Brazilian Capital Goods

LATIN AMERICA
EQUITY RESEARCH
17 DECEMBER 2014
BRAZILIAN CAPITAL GOODS

INTRODUCING 2015 CAPITAL GOODS ROAD MAP—LOOKING FOR VALUE IN A TOUGH DOMESTIC AUTO CYCLE
Daniel Gewehr* Joao Noronha*, CFA

Brazil: Banco Santander S.A. Brazil: Banco Santander S.A.
+5511-3012-5787 | dhgewehr@santander.com.br +5511-3012-5734 | jonoronha@santander.com.br
Investment Strategy: Value or Momentum? Tough Part of the Cycle: We Are Back at 2009 Production Levels
Updating YE2015E Target Prices
IT M AY GET WORSE BEFORE IT GETS BETTER: WE EXPECT A CHALLENGING YEAR FOR DOMESTIC
(1) TACTICAL UW IN THE AUTO/TRUCK SECTOR: SHORT-TERM LACK OF
CAPITAL GOODS COMPANIES; OUR BRAZILIAN VEHICLE PRODUCTION ESTIMATE POINTS TO A
MOMENTUM: (A) WE ARE 8% BELOW CONSENSUS IN 2015 EPS; (B) DECLINE OF 4% FOR PASSENGER CARS; WE EXPECT -6% TRUCK PRODUCTION GROWTH AND -1%
CHALLENGING 2015E: BRAZILIAN VEHICLE PRODUCTION -3.5% GROWTH IN BUSES; INITIAL RECOVERY EXPECTED ONLY FROM 2016E ONWARD (+1.5%)
(2) BUT THERE IS VALUE: AUTO-RELATED NAMES TRADING ON AVERAGE Brazil Capital Goods Production Growth (2009-2015E)
~11% BELOW HISTORICAL FV/EBITDA (1% IN P/E), WITH 48% DCF UPSIDE
(3) UPDATING ESTIMATES: 2015 EPS TRIMMED BY 18%, ON AVERAGE
250
(4) RATIONALE: WE FAVOR NAMES WITH LOWER EXPOSURE TO NEW 2,800 2,723 223
2,700 190 187
DOMESTIC PRODUCTION AND/OR WITH POSITIVE FX EXPOSURE; 2,585 2,589 200
2,600
2,488 2,505
(5) PREFERENCES: MAHLE IS NOW OUR TOP PICK (7.8% DIV. YIELD), 2,500 150
121
133 141 133
2,400
FOLLOWED BY MARCOPOLO (PRICING-IN BELOW INFLATION FCF GROWTH): 2,300
2,287 100
2,203
BOTH WHICH WE ARE ABOVE CONSENSUS ON 2015 EPS; RANDON RANKS 2,200
50
RD 2,100
3 (16% 2015E FCFE YIELD AND TRADING 40% BELOW PEERS ON P/E)
2,000 0
Road Map: a 360º View on the Capital Goods Sector 2009 2010 2011 2012 2013 2014E 2015E 2009 2010 2011 2012 2013 2014E 2015E
360º OVERVIEW: 13 INVESTMENT STUDIES (EARNINGS POWER, BULL/BEAR
Passenger Cars Trucks
SENSITIVITY, DUPONT ANALYSIS, HISTORICAL MULTIPLES, CONSENSUS
DEVIATION, CORPORATE GOVERNANCE, AMONG OTHERS); BNDES DEBT
EXPOSURE; SUB-SECTORS OVERVIEW (ADDING INTERNATIONAL AND
RAILCARS M ARKET); LABOR FORCE STUDY; COMPANY SPECIFICS; UPDATING Note: Thousand units. Source: ANFAVEA and Santander estimates.
YE2015 TARGET PRICES (PAGE 80 ONWARD) .
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.
INDEX
Summary of Investment Thesis ...................................................................................................................................................................................................................................... 3
Snapshot of Brazil Capital Goods Studies: Roadmap .................................................................................................................................................................................................... 5
Where Do We Differ from Consensus? .......................................................................................................................................................................................................................... 6
What Has Changed? ...................................................................................................................................................................................................................................................... 7
Selected Studies
Capital Goods Main Estimates ............................................................................................................................................................................................................................ 9
Tracking Performance (What Do Investors Like?) Evolution of EBITDA and EPS Estimates............................................................................................................................ 10
Sensitivity to Possible Energy Rationing ........................................................................................................................................................................................................... 16
The Bull and the Bear – Sensitivities on Revenue Growth, EBITDA Margins, WACC and Growth ................................................................................................................... 18
Growth and Margin Trends ................................................................................................................................................................................................................................ 20
Earnings Power Value ....................................................................................................................................................................................................................................... 21
Going to Granularity: Revenue and Return per Employee ................................................................................................................................................................................ 23
DuPont Analysis ................................................................................................................................................................................................................................................ 24
Balanced Scorecard .......................................................................................................................................................................................................................................... 26
Checking DCF with Multiples............................................................................................................................................................................................................................. 27
Germany Auto Trip: Takeaways from Meetings at Mahle and Daimler Headquarters ....................................................................................................................................... 28
What Caught our Attention? Highlights from Recent Road Shows/Management Meetings .............................................................................................................................. 29
Summary of Industry Drivers ............................................................................................................................................................................................................................. 30
Segment Positioning ......................................................................................................................................................................................................................................... 33
Looking at Cash and Debt Profile ...................................................................................................................................................................................................................... 34
COGS Breakdown ............................................................................................................................................................................................................................................. 35
Sector Overview
Transportation Matrix ........................................................................................................................................................................................................................................ 36
Prisoner's Dilemma: Growth in Capacity vs. Growth in Sales—Leading to Overcapacity? ............................................................................................................................... 37
Overview of Brazil Truck Market ........................................................................................................................................................................................................................ 38
Overview of Brazil Light Commercials + Passenger Cars Market ..................................................................................................................................................................... 42
Overview of Brazil Bus Market .......................................................................................................................................................................................................................... 44
A Look at Inventory Levels ................................................................................................................................................................................................................................ 46
Railways ............................................................................................................................................................................................................................................................ 47
U.S. Automotive Market..................................................................................................................................................................................................................................... 49
European Automotive Market ............................................................................................................................................................................................................................ 50
Brazilian Crop Market Outlook ........................................................................................................................................................................................................................... 51
Market Share in the Vehicles Industry ............................................................................................................................................................................................................... 52
Overview of Brazil Automotive Industry ............................................................................................................................................................................................................. 53
FX Potential Impact on Brazilian Auto Industry ................................................................................................................................................................................................. 54
Overview of Inovar Auto .................................................................................................................................................................................................................................... 55
BNDES Disbursements and Rates .................................................................................................................................................................................................................... 59
Overview of Fleet and Age ................................................................................................................................................................................................................................ 60
Additional Highlights
Risks for the Sector ........................................................................................................................................................................................................................................... 64
Corporate Governance ...................................................................................................................................................................................................................................... 65
Technical Position (Short-Interest), Insider Sales .............................................................................................................................................................................................. 65
OEMs: Who Does What? Market Share (%) ..................................................................................................................................................................................................... 66
International Peers: Auto Parts, Trailers, and Railcars ...................................................................................................................................................................................... 68
What Caught Our Attention in Recent Developments? 3Q14 Conference Call Highlights ................................................................................................................................ 72
Hey Competition, Can You Jump a Wide Moat? Our Approach to Competitive Advantages of Listed Companies ........................................................................................... 76
The Engineer’s Playground—Main Products under Our Coverage ................................................................................................................................................................... 77
Company Specifics ( Fras-le; Iochpe-Maxion. Mahle Metal Leve; Marcopolo; Randon; Romi; Weg)…………………………………………………………………………………..81
2
Summary of Investment Thesis
 Value with No Short-Term Momentum
 Tactical UW in the Auto/ Truck Sector: We expect a challenging year for domestic capital goods companies. After a 15.4% 2014E
decline, our total Brazilian vehicle production estimate points to a decline of 3.4%, with passenger cars down 3.7%; we expect -6%
truck production growth and -1% growth in buses.
 Value: Sector offers an average 48% upside, with auto-related names trading on average ~11% below the historical FV/EBITDA (1%
in P/E). The current sector average IRR is 19%.
 Rationale for investment: In this environment, we favor names with lower exposure to new production (aftermarket) and/or with
positive FX exposure that are trading belo historical multi les.
 Our list of preferences: Mahle is now our Top Pick (7.8% div. yield) reinforced by our recent trip to the company’s headquarters in
Germany (see page 28), followed by Marcopolo (pricing-in below inflation FCF growth): both which we are above consensus on 2015
EPS; Randon ranks 3rd (16% 2015e FCFE yield and trading 40% below peers on P/E).
 Sensitivity on Production and Rationing: Capital goods is one of the most affected sectors: short energy (not self-sufficient), with
cyclical demand. In case of 5% sales decrease, sector FV/EBITDA would trade 2% above the historical average.
 What to Monitor during 1H15? (1) Development of subsidized interest rates; (2) auto inventory level; and (3) business confidence.
P/E 2015E (Y axis) vs. ROIC 2015E (X axis)—(bubble size refers to stock IRR) Capital Goods: Coverage Universe Impact on 2015E P/E—
Base Case vs. 10% Decline in Brazilian Production
35 45
40
Romi, 30.5% 35
30 30
Iochpe- 25
Maxion, WEG, 11.2% 20
25 26.6% 15
10
20 Mahle Metal 5
Leve, 16.2% 0
Marcopolo
Mahle Metal Leve
Randon
Romi
WEG
15 Randon,
15.4%
Marcopolo,
10
15.4%
5 Fras-le, 18.1%
Base Case 10% Decline in Brazilian Production
0
-5% 0% 5% 10% 15% 20% 25%
Note: Bubble sizes refer to market cap. Source: Santander estimates. Note: Iochpe-Maxion 2015E P/E NM on the 10% decline scenario. Sources: Company data and Santander estimates
3
Summary of Investment Thesis: Value with No Short-Term Momentum
 Mahle Metal Leve, our Top Pick, is a less cyclical player, with more than 60% of sales coming from exports and the aftermarket (segments
that we like), and thus not much exposed to new domestic vehicle production. The company has the sector’s best dividend yield, at 7.8%, and
a 2015E P/E of 12.1x (with an expected 15% ROE), and in our view, is a good carry.
 Marcopolo benefits from (1) a high and stable market share (approximately 45% in Brazil, arising from premium positioning); (2) an attractive
ROE (2014E-17E average of 18%); and (3) a return-oriented management profile (based on CFROGI—cash flow return on gross investment
metrics). Marcopolo is trading below its earnings power value, which in our view is ~R$4.30.
 Randon: Trading at a 40% discount to peers, we see Randon as a good way to play long-term growth in Brazilian transportation. We like its
solid vertical integration strategy, improving long-term EBITDA margins (average of ~14% through 2025E), and ROE (we estimate an
average of 14% for 2015-17). We like management’s focus on higher free cash flow (2015E FCFE of 16%).
 Fras-le: Fras-le is the largest brake-lining producer worldwide and is the leader in both the aftermarket and OEM market in Brazil. We see the
company as a less cyclical player in the automotive universe (76% of revenue in aftermarket) and with positive FX exposure (45% of sales
are international). Fras-le trades at a 2015E P/E of 9.4x — a 30% discount to its Brazilian peers.
 Romi is, in our view, a deep value play in our capital goods universe, with 80% DCF upside potential, despite low short-term momentum. We
expect Romi’s FCFE to yield 18% in 2015, following its successful turnaround (800-bp EBITDA margin recovery since 2012 to ~7% in 2014.
 WEG: We consider WEG a scarcity quality play on FX in Brazil and on an energy efficiency trend. 50% of sales relate to FX, and the
company is one of the few FX-affected names that is not in the commodity business (its 2015E ROE is 21%). While its multiples are slightly
above their historical average, we see WEG with one of the best earnings momentum in 2015E.
 Iochpe: We are maintaining our Hold rating, given the com any’s financial deleverage and as margin expansion is taking longer than
expected, leading to a 2015E P/E multiple of 13.2x. Nonetheless, we believe MYPK3 offers investors: (1) exposure to the global automotive
market; and (2) indirect exposure to Brazilian infrastructure growth (wheels and chassis for heavy vehicles) and railway.
 Brazilian leaders on competitive advantage. In Santander’s strategy team’s re ort Hey Competition, Can You Jump a Wide Moat?,
Marcopolo and WEG ranked 14th and 5th out of the 16 companies in Brazil that have the greatest competitive advantages (out of our 116-
company coverage). (1) The ability to generate ROIC above WACC; and (2) stability of market share.
Current Target Total P/E FV/EBITDA
Com pany Ticker Rating Dividend Yield Vol. Market Cap EPS CAGR
Price Price Return 2015 2016 2015 2016
Fras-le FRAS3 Buy 3.97 6.00 3.2% 55.5% 252 496 9.4 8.3 5.1 4.3 14.5%
Iochpe-Maxion MYPK3 Hold 11.49 17.50 2.8% 55.8% 5,992 1,090 13.2 8.7 4.8 4.3 -9.9%
Mahle Metal Leve LEVE3 Buy 20.44 25.00 7.8% 31.5% 3,003 2,623 12.1 10.8 6.7 6.1 6.4%
Marcopolo POMO4 Buy 3.48 5.00 4.4% 49.8% 13,169 3,131 11.4 10.4 8.3 7.2 1.0%
Randon RAPT4 Buy 4.80 8.00 3.7% 73.1% 7,852 1,389 8.0 5.9 5.4 4.8 -7.4%
Romi ROMI3 Buy 3.07 5.50 2.5% 82.1% 409 220 13.1 6.1 4.4 3.0 NM
WEG WEGE3 Hold 29.85 31.50 2.3% 8.8% 24,039 24,094 21.6 18.8 14.8 12.7 5.4%
Average Capital Goods 3.8% 50.9% 7,817 4,721 12.7 9.9 7.1 6.1 1.7%
Note: Prices are as of December 16h, 2014 in R$. EPS CAGR 2013-16E. Sources: Company data, Bloomberg, and Santander estimates.
4
Snapshot of Brazil Capital Goods Studies: Roadmap
Valuation & Market Operating & Financial Data Sector Outlook & Others
 Tracking Consensus Earnings Revisions WEG  Granularity: Profitability per Employee  Overview of Brazilian Automotive
is the only company with an upward trend in WEG has been the most effective company in ~20% of industrial GDP
earnings revisions, in our view. terms of nominal net income per employee, 10-year fleet CAGR: 6.4%
We are, on average, ~8% below consensus while Mahle has been the most effective in Employs ~484,000 people
regarding 2015E EPS. relative improvement, according to our Government & financing support based
calculations.
 Historical Forward Multiples  DuPont Analysis Decomposition  Quandary
Randon trades at higher discounts to historical Mahle has shown the best combination of ROE The Brazilian automotive market may be on
multiple with respect to P/E ratios (23%). improvement: better asset turnover, upward the verge of excess capacity construction,
trend in margins in the last 5 years leading to subpar capacity utilization in 2017E
(<70%), in our view
 Balanced Scorecard  Growth and Margin Trends  Sector Growth (2015E):
Marcopolo, Randon and Mahle Metal Leve are Mahle is the company with the highest EPS Brazilian passenger cars: -3.4%
the positive highlights in our quantitative growth in the last five years. Truck Production: -6%
screening relative to P/E, cash flow, leverage Bus Production: -1%
and dividend. Nafta & Europe: 3.0% and 1.0%
 Multiple Valuation vs. International Peers:  Sensitivity to Possible Energy Rationing
Brazil’s auto part segment is trading at 10% Less affected (higher percentage of production
discount to international peers. abroad): Iochpe
WEG is trading at 73% premium vs. ABB and
Siemens (vs. 41% historical premium).
 Earnings Power Value  Segment Positioning (Main Player)  Market Share (Important Product)
Iochpe, Randon and Marcopolo are currently Light (Mahle)/ Heavy Market (Iochpe) Iochpe: BZ chassis (~65%)
discounting a decline in earnings going Aftermarket (Mahle) and OEM (Iochpe) Mahle: BZ OEM pistons (~80%)
forward. WEG prices in the highest growth Domestic (Romi) / Foreign (Iochpe) Marcopolo: BZ buses (~40%)
(9.3% per year). BZ Export (Mahle) / Abroad (Romi) Romi: BZ machine tools (~37%)
Europe (Iochpe) / NAFTA (Iochpe) Weg: BZ industrial motors (~80%)
 Checking DCF with Multiples Bull & Bear: Sensitivities on Margins & Growth  What to Monitor:
Higher cost of equity has been capping sector Marcopolo currently prices in margin Monthly inventory levels (ANFAVEA)
fair P/E values and potential upsides looking at compression and no real growth, in our view. Government PSI financing
normalized growth. Argentina exports (ANFAVEA)
 Corporate Governance  Leverage (Net Debt/ EBITDA)  Economic Pulse:

WEG holds the best corporate governance in Lowest: WEG GDP downward revisions: consensus 2015E
terms of the ratio of independent directors vs. Highest: Iochpe-Maxion 0.7% (vs. our 0.3%).
total directors vs. free float Long-Term Debt/ Total Debt: Mahle
Source: Santander.
5
Where Do We Differ from Consensus?
 We are on average ~7.5% below consensus regarding 2015E EPS (ex Romi)
 We are slightly above consensus with respect to Mahle, Marcopolo and Fras-le’s 2015E EPS (4.3%, 3.0% and 2.2%, respectively)
Net Revenue EBITDA EPS
2014E 2015E 2014E 2015E 2014E 2015E
Fras-le
Santander 765 830 103 121 0.35 0.421
Consensus 775 840 107 117 0.36 0.412
vs. Consensus -1.3% -1.2% -4.0% 4.0% -2.6% 2.2%
Iochpe-Maxion
Santander 5,920 6,201 642 719 0.46 0.87
Consensus 5,955 6,336 639 718 0.60 1.26
vs. Consensus -0.6% -2.1% 0.5% 0.0% -23.8% -30.8%
Mahle Metal Leve
Santander 2,322 2,410 402 417 1.54 1.68
Consensus 2,318 2,465 407 439 1.52 1.61
vs. Consensus 0.2% -2.2% -1.1% -5.0% 1.1% 4.3%
Marcopolo
Santander 3,433 3,619 320 395 0.24 0.31
Consensus 3,403 3,713 320 396 0.27 0.30
vs. Consensus 0.9% -2.5% 0.0% -0.3% -10.4% 3.0%
Randon
Santander 3,732 3,877 485 493 0.61 0.57
Consensus 3,880 4,001 511 527 0.68 0.66
vs. Consensus -3.8% -3.1% -5.1% -6.6% -9.6% -13.5%
Rom i
Santander 645 668 48 62 0.03 0.06
Consensus 679 715 69 75 0.08 0.10
vs. Consensus -5.0% -6.6% -30.9% -17.0% -68.4% -42.8%
Weg
Santander 7,798 8,963 1,350 1,626 1.13 1.38
Consensus 7,817 9,009 1,358 1,628 1.18 1.388
vs. Consensus -0.2% -0.5% -0.6% -0.1% -4.3% -0.6%
Average -0.7% -2.1% -1.3% -2.4% -9.4% -7.5%

Sources: Bloomberg and Santander estimates. We believe, Autometal consensus doesn’t fully incor orate Mahindra acquisition.
6
What Has Changed?
 We reduced our 2015 net income estimates by an average of 18%. Nevertheless, we expect the sector to increase YoY net income (ex
Randon), due to cost-cutting measures implemented during 2014.
Target Price
Rating
To From Var.
Fras-le Unchanged at Buy 6.00 6.00 0.0%
Iochpe-Maxion Unchanged at Hold 17.50 22.50 -22.2%
Mahle Metal Leve Unchanged at Buy 25.00 27.00 -7.4%
Marcopolo Unchanged at Buy 5.00 5.00 0.0%
Randon Unchanged at Buy 8.00 8.50 -5.9%
Romi Unchanged at Buy 5.50 7.00 -21.4%
Weg Unchanged at Hold 31.50 29.50 6.8%
Average -7.2%
Source: Santander estimates.
Net Revenue 2015E EBITDA 2015E Net Income 2015E

YoY YoY YoY
To From Var. To From Var. To From Var.
Growth Growth Growth
Fras-le 830 830 0.0% 8.5% 121 121 0.0% 17.9% 53 53 0.0% 18.8%
Iochpe-Maxion 6,201 6,504 -4.7% 4.7% 719 757 -5.1% 11.9% 82 148 -44.3% 90.1%
Mahle Metal Leve 2,410 2,474 -2.6% 3.8% 417 427 -2.5% 3.6% 216 219 -1.4% 9.4%
Marcopolo 3,619 3,783 -4.3% 5.4% 395 449 -12.0% 23.6% 275 290 -5.2% 25.0%
Randon 3,877 4,005 -3.2% 3.9% 493 531 -7.2% 1.6% 173 220 -21.0% -7.2%
Romi 668 722 -7.4% 3.5% 62 78 -20.6% 29.2% 17 34 -50.1% 123.3%
Weg 8,963 9,122 -1.7% 14.9% 1,626 1,826 -11.0% 20.5% 1,114 1,216 -8.4% 22.4%
Average -3.4% 6.4% -8.3% 15.5% -18.6% 40.3%
7
A Snapshot of Capital Goods
 Brazilian Capital Goods Sector Has 13 Listed Players, with 7 Trading Above R$1 Million ADTV
Com pany Fras-le Iochpe Metal Leve Marcopolo Randon Rom i WEG Forjas Taurus Mangels Mills Plascar Schulz Tupy Average
Ticker FRAS3 MYPK3 LEVE3 POMO4 RAPT4 ROMI3 WEGE3 FJTA4 MGEL4 MILS3 PLAS3 SHUL4 TUPY3 -
B lo cks and
B rake Linings fo r M axio n Wheels M achine To o ls A luminum Rental (47%); Heads (64%);
Urban buses A uto parts (52%); Industrial M o to rs B umpers (47%);
Heavy Vehicles - (77%); M axio n P isto ns and kits (64%); Castings Guns (72%); Wheels (50%); Heavy A uto P arts
(32%); Vo lare Truck Trailers (59%); GTD (24%); P anels (15%); Industry (71%);
Main Business (% of Sales, 3Q14) B lo cks (55%); B rake Structural (26%); Filters (14%); (20%); P lastic Helmets (21%); Cylinders (37%); Co nstructio n (10%); P ipe -
(25%); Intercity (46%); Financial Do mestic M o to rs Interio r Do o r Trade (29%)
P ads (25%); Others Co mpo nents P isto n Rings (13%) M achines Others (7%) Steel-made (27%); Real Fittings, Iro n
buses (33%) Services (2%) (12%) P anels (10%)
(20%) (23%) (13%) pro ducts (12%) Estate (26%) B ars and Steel
Sho ts (7%)
Rating Buy Hold Buy Buy Buy Buy Hold NA NA NA NA NA NA -
Market Data Fras-le Iochpe Metal Leve Marcopolo Randon Rom i WEG Forjas Taurus Mangels Mills Plascar Schulz Tupy Average
Current Price (December 16th) (1) 3.97 11.49 20.44 3.48 4.80 3.07 29.85 0.34 0.49 8.32 0.27 5.20 16.30 48,001
52-w eek Price Range(1) 3.31-4.56 12.5-26.36 19.75-25.46 3.46-5.3 5.1-8.85 3-6.81 20.15-31.93 0.33-2.28 0.4-1.18 8.25-32.98 0.25-0.49 5.05-10.09 16.15-21.18 44904-62304
YTD Share Performance(1) NA -50.9% -16.8% -27.2% -42.3% -47.5% 31.0% -85.5% -15.1% -74.8% -46.8% -45.0% -19.4% -6.8%
12-m Share Performance(1) NA -48.1% -15.9% -31.3% -39.3% -53.5% 30.5% -84.7% -15.1% -73.2% -44.4% -42.9% -19.4% -4.2%
Market Cap (R$ mn) 496 1,090 2,623 3,131 1,389 220 24,094 84 9 1,065 67 332 2,350 3,072
Net Debt, last reported (R$ mn) 132 2,425 178 1,111 1,111 386 20 430 405 584 410 223 731 638
Free-float 51% 75% 30% 73% 58% 50% 35% 60% 64% 62% 49% 40% 44% --
3-month ADTV (R$ 000) 252 5,992 3,003 13,169 7,852 409 24,039 107 30 12,101 20 41 2,682 4,824
Target Price YE2015 6.00 17.50 25.00 5.00 8.00 5.50 31.50 NA NA NA NA NA NA --
Investm ent Thesis and Risks Fras-le Iochpe Metal Leve Marcopolo Randon Rom i WEG Forjas Taurus Mangels Mills Plascar Schulz Tupy
Largest brake- Leadership in High and Road
Operating
lining producer the w heels High domestic stable dominance in
Leverage Scarcity quality
w orldw ide and (BZ & globally) market share domestic transportation
case after play on FX (14E - - - - - - -
leader in and chassis sustained by market matrix, w ith an
turnaround ROE 20%).
aftermarket and (in the technology share, aged truck
process
OEM market in BZ Americas) arising from fleet.
Less cyclical Exposed to (10% EBITDA
player and Less Cyclical Increasing domestic margin w ith Long-term
Investment Thesis Deleverage
maturing player (1/3 M&A outside economy 60% thesis: energy - - - - - - -
Case
investment cycle aftermarket) Brazil (81% of capacity efficiency
to increase returns sales) utilization)
Organic A Benjamin
Improving
gro th—2013-16E CFROGI Graham Call: Well Defined LT
Faster 3-Year Dividend Payer EBITDA
CAGR of ~10% for based Trading at Plan: R$20bn in - - - - - - -
EPS CAGR (7% Yield) margins
EBITDA and 15% management 0.5x P/B sales in 2020E
(12.3% avg)
for EPS 2014E
5-year Trend (2008-2013) (4) Fras-le Iochpe Metal Leve Marcopolo Randon Rom i WEG Forjas Taurus Mangels Mills Plascar Schulz Tupy Average
EBITDA CAGR 9.0% 20.5% 9.0% 9.7% 1.6% -11.4% 4.1% -2.8% -11.0% 27.5% -16.3% 7.3% 9.8% 5.0%
EBITDA Margin Average 13.3% 11.5% 15.9% 11.9% 12.0% 6.1% 18.0% 19.3% 6.8% 40.1% 10.4% 17.8% 15.7% 13.0%
ROE Average 1.3% 17.7% 10.8% 26.5% 16.5% 2.0% 18.9% -0.4% -13.7% 2.1% -0.1% 1.9% 1.3% 8.4%
Multiples (2) Fras-le Iochpe Metal Leve Marcopolo Randon Rom i WEG Forjas Taurus Mangels Mills Plascar Schulz Tupy Average (3)
FV/EBITDA 2014E 6.2 5.5 7.0 10.4 5.8 6.3 18.2 NA NA 4.3 NA NA 6.7 7.8
FV/EBITDA 2015E 5.1 4.8 6.7 8.3 5.4 4.4 14.8 NA NA 4.1 NA NA 5.8 6.7
1-year Fw d Historic FV/EBITDA NA 6.7 6.9 8.7 6.0 9.2 11.5 NA NA NA NA NA 6.3 7.4
P/E 2014E 9.4 13.2 12.1 11.4 8.0 13.1 21.6 NA NA 8.9 NA NA 11.1 11.7
P/E 2015E 9.4 13.2 12.1 11.4 8.0 13.1 21.6 NA NA 8.9 NA NA 11.1 11.7
1-year Fw d Historic P/E NA 11.2 12.5 11.0 10.3 14.2 16.5 NA NA NA NA NA 13.3 12.1
P/B 2014E 1.2 0.9 1.9 2.1 1.0 0.3 4.9 NA NA 1.0 NA NA 1.2 1.7
Source: Santander estimates. NA: not available; NM: not meaningful; (1) Bz Avg: Ibovespa; (2) Iochpe: including acquisitions; Average Net Debt/EBITDA excludes Romi and Mangels; (3) Bloomberg estimates, for
the companies not covered; (4) Average excludes Romi, Forjas Aurus, Mangels, Plascar and Schulz. (5) Metalfrio, Plascar and Schulz - 1Q14 data. (6) We used data from 2007 to 2012 for Forjas Taurus,
Mangels and Plascar. Mills EBITDA CAGR from 2009 to 2013
8
Capital Goods Main Estimates
 We forecast a significant decrease in the capital goods market in 2015, with production declining by 3.5%, mainly on higher interest rates,
higher car prices (end of IPI tax exemption) and lower profitability from agribusinesses (which affect ~40% of truck production).
 We note that our 2015 GDP forecast is similar to 2014E (0.3%).
 We expect the U.S. auto market to perform better in 2015 (+3%, in-line with GDP), while we forecast only 1% growth for Europe.
 We do not expect Argentina, which accounts for 85% of Brazilian exports, to recover in 2015.
Brazil Capital Goods Production Growth (2012A-2014E) Capital Goods Main Estimates (Thousand units)
50% 2011A 2012A 2013A 2014E 2015E
41% 2011A 2012A 2013A 2014E 2015E
40%
Total 3,403 3,398 3,705 3,135 3,028
30% YoY Change -0.1% 9.0% -15.4% -3.4%
Light Vehicles 3,144 3,233 3,485 2,966 2,868
20%
YoY Change 2.8% 7.8% -14.9% -3.3%
10% 8%
Buses 36 33 33 28 28
0% YoY Change -8.4% 0.4% -14.0% -1.0%
0%
-1% Trucks 223 133 187 141 133
-3%
-10% -6%
YoY Change -40.5% 40.7% -24.5% -6.0%
-15% -14%
-20%
-25%
-30%
Light Vehicles Buses Trucks
2013A 2014E 2015E
Sources: Company data and Santander estimates. Sources: ANFAVEA, Fabus, and Santander estimates.
9
Tracking Performance (What Do Investors Like?) Evolution of EBITDA and EPS Estimates
Iochpe-Maxion – EBITDA and EPS Estimates Evolution 12-MF Mahle Metal Leve – EBITDA and EPS Estimates Evolution 12-MF
2.05 560.0
3.50 900.0
3.00 800.0 1.90
700.0 520.0
2.50
600.0 1.75
2.00 500.0 480.0
1.50 400.0 1.60
Consensus continues to downward revise Our top-pick has seen downward revisions
300.0 440.0
1.00 company EPS. in consensus estimates, but seems it seems
200.0 1.45
to be bottoming.
0.50 100.0
1.30 400.0
0.00 0.0
Jul-13
May-14
Mar-13
May-13
Mar-14
Jul-14
Oct-14
Dec-12
Sep-13
Nov-13
Dec-14
Jan-14
Mar-13
May-13
Jul-13
Mar-14
May-14
Jul-14
Dec-12
Sep-13
Nov-13
Sep-14
Dec-14
Jan-14
Consensus EPS2014E Consensus EBITDA2014E

Note: Bloomberg consensus. Source: Bloomberg. Note: Bloomberg consensus. Source: Bloomberg.
Marcopolo – EBITDA and EPS Estimates Evolution 12-MF Randon – EBITDA and EPS Estimates Evolution 12-MF
0.95 650.0
0.50 700.0
0.90
0.45 600.0 600.0
0.85
500.0
0.40
0.80 550.0
400.0
0.35
300.0 0.75 500.0
0.30 Estimates have been in a downward trend 200.0 0.70
along with the sector. Estimates entered in a declining trend since 2013
0.25 450.0
100.0 0.65 mid-year.
0.20 0.0 0.60 400.0

Jul-13
May-14
Mar-13
May-13
Mar-14
Jul-14
Oct-14
Dec-12
Sep-13
Nov-13
Dec-14
Jan-14
Mar-13
May-13
Jul-13
Mar-14
May-14
Jul-14
Dec-12
Sep-13
Nov-13
Sep-14
Dec-14
Jan-14
10
Tracking Performance (What Do Investors Like?) Evolution of EBITDA and EPS Estimates
 WEG is the only company in our universe of coverage with an upward trend in earnings revisions.
Romi – EBITDA and EPS Estimates Evolution 12-MF WEG – EBITDA and EPS Estimates Evolution 12-MF
1.30 1,550.0
0.70 100.0
90.0 1,500.0
0.60 1.25
80.0
0.50 70.0 1,450.0
1.20
0.40 60.0
1,400.0
50.0
0.30 1.15
40.0 1,350.0
0.20 30.0
1.10 Consensus continues to revise upwards its EPS
EPS consensus improved since Oct-2013 but saw a 20.0 1,300.0
estimates
0.10 strong fall recently. 10.0 1.05 1,250.0
0.00 0.0
Mar-13
May-13
Jul-13
Mar-14
May-14
Jul-14
Dec-12
Sep-13
Nov-13
Jan-14
Sep-14
Dec-14
Mar-13
May-13
Jul-13
Mar-14
May-14
Jul-14
Dec-12
Sep-13
Nov-13
Sep-14
Dec-14
Jan-14

Note: Bloomberg consensus. Source: Bloomberg.
Note: Bloomberg consensus. Source: Bloomberg.
Capital Goods – Consensus 12M-Forward EBITDA Evolution Capital Goods – Consensus 12M-Forward EPS Evolution
Jan-14 Last Last/Jan-14 Jan-14 Last Last/Jan-14

Fras-le 110.0 107.0 -2.7% Weg 1.19 1.27 6.6%
Romi 72.9 69.2 -5.0% Mahle Metal Leve 1.74 1.57 -9.8%
Weg 1453.8 1358.2 -6.6% Randon 0.84 0.69 -16.9%
Iochpe-Maxion 748.9 638.8 -14.7% Romi 0.34 0.26 -24.3%
Randon 606.2 510.8 -15.7% Autometal 0.48 0.35 -27.1%
Mahle Metal Leve 484.8 406.8 -16.1% Marcopolo 0.39 0.26 -35.3%
Marcopolo 553.5 320.0 -42.2% Iochpe-Maxion 1.92 0.58 -70.1%
11
Historical Valuation Starting to Get Supportive
 Randon is the only company under our coverage that trades below both valuation metrics, while WEG stands out with
ratios at historical highs.

Imlpied Upside/ Downside to
P/E Historical Valuations
Historical Valuation
P/E 12M- Net Income
Current Price Maximum Average Minimum Maximum Average Minimum
Forward 2015E
Fras-le 4.0 9.4 52.6 NM NM NM
Iochpe-Maxion 11.5 13.2 82.4 16.5 11.2 6.6 -20% 19% 100%
Mahle Metal Leve 20.4 12.1 216.1 16.1 12.5 7.0 -25% -3% 74%
Marcopolo 3.5 11.4 274.5 16.8 11.0 4.7 -32% 3% 144%
Randon 4.8 8.0 173.4 16.0 10.3 6.2 -50% -23% 29%
Romi 3.1 13.1 16.8 37.3 14.2 4.5 -65% -7% 191%
WEG 29.9 21.6 1,113.6 21.8 16.5 11.8 -1% 31% 84%
Automotive Average 10.8 16.4 11.2 6.1 -32% -1% 87%
Sector Average 12.7 20.8 12.6 6.8 -32% 3% 104%
Historical Valuations – 12MF P/E Analysis Historical Valuations – 12MF FVEBITDA Analysis
40.00 40.00 20.00 20.00
35.00 35.00
30.00 30.00 15.00 15.00
25.00 25.00
20.00 20.00 10.00 10.00
15.00 15.00
10.00 10.00 5.00 5.00
5.00 5.00
- - - -
Romi
Randon
Marcopolo
Fras-le
WEG
Iochpe-Maxion
Mahle Metal Leve

Mahle Metal Leve
Randon
Romi
Marcopolo
Fras-le
WEG
Iochpe-Maxion
P/E 12M-Forward Maximum Average Minimum FV/EBITDA 12M-Forward Maximum Average Minimum
Source: Bloomberg. Note: Bloomberg.
12
Historical Forward Multiples
 Randon and Romi trade at higher discounts to historical multiples, along with Iochpe, which is trading in-line with its historical P/E.
Iochpe – 12MF P/E and Consensus EPS Iochpe – 12MF FV/EBITDA and Consensus EBITDA
18 4.0 9 1,000
16.5
8.1 900
16 3.5 8
800
14 3.0
7
700
12 2.5
6 600
10 2.0
5 500
8 1.5
400
4 4.6
6 6.6 Current: 10.7 1.0 Current: 5.0 300
Historical: 11.4 Historical: 6.5
4 St. Deviation: 2.3 0.5 3 St. Deviation: 0.7 200
Current/Average: -5.6% Current/Average: -23.6%
2 0.0 2 100
May-12
May-10
Sep-14
Feb-10
Aug-10
Nov-10
May-11
Aug-11
Nov-11
Aug-12
Nov-12
Sep-13
Dec-13
Dec-14
Feb-11
Feb-12
Feb-13
Jun-13
Mar-14
Jun-14
May-10
Nov-10
Dec-13
Aug-10
May-11
Nov-11
Aug-11
May-12
Nov-12
Aug-12
Jun-14
Dec-14
Feb-10
Feb-11
Feb-12
Feb-13
Jun-13
Sep-13
Mar-14
Sep-14
EV/EBITDA 12-M Forward Historical EV/EBITDA Consensus EBITDA (12-M Forward)
P/E 12-M Forward Historical P/E Consensus EPS (12-M Forward)
Sources: Bloomberg. Sources: Bloomberg.
Mahle Metal Leve – 12MF P/E and Consensus EPS Mahle Metal Leve – 12MF FV/EBITDA and Consensus EBITDA
19 2.00 9 550
1.95 8.5
1.90
17 1.85
15.3 1.80 8 500
15 1.75
1.70
1.65 7 450
13 1.60
1.55
11 1.50
1.45 6 400
1.40
9 1.35
Current: 12.7 1.30 Current: 6.7
5 Historical: 6.9 350
7 Historical: 12.0 1.25
1.20 St. Deviation: 1.1
St. Deviation: 2.4
6.6 1.15 4.5 Current/Average: -3.3%
Current/Average: 6.3%
5 1.10 4 300
Nov-11
Jul-12
Jul-13
Apr-14
Oct-14
Sep-11
May-12
Nov-12
May-13
Nov-13
Dec-14
Jan-12
Mar-12
Sep-12
Jan-13
Mar-13
Sep-13
Jan-14
Jun-14
Aug-14
Sep-11
Nov-11
May-12
Jul-12
Sep-12
Nov-12
May-13
Jul-13
Sep-13
Apr-14
Oct-14
Nov-13
Aug-14
Dec-14
Jan-12
Mar-12
Jan-13
Mar-13
Jan-14
Jun-14
Sources: Bloomberg. Sources: Bloomberg.
13
Marcopolo – 12MF P/E and Consensus EPS Marcopolo – 12MF FV/EBITDA and Consensus EBITDA
18 0.5 13 650
16.8
12.2
16 0.5 12 600
14 0.4 11 550
0.4 10
12 500
0.3 9
10 450
0.3 8
8 400
0.2 7
6 6.4 350
0.2 6
4 Current: 12.0 5.5 Current: 10.6 300
0.1 5
Historical: 11.6 Historical: 9.1
2 St. Deviation: 2.4 0.1 St. Deviation: 1.6 250
4
Current/Average: 3.7% Current/Average: 16.5%
0 0.0 3 200
May-10
Nov-10
Nov-12
Dec-13
Dec-14
Aug-10
May-11
Nov-11
Aug-11
May-12
Aug-12
Sep-13
Feb-10
Feb-11
Feb-12
Feb-13
Jun-13
Mar-14
Jun-14
Sep-14
Oct-10
Apr-11
Apr-14
Oct-14
Aug-10
Dec-10
Jul-11
Sep-11
Nov-11
May-12
Jul-12
Sep-12
Nov-12
May-13
Jul-13
Sep-13
Nov-13
Aug-14
Dec-14
Jun-10
Feb-11
Jan-12
Mar-12
Jan-13
Mar-13
Jan-14
Jun-14
Source: Bloomberg. Source: Bloomberg.
Randon – 12MF P/E and Consensus EPS Randon – 12MF FV/EBITDA and Consensus EBITDA
18 9 800
1.4
15.8
16 8 7.8
700
1.2
14
7
1.0 600
12
6
0.8
10 500
5
8 0.6
400
0.4 4
6 4.1 Current: 5.2
6.1 Current: 7.7
Historical: 9.9 Historical: 6.0 300
4 0.2 3 St. Deviation: 0.8
St. Deviation: 2.3
Current/Average: -22.3% Current/Average: -13.3%
2 0.0 2 200
Apr-10
Oct-10
Apr-11
Oct-11
Oct-14
Aug-11
Aug-10
Dec-10
May-12
Jul-12
Sep-12
Nov-12
May-13
Jul-13
Sep-13
Nov-13
Feb-10
Mar-14
Aug-14
Dec-14
Jun-10
Feb-11
Jun-11
Jan-12
Mar-12
Jan-13
Mar-13
Jan-14
Jun-14
May-12
May-10
Nov-10
Aug-10
May-11
Nov-11
Nov-12
Dec-14
Aug-11
Aug-12
Jun-13
Dec-13
Sep-13
Jun-14
Feb-10
Feb-11
Feb-12
Feb-13
Mar-14
Sep-14

14
Romi – 12MF P/E and Consensus EPS Romi – 12MF FV/EBITDA and Consensus EBITDA
40 Current: 8.2 37.3
1.8 36 200
Current: 3.8
Historical: 13.2
35 1.6 32 Historical: 8.4
30.6 180
St. Deviation: 6.2 St. Deviation: 4.9
Current/Average: -37.5% Current/Average: -55.0% 160
1.4 28
30
140
1.2 24
25
120
1.0 20
20 100
0.8 16
15 80
0.6 12
60
10
0.4 8 40
5 0.2 4
4.5 20
3.0
0 0.0 0 0
May-10
Nov-10
May-11
Nov-11
May-12
Nov-12
Dec-13
Dec-14
Feb-10
Aug-10
Feb-11
Aug-11
Feb-12
Aug-12
Feb-13
Jun-13
Sep-13
Mar-14
Jun-14
Sep-14
Oct-11
Oct-14
Jul-10
Apr-12
Oct-12
Sep-10
Nov-10
Aug-11
Dec-11
Aug-12
Dec-12
May-13
Jul-13
May-14
Jul-14
Mar-13
Sep-13
Nov-13
Dec-14
Jan-11
Mar-11
Jun-11
Feb-12
Jun-12
Jan-14
Mar-14
WEG – 12MF P/E and Consensus EPS WEG – 12MF FV/EBITDA and Consensus EBITDA
25 1.8 18 1,600
23 15.8
21.7 1,500
1.6 15
21
1,400
19
1.4 13
17 1,300
15 1.2 10 1,200
13 8.6 1,100
1.0 8
11 11.7
Current: 20.8 Current: 15.4 1,000
9 Historical: 16.9 Historical: 11.9
0.8 5
St. Deviation: 2.4 St. Deviation: 1.6 900
7 Current/Average: 22.9% Current/Average: 29.0%
5 0.6 3 800
May-10
Nov-10
Nov-11
Dec-13
Dec-14
Aug-10
May-11
Aug-11
May-12
Nov-12
Aug-12
Feb-10
Feb-11
Feb-12
Jun-13
Sep-13
Feb-13
Mar-14
Jun-14
Sep-14
May-10
Sep-14
Aug-10
Nov-10
May-11
Aug-11
Nov-11
May-12
Aug-12
Nov-12
Sep-13
Dec-13
Dec-14
Feb-10
Feb-11
Feb-12
Feb-13
Jun-13
Mar-14
Jun-14
15
Sensitivity to Possible Energy Rationing
 We applied cuts of 5% and 10% to the domestic production of the companies under our coverage. Less affected stocks were those of
companies with a higher percentage of production abroad: Iochpe-Maxion
 On average, FV/EBITDA 2015E would increase by 2% and 28%, respectively, if 5% and 10% declines in production took place
Sensitivity Variation vs. Base Case Base Case
Net Net
FV/EBITDA Net Income EBITDA Net Revenue FV/EBITDA EBITDA Net Revenue Net Revenue FV/EBITDA EBITDA Net Revenue Net Revenue
P/E 2015E P/E 2015E Income P/E 2015E Income
2015E 2015E 2015E 2015E 2015E 2015E 2015E 2014E 2015E 2015E 2015E 2014E
2015E 2015E
Iochpe-Maxion
5% decline in BZ Production 29.4 5.7 43 608 6,077 122% 18% -48% -15% -2% 3% 13.2 4.8 82 719 6,201 5,920
10% decline in BZ Production NM 7.0 4 498 5,953 - 45% -95% -31% -4% 1% 13.2 4.8 82 719 6,201 5,920
Mahle Metal Leve

5% decline in BZ Production 14.0 7.5 185 365 2,294 15% 11% -14% -12% -5% -1% 12.1 6.7 216 417 2,410 2,322
Marcopolo
5% decline in BZ Production 15.6 8.8 218 318 3,467 37% 5% -21% -20% -4% 1% 11.4 8.3 275 395 3,619 3,433
Randon
Romi
5% decline in BZ Production 17.9 4.8 12 55 641 36% 9% -29% -11% -4% -1% 13.1 4.4 17 62 668 645
10% decline in BZ Production 27.2 5.3 8 48 615 107% 21% -52% -22% -8% -5% 13.1 4.4 17 62 668 645
WEG
5% decline in BZ Production 28.0 18.6 863 1,309 8,582 29% 25% -23% -19% -4% 10% 21.6 14.8 1,114 1,626 8,963 7,798
10% decline in BZ Production 39.4 24.7 613 992 8,201 82% 67% -45% -39% -9% 5% 21.6 14.8 1,114 1,626 8,963 7,798
Average 5% Scenario 48% 14% -27% -16% -4% 2% 14.3 7.8

Average 10% Scenario 78% 40% -53% -31% -8% -2% 14.3 7.8
Electricity as % of
Company
Cost
Fras-le 7.0%
Iochpe-Maxion 3.0%
Mahle Metal Leve 5.0%
Marcopolo 1.0%
Randon 1.0%
Romi 2.7%
Weg 1.8%
16
Sensitivity to Possible Energy Rationing
 We applied cuts of 5% and 10% to the domestic production of the companies under our coverage. Less affected stocks were those of
companies with a higher percentage of production abroad: Iochpe-Maxion
 On average, FV/EBITDA 2015E would increase by 2% and 28%, respectively, if 5% and 10% declines in production took place
Sensitivity Scenario vs. Sensitivity Scenario vs.

Historical P/E Historical FV/EBITDA
Historical P/E Historical FV/EBITDA
Max Average Min Max Average Min Max Average Min Max Average Min
Iochpe-Maxion
5% decline in BZ Production 16.5 11.2 6.6 79% 164% 344% 8.7 6.7 4.6 -34% -15% 25%
10% decline in BZ Production 16.5 11.2 6.6 - - - 8.7 6.7 4.6 -19% 4% 53%
Mahle Metal Leve

5% decline in BZ Production 16.1 12.5 7.0 -13% 12% 101% 8.5 6.9 4.5 -12% 9% 65%
10% decline in BZ Production 16.1 12.5 7.0 4% 35% 141% 8.5 6.9 4.5 1% 25% 90%
Marcopolo
10% decline in BZ Production 16.8 11.0 4.7 25% 90% 349% 12.0 8.7 5.5 -1% 36% 118%
Randon
10% decline in BZ Production 16.0 10.3 6.2 -5% 48% 147% 7.8 6.0 4.1 2% 33% 95%
Romi
5% decline in BZ Production 37.3 14.2 4.5 -52% 26% 296% 30.6 9.2 3.4 -84% -48% 40%
10% decline in BZ Production 37.3 14.2 4.5 -27% 92% 502% 30.6 9.2 3.4 -83% -42% 55%
WEG
Average 5% Scenario 21.7 13.1 6.9 7% 63% 223% 14.9 8.6 5.1 -26% 2% 66%
Average 10% Scenario 21.7 13.1 6.9 21% 89% 307% 14.9 8.6 5.1 -7% 28% 107%
17
The Bull and the Bear – Sensitivities on Revenue Growth, EBITDA Margins, WACC and Growth
Fras-le – Fras-le – WACC vs. Growth in Perpetuity
Net Revenue 2013-24E CAGR Growth vs. Long term EBITDA Margin
Perpetuity EBITDA Margin Grow th in Perpetuity
8.4% 10.4% 12.4% 14.4% 16.4% 18.4% 20.4% 6.10 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0%
3.4% 2.20 2.80 3.30 3.90 4.50 5.00 5.60 15.0% 3.80 3.90 4.10 4.30 4.50 4.90 5.30
2013-25E Revenue
5.4% 2.40 3.10 3.80 4.50 5.20 5.90 6.60 14.0% 4.20 4.40 4.60 4.90 5.20 5.70 6.20
7.4% 2.60 3.40 4.30 5.20 6.10 6.90 7.80
CAGR
13.0% 4.70 4.90 5.20 5.60 6.10 6.70 7.60
WACC
9.4% 2.70 3.80 4.90 6.00 7.00 8.10 9.20 12.5% 5.00 5.30 5.60 6.00 6.60 7.40 8.60
11.4% 2.80 4.20 5.50 6.80 8.10 9.50 10.80 12.0% 5.30 5.60 6.00 6.50 7.20 8.20 9.60
13.4% 2.90 4.50 6.20 7.80 9.40 11.00 12.60
11.0% 6.00 6.50 7.00 7.80 8.80 10.40 13.00
15.4% 2.90 4.90 6.90 8.90 10.90 12.90 14.80
10.0% 7.00 7.60 8.40 9.50 11.20 14.00 19.60
Source: Santander estimates. Source: Santander estimates.
Iochpe-Maxion – Iochpe Maxion – WACC vs. Growth in Perpetuity

#### 6.8% 8.8% 10.8% 12.8% 14.8% 16.8% 18.8% 17.50 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% 5.5%
2013-25E Revenue CAGR
1.7% 4.80 7.10 9.50 11.80 14.10 16.50 18.80 14.0% 12.00 12.80 13.50 14.40 15.40 16.40 17.60
2.7% 5.70 8.30 10.90 13.50 16.10 18.70 21.30 13.5% 13.90 14.70 15.60 16.60 17.70 18.90 20.30
3.7% 6.60 9.50 12.40 15.30 18.20 21.10 24.10 13.0% 15.90 16.80 17.80 19.00 20.30 21.70 23.40
WACC
4.7% 7.50 10.80 14.10 17.50 20.60 23.80 27.10 13.3% 14.60 15.50 16.50 17.50 18.70 20.00 21.50
5.7% 8.60 12.20 15.80 19.50 23.10 26.70 30.30 13.0% 15.90 16.80 17.80 19.00 20.30 21.70 23.40
6.7% 9.70 13.70 17.80 21.80 25.80 29.90 33.90 12.5% 18.10 19.10 20.30 21.70 23.20 24.90 26.80
7.7% 10.80 15.30 19.80 24.30 28.80 33.30 37.80 12.0% 20.50 21.70 23.10 24.70 26.50 28.50 30.90
Mahle Metal Leve – Mahle Metal Leve – WACC vs. Growth in Perpetuity
#### 11.8% 13.8% 15.8% 17.8% 19.8% 21.8% 23.8% 25.00 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5%
4.5% 16.00 17.00 19.00 21.00 22.00 24.00 26.00 14.0% 21.00 21.00 22.00 23.00 23.00 24.00 25.00
5.5% 16.00 18.00 20.00 22.00 24.00 26.00 28.00 13.5% 22.00 23.00 23.00 24.00 25.00 26.00 27.00
6.5% 17.00 19.00 21.00 23.00 26.00 28.00 30.00 13.0% 23.00 24.00 25.00 26.00 27.00 28.00 30.00
WACC
7.5% 18.00 20.00 23.00 25.00 27.00 30.00 32.00 13.2% 23.00 23.00 24.00 25.00 26.00 27.00 29.00
8.5% 19.00 22.00 24.00 27.00 29.00 32.00 34.00 14.0% 21.00 21.00 22.00 23.00 23.00 24.00 25.00
9.5% 20.00 23.00 26.00 28.00 31.00 34.00 37.00 13.5% 22.00 23.00 23.00 24.00 25.00 26.00 27.00
10.5% 21.00 24.00 27.00 30.00 33.00 36.00 40.00 13.0% 23.00 24.00 25.00 26.00 27.00 28.00 30.00
18
The Bull and the Bear – Sensitivities on Revenue Growth, EBITDA Margins, WACC and Growth
Marcopolo - Marcopolo – WACC vs. Growth in Perpetuity
5.00 6.5% 8.5% 10.5% 12.5% 14.5% 16.5% 18.5% 5.00 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5%
3.6% 2.30 2.90 3.50 4.10 4.70 5.30 5.90 13.5% 3.40 3.50 3.70 3.80 4.00 4.10 4.40
4.6% 2.40 3.00 3.70 4.40 5.10 5.80 6.40 13.0% 3.70 3.80 4.00 4.10 4.30 4.50 4.80
5.6% 2.40 3.20 3.90 4.70 5.40 6.20 7.00 12.5% 4.00 4.10 4.30 4.50 4.70 5.00 5.30
WACC
6.6% 2.40 3.30 4.10 5.00 5.80 6.70 7.50 11.9% 4.40 4.50 4.80 5.00 5.30 5.60 6.00
7.6% 2.40 3.40 4.30 5.30 6.20 7.20 8.20 11.5% 4.60 4.90 5.10 5.40 5.70 6.10 6.60
8.6% 2.40 3.50 4.50 5.60 6.70 7.80 8.80 11.0% 5.10 5.30 5.60 6.00 6.40 6.90 7.50
9.6% 2.40 3.60 4.80 6.00 7.20 8.40 9.60 10.5% 5.50 5.80 6.20 6.60 7.20 7.80 8.60
Randon – Randon – WACC vs. Growth in Perpetuity

8.00 7.4% 9.4% 11.4% 13.4% 15.4% 17.4% 19.4% 8.00 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5%
3.7% 1.60 3.00 4.40 5.70 7.10 8.50 9.90 14.5% 5.10 5.30 5.50 5.80 6.10 6.40 6.80
4.7% 1.70 3.30 4.80 6.40 8.00 9.50 11.10 14.0% 5.60 5.80 6.10 6.40 6.80 7.20 7.60
5.7% 1.80 3.60 5.30 7.10 8.90 10.70 12.40 13.5% 6.20 6.50 6.80 7.20 7.60 8.00 8.60
WACC
6.7% 1.90 3.90 5.90 8.00 9.90 11.90 13.90 13.0% 6.80 7.20 7.50 8.00 8.40 9.00 9.60
7.7% 2.00 4.20 6.50 8.70 11.00 13.20 15.40 12.5% 7.50 7.90 8.40 8.90 9.40 10.10 10.90
8.7% 2.10 4.60 7.10 9.60 12.10 14.60 17.10 12.0% 8.30 8.80 9.30 9.90 10.60 11.40 12.40
9.7% 2.20 5.00 7.80 10.60 13.40 16.20 19.00 11.5% 9.20 9.80 10.40 11.10 12.00 13.00 14.10
Weg – Weg – WACC vs. Growth in Perpetuity

- 16.9% 18.9% 20.9% 22.9% 23.5% 24.0% 24.5% 31.50 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5%
6.8% 16.40 17.90 19.30 20.70 21.20 21.50 21.90 14.0% 23.30 24.00 24.80 25.70 26.70 27.80 29.00
8.8% 18.50 20.30 22.00 23.80 24.40 24.80 25.30 13.5% 24.90 25.70 26.60 27.60 28.80 30.10 31.50
10.8% 20.90 23.10 25.30 27.50 28.20 28.70 29.30 13.0% 26.60 27.50 28.60 29.80 31.10 32.70 34.50
WACC
12.8% 23.60 26.30 29.00 31.50 32.60 33.30 34.00 12.6% 28.00 29.00 30.20 31.50 33.10 34.80 36.90
14.8% 26.80 30.10 33.40 36.70 37.80 38.60 39.50 12.0% 30.70 31.90 33.40 35.10 37.00 39.30 41.90
16.8% 30.40 34.40 38.50 42.60 43.90 44.90 45.90 11.5% 33.10 34.60 36.40 38.40 40.70 43.50 46.80
18.8% 34.50 39.50 44.40 49.40 51.00 52.30 53.50 11.0% 35.90 37.70 39.80 42.30 45.10 48.60 52.80
19
Growth and Margin Trends
 Mahle has the highest EPS growth in the last five years, but WEG is the one that we expect to grow more in the next 5 years
Five-Year Net Revenue, EBITDA and EPS CAGR (2008-2013) Five-Year Net Revenue, EBITDA and Net Income CAGR (2013-2018E)
30.0% 20.0%
25.0% 18.0%
20.0% 16.0%
15.0% 14.0%
12.0%
10.0%
10.0%
5.0%
8.0%
0.0%
6.0%
-5.0%
4.0%
-10.0% 2.0%
-15.0% 0.0%
Randon
Fras-le
WEG
Romi
Iochpe-Maxion
Marcopolo
Mahle Metal Leve
Fras-le
WEG
Randon
Romi
Iochpe-Maxion
Mahle Metal Leve
Marcopolo
Net Revenue EBITDA EPS
Net Revenue EBITDA Net Income
Sources: Company data and Santander estimates. Sources: Company data and Santander estimates.
Five-Year Net Revenue, EBITDA and EPS Average Margins (2008-2013) Five-Year Net Revenue, EBITDA and Net Income Average Margins (2013-2018E)
35.0% 35.0%
30.0% 30.0%
25.0% 25.0%
20.0% 20.0%
15.0% 15.0%
10.0% 10.0%
5.0% 5.0%
0.0% 0.0%
Fras-le
WEG
Randon
Romi
Iochpe-Maxion
Marcopolo
Mahle Metal Leve
Fras-le
WEG
Randon
Romi
Iochpe-Maxion
Marcopolo
Mahle Metal Leve
Gross Margin EBITDA Margin Net Margin
Gross Margin EBITDA Margin Net Margin
20
Earnings Power Value
 Under the earnings power value analysis, we try to assess Capital Goods Universe – EPV – Perpetuity No Growth and Inflation growth
NOPAT Scenario – Price Per Share
ho much im licit gro th is embedded in the com anies’
35 35
current market cap.

30 30
 We find Iochpe and Romi currently discounting a decline in

earnings going forward, with embedded growth below 5%
25 25
nominal growth (our long-term inflation estimate). 20 20
 WEG prices in the highest growth (9% per year). 15 15
 Marcopolo is pricing in below inflation growth going forward, 10 10
while it has been able to improve its margins relative to five 5 5
years ago. 0 0
Fras-le Iochpe-Maxion Mahle Metal Leve Marcopolo Randon WEG
Current Price Perpetuity (Zero Nominal Growth) Perpetuity (Inflation Growth)
Prices as of December 12th, 2014. Source: Santander estimates.
Capital Goods Universe – Implied Nominal Growth (X Axis) and ROIC Spread Capital Goods Universe – Implied Nominal Growth (X Axis) and (Last-Year
(ROIC – WACC) (Y Axis) NOPAT Margin) – (Five-Year Average NOPAT Margin) (Y Axis)
ROIC - WACC Margin Trend (Last Year NOPAT margin
6% vs. Last 5-Year Average) 3%
5%
WEGE3
POMO4 4% 2% LEVE3
3%
2% 2%
1% Implied Nominal Growth in Implied Nominal Growth in

Current Market Cap. Current Market Cap.
0% 1%
0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% WEGE3
LEVE3
RAPT4 -1%
MYPK3 -2% RAPT4 1%

FRAS3
-3% FRAS3
MYPK3 POMO4
-4% 0%
0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%
Prices as of December 12th, 2014. Source: Santander estimates. Prices as of December 12th, 2014. Source: Santander estimates.
21
Between a Rock and a Hard Place – Digging Into Labor Costs and Employee Earnings Efficiency
 The capital goods sector readjusted wages an average of 8% in the last five years (2.3% above the 5.7% of the IPCA).
 This trend was sustained by the tight labor availability if recent years (unemployment currently at 4.9%) and was boosted by
the unionized structure of its workforce.
 Auto parts and new vehicles inflation has not been able to keep pace with CPI since 2006, while bus prices grew above it.
Capital Goods—Historical Wage Increases and Collective Bargaining Calendar
2009 2010 2011 2012 2013 Average Collective Bargaining Season
Iochpe-Maxion (1) 7.0% 8.6% 9.2% 8.5% 8.0% 8.3% ~ October
Mahle Metal Leve 6.5% 9.0% 10.0% 8.0% 8.0% 8.3% ~ October
Marcopolo 6.0% 8.0% 9.3% 7.5% 9.5% 8.1% ~ 2Q (May-June)
Randon 6.0% 8.1% 9.3% 7.5% 9.5% 8.1% ~ 2Q (May-June)
Romi 6.5% 9.0% 10.0% 8.0% 8.0% 8.3% ~ October
WEG 8.0% 6.0% 7.5% 7.5% 7.5% 7.3% ~ January
Automotive Average 6.4% 8.4% 9.4% 7.9% 8.8% 8.2%
Average 6.7% 8.1% 9.2% 7.8% 8.4% 8.0%
IPCA 4.3% 5.9% 6.5% 5.8% 5.9% 5.7%
IGPM -1.7% 11.3% 5.1% 7.8% 5.5% 5.6%
Note: (1) Santander estimates. Source: Santander estimates.
Bus Bodies and Truck trailers Domestic Inflation (2008-14) Machine Tools and Industrial Motors Domestic Inflation (2008-14)
170 170
160 160
150 150
140 140
130 130
120 120
110 110
100 100
90 90
May-09
Sep-12
Nov-06
Sep-07
Feb-08
Jul-08
Dec-08
Aug-10
Nov-11
Feb-13
Jul-13
Dec-13
May-14
Jun-06
Apr-07
Oct-09
Apr-12
Oct-14
Jan-06
Jan-11
Jun-11
Mar-10
Jul-12
Jul-08
Jul-09
Jul-10
Jul-11
Jul-13
Jul-14
Oct-08
Apr-09
Apr-08
Oct-09
Apr-10
Oct-10
Apr-11
Oct-11
Apr-12
Oct-12
Apr-13
Oct-13
Apr-14
Oct-14
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Bus bodies Truck traillers CPI Machine tools Industrial motors CPI
Source: FGV. Source: FGV.
22
Going to Granularity: Revenue and Return per Employee
 WEG has been the most effective company in terms of net income per employee, according to our analysis.
Number of Employees (2008-2013) Net Revenue by Number of Employees (2008-2013)

2008 2009 2010 2011 2012 2013 CAGR 2008 2009 2010 2011 2012 2013 CAGR
Autometal* 8,004 7,220 7,491 7,254 8,630 19,200 19% Autometal* 155,247 176,395 209,543 215,422 186,913 132,976 -3%
Mahle Metal Leve 8,830 7,812 11,347 11,265 10,408 10,001 3% Mahle Metal Leve 211,396 190,044 160,694 198,558 214,143 239,351 3%
Iochpe-Maxion 8,875 8,311 10,838 11,781 18,893 18,710 16% Iochpe-Maxion 205,941 158,538 205,518 246,595 301,620 327,445 10%
Marcopolo* 15,393 18,303 20,393 21,993 20,508 19,911 5% Marcopolo* 164,501 112,424 145,368 153,179 186,129 183,783 2%
Romi 3,214 2,602 3,033 2,763 2,354 2,000 -9% Romi 216,591 182,719 222,067 228,394 262,345 333,712 9%
WEG 21,520 19,287 22,552 25,066 26,187 28,500 6% WEG 209,203 218,314 194,749 207,030 235,761 239,610 3%
Average 10,973 10,589 12,609 13,354 14,497 16,387 8% Average 193,813 173,072 189,656 208,197 231,152 242,813 5%
Note: The data does not include outsourced workers. Notes: * Considers the Company's interest in joint Note: The data does not include outsourced workers. Notes: * Considers the companies’ interest in joint ventures to be
ventures to be 100%. Source: Company data. 100%. Source: Company data.
EBITDA by Number of Employees (2008-2013) Net Income by Number of Employees (2008-2013)

2008 2009 2010 2011 2012 2013 CAGR 2008 2009 2010 2011 2012 2013 CAGR
Autometal* 26,228 29,824 40,136 40,374 31,453 18,493 -7% Autometal* 10,644 15,252 18,332 25,358 18,250 7,130 -8%
Mahle Metal Leve 31,405 27,800 21,408 33,036 36,625 42,622 6% Mahle Metal Leve 7,051 2,646 7,302 16,747 17,215 20,146 23%
Iochpe-Maxion 30,176 16,721 28,735 34,901 23,912 36,326 4% Iochpe-Maxion 24,123 6,634 15,669 18,966 3,539 9,104 -18%
Marcopolo* 17,768 10,088 19,182 20,719 20,989 20,598 3% Marcopolo* 8,734 7,460 14,503 15,643 14,739 14,671 11%
Romi 38,057 9,168 33,281 6,417 -6,088 33,365 -3% Romi 34,484 4,651 21,370 1,291 -16,146 12,951 -18%
WEG 47,681 43,419 34,991 35,054 40,232 44,038 -2% WEG 26,041 28,433 22,989 23,416 25,050 29,595 3%
Average 31,886 22,837 29,622 28,417 24,520 32,574 0% Average 18,513 10,846 16,694 16,903 10,441 15,600 -3%
Note: The data does not include outsourced workers. Notes: * Considers the com anies’ interest in joint Note: The data does not include outsourced workers. Notes: * Considers the com anies’ interest in joint ventures to be
ventures to be 100%. Source: Company data. 100%. Source: Company data.
23
DuPont Analysis
 According to our analysis, Mahle has shown the best combination of ROE improvement: better asset turnover, upward trend in margins,
and stable to downward leverage.
Fras-le – DuPont Analysis Iochpe-Maxion – DuPont Analysis
160% 30% 500% 30%
140% 450%
25% 25%
400%
120%
20% 350%
20%
100%
300%
80% 15% 250% 15%
60% 200%
10% 10%
150%
40%
100%
5% 5%
20%
50%
0% 0% 0% 0%
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014E
2015E
2014E
2015E
2009
2010
2011
2012
2013
Asset Turnover Leverage (Debt/ Equity) Net Margin (RHS)
ROE (RHS) EBIT Margin (RHS)
Mahle Metal Leve – DuPont Analysis Marcopolo – DuPont Analysis

160% 18% 300% 35%
140% 16%
250% 30%
14%
120%
25%
12% 200%
100%
10% 20%
80% 150%
8%
15%
60%
6% 100%
10%
40%
4%
50% 5%
20% 2%
0% 0% 0% 0%
2009
2010
2011
2012
2013
2014E
2015E
2009
2014E
2015E
2010
2011
2012
2013
24
DuPont Analysis
Randon – DuPont Analysis Romi – DuPont Analysis
250% 18% 180% 15%
225% 16% 160%
200% 10%
14% 140%
175% 120%
12%
150% 5%
10% 100%
125%
8% 80%
100% 0%
6% 60%
75%
4% 40%
50% -5%
2% 20%
25%
0% 0% 0% -10%
2009
2010
2011
2012
2013
2014E
2015E
2009
2010
2011
2012
2013
2014E
2015E
Weg – DuPont Analysis

150% 25% ROE Asset Turnover
2009 2013 Var. Stance 2009 2013 Var. Stance
125% Fras-le 19% 10% -9% Negative 81% 77% -4% Negative
20%
Iochpe-Maxion 11% 12% 0.4% Neutral 95% 100% 5% Positive
100% Mahle Metal Leve 9% 15% 5% Positive 113% 99% -14% Negative
15% Marcopolo 19% 19% 0.2% Neutral 83% 89% 6% Positive
Randon 12% 14% 3% Positive 96% 87% -9% Negative
75%
Romi 2% 0% -2% Negative 27% 47% 20% Positive
10%
WEG 23% 18% -5% Negative 78% 67% -11% Negative
50%
Average -0.9% -1.1%
5% Leverage Net Margin
25%
2009 2013 Var. Stance 2009 2013 Var. Stance
Fras-le 1.24 1.36 0.12 Negative 10% 6% -5% Negative
0% 0% Iochpe-Maxion 1.88 3.18 1.29 Negative 4% 3% -1% Negative
2014E
2015E
2009
2010
2011
2012
2013
Mahle Metal Leve 1.37 0.99 (0.38) Positive 3% 8% 5% Positive

Marcopolo 2.40 1.68 (0.72) Positive 7% 8% 1% Positive
Asset Turnover Leverage (Debt/ Equity) Net Margin (RHS) Randon 1.14 1.99 0.85 Negative 6% 6% 0% Negative
ROE (RHS) EBIT Margin (RHS) Romi 1.54 1.19 (0.35) Positive 3% 0% -2% Negative
WEG 1.25 1.18 (0.07) Positive 13% 12% -1% Negative
Average 0.11 -0.5%
Sources: Company data and Santander estimates.
25
Balanced Scorecard
 Marcopolo, Randon and Mahle Metal Leve are the top three ranked stocks, using 8 key metrics.
 The Balanced Scorecard is one of the tools we use to define our preferences, which are: Mahle Metal Leve, Marcopolo and Randon.
Mahle Metal
Balanced Scorecard Fras-le Iochpe-Maxion Marcopolo Randon Rom i WEG
Leve
Total Return 55.5% 41.1% 29.3% 44.4% 62.9% 79.2% 5.8%
DCF Upside 3 5 6 4 2 1 7
P/E 2015E 9.4 14.6 12.3 11.7 8.4 13.3 22.3
Multiple Valuation 2 6 4 3 1 5 7
EPS CAGR 2014-17E 15.3% 66.8% 11.6% 18.9% 11.8% 88.0% 21.8%
Earnings Grow th 5 2 7 4 6 1 3
ROE 2015E 11.9% 6.3% 15.3% 17.4% 11.5% 2.6% 21.2%
Returns 4 6 3 2 5 7 1
FCFE Yield 2015E 9.1% 15.2% 7.6% 4.4% 16.5% 17.1% 2.5%
Free Cash Flow 4 3 5 6 2 1 7
Dividend Yield 2015E 3.2% 2.5% 7.8% 4.3% 3.6% 2.5% 2.2%
Free Cash Flow 4 5 1 2 3 6 7
3-m ADTV (R$ 000) 252 6,001 3,007 13,257 7,918 421 23,836
Share Liquidity 7 4 5 2 3 6 1
Net Debt/EBITDA 2014 1.0 3.0 0.3 0.3 1.9 0.8 -0.2
Leverage 5 7 3 2 6 4 1
Ranking Sum 48 58 47 38 39 50 56
Consolidated Rank 4 7 3 1 2 5 6
Sources: Company data, Bloomberg, and Santander estimates.
26
Checking DCF with Multiples
 This analysis assesses the fair P/E of our coverage universe using different levels of ROE, normalizing nominal growth.
 It’s all about o ortunity cost. Higher cost of equity has been capping sector fair values and potential upsides.
ROE Ke
5-Year 10-Year 10-Year
Return on Equity (ROE) 10% 15.0% 20.0% 25.0% 30.0% 35.0% Average Average Estimate 2014 ROE
Fras-le Target P/E 2.0 4.9 6.4 7.3 7.9 8.3 4.2 5.1 6.2 2.6 17.4%
Target 2015 per Share (R$) 0.84 2.07 2.69 3.06 3.31 3.48 1.78 2.17 2.59 1.11
Upside to Current Price -78% -46% -30% -20% -14% -9% -54% -44% -32% -71%
Iochpe-Maxion Target P/E 1.9 4.8 6.2 7.1 7.6 8.0 3.9 5.8 5.7 - 17.7%
Target 2015 per Share (R$) 1.68 4.15 5.39 6.13 6.63 6.98 3.35 5.00 4.98 -
Upside to Current Price -86% -66% -56% -50% -46% -43% -73% -59% -59%
Mahle Metal Leve Target P/E 2.6 6.4 8.3 9.5 10.2 10.8 7.7 8.6 9.8 6.0 15.3%
Marcopolo Target P/E 2.5 6.2 8.1 9.2 9.9 10.4 7.7 8.1 8.3 6.0 15.5%
Randon Target P/E 2.2 5.4 7.0 8.0 8.6 9.1 5.9 11.8 8.1 4.6 16.6%
Target 2015 per Share (R$) 1.25 3.07 3.99 4.54 4.90 5.16 3.37 6.71
Upside to Current Price -75% -38% -20% -9% -2% 4% -32% 35%
Romi Target P/E 2.1 5.1 6.6 7.5 8.1 8.5 -3.0 0.5 1.5 - 17.2%
Target 2015 per Share (R$) 0.48 1.19 1.54 1.75 1.89 1.99 (0.71) 0.11 0.35 -
Upside to Current Price -84% -60% -49% -42% -37% -34% -124% -96% -88%
Weg Target P/E 2.5 6.2 8.1 9.2 9.9 10.4 8.8 9.3 9.5 7.9 15.5%
Note: Fair P/E formula: Fair P/E = (ROE – g)/ [ROE*(Ke-g)]. Source: Santander estimates.
27
Germany Auto Trip: Takeaways from Meetings at Mahle and Daimler Headquarters
 Learning from the source: We visited Mahle (head of Marketing and Competitor Monitoring) and Daimler’s (Investor Relations Team)
headquarters in Stuttgart to learn these com anies’ views on their main markets and underlying automotive trends.
 Mahle is well positioned to play global automotive trends. We see numerous trends that favor Mahle and that are likely to result in a
less volatile earnings stream, in our view: we highlight lower fuel consumption and downsizing of engines (new, smaller engines will need
more refrigeration and higher-quality/lighter parts).
 Europe: the question mark? Based on management comments, we infer that flat YoY growth (at most 1%) for the European market as a
whole is the base case for 2015, but neither company ruled out the potential for negative growth, potentially stopping the recovery started
in 2014. For the long term, Mahle believes the European market can grow around ~2% per year.
 North America: so far, so good. Based on management comments, we infer that 2015 growth could be in the range of 1-3%, after the
very positive 2014, compared with our previous 3% estimate. For the medium term, both managements mentioned that drivers of growth
remain in place (i.e., increase in population, aging fleet, and increasing wealth in Mexico), with sales possibly crossing the 18-million barrier
in the medium term.
2015E P/E in Relation to R&D as a Percentage of Sales
28
What Caught our Attention? Highlights from Recent Road Shows/Management Meetings
Iochpe-Maxion—Meeting with Management
What we liked What we did not like
(1) Management’s focus on o erating efficiency by resizing domestic operations and (1) Lack of visibility in OEM market, with orders being changed until 14 days before they
automating/increasing some international divisions. (2) Iochpe believes the bottom in the were completed (rule used to be 60 days). (2) The com any’s ex ectations of a flat
domestic market production was reached in 2Q14. (3) They aim to reach 2.5x net debt/ Brazilian heavy vehicles production in 2015, with a 5% decline in a bear-case scenario.
EBITDA throughout 2016. (4) The company believes that a 100-bp EBITDA margin
increase in 2015 is feasible (~120-bp increase in BZ operations and ~80 bps from Europe).
Mahle Metal Leve—German Auto Trip and Innovation Day

(1) We believe the company is well positioned to play the global automotive trends (fuel (1) Aftermarket: on the domestic side, it has been ressured by OEMs’ roducts, longer
efficiency and downsizing of engines). (2) Mahle is investing to increase the importance of maintenance cycle, and imports. (2) Management is in line with our view that domestic
turbochargers in its product mix. (3) It is increasing the electrification of components OEM market could post flat growth in 2015 and we see downside risks to this estimate (3)
(mechatronics). (4) Management expects the ongoing investments in R&D to contribute to Europe recovery seems to be decelerating . (4) In pistons, Mahle believes it may lose
1-2% in margins expansion. (5) Aging fleets should add vehicles to Mahle’s addressable some market share (due to a competitor’s aggressive ricing), offset by market share gains
aftermarket production, in our view. (6) We believe Inovar Auto could increase its share of for other engine components (the strategy is not to embark on a price war).
domestic products and attract new clients, like Asian OEMs.
Marcopolo—European Road Show

(1) EBITDA margin to increase sequentially QoQ: internal target maintained at 12% per (1) International market margins continue to lag. (Brazil will continue to outperform in the
year in the medium term. (2) Despite lower visibility, we believe net income for 2015 will foreseeable future). (2) Backlog only at second week of October (45 days), usually 90 days
likely be around R$280-300 million (new flyer, recovery of Interstate, end of non-recurring (on the other side, Volare backlog is fully booked until YE2014).
learning curve and turnaround of Mexico, Australia and Ciferal). (3) We expect exports to
recover in 4Q14, with good mix.
Romi—Europe Road Show and Investor Day

(1) Management intends to increase to 50% the share of exports/international operations in (1) Downside risk arising from lower top line in domestic market. (2) lack of visibility (yellow
the medium term, from 30% currently. (2) We expect BRL currency devaluation to help light for 2015), with backlog currently at R$274 million (-19% YoY), while new orders
Romi’s com etitiveness. (3) The company’s focus on cash flow, especially in working amounted to R$150 million (-27% YoY). and (3)inconstant equilibrium: while FX
capital, prepares it for tougher times, in our view. (4) The company’s administration devaluation is ositive for Romi, excessive devaluation may affect the com any’s usual
believes that there is a chance of a peak in demand for wind-power-related products in business practices, causing reduced orders for expanding capacity (leaving mainly the
2015, if local content rules are enforced. replacement market).
WEG—Santander 15TH Annual Conference

(1) Upward long-term trend in domestic energy rices bode ell for WEG’s positioning with (1) The R$590 million capex guided for 2014 may be partially pushed into 2015 as projects
energy efficient motors, in our view. (2) Vertical model in motors line allowed the company in Brazil may be postponed due to low market visibility (China and Mexico projects are on
to gain efficiencies to fight Chinese um roducts’ lo er rices. (3) WEG’s 20/20 roject is schedule). (2) Acquisitions: recent lower-than-expected level of acquisitions attributed to
ongoing. (4) Management believes the possible start of auctions by separated sources of high market valuations, in our view.
energy should incentivize continued investments (contrary to competition by source today).
Source: Santander.
29
Summary of Industry Drivers
Indicator Driver For Main Source Latest Data (2013) Estimates (2015E)
ANFAVEA 132,779 units

Truck Production Iochpe (43.5% of sales) (National Automotive Producers 187,089 units
Association) (-6.0% YoY)
FABUS 28,667 units

Bus Production Marcopolo (100% of sales) (National Association of 32,693 units
Manufacturers of Buses) (2.0% YoY)
ABIMAQ
-
Romi (machine-tool and plastic (Brazilian Machinery and
Machinery Sales -
machines, ~83% of sales) Equipment Producers
-
Association)
ANFAVEA for Brazil 2,202,845 units

Passenger Cars Iochpe (56.5% of sales)
Global Insights, IHS, Wards for 2,722,979 units
Production
U.S. ACEA for Europe (-3.7% YoY)
ABIFER 3,500 units

Iochpe (consolidated through
Railcars Production (National Association for 2,280 units
equity income)
Railroad Transportation) (+16.7% YoY)
WEG (electro electronic industrial IBGE

Industrial Production 2.3% -0.3%
equipment, ~61% of sales) (Brazilian Bureau of Statistics)
NA: not available. Sources: Company reports and Santander estimates.
30
Brazil – Passenger Cars and Light Commercial Production (000 units) Brazil – Truck Production (000 units)
4,000 230
3,500 200
2002-2013 CAGR: 9.2%
2002-2013 CAGR: 7.7%
Leverage to GDP: 2.4x
Leverage to GDP: 1.8x 170
3,000
2,500 140
2,000 110
1,500 80
1,000 50
2014E
2015E
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014E
2015E
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Source: ANFAVEA. Source: ANFAVEA.
Brazil – Bus Production (000 units) Brazil – Historical Levels of Installed Capacity Utilization (%)
40 95.0 95.0
35 90.0 90.0
2002-2013 CAGR: 4.6%
30
85.0 85.0
25
80.0 80.0
20
75.0 75.0
15
10 70.0 70.0
May-09
Feb-03
Jul-08
Apr-10
Mar-11
Feb-12
Dec-03
Oct-05
Oct-14
Nov-04
Dec-13
Sep-06
Aug-07
Jan-13
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014E
2015E
Plastic & Rubber Items Machine & Equipment Vehicles
Source: Fabus. Source: CNI.
31
Brazil – Industrial Production vs. Fixed Capital Formation Vehicle Penetration (inhabitants per vehicle) – Selected Countries
21.3%
40.0 40.0
35.0 35.0
13.9%
13.6%
30.0 30.0
10.5%
9.8%
9.1%
8.3% 25.0 25.0
6.3%
6.0%
5.0%
4.8%
4.7%
3.6%
3.1%
3.1%
2.8%
20.0 20.0
2.0%
1.2%
1.1%
0.4%
0.3%
15.0 15.0
-0.6%
10.0 10.0
-2.7%
-4.0%
-4.6%
-5.2%
5.0 5.0
-6.7%
Industrial Production Fixed Capital Formation -7.4% - -
Italy
Mexico
Argentina
Japan
France
U.S.
U.K.
Canada
Brazil
Russia
China
India
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Sources: IBGE and Santander estimates. Source: ANFAVEA.
Transportation Matrix – Selected Countries Coverage Universe – Domestic & Foreign Operations, 2013 (% Sales)
1% 4% 2%
21%
11% 11% 6% 16% 15%
14% 13%
24% 17%
34% 40% 15% 3%
15% 61%
49% 43% 28% 35%
45% 75%
46%
11%
46%
81% 76%
69%
81% 60%
72% 50%
39%
53% 55% 58% 25%
49% 50%
43%
30%
Metal Leve
Autometal
Iochpe-Maxion
Marcopolo
Romi
WEG
8%
Mexico
Austria
France
U.S.
Germany
Brazil
Canada
Russia
Australia
India
Road Railway Water

Domestic Export International Operations
Source: COPPEAD. Sources: Company data and Santander estimates..
32
Segment Positioning
Light and Heavy Market
Iochpe Mahle Metal
By Vehicle Segment Fras-le Maxion Leve Marcopolo Randon Romi WEG Main Player
Light Vehicles NA 56% 58% 0% 4% NM NM Mahle Metal Leve
Heavy Vehicles NA 44% 42% 100% 96% NM NM Marcopolo
NM: Not meaningful. Sources: Company data and Santander estimates.
Aftermarket & OEM

Iochpe Mahle Metal
By Clients Fras-le Maxion Leve Marcopolo Randon Romi WEG Main Player
OEM's 22% 97% 71% 96% 87% NM NM Iochpe-Maxion
Aftermarket 78% 3% 29% 4% 13% NM NM Mahle Metal Leve
NM: Not meaningful. Source: Santander estimates.
Domestic & International

Iochpe Mahle Metal
By Region Fras-le Maxion Leve Marcopolo Randon Romi WEG Main Player
Domestic 56% 39% 60% 69% 81% 76% 50% Randon
Foreign 45% 61% 40% 31% 19% 24% 50% Iochpe-Maxion
Export from Brazil 28% 0% 40% 15% 12% 3% 35% Mahle Metal Leve
International Operations 16% 61% 0% 16% 6% 21% 15% Iochpe-Maxion
Sources: Santander estimates.
Large Continents
Iochpe Mahle Metal
By Continents Fras-le Maxion Leve Marcopolo Randon Romi WEG Main Player
Brazil 56% 39% 60% 69% 81% 76% 50% Randon
North America 23% 24% 14% 0% 3% 1% 17% Iochpe-Maxion
Latin America (ex-Brazil) 11% 0% 8% 20% 13% 4% 9% Marcopolo
Europe 3% 31% 16% 0% 0% 14% 13% Iochpe-Maxion
Asia 3% 7% 0% 1% 0% 5% 5% Iochpe-Maxion
Others 5% 0% 3% 11% 3% 0% 6% Marcopolo
Client Concentration (Top 5% Clients)

Iochpe Mahle Metal
Client Concentration Fras-le Maxion Leve Marcopolo Randon Romi WEG
13% 48% 41% 19% 5% 5% 5%
33
Looking at Cash and Debt Profile
Cash Exposure
Iochpe Mahle Metal
Cash Exposure Fras-le Maxion Leve Marcopolo Randon Romi* WEG
Reais 72.1% 37.2% 93.9% 93.9% 95.00% 97.4% 97.2%
Other Currencies 27.9% 62.8% 6.1% 6.1% 5.0% 2.6% 2.8%
Notes: * Romi – only U.S. dollars. Sources: Santander estimates.
Debt Profile – Short / Long Term

Average
% Short-Term Cost of
Short Debt in % Long-Term % BNDES in % TJLP in total % BNDES Expiring Average Cost of BNDES
Term Long Term Total Debt Local Debt Foreign Debt Total Debt BNDES Debt in BNDES Total Debt debt in 3-years Debt Debt
Fras-Le 23.5% 76.5% 100.0% 47.4% 52.6% 100.0% 25.3% 74.7% 32.9% 39.3% 38.7% 10.7% 8.8%
Iochpe-Maxion 33.7% 66.3% 100.0% 57.2% 42.8% 100.0% NA NA 16.0% 0.3% 85.4% 12.2% 7.2%
Mahle Metal Leve 25.2% 74.8% 100.0% 89.6% 10.4% 100.0% NA NA 46.6% 7.8% NA 8.6% 5.9%
Marcopolo 20.4% 79.6% 100.0% 82.3% 17.7% 100.0% NA NA 50.5% 6.2% 29.6% 7.6% 3.7%
Randon 16.7% 83.3% 100.0% 77.7% 22.3% 100.0% 21.0% 79.0% 22.3% 32.1% 42.3% 10.8% 8.2%
Romi 46.9% 53.1% 100.0% 93.2% 6.8% 100.0% NA NA NA NA NA 5.9% NA
Weg 26.4% 73.6% 100.0% 71.7% 28.3% 100.0% NA NA NA 14.0% NA 6.1% NA
Net Debt/EBITDA
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
Marcopolo
Romi
Weg
Randon
Iochpe-Maxion
Autometal
Mahle Metal Leve
2013 2014E
34
COGS Breakdown
 The most labor-intensive company is Mahle.
 Highest fixed costs are found in Mahle’s and Iochpe’s cost structure.
 Raw materials are more representative in Marcopolo’s COGS.
Iochpe Mahle Metal
% of COGS Fras-le Maxion Leve Marcopolo Randon Romi WEG Main Player
Fixed 22% 37% 43% 15% 17% 35% 30% Mahle Metal Leve
Variable 78% 63% 58% 85% 83% 65% 70% Marcopolo
Labor 15% 21% 30% 23% 11% 24% 22% Mahle Metal Leve
Raw Materials 50% 57% 40% 73% 79% 65% 64% Randon
Steel NA NA 6% 12% - - NA Marcopolo
Copper NA NA 6% - - - 20% WEG
Plastic and Resin NA NA - 9% - - NA Marcopolo
Iron NA NA 14% - - 11% NA Romi
Aluminum NA NA 10% 8% - - NA Mahle Metal Leve
Other NA NA 4% 43% - 54% NA Romi
% in USD 40% 61% 41% 15% 8% 29% 40% Iochpe-Maxion
NA: Not available. Sources: Santander estimates.
35
Transportation Matrix
Brazil’s transportation matrix is road based; we believe it will remain so in the medium term.
Brazil Transportation Matrix, 2005 – 2025E Brazil Transportation Matrix Excluding the Mining Sector - 2012
16%
5%
Air
5% Pipeline
1% Railway
Waterway
Highway
73%
Sources: Brazilian National Hydro Transportation Policy, CNT, and JSL company presentation. Sources: Brazilian National Hydro Transportation Policy, CNT, and JSL company presentation.
Transportation Matrix – Selected Countries - 2005

1% 4% 2%
11% 11% 6%
14% 13%
24% 17%
34%
15%
45% 49% 43% 28%
46%
11%
46%
81%
81%
72%
53% 55% 58%
49% 50%
43%
30%
8%
Mexico
France
U.S.
Austria
Germany
Brazil
Canada
Russia
India
Australia
Road Railway Water

Source: COPPEAD.
36
Prisoner's Dilemma: Growth in Capacity vs. Growth in Sales—Leading to Overcapacity?
 The Brazilian automotive market may be on the verge of excess capacity construction, leading to subpar capacity utilization in 2017E
(<70%).
 More OEMs = more competition = risk on pricing = risk of margin pressure on auto parts.
 We favor heavy vehicles over light vehicles in the medium-term.
Capacity Utilization Estimates (Current – 2017) - Thousands Price Pressure on Automotive Value Chain in Brazil
7,000 82%
80%
6,000
78%
5,000 76%
74%
4,000
72%
3,000
70%
2,000 68%
66%
1,000
64%
0 62%
Current 2017E
Capacity Estimate Production Estimate Capacity Utilization
Sources: ANFAVEA, Roland Berger, and Santander estimates. Source: Roland Berger.
37
Overview of Brazil Truck Market
 We believe trucks represent an indirect infrastructure play in Brazil, given our matrix of transportation.
 We believe truck production could decrease 6.0% in 2015.
 The fleet size in Brazil was 2.09 million trucks in 2013, according to ANFAVEA.
 Eight truck producers are located in Brazil, with MAN and Mercedes being the main players.
 Semi-heavy and heavy vehicles (agriculture and infrastructure bias) have been the main growth category in the last five
years.
Brazilian Truck Production (000 Units) Brazilian Truck Production by Category (000 Units)
230
Semi-Light Light Medium Semi-Heavy Heavy
200 2003 5,052 19,981 9,297 21,848 22,782
2002-2013 CAGR: 9.2%
Leverage to GDP: 2.4x 2004 5,425 24,723 11,185 31,853 34,152
170
2005 4,632 26,935 12,211 35,349 38,873
140 2006 4,754 22,789 12,502 30,657 35,299

2007 5,548 27,058 13,702 43,090 47,654
110 2008 7,120 30,792 15,838 53,896 59,684
2009 5,129 33,315 13,116 40,195 31,878
80
2010 7,216 41,740 17,690 62,813 60,482
50 2011 8,483 49,314 17,690 62,813 60,482
2014E
2015E
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2012 2,450 24,497 8,448 50,671 46,887

2013 4,059 32,093 12,340 70,917 67,680
2014 YTD 2,155 26,965 8,188 49,244 49,694
CAGR 5 Years -10.63% 0.83% -4.87% 5.64% 2.55%
CAGR 10 Years -4.28% 9.94% 5.83% 26.55% 24.33%
38
Overview of Brazil Truck Market
Brazilian Truck Exports (000 Units) Brazilian Truck Inventories (Inventories / Average 6 months of sales)
5.0 5.0
3.0
2.6 2.5 2.5 4.5 4.5

2.3
1.9 2.1
1.8 2.0
1.8 4.0 4.0
1.8
1.7 1.7 1.6
1.5 1.5 1.6 1.6 1.6
1.3 1.4
1.1
3.5 3.5
1.0
3.0 3.0
2.5 2.5
Mar-11
Mar-12
May-11
Jul-11
May-12
Jul-12
Apr-13
May-14
Jul-14
Oct-12
Feb-13
Oct-13
Feb-14
Sep-11
Nov-11
Dec-12
Aug-13
Dec-13
Sep-14
Nov-14
Jan-11
Jan-12
Jun-13
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2014 2013 2014 Average 2013 Average
Source: ANFAVEA. Source: Santander estimates.
Brazilian Truck Production (000 Units) Brazilian Truck Sales (000 Units)
18.4 18.3
18.0 17.7 15.1
16.4 16.9 14.4
16.7 16.2 14.0 13.4
15.2 14.8 13.1 13.2 11.6
12.1 12.3 12.7 12.6 12.4 12.7
12.2
13.8 13.9 13.8 11.2 12.2
12.5 12.3 12.7 12.3 12.4 10.4 10.9
12.0 11.8 10.8 10.6 10.8
10.0
9.2
8.2
7.3
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2014 2013 2014 Average 2013 Average 2014 2013 2014 Average 2013 Average
39
Overview of Brazil Truck Trailer Market
 We believe truck trailers represent an indirect infrastructure play in Brazil, given our matrix of transportation (60% road
based).
 We expect truck trailer production to decrease by 6.0% in 2015.
 The fleet size in Brazil was 606,145 truck trailers in 2013, according to ANTT.
 Fragmented sector with 1,359 companies.
Brazilian Truck Trailer Production (000 Units) Truck Trailers Market Share by Players
100%
7.1 90% 15%19% 20% 24%
6.8 25% 26% 26% 28% 28% 26% 27% 29%
6.4 80% 10%
6.3 6.2
1% 10% 8% 7% 6% 6% 7%
70% 2% 3% 7% 7% 10% 9% 10%
6.0 13% 2% 3% 4% 5%
5.6 5.7 60% 17% 14% 14% 13% 14% 7% 9% 11% 11%
11% 11%
5.3 5.4 50% 19% 11% 12% 10%
12% 12%
5.0 5.0 5.1
40% 19% 19% 15% 15% 16% 15%
4.9 15% 11% 12%
4.7 4.7 4.7 4.7 12% 12%
4.4 4.4 4.5 4.4 30%
4.3
20% 42% 38% 37% 33% 35% 32% 33%
34% 36% 30% 29% 27%
10%
0%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 3Q14
Randon Guerra Fachinni Labrelato Noma Other
Source: Anfir. Source: Anfir.
40
Overview of Brazil Truck Trailer Market
 We expect truck trailer market sales to slow in line with the total truck market.
Truck Trailers Domestic Sales (line red represents truck trailers as % of total truck production)
80,000 45%
70,000 40%
60,000 35%
30%
50,000
25%
40,000
20%
30,000
15%
20,000 10%
10,000 5%
- 0%
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014E
2015E
Truck Trailer Sales as a % of Truck Production
Notes: Santander estimates. Source: ANFAVEA.
41
Overview of Brazil Light Commercials + Passenger Cars Market
 We expect light commercial plus passenger cars production to decrease by 3.3% in 2015.
 The fleet size in Brazil reached 31.3 million cars and 5.6 light commercials in 2013, according to ANFAVEA.
Brazilian Light Commercial + Passenger Cars Production (000 Units) Inhabitants per Vehicle by Country – All Vehicles
4,000 9.0
8.0
3,500
2002-2013 CAGR: 7.7% 7.0
3,000
6.0
2,500 5.0
4.0
2,000
3.0
1,500 2.0
1,000 1.0
2014E
2015E
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
0.0
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Mexico Brazil United States
Source: ANFAVEA. Note: *ANFAVEA Estimates. Sources: AAMA (United States), U.S. Federal Highway Administration (United States), and Wards
Communications (United States) ANFAVEA (Brazil) and INEG (Mexico).
42
Overview of Brazil Light Commercials + Passenger Cars Market
Brazilian Light Commercial + Passenger Cars Exports (000 Units) Brazilian Light Commercial + Passenger Cars Inventories (Inventories / Average
6 months of sales)
60 2.0 2.0
1.8 1.8
50 51 1.6 1.6
48
45 46 1.4 1.4
43
41 42
40
1.2 1.2
1.0 1.0
34 33 32
33 0.8 0.8
30 30
26 0.6 0.6
24
22 22 24 0.4 0.4
21 21
0.2 0.2
0.0 0.0
Jul-11
Jul-12
Jul-14
May-14
May-11
May-12
Apr-13
Mar-11
Mar-12
Oct-12
Feb-13
Oct-13
Feb-14
Sep-11
Nov-11
Dec-12
Aug-13
Dec-13
Sep-14
Nov-14
Jan-11
Jan-12
Jun-13
Brazilian Light Commercial + Passenger Cars Production (000 Units) Brazilian Light Commercial + Passenger Cars Sales (000 Units)
336
331 324
324 321 317 313 314
309 303
304 302 301 300 297 301 294 292
296 289
286 280 278 280 283
276 278 275 280
261 265 269
263 259
255 250 251
237 246
224 229
221 221 222 223
205
43
Overview of Brazil Bus Market
 We expect bus production to increase by 2% in 2015.
 The Brazilian bus fleet reached 545,000 units in 2013, according to Fenabrave, with average age of 14.4 years.
 Consolidated sector, with Marcopolo holding 39.8% of the market.
Brazilian Bus Production (000 Units) Brazilian Bus Market Share
40 50% 50%
45% 45%
35 40% 40%
2002-2013 CAGR: 4.6%
Leverage to GDP: 1.5x 35% 35%
30
30% 30%
25% 25%
25
20% 20%
20 15% 15%
10% 10%
15 5% 5%
0% 0%
10 2007 2008 2009 2010 2011 2012 2013
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014E
2015E
Marcopolo (Old Pattern) Marcopolo (IFRS 10 and 11)
Busscar Caio/ Induscar
Comil Neobus
Mascarello Outros
Source: ANFAVEA. Sources: Marcopolo, Fabus, and Simefre.
44
Overview of Brazil Bus Market
Brazilian Bus Exports (000 Units) Brazilian Bus Inventories (Inventories / Average 6 months of sales)
8.0 8.0
7.0 7.0
6.0 6.0
5.0 5.0
4.0 4.0
3.0 3.0
2.0 2.0
1.0 1.0
Mar-11
Mar-12
May-11
Jul-11
May-12
Jul-12
Apr-13
May-14
Jul-14
Oct-12
Feb-13
Oct-13
Feb-14
Sep-11
Nov-11
Dec-12
Aug-13
Dec-13
Sep-14
Nov-14
Jan-12
Jan-11
Jun-13
Brazilian Bus Production (000 Units) Brazilian Bus Sales (000 Units)
3.2
4.1 3.0
3.9
3.8 3.8
3.7 3.7 2.9 2.92.9
3.7 2.9
3.5 2.8 2.8 2.8
3.4 3.4 3.3 2.7 2.7
3.3
3.1 3.1
3.0 2.9 2.9 2.5
2.8 2.5
2.7 2.4 2.3
2.5 2.2 2.2
2.4 2.2 2.2
2.2
2.2
1.8 2.0
1.6
1.7
45
A Look at Inventory Levels
Brazilian Truck Inventories (000 Units) Brazilian Light Commercials + Passenger Cars Inventories (000 Units)
52.9 406 406 409

53.0 52.1
53.2
364 377 387
372 382 368 386 381
51.5 367 371 350
49.7 49.4 327 337
322 343 321
46.5 47.7 319
45.5 45.346.445.146.146.645.2 286
45.0
253 270
43.7 44.1 44.4
41.8 42.3
39.7
Brazilian Bus Inventories (000 Units)
17.3
16.9
16.6 16.6
15.8 15.7 16.0 16.0
15.7 15.6 15.6
15.3 15.4 15.6
15.3 15.1
15.0 14.8
14.3
13.6
13.6
13.0 12.6
46
Railways
 Iron ore and coal comprise the bulk of transported cargo in Railway Cargo Breakdown (2013)
domestic railways (~76%) in 2013. 0.6% 2.3%

2.8%
Iron or and coal
 Agribusiness has posed the highest growth in terms of RTKs, 3.8%
growing 480% since 1997. 14.9%

Agribusiness
 We expect the rail segment to grow transported cargo weight at a Steel products
CAGR of 4% until 2016. Oil and Ethanol

products
Cement and general
construction materials
75.7% Other
Note: As a percentage of RTK (Revenue ton kilometer).Source: Company data and Santander estimates.
Domestic Locomotive and Railcars Fleet Age Transported Cargo in Brazilian Railways (Million Tons)
Current Fleet 2013 2014E 600
Locomotives 3,099 3,153
Railcars 95,397 98,497 500
Railcar Fleet Average Age 138
133
1990 42 years 122 126
400
2010 25 years
2020E 18 years
300
Source: ANFT - Railway Transporter National Association
200 392 413

367 375
100
0
2013 2014E 2015E 2016E
Iron ore and coal General Cargo
Note: Million Tons. Source: ANFT - Railway Transporter National Association
47
Overview of Main International Markets
NAFTA Light Commercials + Passenger Cars Production (000 Units) Europe Light Commercials + Passenger Cars Production (000 Units)
20,000 24,000
18,000 22,000
16,000
20,000
14,000
18,000
12,000
16,000
10,000
8,000 14,000
6,000 12,000
2014E
2015E
2014E
2015E
2005
2006
2007
2008
2009
2010
2011
2012
2013
2005
2006
2007
2008
2009
2010
2011
2012
2013
Sources: ANFAVEA, HIS, and Santander estimates. Sources: ANFAVEA, IHS , ACEA, and Santander estimates.
Worldwide Vehicle Production (Million Units, 2012) Worldwide Vehicle Sales (Million Units, 2013)
China 22.1 China 22.0

U.S. 11.0 U.S. 15.9
Japan 9.6 Japan 5.4
India 3.9 Brazil 3.8
Brazil 3.7 India 3.2
Mexico 3.1 Russia 3.0
Canada 2.4 U.K. 2.6
Russia 2.2 France 2.2
France 1.7 Canada 1.8
U.K. 1.6 Italy 1.4
Argentina 0.8 Mexico 1.1
Italy 0.7 Argentina 1.0
Sources: ANFAVEA, HIS, and Santander estimates. Source: ANFAVEA, ACEA, and Santander estimates.
48
U.S. Automotive Market
 U.S. light vehicle and light commercials production has recovered to pre-crisis production level.
 Truck production at 251,000 units per year is still 19% below 2007.
 Total fleet in use amounts to 251.5 million vehicles (120 million light vehicles and 130 million commercial vehicles).
Fleet Size (000s, 2005-2012)

US 2005 2006 2007 2008 2009 2010 2011 2012
Light Vehicles 132,909 135,047 135,222 135,882 132,500 129,053 127,577 120,902
Commercial Vehicles 104,788 109,596 113,479 113,931 116,472 119,179 121,355 130,595
Total 237,697 244,643 248,701 249,813 248,972 248,232 248,932 251,497
Note: Estimated data. Source: OICA.
U.S. Light Vehicles and Light Commercials Production U.S. Truck Production
8,000 500
7,000 450
400
6,000
350
5,000
300
4,000 250
200
3,000
150
2,000
100
1,000
50
- -
2005 2006 2007 2008 2009 2010 2011 2012 2013 2005 2006 2007 2008 2009 2010 2011 2012 2013
Light Vehicles Light commercials Trucks
Source: OICA. Source: OICA.
49
European Automotive Market
 European light vehicle production amounted to 17.3 million units in 2013 (10% below 2007).
 Truck production recovery still lagging; Produced units in 2013 are still 65% below 2007 level.
 Light vehicles fleet size amounted to 316 million units in 2012, while commercial fleet amounted to 51 million units.
Figure z: Fleet Size (000s, 2005-2012)

Europe 2005 2006 2007 2008 2009 2010 2011 2012
Light Vehicles 276,695 282,936 286,268 294,744 298,508 303,962 310,193 316,056
Commercial Vehicles 44,902 46,440 47,802 49,187 49,339 49,999 51,062 51,711
Total 321,597 329,376 334,070 343,932 347,846 353,962 361,254 367,767
Note: Estimated data. Source: OICA.
European Light Vehicles and Light Commercials Production European Light Vehicles and Light Commercials Production
25,000 500
450
20,000 400
350
15,000 300
250
10,000 200
150
5,000 100
50
- -
2005 2006 2007 2008 2009 2010 2011 2012 2013 2005 2006 2007 2008 2009 2010 2011 2012 2013
Light Vehicles Light commercials Trucks
Source: OICA. Source: OICA.
50
Brazilian Crop Market Outlook
 Crop production grew at 5.0% CAGR since 2008.
 Planted area increased 3.1% CAGR during the same period, implying a productivity gain in the sector.
 Soy presented the highest growth among crop, but in line with its area growth. Corn posted the highest productivity gains.
 The 2014/2015 harvest is expected to expand 4.2%, with soy forecasts standing out with 11.2% growth, according to Conab.
Planted area by types (Area in 000S hectares), 2008-2015E

Crop production by types (Production in Million Tons), 2008-2015E
250 70
60
200
50
150 40
30
100
20
50
10
0 0
2009
2010
2011
2012
2013
2014
2015E
2009
2010
2011
2012
2013
2014
2015E
Crop Prod. Soy Prod. Corn Prod. Others Prod. Soy Area Corn Area Others Area Crop Area
Source: Conab. Source: Conab.
51
Market Share in the Vehicles Industry
 The passenger cars and trucks market saw an increase in fragmentation on a market share basis.
 It is possible to note an increase of smaller players, detrimental to the dominance from the traditional players.
Trucks Market Share by Producers

Passenger Cars Market Share by Producers
60% 60% 60% 60%
50% 50% 50% 50%
40% 40%
40% 40%
30% 30%
30% 30%
20% 20%
20% 20%
10% 10%
10% 10%
0% 0%
2010
2013
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
0% 0%
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
2013
Ford MAN Mercedes-Benz
Fiat GM Volkswagen Ford Hyundai Others Scania Volvo Others
52
Overview of Brazil Automotive Industry
Automotive Net Sales and Share in Industrial GDP (1996-2012) – US$ Billions
120,000 25.0%
108,000 21% 19% 19% 19%
96,000 19% 20.0%
17% 18%
84,000
15% 13% 14% 15% 15% 14%
15% 15% 15% 15% 15%
14% 14% 13%
72,000 13% 13% 13% 13% 13% 15.0%
60,000 11% 11%
48,000 10.0%
36,000
24,000 5.0%
12,000
0 0.0%
1966
1970
1975
1980
1985
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Vehicles Agricultural Machinery Share in Industrial GDP*
Notes: *ANFAVEA Estimates. (1) Tax-free revenue. (2) Real prices in 2012 (General Price Index-Domestic Supply average) converted into dollars using the average exchange rate for 2012 (Central Bank of Brazil). (3) The base year for
industrial GDP is 2012; for other years it is based on real rates of annual variation converted into dollars using the average exchange rate for 2012 (Central Bank of Brazil). Source: ANFAVEA.
Automotive Investments (1980-2012) – US$ Millions
6,000
5,000
4,000
3,000
2,000
1,000
2012*
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Agricultural Machinery Vehicles
Notes: *Preliminary data. Source: ANFAVEA.
53
FX Potential Impact on Brazilian Auto Industry
 We believe automotive exports could be positively affected by a more devalued Brazilian real in the near term. Looking ahead into 2015,
we see an increasing possibility of further devaluation of the BRL (our economics team forecasts a YE2015 FX of R$2.71/USD and IPCA
inflation at 6.8%).
 (1) The years 2004-08 were characterized by higher exports and a devaluated real BRL rate; and (2) in 2010-2013 YTD, exports lost
relevance while the BRL increased in value relative to the USD. Light vehicle exports declined from an average of 570,000 per year (12-
month rolling, 2004-08) to 470,000 (12-month rolling 2010-13YTD), a 100,000 vehicle delta, which, in a best-case scenario, could add up
to 3% to our 2014 production estimate. Regarding trucks, the two-period delta is 10,000 trucks (34,000 during 2004-08 vs. 24,000 in 2010-
2013 YTD), or 5.6% of our 2014E truck production estimate.
Brazilian Automotive Industry – Brazilian Automotive Industry –
Passenger and Light Vehicle Exports vs. Real BRL/USD Rate Trucks Exports vs. Real BRL/USD Rate
120 70,000 120 5,000
4,500
110 60,000 110
4,000
100 100 3,500
50,000
90 3,000
90
40,000 2,500
80 80 2,000
30,000
70 70 1,500
1,000
60 20,000 60
500
50 10,000 50 -
Apr-05
Oct-07
Oct-12
Apr-10
Feb-11
Feb-06
Jul-06
Jul-11
May-07
May-12
Apr-05
Oct-07
Oct-12
Apr-10
Jun-04
Jan-09
Jan-04
Jun-09
Jul-06
Feb-11
Nov-04
Sep-05
Dec-06
Aug-08
Nov-09
Sep-10
Dec-11
Feb-06
Jul-11
Aug-13
May-12
May-07
Jun-04
Jan-09
Jan-04
Jun-09
Dec-06
Nov-09
Dec-11
Nov-04
Sep-05
Aug-08
Sep-10
Aug-13
Mar-13
Mar-08
Mar-13
Mar-08
Passanger Car + Light Com. Exports Avg. BRL

Truck Exports Avg. BRL BRL Avg. Truck Exports
BRL Avg. Passanger Car + Light Com. Exports
Sources: ANFAVEA and Brazil Central Bank. Sources: ANFAVEA and Brazil Central Bank.
54
Overview of Inovar Auto
In October 2012, the Brazilian government approved the Inovar Auto program, aiming to encourage technology innovation. This program
consists of three main incentives: (1) increase the IPI tax (industrialized products tax) by 30% for all OEMs; (2) discount of up to 30% in the IPI
if companies comply with the new requirements; (3) additional 1-2% IPI discount if more aggressive efficiency standards are achieved. In a
nutshell, companies that comply with the new requirements will continue to experience the former level of IPI tax, whereas noncompliant
companies should experience a significant increase in taxation. Inovar Auto legislation will, initially, cover only the 2013-17 period.
In order to be eligible for the Inovar Auto program, companies must meet the following criteria:
(1) Corporate vehicle efficiency improvement targets;
(2) Local manufacturing process target;
(3) Investment criteria targets (two out of three): (1) R&D investment; (2) engineering investment, basic industrials / supplier
development; and (3) tagging investment.
Inovar Auto – Corporate Vehicle Efficiency Improvement Targets - IPI Reduction Schedule
IPI Reduction Corporate Average Vehicle Efficiency (MJ/km)
Up to 30% depending on compliance with the other prerequisites VE = 1.155 + 0.000593 x M
+1% VE = 1.111 + 0.000570 x M
+2% VE = 1.067 + 0.000547 x M
Note: VE: corporate average vehicle efficiency measured by levels of energy consumption expressed in mega joules per kilometer (MJ/km); M: average mass in kilograms
(curb weight) for all vehicles commercialized in Brazil, and weighted by vehicle sales in the period. Source: Brazilian government.
The following two figures illustrate the required number of production steps that must be performed locally and that comprise the process for
eligibility.
Inovar Auto – Steps Required to Be Performed Locally

Year Light Vehicle Heavy Vehicle Chassis & Engine
2013 8 9 7
2014 9 10 8
2015 9 10 8
2016 10 11 9
2017 10 11 9
Source: Brazilian government.
55
Overview of Inovar Auto
Inovar Auto – Production Steps List
Light Vehicle Heavy Vehicle Chassis & Engine
1 - Stamping 1 - Stamping 1 - Welding
2 - Welding 2 - Welding 2 - Anti-Corrosion Treatment & Painting
3 - Anti-Corrosion Treatment & Painting 3 - Anti-Corrosion Treatment & Painting 3 - Plastic Moulding/Injection
4 - Plastic Moulding/Injection 4 - Plastic Moulding/Injection 4 - Engine Manufacturing
5 - Gearbox and transmission
5 - Engine Manufacturing 5 - Engine Manufacturing
manufacturing
6 - Steering and Suspension Systems
6 – Gearbox and transmission manufacturing 6 - Gearbox and transmission manufacturing
Assembling
7 - Steering and Suspension Systems Assembling 7 - Steering and Suspension Systems Assembling 7 - Electric Components Assembly
8 - Electric Components Assembly 8 - Electric Components Assembly 8 - Axle and Brake System Assembly
9 – Axle and Brake System Assembly 9 - Axle and Brake System Assembly 9 - Final Assembly/Revision and Testing
10 - Chassis Manufacturing or Assembly 10 - Final Assembly/Revision and Testing 10 - Chassis and Body Assembly
11 – Assembly, Final Review and Testing 11 - Chassis Manufacturing or Assembly 11 - Own Infrastructure for R&D
12 - Own Infrastructure for R&D 12 - Assembly, Final Review and Testing
13 – Body Production with Locally Stamped 3rd
Party Parts
Finally, OEMs have to foster local innovation. In order to comply with the Inovar Auto requirements, companies have to perform locally two out
of the three below-listed requirements for: (1) R&D; (2) engineering; and (3) tagging.
Inovar Auto – R&D, Engineering, and Tagging

Engineering Investment, Basic
R&D Innovation (% of Industrials / Supplier Tagging
Year
Revenue) Development Investment (% of Production)
(% of Revenue)
2013 0.15% 0.50% 36.00%
2014 0.30% 0.75% 49.00%
2015 0.50% 1.00% 64.00%
2016 0.50% 1.00% 81.00%
2017 0.50% 1.00% 100.00%
56
Overview of Industrials Macro Environment
Industrial Production (% YoY, 3MMA, Seasonally Adjusted) Industrial Capacity Utilization (%, Seasonally Adjusted)
88 88
90% 40%
87 87
30% 86 86
75%
85 85
20%
84 84
60% 10% 83 83
82 82
45% 0%
81 81
-10% 80 80
30% 79 79
-20%
78 78
15% -30% 77 77
Oct-08
Oct-10
Oct-12
Oct-14
Jul-03
Mar-04
Jul-05
Mar-06
Jul-07
Mar-08
Feb-10
Feb-12
Feb-14
Nov-02
Nov-04
Nov-06
Jun-09
Jun-11
Jun-13
Jul-08
Jul-04
May-05
Dec-06
Apr-09
Mar-13
Oct-03
Feb-06
Nov-10
Oct-14
Jan-03
Sep-07
Jan-10
Aug-11
Jun-12
Jan-14
Diffusion (LHS) YoY Growth 3MMA (RHS) CNI FGV
Source: FGV. Note: Shaded areas indicate monetary-tightening cycles. Sources: CNI and FGV.
Business Confidence (In Points, Seasonally Adjusted)
135 135
125 125
115 115
105 105
95 95
85 85
75 75
65 65
Feb-03
Nov-14
Feb-02
Mar-04
Apr-05
May-06
May-07
Jul-09
Oct-13
Jun-08
Aug-10
Sep-11
Sep-12
Manufacturing Services
Source: FGV.
57
Overview of Industrials Macro Environment
(1)
Resource Utilization (%) Industrial Production Diffusion Index
91% 91% 80 80
90% 90%
70 70
89% 89%
60 60
88% 88%
87% 87% 50 50
86% 86%
40 40
85% 85%
84% 84% 30 30
83% 83% 20 20
Apr-05
May-12
Jul-04
Mar-09
Oct-10
Mar-13
Oct-14
Dec-02
Sep-03
Nov-06
Aug-07
Aug-11
Dec-13
Jan-06
Jun-08
Jan-10
Jan-13
Mar-07
Jul-02
Jun-05
Jan-06
Apr-04
May-08
Feb-10
Jul-09
Jun-12
Apr-11
Mar-14
Feb-03
Oct-07
Oct-14
Sep-03
Nov-04
Aug-06
Dec-08
Sep-10
Nov-11
Aug-13
(1) Combined measure of labor utilization and industrial capacity utilization, weighted by respective Sources: MCM Consultores
contributions to the GDP. Note: Shaded areas indicate monetary-tightening cycles. Source: Santander.
58
BNDES Disbursements and Rates
BNDES PSI Financing Terms (2014)
Product Line New Rate Former Rate Financing Terms

Machine and Equipment (SMEs) 4.5% 3.5% up to 100%
Machine and Equipment (Large Companies) 6.0% 3.5% up to 80% (from 90% previously)
Trucks and Buses (SMEs) 6.0% 4.0% up to 90% (from 100% previously)
Trucks and Buses (Large Companies) 6.0% 4.0% up to 80% (from 90% previously)
Trucks (Pro-Caminhneiro) 6.0% 4.0% up to 100%
Inovation Programs (SMEs) 4.0% 3.5% up to 100%
Inovation Programs (Large Companies) 4.0% 3.5% up to 80% (from 90% previously)
Exports (SMEs) 8.0% 5.5% up to 100%
Exports (Large companies) 8.0% 5.5% up to 80%
Note: New rates announced on December 11th, 2013. Source: BNDES.
BNDES Total Financing (R$, Billions) BNDES Financing – PSI/FINAME (R$, Billions)
200 160
2009-2013 CAGR:
180 2004-2013 CAGR: 140 25.6%
160 18.9%
120
140
120 100
100 80
80
60
60
40
40
20 20
00 00
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
YTD*
2012
2013
YTD*
2009
2010
2011
Source: BNDES. *YTD (January to October) Source: BNDES. *YTD (January to October)
59
Overview of Fleet and Age
 In the past several years, the Brazilian fleet increased at a rapid pace (2003-2013 CAGR of 6.4%).
Total Fleet by Country – All Vehicles (Million) Total Brazilian Fleet by Category (Million)
80 80 35
70 70 30
60 60
25
50 50
20
40 40
15
30 30
10
20 20
5
10 10
0 0 0
2006
2007
2008
2009
2010
2011
2012
2013
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Passenger Cars Light Commercials Trucks Buses
Japan Germany Italy Mexico Brazil*
Note: *ANFAVEA Estimates. Sources: AAMA (United States), Adefa (Argentina), Anfac (Spain), ANFAVEA, Anfia Source: Sindipeças.
(Italy), INEG (/Mexico), Jama (/Japan), SMMT.
.
Brazilian Fleet Size (2006-2013)

Var -
Segment 2009 2010 2011 2012 2013 CAGR
2013/2012
Passenger Cars 23,612 25,541 27,491 29,566 31,339 6.0% 7.3%
Light Commercials 3,936 4,257 4,742 5,100 5,647 10.7% 9.4%
Trucks 1,635 1,769 1,888 2,031 2,097 3.3% 6.4%
Buses 460 498 535 575 612 6.5% 7.4%
60
Overview of Fleet and Age
Inhabitants Per Vehicle by Country – All Vehicles Total Brazilian Fleet by Fuel
9.0 100%
0% 2% 8%
8.0 90% 5% 16%
24%
31%
7.0 80% 37% 41%
47% 52%
6.0 70%
5.0 72% 72%

60% 71%
73%
4.0 50% 64%
59%
3.0 40% 54%
49%
45%
2.0 30% 41% 38%
1.0 10% 10%

20% 10%
9% 10%
0.0 10% 10% 10% 10% 10%
18% 16% 14% 9% 9%
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
9% 10% 7% 5% 4% 3%
0% 3% 2%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Mexico Brazil United States
Ethanol Diesel Gasoline Biofuel
Note: *ANFAVEA Estimates. Sources: Adefa (Argentina), ANFAVEA, Anfia (Italy), Jama (Japan), Kama (South Source: Sindipeças.
Korea), VDA (Germany).
Average Fleet Age – Passenger Cars, Light Commercials, and Trucks Average Fleet Age – Bus
15.0
11.0
10.5 14.8
10.0 14.5
9.5
9.0 14.3
8.5 14.0
8.0
13.8
7.5
7.0 13.5
6.5 13.3
6.0
13.0
2009
2010
2011
2012
2013
2006
2007
2008
2009
2010
2011
2012
2013
Passenger Cars Light Commercials Trucks
Source: Sindipeças. Source: Marcopolo.
61
Overview of Auto Parts Industry
Capacity Utilization – Auto Parts Industry Sales by Segment – Auto Parts Industry
100% 100%
15.3%
16.2%
17.5%
18.6%
21.2%
23.6%
24.5%
24.6%
26.1%
26.2%
26.3%
26.6%
27.2%
27.2%
28.6%
28.1%
90%
29.1%
29.1%
90%
30.6%
30.9%
30.9%
31.9%
32.0%
32.1%
32.6%
35.1%
80% 80%
70% 70%
70% 71% 71% 70% 69% 66% 69% 69% 68% 68% 68% 66% 67% 68% 68% 68%
60% 60%
50% 50%
40% 40%
30% 30% 4% 4% 4% 4% 4% 4% 4% 4% 4%
4% 4% 4% 4% 4% 5% 4%
20% 17% 16% 14% 14% 15% 14%
20% 14% 13% 13% 14% 14% 14% 15% 14% 15% 14%
10% 10%
12% 12% 12% 13% 13% 13% 12% 13% 13% 13% 14% 14% 14% 14% 13% 14%
0% 0%
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Apr-11
Oct-11
Apr-12
Oct-12
Apr-13
Oct-13
Apr-14
Oct-14
Jun-14
Jan-14
Mar-14
Jul-13
Jul-14
Feb-14
Aug-13
Sep-13
Nov-13
Dec-13
Aug-14
Sep-14
Oct-13
Apr-14
May-14
Oct-14
Reposition Export Intersetorial OEM
Used Capacity Spare Capacity
Source: Sindipeças. Source: Sindipeças.
Industrial Production – Auto Parts x Automotive Balance of Trade – Auto Parts Industry
175
150 Exports Imports
125 4% 0%
5% 9%
100
37% 18%
75 21% 45%
50
25 36%
25%
0
Jul-09
May-12
Jan-09
Jan-10
Jun-10
Jun-11
Mar-06
Mar-07
Aug-07
Feb-08
Sep-06
Aug-08
Dec-10
Nov-11
Nov-12
Oct-05
Oct-13
Oct-14
Apr-13
Apr-14
South America North America Europe Asia and Oceania Others

Auto Parts Automotive
Notes: 2002 Average = 100. Source: PIM-PF IBGE. Notes: Data from January to November 2013. Source: Sindipeças.
62
Payment Method
 Brazilian light and heavy vehicles sales are very dependent on credit.
 Finame has been the main tool to finance buses and trucks, gaining share in the last years (77% in 2013 vs. 51% in 2007).
 Number of vehicles purchased with financing has doubled as a percentage of sales since 2008, reaching 53% of sales in 2013.
Heavy Vehicles – Payment Method Light Vehicles – Payment Method

2% 2% 2% 2% 2% 2% 2% 4% 5% 6% 7% 8% 8% 8%
5% 2%
11% 2% 2%
23%
38%
50%
66% 69% 70% 71% 50% 51% 53% 52%
75% 77% 46%
33%
22%
30%
2% 2%
13% 7% 3% 1%
13% 11% 36% 39% 37% 38% 39% 37% 38%
8% 8% 12% 10% 9%
10% 11% 10% 12% 11% 11% 14%
2008 2009 2010 2011 2012 2013 1H14 2008 2009 2010 2011 2012 2013 1H14
Up Front Financed Leasing (Including Finame Leasing) Finame Consortium Up Front Financed Leasing Consortium
Source: Anef. Source: Anef.
63
Risks for the Sector
Fras-le Marcopolo
 Challenges in international expansion.

 Share liquidity.  Exporting sector exposed to currency fluctuations and
 Execution risk (M&A). dependent on long-term interest rates and financing.
 Customer pricing power.  Higher-than-expected prices of key raw materials.
 Increase in competition.  Increasing competition.
 Higher-than-expected prices of key raw materials.  Growth in air travel.
 Uncertainties in regulatory framework.
Iochpe-Maxion Romi
 Execution risk (acquisition integration).

 Lower-than-expected growth in GDP in Brazil, Europe, and the  Increasing competition.
United States.  Execution risk (margins).
 Higher-than-expected prices of key raw materials.  Macroeconomic volatility.
 Sharp interest-rate and currency fluctuations.
Mahle Metal Leve WEG
 Higher competition on domestic aftermarket  Increasing competition.

 Higher-than-expected prices of key raw materials.  Higher-than-expected prices of key raw materials.
 Stronger-than-expected slowdown in the global economy.  Challenges in international expansion.
 Stronger-than-expected slowdown in the global economy.
64
Corporate Governance
 WEG seems to have the best corporate governance with respect to the ratio of independent directors vs. total directors. vs. free float.
Corporate Governance Table

BM&FBOVESPA Share Number of Independent Independent Independent Directors
Free Float* Tag Along
Trading Tier Class Directors Directors Directors (%) (%) / Free Float
Fras-le Nível 1 ON/PN 51.0% 80%-80% 7 3 43% 84%
Iochpe Novo Mercado ON 74.6% 100% 11 3 27% 37%
Metal Metal Leve Novo Mercado ON 29.9% 100% 5 1 20% 67%
Marcopolo Nível 2 ON/PN 72.9% 100%-80% 7 4 57% 78%
Randon Nível 1 ON/PN 57.5% 80%-80% 5 4 80% 139%
Romi Novo Mercado ON 49.7% 100% 11 5 45% 91%
WEG Novo Mercado ON 35.2% 100% 8 4 50% 142%
Average 53.3% 8 4 45% 84%
Notes: * All shares. Sources: Company data, BM&FBOVESPA, and Economatica.
Technical Position (Short-Interest), Insider Sales

Corporate Governance
Short Interest
Days to Cover SI / Float Average Rate
(R$ Thousands)
Randon 1.9 2,335 1.6% 42.0%
Fras-le 0.0 0 0.0% 19.0%
Mahle Metal Leve 2.2 332 0.9% 14.9%
Marcopolo 12.9 37,518 9.1% 1.9%
Romi 0.3 36 0.2% 1.8%
Iochpe Maxion 6.8 2,549 4.3% 1.0%
WEG 7.6 5,135 1.8% 0.7%
Notes: Short interest in thousands. Sources: Company data, BM&FBOVESPA, and Economatica.
65
OEMs: Who Does What? Market Share (%, 2013)
Sources: ANFAVEA and Fabus.
66
OEMs: Who Does What? Market Share (%, 2013)
Sources: ANFAVEA and Fabus.
67
International Peers: Auto Parts, Trailers, and Railcars
 The Brazil auto parts segment is trading at 10% discount to international peers.
Mkt Cap FV/EBITDA EBITDA P/E Earnings P/B Dividend Yield ROE
Company Ticker Country
(US$ mn) 2014 2015 2016 CAGR 2014 2015 2016 CAGR 2014 2014 2015 2016 2014
Autoparts
ArvinMeritor MTOR UNITED STATES 1,361 7.1 6.3 5.7 86.1% 18.8 10.9 8.5 4.1%
Accuride Corp ACW US UNITED STATES 218 6.6 5.7 5.5 46.0% 14.7 9.8 3.4
American Axle AXL UNITED STATES 1,621 5.8 5.4 5.4 14.5% 9.6 8.4 8.4 44.4% 7.8 0.0% 0.0% 0.0% 131.7%
Borgwarner BWA UNITED STATES 11,996 8.9 8.0 7.0 16.7% 16.1 14.1 11.8 17.0% 3.1 0.9% 0.9% 1.0% 19.7%
Cummins CMI UNITED STATES 25,741 8.9 7.9 6.9 13.3% 15.4 12.9 11.4 15.4% 3.2 2.0% 2.3% 2.4% 21.3%
Dana DAN UNITED STATES 3,387 5.1 4.9 4.4 3.6% 10.4 9.6 8.0 18.5% 2.8 1.0% 1.1% 1.1% 24.8%
Eaton ETN UNITED STATES 30,716 11.5 10.1 9.2 10.6% 14.2 12.9 11.6 13.0% 1.8 3.0% 3.4% 3.7% 11.8%
Federal Mogul FDML UNITED STATES 2,262 7.0 6.3 5.6 20.5% 16.9 11.9 8.8 107.2%
Gentex GNTX UNITED STATES 5,232 10.2 9.4 8.4 21.2% 17.9 16.8 14.9 18.3% 3.4 1.7% 1.8% 1.8% 20.0%
Johnson Controls JCI UNITED STATES 30,789 9.9 9.1 8.5 12.2% 14.6 12.7 11.1 42.2% 2.4 1.9% 2.2% 2.4% 16.9%
Lear LEA UNITED STATES 7,139 5.5 4.8 4.5 22.5% 11.3 9.6 8.6 31.0% 2.3 0.9% 1.0% 1.0% 20.5%
Stoneridge SRI UNITED STATES 315 8.9 7.2 6.0 -5.2% 23.9 11.8 10.1 31.0% 1.9 2.9%
Superior SUP US UNITED STATES 513 7.5 5.9 6.6% 34.2 24.1 14.8 -3.5% 1.1 3.4%
TRW Automotive TRW UNITED STATES 11,315 6.8 6.3 5.7 9.3% 13.2 12.1 11.0 0.4% 2.5 20.1%
Titan TWI UNITED STATES 523 10.5 9.3 8.3 -25.9% 48.8 -1.0%
Visteon VC US UNITED STATES 4,142 7.5 6.5 5.8 21.7% 27.9 19.0 14.6 -44.8% 3.7 0.0% 0.0% 0.0% 10.1%
Average U.S. Peers 8,580 8.0 7.1 6.5 17.1% 17.5 13.4 13.3 22.3% 3.0 1.3% 1.4% 1.5% 21.9%
Delphi DLPH BRITAIN 20,657 8.7 7.9 7.1 13.2% 13.8 12.2 10.5 17.7% 6.6 1.4% 1.6% 1.6% 48.1%
Linamar LNR CN CANADA 3,680 6.7 6.0 5.4 19.7% 13.5 11.9 10.8 25.5% 2.6 0.6% 0.7% 0.8% 21.1%
Magna International MGA CANADA 21,055 6.2 5.8 5.4 7.7% 11.5 9.9 8.6 14.4% 2.5 1.5% 1.7% 1.8% 20.9%
Martinrea MRE CN CANADA 708 5.8 5.3 4.6 16.7% 10.0 7.7 6.3 150.4% 1.5 1.2% 1.2% 1.2% 20.0%
ThyssenKrupp TKA GY GERMANY 14,412 6.4 5.2 4.7 44.6% 124.6 17.4 12.8 3.7 0.0% 1.4% 1.9% 9.3%
Autoliv ALIV SS SWEDEN 9,154 6.9% 18.5 15.3 13.2 9.6% 2.5 2.1% 2.3% 2.5% 11.9%
NSK 6471 JP JAPAN 6,770 10.1 8.0 7.4 34.4% 27.2 13.8 12.3 90.9% 2.3 0.9% 1.6% 1.9% 8.9%
Average Intl. Peers (ex-U.S.) 10,919 7.1 6.1 5.5 21.7% 34.2 12.7 10.7 58.1% 2.5 1.1% 1.5% 1.7% 15.4%
Average 8,775 7.8 6.8 6.2 18.4% 22.5 13.2 12.6 32.3% 2.9 1.2% 1.4% 1.6% 19.9%
Trailers & Railcars
American Railcar ARII UNITED STATES 1,042 6.3 5.7 5.5 11.0% 10.3 9.6 9.3 12.8% 2.0 3.3% 3.3% 3.3%
Freightcar America RAIL UNITED STATES 305 11.4 4.7 3.9 49.8 11.4 9.8 1.5 0.9% 1.0% 1.1%
Trinity TRN UNITED STATES 4,201 5.2 5.1 5.0 23.0% 6.5 6.3 6.5 36.1% 1.4 1.4% 1.6% 1.8% 25.6%
Wabash WNC UNITED STATES 727 6.3 5.6 5.1 11.0% 13.3 11.0 9.2 22.0% 1.9 0.0% 0.4% 1.1% 17.7%
CIMC 200039 CH CHINA 7,971 15.2 11.9 10.2 25.6% 19.8% 10.1%
Sinotruck 3808 HK CHINA 1,546 4.7 4.1 3.7 15.6% 18.7 14.1 12.0 60.0% 0.5 1.7% 2.4% 2.9% 2.5%
Average 2,632 8.2 6.2 5.6 17.3% 19.7 10.5 9.4 30.1% 1.5 1.5% 1.7% 2.0% 14.0%
Sources: Santander and Bloomberg.
68
International Peers: OEMs and Machinery
(US$ mn) 2014 2015 2016 CAGR 2014 2015 2016 CAGR 2014 2014 2015 2016 2014
OEMs
Navistar NAV US UNITED STATES 2,912 11.6 4.7 3.6 16.6 9.0 9.6%
Ford F US UNITED STATES 57,692 5.0 3.5 3.0 -4.4% 13.4 9.3 7.8 -5.3% 2.1 3.3% 3.5% 3.9% 16.7%
GM GM US UNITED STATES 50,723 3.3 2.3 2.3 5.5% 11.9 7.2 6.7 17.9% 1.2 3.9% 4.0% 4.2% 11.4%
Paccar PCAR UNITED STATES 23,973 13.4 12.1 10.7 -1.1% 17.8 15.9 14.7 13.6% 3.3 1.7% 1.8% 2.2% 20.4%
Daimler DAI GY GERMANY 88,767 9.3 8.9 8.2 16.8% 10.3 9.8 9.0 3.0% 1.5 3.6% 4.0% 4.4% 15.2%
MAN MAN GY GERMANY 16,747 19.9 16.9 12.3 17.1% 113.4 47.5 26.4 2.8 3.4% 3.4% 3.4% 2.4%
Scania SCVB SS SWEDEN -5.7% 16.5% 19.6%
Volvo VOLVB SS SWEDEN 23,141 11.9 9.3 7.8 7.3% 22.6 14.3 10.6 82.8% 2.2 3.7% 3.9% 4.5% 8.9%
Ashok Leyland AL IN INDIA 2,229 0.6% 0.5% 1.2%
Fiat F IM ITALY 8.9% 14.6% 3.5%
Nissan 7201 JP JAPAN 40,924 11.6 9.8 8.7 3.5% 12.1 9.7 8.4 16.2% 1.1 2.8% 3.1% 3.7% 9.2%
Suzuki 7269 JP JAPAN 17,643 5.8 5.3 4.7 18.2% 18.6 16.7 14.9 25.3% 1.6 0.6% 0.7% 0.8% 9.2%
Toyota 7203 JP JAPAN 215,770 12.0 10.9 9.5 22.3% 12.6 11.1 9.8 48.7% 1.7 2.2% 2.6% 3.0% 14.2%
Mazda 7261 JT JAPAN 15,407 8.8 6.7 5.7 65.3% 15.1 9.8 9.4 132.8% 2.9 0.2% 0.4% 1.0% 21.1%
Renault RNO FP FRANCE 22,104 9.8 8.6 7.8 23.0% 9.1 6.6 5.3 105.1% 0.7 3.2% 3.7% 4.4% 7.7%
PSA UG FP FRANCE 9,675 9.1 7.4 6.8 29.9% 12.0 8.1 0.7 0.0% 0.0% 0.7% -2.3%
BMW BMW GY GERMANY 70,418 9.7 9.3 9.0 -7.1% 9.8 9.3 8.9 7.7% 1.5 3.3% 3.8% 3.9% 15.6%
Porsche PAH3 GY GERMANY 25,517 6.4 5.7 5.2 21.8% 0.6 3.2% 3.6% 3.9% 9.0%
Volkswagen VOW GY GERMANY 106,521 7.3 6.7 6.1 0.9% 8.1 7.5 6.8 14.3% 0.9 2.8% 3.3% 3.8% 11.7%
Average 46,480 9.9 8.2 7.1 12.5% 20.1 13.1 10.1 34.3% 1.6 2.4% 2.7% 3.1% 11.3%
Machinery
Okuma 6103 JP JAPAN 1,360 10.1 7.7 7.5 14.9% 21.9 16.4 16.7 11.6% 1.4 1.1% 1.4% 1.4% 6.3%
Mori Seiki 6141 JP JAPAN 1,723 16.8 11.6 10.0 40.6% 22.7 16.6 16.2 52.5% 1.6 1.4% 1.6% 1.7% 7.5%
Chen Song 57 HK HONG KONG 172
Kennametal KMT UNITED STATES 2,674 7.9 7.7 7.1 6.6% 12.7 12.1 10.6 3.9% 1.4 2.1% 2.1% 2.3% 10.8%
Hardinge HDNG UNITED STATES 147 143.6 19.8 12.4
Gildemeister GIL GY GERMANY 2,044 6.7 5.9 5.4 21.5% 14.5 12.5 11.1 24.7% 1.4 2.6% 3.0% 3.4% 9.6%
Hurco HURC UNITED STATES 210 15.3 15.7 14.7
Nicolas Correa NEA SM SPAIN 18
Starrag-Heckert STGN SW SWITZERLAND 219 6.1 5.4 4.3 7.3% 15.8 12.9 9.0 16.1% 1.1 3.0% 3.8% 4.8% 7.0%
Tornos TOHN SW SWITZERLAND 119 23.7 10.5 7.3 2,885.0 26.2 15.8 1.6 0.0% 0.4% 0.9% -2.4%
Haitian 1882 HK CHINA 3,167 10.2 9.0 8.2 17.8% 14.8 12.8 11.3 13.7% 2.8 2.3% 2.7% 3.0% 19.8%
Average 1,078 11.6 8.2 7.1 18.1% 349.6 16.1 13.1 20.4% 1.6 1.8% 2.1% 2.5% 8.4%
69
International Peers: Electrical Equipment
 WEG is trading at 73% premium to Siemens and ABB average (vs. 31% historical average).
(US$ mn) 2014 2015 2016 CAGR 2014 2015 2016 CAGR 2014 2014 2015 2016 2014
Electric Equipment
ABB ABBN VX SWITZERLAND 48,396 9.0 8.2 7.5 3.7% 17.0 14.6 12.9 8.0% 2.5 3.6% 3.8% 4.1% 14.4%
Emerson Electric EMR UNITED STATES 40,448 8.8 8.5 8.1 5.5% 15.8 14.7 13.5 17.1% 3.8 3.0% 3.2% 3.5% 24.2%
Regal-Beloit RBC UNITED STATES 3,056 7.8 7.2 6.7 19.0% 15.5 13.8 12.1 36.4% 1.4 1.2% 1.4% 1.5% 9.3%
General Electric GE UNITED STATES 249,950 9.3 8.7 8.8 13.1% 15.0 13.9 13.1 17.2% 2.0 3.5% 3.7% 3.9% 12.0%
Rockwell Automation ROK UNITED STATES 14,229 9.9 9.4 8.7 10.8% 17.1 15.6 14.2 9.8% 5.3 2.2% 2.4% 2.6% 30.8%
Areva AREVA FP FRANCE 4,245 15.4 10.0 7.0 4.2% 14.5 -74.0% 0.8 0.0% 0.3% 1.0% -15.6%
Legrand LR FP FRANCE 13,599 11.8 11.2 10.4 2.9% 19.7 18.2 16.8 6.7% 3.1 2.6% 2.8% 3.0% 16.6%
Alstom ALO FP FRANCE 10,546 7.5 11.4 12.1 -25.3% 10.9 15.9 14.8 -16.0% 1.5 0.3% 1.6% 1.6% 13.6%
Schneider Electric SU FP FRANCE 42,958 10.8 9.8 9.1 1.7% 15.5 13.9 12.6 13.5% 1.8 3.2% 3.6% 3.9% 11.8%
Siemens SIE GR GERMANY 100,118 9.3 8.9 8.3 12.3% 13.9 12.7 12.0 18.3% 2.5 3.5% 3.8% 4.0% 18.4%
Ormat Industries ORMT IT ISRAEL 803 7.0 6.8
Average Developed Markets 48,032 10.0 9.3 8.7 4.8% 14.7 14.0 13.6 3.7% 2.5 2.3% 2.7% 2.9% 13.5%
Harbin Power Equipment 1133 HK CHINA 829 2.3 2.3 2.1 -3.5% 11.5 10.9 9.8 -19.8% 0.4 1.4% 1.5% 1.6% 3.7%
Shanghai Electric Group 2727 HK CHINA 13,121 11.9 11.4 11.5 12.7% 17.9 16.8 16.1 5.2% 1.3 2.0% 2.1% 2.3% 7.6%
Teco Electric and Machinery 1504 TT TAIWAN 1,983 8.5 7.8 7.0 11.1% 14.6 13.6 12.0 10.2% 1.3 3.7% 4.1% 4.5% 9.4%
ABB India ABB IN INDIA 4,074 45.5 32.2 77.2 48.0 8.7 0.3% 0.4% 0.4% 11.8%
Bharat Heavy BHEL IN INDIA 9,666 11.4 16.3 13.4 -45.4% 17.0 24.8 20.5 -39.6% 2.7 1.8% 1.1% 1.3% 13.6%
Crompton Greaves CRG IN INDIA 1,725 18.1 14.3 10.6 51.1% 40.3 26.1 16.6 3.0 0.8% 0.8% 1.1% 7.4%
Siemens India SIEM IN INDIA 5,035 0.6% 0.7% 0.8%
Average Emerging Markets 5,205 16.3 14.1 8.9 5.2% 29.7 23.4 15.0 -11.0% 2.9 1.5% 1.5% 1.7% 8.9%
Average 31,377 12.3 11.1 8.8 4.9% 20.4 17.5 14.1 -0.5% 2.6 2.0% 2.2% 2.4% 11.8%
WEG, ABB, and Siemens – Historical FV/EBITDA WEG, ABB, and Siemens – Historical P/E
16.0 18.0 23.0 23.0
16.0 21.0 21.0

14.0
14.0 19.0 19.0
12.0
12.0 17.0 17.0
10.0
15.0 15.0
10.0
8.0 13.0 13.0
8.0
6.0 11.0 11.0
6.0
9.0 9.0
4.0 4.0
7.0 7.0
2.0 2.0
5.0 5.0
Mar-11
Jan-09
May-09
Jun-10
May-12
Jan-13
Jun-13
Mar-14
Jul-14
Feb-10
Oct-13
Sep-09
Nov-10
Aug-11
Dec-11
Sep-12
Dec-14
Mar-11
Mar-14
May-09
May-12
Jul-14
Feb-10
Oct-13
Sep-09
Nov-10
Aug-11
Dec-11
Sep-12
Dec-14
Jan-09
Jun-10
Jan-13
Jun-13
ABB US Equity SIE GR Equity WEGE3 BZ Equity ABB US Equity SIE GR Equity WEGE3 BZ Equity
70
Share Performance
 WEG’s share performance has been the positive highlight for the sector since in the last 12 months, with returns of 30%.
Coverage Universe – Share Performance
130 130
120 120
110 110
100 100
90 90
80 80
70 70
60 60
50 50
40 40
Aug-14
Apr-14
May-14
Sep-14
Mar-14
Jul-14
Oct-14
Feb-14
Dec-13
Nov-14
Dec-14
Jan-14
Jun-14
Iochpe Mahle Metal Leve Romi
Marcopolo Randon Weg
Fras-le
Source: Bloomberg.
71
What Caught Our Attention in Recent Developments? 3Q14 Conference Call Highlights
Iochpe-Maxion Net/Net: Slightly negative. We believe the 3Q14 season could trigger further downward revisions in YE2014 and YE2015 consensus estimates. On the operational side,
company expects a flat domestic market in 2015, while Europe and US are expected to grow by 1%-2% and 3-4%, respectively. Also, management see chance of 100-bp
EBITDA margin expansion YoY. Nonetheless, we the stock should remain on sidelines in the following months due to seasonally weaker 4Q14 (related to OEM stoppages in
December) and visibility on timing of deleverage process in short-term (management expects net debt/EBITDA to return to 2Q14 levels during 4Q14). We Have a hold rating.
Production growth by market:
- Brazil: flat vs. 2014.

- Europe ~+1-2% YoY. YTD, Europe has been better than expected
- U.S.: overall market expected to decelerate vs 1H14; 2015 expected to grow at 3-4%.
Brazil:
- The company has seen demand improving on the margin as OEMs orders are normalizing.
- MAN participation in sales declined to 5.3% in the quarter (from 7.4% in the 3Q13) as a result of weak truck sales.
Tax rate: higher tax rate in the 3Q14 due to non-linear accruals. Company expects 2014E effective rate at 34% ,which tends to benefit 4Q14 net income
Operational improvement driven by: (1) raw material productivity and (2) Increased automation. Company sees further 100bps improvement in margins during 2015 as feasible
(in-line with our estimates).
- Non-recurring expenses (R$6.4 million) are related to operation restructuring, mainly in Brazil (with a minor part in Thailand).
Amsted Maxion / Rail chart segment
- Better sales were spread among clients; Sales continue to be healthy during the 4Q14 (despite weaker seasonality expected for December). Company has a good visibility on
1H15 new orders.
Working capital: increased needs in the 3Q14 due to ad hoc supplier negotiation aiming at better raw material prices. Lower inventory prices mostly recognized in the 3Q14 P/L.
4Q14 EBITDA margins expected to be lower than 3Q14, nevertheless at a lower spread than other years.
Covenants: Manager expects net debt/ EBITDA to decline to 2Q14 level by YE2014 (~3.2x). Management discussed with market participants about the low odds of breaching
the YE2014 net debt/ LTM EBITDA covenant of 3.75x (lower than current 3.9x), due to the expected increase in EBITDA level as 4Q14 should be stronger than 4Q13 and the
devaluated BRL begins to impact positively on results.
New developments: Iochpe launched a new wheel model, which is 6% lighter than peers.
Energy contracts go until 2016, according to CEO.
Mahle Metal Leve Net/Net: Neutral. Com any’s administration expects sales to decline 3-4% YoY in 2014 (vs. our -4.6% estimate) and domestic OEM production to be flat in 2015 (we currently
work with similar estimate, but see some downside risk to it).
Hedging policy comprises 75% of sales, which delays immediate positive impact of weaker BRL.
International market share: Weaker currency increases competitiveness in foreign markets, albeit not in the short term. Expect improvement in market share on a 2-3 year time
horizon (as the company improves its results in bidding process to supply for new projects).
Product portfolio: Filters and cylinder liners continue to increase participation in sales. Mahle expects the liner segment to continue growing due to the increase in share of
aluminum block motors in the light vehicle market.
Reintegra: absence of the benefit during the 3Q14 increased other expenses by R$ 5 million YoY (out of the total R$ 7 million increase in the line).
Marcopolo Net/Net: Slightly positive. Managers detailed the drivers of the results improvement during the quarter, mainly the absence of nonrecurring losses due to Torino production
(urban in Rio de Janeiro) and restructuring in foreign operations.
2015 outlook: according to the CEO, Marcopolo expects at least a flat year vs. 2014 in terms of margins, aiming at 11-12% EBITDA following the recovery in the domestic
interstate (pending ANTT regulation) and urban bus markets.
OEM stoppages: The company will have to adjust production schedules to accommodate expected OEM stoppages during December, which may be 30 days in some cases.
Domestic interstate market: Interstate bus market normalized level amount to 1,500 unit sales per year. YTD sales annualized at 900 units (a 40% decline from the normal
level). The company expects a 2,000-2,500-unit market for the next 4 to 5 years, in the event regulation is approved, reducing the maximum average fleet age to 5 years from
10 years, currently.
Urban busses: The market expects this to be positively affected in 2015 due to the electoral calendar in 2016.
Backlog: The current backlog level supports 2014 guidance. Marcopolo is working at 20-25% below its optimum production level.
Working capital: The receivables increase was mainly due to Caminhos da Escola, which should be normalized during 4Q14.
Volare RC5 (lighter version) expected to be launched during 2015.
India: bus demand seems to be improving on the margin. Marcopolo is looking into new niches, mainly with more value-added products. The Indian market comprises 65,000
units per year (despite the low value added). Tata Motors has ~50% market share (Marcopolo produces ~16,000 units in that market, totaling 50% of Tata production).
Argentinean operation: continues at breakeven, despite low capacity utilization.
Colombia: 2015 expected to be flat vs. 2014 in term of volume and earnings.
Mexico: Paradiso learning curve period has been surpassed.
Australia: 2015 results should bear the fruit of the operational restructuring in place during 2014.
72
Canada: New flyer—3Q14 earnings 30.8% higher YoY. Managers ex ect stable margins in 201 .
Source: Santander.
Randon Net/Net: Slightly positive. Management was vocal regarding their focus on cash flow generation (aiming at working capital and being more selective on capex), which we
believe was the positive aspect of the overall weak 3Q14 results. The company expects 2015 to be a year similar to 2014 regarding production (in-line with our flat volume
growth estimate).
Railcars: Backlog for 2015 being built. Manager expects 500 units to be delivered during the 2H14, with low odds to disappoint as contracts are already signed and financing
terms set.
Crop: Expected to grow by 3% in volume, according to Conab. Management acknowledges the weak YTD performance of grain prices may hinder additional demand (as
farmers have renewed their fleet in the recent strong price/volume years).
Market share: The company has lost market relevance in the truck trailer market in the last 10 years (close to 9%), manly in high volume products. Management highlights the
fact that they lost less share on total market wallet (considering they sell higher value products).
- Niche sales: 80% of Randon truck trailer sales are comprised by 10 products lines (40% of mix is concentrated in niche products as: refrigerated, liquid cargo, etc.).
Auto parts: field force focusing on aftermarket with a 30 people sales team offering the whole portfolio of the group.
Demand elasticity: Sector elasticity to GDP has been around 3x (applied on long term only). Despite the weak 2015E GDP (~1% growth), company believes a flat market is
feasible.
Fleet renewal program: Discussions are ongoing but no visibility on schedule (possibly some news during 2015).
Romi Net/Net: Neutral. The com any’s administration ex ects sales to decline 3-4% YoY in 2014 (vs. our -4.6% estimate) and domestic OEM production to be flat in 2015 (we
currently work with similar estimate, but see some downside risk to it).
Hedging policy comprises 75% of sales, which delays immediate positive impact of weaker BRL.
International market share: Weaker currency increases competitiveness in foreign markets, albeit not in the short term. Expect improvement in market share on a 2-3 year time
horizon (as the company improves its results in bidding process to supply for new projects).
WEG Net/Net: Neutral. Management’s tone as moderate regarding the good 3Q14 results. According to speakers, they still do not expect a meaningful industrial motors recovery in
the domestic market, but this would be partially offset by im roved demand in GTD (mainly generation, as a result of last year’s auction). We are ositive about its focus on
capital discipline (WEG now plans to invest R$450-500 million in 2014, down from ~R$600 million previously) and potential growth in-line with current backlog.
Pricing: Domestic market price negotiations have been tough, with little room for cost inflation pass-through. (YTD 2014 results have illustrated this situation, as margins have
declined, also driven by weaker mix.)
FX: Weaker BRL improves competitiveness; nevertheless, the impact is not fully reflected in margins, in our view, as management could decide to focus on market share in
some locations.
Cost efficiency: Focus has been on capex optimization, postponing projects that may generate excess capacity (or that could take time to become fully operational).
Capex should be in the R$450-500 million range in 2014, below the ~R$600 million formerly guided, due to rationalization of investments. China and Mexico projects (industrial
motors capacity addition) continue to be on schedule and were not reduced.
Revenue breakdown:
- Lower industrial activity in Brazil drove lower participation in industrial motors and paints.
- GTD has benefited by increasing prices and higher demand from wind energy, solar, biomass, and SHPP (small hydro power plants).
- Domestic use motors had a seasonal good quarter, as market began to build inventories for the fourth quarter’s high-demand season.
Backlog:
- Industrial: New projects continue to be postponed; the company still has not seen signs of improvement in this segment.
- GTD: backlog should continue to be strong for the next 24 months, driven by generation projects (2013 July/August generation auctions resulted in good order entries).
Working capital needs increased QoQ (the company spent ~R$115 million) even though receivables and inventories were partially offset by advances from clients. (Advances
were driven by better orders in GTD.)
Source: Santander.
73
Capital Goods – Earnings Consistency

1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14
Iochpe Trend / Act. vs. Est. Low er Low er Low er In-Line Low er Above In-Line Above In-Line In-Line Low er
EBITDA Margin 6.4% 8.0% 9.8% 7.6% 8.3% 12.7% 11.6% 10.6% 10.8% 10.4% 11.3%
EBITDA 76.4 120.3 150.8 104 132.8 220.9 176.5 147.0 163.3 148.0 168.0
YoY Change 54.6% 10.5% 23.9% 30.4% 73.8% 83.6% 17.0% 41.0% 23.0% -33.0% -4.8%
Mahle Metal Leve Trend / Act. vs. Est. NA NA NA NA NA In-Line Above Low er In-Line Above Above
EBITDA Margin 15.1% 14.3% 20.6% 18.4% 17.0% 18.1% 22.3% 13.3% 16.7% 17.7% 17.9%
EBITDA 84 81 117 100 92 115 143 75 98 105 107
YoY Change -11.6% -12.9% -17.1% 127.8% 10.6% 42.6% 22.3% -25.3% 6.1% -9.2% -25.2%
Marcopolo Trend / Act. vs. Est. In Line In Line In-Line Low er Low er In-Line Low er In-Line Low er Low er In-Line
EBITDA Margin 12.3% 10.0% 10.8% 12.3% 9.8% 11.6% 12.0% 11.4% 11.1% 7.3% 9.6%
EBITDA 108.6 90.1 103.7 127.9 81.0 115.3 127.7 105.3 83.9 60.2 85.9
YoY Change 13.1% -5.7% -18.5% -7.9% -25.4% 27.9% 23.1% -17.7% 3.6% -47.8% -32.7%
Randon Trend / Act. vs. Est. Low er Low er Low er Low er Above Above NA NA NA In-Line Below
EBITDA Margin 8.8% 7.6% 9.1% 7.3% 12.3% 14.3% 15.5% 10.7% 15.6% 13.9% 10.8%
EBITDA 65.0 65.9 79.4 73.5 119.5 151.0 176.3 116.6 150.4 140.7 96.0
YoY Change -53.6% -61.2% -41.6% -30.0% 83.9% 129.1% 122.0% 58.6% 25.9% -6.8% -45.5%
Rom i Trend / Act. vs. Est. Low er Low er Low er Above Low er Above Above Above Low er Low er Low er
EBITDA Margin 0.0% -22.8% 0.2% 4.9% 1.7% 7.7% 10.3% 17.7% 9.3% 7.0% 4.6%
EBITDA 0.0 (24.5) 0.3 9.8 2.4 11.6 18.7 31.4 14.3 10.1 7.6
YoY Change -99.9% -342.2% -97.2% -181.6% 13982.4% -147.3% 6484.5% 219.6% 497.2% -12.9% -59.4%
WEG Trend / Act. vs. Est. Low er In-Line In-Line In-Line In-Line Below In-line In-line In-Line In-Line Above
EBITDA Margin 15.2% 17.0% 17.6% 18.1% 16.8% 18.4% 18.6% 17.5% 17.1% 17.1% 17.1%
EBITDA 208.6 260.0 284.3 300.6 248.9 312.5 326.9 341.7 298.5 311.5 350.7
YoY Change -6.9% 20.6% 16.7% 16.4% 19.3% 20.2% 15.0% 13.7% 19.9% -0.3% 7.3%
Source: Santander.
74
Macroeconomic Forecasts
2011 2012 2013 2014E 2015E 2016E
Real GDP (%) 2.7 1.0 2.5 0.3 0.3 1.3
Consumer Spending (%) 4.1 3.2 2.6 1.2 0.5 1.3
Capital Spending (%) 4.7 (4.0) 5.2 (5.4) (4.0) 1.0
Government Spending (%) 1.9 3.3 2.0 1.4 0.6 1.3
Exports (%) 4.5 0.5 2.5 1.7 0.8 1.3
Imports (%) 9.7 0.2 8.3 (0.1) 0.2 1.3
GDP - Agriculture (%) 3.9 (2.1) 7.3 1.4 1.4 1.3
GDP - Industrial (%) 1.6 (0.8) 1.7 (1.4) (0.2) 1.3
GDP - Services (%) 2.7 1.9 2.2 0.9 0.3 1.3
Industrial Production (YoY) 0.4 (3.3) 2.3 (2.6) (0.3) 0.5
Retail Sales (YoY) 6.7 8.4 4.3 1.5 1.1 2.5
GDP per capita (US$) 12,863 11,585 11,487 11,208 10,588 10,677
Unemployment rate (%) 6.0 5.5 5.4 5.0 5.4 6.1
Inflation – IPCA (%) 6.5 5.8 5.9 6.5 6.8 6.5
Inflation – IGPM (%) 5.1 7.8 5.5 4.0 6.0 7.0
R$/US$ Exchange Rate (Year-End) 1.88 2.04 2.34 2.55 2.71 2.94
R$/US$ Exchange Rate (Average) 1.67 1.95 2.16 2.35 2.63 2.83
Interest Rate – Selic rate (%, Year-End) 11.00 7.25 10.00 11.50 12.50 12.50
Foreign Direct Investment (US$ billion) 66.7 65.3 64.0 60.0 58.3 63.9
Current Account Balance (US$ Billion) (52.5) (54.2) (81.4) (78.9) (66.6) (61.6)
Current Account Balance (% of GDP) (2.1) (2.4) (3.7) (3.6) (3.2) (2.9)
International Reserves (US$ Billion) 352 379 362 350 346 352
Nominal Fiscal Balance (% of GDP) 2.60 2.48 3.28 4.17 4.22 3.46
World GDP growth 3.9 3.1 3.4 4.4 4.5 4.6
US GDP growth 1.8 2.2 1.9 2.3 3.0 3.4
Eurozone GDP growth 1.5 (0.5) 0.3 1.4 1.7 1.7
Latin America GDP growth 4.4 2.7 3.3 5.0 5.0 5.0
75
Hey Competition, Can You Jump a Wide Moat? Our Approach to Competitive Advantages of Listed
Companies
 What are we screening? We attempt to find listed companies in our Brazilian coverage universe that have competitive advantages
(“economic moats”), using an a roach focused mainly on: (1) the ability to generate ROIC above WACC; and (2) the stability of market
share.
 Which are the Brazilian leaders in our screening? Sixteen companies passed our screening. The top 10 are Totvs, Ambev, Cetip, WEG,
OdontoPrev, Tegma, Ultrapar, Cielo, Marcopolo, and Localiza. Encouraging performance: an equal weighted portfolio (comprising 16
companies) is up 135% since 2008 versus -17% for the Ibovespa.
 Our recommendations: Ambev, Cetip, Ultrapar, Localiza, Vale, Itaú, and Saraiva.
 Weg. Brazilian leader with competitive advantages. In our strategy report Hey Competition, Can You Jump a Wide Moat? Part 2, April 7,
2014, WEG was ranked 5th among the 16 companies with the greatest competitive advantages (117-company Brazil coverage).
Average ROIC Spread (2008-12) vs. Current P/E 12M Forward Fair P/E Target Multiples among Companies with Sustainable
Return and with Return = Cost of Capital
25
WEG OdontoPrev 15
14
Ultrapar Cielo - Avg. ROE
20
Spread = 148%
13
Ambev
12
Cetip
Localiza 11
15CBD Totvs Natura
10
Vale
Marcopolo
Itaú Unibanco 9
10
Bradesco
8
7
5 Banco do Brasil 6
5
10% 15% 20% 25% 30% 35% 40%
0
-10% 0% 10% 20% 30% 40% 50%
Note: Bubble size: Average 2008-12 market share. In case 2008-12 average data was not available, a shorter Note: Considering a Ke of 12%. Sources: Bloomberg and Santander.
average period was used. Source: Santander.
76
The Engineer’s Playground—Main Products under Our Coverage
Fras-le Products Iochpe-Maxion Products
Source: Company data. Source: Company data.
Mahle Metal Leve Products Marcopolo Products
77
The Engineer’s Playground—Main Products under Our Coverage
Romi Products WEG Products
78
Appendix
Iochpe- Mahle Metal Iochpe- Mahle Metal
Company Fras-le Marcopolo Randon Romi WEG Company Fras-le Marcopolo Randon Romi WEG
Maxion Leve Maxion Leve
General Information Historic Multiples
Ticker FRAS3 MYPK3 POMO4 LEVE3 RAPT4 ROMI3 WEGE3 Current 9.2 14.4 11.8 12.4 8.2 13.6 21.9
Sector Capital Goods Capital Goods Capital Goods Capital Goods Capital Goods Capital Goods Capital Goods
1-yr Forward P/E Average 0.0 11.2 11.0 12.5 10.3 14.2 16.5
Rating Buy Hold Buy Buy Buy Buy Hold
Max 0.0 6.6 4.7 7.0 6.2 4.5 11.8
Current Price 3.84 12.25 3.56 20.76 4.98 3.10 30.00
Min 0.0 16.5 16.8 16.1 16.0 37.3 21.8
Target Price 6.00 17.50 5.00 25.00 8.00 5.50 31.50
Current 5.1 5.0 8.6 6.8 5.6 4.5 14.8
Dividend Yield 2.9% 0.0% 0.0% 7.5% 4.1% 0.0% 1.9%
Total Return 60.7% 46.2% 46.5% 29.4% 66.9% 80.3% 8.3%
1-yr Forward FV/EBITDA Average 0.0 6.7 8.7 6.9 6.0 9.2 11.5
ADTV 252 6,001 13,257 3,007 7,918 421 23,836 Min 0.0 4.6 5.5 4.5 4.1 3.4 7.8
Market Cap 480 1,162 3,217 2,664 1,434 222 24,215 Max 0.0 8.7 12.0 8.5 7.8 30.6 14.8
Free-float 53.8% 63.7% 72.0% 30.0% 55.0% 52.6% 33.6% Current 0.0 3.0 3.0 0.0 1.6 0.7 3.3
Free-float with foreign investors 0.0% 56.0% 0.0% 37.0% 30.0% 35.0% 25.0% 1-yr Trailing P/B Average 0.0 3.2 2.4 0.0 2.7 2.0 5.0
Share Performance Min 0.0 7.0 3.6 0.0 5.1 5.0 9.8
Last Update -3.3% -2.7% -1.9% 2.2% -7.1% -0.6% -5.4% Max 0.0 0.8 0.9 0.0 1.0 0.6 2.6
Last Update vs. IBOV 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Growth
1 Week -3.0% -8.4% -3.5% 2.0% -9.0% 0.0% -0.6% Net Revenue 2014 6.6% -3.4% -6.2% -3.0% -12.2% -3.3% 14.2%
1 Month -12.7% -18.4% -11.7% -13.2% -9.5% -10.9% 1.9%
2015 8.5% 4.7% 5.4% 3.8% 3.9% 3.5% 14.9%
1 Year (LTM) -40.3% -50.8% -33.7% -22.7% -42.4% -54.3% 25.6%
2016 11.3% 5.3% 7.7% 5.6% 9.0% 6.9% 14.5%
YTD -40.3% -53.2% -30.2% -24.2% -45.8% -47.9% 25.2%
2013-16 8.8% 2.1% 2.1% 2.1% -0.2% 2.3% 14.5%
52-week Minimum Price 3.40 12.17 3.46 19.89 4.94 3.00 20.60
EBITDA 2014 -2.8% -5.6% -26.5% -5.6% -14.0% -28.3% 7.5%
52-week Maximum Price 4.63 26.70 5.40 27.93 9.21 6.82 31.93
Multiples
2015 17.9% 11.9% 23.6% 3.6% 1.6% 29.2% 20.5%
P/E 2014 10.8 26.8 14.6 13.5 7.7 29.6 26.6 2016 14.1% 7.8% 12.6% 8.7% 17.5% 28.5% 14.4%
2015 9.1 14.1 11.7 12.3 8.3 13.2 21.7 2013-16 9.3% 4.4% 0.8% 2.0% 0.9% 6.0% 14.0%
2016 8.0 9.3 10.7 11.0 6.1 6.2 18.9 EPS 2014 10.8% -74.6% -24.8% -2.0% -37.1% -71.0% -17.0%
Accounting P/E 2014 10.8 26.8 14.6 13.5 7.7 29.6 26.6 2015 18.8% 90.1% 25.0% 9.4% -7.2% 123.3% 22.4%
2015 9.1 14.1 11.7 12.3 8.3 13.2 21.7 2016 13.9% 51.3% 9.6% 12.2% 36.0% 115.0% 15.3%
2016 8.0 9.3 10.7 11.0 6.1 6.2 18.9 2013-16 14.5% -9.9% 1.0% 6.4% -7.4% 11.7% 5.4%
P/CE 2014 5.9 4.1 12.2 8.6 4.6 5.1 22.4 Financial Statements
2015 5.3 3.4 9.6 7.7 4.7 3.8 18.7 2013 717 6,126 3,659 2,394 4,253 667 6,829
2016 4.7 2.9 8.7 7.1 3.8 2.8 16.3
Net Revenue 2014 765 5,920 3,433 2,322 3,732 645 7,798
P/B 2013 1.2 1.0 2.1 1.9 1.1 0.3 5.3
2015 830 6,201 3,619 2,410 3,877 668 8,963
Earnings Yield 2013 9.8% 6.6% 8.2% 7.9% 10.7% 7.5% 4.0%
2016 923 6,527 3,899 2,545 4,226 714 10,259
PEG 2012 0.6 (0.9) (0.7) 3.0 0.3 2.1
2013 67 467 370 311 446 30 1,012
FV/EBITDA 2014 6.1 5.7 10.7 7.1 5.9 6.4 18.3
2015 5.0 5.0 8.6 6.8 5.5 4.4 14.9
EBIT 2014 66 404 248 290 362 11 1,088
2016 4.2 4.5 7.4 6.2 4.9 3.0 12.8 2015 84 459 290 288 358 20 1,357
FV/Sales 2014 0.8 0.6 1.0 1.2 0.8 0.5 3.2 2016 96 500 325 318 436 36 1,565
2015 0.7 0.6 0.9 1.2 0.7 0.4 2.7 2013 106 680 435 426 564 67 1,255
2016 0.6 0.5 0.8 1.1 0.7 0.3 2.3 EBITDA 2014 103 642 320 402 485 48 1,350
FV/Member 2014 0 0 0 0 0 0 0 2015 121 719 395 417 493 62 1,626
FCFE Yield 2014 7.0% 3.1% 10.6% 9.7% 2.3% 11.9% 1.1% 2016 138 774 445 453 579 79 1,860
2015 9.4% 15.8% 4.4% 7.6% 16.8% 17.2% 2.6% 2013 106 680 435 426 564 67 1,255
2016 13.4% 21.0% 6.9% 8.7% 15.5% 21.8% 3.1% Company EBITDA 2014 103 642 320 402 485 48 1,350
Dividend Yield 2014 2.4% 1.4% 3.4% 2.5% 5.9% 0.8% 2.0%
2015 121 719 395 417 493 62 1,626
2015 3.3% 2.6% 4.3% 7.8% 3.6% 2.5% 2.3%
2016 138 774 445 453 579 79 1,860
2016 3.7% 4.0% 4.7% 7.3% 16.4% 5.4% 2.7%
2013 40 170 292 201 235 26 843
Payout Ratio 2014 25.6% 37.0% 50.0% 33.2% 45.3% 24.2% 52.1%
Net Income 2014 44 43 220 198 187 8 910
2015 30.0% 37.0% 50.0% 96.0% 30.0% 33.0% 50.0%
2016 30.0% 37.0% 50.0% 80.0% 100.0% 33.0% 50.0%
2015 53 82 275 216 173 17 1,114
Target Multiples 2016 60 125 301 242 236 36 1,284
P/E 2014 16.9 38.3 20.4 16.2 13.1 52.5 28.0 2013 40 170 292 201 235 26 843
2015 14.2 20.1 16.3 14.8 14.1 23.5 22.8 Adjusted Net Income 2014 44 43 220 198 187 8 910
P/E 12-MF 2015 12.5 13.3 14.9 13.2 10.3 10.9 19.8 2015 53 82 275 216 173 17 1,114
vs. Current 12-MF #DIV/0! 19% 35% 6% 0% -23% 20% 2016 60 125 301 242 236 36 1,284
FV/EBITDA 2014 8.7 6.5 14.7 8.4 8.0 10.0 19.2 2013 77 383 332 316 353 62 1,023
2015 7.2 5.7 11.8 8.1 7.5 7.2 15.6 Cash Earnings 2014 81 281 264 310 309 44 1,083
FV/EBITDA 12-MF 2015 8.9 4.1 17.4 13.0 7.4 7.8 26.7 2015 90 342 336 345 308 59 1,293
vs. Current 12-MF 77% -18% 102% 91% 32% 73% 80%
2016 102 399 372 377 378 80 1,489
P/B 2014 1.8 1.3 3.0 2.3 1.7 0.6 5.2
2013 (22) (33) (224) (82) (280) 43 (232)
2015 1.6 1.2 2.7 2.3 1.6 0.6 4.5
Change in Working Capital 2014 (27) (127) 15 (41) 49 22 (177)
Returns & Profitability
2015 (24) (29) (63) (25) 13 2 (232)
2013 10.5% 16.0% 20.7% 14.8% 17.4% 4.0% 19.6%
ROE 2014 10.8% 3.5% 14.5% 14.2% 13.4% 1.2% 19.3%
2016 (22) (38) (43) (21) (86) (7) (242)
2015 11.9% 6.3% 17.4% 15.3% 11.5% 2.6% 21.2% 2013 (30) 249 300 115 584 26 206
2016 12.5% 9.1% 17.5% 16.9% 15.0% 5.4% 21.0% Capex 2014 37 267 107 91 104 30 836
2013 9.6% 11.5% 15.9% 13.0% 12.2% 3.0% 17.5% 2015 35 237 127 116 146 23 475
ROIC 2014 9.3% 6.2% 10.6% 12.8% 9.4% 1.1% 18.1% 2016 35 248 101 121 159 25 513
2015 11.1% 8.0% 13.1% 13.6% 9.2% 2.1% 20.3% 2013 167 536 (25) 303 65 72 1,009
2016 12.2% 8.9% 14.0% 15.0% 11.2% 3.8% 21.7% FCFF 2014 53 377 249 264 389 24 142
2013 17.1% 9.5% 16.4% 17.2% 14.4% 0.0% 16.1% 2015 46 381 132 200 272 35 595
ROCE 2014 13.2% 7.9% 11.2% 15.7% 10.7% -0.9% 16.5% 2016 61 391 221 228 229 35 732
2015 9.9% 10.4% 12.4% 13.2% 8.6% -0.1% 16.5%
2013 99 213 375 240 441 36 1,463
2016 10.3% 11.4% 12.7% 14.3% 9.5% 1.0% 17.0%
FCFE 2014 34 36 342 258 33 26 258
2013 27.2% 14.0% 20.0% 27.7% 24.4% 29.0% 32.8%
2015 45 183 141 202 240 38 623
Gross Margin 2014 26.6% 13.5% 17.5% 26.9% 24.8% 26.7% 31.5%
2016 65 244 221 233 222 49 758
2015 27.8% 13.5% 17.8% 26.2% 23.7% 27.3% 32.2%
2016 28.1% 13.5% 18.5% 26.7% 23.6% 29.3% 32.3% 2013 14 0 0 200 58 0 462
2013 14.7% 11.1% 11.9% 17.8% 13.3% 10.0% 18.4% Dividends 2014 11 16 110 65 85 2 474
EBITDA Margin 2014 13.4% 10.8% 9.3% 17.3% 13.0% 7.4% 17.3% 2015 16 30 137 207 52 6 557
2015 14.6% 11.6% 10.9% 17.3% 12.7% 9.3% 18.1% 2016 18 46 151 194 236 12 642
2016 15.0% 11.9% 11.4% 17.8% 13.7% 11.1% 18.1% 2013 172 2,111 411 267 1,192 96 (167)
2013 14.7% 11.1% 11.9% 17.8% 13.3% 10.0% 18.4% Net Debt 2014 141 2,281 164 143 1,095 83 8
Company EBITDA Margin 2014 13.4% 10.8% 9.3% 17.3% 13.0% 7.4% 17.3% 2015 125 2,152 128 145 942 50 (366)
2015 14.6% 11.6% 10.9% 17.3% 12.7% 9.3% 18.1% 2016 98 1,995 37 102 1,009 16 (834)
2016 15.0% 11.9% 11.4% 17.8% 13.7% 11.1% 18.1% 2013 395 1,221 1,516 1,376 1,337 648 4,558
2013 5.6% 2.8% 8.0% 8.4% 5.5% 3.9% 12.4%
Shareholders' Equity 2014 423 1,279 1,512 1,405 1,451 647 4,875
Adjusted Net Margin 2014 5.8% 0.7% 6.4% 8.5% 5.0% 1.2% 11.7%
2015 460 1,331 1,649 1,414 1,572 659 5,655
2015 6.3% 1.3% 7.6% 9.0% 4.5% 2.5% 12.4%
2016 502 1,409 1,800 1,462 1,572 683 6,554
2016 6.5% 1.9% 7.7% 9.5% 5.6% 5.1% 12.5%
2013 0.32 1.80 0.33 1.57 0.98 0.36 1.36
2013 13.8% 3.5% 10.2% 10.0% 10.4% 5.4% 21.4%
FCFE Margin 2014 4.4% 0.6% 10.0% 11.1% 0.9% 4.1% 3.3% EPS 2014 0.35 0.46 0.24 1.54 0.61 0.10 1.13
2015 5.4% 3.0% 3.9% 8.4% 6.2% 5.7% 6.9% 2015 0.42 0.87 0.31 1.68 0.57 0.23 1.38
2016 7.0% 3.7% 5.7% 9.1% 5.2% 6.8% 7.4% 2016 0.48 1.31 0.34 1.89 0.77 0.50 1.59
2013 1.6 3.1 0.9 0.6 2.1 1.4 (0.1) 2013 0.32 1.80 0.33 1.57 0.98 0.36 1.36
Net Debt/EBITDA 2014 1.4 3.6 0.5 0.4 2.3 1.7 0.0 Adjusted EPS 2014 0.35 0.46 0.24 1.54 0.61 0.10 1.13
2015 1.0 3.0 0.3 0.3 1.9 0.8 (0.2) 2015 0.42 0.87 0.31 1.68 0.57 0.23 1.38
2016 0.7 2.6 0.1 0.2 1.7 0.2 (0.4) 2016 0.48 1.31 0.34 1.89 0.77 0.50 1.59
th
Note: Prices of December 15 , 2014. Source: Santander estimates
79
BRAZIL—CONGLOMERATES & INDUSTRIALS
FRAS-LE
CHECK THE BRAKES AND SPEED UP CURRENT PRICE: R$3.84
TARGET PRICE: R$6.00
 Investment Case: Fras-le is the largest brake-lining producer

worldwide and is the leader in both the aftermarket and OEM Daniel Gewehr*
markets in Brazil. We see the company as a less cyclical player in Brazil: Banco Santander S.A.
+5511-3012-5787 | dhgewehr@santander.com.br
the automotive universe (76% of revenue in the aftermarket), and
Joao Noronha*, CFA
considering its positive FX exposure (45% of sales are Brazil: Banco Santander S.A.
international), we believe it is well positioned to benefit from: (1) +5511-3012-5734 | jonoronha@santander.com.br
organic growth—2013-16E CAGR of ~10% for EBITDA and 15%

for EPS, and (2) a maturing cycle of recent investments
(sustaining ROE expansion in upcoming years, reaching the 17%
level in the medium term). Fras-le trades at a 2015E P/E of 9.1x—
a 20% discount to its Brazilian peers—offering a 9% FCFE yield in
2015E and 51% DCF upside.
 Resilient market share leadership. The company's high ~90%

OEM market share in brake linings and ~17% in brake pads offer
an edge in the high-margin aftermarket. OEM suppliers are
perceived as benchmarks, commanding premium prices.
 A less cyclical and more diversified player with positive FX

exposure. Fras-le is exposed to a diversified set of revenue
drivers, a feature that reduces volatility in results. By segment,
aftermarket represents 76% of sales; by geography, the
International operation amounts to 45% of sales. With its power of Company Statistics
diversification, Fras-le has never posted an annual loss in its 60 Bloomberg FRAS3 BZ
years of operation. Our economics team forecasts the BRL at Current Price (12/15/14) R$ 3.84 / US$ 1.43
R$2.71 YE2015, which we believe should benefit Fras-le's growth Target Price (YE 2015) R$ 6.00 / US$ 2.21
and margins outlook. 52-Week Range (R$) 3.40 - 6.43
Market Capitalization (US$ Mn) 178
Float (%) 53.8
 Attractive earnings outlook and valuation. We forecast net
3-Mth Avg. Daily Vol (US$ Mn) 0.1
sales, EBITDA, and net income 2013-16E CAGRs of 9%, 10%, Shares Outstanding - Mn 125
and 15%. Fras-le is part of Randon Group, which bolsters its
growth outlook, in our view. Earnings power: at current prices Price Performance (R$)
Fras-le prices -1.3% real growth in perpetuity. FRAS3 BZ IBOVESPA
350
 Simplifying product portfolio: 80/20 method. New management 300
is focusing on portfolio profitability, reducing exposure to low- 250
volume/low-return lines (e.g., reducing brake pad SKUs by ~20%). 200
150
 A consolidation player in the brake market. We consider 100
acquisitions a free option that could add ~11% to our valuation 50

(e.g., adding R$200 million in revenue in 2016-17 raises our D-12 A-13 A-13 D-13 A-14 A-14 D-14
YE2015 TP to R$6.70). Sources: FactSet, Santander estimates and company reports.
80
FRAS-LE
Financial Highlights: P&L, Balance Sheet and CF Statement, 2013–16E in Millions Company Description
R$ US$ Fras-le, a subsidiary of Randon Group, is a global leader
P&L ACCOUNT 2013A 2014E 2015E 2016E 2013A 2014E 2015E 2016E as a manufacturer and producer of friction materials, for
Total Revenue 717 765 830 923 332 326 315 327 commercial and light vehicles. Its portfolio is composed
YoY change (%) 8.2 6.6 8.5 11.3 (2.0) (1.8) (3.3) 3.6 of: (a) brake linings (commercial vehicles), totaling 57% of
Gross Profit 195 203 231 259 90 87 88 92 revenues; (b) pads and brake shoes (light vehicles),
YoY change (%) 16.0 4.2 13.5 12.3 5.1 (4.1) 1.1 4.5 totaling 28% of revenues; (c) hydraulic brakes and
EBITDA 106 103 121 138 49 44 46 49 polymer solution products for light vehicles, comprising
YoY change (%) 24.9 (2.8) 17.9 14.1 13.2 (10.5) 5.1 6.2 10% of sales; and (d) and other friction materials, adding
As % of Revenue 14.7 13.4 14.6 15.0 14.7 13.4 14.6 15.0 the remaining % of the com any’s revenue. Currently
Operating Income 67 66 84 96 31 28 32 34 the company operates with four industrial units, seven
YoY change (%) 33.5 (2.8) 28.2 14.5 21.0 (10.5) 14.2 6.6
commercial units and three distribution centers around
the globe. In 2013, Fras-le revenue totaled R$717 million
As % of Revenue 9.4 8.6 10.1 10.4 9.4 8.6 10.1 10.4
and net income R$40 million.
Financial Results (17) (10) (14) (16) (8) (4) (5) (6)
Taxes (10) (11) (17) (19) (5) (5) (6) (7) Key Personnel: Pedro Ferro (CEO) and Vanderlei
Net Profit 40 44 53 60 19 19 20 21 Novello (IR Director)
YoY change (%) 61.7 10.8 18.8 13.9 46.5 2.0 5.8 6.1 Web: http://www.frasle.com
As % of Revenue 5.6 5.8 6.3 6.5 5.6 5.8 6.3 6.5
Revenue Breakdown by Vehicle Segment
CASH FLOW 2013A 2014E 2015E 2016E 2013A 2014E 2015E 2016E (2013)
Depreciation & Amortization (37) (37) (37) (42) (17) (16) (14) (15)
Other Noncash Items 0 0 0 0 0 0 0 0
Changes in Working Capital (22) (27) (24) (22) (10) (12) (9) (8)
Controil Other
Operating Cash Flow 84 76 97 116 39 32 37 41 10.0% 5.0%
Capital Expenditures 30 (37) (35) (35) 14 (16) (13) (12)
Free Cash Flow 167 53 46 61 78 23 17 22 Light
Vehicle
Other Invest./(Divestments) - - - - - - - - 28.0%
Change in Debt (36) 3 0 0 (17) 1 0 0
Dividends (12) (16) (16) (18) (6) (7) (6) (6)
Capital Increases/Other 0 0 0 0 0 0 0 0 Heavy
Vehicle
BALANCE SHEET 2013A 2014E 2015E 2016E 2013A 2014E 2015E 2016E
57.0%
Cash and Equivalents 236 258 287 333 101 101 106 113
Current Assets 503 525 584 663 214 206 216 226
Fixed Assets - - - - - - - -
Total Assets 934 950 1,006 1,078 399 372 371 367
Revenue Breakdown by Market (2013)
Current Liabilities 730 761 817 886 311 299 301 301
Long-Term Liabilities 30 31 31 31 13 12 11 11
Shareholders' Equity 395 423 460 502 169 166 170 171
Total Financial Debt 409 399 412 431 174 156 152 147 OEM
ST Debt 75 94 97 101 32 37 36 34 21.1%
LT Debt 334 305 316 330 143 120 116 112
FINANCIAL RATIOS 2013A 2014E 2015E 2016E 2013A 2014E 2015E 2016E
Net Debt 172 141 125 98 74 55 46 33
Capital Employed 568 566 587 603 243 222 217 205
Net Debt/EBITDA 1.6 1.4 1.0 0.7 1.5 1.3 1.0 0.7 Aftermarket
Net Debt/Equity 0.4 0.3 0.3 0.2 0.5 0.4 0.3 0.2 78.9%
Capex/Revenue (%) (4.2) 4.8 4.2 3.8 (4.2) 4.8 4.2 3.8
Int Cover (%) 1.1 1.6 3.8 4.1 1.1 1.6 3.8 4.1
Dividend Payout (%) 49.6 41.1 35.6 34.2 44.9 38.0 31.0 34.2
Shareholder Structure, Current
ROCE (%) 13.6 13.5 17.1 19.2 14.7 15.2 17.1 19.2
ROE (%) 10.5 10.8 11.9 12.5 10.7 11.7 11.9 12.5
MARKET RATIOS 2013A 2014E 2015E 2016E 2013A 2014E 2015E 2016E
P/E 20.1 10.8 9.1 8.0 18.4 9.4 8.9 8.4
P/CE 10.4 5.9 5.3 4.7 9.5 5.1 5.2 4.9
Others
FV/EBITDA 9.3 6.1 5.0 4.2 8.5 5.3 4.9 4.3 53.7%
FV/EBIT 14.5 9.5 7.2 6.0 13.3 8.4 7.1 6.2
FV/Revenue 1.4 0.8 0.7 0.6 1.2 0.7 0.7 0.7
Randon
P/BV 2.0 1.1 1.0 1.0 2.0 1.1 1.1 1.0
46.3%
FCF Yield (%) 20.8 11.1 9.5 12.8 22.8 12.7 9.8 12.2
Div Yield (%) 1.5 3.4 3.3 3.7 1.7 3.9 3.4 3.6
PER SHARE DATA 2013A 2014E 2015E 2016E 2013A 2014E 2015E 2016E
EPS 0.32 0.35 0.42 0.48 0.15 0.15 0.16 0.17 Sources for all charts and tables: Company reports and Santander
estimates.
DPS 0.11 0.09 0.13 0.14 0.05 0.04 0.05 0.05
BVPS 3.16 3.39 3.68 4.02 1.35 1.33 1.36 1.37
81
IOCHPE MAXION HOLD

CURRENT PRICE: R$12.25
LOWERING YE2015 TARGET PRICE TO R$17.50 FROM R$22.50
 Investment Case: We maintain our Hold on Iochpe, given that

financial deleveraging and the margin expansion scenario are taking Daniel Gewehr*
Brazil: Banco Santander S.A.
longer to occur than we expected, leading to a P/E multiple of 14.1x +5511-3012-5787 | dhgewehr@santander.com.br
for 2015E. However, we believe that MYPK3 offers investors (1) Joao Noronha*, CFA
exposure to the global automotive market, through its leadership in Brazil: Banco Santander S.A.
+5511-3012-5734 | jonoronha@santander.com.br
the wheels (globally) and chassis (in the Americas) segments; and
(2) indirect exposure to Brazilian infrastructure growth (wheels and
chassis for heavy vehicles) and railway equipment (~85% of the
transportation matrix).
 Outlook 2015: We anticipate that Iochpe will post an 80-bp

improvement in EBITDA margin to 11.6%, arising from a less volatile
Brazilian market (albeit still slightly negative) and the operating
efficiency measures implemented in 2014. We expect net income to
increase 90% due to the deleveraging process (net debt/EBITDA of
3.0x in 2015E versus 3.6x in 2014E).
 What’s changed: We reduced our 2015 EBITDA estimate by 5%,

due to a tougher environment for domestic operations (~Brazil
re resents 40% of sales). Together ith Ioch e’s leverage, this led
us to lower our 2015 earnings estimate by 44% to R$82 million. We
are 31% below sell-side consensus for 2015 net income. Company Statistics
Bloomberg MYPK3 BZ
 CEO Meeting Highlights. (1) The company targets a medium-term Current Price (12/15/14) R$ 12.25 / US$ 4.56
Target Price (YE 2015) R$ 17.50 / US$ 6.46
normalized EBITDA margin level of 12.5%-13.0%, implying downside
52-Week Range (R$) 12.25 - 26.69
from pre-acquisition estimates of 14-15%. We currently estimate Market Capitalization (US$ Mn) 432
Ioch e’s long-term EBITDA margin at 12.7%. Management’s plans Float (%) 63.7
for the Limeira plant are to offer an alternative to imported aluminum 3-Mth Avg. Daily Vol (US$ Mn) 2.4
Shares Outstanding - Mn 95
wheels. (2) The Limeira plant is set to be operational in 4Q15.
Management believes most of the capacity is already contracted, as Price Performance (R$)
currently 1 million wheels are imported. Of this volume, 30-40% is MYPK3 BZ IBOVESPA
120
imported from Iochpe plants abroad. (3) Europe: Management
expects gradual margin expansion in 2015 through restructuring 100
measures. Turkey has been the outperformer, with a doubling in

80
aluminum capacity (above-average margin vs. the rest of Europe).
Iochpe’s margins have been recovering in Spain (gaining market 60
share in production), Germany, and Italy (new agreement with

40
unions). D-12 A-13 A-13 D-13 A-14 A-14 D-14
Sources: FactSet, Santander estimates and company reports.
82
IOCHPE MAXION
R$ US$ Iochpe-Maxion operates in three main business sectors:
P&L ACCOUNT 2013A 2014E 2015E 2016E 2013A 2014E 2015E 2016E (1) Wheels (supplying steel wheels for light and
Total Revenue 6,126 5,920 6,201 6,527 2,840 2,521 2,358 2,482 commercial vehicles and aluminum wheels for light
YoY change (%) 7.5 (3.4) 4.7 5.3 (2.6) (11.2) (6.5) 5.3 vehicles), accounting for 74% of sales in 2013; (2)
Gross Profit 859 801 835 878 398 341 317 334 Structural components (supplying chassis, sidebars, and
YoY change (%) 49.1 (6.8) 4.2 5.2 35.0 (14.4) (6.9) 5.2 crossbars for commercial vehicles), accounting for 26% of
EBITDA 680 642 719 774 315 273 273 294 2013 sales; Railway equipment (manufacturing railcars,
YoY change (%) 50.4 (5.6) 11.9 7.8 36.3 (13.2) (0.0) 7.8 wheels, and castings) now consolidated through equity
As % of Revenue 11.1 10.8 11.6 11.9 11.1 10.8 11.6 11.9 income. The external market accounted for ~61% of
Operating Income 467 404 459 500 217 172 175 190
Ioch e’s 2013 sales, ith the com any selling its products
in over 40 countries. In October 2011, Iochpe acquired
YoY change (%) 67.8 (13.6) 13.7 8.8 52.0 (20.6) 1.5 8.8
two companies: Hayes Lemmerz (a manufacturer of
As % of Revenue 7.6 6.8 7.4 7.7 7.6 6.8 7.4 7.7
aluminum and steel wheels in Europe) and Galaz (a
Financial Results (213) (240) (237) (203) (99) (102) (90) (77)
Mexican producer of steel-based side rails for commercial
Taxes (29) (73) (78) (98) (14) (31) (30) (37) vehicles), doubling its revenue (2011 pro forma of R$6.3
Net Profit 170 43 82 125 79 18 31 47 billion). Iochpe is listed on the Novo Mercado.
YoY change (%) 154.7 (74.6) 90.1 51.3 130.8 (76.6) 69.8 51.3
As % of Revenue 2.8 0.7 1.3 1.9 2.8 0.7 1.3 1.9
Key Personnel: Dan Ioschpe (Chairman), Marcos
Oliveira (CEO), Oscar Fontoura Becker (CFO) and Luis
CASH FLOW 2013A 2014E 2015E 2016E 2013A 2014E 2015E 2016E Fernando Abreu (IR Director)
Depreciation & Amortization (212) (238) (259) (275) (98) (101) (99) (104) Web: www.iochpe-maxion.com.br
Changes in Working Capital (33) (127) (29) (38) (15) (54) (11) (14) Sales by Segment, 2013
Operating Cash Flow 647 515 690 737 300 219 262 280
Capital Expenditures (249) (267) (237) (248) (116) (114) (90) (94) Structural
Free Cash Flow 536 377 381 391 248 161 145 149 Component
Other Invest./(Divestments) - - - - - - - - s
Wheels 23.6%
Change in Debt (86) 74 0 0 (40) 32 0 0 (Aluminum)
Dividends 0 (16) (30) (46) 0 (7) (12) (18) 22.0%
Capital Increases/Other 0 0 0 0 0 0 0 0
Current Assets 2,219 2,161 2,446 2,726 947 848 902 927 Wheels
Fixed Assets 3,662 3,692 3,670 3,644 1,563 1,448 1,354 1,239 (Steel)
54.4%
Total Assets 6,036 5,946 6,209 6,462 2,576 2,332 2,291 2,198
Current Liabilities 1,834 1,962 2,065 2,110 783 769 762 718
Long-Term Liabilities 2,756 2,486 2,525 2,580 1,176 975 932 878
Shareholders' Equity 1,221 1,279 1,331 1,409 521 501 491 479
Total Financial Debt 2,773 2,870 2,909 2,964 1,184 1,126 1,073 1,008 Sales by Region, 2013
ST Debt 712 959 959 959 304 376 354 326
LT Debt 2,061 1,911 1,949 2,005 880 749 719 682 Asia +
Others
FINANCIAL RATIOS 2013A 2014E 2015E 2016E 2013A 2014E 2015E 2016E Europe 6.6%
Net Debt 2,111 2,281 2,152 1,995 901 894 794 678 30.9%
Capital Employed 3,556 3,779 3,771 3,767 1,518 1,482 1,392 1,281
Net Debt/EBITDA 3.1 3.6 3.0 2.6 2.9 3.3 2.9 2.3
Net Debt/Equity 1.7 1.8 1.6 1.4 1.9 2.1 1.6 1.4
Capex/Revenue (%) 4.1 4.5 3.8 3.8 4.1 4.5 3.8 3.8 South
America
Int Cover (%) 3.0 2.2 1.9 1.9 3.0 2.2 1.9 1.9 North
38.6%
America
Dividend Payout (%) 0.0 9.4 70.4 56.0 0.0 8.7 61.2 56.0 23.9%
ROCE (%) 14.0 12.6 14.2 15.9 15.2 14.2 14.2 15.9
ROE (%) 16.0 3.5 6.3 9.1 16.4 3.7 6.3 9.1
MARKET RATIOS 2013A 2014E 2015E 2016E 2013A 2014E 2015E 2016E Shareholder Structure, Current
P/E 14.6 26.8 14.1 9.3 13.3 23.4 13.8 9.1
P/CE 6.5 4.1 3.4 2.9 5.9 3.6 3.3 2.8
FV/EBITDA 7.4 5.7 5.0 4.5 6.8 5.1 4.8 4.1
Ioschpe
FV/EBIT 10.8 9.0 7.8 6.9 9.9 8.1 7.6 6.4 Family
FV/Revenue 0.8 0.6 0.6 0.5 0.8 0.6 0.6 0.5 25.2%
P/BV 2.0 0.9 0.9 0.8 2.0 0.9 0.9 0.9 Free-float
68.1%
FCF Yield (%) 21.6 32.4 32.8 33.6 23.6 37.2 33.5 34.4
Div Yield (%) (0.0) 1.4 2.6 4.0 (0.0) 1.6 2.7 4.1
BNDESPar
PER SHARE DATA 2013A 2014E 2015E 2016E 2013A 2014E 2015E 2016E 6.8%
EPS 1.80 0.46 0.87 1.31 0.83 0.19 0.33 0.50
DPS 0 0.17 0.32 0.49 0 0.07 0.12 0.18
BVPS 12.87 13.48 14.03 14.85 5.49 5.29 5.18 5.05
Sources for all charts and tables: Company reports and Santander
estimates.
83
MAHLE METAL LEVE BUY

RELIABLE ENGINE FOR A CYCLICAL ENVIRONMENT CURRENT PRICE: R$20.76
 Investment Case: We reiterate LEVE3 as our Top Pick in the

capital goods universe, based on a large market share sustained Daniel Gewehr*
by technology. Mahle’s market share has been above 80% in +5511-3012-5787 | dhgewehr@santander.com.br
bearings and piston rings in the Brazilian OEM market and above Joao Noronha*, CFA
70% in the domestic aftermarket. The company has a good level of +5511-3012-5734 | jonoronha@santander.com.br
diversification and is a less cyclical player than others in our universe,
with more than 60% of sales not exposed to new domestic vehicle
production (coming instead from exports and aftermarket). The
current dividend yield of 8% and 2015E P/E of 12.3x (with an
expected 15.3% 2015E ROE) are a good carry, in our view, while still
offering investors exposure to automotive market trends.
 Outlook 2015: We expect 2015 to be a challenging year for

domestic OEM production (~ -4% in production). In our view, Mahle
should outperform market growth in 2015 due to its alignment with
automotive trends (potential new orders arising from Inovar Auto).
 What’s changed? Following 2014 results, we became more

conservative regarding volumes and margins into 2015. As a
consequence, we lowered our revenue forecast by 3%, while
reducing EBITDA and net income by 3% and 2%, respectively. We
Company Statistics
are 4% above consensus in terms of 2015E net income. Bloomberg LEVE3 BZ
Current Price (12/15/14) R$ 20.76 / US$ 7.72
 Innovation Day Highlights. Positive. During the meeting, top Target Price (YE 2015) R$ 25.00 / US$ 9.23
52-Week Range (R$) 20.01 - 27.45
management took the opportunity to discuss major trends in the
automotive industry (lighter and smaller engines) and how R&D Float (%) 30.0
investment, which we expect to continue at 3% of sales, should play 3-Mth Avg. Daily Vol (US$ Mn) 1.2
Shares Outstanding - Mn 128
a major role in sustaining Mahle’s com etitive ositioning. The
domestic aftermarket should rea the benefits of the ast years’ Price Performance (R$)
boom in auto sales (2006-2013 CAGR of 8%), as Mahle’s current LEVE3 BZ IBOVESPA
120
addressable domestic aftermarket makes up only 34% of the fleet
110
(that is, older than 11 years). Ongoing efficiency programs were also
discussed at the meeting, and management expects them to 100
contribute 1-2% to margins. For more on Mahle trends, please see 90
our November 24 note, Germany Auto Trip: Takeaways from 80
Meetings at Mahle and Daimler Headquarters. 70

D-12 A-13 A-13 D-13 A-14 A-14 D-14
84
MAHLE METAL LEVE
R$ US$ MAHLE Metal Leve is part of a worldwide group (MAHLE)
P&L ACCOUNT 2013A 2014E 2015E 2016E 2013A 2014E 2015E 2016E manufacturer well known as a producer of pistons and its
Total Revenue 2,394 2,322 2,410 2,545 1,109 991 916 901 components, filters systems and other parts for engines.
YoY change (%) 7.4 (3.0) 3.8 5.6 (2.7) (10.7) (7.5) (1.7) MAHLE Metal Leve SA (MML) is controlled by MAHLE
Gross Profit 662 624 631 680 307 266 240 241 Indústria e Comércio Ltda (60.8%) and by MAHLE GmbH
YoY change (%) 12.1 (5.8) 1.1 7.8 1.6 (13.3) (9.9) 0.3 (9.2%), with 30.0% of free float, being the Latin America
EBITDA 426 402 417 453 198 172 158 160 arm with operations in Brazil and Argentina. In 2013,
YoY change (%) 11.8 (5.6) 3.6 8.7 1.3 (13.1) (7.7) 1.2 produced more than 74,000 different products that could
As % of Revenue 17.8 17.3 17.3 17.8 17.8 17.3 17.3 17.8 be categorized in two main lines: pistons (and their
components), which is responsible for around 87% of total
revenues and filter systems, accounting for the other
YoY change (%) 15.4 (6.8) (0.8) 10.5 4.6 (14.2) (11.6) 2.9
13%. Sales are spread around the globe in the main
As % of Revenue 13.0 12.5 11.9 12.5 13.0 12.5 11.9 12.5
automotive markets, selling to OEMs and in the after-
Financial Results (33) (17) 5 9 (15) (7) 2 3
market. Company shares, LEVE3, are listed on
Taxes (85) (79) (76) (83) (39) (34) (29) (29) Bovespa´s Novo Mercado, highest level of corporate
Net Profit 201 198 216 242 93 84 82 86 governance since Aug-2011.
YoY change (%) 12.5 (2.0) 9.4 12.2 1.9 (9.7) (2.5) 4.4
As % of Revenue 8.4 8.5 9.0 9.5 8.4 8.5 9.0 9.5
Key Personnel: Claus Hoppen (CEO) and Caio
Gonçalves de Moraes (CFO)
CASH FLOW 2013A 2014E 2015E 2016E 2013A 2014E 2015E 2016E Web: http://www.br.mahle.com
Other Noncash Items 0 0 0 0 0 0 0 0 Revenue Breakdown by Product Category
Changes in Working Capital (82) (41) (25) (21) (38) (18) (9) (7) (2013)
Operating Cash Flow 344 361 392 432 160 154 149 153
Capital Expenditures (115) (91) (116) (121) (53) (39) (44) (43)
Free Cash Flow 303 264 200 228 140 113 76 81 Filters
Other Invest./(Divestments) - - - - - - - - 13.2%
Change in Debt 10 43 0 0 4 18 0 0
Dividends (167) (176) (207) (194) (77) (75) (79) (69)
Current Assets 1,014 1,153 1,196 1,270 433 452 441 432 Engine
Fixed Assets - - - - - - - - Component
Total Assets 2,428 2,553 2,583 2,644 1,036 1,001 953 899 s
86.8%
Shareholders' Equity 1,376 1,405 1,414 1,462 587 551 522 497 Revenue Breakdown by Region (2013)
Total Financial Debt 488 523 519 516 208 205 192 175
ST Debt 74 132 131 130 32 52 48 44
LT Debt 414 391 389 386 177 153 143 131 South
America Others
Europe
7.9% 2.8%
FINANCIAL RATIOS 2013A 2014E 2015E 2016E 2013A 2014E 2015E 2016E Central 15.8%
and North
Net Debt 267 143 145 102 114 56 53 35
America
Capital Employed 1,642 1,566 1,578 1,585 701 614 582 539 13.9%
Net Debt/EBITDA 0.6 0.4 0.3 0.2 0.6 0.3 0.3 0.2
Net Debt/Equity 0.2 0.1 0.1 0.1 0.2 0.1 0.1 0.1
Capex/Revenue (%) 4.8 3.9 4.8 4.8 4.8 3.9 4.8 4.8 Domestic
Int Cover (%) 3.6 4.0 10.3 11.3 3.6 4.0 10.3 11.3 Market
59.6%
Dividend Payout (%) 93.3 87.2 105.1 89.7 84.5 80.5 91.4 89.7
ROCE (%) 24.1 23.6 23.0 25.3 25.9 26.4 23.0 25.3
ROE (%) 14.8 14.2 15.3 16.9 15.0 15.3 15.3 16.9
Shareholder Structure, Current
P/E 17.4 13.5 12.3 11.0 16.0 11.8 12.1 11.5
P/CE 11.1 8.6 7.7 7.1 10.2 7.5 7.6 7.4
Free Float
FV/EBITDA 8.9 7.1 6.8 6.2 8.1 6.2 6.7 6.5 30.0%
FV/EBIT 12.1 9.8 9.9 8.8 11.1 8.6 9.7 9.2
FV/Revenue 1.6 1.2 1.2 1.1 1.4 1.1 1.2 1.2
P/BV 2.6 1.9 1.9 1.8 2.5 1.8 1.9 2.0
FCF Yield (%) 8.6 9.9 7.5 8.6 9.4 11.4 7.7 8.1
Div Yield (%) 4.8 6.6 7.8 7.3 5.2 7.6 8.0 6.9
Controlling
Group
EPS 1.57 1.54 1.68 1.89 0.73 0.66 0.64 0.67 70.0%
DPS 1.56 0.51 1.62 1.51 0.72 0.22 0.61 0.54
BVPS 10.72 10.95 11.02 11.40 4.58 4.29 4.07 3.88
estimates.
85
MARCOPOLO BUY
DRIVING FORWARD: MAIN BUMP IS BEHIND CURRENT PRICE: R$3.56
 Investment Case: With Marco olo’s (1) high and stable market
Daniel Gewehr*
share (approximately 45% in Brazil, arising from premium
positioning), (2) attractive ROE (2014E-17E average of 18%), and (3) +5511-3012-5787 | dhgewehr@santander.com.br
returns-oriented management profile (based on CFROGI—cash flow Joao Noronha*, CFA

return on gross investment metrics), we believe Marcopolo is an +5511-3012-5734 | jonoronha@santander.com.br
attractive long-term vehicle to play the mass transportation market in
Brazil. Following the sharp 33% correction in LTM, we are keeping
our Buy rating as a value call (the company is trading below its
earnings power value, which in our view is ~R$4.30).
 Outlook 2015: Despite lower economic visibility in 2015, we believe

net income for 2015 can be better than 2014 (R$275 million versus
R$220 million), due to: (a) higher equity income from New Flyer, (b)
potential recovery of urban and interstate lines; especially the former,
as 2016 is a year of municipal elections; (c) end of nonrecurring
learning curve and turnaround of Mexico, Australia, and Ciferal,
which we estimate consumed ~R$25 million; and (d) exports
expected to recover, with good mix and Reintegra credits.
 Main changes: We are reducing our 2015 EPS estimates by 5%, a

Company Statistics
consequence of a lower top-line forecast (school bus program). Our
Bloomberg POMO4 BZ
bottom-line estimate is currently 4% above consensus. Current Price (12/15/14) R$ 3.56 / US$ 1.32
 European CEO Road Show Highlights: What we liked: (1) aligned 52-Week Range (R$) 3.56 - 5.30
Market Capitalization (US$ Mn) 1,188
management: one third of variable remuneration is paid in POMO
Float (%) 72.0
shares, vesting one third per year; and (2) EBITDA margin to 3-Mth Avg. Daily Vol (US$ Mn) 5.2
increase sequentially—internal target maintained at 12% per year in Shares Outstanding - Mn 897
medium-term. What we did not like: international market margins

Price Performance (R$)
continue to lag (Brazil should continue to outperform in the future). POMO4 BZ IBOVESPA
120
 Company with a clear competitive advantage: POMO’s (1) scale, 110
100
(2) higher resale prices, (3) customization, and (4) brand awareness
90
allow the company to charge premium prices and resulted in 80
consistent returns in recent years (16-23% ROIC range). We 70
continue to like the com any’s ca ital disci line, hich should sustain 60
50
its valuation at a premium to peers in the long run, in our view. D-12 A-13 A-13 D-13 A-14 A-14 D-14
86
MARCOPOLO
R$ US$ Founded in 1949, Marcopolo is the market leader of bus-
P&L ACCOUNT 2013A 2014E 2015E 2016E 2013A 2014E 2015E 2016E body manufacturing in Brazil, with a 39.8% market share.
Total Revenue 3,659 3,433 3,619 3,899 1,696 1,462 1,376 1,380 It is also one of the orld’s largest manufacturers, ith a
YoY change (%) (4.1) (6.2) 5.4 7.7 (13.2) (13.8) (5.9) 0.3 market share of 8% in passenger mass transit solutions.
Gross Profit 731 601 645 720 339 256 245 255 The company has a global presence, posting sales to
YoY change (%) (5.9) (17.7) 7.3 11.6 (14.7) (24.4) (4.2) 3.9 more than 100 countries throughout the world. Marcopolo
EBITDA 410 292 352 396 190 125 134 140 has four plants in Brazil and eight plants abroad, as well
YoY change (%) (4.7) (28.7) 20.4 12.5 (13.7) (34.5) 7.5 4.7 as a bank (Banco Moneo), which finances sales in the
As % of Revenue 11.2 8.5 9.7 10.2 11.2 8.5 9.7 10.2 domestic market. In 2013, the com any’s net sales,
EBITDA, and net income reached R$3.7 billion, R$410
million (ex-equity income), and R$292 million,
YoY change (%) (3.1) (32.9) 17.0 12.1 (12.2) (38.4) 4.4 4.4
res ectively. Marco olo has been listed on the Boves a’s
As % of Revenue 10.1 7.2 8.0 8.3 10.1 7.2 8.0 8.3
Level 2 since 2002, offering 100% tag-along rights in ON
Financial Results (5) 9 15 7 (2) 4 6 2
shares and 80% in PN shares.
Taxes (98) (64) (74) (80) (45) (27) (28) (28)
Net Profit 292 220 275 301 135 94 104 107 Key Personnel: José Rubens de La Rosa (CEO), José
YoY change (%) (3.4) (24.8) 25.0 9.6 (12.5) (30.9) 11.6 2.1 Antonio Valiati (CFO), José Antonio Valiati (IR Officer)
As % of Revenue 8.0 6.4 7.6 7.7 8.0 6.4 7.6 7.7
and Thiago Deiro (IR Manager)
Web: www.marcopolo.com.br
CASH FLOW 2013A 2014E 2015E 2016E 2013A 2014E 2015E 2016E
Sales by Segment, 2013
Changes in Working Capital (224) 15 (63) (43) (104) 6 (24) (15)
Operating Cash Flow 186 307 289 353 86 131 110 125 Parts and
Capital Expenditures (300) (107) (127) (101) (139) (46) (48) (36) Others
Volare 9.9%
Free Cash Flow (25) 249 132 221 (11) 106 50 78 22.8%
Other Invest./(Divestments) - - - - - - - - Micros
Change in Debt 573 182 0 0 266 78 0 0 and Intercity
Dividends (144) (110) (137) (151) (67) (47) (52) (53) Minis 35.0%
3.2%
Urban
29.1%
Current Assets 2,525 2,766 2,906 3,060 1,078 1,085 1,072 1,041
Fixed Assets 978 1,068 1,133 1,164 417 419 418 396
Total Assets 4,118 4,485 4,689 4,874 1,758 1,759 1,730 1,658
Long-Term Liabilities 1,529 1,662 1,657 1,652 652 652 612 562 Production Volume by Country, 2013
Total Financial Debt 1,836 2,013 2,008 2,001 784 790 741 681 South Africa
ST Debt 368 411 410 409 157 161 151 139 1.3% Mexico Australia
LT Debt 1,469 1,602 1,598 1,592 627 628 590 542 6.6% 2.6%
Net Debt 411 164 128 37 175 64 47 13
Capital Employed 1,945 1,697 1,798 1,858 830 666 663 632
Net Debt/EBITDA 1.0 0.6 0.4 0.1 0.9 0.5 0.4 0.1
Net Debt/Equity 0.3 0.1 0.1 0.0 0.3 0.1 0.1 0.0
Brazil
Capex/Revenue (%) 8.2 3.1 3.5 2.6 8.2 3.1 3.5 2.6 89.5%
Int Cover (%) 7.4 4.4 2.6 2.9 7.4 4.4 2.6 2.9
Dividend Payout (%) 47.7 37.6 62.5 54.8 43.2 34.7 54.4 54.8
ROCE (%) 24.1 18.4 20.2 21.8 25.8 20.5 20.2 21.8
ROE (%) 20.7 14.5 17.4 17.5 21.2 15.6 17.4 17.5 Shareholder Structure, Current
MARKET RATIOS 2013A 2014E 2015E 2016E 2013A 2014E 2015E 2016E Foreign
P/E 15.7 14.5 11.6 10.6 14.3 12.7 11.4 11.1 Shareholder Controlling
s Treasury Shareholder
P/CE 13.8 12.1 9.5 8.6 12.6 10.6 9.3 9.0 s
35.3% 0.2%
FV/EBITDA 12.3 11.6 9.6 8.3 11.2 10.2 9.3 8.7 25.3%
FV/EBIT 13.6 13.7 11.6 10.0 12.5 12.0 11.3 10.5
FV/Revenue 1.4 1.0 0.9 0.8 1.3 0.9 0.9 0.9
P/BV 3.0 2.1 1.9 1.8 3.0 2.0 2.0 1.9
FCF Yield (%) (0.5) 7.8 4.1 6.9 (0.6) 8.9 4.2 6.6
Div Yield (%) 3.2 3.4 4.3 4.7 3.4 3.9 4.4 4.5 Shareholder
s in Brazil
PER SHARE DATA 2013A 2014E 2015E 2016E 2013A 2014E 2015E 2016E 39.2%
EPS 0.33 0.24 0.31 0.34 0.15 0.10 0.12 0.12
DPS 0 0.12 0.15 0.17 0 0.05 0.06 0.06 Sources for all charts and tables: Company reports and Santander
BVPS 1.69 1.69 1.84 2.01 0.72 0.66 0.68 0.68 estimates.
87
RANDON BUY
 Investment case: We see Randon (trading at a 40% discount to

Daniel Gewehr*
peers) as a good value way to play the long-term growth in the
Brazilian transportation and logistics industry: road dominance in +5511-3012-5787 | dhgewehr@santander.com.br
transportation matrix, with an aging truck fleet. While the company is Joao Noronha*, CFA
the most exposed of those in our universe to the domestic economy +5511-3012-5734 | jonoronha@santander.com.br
(88% of sales are in Brazil), we like its solid vertical integration
strategy, improving long-term EBITDA margins (average of ~14%
through 2025E), and ROE (we estimate an average of 14% for 2015-
17). We like management’s focus on higher free cash flo in recent
years and believe it is key to restoring confidence in the shares.
 Outlook 2015, a tough year ahead: We expect the domestic heavy

vehicle segment to face a challenging 2015. Our estimates point to a
6% decline in new truck production, driven by (1) declining grain
prices and pressured agribusiness margins, (2) business confidence
close to historical lows (we see this as a major driver for truck sales),
and (3) industrial production expected to decline 0.3%.
 Railcar business to partially offset truck business. We expect

sales to continue at the healthy level of ~1,300 units per year, driven
Company Statistics
by fleet expansion and renewals in the domestic market. We believe
Bloomberg RAPT4 BZ
margins are up to 300 bps higher in this segment (vs. truck trailers), Current Price (12/15/14) R$ 4.98 / US$ 1.85
which should help the company sustain profitability in 2015. Target Price (YE 2015) R$ 8.00 / US$ 2.95
52-Week Range (R$) 4.98 - 9.19
 What has changed? We reduced our 2015E sales estimate by
Float (%) 55.0
3.2% to R$3.9 billion (quasi-flat YoY growth), while trimming our 3-Mth Avg. Daily Vol (US$ Mn) 3.1
EBITDA margin by 50 bps to 12.7% (we see the poorer truck trailer Shares Outstanding - Mn 305
mix partially offset by cost-cutting measures and railcar demand).

Our forecast points to net profit of R$173 million (-7.2% YoY). RAPT4 BZ IBOVESPA
120
 Focus on costs. We like the com any’s efforts on cost reduction: (1)
100
Randon recently hired McKinsey to reduce raw material expenditures
(aiming at a 1.5-2.0% in cost reduction), and (2) Randon intends to 80
save R$60 million next year as the group’s shared purchase center 60
begins to be put into use.

40
D-12 A-13 A-13 D-13 A-14 A-14 D-14
88
RANDON
R$ US$ Randon produces a wide range of truck trailers and auto
P&L ACCOUNT 2013A 2014E 2015E 2016E 2013A 2014E 2015E 2016E components for heavy vehicles, such as suspension
Total Revenue 4,253 3,732 3,877 4,226 1,971 1,593 1,474 1,496 systems and brake pads, among other items. It is one of
YoY change (%) 21.5 (12.2) 3.9 9.0 10.0 (19.2) (7.4) 1.5 the 10 largest manufacturers of truck trailers in the world,
Gross Profit 1,040 927 919 998 482 396 350 353 with production of 25.4 thousand trailers in 2013. It also
YoY change (%) 42.0 (10.8) (0.9) 8.6 28.6 (17.9) (11.7) 1.1 manufactures off-road dump trucks, backhoes and forest
EBITDA 564 485 493 579 261 207 187 205 harvesters. The company has an important export base,
YoY change (%) 101.3 (14.0) 1.6 17.5 82.3 (20.9) (9.4) 9.4 shipping its products to more than 100 countries, which
As % of Revenue 13.3 13.0 12.7 13.7 13.3 13.0 12.7 13.7 re resented 12.0% of 2013 sales. Randon’s sales
increased from R$613 million in 2000 to R$4.250 million
in 2013 Randon is listed on Level 1 of the BM&F
YoY change (%) 165.9 (18.9) (1.0) 21.7 140.8 (25.3) (11.8) 13.3
Bovespa.
As % of Revenue 10.5 9.7 9.2 10.3 10.5 9.7 9.2 10.3
Financial Results (35) (51) (67) (60) (16) (22) (25) (21) Key Personnel: David Randon (CEO), Daniel Randon
Taxes (105) (80) (76) (92) (49) (34) (29) (33) (CFO) and Geraldo Santa Catharina (IR Director and
Net Profit 235 187 173 236 109 80 66 83 Treasurer)
YoY change (%) 452.3 (20.5) (7.2) 36.0 400.3 (26.8) (17.3) 26.6 Web: www.randon.com.br
As % of Revenue 5.5 5.0 4.5 5.6 5.5 5.0 4.5 5.6
Sales by Segment (2013)
Other Noncash Items 257 39 (12) (13) 119 17 (4) (4)
Changes in Working Capital (280) 49 13 (86) (130) 21 5 (30) Services
Operating Cash Flow 284 534 506 493 131 228 192 175 1.8%
Auto Parts
Capital Expenditures (584) (104) (146) (159) (271) (44) (56) (56) 45.4%
Free Cash Flow 65 389 272 229 30 166 103 81
Other Invest./(Divestments) - - - - - - - -
Change in Debt 650 (207) 0 0 301 (88) 0 0
Dividends (56) (126) (52) (236) (26) (54) (20) (83)
Vehicles
52.8%
Cash and Equivalents 1,414 1,344 1,532 1,518 603 527 565 516
Current Assets 3,031 2,946 3,149 3,272 1,294 1,155 1,162 1,113
Fixed Assets 1,500 1,479 1,491 1,507 640 580 550 513
Total Assets 4,907 4,810 5,048 5,216 2,094 1,886 1,863 1,774 EBITDA by Segment (2013)
Current Liabilities 4,777 4,248 3,867 4,090 2,039 1,666 1,427 1,391
Long-Term Liabilities 2,110 2,089 2,127 2,184 900 819 785 743
Services
Total Financial Debt 2,606 2,439 2,474 2,527 1,112 956 913 860 3.9%
ST Debt 545 404 404 404 233 158 149 137
LT Debt 2,061 2,035 2,070 2,123 879 798 764 722 Auto Parts
54.0%
Net Debt 1,192 1,095 942 1,009 509 429 348 343
Capital Employed 2,835 2,885 2,884 2,986 1,210 1,131 1,064 1,016 Vehicles
42.1%
Net Debt/EBITDA 2.1 2.3 1.9 1.7 1.9 2.1 1.9 1.7
Net Debt/Equity 0.9 0.8 0.6 0.6 1.0 0.9 0.6 0.6
Capex/Revenue (%) 13.7 2.8 3.8 3.8 13.7 2.8 3.8 3.8
Int Cover (%) 1.7 1.8 2.5 3.1 1.7 1.8 2.5 3.1
Dividend Payout (%) 131.6 53.6 27.8 136.0 119.2 49.5 24.2 136.0 Shareholder Structure, Current
ROCE (%) 19.5 15.3 15.1 17.7 20.9 17.2 15.1 17.7
ROE (%) 17.4 13.4 11.5 15.0 17.6 14.4 11.5 15.0
Foreign
Corporate Investors Treasury
MARKET RATIOS 2013A 2014E 2015E 2016E 2013A 2014E 2015E 2016E 15.6% 1.1%
Individuals 0.9%
P/E 9.4 8.1 8.8 6.4 8.6 7.1 8.6 6.8 7.1%
P/CE 6.3 4.9 4.9 4.0 5.7 4.3 4.8 4.2
FV/EBITDA 6.9 6.1 5.7 5.0 6.4 5.4 5.6 5.1
FV/EBIT 8.8 8.2 7.9 6.7 8.0 7.3 7.7 6.8
FV/Revenue 0.9 0.8 0.7 0.7 0.8 0.7 0.7 0.7 Randon
Institutional
P/BV 1.7 1.0 1.0 1.0 1.6 1.0 1.0 1.1 Investors Family
34.7% 40.6%
FCF Yield (%) 2.9 25.7 17.9 15.1 3.2 29.4 18.3 14.4
Div Yield (%) 2.5 8.3 3.4 15.5 2.8 9.5 3.5 14.8
EPS 0.98 0.61 0.57 0.77 0.45 0.26 0.22 0.27 estimates.
DPS 0.24 0.28 0.17 0.77 0.11 0.12 0.06 0.27
BVPS 5.55 4.76 5.16 5.16 2.37 1.87 1.90 1.75
89
ROMI BUY
 Investment Case: We see Romi as a deep value play in our capital

Daniel Gewehr*
goods coverage with 76% DCF upside, despite the slow momentum
in the short term (driven by weak and declining domestic industrial +5511-3012-5787 | dhgewehr@santander.com.br
production, which our economists forecast -0.3% in 2015). We Joao Noronha*, CFA
ex ect Romi’s FCFE to yield 17% in 2015 following the successful +5511-3012-5734 | jonoronha@santander.com.br
turnaround management has implemented since 2012, which
resulted in an ~800-bp recovery in EBITDA margin to ~7% in 2014E.
 Outlook 2015: We see declining volumes for domestic machine

tools (market to remain close to trough, selling only replacements
des ite Brazil’s average machine fleet age of 17 years). Castings
should improve on potential new orders in renewable energy. We
expect FX to help competitiveness. We forecast a consolidated
EBITDA margin of ~9% in 2015. Romi had ~R$8 million in
nonrecurring expenses during 2014.
 Main changes. We revised our estimates downward, reflecting a

weak expected 2015 in terms of industrial production growth.
According to management, backlog building has been weak in the
final months of the year, which could reduce visibility regarding
Company Statistics
revenue in 2015. We lowered our 2015 EBITDA estimate by 20%, to
Bloomberg ROMI3 BZ
R$62 million (we are 16% below consensus), which materially Current Price (12/15/14) R$ 3.10 / US$ 1.15
reduced our net income estimate to R$17 million from R$34 million. Target Price (YE 2015) R$ 5.50 / US$ 2.03
52-Week Range (R$) 3.06 - 6.80
 Focus on profitability and cash generation. Management has an
Float (%) 30.0
internal target of running at a 15% EBITDA margin (with no 3-Mth Avg. Daily Vol (US$ Mn) 0.2
established timeline) and plans to invest more in productivity. We Shares Outstanding - Mn 72
work with an average 13.0% margin.

ROMI3 BZ IBOVESPA
 Hidden value remains? Romi has property for future rental income 140
and capital appreciation, booked at a cost of R$16 million on the

120
balance sheet, that has market value appraisals of R$142 million
(~60% of market cap), which we view as an upside call. 100
80
60
D-12 A-13 A-13 D-13 A-14 A-14 D-14
90
ROMI
R$ US$ Romi is Brazil’s largest roducer of machine tools and
P&L ACCOUNT 2013A 2014E 2015E 2016E 2013A 2014E 2015E 2016E plastic injection molding machines. It is also becoming an
Total Revenue 667 645 668 714 309 275 254 253 important player in the rough and machined castings
YoY change (%) 8.1 (3.3) 3.5 6.9 (2.1) (11.0) (7.8) (0.4) segment. Founded in 1930, Romi currently has 11
Gross Profit 193 172 182 209 90 74 69 74 production facilities, 9 of which are located in the city of
YoY change (%) 46.6 (10.8) 5.8 14.8 32.8 (17.9) (5.7) 6.9 Santa Bárbara D’Oeste (130 km from the city of São
EBITDA 67 48 62 79 31 20 24 28 Paulo). In 2013, machine tools accounted for 71.3% of
YoY change (%) n/m (28.3) 29.2 28.5 n/m (34.0) 15.2 19.6 revenue, followed by plastic molding machines (12.2%),
As % of Revenue 10.0 7.4 9.3 11.1 10.0 7.4 9.3 11.1 and castings (16.6%). Romi is listed under the Boves a’s
Novo Mercado level of corporate governance. The
external market accounted for 23.9% of the R$667 million
YoY change (%) n/m (62.2) 74.8 79.2 n/m (65.2) 55.8 66.8
in total revenue reported in 2013, with products sold in
As % of Revenue 4.5 1.8 3.0 5.0 4.5 1.8 3.0 5.0
over 30 countries.
Financial Results 4 (0) 3 13 2 (0) 1 4
Taxes (8) (3) (6) (12) (4) (1) (2) (4) Key Personnel: Livaldo Aguiar dos Santos (CEO),
Net Profit 26 8 17 36 12 3 6 13 Luiz Cassiano Rosolen (CFO) and Fabio Taiar (IR
YoY change (%) n/m (71.0) 123.3 115.0 n/m (73.3) 99.0 100.2 Officer)
As % of Revenue 3.9 1.2 2.5 5.1 3.9 1.2 2.5 5.1 Web: www.romi.com.br
Sales by Region, 2013
Other Noncash Items (1) (3) 0 0 (1) (1) 0 0
Changes in Working Capital 43 22 2 (7) 20 9 1 (3) External
Operating Cash Flow 105 65 61 72 49 28 23 26 Market
Capital Expenditures (26) (30) (23) (25) (12) (13) (9) (9) 23.9%
Free Cash Flow 72 24 35 35 34 10 13 12
Other Invest./(Divestments) 0 0 0 0 0 0 0 0
Change in Debt (26) 11 0 0 (12) 5 0 0
Dividends (1) (1) (5) (13) (0) (1) (2) (5)
Capital Increases/Other 0 (3) 0 0 0 (1) 0 0
BALANCE SHEET 2013A 2014E 2015E 2016E 2013A 2014E 2015E 2016E Internal
Cash and Equivalents 107 130 163 199 46 51 60 68 Market
76.1%
Current Assets 785 733 822 871 335 288 303 296
Fixed Assets 344 340 322 303 147 133 119 103
Total Assets 1,421 1,297 1,402 1,436 607 509 517 488
Current Liabilities 98 143 149 155 42 56 55 53 Sales by Segment, 2013
Shareholders' Equity 648 647 659 683 277 254 243 232
Total Financial Debt 203 213 214 215 87 83 79 73 Plastic Castings
ST Debt 54 100 100 101 23 39 37 34 Machines 16.5%
LT Debt 149 113 113 114 63 44 42 39 12.2%
Net Debt 96 83 50 16 41 32 19 5
Capital Employed 746 732 710 700 318 287 262 238
Net Debt/EBITDA 1.4 1.7 0.8 0.2 1.3 1.6 0.8 0.2
Machine
Net Debt/Equity 0.1 0.1 0.1 0.0 0.2 0.1 0.1 0.0 Tools
Capex/Revenue (%) 3.8 4.7 3.5 3.5 3.8 4.7 3.5 3.5 71.3%
Int Cover (%) 3.1 3.1 4.2 5.4 3.1 3.1 4.2 5.4
Dividend Payout (%) (1.4) 4.8 64.7 77.5 (1.3) 4.4 56.3 77.5
ROCE (%) 5.2 2.0 3.6 6.9 5.5 2.3 3.6 6.9 Shareholder Structure, Current
ROE (%) 4.0 1.2 2.6 5.4 4.1 1.2 2.6 5.4
P/E 16.5 29.6 13.2 6.2 15.1 25.8 13.0 6.5
Free-float
P/CE 6.8 5.1 3.8 2.8 6.3 4.4 3.7 2.9 48.5%
FV/EBITDA 7.8 6.4 4.4 3.0 7.2 5.7 4.3 3.1
FV/EBIT 17.3 26.7 13.7 6.7 15.8 23.6 13.3 7.0
FV/Revenue 0.8 0.5 0.4 0.3 0.7 0.4 0.4 0.3
P/BV 0.7 0.3 0.3 0.3 0.7 0.3 0.3 0.4
Romi and
FCF Yield (%) 16.9 10.8 15.6 15.5 18.5 12.4 15.9 14.8 Treasury Fundação Chiti
Div Yield (%) 0.1 0.6 2.2 5.9 0.1 0.6 2.2 5.6 4.1% Romi Families
1.9% 45.5%
EPS 0.36 0.10 0.23 0.50 0.17 0.04 0.09 0.18 Sources for all charts and tables: Company reports and Santander
DPS 0 0.03 0.08 0.17 0 0.01 0.03 0.06 estimates.
BVPS 9.03 9.02 9.18 9.52 3.86 3.54 3.39 3.24
91
WEG HOLD
RAISING YE2015 TARGET PRICE TO R$31.50 FROM R$29.50
 Investment Case: We see WEG as a scarcity quality play on FX in

Daniel Gewehr*
Brazil and on an energy efficiency trend. WEG has 50% of sales
related to FX and is one of the few FX-affected companies that is not +5511-3012-5787 | dhgewehr@santander.com.br
in the commodities business (its 2015E ROE is 21%). While its Joao Noronha*, CFA
multiples are slightly above the historical average, based on our +5511-3012-5734 | jonoronha@santander.com.br
estimates we think WEG may be a good relative call among
industrials in a scenario of potential energy rationing, given that its
main long-term thesis is about energy efficiency (it sells industrial
motors that consume less energy—i.e., the payback period for
industrial motor investment, sold by WEG, is ~1 year).
 Outlook 2015: We expect WEG to increase sales by 15% in 2015,

driven by a recovery in longer-cycle products (especially in the wind
energy segment), M&A, and FX on 50% sales exposure. We see the
company reaching R$8.9 billion in sales, R$1,626 million in EBITDA,
and R$1,114 million in net income in 2015.
 To acquire, or not to acquire—that is the question. Despite the

com any’s good execution track record, our practice is not to include
acquisitions in our long-term estimates; our organic estimates reach
R$20 billion in revenue only by 2022 (vs. R$20 billion in revenue by Company Statistics
2020 as guided by WEG’s 20/20 strategic lan). If e ere to include Bloomberg WEGE3 BZ
acquisitions, our YE2015 target price would be R$36/share. Current Price (12/15/14) R$ 30.00 / US$ 11.16
 What’s changed? Although our net sales estimates remain nearly 52-Week Range (R$) 20.92 - 31.52
unchanged (-2%), we reduced our 2015E EBITDA and net income Market Capitalization (US$ Mn) 9,006
Float (%) 35.3
by 11% and 6% to account for lower-than-expected sales in the 3-Mth Avg. Daily Vol (US$ Mn) 9.6
Brazilian domestic market. However, the more favorable FX helps Shares Outstanding - Mn 807
shift our medium-term estimates upward. We are in-line with 2015

consensus net income estimates.
WEGE3 BZ IBOVESPA
160
 A Brazilian leader with competitive advantages. In our strategy 140
report Hey Competition, Can You Jump a Wide Moat? Part 2, April 7, 120
2014, WEG was ranked 5th among the 16 companies with the
100
greatest competitive advantages (117-company Brazil coverage).
80
60
D-12 A-13 A-13 D-13 A-14 A-14 D-14
92
WEG
R$ US$ WEG is the largest manufacturer of electric motors and
P&L ACCOUNT 2013A 2014E 2015E 2016E 2013A 2014E 2015E 2016E related equipment in Latin America and one of the largest
Total Revenue 6,829 7,798 8,963 10,259 3,165 3,328 3,408 3,632 in the world. With nine plants in Brazil and eight outside
YoY change (%) 10.6 14.2 14.9 14.5 0.2 5.1 2.4 6.6 the country, the company has a global presence, currently
Gross Profit 2,237 2,460 2,882 3,309 1,037 1,050 1,096 1,171 selling products to more than 100 countries. With its four
YoY change (%) 18.9 10.0 17.2 14.8 7.7 1.3 4.4 6.9 business areas, WEG has a diversified portfolio of
EBITDA 1,255 1,350 1,626 1,860 582 576 618 658 products, including electric motors, energy generators
YoY change (%) 19.1 7.5 20.5 14.4 7.9 (1.0) 7.3 6.5 and transformers, electronic components, industrial
As % of Revenue 18.4 17.3 18.1 18.1 18.4 17.3 18.1 18.1 automation systems, and paint and varnishes. In 2013,
Operating Income 1,012 1,088 1,357 1,565 469 464 516 554
the company reported net sales of R$6.8 billion (50%
from exports and foreign subsidiaries). WEG is listed on
YoY change (%) 25.2 7.5 24.7 15.3 13.4 (1.0) 11.1 7.4
the Novo Mercado.
As % of Revenue 14.8 13.9 15.1 15.3 14.8 13.9 15.1 15.3
Financial Results 73 82 84 96 34 35 32 34 Key Personnel: Harry Schmelzer Júnior (CEO), Sérgio
Taxes (240) (253) (324) (373) (111) (108) (123) (132) Schwartz (CFO) and Luis Fernando Moran de Oliveira (IR
Net Profit 843 910 1,114 1,284 391 388 423 455 Manager)
YoY change (%) 28.6 7.8 22.4 15.3 16.5 (0.7) 9.1 7.4 Web: www.weg.net.br
As % of Revenue 12.4 11.7 12.4 12.5 12.4 11.7 12.4 12.5
Gross Sales by Segment, 2013
Other Noncash Items 180 174 179 205 83 74 68 73 Domestic Paints &
Changes in Working Capital (232) (177) (232) (242) (108) (76) (88) (86) Motors Varnishes
Operating Cash Flow 1,023 1,173 1,394 1,618 474 500 530 573 10.5% 6.4%
GTD
Capital Expenditures (206) (836) (475) (513) (96) (357) (181) (182)
21.8%
Free Cash Flow 1,009 142 595 732 468 61 226 259
Other Invest./(Divestments) - - - - - - - -
Change in Debt 537 202 0 0 249 86 0 0
Dividends (392) (437) (303) (360) (182) (186) (115) (127)
Capital Increases/Other 0 0 0 0 0 0 0 0 Industrial
Motors
BALANCE SHEET 2013A 2014E 2015E 2016E 2013A 2014E 2015E 2016E 61.3%
Cash and Equivalents 3,374 3,425 3,744 4,142 1,440 1,343 1,382 1,409
Current Assets 6,852 7,237 7,950 8,876 2,924 2,838 2,934 3,019
Fixed Assets 3,166 3,585 3,791 4,009 1,351 1,406 1,399 1,364
Total Assets 10,141 10,950 11,868 13,012 4,328 4,294 4,379 4,426 Sales by Region, 2013
Current Liabilities 10,980 10,665 11,806 12,884 4,686 4,182 4,357 4,382
Long-Term Liabilities 2,921 3,157 3,116 3,065 1,247 1,238 1,150 1,042
Shareholders' Equity 4,558 4,875 5,655 6,554 1,945 1,912 2,087 2,229
Total Financial Debt 3,209 3,434 3,379 3,309 1,370 1,347 1,247 1,125 External
Market
ST Debt 913 908 894 875 390 356 330 298 49.8%
LT Debt 2,296 2,526 2,485 2,434 980 991 917 828
Net Debt (167) 8 (366) (834) (71) 3 (135) (284)
Capital Employed 4,475 4,968 5,375 5,810 1,910 1,948 1,984 1,976 Internal
Market
Net Debt/EBITDA (0.1) 0.0 (0.2) (0.4) (0.1) 0.0 (0.2) (0.4) 50.2%
Net Debt/Equity (0.0) 0.0 (0.1) (0.1) (0.0) 0.0 (0.1) (0.1)
Capex/Revenue (%) 3.0 10.7 5.3 5.0 3.0 10.7 5.3 5.0
Int Cover (%) 3.7 3.1 4.9 5.5 3.7 3.1 4.9 5.5
Dividend Payout (%) 59.8 51.8 33.4 32.3 54.1 47.8 29.0 32.3 Shareholder Structure, Current
ROCE (%) 28.0 27.0 31.3 33.4 30.1 30.3 31.3 33.4 Treasury+Fi
ROE (%) 19.6 19.3 21.2 21.0 20.0 20.8 21.2 21.0 scal
Comittee
MARKET RATIOS 2013A 2014E 2015E 2016E 2013A 2014E 2015E 2016E 0.1% Free Float
34.6%
P/E 17.6 26.6 21.7 18.9 16.1 23.2 21.3 19.8
P/CE 14.0 21.0 17.5 15.3 12.8 18.3 17.1 16.1 Managemen
FV/EBITDA 11.9 18.3 14.9 12.8 10.9 15.9 14.6 13.4 t
0.7%
FV/EBIT 14.8 22.7 17.9 15.2 13.5 19.7 17.5 16.0
FV/Revenue 2.2 3.2 2.7 2.3 2.0 2.8 2.6 2.4
P/BV 3.3 5.0 4.3 3.7 3.2 4.7 4.3 4.0 Controlling
Families
FCF Yield (%) 6.8 0.6 2.5 3.0 7.4 0.7 2.5 2.9
64.6%
Div Yield (%) 2.6 1.8 1.3 1.5 2.9 2.1 1.3 1.4
EPS 1.36 1.13 1.38 1.59 0.63 0.48 0.52 0.56 estimates.
DPS 0.74 0.59 0.69 0.80 0.34 0.25 0.26 0.28
BVPS 5.56 6.12 6.54 7.34 2.37 2.40 2.42 2.50
93
IMPORTANT DISCLOSURES
Iochpe Maxion – Valuation & Risks
Our YE2015 target price is based on a DCF analysis, assuming a 12.7% WACC and nominal
perpetuity growth of 4.0%.
Risks include: Execution Risk (acquisition integration); Lower-than-expected growth in the GDP in
Brazil, Europe, and the United States; Higher-than-expected prices of key raw materials; and
sharp interest-rate and currency fluctuations.
Marcopolo – Valuation & Risks

Our YE2015 target price is based on a DCF model with a WACC of 11.9% and a growth in
perpetuity of 5%.
Main risks include: challenges in international expansion; exporting sector exposed to currency
fluctuations and dependent on long-term interest rates and financing; higher-than-expected prices
of key raw materials; increasing competition; and contingencies and growth in air travel.
Randon – Valuation & Risks

Our year-end 2015 target price is based on our DCF model, which assumes a WACC of 13.0%
and a nominal growth rate in perpetuity of 5% per year in Brazilian reais.
Risks include lower-thanexpected growth in the agricultural and industrial sectors, higher-
thanexpected prices of key raw materials, and sharp increases in interest rates.
Romi – Valuation & Risks

Our YE2015 target price is based on our DCF model, which assumes a WACC of 15% and a
nominal growth rate in perpetuity of 5% per year in Brazilian reais
Risks include increasing competition, execution risk (margins) and macroeconomic volatility
WEG – Valuation & Risks

Our year-end 2015 target price is based on our DCF model, which assumes a WACC of 12.3%
and a nominal growth rate in perpetuity of 5% per year in Brazilian reais.
Risks include: increasing competition, higher-than-expected prices of key raw materials,
challenges in international expansion and stronger-than-expected slowdown in the global
economy
Mahle Metal Leve – Valuation & Risks

Our year-end 2015 target price of R$27.00 is based on our DCF model, which assumes a WACC
of 13.3% and a nominal growth rate in perpetuity of 5% per year in Brazilian reais.
Risks include: Increasing competition, higher-than-expected prices of key raw materials, and
stronger-than-expected slowdown in the global economy.
Fras-le – Valuation & Risks

Our YE2015 target price is based on a DCF model with a WACC of 12.47% and a growth in
perpetuity of 5%.
Main risks include: challenges in international expansion; higher-than-expected prices of key raw
materials; increasing competition and; low share liquidity.
2014
94
IMPORTANT DISCLOSURES
Key to Investment Codes

% of % of Companies Provided
Companies Investment Banking
Covered with Services in the Past 12
Rating Definition This Rating Months
Buy (B) Expected to outperform the local market benchmark by more than 10%. 48.52 8.52
Hold (H) Expected to perform within a range of 0% to 10% above the local market
41.85 7.04
benchmark.
Underperform Expected to underperform the local market benchmark. 9.63 1.11
Under Review (U/R) 0.00 0.00
The numbers above reflect our Latin American universe as of Wednesday, December 17, 2014.
For a discussion, if applicable, of the valuation methods used to determine the price targets included in this report and the risks to achieving
these targets, please refer to the latest published research on these stocks. Research is available through your sales representative and other
electronic systems.
Target prices are year-end 2014 unless otherwise specified. Recommendations are based on a total return basis (expected share price
appreciation + prospective dividend yield) unless otherwise specified.
Stock price charts and rating histories for companies discussed in this report are also available by written request to Santander Investment
Securities Inc., 45 East 53rd Street, 17th Floor (Attn: Research Disclosures), New York, NY 10022 USA.
Ratings are established when the firm sets a target price and/or when maintaining or reiterating the rating. Ratings may not coincide with the above
methodology due to price volatility. Management reserves the right to maintain or to modify ratings on any specific stock and will disclose this in the
report when it occurs. Valuation methodologies vary from stock to stock, analyst to analyst, and country to country. Any investment in Latin American
equities is, by its nature, risky. A full discussion of valuation methodology and risks related to achieving the target price of the subject security is included
in the body of this report.
The benchmark used for local market performance is the country risk of each country plus the 1-year U.S. Treasury yield plus 5.5% of equity risk
premium, unless otherwise specified. The benchmark plus the 10.0% differential used to determine the rating is time adjusted to make it comparable
with the total return of the stock over the same period. For additional information about our rating methodology, please call (212) 350 3974.
This research re ort (“re ort”) has been re ared by Santander Investment Securities Inc. ("SIS"; SIS is a subsidiary of Santander Investment I, S.A.
which is wholly owned by Banco Santander, S.A. "Santander"]) on behalf of itself and its affiliates (collectively, Grupo Santander) and is provided for
information purposes only. This report must not be considered as an offer to sell or a solicitation of an offer to buy any relevant securities (i.e., securities
mentioned herein or of the same issuer and/or options, warrants, or rights with respect to or interests in any such securities).
Any decision by the recipient to buy or to sell should be based on publicly available information on the related security and, where appropriate, should
take into account the content of the related prospectus filed with and available from the entity governing the related market and the company issuing the
security. This re ort is issued in S ain by Santander Investment Bolsa, Sociedad de Valores, S.A. (“Santander Investment Bolsa”) and in the United
Kingdom by Banco Santander, S.A., London Branch. Santander London is authorized by the Bank of Spain. This report is not being issued to private
customers. SIS, Santander London and Santander Investment Bolsa are members of Grupo Santander.
The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed, that
their recommendations reflect solely and exclusively their personal opinions, and that such opinions were prepared in an independent and autonomous
manner, including as regards the institution to which they are linked, and that they have not received and will not receive direct or indirect compensation
in exchange for expressing specific recommendations or views in this report, since their compensation and the compensation system applying to Grupo
Santander and any of its affiliates is not pegged to the pricing of any of the securities issued by the companies evaluated in the report, or to the income
arising from the businesses and financial transactions carried out by Grupo Santander and any of its affiliates: Joao Noronha*, CFA, and Daniel Gewehr*
*Employed by a non-US affiliate of Santander Investment Securities Inc. and is not registered/qualified as a research analyst under FINRA rules and is
not an associated person of the member firm, and, therefore, may not be subject to the FINRA Rule 2711 and Incorporated NYSE Rule 472 restrictions
on communications with a subject company, public appearances, and trading securities held by a research analyst account.
As per the requirements of the Brazilian CVM, the following analysts hereby certify that we do not maintain a relationship with any individual working for
the companies whose securities were evaluated in the disclosed report. That we do not own, directly or indirectly, securities issued by the company
evaluated. That we are not involved in the acquisition, disposal and intermediation of such securities on the market: Daniel Gewehr and Joao Noronha.
Grupo Santander receives non-investment banking revenue from Ambev, Cetip, Cielo, Iochpe Maxion, Itaú Unibanco, Localiza, Mahle Metal Leve,
Marcopolo, OdontoPrev, Randon, Romi, Saraiva, Tegma, Totvs, Ultrapar, Vale, and WEG.
Within the past 12 months, Grupo Santander has managed or co-managed a public offering of securities of Cetip.
Within the past 12 months, Grupo Santander has received compensation for investment banking services from Cetip.
In the next three months, Grupo Santander expects to receive or intends to seek compensation for investment banking services from Vale.
Santander or its affiliates and the securities investment clubs, portfolios and funds managed by them do not have any direct or indirect ownership
interest equal to or higher than one percent (1%) of the capital stock of any of the companies whose securities were evaluated in this report and are not
involved in the acquisition, disposal and intermediation of such securities on the market
The information contained within this report has been compiled from sources believed to be reliable. Although all reasonable care has been taken to
ensure the information contained within these reports is not untrue or misleading, we make no representation that such information is accurate or
complete and it should not be relied upon as such. All opinions and estimates included within this report constitute our judgment as of the date of the
report and are subject to change without notice.
From time to time, Grupo Santander and/or any of its officers or directors may have a long or short position in, or otherwise be directly or indirectly
interested in, the securities, options, rights or warrants of companies mentioned herein.
Any U.S. recipient of this report (other than a registered broker-dealer or a bank acting in a broker-dealer capacity) that would like to effect any
transaction in any security discussed herein should contact and place orders in the United States with SIS, which, without in any way limiting the
foregoing, accepts responsibility (solely for purposes of and within the meaning of Rule 15a-6 under the U.S. Securities Exchange Act of 1934) for this
report and its dissemination in the United States.
© 2014 by Santander Investment Securities Inc. All Rights Reserved.
2014
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LATIN AMERICA

Daniel Gewehr* Joao Noronha*, CFA

YE2015 TARGET PRICES (PAGE 80 ONWARD) .

IMPORTANT DISCLOSURES/CERTIFICATIONS ARE IN THE “IMPORTANT DISCLOSURES” SECTION OF THIS REPORT.

 Corporate Governance  Leverage (Net Debt/ EBITDA)  Economic Pulse:

Average -0.7% -2.1% -1.3% -2.4% -9.4% -7.5%

Net Revenue 2015E EBITDA 2015E Net Income 2015E

2013A 2014E 2015E

Consensus EPS2014E Consensus EBITDA2014E

0.20 0.0 0.60 400.0

Consensus EPS2014E Consensus EBITDA2014E

Jan-14 Last Last/Jan-14 Jan-14 Last Last/Jan-14

ratios at historical highs.

Mahle Metal Leve

Source: Bloomberg. Note: Bloomberg.

Sources: Bloomberg. Sources: Bloomberg.

Sources: Bloomberg. Sources: Bloomberg.

Source: Bloomberg. Source: Bloomberg.

EV/EBITDA 12-M Forward Historical EV/EBITDA Consensus EBITDA (12-M Forward)

Source: Bloomberg. Source: Bloomberg.

Source: Bloomberg. Source: Bloomberg.

Source: Bloomberg. Source: Bloomberg.

Sensitivity Variation vs. Base Case Base Case

Mahle Metal Leve

Average 5% Scenario 48% 14% -27% -16% -4% 2% 14.3 7.8

Source: Santander estimates.

Sensitivity Scenario vs. Sensitivity Scenario vs.

Mahle Metal Leve

Source: Santander estimates.

13.0% 4.70 4.90 5.20 5.60 6.10 6.70 7.60

Iochpe-Maxion – Iochpe Maxion – WACC vs. Growth in Perpetuity

Randon – Randon – WACC vs. Growth in Perpetuity

Weg – Weg – WACC vs. Growth in Perpetuity

Mahle Metal Leve

Mahle Metal Leve

Mahle Metal Leve

current market cap.

 We find Iochpe and Romi currently discounting a decline in

nominal growth (our long-term inflation estimate). 20 20

 WEG prices in the highest growth (9% per year). 15 15

 Marcopolo is pricing in below inflation growth going forward, 10 10

while it has been able to improve its margins relative to five 5 5

Current Price Perpetuity (Zero Nominal Growth) Perpetuity (Inflation Growth)

Prices as of December 12th, 2014. Source: Santander estimates.

1% Implied Nominal Growth in Implied Nominal Growth in

MYPK3 -2% RAPT4 1%

Number of Employees (2008-2013) Net Revenue by Number of Employees (2008-2013)

EBITDA by Number of Employees (2008-2013) Net Income by Number of Employees (2008-2013)

Mahle Metal Leve – DuPont Analysis Marcopolo – DuPont Analysis

225% 16% 160%

Weg – DuPont Analysis

Mahle Metal Leve 1.37 0.99 (0.38) Positive 3% 8% 5% Positive

Sources: Company data, Bloomberg, and Santander estimates.

Sources: Company data and Santander estimates.

Mahle Metal Leve—German Auto Trip and Innovation Day

Marcopolo—European Road Show

Romi—Europe Road Show and Investor Day

WEG—Santander 15TH Annual Conference

ANFAVEA 132,779 units

FABUS 28,667 units

ANFAVEA for Brazil 2,202,845 units

ABIFER 3,500 units

WEG (electro electronic industrial IBGE