.213 147 2014E 2.5 23.572 2.044 73.006 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 3.307 777 2012E 1.881 14.3 1. Balance Sheet and CF Statement.594) 0 2013E (5.483 2.001 (0.746 308 2014E 5.TELEFONICA BRASIL Financial Highlights: P&L.1 8.3 0.3) 65.01 1.1 0.195 21.492 1.0 11.2 0.810 13.

2013 Latin American Universe Book BRAZIL—TELECOM.4x net debt/EBITDA 2012E. Shares Outstanding .11.com.2x P/E 2013E) although Brazil: Banco Santander S. We do not expect 4Q12 to be a catalyst.br it might lack short-term triggers.com.000 subs by 2016.4% yield).Mn Lower MTRs: All eyes on TIM.95 32. while speeding up 100 investment in quality (the challenge). we believe that a positive operating performance could present upside risk to our estimates (currently at 350. reducing its flexibility to launch new offers (as to reaccelerate growth). 65% below guidance). and we still see some regulatory overhang (which we expect to fade away only gradually). 180 we expect TIM. although we do not expect it to have any major impact on TIM’s 2013 financials. our estimates point to high single-digit top-line and EBITDA growth.A. Daily Vol (US$ Mn) (currently R$3 billion/year). 220 .60 could fine-tune its guidance for TIM.98 / US$ 19.br increase its dividend payout (54% in our current estimates. and (2) a 9. As for capex. Yet. to 160 play a leading role in this transition process. as a pure-mobile challenger in an integrated world.7x EV/EBITDA and 11.9 3-Mth Avg.00 / US$ 28. MEDIA & TECHNOLOGY TIM PARTICIPAÇÕES BUY CURRENT PRICE: R$7. in our view. Regarding TIM Fiber. slightly below guidance (double-digit growth). On the upside.89 .6 2. its 140 success will depend on TIM’s ability to reshape offers.64 Target Price (YE 2013) R$ 12. Santander estimates and company reports.A.00  Investment Case: We currently see TIM’s stock trading at an Valder Nogueira* attractive valuation (3.2% FCFE yield for 2013E. +5511-3012-5759 | brmendonca@santander. Market Capitalization (US$ Mn) we expect our three-year estimate of R$9 billion to be maintained  6. continuously 120 stimulating F2M traffic migration (the opportunity). In this sense. and creating medium-term 80 differentials other than the mere on-net community effect (which 60 tends to lose relevance in a lower MTR scenario).  Telecom Italia‘s 2013‘s strategic plan potentially fine tuning TIM‘s guidance: After a tougher-than-expected 2012. on the back of (1) low 0. Integrated players tend to be Price Performance (R$) 16.  2013 Outlook: Anatel is closely following TIM’s quality indicators. we would not Company Statistics rule out the possibility that TI’s 2013 strategic plan (TBA in 1Q13) Bloomberg TIMP3 BZ / TSU US Current Price (01/03/13) R$ 7. for a 4. +5511-3012-5747 | jvalder@santander. We would not be surprised to see the double-digit growth guidance for 2013 reduced to a high 52-Week Range (R$) single digit (already in-line with our current estimates).416 TIM Participações followers: Now that a faster MTR drop has been defined until 2015. 9.469 Float (%) J-11 M-11 A-11 D-11 IBOVESPA A-12 A-12 D-12 Sources: FactSet. we see room for TIM to Bruno Mendonca* Brazil: Banco Santander S.98 TARGET PRICE: R$12.

Rogerio Tostes (IR Director) and Rogerio Takayanagi (CEO TIM Fiber) Web: tim.9 12. 2011 Equipment 10.438 6.6 2.241 (14.623 1.540 1.3 16.544 1.1 0.701) (546) 2.9 P/BV 1.263 8.188 0.794 4.8 9.619 858 (892) 0 2011A (1.252 2.6 9.6 12.2 0.2) 2.8 27.5 13.159 16.0 (55) (467) 907 6. TIM had 69.056 13.2 8.499 6.175 1.522 612 212 1.2 1.8 11.98 DPS 0.8 27.1 17.727 11.848 1.382) (48) 2.170 80.171 2.242 3.9 1.2 1.289 12.598) (23) 3.1% Mobile Data 12.553 7.0 4.2 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 16. Key Personnel: Andrea Mangoni (CEO)./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (2.444 (13.1 4.7 4.2) 5.2 4.481 (2.030 13.592 13.395 10.445 1.0 0.240 (1.7 23.2 7.393 16.56 0.85 0.627 3.382 2.5 6. bearing 100% tag-along rights.225 73.587 1.991 10. Intelig.345) 938 590 (817) 0 2013E (2.946 12.0 (119) (1.59 13.20 0. Balance Sheet and CF Statement.2 12.7 1. 3Q12 Pre-Paid 14.686 12. 2012 Free Float 32.928 2.692 9.415 5.83 0.460 4.6 10.4 2014E 10.6% Interconnection 14.64 0.0 0.2) 5.9 5.3 4.224 39.0) 7.6 4.068 10.370 1.3 8.0 0.5 9.8 1.2 2.4 7.965 6.4 0.064 4.7 4.700 12.007) 2.0 0.2 2013E 10.2% Sales Breakdown. and in July 2011 infrastructure companies AES EP Telecom and AES Com Rio (together renamed TIM Fiber) to gain inroads into the fixed-line broadband segment.570 3.066 24.220 400 (416) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 3.476) 877 166 (414) 0 2014E (1.0% Shareholder Structure.420) (59) 2.0 0.2 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.755 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 398 2.2 7.5 3.6 12.539 8.5 15.6 13.1 12. Brazil’s third largest mobile subscriber base.153 (6.570 6. TIM Participações is controlled by Telecom Italia.180 639 2013E 1.8 9.684) 730 240 (275) 0 2012E (1.095 6.796 3.3% Fixed Line Services 6.6 14.159 2.354 16.0 3.7 P/CE 5.7 3.5 (159) (890) 1.3 0.517 6.224 19.768 13.6 (115) (326) 811 6.542 Net Debt/EBITDA 0.2 4.6 14.926 5.3 4.3 1.6 (134) (329) 762 (41.7 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 0.735 6.4 0.br Subscriber Base.739 4.247 2013E 3.1 0.833 12.0 17.5 10.8 US$ 2012E 9.7 1.293 426 (486) 0 2012E (2.22 15.096 (3.3 1.1 0.riweb.538 7.984 4.691 6.9 51.3 12.9 2.951 581 2012E 1.116 725 279 Capital Employed 13.6 11.4 1.983) 1.7 27.310 7.7 2.9% Other 4.2 12.0 60.090 2012E 2.598 15.957 3. In 2009.9 27.371 9.2 ROE (%) 10.1 8.6 (237) (583) 1.3 4.725 14.7 2.419 6.1 4.4 4.6 13.6 12.430 4.355 7.8 FV/EBITDA 4.254 0.939 7.8 12.9 2011A 9.749) 490 308 (427) 0 2013E (1.213 (1.597 2011A 1.37 1.3 27.483 728 LT Debt FINANCIAL RATIOS Net Debt 2013E 20.0 7.3 3.com.2 6.5 11.4 11.4 2014E 21.065 9.6 6.36 5.TIM PARTICIPAÇÕES Financial Highlights: P&L.5 4. Claudio Zezza (CFO).8 R$ 2012E 18.664 (1.003) 1.3 14.396 23.1% Sources for all charts and tables: Company reports and Santander estimates.263 2.082 2.1 51.2 0. By the end of 3Q12.075 8.5 4.8 51.851 13.221 28.6 13. TIM acquired long distance providers.725 33.551 14.1 51.651 10.7 27.3 1.907 1.1 Net Debt/Equity Capex/Revenue (%) Int Cover (%) 0.17 14.9 15.8 4.467) (13) 2.2 11.2 FCF Yield (%) 5.003 3.2 9.7 1.3 FV/Revenue 1.1 11.6 11.776 15.143 2.872 4.350 (39.9 MARKET RATIOS P/E FV/EBIT Div Yield (%) 2.12 16.6 1.7 9.287 7.988) 1.5 54.6 (221) (623) 1.71 0.925 (2. The remaining capital is free float.1) 26.8 17.119 8.184 641 2014E 2.809 (3.661 1.4 8.5 (79) (439) 853 5.875) (120) 4.851 14.9 8.776 337 (839) 0 2014E (2.6 3.1 14.3 8.349 13.160 4.58 1.401) 1.9 13.2 10.034 6.37 0.1 0.965) (103) 4.198 3. TIM trades at the Novo Mercado section of the Bovespa under the ticker symbol TIMP3.8 ROCE (%) 10.806 7.8% Post-Paid 85.1 0. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 17.5 14.4 million subscribers and nationwide coverage.34 0.49 0.19 PER SHARE DATA TIM Participações is a holding company that controls TIM Brasil.609 12.412) (286) 1.9% Telecom Italia 67.8 4. 221 .35 0.3 0.16 6.5 12.2 12.76 1.5 9.9 26.495 3.3) 7.866 6.2 13.281 6.5 1.3 17.2% Mobile Voice 52.685 3.8 11.2 3.204 5.345 2014E 4.7 8.2 3.4 1.5 2.790 4.79 6.216 (1.1 1.2 6.2) 2.91 BVPS 5.8 2.8 - - - - - - - - Dividend Payout (%) 22.2 1.81 1. which holds 67% of TIM’s capital.9 9.096 (1.276 12.3 17.663 (9.180 26.250 1.235 2.811 0.7 9.

5-percentage-point increase from TOTS3 BZ Current Price (01/03/13) R$ 40. growing 8. due to higher trailing-12-month inflation. combining a better service mix (hosting and 52-Week Range (R$) consulting gaining significance) and implementation efficiency Market Capitalization (US$ Mn) (considering Totvs’s implementation team moving to the profitability level of the franchises). and EPS 70 CAGRs of 12%. EBITDA. We acknowledge that Totvs is not a bargain (trades at 110 100 14.7 Shares Outstanding .90 / US$ 20.com. driven by (1) license and services sales keeping their current trend. J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet.br resilient track record of solid quarterly results.6% revenue growth. assuming EBITDA breakeven by 2014 (based on guidance). +5511-3012-5747 | jvalder@santander. in our view. For 2013.0% and 10.9% in 2012E). we still see Totvs as a strong core-value play and expect its resilient execution to continue positively surprising the market.A. and 25%.)  We expect an EBITDA margin of 35% by 2021 (versus 27% in 2012E) due to: (1) a 5-percentage-point increase from operating Company Statistics leverage.247 Float (%) 70.5x EV/EBITDA and 25.00 / US$ 23. 18%.75 3. (2) a 1. most likely at the low end of the range.2x goodwill- 90 adjusted). however. In this sense. and (3) a 1. rarely gives investors a clear entry point at discounted prices. Santander estimates and company reports. although multiples may seem rich compared with other Bruno Mendonca* Brazil: Banco Santander S. On the EBITDA side.0% YoY (from 12.7% YoY in 2013. Daily Vol (US$ Mn) 7.33 service efficiency.43.5-percentage-point gain from international operations and digital TV.00  Investment Case: Totvs continues to present an excellent mix of Valder Nogueira* growth/profitability with a strong defensive appeal.  2013 Outlook: We maintain our double-digit top-line growth estimate until 2016. 29.90 TARGET PRICE: R$49. 222 .br stocks/sectors in Brazil.Mn 162 Price Performance (R$) Totvs IBOVESPA 130  ROE of 22% and 2011-14E EPS CAGR of 25% support rich 120 valuation.2013 Latin American Universe Book BRAZIL—TELECOM. +5511-3012-5759 | brmendonca@santander. as maintenance gains significance in the revenue mix (to Bloomberg 57% of the total from 47%). but we do not see these multiples as impeditive given 80 Totvs’s strong growth outlook (2011-14E top line. or 23.09 Target Price (YE 2013) R$ 49. MEDIA & TECHNOLOGY TOTVS BUY CURRENT PRICE: R$40.A. (We estimate 27. respectively. and (2) maintenance revenue growth accelerating to 14. we expect Totvs to easily meet its 27-30% guidance.com. respectively) and differentiated level 60 of profitability (ROEs of 22% and 24% for 2013E and 2014E).2%.0 3-Mth Avg. we forecast decent 11.93 .6x P/E for 2013E. The Brazil: Banco Santander S.

1 60.60 2.44 3.86 5.647 323 149 1.1 174 2.8 22.4 P/BV 8.6 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.3 3.3) (0.5 20.1 39 (152) 337 29.0 3.1 233 10.6 1.3 27.00 2771.2 16.9 15.8 19.1 26.1 FV/Revenue 4.3 (0.433 12.4) (0.2 13.9 2.8 14.4 22.9 2.3 19.1 26.2 17.1) Net Debt/Equity 0.9 (3) (46) 108 12.000 clients and are complemented by a broad portfolio of vertical solutions.6 16.5 27.3 2.2 US$ 2012E 739 2.45 BVPS 3.4) (0.410 251 94 2011A 124 282 336 755 136 282 330 222 40 2012E 208 380 274 717 150 89 479 126 47 2013E 290 480 242 784 154 71 559 120 45 2014E 362 572 225 860 159 58 643 115 43 LT Debt 2013E 1.2) (0.887 350 127 1. 9M12 License fees 23.22 8.5 14.9 490 10.9 30.4 4.0 69.6 1.4 Div Yield (%) 1.0 434 12.1 (10) (22) 96 36.1 17.50 0.7 4.2 212 6.0 2.6 6.2) (0.7 30.5 1.6 ROE (%) 27.5 5.6 2013E 780 5.3% Services 29.3 27. the world's sixth largest ERP developer and the leader in emerging markets.9 342 158 157 157 182 79 75 72 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E Net Debt 184 (164) (357) (542) 98 (82) (170) (247) Capital Employed 803 793 818 867 428 397 390 396 Net Debt/EBITDA 0.5 57.4 2.4 2.6 19. Gilsomar Maia (IR.5 24.0 19.4 43. Its ERP operations serve over 30.95 Totvs is Latin America's largest developer of application software.3 25.2 434 12.279 13.9 386 25.77 0.8) (1.9 18.9 MARKET RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 31.6 1.8% BNDES 6.0 233 10.6 16.2 4.9 199 14. Balance Sheet and CF Statement.2 22.9 (6) (90) 209 23.785 11.60 0.255 493 1.8 3.1 501 15.8 FV/EBITDA 18.00 Existing Clients New Clients Revenue Breakdown.4 28.0 2.2 ROCE (%) 34. 223 .1 41.8 39. 9M12 12531.8 5.96 0.3 15.4 501 2.4 5.0 18.5 24.9 2011A 722 8.6 1.9 3.4) 0.2 28.6 1.5 60.3 (0.007 508 1.6 24. as well as by valueadded services such as consulting.6 578 8.6 (0.7 41. 2012 Board/ Directors 17.2 4./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (82) 0 252 (44) 125 0 (79) 0 2012E (82) (24) 266 (33) 77 (82) (102) 30 2013E (71) (11) 320 (32) 291 (1) (125) 30 2014E (51) (11) 377 (36) 353 0 (156) 0 2011A (47) 0 142 (25) 71 0 (45) 0 2012E (42) (12) 137 (17) 40 (42) (52) 15 2013E (35) (5) 156 (16) 142 (1) (61) 15 2014E (24) (5) 176 (17) 165 0 (73) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 233 529 630 1.4 33.5 12.06 1.3 309 6.06 2.8 212 6.3) (0.2 7 (57) 127 17.0 60.2 20.1 20.6 6.1 (18) (39) 169 41.29 1.4 3.3 1.67 0.4 16.175 251 94 2014E 793 1.3 26.32 0.2 12.1 18 (71) 157 24.1 23.63 0.4 PER SHARE DATA 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 1.4 28.9 22.1 501 15.4 4.8 5.5 31.2 25. infrastructure and BPO.0 FINANCIAL RATIOS Int Cover (%) - - - - - - - - Dividend Payout (%) 66.0 14.7 29.2 16.66 2.2 2014E 832 6. M&A and Planning Director) and Flavio Bongiovanni (IR Manager) Web: www.0 971 12.6 26.8 51.7 4.3 2.3 867 15.1 4.240 13.2 28.1) 0.5 535 6.07 0.1 309 6.3 P/CE 21.600 11.097 13.5% Maintenance 47.0 386 25.0 21.2% Shareholder Structure.3 26.3 2.6 (0.78 0. Alexandre Dinkelmann (CFO).4 199 14.2 2014E 1.3 1. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 1.1 23.4) Capex/Revenue (%) 3. Key Personnel: Laercio Cosentino (CEO).92 7.com/ri Licenses Sold.totvs.9 174 2.28 0.7 8.434 300 177 957 253 95 2013E 608 1.2 43.415 255 529 619 416 74 2012E 416 761 548 1.6 39.4 14.8) (1.2 R$ 2012E 1.38 0.2 13 (117) 260 24.7 FCF Yield (%) 2.1% Sources for all charts and tables: Company reports and Santander estimates.1% Free Float 76.3 21. It is the absolute leader in Brazil and the leader in the small and medium enterprises (SME) segment in Latin America.6 24.97 DPS 0.0 FV/EBIT 35.96 3.4 60.TOTVS Financial Highlights: P&L.4 41.5 27.5 1.6 25.7 13.

Consequently.7 Shares Outstanding . 224 . for 2013 we expect the payout to decline to 55%. Bloomberg Jirau: one (big) uncertainty.6% YoY for EBITDA in 2013 based on an increase in capacity and additional bilateral sales.2013 Latin American Universe Book BRAZIL—UTILITIES TRACTEBEL HOLD CURRENT PRICE: R$33. In 2H13. Tractebel has almost fully contracted its firm energy through 2014 at attractive price levels. Daily Vol (US$ Mn) 8. given its active participation in the trading business.6 3-Mth Avg. with an implied 4.37.57 Target Price (YE 2013) R$ 33.  Prices for free market. +5511-3012-5751 | mprado@santander.50 information on the Jirau project.818 26.Mn 653 potential hike to prices in this market in 2013. coupled with a price rollover of Tractebel’s current contracts. we expect Tractebel to acquire GDF-Suez’s stake of the Jirau megahydro plant project.  Maria Carolina Carneiro* Brazil: Banco Santander S. the main Float (%) risk lies in the final price for the contract in the free market. but trading at aboveaverage multiples.74 / US$ 16. combined with its good allocation strategy. In our view. the company might benefit in the short term from a potential hike in prices.16/share).98 52-Week Range (R$) 29.5% dividend yield.56 / US$ 15. 120 IBOVESPA 100 80 60 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet.10 . +5511-3012-6682 | macarneiro@santander. After incorporating new estimates and TBLE3 BZ Current Price (01/03/13) R$ 33. In our view.com.A. we arrived at a negative contribution Market Capitalization (US$ Mn) to the target price of Tractebel (-R$1. coupled with a worse hydrology and higher spot prices.com. 140 Uncertainties related to the final return of the project remain. Tractebel is a premium company with reasonable dividend payments.A. the company is not exposed to risk-related prices or to the concession risk.br concessions after the MP579.74 TARGET PRICE: R$33. Santander estimates and company reports. Higher  prices could also benefit the final returns for the Jirau project (which Company Statistics has not sold all its firm capacity). In any case. Nevertheless. Therefore. could translate into final prices (and Price Performance (R$) Tractebel returns) reaching better levels. the transfer of the Jirau 160 project will likely be postponed until 2H13 (not in early 2013). The 10.br 2013 Outlook: We expect solid growth of 11.56  Investment Case: We maintain our Hold rating on Tractebel based on the limited upside we see after we incorporated a higher capex Marcio Prado* estimate for the Jirau project and the limitation on the renewal of Brazil: Banco Santander S.

942 19.652 189 2013E 207 742 370 6.526 (2.6 39.5 1.8 0.4 17.0) 4.6 3.543) 0 2013E (505) 0 10 455 (876) (421) 0 (497) (971) 0 2014E (491) 0 9 1.4 7.5 0.868 3.214 2.3 9.1 6.3 9.160 11.305 378 2013E 434 1.1 10.31 1. Tractebel is currently expanding its annual capacity by 2.2 (206) (800) 1.0 FV/EBIT 9.8 6.488 (0.7% Sources for all charts and tables: Company reports and Santander estimates.918 2.355 155 2014E 626 1.8 2014E 5.0 2013E 2.387 1.22 2.74 3.2 69.737 17.investor-relations.4 60.73 1.1 67.650 5.3 (374) (587) 1.064 10.804 (1.371 1.0% Suez Energy 68.2 Net Debt/Equity 0. with the construction of wind farms and Jirau.7) 0.3 10.008 15.327 5.5 R$ 2012E 4. Tractebel originated from a spin-off of Eletrobras subsidiary Eletrosul’s generation assets (Gerasul).846 326 2014E 1. 225 .54 DPS 2.45 1.5 9.9 13.6 Dividend Payout (%) 113.0 26.532 777 13.9 4.8 105.32 1.4 17.3 4.155 8.9 4.6 5.2 40.127 2.6 33.155 354 6.078 1.3 9. in a privatization auction in 1998.6 0.6 0.5 3.3 57.613 777 12.8 99.1 13.611 7. Key Personnel: Mauricio Stolle Bahr (Chairman). 2012E Thermal 17.0 7.867 3.4 66.7 8.546 (0.9 (81) (956) 1.9 41.114 1.894 2.5 37.0 3.0 146.7) 1.1 FV/EBITDA 7.3 (2.3 FINANCIAL RATIOS Capex/Revenue (%) Int Cover (%) ROE (%) MARKET RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 13.907 MW (firm capacity of 3.2 4.595 831 2.0% Sales by Segment.0 8.232 2.0 11 (496) 1.141 4.9 3.br/ Installed Capacity Source.448 19.6 3.3 (223) (350) 865 25.939 777 12.5 1.7 0.5 0.21 0.2 11.49 3.6 1.170 1.235 2.9 (39) (467) 947 13.8 4.126 (187) 938 0 (603) (2.8 0.006 6.4 9.339 3.11 2.0 10.7) 64.14 1.927 2.3% Banco Classico 10.9) 4.85 8.TRACTEBEL Financial Highlights: P&L.6 4.8 2.2 4.8 4.6 40. Eduardo Antonio Gori Sattamini (CFO) and Antonio Previtali Jr.0% Regulated Market 51.3 (1.26 1.com.5 11.123 1.0 0.18 3.2 0.9 FV/Revenue 5.6 63.7 14.830 9.589 2.9 69.467 2.1 63.738 1.2 61.3 91.97 3.3 (1.156 3. Manoel Zaroni Torres (CEO).529 1.4 3.2 0.527 7.3 7.02 4.643 2.2 (1.5 13.1 10.0% Hydro 81.45 3.8) 1.9 ROCE (%) 127.0 P/CE 10./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (501) 0 (62) 214 (514) (301) 0 447 (1.4 67.66 FCF Yield (%) Div Yield (%) PER SHARE DATA Tractebel is the largest private generation company in Brazil. the French company Suez.052) 0 2011A (299) 0 (37) 128 (307) (180) 0 267 (821) 0 2012E (250) 0 288 375 (337) 38 0 (196) (793) 0 2013E (246) 0 5 222 (427) (205) 0 (242) (474) 0 2014E (229) 0 4 524 (87) 437 0 (281) (956) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 782 1.024 MW.455 1.559 12.509 14.7 8.6 37.372 2.450 2.0% Trading + Exports 8.2 12.152 5.36 1.1 3.2 1.7 14.9 60.945 223 2012E 428 970 388 6.601 3.5 106.022 1. with a total annual installed capacity of 6.225 1.118 7.340 3.0 11.2) 1.2 3.9 7.7 119.9 99.28 1.2 105.2 40.5 US$ 2012E 2. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 4.906 1.0 68.0 3.46 BVPS 8.2 1.6 5.522 11.49 2.507 (0.655 5.5 33.1 10.5) 33.624 12.7 1.450 3.911 2.559 5.9 7.4 11.1 37.376) 0 2012E (487) 0 560 730 (657) 73 0 (382) (1.1 72.9 1.5 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 2.283 261 2011A 417 860 414 6.463 1.2 2. 9M12 Free Float 21.7 0.858 2.35 6.081 4.0 8.9 6.2 3.411 911 1.718 6.6 4.3 4.915 13.5 3.2 P/BV 3.520 2.5 6.9 37.1 80. 2012E Free Market 41.4 2011A 2.8 2014E 2.867 2.4 64.0% Alternative 2.441 1.5) 0.9 1.6 66.910 11.3 29.283 9.6 0.1 8.5 5.041 119 LT Debt 2013E 5.3 4.8 41.723 1.559 777 12.3 4.829 16.37 7.5 3.649 417 2012E 855 1.8) 61.621 (6.528 4.0% Shareholder Structure.5 72.0 10.560 Net Debt/EBITDA 1.4 75.064) 2.5 0.1 8.6 68.827 2.2 (106) (411) 835 (3.139 4.7 6.3 8.583 10.9 0. (IR Manager) Web: http://tractebel.731 5.434 1.0 24 (1.2 4.362 5.5 59.888 1.057 4.200 922 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E Net Debt 2. representing 6% of Brazil’s total installed capacity.4) 1.9 6. Balance Sheet and CF Statement.148 415 Capital Employed 1.7 7.528 2.800 MW).1 7.5 3.9 13.8 7.1 4.420 847 1.0 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.8 8.6 5.858 3.2 33. Gerasul was acquired by Tractebel’s current controller.

9 3-Mth Avg.com.A. We have recognized both RBNI. profits and therefore dividends will be booked and calculated from 2013 and beyond.70 TARGET PRICE: R$37. we believe Transmissao will be one of the most attractive dividend plays in Brazil given its stable cash flow 29.55 Target Price (YE 2013) R$ 37. ability to releverage its balance sheet and low-capital intensive growth opportunities (reinforcements).65. there are still several uncertainties facing Transmissao in 2013 and beyond: How will RBNI-related indemnification value be received? How will RBSE-related indemnification value be received? Will RBSE-related indemnification value be entitled to IPCA + 4% remuneration? Transmissao has only answered the first of these two questions: 50% of RBNI will be received in 1H13 (R$1.77 RAISING YE2013 TARGET PRICE TO R$37. we expect them to be back sooner rather than later. While uncertainties remain (see below).31  Investment implemented Case: After last-minute the Brazilian changes to federal MP579 government (via MP591). should our estimates prove correct.Mn 154 Price Performance (R$) Transmissao Paulista IBOVESPA A-11 A-12 120 100 generation. 226 . we believe profit reserve would allow Transmissao to pay a TRPL4 BZ Current Price (01/03/13) R$ 33.br our Buy rating. long-term concession contracts. There are still lots of uncertainties on how revenue. For 2013 and beyond. 80 60 40 J-11 M-11 D-11 A-12 D-12 Sources: FactSet.5 billion) and the other 50% though 2015. Santander estimates and company reports. Daily Vol (US$ Mn) 7.15 . We believe profit reserves will allow 52-Week Range (R$) Transmissao to pay higher dividends than implicit in annual net profit Market Capitalization (US$ Mn) in 2013 and 2014. we maintain Marcio Prado* Brazil: Banco Santander S.com.3 Shares Outstanding .99 dividend yield of 15%.0 billion) will be paid annually for 30 years. as we see decent upside supporting our valuation.and RBSE-related indemnification as RAP (booked on the revenue line).77 / US$ 17.77 FROM R$37.  Dividends. We assume that RBSE-related indemnification (R$3. Company Statistics Although we cannot guarantee extraordinary dividend payments for Bloomberg 2012. we believe Transmissao will be able to pay 7% + IPCA as DY. Our YE2013 target price incorporates this new scenario. But. +5511-3012-6682 | macarneiro@santander.70 / US$ 16. +5511-3012-5751 | mprado@santander.2013 Latin American Universe Book BRAZIL—UTILITIES TRANSMISSAO PAULISTA BUY CURRENT PRICE: R$33.549 Float (%) 20.92 2.br Maria Carolina Carneiro* Brazil: Banco Santander S.A. Transmissao accepted the renewal of its transmission concessions under MP579/591 terms.  2013 Outlook: After renewing its concessions under MP579/591.

067 769 361 LT Debt 2013E 2. 2012 New Assets 6.8) 19. with the bulk of its revenue concentrated in the State of São Paulo.1 FCF Yield (%) 19.2) 54.5) 14.0 (568) (304) 579 (21.9 3.1 6.4 0.9) 973 30.264 4.083 1.0 15.51 0.031 6.3 24.0 5. Balance Sheet and CF Statement.812 1.893 1.451 35.477 694 2012E 769 1.019 645 577 2.7 2.9 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.415 1.7 (106) (151) 479 38.2 0.397 4.4) (17.53 0.0 13.235 6.424 963 665 2.371 (20.2% RBSE/RBNI 93.2) 2.1 2.078 (537) 1.085) 16 2012E 5 0 (19) 1.263 5.042 3.3 82.0 1.297 4. a subsidiary of ISA Colombia.9 Net Debt/Equity 0.6 4.0 154.1 5.5 866 41.44 14.5 0.4) 14.207 1.8 4.161 2.4 2.9 2013E 1.5 1.258 0 799 (265) 0 2013E 1.527 (36.901 75.7) 504 (48.678 2013E 1.9 18.2 39.06 0 2.3) 70.180 (13.5 6.8 222 33.9 3.5 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 3.0 500.6) (17.6 50.062 409 476 Capital Employed 6.4 0.5 2.5 1.9) 1.0) FV/EBITDA 7.4 31.0 1. Key Personnel: Luis Fernando Alarcón Mantilla (Chairman).9 5.0 500.6 5.072 859 1.44 29.163 Net Debt/EBITDA 1.847 (508) (422) 0 (1.324 (660) 1.1 3.7 2.4 5.935 3.023 1.89 DPS 5.9% Eletrobras 35.704 8.2 0.3 1.1 19.9 (8.2) 70.732 84.1 (62) (26) 78 (83.8 21.5 336 (76.43 PER SHARE DATA BVPS CTEEP is the largest pure-transmission privately owned player in Brazil.390 (10.20 14.03 1.0% Revenues by Segment.9 50.9 2.162 4.831 860 2013E 513 769 3. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 2.527 (36.TRANSMISSAO PAULISTA Financial Highlights: P&L.050 2.6 2014E 1.5 32.9 5. and Eletrobras is a major shareholder.9 24.9 ROCE (%) 18.9 US$ 2012E 1.446 (1.051 1.7) 6.1 1.2 0.2 P/CE 15.9 3.464 14.495 2.6 5.89 28.5 21.0 18.6) Dividend Payout (%) FINANCIAL RATIOS Capex/Revenue (%) 146. The company owns and operates 12.0) 6.98 17.533 1.7) (11. representing 16% of Brazil’s transmission grid.7 5.616 6.4 1.7) 711 (39.771 1.4 17.4 1.570 1.4 0.165 3.11 33.1 (126) (52) 158 (83.24 3. 227 . Reynaldo Passanezi Filho (CFO) and Thiago Lopes da Silva (IR Manager) Web: www.5 166 (77.084 (395) 355 0 (250) (789) 0 2011A 4 (8) (64) 643 (320) 1.4 1.732 84.2) 1. 9M12 Others 20.6 34.04 1.0 (339) (181) 345 (17.180 (13. CTEEP has a presence in 12 states in Brazil.1 50.074 6.058 4.2) 2.935 909 2014E 643 1.8 FV/Revenue 3.0 3.685 792 2011A 270 522 3.91 3.429 9.0) (46.4) 13.1 1.453 3.662 (8.901 75.081 (45.840 4.12 0 5.324 3.6 0.9 Int Cover (%) (41.5) (29.6) (41.9 17.8 477 41.7 17.2 13.7 31.640 9.13 1.779 0 1.309 1.1 1.5 2014E MARKET RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E P/E 15.54 29.5 50.2) 1.499 2.1% ISA Capital do Brasil 37. 9M12 Transmission 100.159 922 433 2014E 293 490 3.2 25.3 1.618 0 (55) 1.8 22.307 1.993 km of transmission lines.br EBITDA by Business.9 0.5 ROE (%) 13.4 4.236 4.4 874 20.043 1.2 (84) (98) 295 86.02 13.cteep.0 15.8) 19.1 1.6 13.6 19.3 2011A 1.026 893 783 971 489 407 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E Net Debt 2.5 1.8) 745 (14.7 (205) (294) 930 60.com.5 24.8% Sources for all charts and tables: Company reports and Santander estimates.8 (8.9 18.131 MWA transmission capacity.648 1.0 1.8 6.6 2014E 711 (39.9 R$ 2012E 2.302 2012E 1.7 34.5 14.2 25.8 5./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A 6 (13) (107) 1.5 24.0 P/BV 2.070 8.343 (1.4 0.0 3.533 1.8) 1. with total 45.371 (20.9 5.5) (29.0 19.2 (39) (46) 137 76.5) 53.869 1.2 0. César Augusto Ramírez Rojas (CEO).662 (8. The company is controlled by ISA Capital do Brasil.0 17.7 82.9 5.2 5.245 3.5 6.265 2.290 2.328 7.0) 53.1) 1.012 981 2.635) 0 0 2014E 594 0 112 1.3 12.062 0 802 (648) 10 2012E 3 0 (10) 682 (340) 647 0 411 (137) 0 2013E 799 0 (27) 912 (251) (208) 0 (807) 0 0 2014E 277 0 52 505 (184) 166 0 (116) (368) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 507 979 6.899 1.6 FV/EBIT 7.7) (11.2% Finance Secretariat 6.5 (3.11 0.4 0.0) (46.5 4.1) 1.76 6.8 21.077 1.390 (10.327 2.8) 54.8% Shareholder Structure.429 (1.251 6.469 1.4) 7.971 36.4 18.7 31.9 3.2 18.5 (3.1) 6.0 Div Yield (%) 12.91 2.3 736 (15.7 45.2 0.3 0.

com. given the stronger expected GDP.Mn 544 Price Performance (US$) Ultrapar  The balance sheet should remain solid.) and a higher growth rate in diesel.36 / R$ 45. GAS & PETROCHEMICALS ULTRAPAR BUY CURRENT PRICE: US$22. fueled by solid growth patterns in the ciclo-otto side of the business (gasoline. but the quite high US$240-250/ton EBITDA margin should continue. mainly driven Christian Audi New York: Santander Investment Securities Inc. particularly on the industrial side of the Company Statistics business (cost-cutting programs). +5511-3012-6042 | vneto@santander. as the company will incorporate all the new expansions and the new terminal in its EBITDA.  2013 Outlook: Ultragaz should show an uptick in 2013 in terms of improved performance.2013 Latin American Universe Book BRAZIL—OIL. 64.24. In addition.us Vicente Falanga Neto* Brazil: Banco Santander S. +1-212-350-3991 | caudi@santander.  Ipiranga: This unit should generate higher volume growth than in 2012.A. Bloomberg UGP US / UGPA3 BZ Current Price (01/03/13) US$ 22.00 52-Week Range (US$) 17.02  Oxiteno could post lower volume growth in 2013. We expect Ultrapar to continue to deliver solid results in 2013. 228 .36 TARGET PRICE: US$27.br by the fuel distribution segment. its main growth driver.28 Target Price (YE 2013) US$ 27. Market Capitalization (US$ Mn) 12. Santander estimates and company reports. and reiterate it as our top pick in the Oil & Gas industry due to the company’s demonstrated ability to deliver strong EPS growth with capital discipline and strong corporate governance. thus 160 enabling Ultrapar to pursue acquisitions that have historically 140 been accretive. Below we highlight our expectations for the company’s four different business segments in 2013. we believe. we expect the convenience store push (which has been quite successful so far) and growth in the CONEN region (where Ipiranga still only has a small market share) to persist.172 Float (%)  Ultracargo: 2013 could be a particularly good year. while concurrently showcasing the company’s 120 strong integration capabilities.0 3-Mth Avg.75 . Daily Vol (US$ Mn) 8.50 FROM US$29. etc. driven by commercial initiatives that the company has undertaken. 100 IBOVESPA 80 60 j-11 m-11 a-11 d-11 a-12 a-12 d-12 Sources: FactSet.50 LOWERING YE2013 TARGET PRICE TO US$27.00  Investment Case: We maintain our positive view on Ultrapar.50 / R$ 58.4 Shares Outstanding .

3 14.75 5.6 0.3 4.7) 2.041 1.052 20.5 Capex/Revenue (%) 2. André Covre (CFO and IR Officer) Web: www.494 (1.316 15.937 19.8 13.551 1.1 71.107 5.58 0.379 11.2 4.3 1.6 0.3 1.2 10.4 21.453 7.3 3.523 4.4 3.6 6.3 Int Cover (%) 3.5 FINANCIAL RATIOS MARKET RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 20.779 3.011 13.036 2.5 2.5 0.7 18.88 1.4 1.985 (800) (39) (1) 0 (1.01 5. is controlled by the Igel family and its management team.4 0.124 2013E 970 3.1) 3.7 P/CE 12.3 1.8 (297) (301) 849 10.079 2.07 1.2 3.6% 6.8 1.0 3.7 13.6 10.167 13.9 10.959 2.331 3.8 FCF Yield (%) Div Yield (%) PER SHARE DATA 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 1. and the largest specialty chemicals producer in Brazil via Oxiteno).3 (283) (463) 1.403 18.71 11. 2012 Ultra S.9 4.4 14.840 6.5 0.444 3.257 1.0 2.7 2.0 (249) (383) 978 15.257 3.068 5. and has shares listed in the Brazilian stock exchange.ultrapar.4 1.8 2013E 28.5 P/BV 3.200) (194) (18) 0 (733) 49 2014E (742) 8 (168) 1.2 4.1 18.088 3.2 4.270 4.998 6. Key Personnel: Pedro Wongtschowski (CEO).5 0.1 823 17.155 2.97 5.6 17.024 (3.4 2.3 FV/Revenue 0.0 9.394 (5.34 5.037 6.924 5.2 12. operating via Ultragas and Ipiranga).989 11. 2013E Oxiteno Ultracargo 0.368 (1.229 2012E 1. the production of specialty and commodity chemicals (the largest producer of ethylene oxide and derivatives in South America.0 12.305 2012E 2.168 2.2% Ipiranga 85.2 Dividend Payout (%) 68.3% Ultragaz 7.880 10.7 R$ 2012E 53.8 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.8 4.5 2.2 4.5 4.708 6.324 4.3 2.8) (1.263) 40 2011A (346) 4 (40) 817 (651) (86) (66) 124 (314) 4 2012E (361) 3 (98) 770 (722) (246) (2) 0 (312) 20 2013E (362) 4 (111) 832 (585) (95) (9) 0 (357) 24 2014E (345) 4 (78) 923 (372) (18) (0) 0 (587) 19 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 2.821 7. The company.562 2.9% Shareholder Structure.233 3.522 11.17 2.0 4.3 12.562 2.0 2014E 29.2 2.9 4.180 3.6 14.2 4.5) 1.5 1.7 25.32 0.246 16.1 13.4 2.965 1.872 14.5 0.196 6.1 13.2 FV/EBITDA 10.5 18.9 4.3 16.8 3.090) (144) (111) 208 (525) 6 2012E (700) 7 (191) 1.0 13.6 14.524 4.5 0.5 0.9 1.562 2.0 21.4 1.9 ROCE (%) 11.0 3.35 2.55 0.11 1.045 10.525 3.9) (2.736 1.103 17.6 0.406 15.347 15.47 0.0 2.6 945 13.680 15.2 Net Debt/Equity 0.098 4.156 6.0 (0.551 5.400) (477) (4) 0 (606) 39 2013E (742) 7 (227) 1.1) (0.661 14.56 1.8 5.ULTRAPAR Financial Highlights: P&L.438 13.0 2.80 2.194 (0.88 11. 2013E Other 2.950 8.7 71.184 21.7) 1.515 5.1 2.5 2.1 1.66 1.97 1.305 2011A 1.5 17.5 3.625 1.5 2.2 3.9 106.5 24. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 48.6 1.515 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E Net Debt 2.501 9. 229 .9 1.3 13.1 11.6 2.9) (0.7 US$ 2012E 27. Balance Sheet and CF Statement. which went public in 1999.7% Sales by Segment.8 3.356 4.0 2.1 1.617 17.524 4.2 4.657 Capital Employed 9.3 (138) (226) 577 14.2 12.2 61.0% Free Float 64.5 0.678 8.8 2.7 4.88 BVPS Ultrapar is engaged in fuel distribution (it is the second largest fuel distributor in the country.7 72.2 16./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (580) 6 (67) 1.562 2.2 4.1 1.0 17.2 2.890 2.6 6.8 (177) (180) 507 16.138 1.2 1.0 4. as well as ADRs on the NYSE.679 1.6 2.165 6.2 1. and integrated logistics for special bulk (through Ultracargo).257 3.4 2.587 1.0 2014E 62.390 6.979 3.2 3.975 7.576 7.098 2014E 929 3.482 1.9 1.5) 4.8 5.6 18. offers full tagalong rights.4 0.0) (0.14 10.185 2.589 1.5 21.231 6.563 1.952 3.648 1.257 3.408 Net Debt/EBITDA 1.br Sales by Country.27 DPS 0.6 2.5 4.844 4.305 2013E 2.7 17.0 13.3% Brazil 97.307 9.6 3.121 1.2 11.148 3.6 (287) (549) 1.987 2.927 11.7 10.3 74.8 2.910 7.8 17.4 1.086 9.1 ROE (%) 15.2 4.743 4.030 2.com.707 (1.305 2014E 1.3 18.473 10.0% Sources for all charts and tables: Company reports and Santander estimates.003 2.0 (128) (197) 504 (0.145 9.200 18.5 15.6 21.6 (134) (255) 653 13.7 106.0 FV/EBIT 14.A 24.0 4.326 2.0 2.505 3.6 0.3 2.20 10.0% Others 12.261 4.1 1.8) (0.375 5.77 0.454 4.2 2011A 29.272 9.142 2.713 1.4 833 1.2 3.6 0.025 4.477 4.0 14.072 LT Debt 2013E 58.8) (0.438 6.597 4.

230 . although strategically important for the long term.9 the largest player in the industry). IBOVESPA A-12 D-12 Sources: FactSet. Moreover.41 . we also believe that: (1) near-term visibility on the ―stabilization‖ of its retail store network remains low. Santander estimates and company reports.53 Target Price (YE 2013) R$ 13.78 52-Week Range (R$) (2) good free cash flow (5% FCFF yield). however.25 TARGET PRICE: R$13.00.to long-term growth outlook Brazil: Banco Santander S. EPS could grow 31% YoY.A.  Bloomberg Investment positives: Our positives: (1) high returns (22% ROIC). improve control distribution network to drive sales.2013 Latin American Universe Book BRAZIL—RETAIL & CONSUMER GOODS UNICASA MÓVEIS HOLD CURRENT PRICE: R$11.  2013 Outlook: We anticipate 14% YoY top-line growth stemming mainly from openings of New stores and some stabilization in the Dell Anno/Favorita store network in São Paulo.0x (20%) and a DCF using a cost of equity in BRL 60 A-12 of 12.00  Investment Case: We are downgrading Unicasa to Hold from Buy. (3) ―control‖ of 100 distribution network is much more elusive than we thought. REPLACING YE2012 TARGET PRICE OF R$20. Our YE2013 blended target price of R$13. We expect an EBITDA margin of 23.50 3-Mth Avg. thanks to lower price promotions (= higher gross margin) and less ―extraordinary‖ expenses from provisions and store closings (we remain concerned. and (5) strong balance sheet.0 9. Unicasa’s returns (ROIC) remain high and cash flow generation attractive. which resulted in a substantial reduction in our earnings outlook (an approximate -34% cut in EPS for 2013E and 2014E). and (3) the Bruno Soares Taveira* Brazil: Banco Santander S. (2) competitive environment.br and expectations of lower margins.br Ronaldo Kasinsky* Brazil: Banco Santander S. (3) ample opportunities to Market Capitalization (US$ Mn) 365 Float (%) 46. Shares Outstanding . will add another element of volatility to its operations.25 / US$ 5.Mn 66 Investment concerns: Our concerns: (1) results significantly below Price Performance (R$) Unicasa Móveis that guided during the IPO process substantially raised execution risk 110 and harmed credibility. Daily Vol (US$ Mn) 0. +5511-3553-9602 | btaveira@santander. (4) scale (among  Company Statistics 80 Valuation.com.com. about the potential impact of managing some stores).00 is based on 70 a 2013E P/E of 15.com.br company’s strategy to operate stores. In our new assumptions.00 DOWNGRADING RATING TO HOLD FROM BUY INTRODUCING YE2013 TARGET PRICE OF R$13.A. Tobias Stingelin*. +5511-3553-0699 | tstingelin@santander.9% (+270 bps YoY). (2) the competitive environment has become fiercer.9% (80%). and 90 (4) relatively low share liquidity. CFA on the back of a change in our medium. but we believe that it will take at least a couple of ―clean‖ quarters for the story to de-risk again.16.  UCAS3 BZ Current Price (01/03/13) R$ 11.A. +5511-3553-2396 | rkasinsky@santander.00 / US$ 5.

85 1.6 6.0 2014E 367 13.2 126 8.8 Dividend Payout (%) 33.0 94. in 2011.4 75 14.1) (0.9 20.8% 2.0 16.7 14. Telasul Madeira (focus on D class)—which are then sold through its exclusive stores for each brand and through almost 2.7 8.9 6.4) 118 (5.3) (0.2 5 (14) 35 14.88 1.2 2011A 176 7. Balance Sheet and CF Statement.6% Free Float 46.0 16.8 137 16.4 2.4 - 12. 231 .3 6 (11) 27 17.8 81 10./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (7) (1) (25) 39 (32) 6 0 2 (18) 0 2012E (8) (9) (14) 29 (8) 27 0 (1) (136) 128 2013E (8) 0 (10) 57 (8) 45 0 0 (15) 0 2014E (9) 0 (13) 66 (10) 53 0 0 (28) 0 2011A (4) (1) (15) 24 (19) 4 0 1 (11) 0 2012E (4) (5) (7) 15 (4) 14 0 (0) (69) 65 2013E (4) 0 (5) 26 (4) 20 0 0 (7) 0 2014E (4) 0 (5) 29 (4) 23 0 0 (12) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 12 126 77 258 53 9 196 7 1 2012E 24 150 80 283 46 1 235 6 5 2013E 58 197 80 330 50 1 279 6 5 2014E 86 246 81 383 61 1 321 6 5 2011A 7 67 41 138 28 5 104 4 1 2012E 11 71 38 133 22 0 111 3 2 2013E 26 88 36 146 22 0 124 3 2 2014E 37 105 35 163 26 0 137 3 2 6 1 1 1 3 0 0 0 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E (34) LT Debt FINANCIAL RATIOS Net Debt 2013E 324 13.9) 60 (25.3 FV/Revenue - 2.6 12. ROIC reached 25% in 2011.9 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E - 16.6 2.5) 31 (36.7 25.40 0.19 BVPS 3.61 0.4 - 13.6) 18.6% Shareholder Structure.7 2.3% Telasul Customized (Multibrand & Retaile 10.4 17.6 21.3) (0.0 2014E 159 7.0 82.8 10.1) (0. Key Personnel: Alexandre Grendene (Chairman).4 10.6% Dellano / Favorita (Exclusive Stores) 53.4 198.88 2.8 78 13.2 27 (39.2 - 3.3) (0.9 21. creates.2) (0. produces.6 - 11. The company designs.1) (0.3 12 (23) 58 31.0 8.5% New (Multibrand Stores) Exports 4. New (focus on C class).05 0.1 1.8 31.3 FCF Yield (%) - 3.9 US$ 2012E 145 (17.10 0.7) (0. Paulo Junqueira (CFO) and Alisandra Reis de Mattos (Investor Relations Manager) Web: http://ri.4 6 (10) 31 14.7 25.9 R$ 2012E 285 (3.1 2.34 0. Frank Zitolie (CEO).6 23.8 20.0 8.0 23. respectively.9 32 18.8 15.8 34 7.0 3.4 19.1 2.6 74 9.3 18.5 68 7. and R$59 million.1) (0.46 DPS 0.1 1.0) (0.2 8 (24) 59 8.4 21.0 3.8) 18.9 33. operating out of one state-of-the-art industrial complex and an exclusive distribution channel consisting of 929 stores as of 2Q12.7 232. Frank) Frank Zitolie 5.9 2.44 3.8 2.5 2.8 - 19.7 19.1 156 13.4 FV/EBIT - 13.9 7.3 87 12.3 48 15.6 2013E 148 2.com.UNICASA MÓVEIS Financial Highlights: P&L.4 49.4 ROE (%) 29. and markets its four different consumer brands focused on different social classes—Dell Anno (focus on A and B class).0 10.6 - 15.8 10.0) (0.8 19.6 10.2 (6) (18) (52) (80) (3) (9) (23) Capital Employed 205 236 280 322 109 111 124 137 Net Debt/EBITDA (0. EBITDA.br/pt/default.2 9.0 78 28.8 21.0% Sources for all charts and tables: Company reports and Santander estimates.19 1.3 11 (19) 44 (24.3 Div Yield (%) - 18.0 ROCE (%) 24.8 9.3) 21.8 2.6 2.8 30.67 0. Unicasa reported sales.6 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.5% Others 1.A is one of the largest planned furniture players in the Brazilian market.3 2.7) (0.unicasamoveis.6 Int Cover (%) 30.68 1. The company recently launched Unicasa Corporate to focus on the office and hotel markets.4 28.7 25.8 21.0 11.1 32.8 P/BV - 3.0 18.8% Zitolie Family (exc.4 14 (23) 70 20.22 0.9 2. and net income of around R$295 million.3 19.0 63 4. Favorita (focus on B and C class).3 17.3 6 (10) 23 (35.0 82.9 2.3 - 3.06 0.2) (0.06 0.8 21.6 38 7.83 1.43 0.6) 21. R$80 million.000 multibrand retailers in the case of New and Telasul Madeira. 28%. having grown at CAGRs of approximately 15%.9) Net Debt/Equity (0.1) 15.3) 60 (19.22 4.9 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 1.9 27.0 94.4 P/CE - 14.2) 15.4 12. 2012E New (Exclusive Stores) 25.7 19.7% Unicasa Corporate 1.9) (0.8 - 2.3 23.9 69 32.32 2.aspx Sales by Format.3) Capex/Revenue (%) 10. September 30.2 52 (29.3 27.9 18.2 7.2 25. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 295 2.8 9.56 4.03 0.2 FV/EBITDA - 11.9 8.6 44 14. 2012 Alexandre Grendene 39.9 35.7 48.7 2.6% 8.07 MARKET RATIOS PER SHARE DATA Unicasa Móveis S.0 7.7 7.9 23.0 35 14. and 25% in the 2009-2011 period. by our calculations.

13.br The main benefits of new import tariff protection to be seen in volume rather than in prices.33 52-Week Range (R$) 5.00 / US$ 3. consensus estimates for 2013 are too optimistic. CFA Brazil: Banco Santander S.br itself.50 Target Price (YE 2013) R$ 7.23 TARGET PRICE: R$7. leverage Float (%) 44. based on our projections for a net loss in 2012.8x for the company’s main  LatAm peers. and cash burn should continue.9x 2013E FV/EBITDA. We still see Usiminas as the most expensive stock in Company Statistics the Latin American steel sector Bloomberg 2013 Outlook: Although our estimates show gradually improving USIM5 BZ Current Price (01/03/13) R$ 13.23 / US$ 6. +5511-3012-5758 | ffreis@santander.Mn 987 our view.  Alex Sciacio*.2 Shares Outstanding . given the still-substantial capex for 2012 and 2013. Furthermore. versus the average of 7.8 billion. Santander estimates and company reports. In our opinion.415 Price Performance (R$) Usiminas IBOVESPA 120 100 80 60 40 20 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet.com.5 remains high (5.72 earnings for Usiminas. these improvements are not sufficiently strong Market Capitalization (US$ Mn) to make us more positive on the name.  We do not expect Usiminas to generate FCF until 2014.com. in 3-Mth Avg. Based on our 2013 EBITDA estimate of R$1. 232 . We expect that rising sales volume for heavy plates will have the main positive impact on operating performance. We also expect dividends to be minimal.00  Investment Case: We see Usiminas stock already discounting the Felipe Reis* expected operating performance improvements and trading ahead of Brazil: Banco Santander S. and we see downside risk to such numbers. 6. Daily Vol (US$ Mn) 35.A.A. We already incorporated this expectation into our model. +5511-3012-5870 | azsciacio@santander.  Valuation remains very expensive.2013 Latin American Universe Book BRAZIL—METALS & MINING USIMINAS UNDERPERFORM CURRENT PRICE: R$13.4x ND/EBITDA). we see Usiminas trading at 10. which alone should surpass EBITDA for those years.62 .

860) 549 (2.552 5.284 8. 233 .9 (692.3 437 10.550 0 2013E 1.7) 8.2 30. State of São Paulo (former Cosipa).9 925 3.7% Nippon Steel 29. pipeline.033) 0 0 0 2013E (497) (32) (268) 306 (840) (365) (840) 0 (38) 0 2014E (488) (32) (59) 597 (280) 421 (280) 0 (49) 0 2012E 1.401 4.08 0 0.2) 1.4) 5.9 9.806 80.0 0. and Cubatão.0% Revenue by Destination.360 2. 9M12 Steel Processing 16.708 6.814 11.716 Capital Employed 26.9 5.6 9.7) 845 4.91 8.2) 1.117 1. 9M12 Ternium/ Tenaris 27.7 ROE (%) 1. 2011–14E in Millions P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 11.4) (0.3 939 17.0) (0.0% Mining 4.0 11.314 17.5 2. electronic equipment.033) (893) (1.7 0.264 (52.938 (2. auto-parts.957 2.05 0 0.006) (65) (542) 620 (1.630 118.08 0.5 21 90 (28) (112.0 (450.5 13.0 13.0 31 (91.294 (49.1 Div Yield (%) 0.2 0.20 Capex/Revenue (%) MARKET RATIOS PER SHARE DATA EPS DPS BVPS 0.2) Company Description 2013E 7.38 17.774 3.5) 59.0% Shareholder Structure. Camargo Correa (13.5 23.264 17./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (638) 1.0 748 (42. State of Minas Gerais.6 805 108.2 5.153 8.9 (692.324 Net Debt/EBITDA 2.463 11.725 0 LT Debt FINANCIAL RATIOS Net Debt 2013E 14.7 6.7) 6.488 17. hot. heavy plates.281 (601) 904 (601) 0 (105) 0 2011A (381) 1.6 0.6 626 (67. with an approximate 59% float.2) 1.5 2014E 14.872 9.925 (1.5 11 47 (14) (110.3 8.7 FV/EBITDA 10.4 1.1 10.2) CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.380 4.85 9.7 2.5 9.5 280.33 8.796 4.613 8.52 17.5 2.4 0.199 9.6) 10.0 16.5% Employee Pension Fund 6.1% Sources for all charts and tables: Company reports and Santander estimates.495 27.985 10.7 FCF Yield (%) 5.6 2. 9M12 Exports 14.106 (3.3) 0.3 53 (213) 429 94. Ronald Seckelmann (CFO) and Cristina Morgan (Head of IR) Web: www.6 19.6 2.6) Dividend Payout (%) 5.0 24.3 25 (99) 200 83.187 3.6 2.099 17.14 (00.6) 57.120 2.6 5.358 17.3 1.6 0. The company produces a wide range of products.902 16.199 0 2014E 3.9 10.9 12.730) (2.767 6.029 9.0% Capital Goods 9.437 15.820 6.03) 0.078 33.0 Int Cover (%) 1. Julian Eguren (CEO).0 (263.451 (9.3 0.862 0 2012E 3.409 6.6) 47.895 17. Key Personnel: Paulo Penido (Chairman).6 374 (65.860) 0 (82) 0 2012E (938) (80) (432) 398 (2.6 8.4 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 43.8 298.2 0.2) 998 (21.4 1. Nippon Steel (27.3 2.05 17.0%).401 0 2011A 2.51 17.3 0.223.025 26.0%).8 0.9 2011A 7.1) 5.6 0.0 R$ 2012E 12.9 Net Debt/Equity 0.621 9.021 13.5 0.692 8.4 0.785 1.1 (13.8 18.287 0 8.4 5. including slabs.8 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 0.4 38.260 5.8 4.1%) currently share control of the company.672 5.9) 7.593 7.0 (275.8 0.726 8.7 13.379 3.USIMINAS Financial Highlights: P&L.1 29.2 1. Votorantim (13.0 16.3 24.0) 8.296 9.0% Steel 87.0 11.7) (5.14 Usiminas is the largest Brazilian flat steel producer.166.707) 0 (49) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 5.725 4.7) 0.380 0 2014E 1.700) (739) (1.891 13.5 280.0 2.617 15.185 17.191 12.224 (2.2) 1.5 2.000) (1. In 9M11.8 P/CE 11.2) 386 (50.0 1.5 1.11 0.and cold-rolled coils.236 4. and naval industries.4 6. The company trades exclusively in the São Paulo Stock Exchange.1 1.3 (30) (68) 139 (84.0) 515 (31.707) 328 (1.9 0.956 1.34 8.571 5.7 0.146 26.4) 2.5 296.939 13.862 8.2 19.0 1.com Revenue by Division.1 12.287 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 3.872 0 2013E 2.4 (447.9 6.036 4.3 2.3 1.758 17.0 0.8) (5.6 3.4 3.5 (50) (60) 109 n/m 1.0 0.7 17.3 13.1) 2.8 10.4 1.330 12.5 (101) (122) 221 n/m 1.047) (69) (126) 1.497 5.902 (8.0 60 (90.824 529 3. Balance Sheet and CF Statement.8 0.3 (0.000) 0 0 0 2013E (1.5 799 1.5 395 1.4 1.0% Domestic 86.22 0.0 million tons per year.8% of voting shares).477 3.2 0.6) 1.6 892 73.214 4.2 P/BV 0.3 (50) (114) 233 (85.43 0.326 35.6 2.7 5.822 13.255 8.772 34.1 1.6) 754 (49.8% Others/ Free Float 36.3 1.089 316 1.048 1.715 17.2 0. with a crude steel capacity of approximately 9.463 16.361 8.8 0. 20% of total sales were directed to the export market. The company has two plants located in Ipatinga. the company has a market share of nearly 45% in the flat steel segment.132 10.852 13.3 0.388 8.550 4.04 0.11 0.0 US$ 2012E 6. It is a leading supplier to the automotive.2 1. In Brazil.8 FV/Revenue 1.9 2012E (484) (41) (223) 206 (1.8 4.346 12.6) 773 (46.4 3.5 2014E 6.776 5.4 FV/EBIT 21.541 7.445 12.8 10. and the employee’s pension fund (10.5 24.5 20.418 1.5 (13.usiminas.617 12.757 6.700) 0 (77) 0 2014E (1.6 0.01) 0.890 3.921 33.9 10.24 (00.7 0.3) 47.647 11.8 ROCE (%) 2. and galvanized products.5 (0.0) 10.

+5511-3012-5870 | azsciacio@santander. In 4Q12.  Dividends unlikely to surprise positively.00  Investment Case: A challenging macro environment. We maintain our Hold rating on the stock.4 Shares Outstanding .A. Current Price (01/03/13) US$ 21.509 2013E FV/EBITDA versus its last three-year average of 5.25 TARGET PRICE: US$21. which came in at US$16. in our view. +5511-3012-5758 | ffreis@santander.A.7 to trade at lower-than-historical average multiples. The company plans to 110 Vale  109. capex cuts.com.25. in our view. Santander estimates and company reports.3 billion.53 Valuation continues to be unattractive.70 Target Price (YE 2013) US$ 21. CFA Brazil: Banco Santander S.153 sluggish global macroeconomic environment should prompt the stock 61.  No major cuts in 2013 capex budget.00 52-Week Range (US$) 15. although excess  cash will be returned to investors. lack of triggers. 234 . and unattractive valuation. Management is now committed to allocate capital only on world-class assets that are capable of generating decent returns across the cycles. flattish iron ore Felipe Reis* prices around US$120/ton. Vale is trading at 5.2013 Latin American Universe Book BRAZIL—METALS & MINING VALE HOLD CURRENT PRICE: US$21.  Alex Sciacio*.br should continue to hold back investors’ appetite. Vale should also book the impairment of investments in the Onca Puma nickel project.67 . Price Performance (US$) Cost-reduction efforts should increase. in-line with our expectations. Vale’s CFO stressed that the dividend payout is attached to cash flow and that there is no promise of progressive dividends YoY.00 / R$ 44.25 / R$ 37.com. The shut down loss-making plants and improve global procurement activities and targets to reduce SG&A expenses by 20% (US$500 IBOVESPA 100 90 80 million/year). and declining returns Brazil: Banco Santander S.br 2013 Outlook: We see a negative combination of very weak earnings momentum (likely implying lower dividends). 70 60 50 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet. Daily Vol (US$ Mn) 301. continued tax liability issues.Mn 5. This reinforces our view that Vale’s Company Statistics dividends for 2013 will be lowered to US$3-4 billion from US$6 billion Bloomberg VALE US / VALE3 BZ in 2012. a concerning warning of gradually poorer iron ore quality at the Minas Gerais region.8x.3x our Market Capitalization (US$ Mn) Float (%) poor operating momentum coupled with lack of stock catalysts and a 3-Mth Avg.

3 1.7 (1. Murilo Ferreira (CEO).8) 38.7 8.100) 0 7.0 2.7 42.1% Shareholder Structure.9 15.3 1.367) 18.727 (27.883 (6.16 0.774 30.3 5.327 242.2 (5.4 FV/EBIT 3.6 37.166 7.0 4.3 1.82 DPS 3.317 (42.669 45.1 59.3 25.3 14.7 28.244 0 0 (9.0 3.5 (5.998 62.1 12.8 6.7% Free Float 33.4 8.2 13.410 60.8 13.542 100.158) (2.5 1.0 0.961 29.8 11.851) 38. 235 .83 30.0 5.95 4.950) (927) 12.4 FV/EBITDA 2.2 57.549) 0 (2.1 3.9 40.4 Div Yield (%) 14.839 49.0) 34.907) 31.2 Capex/Revenue (%) 27.2 10.8 33.779 117.2 0.643 (24.781 32.144 44.2 35.2 25. In 9M12.1 6.7 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.307 (33.6) 19. Luciano Siani (CFO) and Roberto Castello Branco (IR Director) Web: www.9 5.014 22.0 4.793 229.51 18. BNDESPar.739 (11.2 14.000) 0 2012E (4.382) 0 2014E (5. Valepar’s main shareholders are Litel (Previ).6 4.1 FCF Yield (%) 14.907) 0 (2.3 36.284 278.895 128.493 60.6 0.6 328 (3.170 0 2012E 4.1 29.8 4.7 2.5 3.274 14.44 37.6 1.034 (2.2 31.2 7.4 16.684) 14. 9M12 NonFerrous Metals 19.253) 9.6 4.3 24.7 42.994 Net Debt/EBITDA 0.513 (35.082) 0 2012E (8.3 57.0 26.8 7.4 5.2 13.6 R$ 2012E 86.2 Int Cover (%) 14.497 (16.5% Valepar 33.116 24.749 241.6) 44.036) 15.353 17.037 9.558 16.532 (7. Vale is also the largest logistics company in Brazil.454 102.8) 25.364 20.9 43.513) 3.617 77.725 303.836 (16.491 0 0 (15.3 0.3 0.75 1.000 (6.5 1.154 (46.0% Sales by Destination.514 (38.587 4.93 2.3% South America 23.000) 0 2013E (5.36 1.6 4.839 (48.711 23.9 7.086) 0 (1.552 (3.233 2. which owns 53% of the voting stock and 32% of total capital.549 FINANCIAL RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E Net Debt 36.708 (40.313) (5. 9M12 Europe 18.1 16.245 (0.6) 39.7 8.0 30.424 152.531 21.250) 2.94 5.3 0.273 (16.876 44.7 38.72 4.1 8.502 39.2) 53.0 22.5 4.2 ROCE (%) 19.4 1.552) (8.778 43.314 145.236 0 0 (8.7 49.4% 4.9 2014E 117.728 9.5 5.3 0.005) 30.501 53.622) (1.2 40.2 2013E 106.058 (32.0 52.072 0 0 (9.170 29.2 3.342 (5.7 2011A 58.0% North America Other 2.586 0 0 (4.2 28.5 52.333 275.441) 8.2 28.162 10.954 29.925 25.175 26.458 104.5) 44.143 (32.599 31. and one of the largest companies in the mining and metal industries in terms of market cap.906) 5.105 47. 2011–14E in Millions P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 98.873) 0 2014E (11.com Sales by Segment.4) 27.85 0.572 23.321 110.759 Capital Employed 192.6 3.2 27.4 38.5 (3.350 27.6 37.537 (16.6 49.2 26.417 33.9) 4.678 41.9 43.684 141.894 52.623 58. Vale is controlled by the Valepar consortium.92 15.6) 27.6 30.715 23.406) 25.8 1.4 2.0% 1.768) 38.53 33.410 0 2013E 9.597 0 2011A 3.794) 23.6 3.42 2.3% Sources for all charts and tables: Company reports and Santander estimates.047 0 2014E 4.707) (1.211 24.634 90.9 6.088 35. Balance Sheet and CF Statement.4) 34.5 5.5 12.772 166.2 3.7 1.2 47. controlling and operating several railroads and ports.462 58.5 56.047 28.0 3.0% 4.4 3.77 5.954 0 2013E 4.236) 15.155 144.68 17.2 20.1 28.8 15.730 (41.6 48.6 705 (7.340 33.6 2.3 8.4 2.256) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 6.8 7.998 0 2014E 10.54 2.7 0.3 0.792 85.991 30.9 14.5 1.4 1.162 51.9 2014E 54.134) 0 2011A (4.5 P/BV 0.448 96.5 9.247 42.462 0 2012E 9.VALE Financial Highlights: P&L.551) 0 170 20.0 1.162 218.72 1.6 (1.4 3.549 0 LT Debt 43.295 167.336 22.435 254.171 (32.7 11.5 P/CE 2.540 93.193 36.1 12. and Mitsui.0% Asia 49.2 (2.049 97. Bradespar.73 MARKET RATIOS PER SHARE DATA BVPS Vale is the world’s largest producer and exporter of iron ore and nickel.235 29.5% BNDESPar 5.736 88.0 30.535 28.36 2.300) 0 (2.67 1.761 0 0 (4./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (6.2 FV/Revenue 1.369 (12.759 29.0% Iron Ore 67.666 62.9 18. its ferrous minerals activities (mainly iron ore and pellets) accounted for 93% of the company’s EBITDA.597 23.9 Dividend Payout (%) 49.2 28.088 126.vale.0% Fertilizers Logistics Other 9.1 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 2.085) 0 4.7 37.9) 45.731 189. 2012 ADR's 27.749) 30.955 89.419) 0 (1.1) 33.0 ROE (%) 26.2 1.0 0.608) 0 2013E (10.096 19.4 756 (3.2 Company Description 2013E 52.639 25.4 12.623 40.356) 42.9 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 8.0 38.08 16.468 17.847 27.9 45.915) 0 366 43.007 196.742 21.2 31.6 US$ 2012E 44.3) 20.122) 0 (1.2 0.4 28.827) 15.0) 2.458 211.6 0.551 7.824 74.854 24.7 52.659 121.282) 22.2 52.1) 33.529 (0.7) 26.121 333.77 35.789 24.9 Net Debt/Equity 0. Key Personnel: Dan Conrado (Chairman).731 2.610 30.8 48.2 38.

+5511-3012-5914 | bgiardino@santander. Our EBITDA estimate of R$1.00 DOWNGRADING RATING TO UNDERPERFORM FROM HOLD INTRODUCING YE2013 TARGET PRICE OF R$28.00 / US$ 12.A. We estimate that WEG’s most recent 10 acquisitions account for around R$920 million in annual revenue.2 billion in 2011. and we recommend investors to take profits after the rally on MSCI LatAm Standard Index inclusion.Mn 620 17% (16. but in-line with the 1995-2010 sales CAGR of 18%.97 . in our view. our YE2013 target price Price Performance (R$) WEG IBOVESPA 140 would be R$33.44 Target Price (YE 2013) R$ 28. 120  Management intends to grow production outside Brazil in five 100 years to 20% of sales from 10%. focusing on small/midsized acquisitions. boosted by the depreciation of Brazilian real and by the contribution of recent acquisitions. a bold plan.00. Daily Vol (US$ Mn) 11. The shares are trading at 24.A.2% from 2011).com. We believe that Daniel Gewehr* WEG’s deserved premium investment case is already reflected in the Brazil: Banco Santander S. CFA Brazil: Banco Santander S.40 Market Capitalization (US$ Mn)  8. While WEG’s 2020 strategic plan left us Company Statistics confident that it would achieve higher top-line growth (2010-20 Bloomberg CAGR of 17%). 100-bp higher YoY. Santander estimates and company reports. CFA Brazil: Banco Santander S. In our view. about 35% higher than its five-year historical multiples and 40% higher than its international peers. we still lack visibility on margins returning to 2007-08 Current Price (01/03/13) R$ 29.br Joao Noronha*. ceteris paribus.1x FV/EBITDA).1x our 2013E P/E estimate (14. +5511-3012-5734 | jonoronha@santander.5 Shares Outstanding . for 12% potential upside.952 WEG‘s new strategic plan calls for net revenue of R$20 billion in Float (%) 33. potentially reaching 25%. but we added a stronger contribution of sales growth (+6% versus previous net revenue estimate) in detriment of profitability (-90 bps). Our sensitivity analysis indicates that if WEG reaches its 17% sales CAGR. implying a 2010-20E CAGR of 3-Mth Avg. respectively. down on margins.  Bruno Giardino*.2013 Latin American Universe Book BRAZIL—CAPITAL GOODS WEG UNDERPERFORM CURRENT PRICE: R$29. WEGE3 BZ 52-Week Range (R$) 17.br current share price.40 TARGET PRICE: R$28. REPLACING YE2012 TARGET PRICE OF R$23.com. Our 2013 EBITDA estimate (5% above consensus) remains virtually unchanged. 80 60 j-11 m-11 a-11 d-11 a-12 a-12 d-12 Sources: FactSet.340 million implies a margin of 18%. driven by the gradual improvement of sales mix and the ramp-up of recently opened plants (India and Espírito Santo). +5511-3012-5787 | dhgewehr@santander.br 2013 Outlook: We expect the company to continue to deliver a strong top-line growth of 19% in 2013.44 levels.  What‘s changed? Up on growth.com. 236 .40 / US$ 14. up from R$5.00  Downgrading to Underperform on rich valuation.7 2020.A. or about 15% of WEG’s sales. this strategy aims to expand into new technologies and/or markets.29.

867 2.903 11. electronic components.3 9 (102) 329 (6.9% Industrial Motors 63.2 33. Sérgio Schwartz (CFO).744 1.563 16.421 775 2.9 2.2 1.5 2.2 1.4 0.8 17.446 18.2 4.4 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 0.4 19.0 680 10.424 4.1 10.118 33.5 2.2 4.496 4.0 512 19.6 (12) (158) 400 15.7 24.61 0.446 5.1 0.444 12.7 10.1 0.88 1.128 1./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (188) 125 (520) 359 (650) (464) 1.5 19.0 24.726 7.2 2.1 15.4 15.4 15.0 2.216 1.1 14.0 3.8 18.127 2.1 14.61 0.2 11.60 0.2 1.309 21.0 16.8 Capex/Revenue (%) Int Cover (%) MARKET RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 19.045 (298) 449 0 (210) 0 2014E (241) 127 (273) 1.1 1.6 2.883 1. energy generators and transformers.9 14.0 5.408 6.395 4. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 5.0 836 26.7 17.701 2012E 2.449 13.net.3 15.8 2.9 396 15.556 12.736 1.0 (54) (298) 755 17.3 1.2 4.32 BVPS 3.2 0.3 17 (200) 644 9.2 0.56 6.0) 1.168 657 LT Debt FINANCIAL RATIOS Net Debt 2013E 7.304 2.017 1.0 Net Debt/Equity 0.0 5.6 971 4.3 R$ 2012E 6.020 8.283 21.5 3.4 FV/EBITDA 13.2 2013E 3. 9M12 Internal Market 49.br Gross Sales by Segment.5 2.5 2.1 13.200 5.5 1.3 2.7 13.239 1.458 1.340 25.2 16.595 2013E 2.7 11.28 0.088 3.7 55.440 3.7 12.2 1.4 0.0 19.3% Shareholder Structure.756 1.510 4. the company reported net sales of R$5. WEG has a diversified portfolio of products.2 0.weg. industrial automation systems.7 15.162 2.495 877 1.4 16.48 0.803 3.61 FCF Yield (%) Div Yield (%) PER SHARE DATA WEG is the largest manufacturer of electric motors and related equipment in Latin America and one of the largest in the world.4 P/CE 15.277 10. In 2011. Balance Sheet and CF Statement. 237 .95 1.1 11.37 0.2 17.1 10.0 0.6 2.9 16.4 2.1 12.009 1.5 1.9 2011A 3.932 5.0 0.0 Dividend Payout (%) 57.039 (300) 0 2012E (208) 127 (341) 729 (324) 202 (584) (380) 0 2013E (222) 112 (296) 1. and paint and varnishes.200 936 584 540 511 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 245 430 245 17 131 203 109 7 Capital Employed 4.65 DPS 0.79 2.8 64.0 16.674 7.780 1.4 13.8 18.5 879 11.8 17.1 2014E 3.9 16.8 61 (95) 350 19.0 427 7.9 663 10.04 1.8 103 (159) 587 13.8 10.165 2.81 5.8 2.1 4.2 18.134 2.152 4.1 ROE (%) 15.1 2014E 8.56 0.901 22.026 1.2 4.1 16.1 2.206 1. 9M12 GTD 22.095 9.1 10.1 0.8 8.160 3.5 3.2 18.7 17.1 16.3 16.3 US$ 2012E 3.294 2.8 FV/Revenue 2.236 695 2014E 1.0 23.7 FV/EBIT 18.859 3.274 5.370 816 2.854 5. currently selling products to more than 100 countries.4 18.2% Sales by Region.4 16.4 21.806 9.833 1.1 18.9 18.1 13.1 0.128 2.8 17.2) 10.563 3.7% External Market 50.8 (4.31 0. including electric motors.0 1.535 6.4 2. Laurence Beltrão Gomes (IR Officer) and Luis Fernando Moran de Oliveira (IR Manager) Web: www.1 16.2 P/BV 3. 2012E Sources for all charts and tables: Company reports and Santander estimates.7% Domestic Motors 8.0 16.198 1.3 0.4 ROCE (%) 12.083 1.5 2.4 31.2 1.9 26.2 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.210 3.12 1.6 15.615 12.5 5.057 8.0 (25) (136) 346 5.6 18.2 billion (34% from exports and foreign subsidiaries).5 575 12.9 13.4 14. Key Personnel: Harry Schmelzer Júnior (CEO).070 21.7 15.6 (27) (363) 920 21.565 2014E 2.737 1.674 15.5 1.337 752 2013E 1.1 19.6 33.3 60.098 24.0 12.865 5.9 12.8 8.521 2.836 4.5 547 4.2% Paints & Varnishes 5.765 2. WEG is listed on the Novo Mercado.106 9.820 5.992 2.843 907 2012E 1.5 (4.0 2.0 11.213 2.0 0.403 5. With its four business areas.1 12.74 0.56 0.7 10.8 1.544 2011A 1.3 525 17.650 1. With nine plants in Brazil and eight outside the country.7 18.22 1.7 32.800 3.WEG Financial Highlights: P&L.0 3.8 1.322 18.253 Net Debt/EBITDA 0.5) 1.0 15.376 4.47 2.163 10.189 18.9 1.53 0.1 0.2 929 18.446 3.5 3.5 2.53 3.8 613 12.862 1.1 4. the company has a global presence.2 2.5 5.291 (422) 505 0 (251) 0 2011A (112) 74 (310) 214 (388) (277) 620 (179) 0 2012E (106) 65 (174) 373 (165) 103 (298) (194) 0 2013E (102) 51 (135) 478 (136) 205 0 (96) 0 2014E (105) 55 (119) 561 (184) 220 0 (109) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 2.3 10.

as TECON Salvador was operating at full capacity before its expansion. in our view.000 TEUs/year to 530. +5511-3012-5765 | pbalcao@santander.br Bruno Amorim* Brazil: Banco Santander S. combined with lower capex going forward (~R$35 million in 2013E).2013 Latin American Universe Book BRAZIL—TRANSPORTATION & INFRASTRUCTURE WILSON. as its container terminals could receive some containers currently handled in Santa Catarina and Espirito Santo (which previously charged lower ICMS taxes on imported goods). with the fleet growing from 17 units in 2012 to 21 at year-end 2013. in our view. suggests significant cash generation within WS’s port terminals division. when the weaker BRL led to lower revenue (-9% YoY) and EBITDA (-4% YoY). from 300.00 INTRODUCING YE2013 TARGET PRICE OF R$36.com.6 Shares Outstanding . SONS HOLD CURRENT PRICE: R$33. Sons during coming years (2012E-15E EBITDA CAGR of 15%). 2012. value creation should materialize only in the very long term. WS recently completed the expansion of its TECON Salvador terminal. Pedro Balcão Reis* Brazil: Banco Santander S.152 Float (%) 42. In our view.00 .com. EBITDA and the bottom line will grow 16%.000 TEUs/year.00.br Company Statistics Bloomberg WSON11 BZ Current Price (01/03/13) R$ 33. 80 70 60 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet.00 Market Capitalization (US$ Mn) 1.Mn 71 Price Performance (R$) Wilson. Daily Vol (US$ Mn) 0. However. Santander estimates and company reports. given that they will be allocated mainly within the offshore division (where WS has long-term contracts with Petrobras). Sons IBOVESPA 110 100 90  The end of the ―ports war.A. +5511 3012-6535 | rmanda@santander.33. The terminal’s favorable operating performance (R$93 million EBITDA in 2013E).A. 18% and 37%.21 Target Price (YE 2013) R$ 36. +5511-3012-6016 | bamorim@santander.00 / US$ 16. we believe that the company’s substantial capex plan (of ~US$1.0 3-Mth Avg. We maintain our Hold rating.50    Investment Case: We forecast significant growth for Wilson.00 / US$ 16.2 billion by 2017) will likely prevent it from generating cash until 2017. this expansion should contribute significantly to future volume growth (+7% YoY in 2013E). representing an inflection vs. Although we anticipate relatively low execution risk for these investments.br Renan Manda* Brazil: Banco Santander S. as the company has access to attractive financing lines from the Brazilian Merchant Marine.‖ The expected ICMS tax equalization among Brazilian states should be marginally positive for WS.com.A. REPLACING YE2012 TARGET PRICE OF R$31. respectively. WS’s relatively high leverage (average net debt/EBITDA of ~3x in 2012E-17E) does not represent a major concern in our view.00 52-Week Range (R$) 24. 238 . (ii) an increase in platform supply vessels (PSVs). We expect 2013’s strong results to be mainly driven by: (i) material volume growth at TECON Salvador stemming from the conclusion of expansion works in 2H12. Port terminals remain a cash cow. 2013 Outlook: We estimate that net revenue.00 TARGET PRICE: R$36. and (iii) increased activity in the Guarujá shipyard.

9 1. (2) towage services.3% Sources for all charts and tables: Company reports and Santander estimates.3 477 17.8 (16.3) 5.469 2.2 2.3) (6.4 5.8 6.838 144 2011A 137 294 783 1.7 11.616 29.2 185 17.0 3.2 Capex/Revenue (%) Int Cover (%) 7.956 2. Key Personnel: Cezar Tavares Baião (CEO).4) (6.208 Net Debt/EBITDA 2.231 562 783 61 LT Debt FINANCIAL RATIOS Net Debt 2013E 1. located in Guarujá-SP.52 0. including warehousing.1 100 12.180 1.4 R$ 2012E 1. The company’s IPO was held on April 30.0 1.1 14.4 34. SONS Financial Highlights: P&L.076 1.119 551 1.7 17.67 13.0 20.8% Shareholder Structure.7 13.3 25.1% Tecon Rio Grande 70.4 ROE (%) MARKET RATIOS FV/EBITDA 9.1 218 25.1 31.1 16.1 1.4 3.5 18.229 754 2.7 89 (14.9% Revenue Breakdown.9 13.0 2011A 698 21. November 2012 Aberdeen Asset Management Other 28.7 405 31.1 2.6) 24. when its BDRs were listed on the Bovespa.554 122 2014E 319 785 2.1 1.5 8.904 2.2 1.359 3.5 104 4.8 10.5% 8.6 9.3 23. and (6) a shipyard.5 16.772 3.2 12.2 0.0 847 1. which provides support services to the oil & gas industry through the operation of supply vessels (PSVs and OSVs). (3) logistics—an asset light segment that provides clients with logistics solution.4) 14.9 207 12.893 1.2 11.0 10.8 9.67 13.9 (25) (86) 63 (49.2) (9.52 1.2% Capital Group International 5.96 16. 2012E Shipyard 11.8 2.8 10.9 2.0% Ocean Wilson Holdings 58.0 7.5 25.2 13.8 7.5 (23) (26) 51 37.1 15.9 1.565 334 1. Felipe Gutterres (CFO and IR Officer) Web: http://www.0 14.36 0.6 6.124 1.3 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 1.4 2.96 16. 2011–14E in Millions Company Description P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 1.9 31.8 (24) (27) 53 4.2 2.2 12. distribution.0 1.38 0.7 174 0.8 31.6 24.733 7.0 27.7 12.9) 5.9 2.1 Net Debt/Equity 0.4 US$ 2012E 636 (8.2 7.5 26.519 347 440 555 647 Capital Employed 1.38 13.5 273 27.8 2013E 739 16.8) (7.7% Towage 27.2 37.837 836 923 1.8 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.2 18.wilsonsons.1 8.46 1. Sons (WS) is an operator of port and maritime logistics with 170 years of experience in the Brazilian market.569 896 908 61 2012E 288 655 1.9 (15) (52) 37 (46.65 0.6% Offshore 7.2 2.0 7.07 1.06 1.1 13.10 13.7) (9.169 15.5 10.1 9.7 0.1 25.5 12.9 13.52 0.013 1.36 0.5 7.3 13.5 12.1 31.65 0.7) (18.1 1.3 70.8) 157 (3.7 8.10 Wilson. 2012E Tecon Salvador 29. which is currently focused mainly on building PSVs and tugboats for WS’s other business units.0 14.245 6.4 7.2 1.7 17.6 2. (5) offshore.475 1.7 11.9 25.0 10.0 7.2 1.9 FV/Revenue 2.7 7.1 3.5 21. Its operations include the following six business segments: (1) port terminals.4 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 28.668 655 2.1 2.9) FV/EBIT FCF Yield (%) Div Yield (%) PER SHARE DATA EPS DPS BVPS 1.2 37.07 1.8 3.100 522 691 54 2014E 136 334 1.5 (49) (57) 111 53.0 (22) (30) 37 (1.3 1.8 (55) (63) 122 9.4 104 32.0 3.br Container Volume Breakdown.321 1.569 1.694 451 530 637 721 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 651 932 1.8 12.7 1.2 2.7 8.WILSON. 2007.5 239 9.0 Dividend Payout (%) 24.2 2.3 163 34. including two container terminals (TECON Rio Grande and TECON Salvador) and terminals to support the oil and gas industry (Brasco).87 14.3 9.9 23.9 2014E 754 1.259 309 949 484 575 45 2013E 136 335 1.7 0.220 96 2013E 306 754 2. (4) a shipping agency.5) 5. Balance Sheet and CF Statement.1 13.9 2014E 1.com.0 2.435 335 1.8% Port terminals 35.176 1.3 14.130 294 836 477 484 33 2012E 136 309 898 1.1% Logistics 17.0 ROCE (%) 15.9 31.433 1.8 25.9 1.9 P/CE 11.4 174 26.2 P/BV 2.7 29.7 31.8 6.7 31.06 1.249 1.1 19.7 9.422 2./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (99) (17) 197 (441) (295) 260 (30) - 2012E (134) 40 288 (387) (141) 175 (44) - 2013E (187) (7) 324 (516) (224) 252 (28) - 2014E (238) 0 396 (540) (180) 211 (30) - 2011A (59) (10) 118 (263) (176) 155 (18) - 2012E (68) 21 147 (198) (72) 89 (23) - 2013E (86) (3) 148 (236) (103) 115 (13) - 2014E (103) 0 172 (235) (78) 92 (13) - BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 257 551 1.048 1.6) (7.87 14.0 (43) (59) 72 15.8 27.027 1.5 36.0 2.9 8.5 308 12.0 7.46 1. trucking and multimodal transportation. 239 .6 60.52 0.9 6.678 785 2.6 16.

We are expecting a positive effect in our target price of 5% due to the construction of the recently announced coal power plant Cochrane (532 MW. (2) AES Gener has a strong expansion plan that represents 22% of the current capacity.  Strong pipeline in execution. We see the stock trading at a 2013E P/E of 13. 240 . We see AES Gener as attractively positioned to gain diversified exposure in Chile: (1) to the north part of Chile with its Price Performance (Ch$) AES Gener expected mining growth.6 billion. in the SIC.76 partner that would own 40% of Cochrane. The company officially announced a AESGENER CI Current Price (01/03/13) Ch$ 304. and (2) to the central part of Chile with a low 130 hydro conditions risk.00 / US$ 0.cl to a recovery in the central system of Chile (SIC) results. and we are expecting the 52-Week Range (Ch$) 256.com. which is positive. we expect a Market Capitalization (US$ Mn) yearly 2017E EBITDA growth of 34%.51 same for Alto Maipo.7%.00  Investment Case: Our positive view on AES Gener is based on the Adolfo Ortuzar* following: (1) we expect an improvement in 2013 results mainly due Chile: Santander Investment Chile Limitada +5622 336 3359 | aortuzar@santander. Owing to these new facilities.00 INTRODUCING YE2013 TARGET PRICE OF CH$370. (3) AES Gener has lower exposure to hydro conditions. Santander estimates and company reports. REPLACING YE2012 TARGET PRICE OF CH$360. we expect the start- Company Statistics up of Alto Maipo.1 Shares Outstanding . in-line with its history but attractive considering the 80 company’s aggressive expansion plan that should lead to a 2012E- 70 J-11 17E EBITDA CAGR of 11.A. +5511-3012-5751 | mprado@santander. mainly driven by the operations in the SIC that should double AES Gener’s 2012E EBITDA due to (1) to the start-up of the 270-MW coal power plant Campiche in 1Q13. scheduled to begin construction in 1Q13 and operation in 2017.314. 5. (2) a better generation mix and (3) lower LNG prices. M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet. and (4) a strong link to mining production growth in Chile.3 3-Mth Avg.cl Marcio Prado* Brazil: Banco Santander S. in mid-2016. We expect net income to grow 78% in USD terms owing a weak comparison base due to lower taxes associated to a nonrecurring event in 3Q12.4 billion) in the north part of Chile (SING).br 2013 Outlook: We anticipate EBITDA growth of 23% in USD. as we expect low rainfall 120 during 1H13.57 .8x in local 90 currency. 110 IPSA 100  Valuation.25 TARGET PRICE: CH$370.2013 Latin American Universe Book CHILE—UTILITIES AES GENER BUY CURRENT PRICE: CH$304.  Cristián Jadue* Chile: Santander Investment Chile Limitada +5622-336-3323 | cjadue@santander. a 531 MW hydro power plant with a capex of Bloomberg US$1.64 Target Price (YE 2013) Ch$ 370. Daily Vol (US$ Mn) 2.Mn  8.070 Diversification.193 Float (%) 29.00.25 / US$ 0. Also. US$1.

829 514 2.301 2.6 540 77.489 1.2 12.04 0. the company operates through Chivor.6 1.0 75.0 2011A 2.4 Ch$ 2012E 1.151 64 2013E 169 429 2.01 0.447 1.9 7.0 12.0 16.6 430 (20.4 4.6 FCF Yield (%) 6.0 6.0 34.0 8.3 13.972 3.3 34.1% Others 14.2 14.860 2.1 179.6 0.7 2.7 2.070 404 1.5 34.8 0.000 1.4 (31) (70) 194 9.9) 19.458 3.943 7.7 188.6 8.4 13.7% stake.508 234 1.31 0.3) 28.6 209 (19.313 1. 3Q12 SIN (Colombia) 23.242 49 2012E 205 443 2. diesel and coal facilities.1 25. 9M12 SIC (Chile) 23.978 2.gener.449 137 2013E 345 876 5.2% Inversiones Cachagua (AES Corp) 70.7 13.0 34.0 11. 241 .3 13.786 2.0 8.5 3.9 Net Debt/Equity 0.5) 643 (12. natural gas.6 P/CE 8.180 1.4 14.1 16. with a 70.6 737 55.505 313 1.0% SIN (Colombia) 42.7 2.05 DPS 19 14 6 11 0.3 12.7 6.3% Shareholder Structure.9 4.4 30.0 2.2 7.9 3.2 3. 2011–14E in Billions (Ch$).9 771 4.6 34.2 LT Debt FINANCIAL RATIOS Net Debt Capex/Revenue (%) Int Cover (%) Dividend Payout (%) ROCE (%) ROE (%) MARKET RATIOS P/E 2013E 1.4) 19. Luis Felipe Cerón (CEO).4 7.1 2. while in Colombia.7 0.0% SING SADI (Chile & Argentina) 35.3 11.5 0.8 2./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (95) 0 (14) 240 (190) 133 (24) 94 (155) 0 2012E (103) 0 (23) 180 (180) 64 39 27 (120) 0 2013E (110) 0 (4) 283 (342) 6 97 (31) (50) 0 2014E (119) 0 (4) 308 (582) (12) 200 62 (92) 0 2011A (196) 0 (28) 496 (392) 275 (49) 194 (320) 0 2012E (211) 0 (47) 371 (370) 131 80 56 (246) 0 2013E (227) 0 (9) 587 (710) 13 200 (64) (103) 0 2014E (237) 0 (8) 616 (1.3 (49) (53) 159 83.272 3.2 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest. Daniel Stadelmann (CFO). Constanza López (IR Senior Analyst) and Paola Lara (IR Analyst) Web: www.1 1.4 2.206 8.393 95 2012E 435 942 4.0 8.131 2.218 4.1 1.5 25.8 1. with a presence in the two largest electricity grids in the country.385 450 2014E 136 694 5.4 413 8.8) 28.8 12.03 0.9 FV/EBITDA 8.8 48.2 8.0 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 12.0 2014E 1.159 2.6 25.4 2. Laurie Kelly (Treasury & IR Director).8 0.7 0.0 16.411 1.1 (80) (143) 207 (37.371 Capital Employed 2.5 (62) (133) 368 78. Millions (US$) P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 1.4 17.9 8. Balance Sheet and CF Statement.03 0.2 282 (15.014 2.696 3.0 50.3 272 29.5 7.4 24.2 13.9 7.0 24.843 2.510 2.4 355 25.4 (62) (140) 387 5.0 13.2 18.254 117 2011A 550 1.169 220 2014E 68 347 2.3 563 30.040 2.130 18.775 2.4 16.9 15.29 0.534 5.2 2013E 2. In Chile.3 737 26. the company operates in the central and northern grids (the SIC and the SING.319 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 957 946 1.5 6.822 2.1 6.437 Net Debt/EBITDA 2.3 (0.980 2.344 1.1 3.6 826 4.7 385 8.AES GENER Financial Highlights: P&L.8) 9.6 580 (15.010 626 2.2 48. respectively).0 2014E 2.9 790 23.7 FV/EBIT PER SHARE DATA 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 19 12 22 23 0.0% Installed Capacity per Region.4 P/BV 1.9 15.4 13.7 0.9 5.163) (24) 400 123 (184) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 285 564 2.1 332 50.7 13.1 (39) (70) 101 (36.2 3.6 261 68.1 3.5 13.357 1.027 267 1.7 3.8 0.110 1.6 24.7 7.3 7.529 2.0 3.2) 9.2 687 58.2 589 4.8 48.1 3.4 357 47.210 1.9 11.35 BVPS Company Description AES Gener is the second largest electricity generation company in Chile.178 MW of installed capacity in Chile and a 1.04 0.017 6.7% Sources for all charts and tables: Company reports and Santander estimates.4 30.3 3.1 8.0 9.6 6.4 16.2 16.9 381 22.8 1.4 US$ 2012E 2.8 18.031 12.0 8.483 2.355 2.266 824 2.330 2.502 6.8% SIC (Chile) 41.9 5.cl EBITDA per Region.6 16.6 2.000 MW facility in Colombia with a mix of hydro.749 233 1.2 295 8.375 5.7 50.0 2.5) Div Yield (%) 6.095 6.7 14.767 5.9 49.087 4.6 2.0 13.3 (0.5 6.4 10.7 34.5 (30) (64) 178 76.5) 6.9 2. 3Q12 Pension Funds 15.108 970 1.475 2.5 10.849 495 2.33 0.9 24.04 0.7 74.3 (101) (110) 329 93.02 148 147 163 174 0.217 1.413 4. Key Personnel: Andrés Gluski (Chairman).186 1.011 5.3 9.0) 313 (12.9 24.9% SING SADI (Chile & Argentina) 34.0 FV/Revenue 3.3 9.2 8. The company is controlled by the AES Group.250 5.7 0.8 12.360 1. The company has a diversified generation portfolio with 3.

the company faces no major tariff revisions until 2015.0% since the start of 2012 and.8% dividend yield expected in 2013 might still be attractive for yield-oriented investors.401 Float (%)  However.74 52-Week Range (Ch$) 285. +5511-3012-5751 | mprado@santander.2013 Latin American Universe Book CHILE—UTILITIES AGUAS ANDINAS HOLD CURRENT PRICE: CH$340. which explains the 8. which should translate into 100% water treatment in the Santiago area from the current 83%. Aguas Andinas has one of the highest dividend yields among Chilean utilities (a 100% dividend-payout policy): Our 2013E dividend yield is 5.00 . Thus.cl beginning of 2012. Santander estimates and company reports.119 Price Performance (Ch$) Aguas Andinas IPSA 140 supporting our three-year EBITDA CAGR (2011A-2014E) of 6.8%. we have a neutral view on Aguas Andinas’s stock price. dollars for the Chilean benchmark in the same period. thus reducing regulatory risk and 44. We expect the bulk of Aguas Andinas’s EBITDA growth to come from the total implementation of this project. the stock is trading at a 2013E P/E of 14.2 Shares Outstanding .8% in U.00  Investment Case: We continue to see little upside in the stock price Cristián Jadue* at current multiples.5% (including dividends).01 TARGET PRICE: CH$365. which is below our estimate of 16. AGUAS/A CI Current Price (01/03/13) Ch$ 340.9 3-Mth Avg.Mn 6.72 Target Price (YE 2013) Ch$ 365. Daily Vol (US$ Mn) 3.00 INTRODUCING YE2013 TARGET PRICE OF CH$365. 242 .5x.A.2% increase in EBITDA we expect in 2013.00. However. 120 100 80 60 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet. REPLACING YE2012 TARGET PRICE OF CH$320.01 / US$ 0.17 Market Capitalization (US$ Mn) 4. Company Statistics Bloomberg  In our view. a 3.br growth rate in results in 2013 due to the Mapocho Urbano Limpio project’s start of operations.cl Marcio Prado*  2013 Outlook: We expect the company to post a one-time strong Brazil: Banco Santander S.00 / US$ 0.345. we view current valuations as fair. therefore.1%. its historical multiples. Francisco Errandonea* Chile: Santander Investment Chile Limitada +5622-336-3357 | ferrando@santander.S.  We see little upside potential after the rally: Aguas Andinas’s return has outperformed the IPSA index by 16. Moreover. the company‘s 2013 expansion plans are already priced into the stock: Currently. mainly due to the stock’s strong rally since the Chile: Santander Investment Chile Limitada +5622-336-3323 | cjadue@santander. Our YE2013 target price implies potential upside of 9. we believe the 5.com. which is above the levels of the utilities we cover in Chile.8% premium vs.

3 3.5 (44) (72) 286 8.4 4.8 243 6.5 62.4 281 7.5 14.9 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 16.3 FV/Revenue 7.7 13.22 0.3 2.5 100.0 22.4 13.2 264 7.409 114 2013E 75 254 2. Chile’s capital.812 2.1 11. Balance Sheet and CF Statement.5 15.4 2011A 742 8.2 3.1 15.0 11.7 13.0 3.8 48.6 (49) (77) 263 13.05 0.4 11.1 16.0 102.7 13. 2012E Others 18.7 P/CE 11.480 180 556 670 573 75 2011A 10 169 2.9 188 7.8 357 14.470 198 593 614 626 85 2012E 53 147 1.4 62.2 15. Jesús García (CEO).5 (22) (36) 143 12.1 1.4 10.9 (26) (38) 153 7.3 9.146 307 1.961 361 1.9 3.257 1.0% Others 40.2% Sales by Segment.9 0.21 0.8% Collection 21.6 13.4 14.9 10.1 FCF Yield (%) 3.4 4.7 466 10.9% Water 40.1 3.6 2.2 97.9 38.8 Div Yield (%) 5.0 0.412 1.2 38.1 16.9 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.8 246 8.8 6. Millions (US$) P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 363 10.7 FV/EBITDA 11.6 2.2 15. 2011–14E in Billions (Ch$).293 3.2 US$ 2012E 800 7.9 10.7 48.5 6.010 405 1.1 14.8 14. Agbar and Suez Environment are global players with extensive expertise in the sanitation and energy transportation sectors.2 Ch$ 2012E 386 6.2 10.2 10.4 11.4 13.285 1.9 19.541 150 692 630 690 56 2013E 37 126 1.7 6.0 8.392 1.1 218 8.6 11.1 10. 2012E ESSAL 8.5 228 12.04 0.2 95.300 1.9 1.2 3.5 P/BV 3.274 3.6 62.124 1.840 2.135 998 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 621 637 599 569 1.3 525 4.9 492 4. a holding company owned by Aguas Barcelona (Agbar).9 0.0 2.1 263 8.252 1.8 22.4% Treatment 18.0 403 3.340 1.4 62.295 1.8 2014E 445 5.4 541 634 562 499 1.118 1./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (53) 106 34 201 (139) 62 (1) 55 (107) 0 2012E (55) 110 (35) 147 (61) 86 7 65 (114) 0 2013E (61) 123 14 219 (63) 156 2 (55) (121) 0 2014E (63) 126 (2) 214 (50) 164 2 (63) (136) 0 2011A (108) 216 70 410 (284) 126 (2) 112 (218) 0 2012E (114) 228 (72) 305 (126) 179 15 134 (236) 0 2013E (123) 246 29 438 (125) 313 5 (109) (241) 0 2014E (126) 252 (5) 426 (100) 326 4 (125) (271) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 5 83 1.2 31.9 100.7 ROE (%) 18.04 0.5 14.5 5.3 2.2 9.074 359 1.2 11. Aguas Andinas also has operations in Chile’s Region X through the acquisition of Empresa Sanitaria de los Lagos (Essal).04 100 103 107 109 0.4 13.8 472 8.8 21.6 12.4 15.7 95.210 1. Key Personnel: Felipe Larrain (Chairman).0 3.3 228 6.3 FV/EBIT MARKET RATIOS 15.8% 5.04 0.3 7.22 BVPS Company Description Aguas Andinas is the largest water utility company in Chile.7 13.281 174 2012E 109 300 2.5 13.2 (36) (26) 113 9.108 1.5 5.8 560 6.3 48.8 175 16.8 32.5 PER SHARE DATA 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 18 21 23 25 0.0 0.5 ROCE (%) 12. and the most populous region in the country.0 63.112 1. largest city.AGUAS ANDINAS Financial Highlights: P&L.3 14.6 (24) (37) 127 12.0 201 7.1% of the shares by Inversiones Aguas Metropolitanas (IAM).9 6.225 2.8 11.377 1.785 Net Debt/EBITDA 2. The company provides water and basic sanitation services to residential.6 11.04 0.21 0. Miguel Angel Zarza (CFO) and Mary Laverty (IR) Web: EBITDA by Sector.2 62. 243 .0 34.1% Sources for all charts and tables: Company reports and Santander estimates.9 389 8.9 (52) (76) 305 6.6 16.2 48.1 434 7. which is owned by Suez Environment.289 3.9 11.9 33.3 3.9 2013E 847 5.139 Capital Employed 1.3 7.4 34.113 1. The company is controlled with a hold of 50.521 178 619 652 636 74 2014E 4 97 1. Aguas Andinas stock trades in the Chilean stock market.0 95.318 1. and industrial customers in the Santiago metropolitan region.147 149 LT Debt 2013E 424 9.8 11.8 5.6 435 11.5 63.125 1.8% Aguas 91.5 7.9% Shareholder Structure.0 11.04 0.2 32.0 31.1% IAM 50.8 19.5 47.1 7.1 15.285 150 2014E 8 195 2.820 2.7 2.6 526 6.3 47.4 20.6 5.7 14.8 14. 2012E Local Institutional CORFO Investor 4.0 1.2 8.9 5.7 2.05 DPS 17 19 20 22 0.392 1.5 7.4 213 13.8 48.4 503 8.2 22. and one of the largest private water and sewage companies in South America. commercial.8 33.6 6.2 (74) (52) 231 7.9 6.8 2014E 886 4.271 1.0 62.2 15.9 48.0 108.4 7.392 2.214 1.0 FINANCIAL RATIOS Net Debt Net Debt/Equity Capex/Revenue (%) Int Cover (%) Dividend Payout (%) 1.2 7.

8 billion in 2013—29% Bloomberg ANDINAB CI / AKO/B US Current Price (01/03/13) Ch$ 3.)  Company Statistics 2013 Outlook: We expect 28% EBITDA growth YoY (Ch$259 billion) due to a lower comparison base after the merger with KO Polar in 4Q12. Santander estimates and company reports. etc. The negative impact of Polar’s lower margins should 6.2x—a 14% premium on a historical basis but in-line with other LatAm bottlers. 244 .cl Luis Miranda*. Daily Vol (US$ Mn) 5. The stock currently trades at a 2013E FV/EBITDA of 12. BRL and ARS.com. and write-offs related to the Carlos Valdovinos facility.2013 Latin American Universe Book CHILE—FOOD & BEVERAGE ANDINA UNDERPERFORM CURRENT PRICE: CH$3.00 lower their exposure to stocks that have outperformed this year in 52-Week Range (Ch$) 2.0 3-Mth Avg. Considering that the Argentine unit represents 16% of EBITDA and that our FV estimate for that operation is 2.007 TARGET PRICE: CH$3.000 / US$ 37. Andina rose 31% YTD vs. CFA Mexico: Banco Santander S. Capital increase announcements in Chile could exceed US$9.  Risk of divestment as investors participate in the historical pipeline of equity offerings in 2013.Mn 947 Price Performance (Ch$) Andina IPSA 140 120 be partially offset by lower sugar costs. +5255-5269-1926 | lmiranda@santander.020 Float (%) 50. we are maintaining our Underperform recommendation.22 Target Price (YE 2013) Ch$ 3.3. higher labor costs.cl Chile and Brazil.000  Investment Case: We believe Andina’s valuation has incorporated Nicolas Schild* the good news for 2013 (synergies. We believe investors might the IPSA’s 3% rise in 2012 and was the fourth best performer in the IPSA in 2012.237 . the consolidation of production in Santiago at the Renca plant. we expect 100 80 results to be pressured owing to the appreciation of CLP vs. synergies from the merger. but risks related to Argentina remain. costs related to the merger. using a weighted average multiple implies that Andina (ex Argentina) is trading at a 10% premium to its LatAm peers. In the short term.A. exposure to consumption in Chile: Santander Investment Chile Limitada +5622-336-3361 | nschild@santander. Also.9x EBITDA. Francisco Errandonea* Chile: Santander Investment Chile Limitada +5622-336-3357 | ferrando@santander.3 Shares Outstanding .) but that it has not fully incorporated the potential risks of its Argentine operations. and greater economies of scale. in our view. lower sugar costs. Market Capitalization (US$ Mn) higher than the previous record (2011).mx Thus. (N.B. we do not expect a recovery in earnings visibility in the short term and believe that Andina could be affected by divestment as investors participate in 2013’s historical pipeline of equity offerings in Chile.140 order to participate in the pipeline.  Valuations have priced-in most of the good news.007 / US$ 38. 60 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet.

6 Div Yield (%) 4.7 22.0 11.0% Others 21.2 15.1 (25) (37) 90 (7.9 376 3.7 2.0 4.6 14.8 61.132 2.6 407 29.3 9.674 852 539 1.2 1.7 2.6 18.1 5.1 17.8 15.2 12.3 1.2 182 (2.3 1.9 US$ 2012E 2.915 2.0 12.0% Sources for all charts and tables: Company reports and Santander estimates.9 15.9 17.5 0.2 12.4 1.436 2.9 13.0 17.0% Controlling Group 50.8 953 14.566 6.5 20.7 17.6 225 14.5 5.6 0.9 2.com EBITDA by Country.5 20.2 P/CE 12.6 404 5.0 12.445 379 253 813 167 24 2012E 53 746 1.6 1.8% Shareholder Structure.5) 7.1 16.5 Capex/Revenue (%) 12.1 2.2 202 11.1 11.248 409 266 571 335 128 2014E 31 396 758 1.3 (74) (87) 247 33.1 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 17.226 28. in Brazil it distributes Kaiser beer.8 FV/EBITDA 9.ANDINA Financial Highlights: P&L.6 449 10.1 0.4 (32) (50) 142 19.0 2.4 8.546 835 542 1.21 1.5 4.4 315 6.2 1.5 24.1 15.1 2.8 9.4% 1.2 1.1 2014E 1.2 20.1 2011A 2.0 P/BV 4.1 2.8 31.7 13.8 2.5 0.1 17.4 64.1 Net Debt/Equity 0.6 1.3% Chile 42.7 23.6 20.6 20.6 836 10.4 (65) (100) 284 15.5 14.7 21.9 Ch$ 2012E 1.3 ROCE (%) 22.8 2.412 829 486 1. 2011–14E in Billions (Ch$).0 417 10.4 14.3 1.5 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 128 95 126 150 1.1 13.1% Argentina 16.38 8. 2013E Paraguay 9. It has operations in Chile.0 16.134 390 228 514 296 126 2013E 27 375 704 1.7 10.54 1.7 2. 3Q12 Juices 6.0% ADRs 7.11 FV/EBIT PER SHARE DATA BVPS Company Description Andina is the second largest Coke bottler in Latin America and the seventh largest globally in terms of volume sales.6 24.020 Net Debt/EBITDA 0.7 23.6) 14.0% AFPs 7.160 18.3) 18. Balance Sheet and CF Statement.6 14.1 2014E 3.9 15.6 32.8 22. Andres Wainer (CFO) and Paula Vicuña (Head of IR) Web: www.5 LT Debt FINANCIAL RATIOS Net Debt MARKET RATIOS 2013E 1.1 259 28.2 FV/Revenue 1.0 72.2 63.4 1.1 1.7 18.032 16.5 FCF Yield (%) 0.2 17.2 292 12.47 1.6 18.5 9.6 ROE (%) 23.4 153 7.5 142 (4.7 537 28.8 2.5 5.0 0.054 27.koandina.029 1.531 2.5 0. 245 .93 7.3 (35) (42) 119 32.474 27.7 11.4 583 8.4 15. Brazil.3) 9.0 18.0 1.7 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.70 0.5 4.9 2. Key Personnel: Juan Claro (Chairman).0 60.393 17.1 17. Argentina and Paraguay.9 14.323 421 267 633 338 129 2011A 60 454 674 1.7 17.9% Volumes by Segment.8 21.094 630 267 2013E 56 765 1.6 25.0 8.797 1.1 5.7 13.5 (9) (35) 97 (6. 2012E Coca Cola 15.7 11.1% Soft Drinks 87.8% Water Beer 4.7 17.5 14.5 (19) (72) 201 (1.4) 7. Millions (US$) P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 983 10.99 0.5 0.1 14.4 13.4 7.7 2013E 3./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (39) 29 (14) 152 (127) 6 (23) 4 (71) 0 2012E (50) 47 (41) 146 (182) 51 (22) 109 (62) 0 2013E (63) 0 (4) 174 (153) 56 0 39 (54) 0 2014E (67) 0 (7) 191 (121) 75 0 2 (71) 0 2011A (82) 60 (29) 313 (262) 12 (48) 9 (147) 0 2012E (103) 96 (84) 302 (375) 106 (46) 225 (129) 0 2013E (130) 0 (8) 361 (317) 117 0 81 (112) 0 2014E (134) 0 (14) 382 (242) 151 0 5 (143) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 31 236 350 750 197 131 422 87 12 2012E 25 351 614 1.4 2.6 11.7% Brasil 31.7 10. Miguel Angel Peirano (CEO).4 17.3 652 10.6 196 28.2 10.1 0.5 16.41 6. The Coca Cola Company holds a 15% stake in Andina.9 20.91 555 543 603 669 6.5 18.306 2.3 13.3 1.1 (52) (77) 185 (7. The company also distributes fruit beverages and mineral water in all it markets.08 0.5 0.4 7.0 592 28.4 60.2 60.304 6.7 Int Cover (%) 25.5 12.3) 9.7 12.82 DPS 93 66 57 75 1.279 682 261 75 170 208 209 144 362 424 421 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 56 271 308 306 107 576 628 619 Capital Employed 534 845 938 999 1.6 Dividend Payout (%) 68.5 294 0.0 462 14.0 4.0 2. serving more than 48 million inhabitants. and in addition.165 684 260 2014E 63 801 1.

79. We expect risk-adjusted margins to rise. which we believe might not be sustainable into 2013. we believe it is priced-in and should support loan growth 70 and help maintain the dividend payout in the mid-60% range. BCH currently trades at a 2013E adjusted P/BV of 2. In relative terms Company Statistics of adjusted P/BV. which is ahead of its three-year average of 2. 246 .00 / US$ 103.065 Float (%) 15..45 .4 Shares Outstanding . However. 120 hurting the higher yielding consumer segment. Our valuation implies a target multiple of 3.cl 2013 Outlook: We expect BCH to post a loan growth rate that is slightly higher than that of the Chilean system.6x. +1-212-297-1367 | lguzman@santander.57 / US$ 98.us by 23% thanks to its strong loan growth while continuing to deliver low twenties adjusted ROEs. which represents 110 approximately 2% of its loan portfolio.49 Market Capitalization (US$ Mn)  Pull back from higher yielding loans.2013 Latin American Universe Book CHILE—FINANCIAL SERVICES BANCO DE CHILE UNDERPERFORM CURRENT PRICE: CH$77. such as other large or small cap banks. in our view.00 52-Week Range (Ch$) 64. REPLACING YE2012 TARGET PRICE OF CH$84.50 Target Price (YE 2013) Ch$ 84. supporting an adjusted ROE of more than 20%.8x. the bank 15. Banco de Chile has fully closed the valuation Bloomberg discount to its closest Chilean peer (from a three-year average of -22%).00  Investment Case: In the last 12 months.5 3-Mth Avg. Daily Vol (US$ Mn) 3. Santander estimates and company reports. and we recommend that investors seek less expensive vehicles to gain exposure to the Chilean banking industry. CHILE CI / BCH US Current Price (01/03/13) Ch$ 77. While the capital increase 90 (US$527 million expected in 1Q13) initially put overhang pressure on 80 the stock. Banco de Chile has Boris Molina outperformed the market by 10% and other large cap Chilean banks New York: Santander Investment Securities Inc.us Nicolas Schild* Chile: Santander Investment Chile Limitada +5622-336-3361 | nschild@santander. After aggressive market share gains in riskier loans (i.  Valuation remains fully priced-in. SME and consumer loans). based on higher inflation and slightly lower NPL risk provision charges. +1-212-350-3977 | bmolina@santander.  Luis Guzmán New York: Santander Investment Securities Inc. IPSA J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet.00 DOWNGRADING RATING TO UNDERPERFORM FROM BUY INTRODUCING YE2013 TARGET PRICE OF CH$84.e.00.Mn 91. the bottom line should be favorably affected by efficiency gains. Furthermore.57 TARGET PRICE: CH$84. we believe the bank’s solid outlook is fully priced-in.0x YE2013 adjusted P/BV—in-line with the current 2012E adjusted P/BV. with asset quality remaining largely stable.  Price Performance (Ch$) 100 Biannual capital increase priced-in.813 has slowed down its growth pace (losing its recently won market share leadership position) as the bank could suffer from the Banco de Chile implementation of lower interest rate caps in the foreseeable future.

969 LOAN BOOK Companies Total Consumer Mortgages Other Loans Gross Loans Loan Grow th (%) NPL Provisions 2011A 11.00 Banco de Chile is the second largest bank in Chile with a 19% market share in total assets. 3Q12 SM-Chile Minorities 19.802 15.58 4.1 2011A 17.6 2012E 4.9 119.2 1.364 1.1 97.228 9.cl Loan Book.5 187 (430) 2013E 13.07 22.010 2014E 2.745 2.046 1.0 49.00 2014E 5.84 (0.0 1. Arturo Tagle Quiroz (CEO).607 33 23.936 5.806 6. Ergas 5.4 21.043 (229) 814 429 1.410 1.8 56.933 0 47.366 20.1 5.373 (1.1 3.BANCO DE CHILE Financial Highlights: P&L and Balance Sheet.8 20.7 47.0 344 (740) 2012E 25.16 39.6 21.62) 0.8% 2.99 3.8 1.5% J.1 93.3 1.34 3.8 10.6 91.278 8.218 32.8 79.9 80.1 97.13 0.240 64 53.297 4.778 (258) 1.5 7.566 3.325 5.9 3.099 5.4 0.796 0 40.415 1.523 992 431 2.31) 0.79 3. Pedro Samhan (CFO) and Pablo Mejia (IRO) Web: www.5 10.985 2011A 2.35 26.6 2012E 4.9 1.448 9.696 2014E 2.0 2014E 12.7 2013E 14.391 0 43.53) 0.9 12.00 2013E 6.2 21.651 876 425 2.50 2.093 32.051 2.2 10.8 22.588 3.9% Citigroup 29.8 22.88 0.843 2.269) 1.4% Foreign Trade 7.7 9.9 80.4 14.67 6.1 2011A 4.102 (613) 488 (60) 429 398 2012E 943 (195) 748 406 1.512 10.952 2.8 2013E 4.024 782 419 1.35 29.052 4.39) 0.255 2.44 (0.614 22.037 9.828 42.86 7.993 36 21.1 2.759 39.9 12.9 3.9 48.9 1.9 122.2 3.2 10.2 25.90 5.1 2.9 2.82 3.052 (108) 944 954 2013E 2.347 3.7% NII 65.18 5.7 46.9 55. Key Personnel: Pablo Granifo Lavín (Chairman).096 39.5 94.415 4.1 93. Millions (US$) Ch$ Company Description US$ INCOME STATEMENT Net Interest Income NPL Provisions Adj Net Interest Income Non-Interest Income Total Operating Revenue Non-Interest Expense Profit Before Taxes Taxes Net Profit Adjusted Net Profit 2011A 859 (125) 734 368 1.0 1.4 21.846 27. The bank has historically grown via a combination of organic growth and acquisitions.647 2. 2011–14E in Billions (Ch$).7 547 (1.00 2011A 6.698 31 26.952 2012E 1.65 32.00 2014E 7.6 2014E 4.8 5.40 27. as measured in total loans.152 (255) 897 454 1.363 5.9 80.37 (0.0 1.57 6.566 4.756 2012E 3.985 863 5.9 80.8 10.645 881 4.3 1.36 2.86 6.243 (678) 565 (78) 487 487 2014E 1.2 25.4 21. 2013E Personal Loans 14.00 2012E 5.0 1.00 2012E 6.0 2.5% Sources for all charts and tables: Company reports and Santander estimates.289 4.010 1.4% Mortgages 21.602 0 21.9 274 (610) 2011A 21.788 867 4.0 1.9 PER SHARE DATA EPS BVPS DPS Adj EPS Adj BVPS Surplus Capital per Share Unrealized Cap.1 5.95 3.3 1.6 2013E 14.03 (0.10 5.179 0 19.813 916 2.9 119.011 (123) 887 823 2012E 1.4 226 (509) 2014E 15.63 5.739 1.1 4.108 4.178 2.378 21.4 3.607 0 17.8 1.708 68 41.048 19.741 14. which includes corporations and individuals.25 3.632 2013E 3.538 835 2.18 22. 2013E Trading Other 4.5 94.5% Revenue Structure.0 13.8 79.4 14.466 4.5 10.6 2014E 4.bancochile.490 5.201 2013E 1.4 9.00 2013E 5.2 1.261 18.0% Fees 27.1 3.294 748 458 1.6 91.503 2014E 4.78 28.54 22.648 35.8 5.3 2.4 0.804 58 58.5% Shareholder Structure.687 889 2.4 21.154 (642) 512 (52) 459 464 2013E 1.6 55.906 8.328 (515) 1.171 (162) 1. the most recent one being the purchase of Citibank’s operations in Chile in early 2008.4 3.9 55.943 0 33.8 20.938 6.6 55.1 1.8 1.594 9.2 2012E 14.1 MARKET RATIOS Adj P/E Adj P/BV Div Yield (%) 2011A 17.0 461 (1.7 2.205 2.40 0.729 (1.6% Free Float 15.3 1.902 29 29.966 0 23.160 70 50.0 2.89 19.9 2.8 56.93 5.0 49.1 5.46 31.473) 1.5 4.6 3.603 2.249 3. as of September 2012.281 (1.2 21.2 27.63 25.576 (1.206 11.0 122.03 2.8 56.520 761 2.1 5.91 32.924 5.8 1.096 BALANCE SHEET Cash and Equivalents Securities Loans (net) Intangible Assets Total Assets Core Deposits Other Financial Liabilities Subordinated Debt Technical Provisions Equity Adjusted Equity 2011A 1.038) 2014E 30.9 2014E 13.8 7.762 4.7 9.553 3.7 120.8 56.6 21.4 9.0 1.01 34.439 881 3.6 3.8 2013E 4. Gains/Shr 2011A 4.0 179 (384) 2012E 12.064 19.7 46.938 (400) 1.3 2.319) 1.2 27.419 2.073 1.01 2.9 122.0 2.0 13.8 4.3 3.024 8.351 (729) 622 (91) 531 543 2011A 1.221) KEY RATIOS NIM Risk Charge Operating Revenue / ATAs Cost / ATAs Adj Efficiency Effective Taxes Reported ROE (%) Adj ROE (%) NPL Ratio Adj NPL Ratio Loans / Total Assets Loans / Core Deposits RWA % Total Assets Core Tier I Ratio (%) Dividend Payout (%) 2011A 4.24 24.0 2012E 15.229 45.659 6.498 6.3 1.405) 1.288 17. 247 .162 (475) 1.1 1.7% Commercial 56. The bank is engaged primarily in commercial banking in Chile.7 120.7 47.56 0. providing general banking services to a diverse customer base.191 16.9 80.3 1.256 (183) 1.1 4.8 393 (904) 2013E 27.9 80.662 2.049 2.806 4.0 122.9 48.5% Quiñenco 29.65 35.

Campanario and La Polar) is not as significant as before. and we believe the bank will retain its market share in the higher-yielding loan segments. we believe the bank can partially offset this by 3-Mth Avg.217 .360 55% previously) has had a negative impact on consumer-exposed Float (%) banks such as BCI.000 INTRODUCING YE2013 TARGET PRICE OF CH$39.us higher inflation.350 TARGET PRICE: CH$39.  New York: Santander Investment Securities Inc. such as rules allowing banks and retailers to share credit information. which Company Statistics strengthens our Buy rating conviction.36. Santander estimates and company reports. as we believe the overhang from the default of particular companies (e. This decrease should have a negative impact on all banks.399 Market Capitalization (US$ Mn) 7. BCI should continue to post market share gains.g.350 / US$ 70.000 / US$ 79.5x. 248 .8x. and Nicolas Schild* cost improvements. but the timing of the implementation is not yet clear.  Valuation remains cheap: The stock is currently trading at an inexpensive 2013E adjusted P/BV multiple of 1. 80 70 60 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet. we expect the lower caps to be accompanied by positive regulations. such as BCI. in our view. Daily Vol (US$ Mn) 2. Our YE2013E valuation  implies room for multiple expansion to a target multiple of 2. We expect adjusted ROE to reach 21%.cl 2013 Outlook: We expect loan growth to decelerate to a low-doubledigit rate (11% in 2013). that are exposed to BCI IPSA 120 110 100 90 consumer finance.  BCI CI Current Price (01/03/13) 36. based on higher margins (stemming from higher inflation) and cost improvements (cost-reduction initiatives).59 52-Week Range (Ch$) 29.3x and below peers.us Luis Guzmán Furthermore. However. which should have a positive impact on banks’ client credit analysis.2013 Latin American Universe Book CHILE—FINANCIAL SERVICES BCI BUY CURRENT PRICE: CH$33.000. +1-212-350-3977 | bmolina@santander. Bloomberg Efficiency gains to come: While the banking regulator’s announcement of future lower caps on interest rates (35% versus Ch$ 33.000  Boris Molina Investment Case: We reiterate our Buy rating on the stock. below its threeyear average of 2.Mn 104 posting efficiency gains in the years ahead.5 Shares Outstanding . Chile: Santander Investment Chile Limitada +5622-336-3361 | nschild@santander. we expect profitability in coming years to be aided by New York: Santander Investment Securities Inc. REPLACING YE2012 TARGET PRICE OF CH$34. exposure to the higher-yielding loan segments.54 Target Price (YE 2013) Ch$ 39. such as SME and consumer lending..2 Price Performance (Ch$) Lower interest rate caps: The announcement that interest rate caps would be reduced to 35% from 55% came in mid-2012. +1-212-297-1367 | lguzman@santander.

1 2012E 11.5 2013E 10.9 122.7% Revenue Structure.214 21.905 2011A 2.386 3.8% Sources for all charts and tables: Company reports and Santander estimates.2 3.488 18.478 0 12.2 4.89 2013E 6.4 23.659 1.636 71 22.808 1.7 22.418 5.972 2.1 21.0 3.7 2.6 9.881 13.816 1.1 2.3 4.3 2.69 32. Eugenio Von Chrismar Carvajal (CFO) and Andrés Irarrázabal (IRO) Web: www.0 72.28 7.856 3.709 11. 2011–14E in Billions (Ch$).46) 0.43 2012E 5.2 3.331 4.8 3.452 (233) 423 2013E 3.6 52.6% Mortgages 20.101 78 16.2 2011A 2.2 2.773 301 3.504 11.081 9.713 692 2.2% Fees 25.311 7.2 1.418 (238) 222 2012E 2.49 1.228 15.2 72.2 87.7 1.901 910 3.9 2.0 1.7 28.2 4.0 2012E 11.178 9.169 0 11.3% Other 3.403 2013E 2.6 50.505 167 37.594 79 17.7 28.9 1.0 72.521 6.2 2.5 22.8 9.6% NII 60.482 1.260 3.85 PER SHARE DATA EPS BVPS DPS Adj EPS Adj BVPS Surplus Capital per Share Unrealized Cap. 2013E Trading 10.7 87.6 2012E 3.7 2013E 3.4 121.399 11.2 9.871 1.343 2.2% Inmobiliaria e Inversiones Chosica S.5 47.645 2014E 2.366 151 31.948 5.5 22.7 22.89 6.9 1.BCI Financial Highlights: P&L and Balance Sheet. Lionel Olavarría Leyton (CEO).2 4.1 72.358 2014E 4.610 2.444 (352) 1.4 2013E 10.352 2.1 70.187 24.cl Loan Book.3 2.7 352 (404) 2011A 15.444 26.6 9.029 2. The bank’s business has traditionally been oriented toward small and medium-sized companies (SMEs) and lowermiddle-income individuals.6 2.6 50.529 1.2 9.7 83.614 781 149 1.141 (253) 888 548 1.96 21.233 327 2. More recently.771 401 419 2014E 3.86 2014E 7.4 2.bci.9% Shareholder Structure.1 3.810 LOAN BOOK Companies Total Consumer Mortgages Other Loans Gross Loans Loan Grow th (%) NPL Provisions 2011A 7.05 36.535 825 2.18 22.954 2013E 4.473 309 2.401 2.3 4.130 3.5 259 (324) 2013E 9.7 122.273 142 44.5 18.7 2.4 2.5 9.2 16.9 122.82 0.918 13.685 4. Key Personnel: Luis Enrique Yarur (Chairman).98 (0.548 22.809 640 170 1.928 1.8 21.48 32.599 13.8 9.3 114.45 1.932 (997) 935 (164) 771 735 BALANCE SHEET Cash and Equivalents Securities Loans (net) Intangible Assets Total Assets Core Deposits Other Financial Liabilities Subordinated Debt Technical Provisions Equity Adjusted Equity 2011A 1.412 1.866 13.3 4.916 0 29.39 36.1 72.2 16.475 2.383 31.182 750 1.899 0 14.833 2.5 703 (809) KEY RATIOS NIM Risk Charge Operating Revenue / ATAs Cost / ATAs Adj Efficiency Effective Taxes Reported ROE (%) Adj ROE (%) NPL Ratio Adj NPL Ratio Loans / Total Assets Loans / Core Deposits RWA % Total Assets Core Tier I Ratio (%) Dividend Payout (%) 2011A 4.34 28.1 3.92 28.9 1.624 2.436 (790) 646 (106) 541 518 2012E 1.594 303 3. BCI offers a full range of banking products and services and participates in nearly all sectors in the financial industry through its business units and subsidiaries.3 17.6 2.3 114.4 46.9 3.971 1.7 87.43 4. 2013E Personal Loans 13.4 2.293 2012E 3.2 3.2 2014E 3.750 2.3 17.1 21.3 4.4 2.2 87.54 1.7 2014E 9.307 3.2 31.191 2012E 1.5 21.144 5.9 2011A 4.6 2012E 3.9 30.6 52.3 17. 3Q12 Free Float 36.613 6.091 701 1.041 11.9 MARKET RATIOS Adj P/E Adj P/BV Div Yield (%) 2011A 13.696 4.2 72.31 (0.1 20.144 5.0 2.9 2.4 121.3 17.567 153 40.9 2.174 0 21. 63.1 2.378 19.4 21.5% Foreign Trade 7.A.6 2.0 3.850 28.2 4.1 546 (682) 2013E 19.49) 0.899 7.4 23.6 2.70 5. with a 13% market share as measured in total loans in 3Q12.222 1.587 12.362 11.8 21.19 0.9 30.127 15.52 1.2 304 (365) 2014E 10.5 9.979 5.4 46.072 2.2 2014E 3.7 2013E 3.247 (321) 926 665 1.5 47.5 18.5 2.7 89.0 1.9 1.023 26.8 620 (744) 2014E 20.138 19.031 2.5 474 (534) 2012E 18.2 3. 249 .0 27.215 0 27.192 15. Gains/Shr BCI is the third largest private bank in Chile.0 27.391 0 16.2% Commercial 58.4 246 (277) 2012E 8.0 2.783 0 32.96 2.935 2.446 3.922 1.4 2.1 2.7 2014E 9.343 23.1 20.985 886 150 1.2 3.2 31.6 2.591 (909) 681 (124) 558 618 2013E 1.012 13.553 3.998 75 19. Millions (US$) Ch$ Company Description US$ INCOME STATEMENT Net Interest Income NPL Provisions Adj Net Interest Income Non-Interest Income Total Operating Revenue Non-Interest Expense Profit Before Taxes Taxes Net Profit Adjusted Net Profit 2011A 551 (122) 429 265 694 (382) 312 (51) 261 250 2012E 607 (156) 450 324 774 (442) 331 (60) 271 301 2013E 697 (170) 527 338 865 (456) 408 (71) 337 326 2014E 771 (186) 585 371 956 (494) 463 (81) 382 364 2011A 1.7 122.4 2011A 14.479 1.7 2.768 11.7 83.4 21.334 1. the bank has been targeting high-income individuals through its new business division dedicated to this segment.9 1.259 696 427 2011A 5.7 89.39 0.096 3.858 5.659 18.315 700 147 1.5 21.839 5.558 (376) 1.792 (946) 846 (148) 698 676 2014E 1.1 70.841 10.9 1.7 2.

M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet.86 Target Price (YE 2013) Ch$ 1. INFRA & RE BESALCO BUY CURRENT PRICE: CH$880. of which 28% should be executed in 2012. We expect the Machinery division to 1.050 FROM CH$1.8x 60 and 9. boosting operating results. IPSA 90 80  Upside for the stock at current valuations.1 Shares Outstanding .cl the machinery division and driven by large new contracts (especially in the forestry sector with CMPC and Arauco). We estimate those two projects negatively Company Statistics affected operating margins by 170 bps and should have a less Bloomberg severe impact on 2013 results.4%.050 / US$ 2. Rodrigo Ordoñez* Chile: Santander Investment Chile Limitada +5622-336-3358 | rordonez@santander.cl supported by the backlog increased 16% YTD. which would have increased our target price 100 by 6. Our Price Performance (Ch$) Besalco estimates for 2013 do not include the pipeline of 13 hydro power 110 plants during 2013-19. BESALCO CI Current Price (01/03/13) Ch$ 880. to Ch$1.14 52-Week Range (Ch$) 745.00 TARGET PRICE: CH$1. given that negative results in these projects were almost fully accounted for in 2012’s financial statement.050 RAISING YE2013 TARGET PRICE TO CH$1.2013 Latin American Universe Book CHILE—CEMENT. triggered by Chile: Santander Investment Chile Limitada +5622-336-3357 | ferrando@santander. and the remaining from 2014 onward. 250 . the Coloso tunnel project and the Copiapo public hospital project).00 / US$ 1. also supported by the backlog of US$388 million as of September 12. at 10% and 3% discounts vs. thus providing stable cash flows.00 .8 3-Mth Avg. Santander estimates and company reports.Mn 569 continue its solid growth. We expect margin recovery in the construction division in 2013. Moreover. as we Nicolas Khaliliyeh* project: (1) strong earnings momentum in the machinery division. Chile: Santander Investment Chile Limitada +5622-336-3423 | nkhaliliyeh@santander.7%.060 Float (%) 39.4x.7x and 9.120 per share.  Margin improvement in Besalco Construction should start in 2013. its historical 50 J-11 three-year average of 20. 39% during 2013.994. respectively. We model Besalco’s 70 stock trading at an attractive 2013E P/E and FV/EBITDA of 18.cl Francisco Errandonea*  2013 Outlook: We expect EBITDA expansion of 20. Daily Vol (US$ Mn) 1.000  Investment Case: We reiterate our Buy rating for Besalco. with the renewal of Cerro Alto contract until 2019 happening in 2013. and (2) margin improvement in the construction business due to the end of some less-profitable projects that were consolidated in 2012.00 Market Capitalization (US$ Mn)  Stability cash flows in the machinery unit and potential upside for hydro power plants.1x. given that the division was significantly affected by two projects that had profitability below expectations (namely. we believe margin improvement in the construction unit should boost Besalco’s results in 2013. CONSTRUCTION. respectively.

0 18. 3Q12 Cerro Alto 14. It has been listed in the Chilean market since its IPO in 1995.9 2014E 987 5.2 2011A 665 34.8% and a ADTV of US$0.8 38 31.1 2 (4) 21 5.1 71 20. sales reached US$591 million.2 14.7 2.1 US$ 2012E 835 25.2% Machinery 32.4 (9.5 2.0% Pension Funds 7. The Bezanilla family owns 60.6 3. specializing in infrastructure projects (e.2 6.0 9.0 2.3% Machinery 21.0 14.0 16.10 0.0 4 (12) 61 10.8 12.1 48.4 10.besalco.4% 17.5 (1. 98.4 8.3 110 21.5 19.8 27.4 12. and real estate.6 0. hospitals.3 128 9. with a free float of 39. 3Q12 Construction Others 9.3% Shareholder Structure.1 47.1 16.3) FV/Revenue P/BV FCF Yield (%) Div Yield (%) 3.7 19. power plants.3 47 20.6 59 11.8) (1.6 59 10.4 5.2 7.03 0.0% 6.6 0. 2012 Others 32.3 6.4 12.1 5.0 LT Debt FINANCIAL RATIOS Net Debt MARKET RATIOS 2013E 452 11.0 9. machinery services.1 8. 28.2 162 9.7 21.1 16.5 Dividend Payout (%) 86.5 10.1 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.2 6.3 4.6 29 11.2 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 20.9 1.8% Controller 60.7 12.2% of the total shares outstanding.0% higher than last year.2 81 13.6 1.0 43.4 27.3 117 21.2 ROCE (%) 33.6 1.0 1.7 8.4 15.5 54 29.5 9.4 53 14.1 2013E 938 12.05 0.7 5.5 24. Key Personnel: Victor Bezanilla Saavedra (Chairman). Of this.4 45.03 0. Besalco has operations in Chile and Peru and as of September 2012 figures.4 57 20. roads.1 3 (4) 20 14.0 1.2 FV/EBIT 20.2 28.5 13.6% 4.8 16.9% Cerro Alto 26.4 15.6 16.8 1.7% 4.6 1.1 5 (8) 42 5.4 9.3 2.4 10.66 0.04 268 294 324 358 0. Paulo Bezanilla Saavedra (CEO)..5% 5.7% came from Chilean operations.0) (1.3 5.6% EBITDA per Division.2% 0.72 PER SHARE DATA BVPS Company Description Besalco is one of the largest engineering and constructing companies in Chile.4 45 17.6 P/CE 11.8 48.6 9.2 14.8% Assemblies Real Estate Besco 4.3 28.3 8.07 0. bridges.6 7.7 0.7 2.2 10./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (16) 0 (23) 12 (53) (8) 14 47 (15) (8) 2012E (11) 0 (1) 9 (6) 33 17 16 (9) 1 2013E (27) 0 (9) 44 (57) (44) 1 (24) (9) 0 2014E (29) 0 (8) 52 (45) (7) 2 (4) (11) 0 2011A (32) 0 (48) 25 (110) (16) 29 98 (30) (17) 2012E (22) 0 (2) 19 (12) 68 35 34 (19) 2 2013E (55) 0 (18) 92 (118) (92) 3 (49) (20) 0 2014E (58) 0 (15) 104 (89) (13) 3 (8) (23) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 24 210 100 423 153 105 153 129 50 2012E 57 249 116 461 187 93 168 145 78 2013E 13 217 147 460 170 89 185 122 58 2014E 6 221 162 480 170 88 204 118 55 2011A 47 404 193 815 295 201 294 249 96 2012E 121 530 247 982 397 197 356 310 167 2013E 26 443 299 939 348 181 377 249 119 2014E 13 447 328 970 344 178 412 238 112 79 67 63 63 152 143 129 127 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 105 88 109 112 202 188 222 226 Capital Employed 84 123 146 163 161 262 298 330 Net Debt/EBITDA 2.6 36. 251 .5 FV/EBITDA 10. It is also involved in the concession business.6 9.1 9.3 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 34 36 47 53 0.5 0.4 89 13.1 14.4 15.9 2014E 494 9.6 9.63 0.5 26 22.5 1.2% Sources for all charts and tables: Company reports and Santander estimates.3) (2.4 10.5 6.8 17.4 1.6 97 19.6 ROE (%) 12.4 3 (5) 27 29.8 81 32.6 17.2 16.0 8.5 1.5 0.g.3 8.9 43.4 13.0 2 (6) 30 14.0 2.3% Real Estate Besco Assemblies Others 5.1 90.7 0.5 1.5 1.4 6 (11) 55 30.1 64 13.6 9.5 16.BESALCO Financial Highlights: P&L.1 25.3 16.1) 6.0 13.8 39 25.9 122 11.7 1.6 (8.9 24. Pablo Valenzuela Mancilla (CFO) and Ana Maria Tampe (IR Officer) Web: www.5 13.5 8.4 13.8 79 32.cl Sales per Division.6 1.2 18.6 1.9 2.9 2. Millions (US$) P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 322 27.4 Net Debt/Equity 0. 2011–14E in Billions (Ch$).5 Capex/Revenue (%) 16.52 0.0% Construction 47.3 22.4 24.11 DPS 26 17 17 20 0.76 million.8 16.1 148 21.8 1. Balance Sheet and CF Statement.4 1.5 11.9 14.3 14.6 3.4 8.5 0.4 1.1 Int Cover (%) 10.4 15.1 7 (8) 40 20.3 1.1 Ch$ 2012E 406 26.9) 6.07 0.9 1. airports) and industrial projects.7 1.

2013 Latin American Universe Book

CHILE—METALS & MINING

CAP

UNDERPERFORM
CURRENT PRICE: CH$16,826
TARGET PRICE: CH$16,000

Investment Case: We rate CAP Underperform based on the

Rodrigo Ordoñez*

significant cut to our estimates supported by a weaker-than-expected

Chile: Santander Investment Chile Limitada
+5622-336-3358 | rordonez@santander.cl

2012 in terms of operations. In addition, we believe the company’s
profitability is under pressure from both the cost and price sides, and
its valuation looks unattractive compared with its LatAm peers.

Francisco Errandonea*
Chile: Santander Investment Chile Limitada
+5622-336-3357 | ferrando@santander.cl

2013 Outlook: We estimate an EBITDA increase of 6.4% in 2013,
supported by the ramp-up of the new capacity expansion at the Los
Colorados and Cerro Negro Norte mines, scheduled for May and
October 2013, adding 6 million tons of iron ore through 2015. Iron
prices should stay in the US$120 per ton area, awaiting the high
marginal cost supply (China) to cease its operations. Finally, we
estimate the steel unit will continue operating under break-even.

We believe the 2012-13 consensus estimates are too optimistic.
We are cutting our EBITDA estimates by about 17% for 2012 and for
2013 (versus our report from May 2012) based on the company
having a worse than previously expected performance in the first
nine months of 2012, lower estimates for iron prices, and higher
costs per ton. Our estimates are 19% and 22% below consensus.

Company Statistics
Bloomberg

CAP‘s iron ore profitability is declining, in our view. CAP is
developing an expansion plan for its iron ore reserves, for which

CAP CI

Current Price (01/03/13)

Ch$ 16,826 / US$ 35.59

Target Price (YE 2013)

Ch$ 16,000 / US$ 32.65

52-Week Range (Ch$)

14,560 - 21,846

capacity should expand from 12 million tons to 18 million tons in

Market Capitalization (US$ Mn)

2012-15, equivalent to a 50% increase in volume sales. However,

Float (%)

during 2012-16E, EBITDA should rise only 16.8%, in our view, due to

5,319
49.4

3-Mth Avg. Daily Vol (US$ Mn)

5.3

Shares Outstanding - Mn

149

lower iron ore prices and increasing costs.
Price Performance (Ch$)

Valuation gap to narrow versus peers, according to our

110

estimates. Historically, CAP traded at a P/E well above those of its

100

main peers, as the stock was one of the only pure commodity plays

90

in the Chilean equity market. However, because Chilean pension

80

funds are increasing their exposure to foreign equities, that premium

70

will be difficult to justify. Brazilian peers have the largest growth plans

60

and lower cost structures, and owing to their largest scale, have more

50

pricing power. Thus, we expect CAP’s stock price to derate.

CAP

J-11

M-11

A-11

IPSA

D-11

A-12

A-12

D-12

Sources: FactSet, Santander estimates and company reports.

252

CAP
Financial Highlights: P&L, Balance Sheet and CF Statement, 2011–14E in Billions (Ch$),
Millions (US$)

Company Description
CAP is a Chilean mining and steel company engaged in
the production of iron ore and long and flat steel products.
With 12 million metric tons of annual iron ore capacity,
1.45 million tons of crude steel capacity and 425,000 tons
of steel processing as of 2011, the company is the largest
steel company in Chile, with a market share of over 50%.
The mining business is managed by Compañía Minera
del Pacífico (CMP), from which about 85% of its
production is exported. The company is listed on the
Chilean Stock Exchange and is controlled by Invercap
with a 31.3% stake, followed by Mitsubishi Corporation
with a 19.3% stake, Chilean pension funds 9.3%. The
remaining 40.1% is free float in the Chilean stock market.

Key Personnel: Jaime Charles (CEO), Raúl Gamonal
(CFO) and Javiera Mercado (Investor Relations Officer)
Web: www.cap.cl

EBITDA by Region, 1H12

Chile
16.0%

Other Asia
17.0%

China
67.0%

EBITDA by Business, 2011

Mining
94.5%

Steel
Production
-0.5%

Steel
Procesing
6.0%

Shareholder Structure, August 2012
Mitsubishi
Corp
19.3%

Invercap
31.3%

Pension
Funds
9.3%

Others
40.1%

Sources for all charts and tables: Company reports and Santander
estimates.

253

2013 Latin American Universe Book

CHILE—FOOD & BEVERAGE

CCU

BUY
CURRENT PRICE: CH$7,400
TARGET PRICE: CH$8,700

RAISING YE2013 TARGET PRICE TO CH$8,700 FROM CH$7,850

Investment Case: We see value in CCU, not only because it

Nicolas Schild*

continues to be one of the cheapest brewers in LatAm (2013E P/E of

Chile: Santander Investment Chile Limitada
+5622-336-3361 | nschild@santander.cl

18.2x) but because it is a defensive play, with close to 90% of

Francisco Errandonea*

EBITDA coming from Chile where we expect the good momentum of

Chile: Santander Investment Chile Limitada
+5622-336-3357 | ferrando@santander.cl

consumption to continue. Also, we expect a more rational Chilean
beer market in 2013, after severe competition with Ambev
significantly affected 2012 results.

Luis Miranda*, CFA
Mexico: Banco Santander S.A.
+5255-5269-1926 | lmiranda@santander.com.mx

Cheap brewer in an expensive neighborhood. We expect multiple
expansion to continue from its 2013E P/E and FV/EBITDA of 18.2x
and 11.2x, which are 19% and 8% discounts to the LatAm beverage
sector.

A more rational market in Chilean beer. After engaging in a price
war with Ambev during 1H12, reaching a historical price gap of 30%
between its flagship brand and competition, CCU started increasing
prices in 3Q12 (8% QoQ). The competition followed with price
increases almost immediately. We expect this rational market to
continue in 2013, benefiting earning visibility. Also, the current high
wine/beer price ratio gives CCU a good opportunity to continue
increasing prices without a severe substitution of wine products.

Company Statistics
Bloomberg

CCU CI / CCU US

Current Price (01/03/13)

Ch$ 7,400 / US$ 31.37

Target Price (YE 2013)

Ch$ 8,700 / US$ 35.51

Defensive play. In the currently volatile economic environment, CCU

52-Week Range (Ch$)

6,066 - 7,800

shares represent a good opportunity to gain exposure to the Chilean

Market Capitalization (US$ Mn)

4,986

Float (%)

33.9

consumption story, in our view. We expect positive momentum of

3-Mth Avg. Daily Vol (US$ Mn)

2.9

Chilean private consumption to remain decoupled from the

Shares Outstanding - Mn

319

international scenario in 2013, thanks to a historically low
unemployment rate and positive consumer confidence.

Price Performance (Ch$)
CCU

IPSA

140

2013 Outlook: We expect 2013 to be a better year for CCU, with

120

EBITDA growing 10.2% YoY and margins improving gradually. Our
expectations for price increases and margin recovery in Chile are
partially offset by our gloomy outlook for Argentina.

100

80

60

J-11

M-11

A-11

D-11

A-12

A-12

D-12

Sources: FactSet, Santander estimates and company reports.

254

CCU
Financial Highlights: P&L, Balance Sheet and CF Statement, 2011–14E in Billions (Ch$), Millions
(US$)
P&L ACCOUNT
Total Revenue
YoY change (%)
Gross Profit
YoY change (%)
EBITDA
YoY change (%)
As % of Revenue
Operating Income
YoY change (%)
As % of Revenue
Financial Results
Taxes
Net Profit
YoY change (%)
As % of Revenue

2011A
970
15.7
519
14.2
239
15.1
24.6
191
17.7
19.7
(23)
(45)
123
10.9
12.7

Ch$
2012E
1,071
10.4
574
10.6
226
(5.3)
21.1
173
(9.4)
16.1
(22)
(38)
112
(8.5)
10.5

CASH FLOW
Depreciation & Amortization
Other Noncash Items
Changes in Working Capital
Operating Cash Flow
Capital Expenditures
Free Cash Flow
Other Invest./(Divestments)
Change in Debt
Dividends
Capital Increases/Other

2011A
(48)
(2)
(20)
149
(96)
89
22
14
(63)
0

2012E
(53)
3
(13)
38
9
4
(4)
(39)
(66)
0

2013E
(59)
0
(4)
184
(146)
19
0
(20)
(62)
0

2014E
(65)
0
(1)
208
(99)
71
0
(38)
(71)
0

2011A
(99)
(3)
(41)
308
(199)
184
46
29
(130)
0

2012E
(109)
7
(26)
78
18
7
(8)
(81)
(136)
0

2013E
(122)
0
(8)
382
(302)
39
0
(42)
(128)
0

2014E
(129)
0
(2)
416
(198)
143
0
(75)
(142)
0

BALANCE SHEET
Cash and Equivalents
Current Assets
Fixed Assets
Total Assets
Current Liabilities
Long-Term Liabilities
Shareholders' Equity
Total Financial Debt
ST Debt

2011A
178
543
557
1,298
351
263
569
247
76

2012E
115
508
613
1,331
321
279
636
208
31

2013E
72
494
700
1,404
363
241
703
188
48

2014E
72
522
734
1,467
382
213
776
150
39

2011A
342
1,045
1,073
2,501
676
506
1,096
476
147

2012E
244
1,081
1,305
2,833
683
593
1,352
442
65

2013E
147
1,008
1,428
2,866
742
492
1,435
383
99

2014E
144
1,045
1,469
2,934
763
426
1,553
300
78

171

177

139

111

329

376

284

222

2011A

2012E

2013E

2014E

2011A

2012E

2013E

2014E

69

93

116

78

134

198

236

156

Capital Employed

846

927

1,017

1,052

1,630

1,971

2,076

2,105

Net Debt/EBITDA

0.3

0.4

0.5

0.3

0.3

0.4

0.5

0.3

Net Debt/Equity

0.1

0.1

0.2

0.1

0.1

0.1

0.2

0.1

Capex/Revenue (%)

9.9

(0.8)

12.6

8.0

9.9

(0.8)

12.6

8.0

Int Cover (%)

16.6

14.8

20.6

27.3

16.6

14.8

20.6

27.3

Dividend Payout (%)

56.7

54.0

54.9

54.9

59.8

53.7

56.2

55.2

ROCE (%)

18.1

15.2

15.4

16.1

19.9

14.9

15.3

16.1

ROE (%)

21.6

17.7

18.4

18.6

23.2

17.4

18.3

18.6

LT Debt
FINANCIAL RATIOS
Net Debt

MARKET RATIOS

2013E
1,159
8.2
624
8.7
249
10.2
21.5
190
10.0
16.4
(21)
(39)
129
15.2
11.2

2014E
1,244
7.3
671
7.6
271
9.1
21.8
207
8.8
16.6
(19)
(44)
144
11.4
11.6

2011A
2,004
22.0
1,073
20.4
493
21.4
24.6
394
24.1
19.7
(48)
(93)
254
16.9
12.7

US$
2012E
2,201
9.8
1,180
10.0
464
(5.9)
21.1
355
(9.9)
16.1
(45)
(79)
231
(9.0)
10.5

2013E
2,402
9.1
1,294
9.7
516
11.1
21.5
394
10.9
16.4
(44)
(82)
268
16.1
11.2

2014E
2,487
3.6
1,343
3.8
543
5.3
21.8
414
5.0
16.6
(38)
(87)
288
7.5
11.6

2011A

2012E

2013E

2014E

2011A

2012E

2013E

2014E

P/E

17.6

21.4

18.2

16.3

16.4

22.1

17.9

16.3

P/CE

12.7

14.5

12.5

11.3

11.8

15.0

12.3

11.3

FV/EBITDA

11.2

12.7

11.2

10.0

10.5

13.1

11.1

10.0

FV/EBIT

14.0

16.5

14.7

13.2

13.1

17.1

14.5

13.2

FV/Revenue

2.8

2.7

2.4

2.2

2.6

2.8

2.4

2.2

P/BV

3.8

3.8

3.4

3.0

3.8

3.8

3.4

3.0

FCF Yield (%)

4.1

0.1

0.8

3.0

4.4

0.1

0.8

3.0

Div Yield (%)

2.9

2.8

2.6

3.0

3.1

2.7

2.7

3.0

PER SHARE DATA

2011A

2012E

2013E

2014E

2011A

2012E

2013E

2014E

EPS

385

353

406

453

1.48

1.50

1.66

1.81

DPS

197

208

194

223

0.76

0.89

0.79

0.89

1,786

1,995

2,208

2,438

6.88

8.49

9.01

9.75

BVPS

Company Description
CCU is a diversified beverage company operating mainly
in Chile and Argentina. It is the largest brewer in Chile,
the second largest brewer in Argentina, and recently
acquired a small soft drink operation in Uruguay. It is also
Chile’s second largest carbonated soft drink producer and
the largest producer of bottled juice, as well as the largest
mineral water producer through its Ecusa division. CCU
participates in the Chilean wine industry, with its 56%
stake in the second largest exporting Chilean winery
(Viña San Pedro Tarapacá). It holds an 80% stake in
Compañía Pisquera de Chile, the second largest Chilean
producer of Pisco. CCU is controlled by the Luksic group
(Quiñenco) and Heineken, which together own 66.1% of
the company.

Key Personnel: Guillermo Luksic (Chairman), Patricio
Jottar (CEO), Ricardo Reyes (CFO), Felipe Arancibia
(Head of IR) and Carolina Burgos (IR)
Web: www.ccu.cl

Sales by Segment, 3Q12

Beer
Argentina
22.5%

San Pedro
16.3%

Spirits
6.9%

Others
-0.1% Beer Chile
27.8%

Ecusa
26.4%

EBITDA by Segment, 3Q12
Beer
Argentina
9.1%

Spirits Others
5.8% 4.2%

San Pedro
11.7%

Beer
Chile
44.8%

Ecusa
24.3%

Shareholder Structure, 3Q12

ADRs
11.5%

Others
22.4%

Heineken
33.1%

Quiñenco
33.1%

Sources for all charts and tables: Company reports and Santander
estimates.

255

2013 Latin American Universe Book

CHILE—RETAIL & CONSUMER GOODS

CENCOSUD

BUY
CURRENT PRICE: CH$2,709
TARGET PRICE: CH$3,300

INTRODUCING YE2013 TARGET PRICE OF CH$3,300; REPLACING YE2012 TARGET PRICE OF CH$3,900.00

Investment Case: Our positive view on Cencosud is based on:

Adolfo Ortuzar*

(1)

Chile: Santander Investment Chile Limitada
+5622 336 3359 | aortuzar@santander.cl

margin

improvements

at

the

Brazilian

and

Colombian

supermarkets, home improvement stores (HI), and Chilean
department stores (DS); (2) the recent acquisition of Carrefour
Colombia (CC), which contributes 9% to our target price; and (3) we
note that Mr. Paulmann’s announcement of subscribing his shares of
the capital increase (60.5%), significantly reduces overhang risk, in

Francisco Errandonea*
Chile: Santander Investment Chile Limitada
+5622-336-3357 | ferrando@santander.cl

Tobias Stingelin*, CFA
Brazil: Banco Santander S.A.
+5511-3553-0699 | tstingelin@santander.com.br

our view.

2013 Outlook: We expect revenue and EBITDA adjusted growth of
27% and 38%, respectively, in 2013, attributable to the consolidation
of CC, which would represent 10% of 2013E consolidated EBITDA,
together with a 7% floor expansion, healthy SSS, lower financial
costs, and margin improvements.

We expect significant margin improvements: Based on an
exercise we ran including Carrefour Colombia (which has lower
margins) in Cencosud’s 2012 results, the EBITDA margin would be
7.5%, 30 bps lower than our 2013 estimate (7.8%) and 40 bps below
our 2014 estimate (7.9%) due to: the significant synergies we expect

Company Statistics

for Brazil and Colombia (IT systems, back-office consolidation,

Bloomberg

CENCOSUD CI / CNCO US

Current Price (01/03/13)

Ch$ 2,709 / US$ 17.04

Target Price (YE 2013)

Ch$ 3,300 / US$ 20.22

improvements in HI and DS Chile, and synergies between Carrefour

52-Week Range (Ch$)

2,503 - 3,248

Colombia and the HI business in that country.

Market Capitalization (US$ Mn)

purchases, credit, sales mix, and management knowledge), margin

14,366

Float (%)

Debt levels to improve in 2013: With the Carrefour Colombia

39.5

3-Mth Avg. Daily Vol (US$ Mn)

14.5

Shares Outstanding - Mn

2,508

acquisition, net debt/EBITDA temporarily rises to 5.2x at the end of
2012E, above Cencosud’s target of 3.0x. Nevertheless, with a capital

Cencosud

increase of US$1.5 billion and a capex decrease in 2013 (from

110

US$1.5 billion ex CC in 2012 to US$600 million), the 2013E multiple

100

should be 2.8x.

Price Performance (Ch$)

Valuation: Cencosud trades at a 2013E P/E adjusted (without

90
80

considering the revaluation of assets) of 19.1x, in-line with its

70

historical average, which we view as attractive given our expectation

60

J-11

of a strong 2011-14E net income adjusted CAGR of 32%.

IPSA

M-11

A-11

D-11

A-12

A-12

D-12

Sources: FactSet, Santander estimates and company reports.

256

CENCOSUD
Financial Highlights: P&L, Balance Sheet and CF Statement, 2011–14E in Billions (Ch$), Millions
(US$)
P&L ACCOUNT
Total Revenue
YoY change (%)
Gross Profit
YoY change (%)
EBITDA
YoY change (%)
As % of Revenue
Operating Income
YoY change (%)
As % of Revenue
Financial Results
Taxes
Net Profit
YoY change (%)
As % of Revenue

2011A
7,569
22.2
2,139
22.5
615
31.6
8.1
495
34.9
6.5
(90)
(119)
285
12.6
3.8

Ch$
2012E
9,122
20.5
2,582
20.7
652
6.0
7.2
497
0.4
5.4
(145)
(111)
250
(12.2)
2.7

CASH FLOW
Depreciation & Amortization
Other Noncash Items
Changes in Working Capital
Operating Cash Flow
Capital Expenditures
Free Cash Flow
Other Invest./(Divestments)
Change in Debt
Dividends
Capital Increases/Other

2011A
(120)
41
(46)
401
(616)
245
552
(78)
65

2012E
(146)
13
(86)
322
(2,062)
865
1,855
(86)
906

2013E
(223)
0
(78)
500
(315)
850
(86)
(75)
752

2014E
(240)
0
(37)
657
(359)
125
(174)
(107)
0

2011A
(248)
85
(95)
828
(1,273)
507
1,142
(162)
134

2012E
(294)
26
(174)
649
(4,152)
1,742
3,736
(172)
1,824

2013E
(455)
0
(160)
1,021
(644)
1,735
(176)
(153)
1,534

2014E
(487)
0
(76)
1,335
(729)
253
(353)
(217)
0

BALANCE SHEET
Cash and Equivalents
Current Assets
Fixed Assets
Total Assets
Current Liabilities
Long-Term Liabilities
Shareholders' Equity
Total Financial Debt
ST Debt

2011A
131
2,066
3,568
7,505
2,187
2,348
2,874
2,143
261

2012E
153
2,365
4,967
9,398
2,587
3,562
3,245
3,525
470

2013E
458
3,441
5,060
10,567
2,855
3,430
4,277
2,968
46

2014E
458
3,808
5,179
11,053
3,167
3,256
4,625
2,777
28

2011A
252
3,978
6,872
14,454
4,213
4,521
5,536
4,128
503

2012E
325
5,032
10,569
19,997
5,505
7,579
6,904
7,499
1,000

2013E
935
7,022
10,327
21,565
5,827
7,000
8,730
6,058
94

2014E
916
7,616
10,358
22,105
6,334
6,512
9,251
5,554
56

LT Debt

2013E
11,624
27.4
3,192
23.7
901
38.1
7.8
678
36.5
5.8
(176)
(146)
356
42.3
3.1

2014E
13,102
12.7
3,602
12.8
1,034
14.8
7.9
794
17.1
6.1
(153)
(186)
455
27.7
3.5

2011A
15,647
28.8
4,422
29.2
1,272
38.8
8.1
1,024
42.3
6.5
(186)
(246)
589
18.7
3.8

US$
2012E
18,370
17.4
5,199
17.6
1,314
3.3
7.2
1,001
(2.2)
5.4
(292)
(224)
504
(14.5)
2.7

2013E
23,723
29.1
6,515
25.3
1,839
40.0
7.8
1,384
38.3
5.8
(359)
(298)
727
44.2
3.1

2014E
26,608
12.2
7,316
12.3
2,100
14.2
7.9
1,613
16.5
6.1
(311)
(379)
923
27.1
3.5

1,882

3,055

2,922

2,749

3,625

6,499

5,964

5,497

2011A

2012E

2013E

2014E

2011A

2012E

2013E

2014E

Net Debt

2,012

3,372

2,510

2,319

3,876

7,174

5,123

4,637

Capital Employed

4,704

6,366

6,477

6,615

9,059

13,545

13,218

13,230

Net Debt/EBITDA

3.3

5.2

2.8

2.2

3.0

5.5

2.8

2.2

Net Debt/Equity

0.7

1.0

0.6

0.5

0.8

1.0

0.6

0.5

Capex/Revenue (%)

8.1

22.6

2.7

2.7

8.1

22.6

2.7

2.7

Int Cover (%)

4.5

3.3

5.5

6.8

4.5

3.3

5.5

6.8

31.0

30.0

29.9

30.0

32.7

29.8

30.6

30.2

ROCE (%)

8.1

6.1

8.3

9.2

8.8

6.0

8.2

9.2

ROE (%)

9.9

7.7

8.3

9.8

10.7

7.6

8.3

9.8

FINANCIAL RATIOS

Dividend Payout (%)

MARKET RATIOS

2011A

2012E

2013E

2014E

2011A

2012E

2013E

2014E

P/E

23.9

26.0

19.1

16.4

22.3

27.5

19.1

16.1

P/CE

16.8

16.4

11.7

10.7

15.7

17.4

11.7

10.6

FV/EBITDA

14.7

15.2

10.3

9.5

13.7

16.0

10.3

9.3

FV/EBIT

18.3

19.9

13.7

12.3

17.0

21.0

13.7

12.1

FV/Revenue

1.2

1.1

0.8

0.7

1.1

1.1

0.8

0.7

P/BV

2.4

2.0

1.6

1.6

2.4

2.0

1.6

1.6

FCF Yield (%)

3.6

13.3

12.5

1.7

3.9

12.6

12.5

1.7

Div Yield (%)

1.2

1.3

1.1

1.4

1.2

1.2

1.1

1.5

PER SHARE DATA

2011A

2012E

2013E

2014E

2011A

2012E

2013E

2014E

EPS

126

100

142

165

0.78

0.60

0.87

1.01

DPS

35

34

30

39

0.20

0.22

0.18

0.23

1

1

2

2

0.01

0.01

0.01

0.01

BVPS

Company Description
Cencosud is one of the leading multiformat retailers in
Chile, Argentina, Colombia, Peru and Brazil. The
company’s retail formats in Chile include Jumbo
hypermarkets
and
supermarkets,
Santa
Isabel
supermarkets, the Easy home improvement division,
shopping centers, and the department store chains, Paris
and Johnson. In Argentina, Cencosud operates Jumbo
hypermarkets, Disco and Vea Supermarkets, Easy home
improvement stores, and shopping malls. In Brazil, the
company entered the market in 2007 with the acquisition
of GBarbosa, and now it has operation in three states,
with GBarbosa, Bretas and Prezunic being the most
important brands. In Peru, where the company has had
locations since 2007, its operations include Wong
hypermarkets and Metro supermarkets. Finally, Cencosud
has operated its home improvement business in
Colombia since 2H08, and on October 2012, it
announced the acquisition of Carrefour Colombia.

Key Personnel: Horst Paulmann (Chairman), Daniel
Rodríguez (CEO), Juan Manuel Parada (CFO) and María
Soledad Fernández (Head of Investor Relations)
Web: www.cencosud.cl

Revenues by Country, 2012E

Peru
8.1%

Brazil
23.1%

Colombia
0.5%

Chile
40.4%
Argentina
27.6%

Revenues by Segment, 2012E

Home
Improvement

11.9%

Department Financial
Services Real
Store
3.0% Estate
9.7%
1.8%

Supermarkets

73.4%

Shareholder Structure, 2012E

Others
24.5%

AFPs
15.0%

Paulmann
Family
60.5%

Sources for all charts and tables: Company reports and Santander
estimates.

257

2013 Latin American Universe Book

CHILE—PULP & FOREST PRODUCTS

CMPC

HOLD
CURRENT PRICE: CH$1,792
TARGET PRICE: CH$2,000

INTRODUCING YE2013 TARGET PRICE OF CH$2,000; REPLACING YE2012 TARGET PRICE OF CH$2,250

Rodrigo Ordoñez*

Investment Case: After some balance in the pulp market expected
in 2013, we believe that CMPC’s main focus will be the Guaiba
project financing. This includes a potential overhang from a capital
increase and, in our view, reductions in capex due to the company’s

Chile: Santander Investment Chile Limitada
+5622-336-3358 | rordonez@santander.cl

Francisco Errandonea*
Chile: Santander Investment Chile Limitada
+5622-336-3357 | ferrando@santander.cl

high debt level, which will limit the company’s ability to grow in the
nonpulp business. We believe that the oversupplied pulp market is
already priced into CMPC’s stock, limiting the stock’s downside.

2013 Outlook: We expect a better year for CMPC, with an EBITDA
expansion of 6.7% supported by (1) higher margins and pulp volume
sales (+4%) after the ramp-up of Laja and Santa Fe expansions, (2)
in tissue, improved margins from higher capacity (new machine in
Chile) and an increasing learning curve, and (3) a new plywood mill
in the forestry division.

Guaiba‘s expansion. Capex of US$2.1 billion will be financed by a
US$500 capital increase and by additional debt of US$1.7 billion,
according to the company. We expect that the controllers will
subscribe some US$223 million, creating an overhang of some 77

Company Statistics

days of ADTV. Our main concern is on the debt side, as the

Bloomberg

company wants to meet its internal policy of 2.5x ND/EBITDA.

Current Price (01/03/13)

Ch$ 1,792 / US$ 3.79

Target Price (YE 2013)

Ch$ 2,000 / US$ 4.08

52-Week Range (Ch$)

1,673 - 2,196

According to our estimate, by 2014 ND/EBITDA will be 3.5x. Thus,

CMPC CI

we believe CMPC can cut capex in the nonpulp business, limiting its

Market Capitalization (US$ Mn)

growth outlook.

Float (%)

8,339
44.6

3-Mth Avg. Daily Vol (US$ Mn)

Pulp outlook 2013. Our bearish outlook for pulp for 2013 is
improving after Jari announced it will stop its 400,000-ton mill. We
expect mainly flat prices for BHKP until mid-2013, when the hardest

4.1

Shares Outstanding - Mn

2,200

Price Performance (Ch$)
CMPC

IPSA

110

time for market pulp begins, after the start-ups of Eldorado, Suzano,
100

and Montes del Plata pressure prices below US$700 per ton.
90

Tissue is the growth driver. The increasing capacity of CMPC

80

tissue since 2011 of 28% should begin to translate into increasing

70

margins after start-up costs are completed, mainly building brands.

60

We expect the EBITDA margin to reach 14-15% by 2015, up from
10-11% in 2010-11.

J-11

M-11

A-11

D-11

A-12

A-12

D-12

Sources: FactSet, Santander estimates and company reports.

258

CMPC
Financial Highlights: P&L, Balance Sheet and CF Statement, 2011–14E in Billions (Ch$), Millions
(US$)

Company Description
CMPC is one of the main manufacturers of forestry
products in Latin America, with interests in the wood,
pulp, paper, tissue and packaging businesses. The
company has approximately 654,000 planted hectares of
eucalyptus and radiate pine in Argentina, Chile and Brazil;
1.4 million cubic meters per year of wood capacity; 2.5
million tons per year of pulp capacity; and it is considered
a market leader in the tissue business in Chile, Argentina,
Peru, Mexico, Brazil and Uruguay. CMPC is also the
largest packaging supplier for the export industries in
Chile. The company is controlled by the Matte Group,
which holds a 55.4% stake in CMPC. The stock is listed
on the Santiago Stock Exchange.

Key Personnel: Eliodoro Matte (Chairman), Hernán
Rodríguez (CEO), Luis Llanos (CFO) and Trinidad Valdés
(IR)
Web: www.cmpc.cl

Sales by Geography, September 2012

Europe
12.0%

Asia
15.0%

North
America
4.0%

Others
43.0%

Chile
26.0%

EBITDA by Business, September 2012
Paper
Products
4.0%

Forestry
17.0%
Paper
18.0%

Pulp
36.0%

Tissue
25.0%

Shareholder Structure, September 2012
Pension
funds
11.4%

Float
33.2%

Matte
Family
(Controller)
55.4%

Sources for all charts and tables: Company reports and Santander
estimates.

259

2013 Latin American Universe Book

CHILE—UTILITIES

COLBUN

HOLD
CURRENT PRICE: CH$137.60
TARGET PRICE: CH$155.00

UPGRADING RATING TO HOLD FROM UNDERPERFORM
INTRODUCING YE2013 TARGET PRICE OF CH$155.00; REPLACING CH$146.00 YE2012 TARGET PRICE

Investment Case: Our recommendation is based on Colbún’s

Cristián Jadue*

stretched valuations and high-risk profile (hydro and regulatory);

Chile: Santander Investment Chile Limitada
+5622-336-3323 | cjadue@santander.cl

however, we expect to see a recovery in results as Santa Maria coal
starts operations, lowering hydro risk and decreasing operating costs
for 2013.

Francisco Errandonea*
Chile: Santander Investment Chile Limitada
+5622-336-3357 | ferrando@santander.cl

Marcio Prado*

Valuations at unattractive levels: Colbún’s stock currently trades at

Brazil: Banco Santander S.A.
+5511-3012-5751 | mprado@santander.com.br

a 12-month-forward P/E of 33.7x our earnings estimate, at more than
a 100% premium to its Chilean peers. Although strong earnings
growth could justify the premium, we believe the 2014E P/E of 14.0x
implies that future growth is already reflected in the stock price,
supporting our Hold rating.

Growth already incorporated into the stock price: Although we
continue to believe that Colbún’s expansion plan will enable it to post
significantly higher EBITDA growth levels versus its peers, we
believe that current valuations more than rule out these expectations,
as post-growth valuation leaves little room for further upside in the
stock, in our view.
Company Statistics

Colbún has operations solely in the Chilean SIC; therefore, its

Bloomberg

exposure to hydro volatility is greater than that of its peers. Poor

Current Price (01/03/13)

Ch$ 137.60 / US$ 0.29

Target Price (YE 2013)

Ch$ 155.00 / US$ 0.32

52-Week Range (Ch$)

125.60 - 145.87

hydro conditions (lower than our estimates) in 2012 and the delay of
the Santa Maria coal power plant affected Colbún’s 2012 results.

Market Capitalization (US$ Mn)

Also, the company’s high exposure to hydro capacity (average 60%

Float (%)

of generation) makes its EBIT volatile compared with its peers.

COLBUN CI

2013 Outlook: We anticipate a tight supply/demand position, due to
(1) the expected continuation of the ongoing drought through 1Q13,

5,104
41.0

3-Mth Avg. Daily Vol (US$ Mn)

2.0

Shares Outstanding - Mn

17,536

Price Performance (Ch$)
Colbun

IPSA

110

as the ice-melting season should be shorter than in a normal year,
and (2) the start of the first stage of the Codelco contract, which
should increase generation using some high-cost diesel facilities and

100

90

lead to energy purchases by Colbún in the spot market. However,
80

this could be partially offset by the start-up of the Santa Maria project.
70

J-11

M-11

A-11

D-11

A-12

A-12

D-12

Sources: FactSet, Santander estimates and company reports.

260

COLBUN
Financial Highlights: P&L, Balance Sheet and CF Statement, 2011–14E in Billions (Ch$), Millions
(US$)

Company Description
Colbún is the second largest generator of electricity in the
Central Interconnected System. The company has a total
installed capacity of 2,960 MW, with all the generating
facilities linked to the Chilean Central Grid (SIC). Its
controller is the Matte Group, one of the largest economic
groups in Chile, which also has a presence in the pulp
and paper, banking, telecommunications, and real estate
sectors, among others.

Key Personnel: Bernardo Matte L. (Chairman),
Bernardo Larraín M. (CEO), Cristián Morales (CFO),
Olivia Heuts (Head of IR) and Macarena Paul (IR)
Web: www.colbun.cl

Generation in the SIC (GWh), Dec. 2011-Nov. 2012

AES Gener
16.0%
Colbún
23.0%

Endesa
36.0%

Others
25.0%

Electricity Generation Mix, 2012E

Hydro
47.8%

Thermal
52.2%

Shareholder Structure, 2012E
Chilean
Pension
Funds
18.9%

Others
22.4%

Angelini
Group
9.6%

Matte Group
49.2%

Sources for all charts and tables: Company reports and Santander
estimates.

261

mx stock.  Valuation limits upside.1%.00 52-Week Range (Ch$) 882.1.7 Shares Outstanding . thus likely limiting VCO’s earnings momentum.  Global wine shortfall to relieve competition in 2013.9x and 20.475 Float (%) 59. with the GBP. EUR. We believe the latter would present a good opportunity for VCO to regain market share overseas. After facing a tough competitive environment from Old World wine producers (50% of global production). while locally. +14. +5255-5269-1926 | lmiranda@santander.31 / US$ 39. In contrast to past economic crises.Mn 747 63%.com.2% YoY.145 Market Capitalization (US$ Mn)  FX to continue limiting profitability gains.9 3-Mth Avg. We believe this will be partially offset by 80 our expectations for the continued appreciation of local currencies. respectively. and relief in price competition 90 from European vineyards. CFA Mexico: Banco Santander S.2013 Latin American Universe Book CHILE—FOOD & BEVERAGE CONCHA Y TORO HOLD CURRENT PRICE: CH$935 TARGET PRICE: CH$1.50 Target Price (YE 2013) Ch$ 1. This should benefit VCO’s overseas income (85% of consolidated) based on our projections for an increase in overseas demand and lower capacity for price competition from European vineyards stemming from a possible increase in their wine costs due to a grape scarcity. CONCHA CI / VCO US Current Price (01/03/13) Ch$ 933.050 LOWERING YE2013 TARGET PRICE TO CH$1. attributable to lower raw material costs (owing 100 to a positive 2012 harvest in Chile). we expect a better scenario for VCO. this is at a Bloomberg slight premium to the historical level but close to a 30% premium to that of its peers. 70 J-11 M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet.cl Luis Miranda*. our expectations for a negative impact of strong local currency and expensive valuations limit the upside potential for the Francisco Errandonea* Chile: Santander Investment Chile Limitada +5622-336-3357 | ferrando@santander. and USD accounting for 1.7x. due to the expectations for the first global wine shortfall in more than a decade because of a historically weak 2012 European harvest. In terms of P/E.100.A. a solid performance of the Chilean economy should help the CLP maintain its appreciated status.cl decade. Santander estimates and company reports. VCO trades at 2013E FV/EBITDA and P/E Company Statistics multiples of 13.050.00  Investment Case: We expect some relief in the competitive scenario Nicolas Schild* on expectations for the first global wine shortfall in more than a Chile: Santander Investment Chile Limitada +5622-336-3361 | nschild@santander. grape prices have trended down thanks to a positive 2012 harvest in Chile.47 . 262 .  Price Performance (Ch$) Concha y Toro IPSA 120 110 2013 Outlook: We expect the EBITDA margin to increase 70 bps to 13.050 / US$ 43. in our view. On the other hand. Daily Vol (US$ Mn) 0. Close to 80% of currency mix is foreign.00 FROM CH$1.

Concha y Toro is controlled by the three families.1 (0) (10) 34 11.8 2.3 7.2 9.37 BVPS Company Description Concha y Toro is the largest Chilean winery. varietal.0 Div Yield (%) 2.1 7.1% of the company. 3Q12 Fetzer 12. and started producing in U.67 1.4 (0.6% Controlling Group 40.3% Latin America 16.S.3 3.8 7.1 38.7 1.0 13.1 2.1 3.5) 12.4 37 (9.8 8.7 7.4 303 2. representing 16%.6% Europe 50.7 17.6 10.2 9.6 23.3 7.5) 14.4 6.0 9.8 41.2 2.7 2.8 1.0 2.1 (0.3 FV/EBIT 23.2 7.6 19.3 141 8.4 40.2 15.9 Ch$ 2012E 444 5.6 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E Net Debt 210 185 175 161 404 394 356 326 Capital Employed 638 646 657 670 1.035 4.2 13.6 13.6 8.10 DPS 22 26 16 18 0. the company has a volume market share of 29.2 5.74 533 565 593 628 20.8 2.0 23.S.0 1.8 8.2) 1.0 40.4 13./(Divestments) Change in Debt Dividends Capital Increases/Other 2011A (18) 0 (78) (16) (41) 21 (75) 148 (17) 0 2012E (18) 0 0 45 (11) 51 10 7 (19) 0 2013E (19) 0 (11) 42 (19) (1) 0 (24) (12) 0 2014E (21) 0 (12) 48 (21) 7 0 (19) (14) 0 2011A (37) 0 (162) (34) (85) 42 (154) 306 (35) 0 2012E (37) 0 1 93 (23) 105 21 15 (39) 0 2013E (40) 0 (23) 87 (40) (3) 0 (50) (25) 0 2014E (41) 0 (25) 95 (41) 15 0 (39) (27) 0 BALANCE SHEET Cash and Equivalents Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Liabilities Shareholders' Equity Total Financial Debt ST Debt 2011A 21 372 260 774 168 208 398 231 53 2012E 53 402 257 812 176 215 422 238 97 2013E 39 406 257 816 211 161 443 214 92 2014E 33 419 257 829 231 129 469 194 105 2011A 40 717 500 1.0 4.1) 9.0) 9.3% Others 2. varietal blends.4 2.4 6.8 1.86 1.1% Exports 60.8 1.8 13.1 90 18.3 55 (6.5 24.6 7.3 Capex/Revenue (%) 9.2 354 5.5 13.7 17.0 85 (5.8 CASH FLOW Depreciation & Amortization Other Noncash Items Changes in Working Capital Operating Cash Flow Capital Expenditures Free Cash Flow Other Invest.7 2.0 Int Cover (%) Dividend Payout (%) ROCE (%) 9.0 177 9.7 122 2.0 13.5 4. Concha y Toro’s wine exports represent 61% of the company’s revenues.7 12.1 7.7 50 14.9 US$ 2012E 912 4. The U.2% Asia 11. and Latin America are its main export markets.2) 6. Millions (US$) P&L ACCOUNT Total Revenue YoY change (%) Gross Profit YoY change (%) EBITDA YoY change (%) As % of Revenue Operating Income YoY change (%) As % of Revenue Financial Results Taxes Net Profit YoY change (%) As % of Revenue 2011A 423 13.9 5.665 431 328 905 436 188 2014E 67 846 519 1.7 113 (7.7 1.3) 8. which together own 40.CONCHA Y TORO Financial Highlights: P&L.0 17.0 P/CE 10.5 9.4 0.0 20.0 7.9 1.79 1.0 41 (10.3 Net Debt/Equity 0.9 12.9) 6. 61% and 17%.7 22 (13) 50 20.7 P/BV 1.87 2.0 4.7 20.4 40.0 147 3. Eduardo Guilisasti (CEO).6 23.5 0.6 13.4 0.A after the acquisition of Fetzer Winery in 2011.6 1.5 4.0 2014E 1.0 143 7.5 2.5 9.8) 8.22 25.5 4.7 2.675 467 260 948 393 212 178 141 122 89 342 300 248 181 LT Debt FINANCIAL RATIOS 2013E 479 7.229 1.5 1.2 295 13.0 2014E 517 8.1 (0) (20) 70 12. such as premium.7 2.8 1.conchaytoro.4 9.729 374 457 897 506 206 2013E 80 828 524 1.9 1.6 8. Guilisasti Gana.0 7.67 0.1 71 12.7 1.6 2011A 874 19.3 63 14. with international and domestic sales.7%.9 ROE (%) MARKET RATIOS PER SHARE DATA 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E EPS 68 41 45 52 2.0% USA 15. Balance Sheet and CF Statement.3 0.4 2.8 11.2 11.2 21.3 5.342 1.4 6. Concha y Toro also produces wine in Argentina through its subsidiary. 263 ..6 1 (11) 39 16. 3Q12 Canada 4. 2011–14E in Billions (Ch$).8 2013E 993 8.09 0.6 1 (23) 78 12.3 3.1 1.4 11.5 4.7% Shareholder Structure.4 18.7 46 (27) 104 27.8 337 11.0 4.6% Domestic Market Other Products 5.1 15. Larraín Santa María and Fontecilla.2 13.8 59 (2.4 6.9% Sources for all charts and tables: Company reports and Santander estimates.491 323 400 767 444 102 2012E 113 856 546 1.1% Others 48.53 24.4 0.6 1.6% Sales Breakdown.9) 12.4 7 (21) 62 (40. 3Q12 AFPs 11.3 37.3 5.5 FCF Yield (%) 2. which is the second largest exporter in the country.0% ADRs 2.1 44 17.6 3.7 100 10.2 130 15.2 5.9 12.354 Net Debt/EBITDA 3.4 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E P/E 14.8 14.0 11. Osvaldo Solar (CFO) and Matías Rojas (IR) Web: www.0 16.8 FV/EBITDA 16. Viña Trivento.8 20.3 2.cl Export Sales Mix.8 14.5 13.4 3 (10) 30 (39.4 76 (10. respectively. Europe.1 16.375 1. targeting the complete range of wine segments through a broad range of varieties. Key Personnel: Alfonso Larraín (Chairman).4 FV/Revenue 2.4 42.2% Argentina 5.03 24.4 40.9 162 10.3% Domestic Market Wine 16. In Chile.2) 1.4 0. As for 3Q12. and popular wines.6 0.

However.4% higher EBITDA in fuel due to Terpel’s solid volume growth rate. when we anticipate the most difficult time for market pulp. We expect 19.8.cl believe Copec should be a market performer.S.700 FROM CH$8.  Price Performance (Ch$) Copec IPSA 110 100 Potential flows trigger.000  Investment Case: Even though we maintain our bearish three-year Rodrigo Ordoñez* outlook for pulp due to the increasing capacity in the market.300 mainly flat prices for BHKP until mid-2013.2013 Latin American Universe Book CHILE—PULP & FOREST PRODUCTS COPEC HOLD CURRENT PRICE: CH$7. but Copec will not consolidate the project and it will be accounted for on the nonoperating lines.700 / US$ 15. after Jari announced it will stop its 400.02% in that 60 J-11 index. Montes del Plata should post sales and EBITDA of US$367 million and US$83 million in 2013. Terpel’s expected fuel division growth and higher Bloomberg occupancy rates in the panel mill in the U.000-ton mill.264 Float (%) 39. 264 .82 Target Price (YE 2013) Ch$ 7.S. while the 80 historical average is in the 8% area.1 Shares Outstanding . we would expect some buying pressure under that scenario.71 52-Week Range (Ch$) 6. with EBITDA increasing 6.006 / US$ 14. such as Terpel fuel’s unit. should keep the growth rate in-line with that of the Chilean market.700 LOWERING YE2013 TARGET PRICE TO CH$7. However.  2013 Outlook: We expect a better 2013. pressuring prices below the US$700 per ton area.296 Market Capitalization (US$ Mn)  2013 pulp outlook. and in the Teno mill. after the start-ups of new mills.S. COPEC CI Current Price (01/03/13) Ch$ 7.cl comfortable building a position in Copec stock at current valuations.  No major triggers looking forward. Santander estimates and company reports.0% of their AUM in local equities. we still are not Francisco Errandonea* Chile: Santander Investment Chile Limitada +5622-336-3357 | ferrando@santander.Mn 1. and (2) 7.2 3-Mth Avg.006 TARGET PRICE: CH$7. no significant investments could boost earnings. A potential return of Chilean mutual funds to 90 the market could be a positive trigger for the stock. as our estimates for growth are roughly in-line with the estimates for the Chilean companies.0% (versus -20% in 2012). Currently mutual funds have just 6. Daily Vol (US$ Mn) 7. supported by growth in its nonpulp business. After the pulp mill Montes del Plata start-up. mainly based on (1) 29% higher EBITDA in panels due to increasing capacity in the U. 2013 is looking better from our bearish position. M-11 A-11 D-11 A-12 A-12 D-12 Sources: FactSet.465 . Given that mutual funds follow 70 the Chilean Index (IPSA) and Copec has a weight of 9. in our Company Statistics view. we Chile: Santander Investment Chile Limitada +5622-336-3358 | rordonez@santander. and the recent acquisition of panel mills in the U.

7% EBITDA Breakdown. 2011–14E in Billions (Ch$). respectively. and fishing businesses.ec.9% Forestry 54.000 ha of forest in Chile. 32. September 2012 Others 32.cl Sales Breakdown. and the remaining 39.3% AntarChile 60.S.0% Fuel 80. the second largest listed Chilean company in terms of market cap. The company also has investments in the electricity and mining sectors. and Uruguay. fuel. Copec owns over 1.1% Fuel 43. Eduardo Navarro Beltrán (CEO). is a holding company with a presence in the forest products. and 1. a listed holding company controlled by the Chilean Angelini Group.1%. Rodrigo Huidobro Alvarado (CFO) and Cristián Palacios González (Head of IR) Web: www.8% Sources for all charts and tables: Company reports and Santander estimates.0% of consolidated EBITDA. Copec’s main shareholder is Antarchile (which owns 60. which is its forest business. Millions (US$) Company Description Empresas Copec. which according to 2011 figures represented 66.9%.8% of Copec). 265 . September 2012 Forestry 18. September 2012 Fishing 2.2% is listed only on the Chilean stock exchange.9% Pension Funds 6. Key Personnel: Roberto Angelini Rossi (Chairman).COPEC Financial Highlights: P&L. Balance Sheet and CF Statement.000. Argentina.0% Shareholder Structure. Brazil. Through its fully owned subsidiary Arauco. and has 8 panel mills in the U.3% Fishing 1.

10 FROM CH$6.10 6. Company Statistics Bloomberg  CORPBANC CI / BCA US Current Price (01/03/13) Ch$ 6.50 TARGET PRICE: CH$8.7.  2013 Outlook: Up jumps Colombia while Chile remains flat. loan-to-deposit ratios below peers. Price Performance (Ch$)  Valuation remains attractive. 80 70 60 J-11 M-11 D-11 A-12 D-12 Sources: FactSet.80 Colombia should become the fifth largest banking group in the 52-Week Range (Ch$) 5. +1-212-297-1367 | lguzman@santander. with solid profitability in the low twenties.649 funding mix. At current prices.2013 Latin American Universe Book CHILE—FINANCIAL SERVICES CORPBANCA BUY CURRENT PRICE: CH$6.Mn 337. we see room for multiple expansion. under Basel III criteria). In terms CorpBanca IPSA A-11 A-12 110 100 of 2013E adjusted P/BV. CorpBanca asset quality.us Luis Guzmán operation favorably. we expect CorpBanca Colombia to merge with Helm and to post revenue and cost synergies.85  Boris Molina Investment Case: CorpBanca is in the process of transforming itself into a one-of-a-kind Andean player. with ROI being above New York: Santander Investment Securities Inc. In the LTM the stock has underperformed 14% versus Chilean peers under coverage. +1-212-350-3977 | bmolina@santander. as it will become one-third Colombian and two-thirds Chilean in 2013E. Daily Vol (US$ Mn) 1.us the cost of capital starting in 2014E.0x.642 Float (%) 37. We view the Colombian New York: Santander Investment Securities Inc. which lowers the capital discount in our valuation to 13% from our previous 25% estimate.cl interest from the Colombian operations. as our valuation implies a target P/BV of 2.90 UPGRADING RATING TO BUY FROM HOLD RAISING YE2013 TARGET PRICE TO CH$8. Santander estimates and company reports. we do not expect significant changes.50 . We are raising our estimate for Nicolas Schild* the consolidated capital ratio of the group (adjusting for minority Chile: Santander Investment Chile Limitada +5622-336-3361 | nschild@santander. as it should create value. as the expected increase in inflation should have a limited positive impact given the thin spreads at the large corporate segment. For the Chilean operation.40 country.32 Target Price (YE 2013) Ch$ 8.5x. We believe that the risk of an additional capital increase (after the one expected in 1Q13) should be significantly lower than we previously thought and we are upgrading our recommendation on the stock. and a capital position above our estimated capital requirement given its asset and 4. increasing adjusted profitability to the low twenties in the medium term.3 Shares Outstanding . During 1Q13.50 / US$ 20. healthy Market Capitalization (US$ Mn) A new start in Colombia: After the merger with Helm. which 90 is below Chilean peers. the bank is currently trading at 2. 266 .3 3-Mth Avg.10 / US$ 24.

7 89.94) 0. 2013E Chile Mortgage 10.1 3.3 1.485 3.3 9.053 1.137 4. and it also has stakes in media and real estate businesses.22 0.906 20.655 15.5 0.69 1.2 7.361 24.5 205 (353) 2014E 12.38 0.004 2.6 2.6% Colombia Mortgage 1.70 2.92 0.98 12.7 3.348 (262) 1.5 2012E 14.2 49.4 1.3 1.6 2.888 5.14) 0.01 (3.618 1.76 (5.837 4.3 107.6 258 (447) 2011A 10.4 2012E 14.3 5.4 PER SHARE DATA EPS BVPS DPS Adj EPS Adj BVPS Surplus Capital per Share Unrealized Cap.40) 0.886 39.301 869 2014E 877 2.00 2011A 1.CORPBANCA Financial Highlights: P&L and Balance Sheet.68 2.396 1.52 2.773 2014E 1.4 2014E 9.2 2.116 12.365 38.0 96.949 1.086 484 1.9 10.2 117.62 8. CorpBanca’s strategy is based on a low cost structure and a wide array of financial products and services.1 1.