Chilean Equity Yearbook 2021

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EQUITY RESEARCH - CHILE

EQUITY YEARBOOK 2021
January 18th, 2021
CHILE EQUITY STRATEGY 2021

Positive Earnings Recovery in an Election Year
CONTACT We are introducing a new Target IPSA of 5,156 points, which implies a 13% total return.
Aldo Morales E. Our target IPSA is derived from a 50/50 blended of two methods: (1) a Top-Down approach,
Head of Equity Research where we reach a 5,137 pts target 2021. (2) a Bottom-up approach, where we ponder every
aldo.morales@bice.cl company´s upside to current prices by its weight in the IPSA index, reaching a target of
+(562) 2692 2576
5,174 pts. The Chilean Stock Market seem highly attractive compared to Emerging markets
Paulina Vargas J. (MXEF) and offers higher EPS growth in 2021. In this regard, we see an extremely attractive
Senior Equity Research Analyst opportunity for the local market to gradually recover the historical premium, which will be
paulina.vargas@bice.cl subject to the evolution of the political uncertainty, regarding the presidential election and
+(562) 2692 3486
the constitutional process this year.
Jonathan Fuchs N.
Senior Equity Research Analyst We are updating all our sample of Chilean companies under coverage, introducing
jonathan.fuchs@bice.cl 2021YE target prices, and selecting Beverages as our sector top pick in 2021. We expect
+(562) 2692 2527
Earnings per share (EPS) of IPSA companies to increase by +58% in 2021 (excluding one-
Manuel Barrientos A. offs) mainly benefited by a normalization of trends after the pandemic. We believe the
Equity Research Analyst beverage sector is well positioned to show relevant improvements in 2021, considering the
Manuel.barrientos@bice.cl expected reopening of the economy and tourism, coupled with lower pressure from US-
+(562) 2692 1836
related costs. In addition, the sector trades with a significant discount on valuation compa-
red to historical averages.
We expect local GDP to post -6.0% decrease in 2020, and to show a significant +5.2% re-
covery in 2021. The activity will continue to be affected during most part of the first half of
this year, but will occur in parallel with the vaccination process, allowing greater flexibility
in terms of restrictions, especially during the second half. On the other hand, we expect
inflationary pressures to remain during the first months of the year, and to normalize to-
wards the second half in a context of a weaker labor market and activity gap. Lastly, we
expect exchange rate volatility in 2021, considering the opposite effects from the macro
fundamentals side versus all of the uncertainty regarding a covid’s second wave, and the
presidential elections.
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January 18th, 2021
1. CHILE EQUITY MARKET — INVESTMENT CASE

Chile Stock Market seem highly attractive compared to Emerging markets (MXEF) and offers higher EPS
growth in 2021. When we look at the historical pair trade, we observe that during the 2007-2020 period,
Chile traded with a 45% premium compared to Emerging Markets (MXEF), which could have been justified
by a higher political stability and a more sustainable growth path locally. However, since the social unrest
observed in Chile (October 18th, 2019), the local stock market has shown a severe 48% underperformance
compared to the MSCI emerging market index in US dollar. In this regard, if we look at 21YE P/E Fwd, we
reach that both Chile and the MXEF are trading around 15.8x, so the Chilean stock market presents 0%
premium to Emerging Markets, which we believe is very difficult to justify, considering that Chile presents
even higher EPS growth in 2021 (+58% BICE estimates) vs. +35% of the MXEF (according to Bloomberg). In
this regard, we see an extremely attractive opportunity for the local market to gradually recover the
historical premium, which will be subject to the evolution of the political uncertainty regarding the presi-
dential election and the constitutional process.
IPSA INDEX vs. MSCI EMERGING MARKETS
161
141
121
101
81
Piñera II
election
61 Bachelet II
Election Social
Bachelet II Tax Unrest
41 reform
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Jan/12 Jan/13 Jan/14 Jan/15 Jan/16 Jan/17 Jan/18 Jan/19 Jan/20 Jan/21
Chile presents strong macro fundamentals, but two stones in the road: this year’s presidential election
and the constitutional process. Chile’s economy is highly dependent to the price of copper (around 50% of
exports), which is actually at its maximum level since 2012 and is expected to remain in a positive range
this year on lower inventory levels and demand stimuli, mainly from China. On the other hand, despite the
imminent rise of a second wave of Covid-19 cases in Chile in the short-term, the country has assured one of
the largest amounts of vaccines per inhabitant globally (currently 30 million, which compares to 18.7 mil-
lion inhabitants). In this regard, the government has announced an ambitious program to reach 100% pop-
ulation vaccinated at the end of the first half 2021. In this context, we believe the country is well positioned
to post a strong economic and earnings rebound this year, however, the stones in the road are both the
presidential election (November 21st, 2021) and the constitutional process (2021-2022). In the short-term,
violence and disturbs have diminished severely after the recently approved (October 25th, 2020) new con-
stitutional process, so the current focus has been the election of constituents. Here, we highlight that the
center-left wing was divided into two list, meanwhile the center-right or more pro-market wing is highly
aligned, so we believe the 2/3 quorum could become an active restriction to avoid irrational changes.
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January 18th, 2021
1.1. TARGET IPSA 2021
Our base case scenario points to an IPSA target of 5,156 pts YE21, which implies a 13% total return. How-
ever, it could be +43% if the current political uncertainty is eliminated. We expect 2020 to end up with a -
35% earnings per share (EPS) drop, affected by three main negative issues: the local social unrest (4Q19),
the quarantines because of the pandemic, and the US dollar appreciative trend observed during most part
of the year. For 2021 instead, we expect a strong +58% YoY EPS rebound excluding one-offs, led by Shop-
ping Centers and Retail companies, that should normalize results after the negative macro scenario from
last year. Our target IPSA is derived from a 50/50 blended of two methods: (1) a Top-Down approach,
where we reach a 5,137 pts target 2021. Under this approach, we use our +58% EPS growth forecast for
2021, and a target P/E of 17.2x, which is the last 5-year average. (2) a Bottom-up approach, where we pon-
der every company´s upside to current prices by its weight in the IPSA index. Under this approach, we
reach a target of 5,174 pts. On the other hand, we highlight that our bull case scenario points to 6,093
points, which could eventually imply a 43% return. Our bull case is derived from using the same +58% EPS
growth of our base case scenario but including a 1 standard deviation above the last 5-year P/E average,
which could be justified by a relative preference over the region, the current copper prices (at maximum
level since 2012), and the elimination of the local political uncertainty after this year presidential elections
and the constitutional process. Lastly, our bear case scenario points to 3,491 pts, which assumes only 35%
EPS growth and 1 standard deviation below the 5-year average P/E.
1.2. SECTORIAL OVERVIEW 2021
We have a Neutral view of Shopping Centers, but acknowledge that there is a strong potential return in a
normalization scenario post covid-19. In the short-term, we still see significant risks, considering the re-
cent surge of covid cases in Chile, which could eventually imply new quarantines, implying further down-
ward revision of estimates for the sector this year. In addition, in our conversations with local investors, we
still see them highly concerned about long-term behavioral changes, lower bargaining power with tenants,
or even disruptive changes in the business model. In this regard, after a strong underperformance against
the IPSA Index during the last 12-months, we believe it’s a matter of time that Shopping Centers begin to
offer a very attractive entry point, considering the strong earnings recovery expected in 2021, coupled with
highly discounted multiples under an earnings normalization in 2022, and attractive spread between cap
rates and local free-risk rates compared to regional peers.
In the Retail sector, we like Cencosud’s divestment strategy, and Ripley’s cheap Valuatios, but remain
neutral on Falabella. Despite the recent rally, we still like Cencosud on its significant delivery in terms of
operating turnaround and new strategy focused on profitability, which has derived in several divestment of
less profitable subsidiaries such as D-stores in Peru and the announced IPO of its Brazilian subsidiary. Also,
we highlight as positive the current alliance with the local last mile app “Cornershop”, which should boost
supermarket sales ahead. On the other hand, we expect Falabella and Ripley to show gradual recoveries in
2021, which should be a transition year for the discretionary consumption and financial retail. We still see
several challenges beyond macro, considering the expensive transition to e-commerce and increasing com-
petence from international players. In this regard, Falabella seem fairly valued, which is not the case of
Ripley, where we believe the current valuations are extremely cheap and offers an attractive return in the
event of some triggers such as the potential divestment of some Real Estate assets.
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January 18th, 2021
We have a positive view on Beverages for 2021, considering the expected earnings recovery and attrac-
tive valuations. We believe the beverage sector is well positioned to show relevant improvements in 2021,
considering the expected reopening of the economy and tourism, coupled with lower pressure from US-
related costs. Our top pick is CCU because all beverages (CCU and Andina) present attractive valuations,
but CCU will be largely more benefited by the US dollar depreciation and presents lower exposure to Ar-
gentina, whose macro scenario is highly uncertain this year. Furthermore, CCU seem more discounted to
global peers than Andina.
We still like Vineyards (Concha y Toro) on Valuation. Although the company will face a very different mac-
ro scenario this year compared to 2020, considering the expected US-dollar depreciation, higher Cost of
Wine, and gradual recovery of some sales channels where the company is less relevant in the export mar-
kets, we still see a significant return at current prices, and attractive valuations compared to historical aver-
age and global peers.
We have a neutral view on Electric Utilities, considering the still relevant regulatory uncertainty and
increasing CAPEX requirements. We expect a positive cash flow normalization in 2021, after the negative
impact from the pandemic last year, however, the decarbonization process continue generating uncertain-
ty on the timing and the investment needs to go renewable. In addition, there’s no real clarity regarding
the potential impact on energy demand in the regulated segment after some recently announced law pro-
jects such as the Electric portability. On the other hand, we expect approximately 2,200 MW of renewable
capacity to start operation in the companies under coverage this year, and do not rule out new NCRE pro-
ject announcements considering a potential acceleration on the coal phase-out program.
We have a Neutral to negative view on Commodity stocks, mainly on expensive valuations after the re-
cent rally. Despite the industry fundamentals remain strong, considering the positive recovery of China, we
believe that after a strong 75% rally of SQM shares during the LTM, the company is largely including most
of the mid-term potential growth of the Lithium segment related to the EV industry. On the other hand,
CAP will continue with a strong earnings momentum and attractive valuations compared to its historical
average, however the gap compared to global peers has been reduced.
We have a neutral to positive view for the banking sector, mainly on a positive earnings recovery but
partially offset fair valuations 2021E. We expect double-digit earnings growth for most companies in 2021,
mainly on lower provision expenses. The industry is in good shape to face the challenging first half of the
year, given the significant amount of voluntary provision made last year, which led the coverage ratio to
reach levels of 1.6x (vs. 1.2x in December 2019). On the other hand, we expect a loan growth acceleration,
boosted by loans to individuals, being partially offset by the commercial segment due to the company's
significant indebtedness increase during 2020. Lastly, after the positive stock performance in the short-
term, most larger banks present fair valuations in 2021, which could limit the potential upside ahead.
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January 18th, 2021
CHILEAN EQUITY VALUATION - BICE ESTIMATES

IPSA Mkt. ADVT Last Target Div. Total Perform ance
Weight Cap US$ M Rec. Price Price Upside Yield Return 1M 6M 1Y
Beverages 6% 7,332 9.9 24.3% 3.5% 27.9% 7% 4% -11%
Andina-B 2% 2,342 3.8 HOLD 1,983 2,387 20.4% 5.8% 26.1% 11% 5% -6%
CCU 2% 3,020 2.7 BUY 6,000 7,583 26.4% 2.3% 28.6% 7% 2% -16%
Concha y Toro 2% 1,281 3.1 BUY 1,259 1,590 26.3% 2.5% 28.8% 2% 5% -9%
Real Estate 3% 4,449 3.5 21.6% 0.7% 22.3% -2% -17% -29%
Parque Arauco 2% 1,419 2.9 HOLD 1,150 1,430 24.3% 0.0% 24.3% -4% -21% -37%
Mallplaza 1% 3,031 0.6 HOLD 1,135 1,404 23.7% 0.0% 23.7% -1% -14% -28%
Cencoshopp 2% 2,893 1.3 HOLD 1,245 1,454 16.8% 2.1% 18.9% 0% -16% -23%
Electric Utilities 18% 23,715 26.2 20.5% 6.5% 27.1% 3% 2% -11%
Enel Américas 9% 12,127 13.0 HOLD 117 144 23.2% 3.6% 26.7% -3% -1% -27%
Enel Chile 4% 5,705 4.1 HOLD 60.6 70.9 17.2% 4.5% 21.7% 6% -3% -16%
Engie Chile 1% 1,304 3.2 HOLD 909 1,130 24.3% 3.6% 28.0% 2% -11% -22%
Aes Gener 1% 1,450 2.1 BUY 123.5 149.6 21.1% 14.6% 35.7% 6% 25% -1%
Commodities 16% 15,350 23.1 4.7% 2.5% 7.1% 12% 75% 78%
CAP 2% 1,887 4.6 HOLD 9,270 11,537 24.5% 4.4% 28.8% 3% 71% 77%
SQM-B 14% 13,463 18.5 SELL 41,450 35,184 -15.1% 0.5% -14.6% 20% 78% 79%
Retail 12% 15,533 23.6 23.3% 0.2% 23.5% 8% 4% -6%
Cencosud 5% 5,617 12.2 BUY 1,440 1,748 21.4% 0.5% 21.9% 13% 14% 41%
Falabella 6% 9,296 10.7 HOLD 2,720 3,166 16.4% 0.0% 16.4% 3% 7% -16%
Ripley 1% 621 0.7 BUY 235 311 32.1% 0.0% 32.1% 8% -10% -43%
Water Utilities 2% 2,634 8.7 30.7% 7.9% 38.6% 1% -16% -25%
Aguas Andinas 2% 1,854 8.0 BUY 226 295 30.2% 7.2% 37.4% 3% -18% -26%
IAM 1% 779 0.7 BUY 572 750 31.1% 8.6% 39.7% -1% -15% -24%
Insurance & Pensions 0% 1,391 0.6 43.9% 9.8% 53.7% 11% 1% -24%
ILC 0% 655 0.5 BUY 4,810 7,137 48.4% 5.5% 53.9% 8% -5% -36%
Habitat 0% 736 0.1 HOLD 540 753 39.5% 14.1% 53.5% 15% 7% -12%
Telecom & IT 1% 549 0.9 29.7% 1.1% 30.8% 2% -19% -28%
Sonda 1% 549 0.9 BUY 463 600 29.7% 1.1% 30.8% 2% -19% -28%
Banks 23% 30,167 24.2 13.9% 3.1% 17.0% 12% 14% -10%
Banco De Chile 10% 10,803 10.4 HOLD 78.5 88.1 12.3% 3.0% 15.3% 7% 9% 1%
Santander 7% 10,122 8.4 BUY 39.4 45.3 14.9% 4.0% 18.9% 9% 26% -5%
BCI 5% 6,587 3.4 HOLD 32,500 37,089 14.1% 2.2% 16.3% 16% 19% -3%
Itau Corpbanca 1% 1,808 1.6 SELL 2.6 2.9 10.5% 0.0% 10.5% 12% 8% -29%
Grupo Security 0% 848 0.3 BUY 155 182 17.7% 6.3% 24.0% 18% 8% -15%
IPSA 8,099 139.7 4,572 5,156 12.8% 8.6% 14.5% -6.3%
Source: BICE Inversiones
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January 18th, 2021
CHILEAN EQUITY VALUATION - BICE ESTIMATES

EV/EBITDA P/E P/BV ROE NFD/EBITDA
5Yr Avg 20YE 21YE 5Yr Avg 20YE 21YE 5Yr Avg LTM 5Yr Avg 20YE 21YE 5Yr Avg 20YE 21YE
Beverages 9.1 7.9 7.9 16.8 15.7 15.7 2.3 1.8 11% 12% 11% 1.6 1.6 1.6
Andina-B 7.7 6.9 6.9 16.2 13.2 13.8 2.7 2.3 11% 15% 15% 1.9 1.9 1.9
CCU 8.4 8.4 7.8 18.0 22.2 20.7 2.6 1.7 12% 7% 8% 0.0 0.7 0.7
Concha y Toro 11.1 8.4 9.1 16.2 11.8 12.6 1.8 1.5 10% 12% 11% 2.8 2.1 2.2
Real Estate 14.8 29.8 15.7 16.8 37.5 24.9 1.7 1.0 7% 1% 4% 4.7 7.3 4.1
Parque Arauco 15.8 32.7 15.8 16.8 - 26.8 1.7 1.0 6% - - 5.3 - -
Mallplaza 13.9 31.8 15.2 - - 27.6 1.7 1.3 7% 0% 4% 3.6 9.3 4.6
Cencoshopp - 25.0 16.2 - 37.5 20.2 - 0.8 - 2% 4% 5.1 5.3 3.6
Electric Utilities 6.6 6.2 5.9 13.1 12.3 9.0 1.1 1.0 9% 10% 9% 2.1 2.2 2.4
Enel Américas 4.6 5.8 5.1 9.6 14.0 11.5 1.5 1.6 15% 11% 12% 1.0 1.2 1.0
Enel Chile 6.4 6.8 6.7 10.5 - 12.8 1.3 1.4 11% 12% 10% 1.2 1.9 1.9
Engie Chile 5.7 4.9 4.8 9.4 8.5 8.8 0.9 0.6 7% 7% 7% 2.0 1.9 1.9
Aes Gener 6.3 6.9 6.9 6.7 - 2.7 0.8 0.8 10% 13% 9% 4.3 4.7 4.9
Commodities 8.0 12.7 10.6 15.1 40.3 26.7 2.7 4.1 9% 1.1
CAP 6.3 4.2 4.2 10.5 6.4 7.2 0.7 1.0 4% - - 1.6 - -
SQM-B 9.8 21.2 17.0 19.8 74.1 46.2 4.7 7.2 15% - - 0.6 - -
Retail 12.6 27.2 12.7 17.1 64.2 24.2 1.4 1.0 7% -3% 4% 3.3 3.2 3.3
Cencosud 9.3 8.8 8.5 15.1 64.2 18.3 0.9 1.0 3% 2% 5% 4.4 3.2 3.3
Falabella 10.6 20.5 11.3 19.8 - 26.0 2.2 1.3 13% -1% 5% 3.4 - -
Ripley 17.8 52.3 18.4 16.4 - 28.4 1.1 0.5 6% -10% 2% 2.1 - -
Water Utilities 7.8 8.8 8.3 16.3 13.8 12.2 2.5 1.2 13% 12% 13% 2.7 3.3 3.3
Aguas Andinas 9.6 8.8 8.3 15.4 13.8 12.2 3.4 1.6 21% 12% 13% 2.8 - -
IAM 6.1 17.2 1.7 0.8 5% 12% 13% 2.7 3.3 3.3
Insurance & Pensions 3.5 3.3 8.4 6.6 5.3 1.9 0.8 30% 21% 22% -0.5 0.0 -0.2
ILC 6.9 8.3 5.8 1.4 0.6
Habitat 3.5 3.3 9.9 4.8 4.7 2.3 1.1 30% 21% 22% -0.5 0.0 -0.2
Telecom & IT 7.8 6.9 6.3 18.6 27.0 14.4 1.7 0.9 8% 0.6
Sonda 7.8 6.9 6.3 18.6 27.0 14.4 1.7 0.9 8% - - 0.6 - -
Banks 12.0 14.2 12.5 2.0 1.3 14% 7% 10%
Banco De Chile 14.7 16.8 14.0 3.0 2.2 20% 13% 14%
Santander 14.1 14.8 12.9 2.9 2.0 18% 13% 15%
BCI 12.3 15.8 12.7 1.8 1.2 15% 8% 9%
Itau Corpbanca 10.3 - 14.9 0.8 0.5 7% -7% 4%
Grupo Security 8.9 9.5 7.9 1.3 0.7 11% 8% 9%
IPSA 18.9 15.8 13.3
Source: BICE Inversiones
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January 18th, 2021
2. CHILE MACROECONOMIC OUTLOOK
The pandemic and its associated quarantines have produced a significant economic deterioration, but it
could be mitigated by Public Investment in 2021. We expect GDP to post -6.0% decrease in 2020YE and to
strongly recover in 2021 with a +5.2% growth. The activity will continue to be affected during most part of
the first half of this year, but will occur in parallel with the vaccination process, allowing greater flexibility in
terms of restrictions, especially during the second half. On the other hand, consumption would maintain
greater dynamism in the short-term, mainly boost by the recently approved withdrawal of another 10% of
pension funds, however in the medium term, it could be negatively affected by a weaker labor market,
which could take longer to recover. Regarding Investment, both the Construction, and Machinery & Equip-
ment components could be affected this year by the political uncertainty, however, we expect it to be miti-
gated by Public Investment, which is currently being also benefited by the surge in copper prices.
GDP GROWTH — CHILE
6% 5.2%
4.8%
4.0%
4%
2.3%
1.8% 1.5%
2% 1.3% 1.1%
0%
-2%
-4%
-6%
-6.0%
-8%
2014 2015 2016 2017 2018 2019 2020 2021 2022
GDP Forecast
We expect inflationary pressures to remain during the first months of the year, and to normalize towards
the second half in a context of a weaker labor market and activity gap. Short-term inflationary pressures
are being explained in part by the greater disposable income after the second 10% withdrawal of pension
funds, in addition to a limited supply of some goods that have not been able to replace their inventories.
On the other hand, although the Chilean peso has been appreciating against the US dollar in the short-
term, we observed the total opposite during most part of last year, which should continue driving prices
upward during the first months of 2021. In any case, the price of Services could be contained by the proba-
ble re-imposition of sanitary restrictions in the context of an imminent second wave of Covid-19 cases in
Chile, especially during the 1H21. For the second half and so on, we expect that the deterioration of the
labor market coupled with the activity gap, would reduce the pressure on prices. In this regard, we expect
4% inflation during the 1H21, favored by a low comparable basis, and 3.1% at the end of the year.
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January 18th, 2021
We expect the monetary policy rate (MPR) to remain expansive at current 0.5% at least until mid-2022.
In its last report, the Central Bank of Chile indicated that the evolution of economic figures will continue to
be marked by the economic re-opening process. However, the improvement in activity was slower than
expected in September, especially for Construction and Services, and considering the setback seen in De-
cember 2020, the central bank estimate GDP to be around -6.25% and -5.75% and inflation to converge to
its target 3% by the end of 2022. In this context, we do not expect monetary policy rate increases until mid-
2022.
We expect exchange rate volatility, considering the opposite effects from the macro fundamentals side
versus all of the uncertainty regarding a covid’s second wave, and the presidential elections. We ob-
served a significant appreciation in the exchange rate at the end of 2020. This would have been driven by
an increased appetite for more riskier assets, including commodities such as copper, and currencies from
emerging economies. However, this trend has reversed in the short term, as the risk aversion is increasing
in the context of the recent surge of covid-19 cases in Chile, which should only be a temporary effect. On
the other hand, we expect copper prices to average around US$ 3.5 per pound in 2021, and the higher
fiscal spending to be financed with a large proportion of US denominated debt issuance. Lastly, the Chilean
peso should maintain a higher risk premium as a result of the political uncertainty that is prevalent in a
presidential election year.
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January 18th, 2021
ECONOMIC FORECAST — BICE ESTIMATES
2019 2020E 2021E 2022E
GDP (% YoY) 1.2% -6.0% 5.2% 4.8%

GDP (US$ million) 278,102 245,467 283,130 316,022
GDP per capita (US$) 15,510 13,572 15,677 17,500
Domestic Demand 1.8% -9.4% 6.0% 5.0%
Investment 4.5% -12.1% 3.6% 4.1%
Consumption 1.9% -7.1% 5.0% 5.0%
Exports -2.0% -1.4% 7.3% 2.9%
Imports -0.9% -12.9% 10.1% 3.2%
Inflation (YoY) 3.1% 2.8% 3.1% 3.3%

Inflation ex Energy and Food (YoY) 2.4% 2.6% 2.5% 2.8%
Nominal Exchange Rate (EoP) 770 745 715 700
Nominal Exchange Rate (AoP) 703 795 725 707
Real Exchange Rate (Average, 1986) 95.0 103.5 99.5 98.0
Monetary Policy Rate (EoP) 1.75% 0.50% 0.50% 0.75%
Unemployment Rate (Average) 7.0% 11.5% 10.0% 9.5%

Employment 1.3% -15.8% 1.6% 4.8%
Labor Force 1.4% -10.4% 0.0% 3.4%
Real Wages 2.4% 1.7% 1.0% 1.2%
Trade Balance (US$ million) 1,783 13,983 11,950 13,477

Current Account (% GDP) -2.8% 2.2% 0.5% 0.4%
Copper (US$c) (Average) 273 285 350 360
Oil (US$) (Average) - 38 49 50
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January 18th, 2021
COMPANY BRIEFINGS
I. BEVERAGES
1. Embotelladora Andina
2. CCU
3. Concha y Toro
II. ELECTRIC UTILITIES
4. Enel Américas
5. Enel Chile
6. Engie Energía Chile
7. AES Gener
III. COMMODITIES
8. SQM
9. CAP
IV. REAL ESTATE
10. Parque Arauco
11. Mallplaza
12. Cencosud Shopping
V. RETAIL
13. Falabella
14. Cencosud
15. Ripley
VI. WATER UTILITIES
16. Aguas Andinas
17. IAM
VII. INSURANCE & PENSION
18. ILC
19. Habitat
VIII. IT
20. Sonda
IX. FINANCIALS
21. Banco de Chile
22. Banco Santander
23. BCI
24. Itaú Corpbanca
25. Grupo Security
X. HOLDINGS
26. Quiñenco
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BEVERAGES - EMBOTELLADORA ANDINA
January 18th, 2021
HOLD EMBOTELLADORA ANDINA

Target Price: CL$ 2,387 Looking for Increasing the Portfolio Mix, but Growth is Limited
Current Price: CL$ 1,983 in the Short-term
SUMMARY What’s new: We are updating our coverage of Embotelladora Andina, introducing our YE21
Bloomberg ANDINAB CI target price of CL$ 2,387, while downgrading shares from BUY to HOLD.
Reuters AND_pb.SN
Credit risk rating AA
Investment Thesis: (1) Company with high regional diversification that plans to become a
52 weeks high/low (CL$) 2211/1526
ADVT 6M (USD Mn) 3.3 total beverage company in order to continue growing. Embotelladora Andina is in a mature
Free float (%) 35.0% industry where the consumption of carbonated beverages is decreasing, so within its stra-
# stocks (Mn) 473 tegy it has sought to complement the product portfolio, and therefore has generated seve-
Market Cap (USD Mn) 2,342
ral distribution agreements as Diageo (spirits), Capel (Pisco), and now lastly its largest distri-
Target price (CL$) 2,387
Current price (CL$) 1,983 bution license so far with Cervecerías Chile (ABInBev). This has allowed it to reach the final
Upside potential 20.4% client with a diversified and complete portfolio, while increasing the sale of its main pro-
Div. Yield (%) 5.8% duct, Coca-Cola. Therefore, its plan is to generate the same in the other subsidiaries, and to
Total Return 26.2% continue increasing the product portfolio. (2) Limited mid-term growth mainly due to expo-
RATIOS sure to Argentina and Heineken distribution license term in Brazil. According to our estima-
2019 2020E 2021E 2022E tes, revenue and EBITDA CAGR between 2019-2024e is 2% and 1.1% respectively, being
EV/EBITDA 7.4x 6.9x 6.9x 6.8x lower than their local peers, mainly due to exposure to Argentina, where macroeconomic
EV/Sales 1.4x 1.4x 1.3x 1.3x drivers are unfavorable, and the loss of Heineken's distribution license in Brazil in 2022
P/E 11.1x 13.2x 13.2x 13.8x
(10% of the volumes and 20% of revenues in Brazil). (3) Valuation does not seem as attracti-
P/BV 2.0x 2.0x 2.0x 1.9x
Div. yield 4.3% 4.1% 5.8% 5.8% ve compared to the regional peers. Andina is trading in line with regional peers (6.5x EV/
EBITDA 22E) and despite being below its history (8x EV/EBITDA), we believe that a de-rating
STOCK PERFORMANCE has occurred in the sector due to the lower growth potential of the industry.
1.1
Outlook 2021: We expect a low to mid single digit growth at the top line, but flat EBITDA
1.0
0.9 YoY, mainly on (1) the new distribution agreement in Chile, which we expect boost volumes
0.8 (represent 12% of volumes), and revenues due to the higher price of the beer than CSD.
0.7 Nevertheless we expect an EBITDA margin compression YoY due to the lower margins of
0.6 the distribution license. (2) In Brazil we expect a challenging year mainly on a high compa-
0.5
rable basis resulting from the pandemic where the subsidiary managed to be more efficient
sep/20
nov/20
ene/20
mar/20
may/20
jul/20
and have important savings. (3) In Argentina we expect an EBITDA margin compression
mainly due to adverse macroeconomic variables such as inflation and currency deprecia-
IPSA ANDINA-B
tion, however we expect a recovery in the volume of low-single-digit. On a consolidated
basis, and excluding the new beer distribution agreement, volumes would grow by 3%.
CONTACT
Paulina Vargas J.
Risks: As main downside risks, we mention (1) Higher-than-expected negative economic
paulina.vargas@bice.cl
+(562) 2692 3486 effects in Argentine or an impairment of that subsidiary. As potential upside risks we highli-
ght (1) New beer distribution license announcement in Brazil, or new product announce-
Aldo Morales E. ments for the beverage portfolio in any of the four countries at accretive terms.
aldo.morales@bice.cl
+(562) 2692 2576
12
January 18th, 2021
ANDINA-B
Embotelladora Andina SA is a Chilean company dedicated to the production, marketing and distribution of beverages,
juices and waters, under the Coca Cola system in Chile, Brazil, Argentina and Paraguay. In Chile (~ 38% of EBITDA),
Andina maintains franchises in the Central Zone (Metropolitan Region) and after the merger with Kopolar in 2012, it
incorporated Northern and Far-South territories in Chile. Also has distribution licenses of liquors, pisco, and beers. In
HOLD Brazil (~ 34% of EBITDA), in addition to Coca-Cola products, Andina distributes beers under licenses such as Heineken,
Amstel, Kaiser, among others, in the states of Rio de Janeiro, Espiritu Santo and part of Sao Paulo and Minas Gerais.
The company is controlled by a group of shareholders who own 38.9% of the property (series A and B), while The
Target Price: CL$ 2,387 Coca Cola Company participates with 7.3% of the property.
Current Price: CL$ 1,983
EBITDA BREAKDOWN (%) FINANCIAL STATEMENTS (CL$ million)

Other INCOME STATEMENT 2019 2020E 2021E 2022E
-1% Revenues 1,779,025 1,716,636 1,787,702 1,766,068
Chg% 6.3% -3.5% 4.1% -1.2%
Argentina EBITDA 348,869 347,595 346,826 348,706
23% Chile Chg% 7.4% -0.4% -0.2% 0.5%
38%
Paraguay EBITDA margin 19.6% 20.2% 19.4% 19.7%
12% Net Interest -1,053 -40,667 -53,273 -42,149
Associates -3,415 1,429 2,008 2,197
Net Income 173,722 129,947 130,502 124,957
Brazil Chg% 79.8% -25.2% 0.4% -4.2%
34%
Net Margin 9.8% 7.6% 7.3% 7.1%
BALANCE SHEET 2019 2020E 2021E 2022E

Current Assets 533,474 784,747 774,444 778,134
REVENUES BREAKDOWN (%) Total Assets 2,390,948 2,488,077 2,494,173 2,500,785
Paraguay Other Financial Debt 783,921 1,097,791 1,080,791 1,063,791
8% -2% Total Liabilities 1,422,044 1,613,484 1,590,559 1,574,870
Equity 948,650 853,362 880,560 901,116
Liabilities + equity 2,390,948 2,488,077 2,494,173 2,500,785
Chile
36%
Argentina FCFF 2019 2020E 2021E 2022E
20%
+ EBIT 237,781 237,284 238,086 231,214
+ Dep and Amort 111,087 107,649 108,740 117,491
- Taxes -61,167 -44,840 -42,991 -47,283
Brazil - CAPEX -110,683 -85,650 -125,139 -120,414
34%
- Working Capital -7,354 -48,321 -30,926 9,149
Total 169,664 166,123 147,769 190,158
DUPONT ANALYSIS 2019 2020E 2021E 2022E

OWNERSHIP (%) ROE 18.3% 15.2% 14.8% 13.9%
Profit Margin 9.8% 7.6% 7.3% 7.1%
Asset Turnover 0.7 0.7 0.7 0.7
Equity Multiplier 2.5 2.9 2.8 2.8
Other
Controllin
DEBT RATIOS 2019 2020E 2021E 2022E
40% EBITDA / Fin. Expenses 7.5x 6.8x 6.5x 6.6x
g group
39% NFD / EBITDA 1.8x 1.9x 1.9x 1.8x
Debt / Equity 0.8x 1.3x 1.2x 1.2x
Source: Company reports, BICE Inversiones estimates
Pension Coca Cola

Funds ADRs 7%
5% 2%
13
January 18th, 2021
VALUATION
Our target price is based on a blended 50%/50% between (1) a sum of the parts (SOTP) methodology, whe-
re we value each of the company´s subsidiaries (Chile, Brazil, Argentina, and Paraguay) under a 10 -Yr dis-
counted cash flow approach (DCF) in CL$ terms; and (2) 2021E target 8.0x EV/EBITDA multiple. In our va-
luation model we use a 6.5% equity risk Premium and 2.7% risk-free rate. In addition, we are using a perpe-
tuity exit multiple for each subsidiary. According to our estimates, Embotelladora Andina is trading at 6.9x
EV/EBITDA 2021E, which compares to 8x from its last 5 years.
VALUATION - ANDINA
Andina Chile Brasil Argentina Paraguay Total

Country Risk 147 256 1394 400
% EBITDA Long-Term 44% 34% 9% 12%
Risk-free rate 2.7% 2.7% 2.7% 2.7%

Spread 2.3% 3.4% 14.8% 4.8%
Pre-tax cost of Debt 5.0% 6.1% 17.5% 7.6%
Beta 1.05 1.03 1.06 1.11
Risk Premium 6.5% 6.5% 6.5% 6.5%
Ke 9.6% 10.5% 22.1% 12.5%
D/A 30% 30% 30% 30%
E/A 70% 70% 70% 70%
Tax 27.0% 34.0% 25.0% 10.0%
WACC 7.8% 8.6% 19.4% 10.8% 9.5%
G 2.0% 3.5% 3.0% 3.0% 2.7%
NPV 700,882 376,727 130,895 181,778 1,390,283

Perpetuity 832,818 604,905 41,810 128,011 1,607,544
% 51% 33% 6% 10%
EV/EBITDA EV/EBITDA EV/EBITDA EV/EBITDA

2021E 9.9x 8.1x 4.8x 7.7x
Perpetuity Exit Multiple 8.0x 8.0x 5.0x 6.0x
EV 2,997,827
+ Related companies 53,787
- NFD 657,063
- Minority interest 23,054
Equity 2,371,497
# Stocks A-series (Mn) 473.3

# Stocks B-series (Mn) 473.3
# Stocks (Mn) 946.6
P° Target A-series 2,278

T.P. 2021E - DCF (1) 2,505
T.P. - 8.0x EV/EBITDA 21E (2) 2,270
T.P. Blended (1)(2) 2,387
Current Price A-Series 1,650
Current Price B-Series 1,983
Upside 20.4%
+ Dividend Yield 5.8%
Total Return 26.2%
14
BEVERAGES - CCU
January 18th, 2021
BUY CCU
Target Price: CL$ 7,583 Attractive exposure to the USD depreciation and Discounted
Current Price: CL$ 6,000 Valuations
SUMMARY What’s new: We are updating our coverage of CCU, introducing our YE21 target price of
B lo o m b e rg CCU CI CL$ 7,583, while upgrading shares from HOLD to BUY.
R e u te rs C C U .SN
C re d it ris k ra tin g AA+
Investment Thesis: (1) Multicategory leader in the Chilean beverage industry, with a solid
5 2 w e e ks h igh /lo w (C L $ ) 7 6 9 1 /4 1 2 5
AD VT 6 M (U SD M ) 2 .5 financial position. CCU has been competing in its main markets for many years as a multi-
Fre e flo a t (% ) 40% category player, so it has the experience and know-how to cover its territories well and
# s to c ks (M ) 370 face the competition properly. It is also a company that has a very healthy financial posi-
M a rke t C a p (U SD M ) 2 ,3 8 9
tion, having the lowest level of NFD/EBITDA in the industry (less than 1x). (2) Positive player
Ta rge t p ric e (C L $ ) 7 ,5 8 3
C u rre n t p ric e (C L $ ) 6 ,0 0 0 to gain exposure to dollar depreciation. Dollarized costs represent ~65% of the total COGS,
U p s id e p o te n tia l 2 6 .4 % thus a higher-than-expected depreciation of the dollar would positively impact the com-
D iv. Yie ld (% ) 2 .3 % pany’s gross margin. (3) According to our estimates, the company has a relevant fundamen-
To ta l R e tu rn 2 8 .6 %
tal potential upside and has an attractive valuation compared to peers and historical avera-
RATIOS ge. From a DCF point, the company presents an attractive upside, and if we exclude the
2019 2020E 2021E 2022E international business operation (mainly Argentina) which represents 5% of the EBITDA
EV/EBITDA 8.8x 8.4x 7.8x 7.0x LTM, the target price by DCF only decreases by 3%. On the other hand, CCU is trading 20%
EV/Sales 1.6x 1.4x 1.3x 1.3x below its historical average (10x EV/EBITDA) and one standard deviation below the histori-
P/E 20.9x 22.2x 20.7x 17.3x
cal discount that has against international peers.
P/BV 2.1x 1.7x 1.6x 1.5x
Div. yield 5.9% 3.9% 2.3% 2.4%
Outlook 2021: We expect a partial recovery of EBITDA and Net income, growing mid to
STOCK PERFORMANCE high single-digit. In terms of volume, we expect a mid-single-digit growth in Chile, a low-
1.1 single-digit in International Business, and flat volumes for the vineyard after 2020 with solid
1.0 growth in the domestic market. Regarding EBITDA margins we foresee a recovery in Chile
0.9 mainly on the gross margin, while in the International division we expect only a slight re-
0.8
bound YoY mainly on a low comparable basis. Despite the positive effect of the dollar de-
0.7
0.6 preciation on the COGS side, it would be partially offset by a rise in the price of raw mate-
0.5 rials as aluminum, after a weak 2020 for the commodities due to the pandemic. In the vi-
Jan/20
May/20
Nov/20
Jul/20
Sep/20
Mar/20
neyard, we expect a decrease in the EBITDA margin mainly due to the higher cost of wine
YoY at least the first semester, and after two years of strong EBITDA growth in that subsi-
IPSA CCU diary. In Colombia, we expect that volumes will continue to grow at double-digit rates and
that the breakeven in EBITDA will be achieved in 2021.
CONTACT
Paulina Vargas J. Risks: As main downside risks, we mention (1) that the company may lose market share in
paulina.vargas@bice.cl the mid-term or be unable to raise prices for certain categories due to more aggressive
+(562) 2692 3486 competition; and (2) that the Argentina government continue with price control. As poten-
tial upside risks, we highlight (1) M&A noise.
Aldo Morales E.
+(562) 2692 2576
15
BEVERAGES - CCU
January 18th, 2021
CCU
CCU is a Chilean company dedicated to the production, marketing and distribution of alcoholic beverages (beers and
wines) and non-alcoholic beverages (beverages, juices and waters) under different franchise agreements, highlighting
distribution licenses of brands such as PEPSI, Heineken, and Sol, at the same time its own emblematic brands such as
Cristal, Escudo, and Royal Guard, among others. The company divides its operations into three subsidiaries (1) Chile (~
BUY 80% of EBITDA LTM); (2) International (Argentina, Uruguay, Paraguay, and Bolivia), and (3) San Pedro de Tarapacá
Vineyard, in addition to having a joint venture (JV) in Colombia (Postobón). The controller shareholder is IRSA which
holds 60% of the stake. Lastly, IRSA is controlled by the Chilean holding Quiñenco S.A. (50%) related to the Luksic
Target Price: CL$ 7,583 group, and Heineken (50%).

-1% Revenues 1,822,541 1,880,344 1,914,230 1,978,605
Chg% 2.2% 3.2% 1.8% 3.4%
Wine
Internatio 16% EBITDA 335,829 301,539 326,735 354,562
nal Chg% -40.2% -10.2% 8.4% 8.5%
5% EBITDA margin 18.4% 16.0% 17.1% 17.9%
Net Interest -14,603 -24,517 -26,063 -24,378
Associates -16,432 -8,383 -4,118 3,878
Chile Net Income 130,142 100,086 106,846 128,157
78%
Chg% -57.6% -23.1% 6.8% 19.9%
Net Margin 7.1% 5.3% 5.6% 6.5%

REVENUES BREAKDOWN (%) Current Assets 789,282 948,920 971,884 1,074,891
Total Assets 2,353,691 2,563,644 2,640,409 2,754,570
Other
-2%
Financial Debt 330,155 527,485 543,758 560,614
Total Liabilities 910,763 527,485 543,758 560,614
Wine Equity 1,328,054 1,339,307 1,396,109 1,470,844
15% Liabilities + equity 2,353,691 2,563,644 2,640,409 2,754,570
Internatio FCF 2019 2020E 2021E 2022E

nal + EBIT 230,808 190,035 207,435 231,408
20% Chile
65% + Dep and Amort 105,021 111,505 119,301 123,154
- Taxes -39,976 -45,257 -43,277 -52,140
- CAPEX -134,669 -184,913 -173,101 -134,309
- Working Capital 19,362 -47,587 -38,949 -140
TOTAL 180,546 23,782 71,408 167,973
OWNERSHIP (%) DUPONT ANALYSIS 2019 2020E 2021E 2022E

ROE 9.8% 7.5% 7.7% 8.7%
Profit Margin 7.1% 5.3% 5.6% 6.5%
Other
21%
DEBT RATIOS 2019 2020E 2021E 2022E

ADRs Controllin EBITDA/Fin. Expenses 12.1x 10.4x 11.0x 11.6x
19% g group NFD/EBITDA 0.4x 0.7x 0.7x 0.4x
(IRSA)
Debt/Equity 0.2x 0.4x 0.4x 0.4x
60%
16
BEVERAGES - CCU
January 18th, 2021
VALUATION
re we value each of the company´s subsidiaries (Chile, International, and wine) under a 10 -Yr discounted
cash flow approach (DCF) in CL$ terms; and (2) 2021E target 9x EV/EBITDA multiple. In our valuation model
we use a 6.5% equity risk Premium and 2.7% risk-free rate. In addition, we are using a perpetuity exit multi-
ple for each subsidiary. According to our estimates, CCU is trading at 7.8x EV/EBITDA 2021E, which compa-
res to 10.0x from its last 5 years.
VALUATION - CCU
In t e r n at io n al V iñ a
CCU C h ile Divis io n San Pe d r o T o t al
C o u n t ry R is k 147 1394 147
% EB ITD A L T 78% 11% 11%
Fre e R is k R a t e 2 .7 % 2 .7 % 2 .7 %
Sp re a d (AA+) 2 .3 % 1 4 .8 % 2 .3 %
Rd 5 .0 % 1 7 .5 % 5 .0 %
L e ve re d B e t a 1 .0 1 .0 1 .0
R is k P re m iu m 6 .5 % 6 .5 % 6 .5 %
Ke 9 .1 % 2 1 .5 % 9 .1 %
D /A 10% 10% 10%
E/A 90% 90% 90%
Ta x 2 7 .0 % 2 5 .0 % 2 7 .0 %
W AC C 8 .5 % 2 0 .7 % 8 .5 % 9 .8 %
G 3 .0 %
NPV 1 ,3 3 1 ,3 2 7 5 4 ,2 8 7 1 5 5 ,3 5 0 1 ,5 4 0 ,9 6 3
P e rp e t u it y 1 ,5 7 5 ,3 6 9 3 9 ,8 4 2 2 1 6 ,7 5 6 1 ,8 3 1 ,9 6 6
% 8 6 .2 % 2 .8 % 1 1 .0 %
EV/EB ITD A EV/EB ITD A EV/EB ITD A

2021E 1 0 .7 x 3 .7 x 9 .5 x
P e rp e t u it y Ex it M u lt ip le 9 .0 x 5 .0 x 9 .0 x
EV 3 ,3 7 2 ,9 2 9
+ R e la t e d c o m p a n ie s 1 2 4 ,4 9 5
- N FD 2 1 6 ,0 0 4
- M in o rit y in t e re s t 2 6 3 ,1 8 4
Eq u it y 3 ,0 1 8 ,2 3 6
# St o c ks (M n ) 3 6 9 .5
T.P . 2 0 2 1 E - D C F (1 ) 8 ,1 6 8
T.P . - 9 x EV/EB ITD A 2 1 E (2 ) 6 ,9 9 8
T.P . B le n d e d (1 )(2 ) 7 ,5 8 3
C u rre n t P ric e 6 ,0 0 0
U p s id e 2 6 .4 %
+ D ivid e n d Yie ld 2 .3 %
To t a l R e t u rn 2 8 .6 %
17
VINEYARDS- CONCHA Y TORO
January 18th, 2021
BUY VIÑA CONCHA Y TORO

Target Price: CL$ 1,590 A More Challenging Year Ahead, but Still at Attractive Valua-
Current Price: CL$ 1,259 tions
SUMMARY What’s new: We are updating our coverage of Concha y Toro, introducing our YE21 target
Bloomberg CONCHA CI price of CL$ 1,590 while maintaining our BUY recommendation.
Reuters CHT.SN
Credit risk rating AA-
Investment Thesis: (1) Successful business model that allowed to strengthen the Company
ADVT 6M (USD M) 2.2 in the year of the pandemic. Concha y Toro is known for maintaining an integrated business
Free float (%) 61% model in its key markets, where through the distribution offices it can respond quickly to
# stocks (M) 747 demand, which was crucial in dealing with the pandemic. Besides, due to the focus on com-
Market Cap (USD M) 1,281
mercial strategy, it had extraordinary volume growth and historic results. We even expect
Current price (CL$) 1,259 to close 2020 with an EBIT margin in line with the 2022 guidance, which was in the 15.5%-
Upside potential 26.3% 16.5% range. However, there are more headwinds in 2021, as a depreciated dollar, and a
Div. Yield (%) 2.5% higher cost of wine YoY which according to our estimates would lead to a contraction in the
Total Return 28.8%
gross margin (although it would still be at healthy levels). (2) Attractive valuations compa-
RATIOS red to its historical average and global peers. Although the company has been delivering
2019 2020E 2021E 2022E sound results for several quarters, this has not been reflected in the stock price. So, we
EV/EBITDA 13.0x 8.4x 9.1x 8.5x believe there is still a relevant upside. Besides the stock is trading below its history (10-11x
EV/Sales 2.1x 1.6x 1.6x 1.5x EV/EBITDA), and present a higher discount than the last three years' historical discount of
P/E 20.1x 11.8x 12.6x 12.0x
20% against the global peers.
P/BV 1.8x 1.5x 1.4x 1.3x
Div. yield 1.8% 1.8% 2.5% 2.4%
Outlook 2021: After two years of outstanding growth, we expect this year to be more cha-
STOCK PERFORMANCE llenging, given that on the one hand the volumes in the company's key markets were bene-
fited by the pandemic and its lower exposure to the on-premise channel, and added to the
1.1
1.0 fact that the FX basket had a positive effect on revenues (dollar appreciated by 12% YoY),
0.9 and the cost of wine was at very low levels to previous years. Therefore there was a lot of
0.8 growth in volume and margins reached maximums not seen for more than 10 years. Thus,
0.7 by 2021 we expect that export markets could continue to benefit from the second wave,
0.6
but with a decreasing trend during the year, which would be partially offset by increases in
0.5
the USA, and countries that were more restricted in terms of quarantines (LatAm countries
Jan/20
May/20
Nov/20
Jul/20
Sep/20
Mar/20
and Asia). We forecast flat volumes for the year. On the other hand, we expect a higher
cost of wine YoY (high-single-digit increase) but that would be seen mainly in the first se-
IPSA CONCHATORO
mester, as the 2021 harvest comes with good perspectives added to a depreciation of the
dollar of high-single-digit. What could compensate for the higher costs would be an increa-
CONTACT
se in the weight of the premium categories within the mix, which has been the strategy
Paulina Vargas J.
that the company has been successfully implementing in recent years.
+(562) 2692 3486
Risks: As main downside risks, we mention (1) a higher-than-expected depreciation of the
Aldo Morales E. dollar (and the FX basket); (2) a very competitive scenario in the USA that does not allow
them to grow and consolidate its operation as expected; and (3) a more pronounced decli-
+(562) 2692 2576
ned in Export markets volumes after the quarantines are lifted. As potential upside risks, we
highlight (1) a higher-than-expected growth in China after the high tariffs that the country
imposed on Australian wines (a principal competitor of Chilean wines); (2) announcements
related to the real estate business.
18
January 18th, 2021
CONCHA Y TORO
Viña Concha y Toro is a Chilean company dedicated to the production, marketing and distribution of wines and other
alcoholic beverages, with a worldwide presence. The company is vertically integrated, owns its own vineyards, oper-
ates production and bottling plants, while also has an important distribution network. On the other hand, Concha y
Toro is the largest exporter in Chile in terms of value, with its main markets are Europe (~ 50%), USA and Canada (~
BUY 15%), and LatAm (~ 18%). Additionally, the company has operations and vineyards in Argentina through Trivento, and
in the U.S. through Fetzer, owning more than ~ 11,600 hectares of vineyards in total. The company is controlled by a
group of investors mainly related to the Guilisasti family, with a ~ 39% of the ownership.
Target Price: CL$ 1,590
REVENUES BREAKDOWN (%) FINANCIAL STATEMENTS (CL$ million)

0%
Revenues 656,980 781,602 762,662 782,566
USA Chg% 7.0% 19.0% -2.4% 2.6%
Argentina 17% EBITDA 105,644 151,071 136,252 138,447
1% Chg% 22.8% 43.0% -9.8% 1.6%
Domestic EBITDA margin 16.1% 19.3% 17.9% 17.7%
Chile &
Net Interest -11,826 -13,693 -11,330 -10,170
Other
15% Exports Associates 3,229 3,220 3,923 3,933
67% Net Income 52,500 79,490 74,841 78,328
Chg% 6.9% 51.4% -5.8% 4.7%
Net Margin 8.0% 10.2% 9.8% 10.0%
VOLUME BREAKDOWN (%) Current Assets 642,488 666,759 673,039 732,824

Total Assets 1,253,817 1,307,756 1,312,019 1,353,441
Financial Debt 391,575 371,637 324,937 324,737
Argentina
2% Total Liabilities 659,783 660,669 612,901 597,361
USA
11% Equity 589,591 642,045 693,039 748,915
Domestic
Chile & FCF 2019 2020E 2021E 2022E
Other + EBIT 77,077 123,127 107,542 111,314
Exports
25%
62% + Dep and Amort 28,567 27,944 28,709 27,132
- Taxes -17,072 -27,693 -26,584 -27,908
- CAPEX -41,267 -34,993 -26,693 -23,477
- Working Capital -38,181 -48,104 -27,923 8,278
TOTAL 9,124 40,280 55,051 95,339

ROE 8.9% 12.4% 10.8% 10.5%
Profit Margin 8.0% 10.2% 9.8% 10.0%
Other Equity Multiplier 2.1 2.0 1.9 1.8
26%
Controllin
g Group DEBT RATIOS 2019 2020E 2021E 2022E
39%
Other
EBITDA/Fin. Expenses 8.5x 10.2x 11.3x 13.2x
Institution NFD/EBITDA 2.9x 2.1x 2.2x 1.7x
al Debt/Equity 0.7x 0.6x 0.5x 0.4x
Investors
26% Pension Source: Company reports, BICE Inversiones estimates
ADRs Funds
3% 6%
19
January 18th, 2021
VALUATION
Our target price is based on a blended 50%/50% between (1) a 10-Yr discounted cash flow approach (DCF)
in CL$ terms, using a weighted discount rate according to the EBITDA share of each subsidiary (Chile, Ar-
gentina and USA); and (2) 2021E target 10x EV/EBITDA multiple. In our valuation model we use a 6.5%
equity risk Premium and 2.7% risk-free rate. In addition, we are using a perpetuity exit multiple of 9x EV/
EBITDA (lower than history on low visibility of business drivers). According to our estimates, Concha y Toro
is trading at 9.1x EV/EBITDA 2021E, which compares to 10x-11x from its last 5 years.
VALUATION - CONCHA Y TORO
Concha y Toro Chile Argentina USA Total

Country Risk 147 1394 100
% Ventas LP 82.5% 0.6% 16.8%
Free Risk Rate 2.7% 2.7% 2.7%

Spread (AA-) 2.3% 14.8% 1.8%
Rd 5.0% 17.5% 4.6%
Levered Beta 0.93 0.94 0.95
Risk Premium 6.5% 6.5% 6.5%
Ke 8.8% 21.3% 8.4%
D/A 25% 25% 25%
E/A 75% 75% 75%
Tax 27.0% 25.0% 21.0%
WACC 7.9% 20.4% 7.5% 7.9%
G 3.0%
NPV 617,068
Perpetuity 790,458
EV/EBITDA
2021E 10.3x
Perpetuity Exit Multiple 9.0x
EV 1,407,526
+ Landbank 81,030
- NFD 297,861
Equity 1,210,094
# Stocks (MM) 747.0

Target Price - DCF (1) 1,620
Target Price - 10x EV/EBITDA 2021E (2) 1,560
Blended Target Price (1)(2) 1,590
Current Price 1,259
Upside 26.3%
Total Return 28.8%
20
ELECTRIC UTILITIES - ENEL AMÉRICAS
January 18th, 2021
HOLD ENEL AMERICAS

Target Price: CL$ 144 Significant Growth after the Merger with EGP Américas
Current Price: CL$ 117
SUMMARY What's new: We are updating our coverage of Enelam, introducing a target price YE21 of
Bloomberg ENELAM CC CL$ 144 and maintaining a HOLD recommendation.
Reuters ENELAM.SN
Investment Thesis: Stable outlook on regulatory matters. After the latest upward revisions
52 weeks high/low (CL$) 166.3/87.6
ADVT 6M (US$Mn) 15 in Brazilian distributors (Ceará +8.2%; Sao Paulo +7.02%) and the entry into force of the
Free float (%) 35.0% rate revision at Codensa (Colombia), no revisions would be expected during 2021, starting
# stocks (Mn) 76,086 the next regulatory cycle at the end of 2022 in Peru and Argentina, followed by Brazil in
Market Cap (US$ Mn) 12,127
2023. (2) Attractive vehicle for exposure to Latin America ex Chile, especially to Brazil whe-
Target price (CL$) 144
Current price (CL$) 117 re there is a high potential for efficiencies and organic growth. (3) With the eventual inte-
Upside 23.2% gration of EGP Americas, the company would become a strong ESG player in the region
Div. Yield (%) 3.6% with a large presence of renewable assets in the generation portfolio, where around 65% of
Total Return 26.8%
the generation assets would come from renewables sources. (4) Solid financial position
RATIOS (NFD/EBITDA 1.0x 2021E) that would allow taking advantage of inorganic growth opportu-
2019 2020E 2021E 2022E nities in the region, in addition to the portfolio of projects that EGP Americas would bring.
EV/EBITDA 5.9x 5.8x 5.1x 4.8x (5) Fair valuations. According to our estimates, the company does not present a significant
EV/Sales 1.6x 1.5x 1.4x 1.3x discount with respect to its historical multiple EV/EBITDA 5.1x.
P/E 10.5x 14.0x 11.5x 10.0x
P/BV 1.7x 1.5x 1.4x 1.3x
Div. yield 3.8% 6.4% 3.6% 4.2% Outlook 2021: We expect a normalization in the consumption of electrical energy for the
distribution sector, which as of September 2020 already showed a gradual recovery
STOCK PERFORMANCE reaching energy distribution levels (TWh) close to 2019, particularly in Brazil, and to a lesser
extent in Colombia and Peru. This, added to efficiencies at the operational level, would
1.1
boost EBITDA to a growth of + 13.6% YoY, reaching US $ 3,542 million, which could be in-
1.0
0.9 creased if the incorporation of the renewable assets of Enel Green Power Américas mate-
0.8 rializes, which would contribute close to US$ 500 million to EBITDA level during 2021, an
0.7 operation that should materialize by the middle of the year.
0.6
0.5
Risks: As the main downside risks, we highlight: (1) non-renewal of concessions with close
Jan/20
May/20
Nov/20
Jul/20
Sep/20
Mar/20
contract termination dates, mainly transmission lines in Brazil and El Chocón generation
plant in Argentina. (2) Risk in operation in Argentina regarding the official exchange rate,
IPSA ENELAM
measures such as freezing of tariffs or other measures that may be detrimental to the ope-
ration. (3) Execution risk in EGP Americas project portfolio. (4) Deterioration of regional
CONTACT
macroeconomic variables given the high sensitivity of the results, especially to the exchan-
Manuel Barrientos A.
ge rate.
manuel.barrientos@bice.cl
+(562) 2692 1836
Aldo Morales E.
+(562) 2692 2576
21
ELECTRIC UTILITIES - ENEL AMERICAS
January 18th, 2021
ENELAM
Enel Américas is the largest private electricity utility company in Latin America, with an installed generation capacity
of ~11,271 MW and more than 24 million customers in the distribution segment. The company includes assets of the
generation, distribution and transmission of electricity business for the Enel group in Argentina, Peru, Colombia and
Brazil, the latter being the most important country (~41% of LTM EBITDA), highlighting 4 electricity distribution con-
HOLD cessions in Rio de Janeiro, Sao Paulo, Ceará and Goias. Enel Américas is controlled by the Italian group Enel S.p.A.,
which owns 65% ownership of the company.
Target Price: CL$ 144

EBITDA BREAKDOWN (%) FINANCIAL STATEMENTS (US$ million)

Argentina INCOME STATEMENT 2019 2020E 2021E 2022E
10% Revenues 14,314 11,739 12,736 13,996
Chg% 8.6% -18.0% 8.5% 9.9%
Otros
-10% EBITDA* 3,994 3,118 3,542 3,772
Peru Chg% 19.0% -21.9% 13.6% 6.5%
14% EBITDA margin 27.9% 26.6% 27.8% 27.0%
Brasil Net Interest -639 -429 -186 -292
41% Associates 1 3 3 3
Colombia Net Income 1,614 867 1,054 1,212
36% Chg% 34.4% -46.3% 21.6% 15.0%
Net Margin 11.3% 7.4% 8.3% 8.7%

Current Assets 6,581 5,944 6,966 8,110
EBITDA BREAKDOWN (%) Total Assets 29,776 25,197 26,999 28,977
Financial Debt 6,381 5,913 6,096 6,285
Tx Total Liabilities 17,530 15,263 15,984 16,747
2% Equity 9,966 7,872 8,493 9,178
Others
-2% Liabilities + equity 29,776 25,197 26,999 28,977
Gx
40% FCFF 2019 2020E 2021E 2022E
+ EBIT 2,769 1,972 2,341 2,546
+ Dep and Amort 948 905 961 986
- Taxes -236 -471 -816 -581
Dx - CAPEX -892 -1,213 -1,740 -1,820
60% - Working Capital -209 37 330 253
Total 2,381 1,231 1,077 1,384

OWNERSHIP (%) ROE 16.2% 11.0% 12.4% 13.2%
Profit Margin 11.3% 7.4% 8.3% 8.7%
ADRs Equity Multiplier 3.0 3.2 3.2 3.2
Pension
Funds 5%
14% DEBT RATIOS 2019 2020E 2021E 2022E
EBITDA / Fin. Expenses 3.7x 4.3x 4.9x 4.2x
Institution
al NFD / EBITDA 1.7x 1.2x 1.0x 0.8x
Investors Debt / Equity 0.6x 0.8x 0.7x 0.7x
Enel 17%
65%
* EBITDA = EBIT + Dep & Amort. + Write offs
Other
1%
22
ELECTRIC UTILITIES - ENEL AMÉRICAS
January 18th, 2021
VALUATION
Our target Price 2021E of CL$ 146 is based on a target EV/EBITDA multiple approach for each subsidiary,
where we use EV/EBITDA of regional peers for each segment. Subsequently, we deduct the net financial
debt of each subsidiary and adjust for the percentage of ownership, to reach the economic value of the
equity. Regarding EGP Américas, we incorporate it assuming a US$ 500 mm EBITDA 2021E an the additional
31,195 million shares approved at the corresponding shareholders’ meeting. Additionally, we incorporate
the associates, land and all the net financial debt and expenses of the holding company. Finally, we apply a
10% holding discount, in line with discounts that are used at a market level.
VALUATION - ENEL AMERICAS

EV/EBITDA EV NFD Equity Equity*
Enel Am éricas Method 21E 21E 21E 21E % stake 21E
Gx Argentina - Costanera EV/EBITDA 3.5x 113 -20 133 75.6% 100
Gx Argentina - Docksud EV/EBITDA 3.5x 86 -42 127 40.3% 51
Gx Argentina - Chocon EV/EBITDA 3.0x 64 -54 119 65.7% 78
Gx Peru - Generacion Peru EV/EBITDA 5.7x 1,425 -293 1,718 83.6% 1,436
Gx Peru - Piura EV/EBITDA 5.7x 208 -27 236 96.5% 227
Gx Colombia - Emgesa EV/EBITDA 5.7x 4,147 589 3,558 48.5% 1,725
Gx Brazil - EGP Cachoeira EV/EBITDA 8.2x 621 -107 728 99.8% 726
Gx Brazil - Enel Gen. Fortaleza EV/EBITDA 8.2x 700 -40 740 100.0% 740
Gx Brazil - EGP Volta Grande EV/EBITDA 8.2x 512 120 392 100.0% 392
Dx Argentina - Edesur EV/EBITDA 3.5x 47 -64 111 72.1% 80
Dx Peru - Enel Dist. Peru EV/EBITDA 9.3x 2,488 447 2,041 83.2% 1,697
Dx Brazil - Enel Dist. Rio EV/EBITDA 7.8x 2,059 475 1,584 99.7% 1,580
Dx Brazil - Enel Dist. Ceara EV/EBITDA 7.8x 1,986 378 1,608 74.1% 1,191
Dx Brazil - Enel Dist. Goias EV/EBITDA 7.8x 1,445 371 1,074 99.9% 1,073
Dx Brazil - Enel Dist. Sao Paulo EV/EBITDA 7.8x 4,860 521 4,339 100.0% 4,339
Dx Colombia - Codensa EV/EBITDA 9.3x 6,049 573 5,476 48.3% 2,645
Tx Brazil - Cien EV/EBITDA 5.0x 152 -82 234 100.0% 234
EGP Américas EV/EBITDA 12.6x 6,300 -260 6,560 100.0% 6,560
Total Subsidiaries 26,961 2,744 24,216 24,874
+ Associates 4
+ Lands 149
- Holdco - NFD 661
+ Holdco - NPV SG&A -898
Enel Américas 23,468
# Stocks (Mn) 107,282

P° Target 160
- Holding discount 10%
P° Target 144
Current Price 117
Upside 23.2%
+ Dividend Yield 21E 3.6%
Total Return 26.8%
23
ELECTRIC UTILITIES - ENEL CHILE
January 18th, 2021
HOLD ENEL CHILE

Target Price: CL$ 70.9 Leading the Coal Phase-out
Current Price: CL$ 60.6
SUMMARY What's new: We are updating our coverage of Enel Chile, introducing our YE21 target price
Bloomberg ENELCHIL CC of CL$ 70.9, while maintaining our HOLD recommendation.
Reuters ENELCHILE.SN
Credit risk rating AA+(cl)/Baa2/A-
Investment Thesis: (1) Leading renewable energy company in the country. Enel Chile,
52 weeks high/low (CL$) 76.8/49.6
ADVT 6M (US$Mn) 4.0 mainly through its renewable segment EGP, has a large generation matrix with a strong
Free float (%) 35.1% presence of NCRE plus the hydro energy in the Enel Generación Chile portfolio. That would
# stocks (Mn) 69,167 allow them to be the first of the large generation companies to withdraw 100% of the coal-
fired plants from its generation matrix, closing the last coal-fired plant in May 2022. (2) Fair
Target price (CL$) 70.9
Current price (CL$) 60.6 valuations. According to our estimates, the company would be trading at levels close to the
Upside 17.2% historical average in the EV/EBITDA multiple of 7.1x in the last 3 years, presenting a slight
Div. Yield (%) 4.5% discount of 4% in said multiple. (3) High growth potential through the EGP renewable arm,
Total Return 21.7%
where the company expects to add 1.1 GW of additional installed capacity to the 1.3 GW
RATIOS that is currently under construction, which would allow the company the ability to seek
2019 2020E 2021E 2022E new clients.
EV/EBITDA 6.5x 6.8x 6.7x 6.2x
EV/Sales 2.5x 2.3x 2.4x 2.5x Outlook 2021: In the case of Enel Chile, we expect a flat 2021, growing +0.9% in revenues
P/E 16.5x -38.7x 12.8x 11.9x
to CL $ 2,656,118 million, in a year in which tariff adjustment in the distribution segment
P/BV 1.4x 1.3x 1.3x 1.2x
Div. yield 4.5% 7.0% 4.5% 3.9% comes into effect in the first half of the year, in addition to lower regulated return, that
goes from 10% pre-taxes to 6% after taxes, which would be offset by a recovery in demand
STOCK PERFORMANCE in the distribution sector, while we expect the generation segment to remain relatively flat
in terms of revenues. On the other hand, we would expect EBITDA growth of + 4.3% YoY,
1.1
where in the generation segment we would expect a slight increase in energy purchases to
1.0
supply energy contracts, which would put pressure on operating margins, being partially
0.9
0.8 offset by the entry into operation of approx. 987 MW of renewable installed capacity by
0.7 EGP during the year.
0.6
0.5 Risks: As main downside risks, we highlight: (1) Uncertainty regarding the implementation
Jan/20
May/20
Nov/20
Jul/20
Sep/20
Mar/20
of reforms regarding the Long Distribution Law. (2) Water scenario lower than expected in
Chile, which remains below the historical averages of rainfall. (3) Execution risk in genera-
IPSA ENEL CHILE tion projects, where delays in the start of operations could expose the company to the
volatility of the spot market. As main upside risks, we highlight: (1) Total recovery of ac-
CONTACT
counts receivable related to the price stabilization mechanism. (2) Migration of regulated
clients lower than expected in the medium term.
+(562) 2692 1836
Aldo Morales E.
+(562) 2692 2576
24
January 18th, 2021
ENELCH
Enel Chile is a company that operates the electricity generation and distribution business. After a corporate restruc-
turing (Elqui project), it was composed by (1) the assets of Enel Generación Chile, with an installed capacity of 5,990
MW and a strong presence of hydro capacity (~58% in 2020), (2) the Enel Green Power generation assets in Chile,
with an installed capacity of 1,222 MW privileging wind and solar plants and (3) Enel Distribución Chile, which oper-
HOLD ates a concession area exceeding 2,000 km2 in the Metropolitan region. Enel Chile is controlled by the Italian group
Enel, with a 65% stake.
Target Price: CL$ 70.9

EBITDA BREAKDOWN (%) FINANCIAL STATEMENTS (CL$ billion)

INCOME STATEMENT 2019 2020E 2021E 2022E
Sales 2,770,834 2,632,517 2,656,118 2,447,127
Chg% 12.8% -5.0% 0.9% -7.9%
EBITDA 1,053,492 889,846 928,121 968,966
Chg% 18.2% -15.5% 4.3% 4.4%
EBITDA margin 38.0% 33.8% 34.9% 39.6%
Net Interest -137,499 -91,148 -108,735 -121,449
Associates 366 2,121 2,121 2,121
Net Income 296,154 -108,307 327,037 352,926
Chile
Chg% -18.1% -136.6% -402.0% 7.9%
100% Net Margin 10.7% -4.1% 12.3% 14.4%

Current Assets 1,018,213 1,087,448 1,019,702 1,460,772
EBITDA BREAKDOWN (%) Total Assets 7,857,988 8,154,850 8,321,721 8,757,261
Enel Chile Financial Debt 1,954,826 2,049,636 2,112,865 2,178,364
-4% Total Liabilities 4,110,705 4,722,310 4,726,823 4,946,924
Equity 3,484,698 3,185,513 3,323,750 3,513,158
EGP
24%
FCFF 2019 2020E 2021E 2022E
Gx
54%
+ EBIT 526,055 -72,693 598,632 634,969
+ Dep and Amort 236,627 239,987 323,490 326,060
Dx - Taxes -61,228 59,261 -129,881 -140,162
18% - CAPEX -300,346 -688,774 -558,107 -320,530
- Working Capital 14,970 -33,989 -75,181 57,775
Total 416,078 -496,209 158,953 558,111

OWNERSHIP (%) ROE 8.5% -3.4% 9.8% 10.0%
Pension Other ADRs Profit Margin 10.7% -4.1% 12.3% 14.4%
Funds 1.4% 3% Asset Turnover 0.4 0.3 0.3 0.3
14%
DEBT RATIOS 2019 2020E 2021E 2022E

NFD / EBITDA 1.6x 1.9x 1.9x 1.6x
Institution
Enel
al 65% Source: Company reports, BICE Inversiones estimates
Investors
16%
25
January 18th, 2021
VALUATION
Our target price is based on a sum of the parts (SOTP) methodology, where we separate (1) the Enel Gene-
ración Chile and EGP, which are valued using a 20-Year discounted cash flow approach in CL$ terms with a
perpetuity exit multiple of 6.0x and 8.0x EV/EBITDA respectively, and (2) Enel Distribución Chile, which is
valued using a 10-Year discounted cash flow approach also in CL$ terms, with a perpetuity exit multiple of
10x EV/EBITDA. In our valuation we use a 6.5% equity risk premium, a 2.7% risk-free rate in the distribution
segment and a 3.7% risk-free rate for both generation subsidiaries. According to our estimates, Enel Chile
would be trading at a slight 4% discount compared to the 7.1x EV/EBITDA multiple from its last 3-years
average.
VALUATION - ENEL CHILE

Enel Chile - Discount rate Dx Gx EGP
Free Risk Rate 2.7% 3.7% 3.7%
Spread (A) 1.2% 1.2% 1.2%
Pre-tax cost of Debt (Kd) 3.9% 4.9% 4.9%
Unlevered Beta 0.70 0.80 0.80
Leveraged Beta 0.70 1.05 1.51
Risk Premium 6.5% 6.5% 6.5%
Cost of Equity (Ke) 7.3% 10.6% 13.6%
D/A 0% 30% 55%
E/A 100% 70% 45%
Tax 27.0% 27.0% 27.0%
WACC 7.3% 8.5% 8.1%
Enel Chile - DCF Valuation Enel Dx Enel Gx EGP Total

NPV 729,036 3,010,070 2,508,007 6,047,908
Perpetuity 1,127,264 495,579 669,172 2,250,154
NFD 1,597 942,025 269,712 1,153,030
Stake 99.1% 93.6% 100.0%

EV/EBITDA 2021E 10.9x 6.9x 11.5x 8.9x
Perpetuity Exit Multiple 10.0x 6.0x 8.0x
+ Associates 19,583
+ Lands 78,158
- Holdco - NFD 1,868,760
+ Holdco - NPV SG&A -466,834
Equity 4,907,178
P/E 2021E 15.0x

P/BV 2021E 1.5x
# Stocks (Mn) 69,167

P° Target 2021E 70.9
Current Price (CL$) 60.6
Upside (%) 17.2%
Div. Yield 21E 4.5%
Total Return (%) 21.7%
26
ELECTRIC UTILITIES - ENGIE ENERGÍA CHILE
January 18th, 2021
HOLD ENGIE ENERGÍA CHILE

Target Price: CL$ 1,130 Significant Capex Requirements Put Pressure on the Dividend
Current Price: CL$ 909 Policy
SUMMARY What's new: We are updating our coverage of Engie Energia Chile, introducing our YE21
Bloomberg ECL CC target price of CL $ 1,130, while maintaining our HOLD recommendation.
Reuters ECL.SN
Credit risk rating A+
Investment Thesis: (1) Engie Energía Chile is one of the main players in the energy genera-
ADVT 6M (US$Mn) 2.1 tion business in the northern part of Chile, with a client base mainly focused on companies
Free float (%) 47.2% related to the mining business, and a portfolio with a useful life of 11 years in average. (2)
# stocks (Mn) 1,053 Important exposure to the transmission business. Through its participation in TEN, where
Market Cap (US$ Mn) 1,304.0
they own a 50% ownership, the company maintains exposure to a stable business such as
Current price (CL$) 909 power transmission. (3) The company is at the beginning of an important Capex phase,
Upside 24.3% which seeks to replace the current installed coal-fired power with renewable capacity, so a
Div. Yield (%) 3.6% cycle with strong capital requirements is expected, which would force the company to
Total Return 28.0% maintain a policy of dividends in the mandatory minimum, 30% of net income, to be able to
RATIOS sustain the transition to renewables. New project announcements for approximately 500
2019 2020E 2021E 2022E MW of installed capacity would be expected.
EV/Sales 1.7x 1.7x 1.8x 1.7x Outlook 2021: We expect a slight decrease in revenues of -4.1%, mainly due to lower
P/E 15.5x 8.5x 8.8x 10.3x
energy sales prices and lower energy demand in the regulated segment, partially offset by
P/BV 0.8x 0.6x 0.6x 0.6x
Div. yield 7.0% 5.4% 3.6% 3.4% recovery in demand from unregulated clients. On the other hand, we expect EBITDA to
remain flat, increasing by +2.2%, in a year in which three renewable projects are expected
STOCK PERFORMANCE to come into operation for a total of 362 MW of installed capacity that would generate
energy at low cost, therefore, we estimate an improvement in margins of + 224bp. Finally,
1.1
1.0 the dividend policy is expected at the mandatory minimum to be able to finance invest-
0.9 ment plan, which would grant a dividend yield close to 3.6%.
0.8
0.7 Risks: As main downside risks, we highlight: (1) Project execution risk. 362 MW of rene-
0.6
wable capacity is expected to come into operation during 2021, so a delay could mean ex-
0.5
posure to price fluctuations in the spot market. (2) Renewals of contracts with free custo-
Jan/20
May/20
Nov/20
Jul/20
Sep/20
Mar/20
mers at worse conditions than anticipated by the market. As main upward risks we highli-
ght: (1) Migration of regulated clients lower than expected in the medium term. (2) Total
IPSA ECL
recovery of accounts receivable related to the rate stabilization mechanism.
CONTACT
+(562) 2692 1836
Aldo Morales E.
+(562) 2692 2576
27
January 18th, 2021
EECL
Engie Energía Chile (EECL) is a Chilean company involved in the production and supply of electricity mainly to industri-
al customers, mining companies in the north of Chile, and regulated customers. Additionally, it has a 50% stake in the
Transmisora Eléctrica del Norte (TEN) company, which owns a transmission line that connects the SIC and SING sys-
tems in Chile. The company has an installed generation capacity of 2,182 MW with a strong share of thermo-
HOLD generation plants (92.9% of installed capacity) and is currently executing an investment plan for the transition to
NCRE. EECL is controlled by the French company ENGIE (former GDF Suez) that maintains a total of 60% ownership.


Sales 1,454 1,303 1,250 1,167
Chg% 14.0% -10.4% -4.1% -6.6%
EBITDA 533 445 455 407
Chg% 41.8% -16.4% 2.2% -10.7%
EBITDA margin 36.6% 34.2% 36.4% 34.8%
Net Interest -33 -58 -47 -49
Associates 0 0 0 0
Net Income 111 158 153 131
Chg% 8.0% 42.7% -2.9% -14.6%
Chile
100% Net Margin 7.6% 12.1% 12.3% 11.2%

Current Assets 485 336 452 665
INSTALLED CAPACITY (%) Total Assets 3,508 3,656 3,738 3,848
Hydro Financial Debt 864 946 975 1,006
NRCE 2% Total Liabilities 1,384 1,439 1,415 1,440
5%
Equity 2,059 2,217 2,323 2,408
Liabilities + equity 3,508 3,656 3,738 3,848
FCFF 2019 2020E 2021E 2022E

+ EBIT 378 268 266 237
+ Dep and Amort 155 177 189 170
- Taxes -43 -45 -57 -48
Thermal - CAPEX -155 -304 -156 -68
93%
- Working Capital 152 155 -145 17
Total 487 251 98 307

OWNERSHIP (%) ROE 5.4% 7.1% 6.6% 5.4%
Others Profit Margin 7.6% 12.1% 12.3% 11.2%
22%
DEBT RATIOS 2019 2020E 2021E 2022E

Pension
Engie Debt / Equity 0.4x 0.4x 0.4x 0.4x
Funds
18% 60%
28
January 18th, 2021
VALUATION
Our target price is based on a discounted cash flow approach (DCF), in USD$ terms, and we value the asso-
ciate TEN with an EV/EBITDA multiple approach, using our 2021E EBITDA forecast and 15.0x EV/EBITDA. In
our valuation model we use a 6.5% equity risk premium and 1.5% risk-free, leading to a 7.1% discount rate
(WACC) with no perpetuity exit multiple given the strong presence of thermal power plants in the genera-
tion mix of the company. According to our estimates, Engie is trading at a 32% discount vs its last 5-years
average EV/EBITDA multiple of 7.1x.
VALUATION - ENGIE ENERGIA CHILE

ECL - Discount rate
Country Risk 147
Free Risk Rate 1.5%
Spread (A) 3.8%
Pre-tax cost of Debt (Kd) 5.3%
Unlevered Beta 0.80
Leveraged Beta 1.19
Risk Premium 6.5%
Cost of Equity (Ke) 9.2%
D/A 40%
E/A 60%
Tax 27.0%
WACC 7.1%
ECL - DCF Valuation

NPV 2,252
NFD 860
EV/EBITDA 2021E 4.9x
Associates - TEN 234

Min. Interest
Headcount & Other
Equity 1,626
P/E 2021E 10.6x

P/BV 2021E 0.7x
# Stocks (Mn) 1,053

P° Target 2021E 1,130
Current Price (CL$) 909
Upside (%) 24.3%
Div. Yield 21E 3.6%
29
ELECTRIC UTILITIES - AES GENER
January 18th, 2021
BUY AES GENER

Target Price: CL$ 150 Recent Cash Injection Supports the Transition to Renewables
SUMMARY What's new: We are updating our coverage of AES Gener, introducing a YE21 target price
Bloomberg AESGENER CC of CL$ 150, while upgrading from HOLD to BUY recommendation.
Reuters AESGENER.SN
52 weeks high/low (CL$) 131.4/80.8 Investment Thesis: Investment thesis: (1) Improved financial position of the company. After
ADVT 6M (US$Mn) 1.9 the cash injections of US$ 720 related to the early termination of the contract with BHP and
Free float (%) 33.3% US$ 113 million for the incorporation of a commercial partner to the Cochrane property, it
# stocks (Mn) 8,400 would allow the company's financial ratios to improve and reduce the amount necessary
Market Cap (US$ Mn) 1,450 for the capital increase (US $ 300 million instead of the initial US$ 500 million) resulting in
lower dilution than expected. (2) Attractive business in Colombia, where the company owns
Current price (CL$) 124
Upside 21.1% a hydro generation plant with attractive margins plus the recent award of new 325 MW
Div. Yield (%) 14.6% renewable projects that would allow accelerating the transition to a more renewable gen-
Total Return 35.7% eration matrix. (3) Attractive return on dividends, where the policy of 100% payment of
recurring profits would grant a 2021E dividend yield close to 15%.
RATIOS
2019 2020E 2021E 2022E
EV/EBITDA* 6.9x 6.9x 6.9x 6.0x Outlook 2021: Without the one-time effect of the payment related to the early termination
EV/Sales 2.4x 2.2x 2.2x 2.5x of the contract with BHP, we would expect an increase in EBITDA of approximately + 5% to
P/E 15.7x -5.9x 2.7x 5.1x
US $ 828 million mainly explained by: (1) +40% growth in Colombia given a poor compara-
P/BV 0.7x 0.7x 0.5x 0.5x
ble basis on 2020 due to the low power generation observed due to works in the reservoir
Div. yield 15.8% 21.3% 14.6% 14.6%
*EV/EBITDA 2020-2021 excludes one-offs. to expand its useful life; and (2) the start of operations in Alto Maipo, which would enter
into operation towards the second half of the year, for which we expect a contribution of
STOCK PERFORMANCE
US$ 30 million of additional EBITDA, while the operation in Chile would remain flat (+2.8%)
1.2
as well as the Argentine operation (+0.6%).
1.0
0.8
Risks: As main downside risks, we highlight: (1) Execution risks in the investment plan that
0.6 intends to operate 358 MW of additional renewable energies in Chile during 2021. (2) Cost
0.4 overruns or new delays in the execution of the Alto Maipo project, which was delayed for
Jan/20
May/20
Nov/20
Jul/20
Sep/20
Mar/20
the second half of 2021. (3) Hydrological scenario worse than expected in Colombia, in
addition to a greater deterioration of the exchange rate in the country with respect to the
IPSA AESGENER USD.
CONTACT
+(562) 2692 1836
Aldo Morales E.
+(562) 2692 2576
30
January 18th, 2021
AES GENER
AES Gener in a Chilean company linked to the electric generation business, maintaining operations in (1) Chile (80% of
LTM EBITDA), with an installed capacity of ~2,741 MW mainly trough coal-fired thermoelectric plants in the central
and northern area of the country; (2) Colombia (15% of LTM EBITDA) where the main asset is a hydroelectric power
plant, with 1,020 MW of installed capacity, plus a solar plant with 20 MW of capacity; and (3) Argentina, with a natu-
BUY ral gas power plant in the north of Argentina, with an installed capacity of 364 MW. The company also owns 50.1% of
the thermo-electric generation units of Guacolda (763 MW) and has a 93.3% stake in the hydroelectric project Alto
Maipo (531 MW). AES Gener is controlled by the U.S. company AES Corp with 67% ownership.

Argentina INCOME STATEMENT 2019 2020E 2021E 2022E
5% Sales 2,412 2,517 2,631 2,233
Chg% -8.9% 4.3% 4.6% -15.2%
EBITDA 839 1,061 1,220 914
Colombia Chg% -5.4% 26.4% 14.9% -25.0%
15%
EBITDA margin 34.8% 42.2% 46.3% 40.9%
Net Interest -130 -123 -160 -145
Associates -126 -79 17 17
Net Income 116 -248 549 287
Chile
Chg% -59.7% -314.5% -321.1% -47.8%
80%
Net Margin 4.8% -9.9% 20.9% 12.9%

Current Assets 970 1,223 933 1,131
FUEL PORTFOLIO (%) Total Assets 8,443 8,456 9,046 9,465
Financial Debt 4,226 4,108 4,235 4,366
NCRE Equity 2,447 2,035 2,891 3,177
7% Liabilities + equity 8,443 8,456 9,046 9,465
Gas/Diese
l Coal FCFF 2019 2020E 2021E 2022E
16% 49% + EBIT 564 803 957 578
- Non-Cash Income -168 -392 0
Hydro + Dep and Amort 265 255 260 333
28% - Taxes -112 32 -206 -108
- CAPEX -503 -593 -1,139 -555
- Working Capital 38 -234 74 101
Total 253 95 -446 350

ROE 4.7% -12.2% 19.0% 9.0%
Profit Margin 4.8% -9.9% 20.9% 12.9%
25%
DEBT RATIOS 2019 2020E 2021E 2022E
Pension AES Corp
Funds
66%
9% Debt / Equity 1.7x 2.0x 1.5x 1.4x
31
January 18th, 2021
VALUATION
Our target price is based on a sum of the parts (SOTP) methodology, where we value each of the com-
pany’s subsidiaries (Chile, Colombia, Argentina and Alto Maipo) under a 20-Year discounted cash flow ap-
proach (DCF), in USD$ terms. In our valuation model we use a 6.5% equity risk premium and 1.5% risk-free
rate. In the case of Chile, we use a 8.2% discount rate (WACC). For all subsidiaries we use a market based
perpetuity exit multiple. According to our estimates, AES Gener is trading at with a 8% discount compared
to its last 5-year EV/EBITDA 7.5x average and a 13% discount in comparison to the recent Cochrane deal
carried out at a 7.9x EV/EBITDA multiple according to our estimates.
VALUATION - AES GENER

AES Gener - Discount rate Chile Colom bia Argentina Alto Maipo
Country Risk 147 211 1,394 147
Free Risk Rate 1.5% 1.5% 1.5% 1.5%
Spread (A) 6.0% 6.6% 18.4% 6.0%
Kd 7.5% 8.1% 19.9% 7.5%
Unlevered Beta 0.8 0.8 0.8 0.8
Levered Beta 1.7 1.2 0.8 1.7
Risk Premium 6.5% 6.5% 6.5% 6.5%
Ke 12.4% 9.7% 19.2% 12.4%
D/A 60% 40% 0% 60%
E/A 40% 60% 100% 40%
Tax 27.0% 33.0% 30.0% 27.0%
WACC 8.2% 8.0% 19.2% 8.2%
AES Gener - DCF Valuation Chile Colom bia Argentina Alto Maipo Total
NPV 2,604 1,671 84 851 4,894
Perpetuity 248 477 1 195 883
NFD 2,455 96 -25 1,518 3,696
Stake 90% 100% 100% 93%
EV/EBITDA 2021E 2.9x 12.3x 2.1x 4.7x

Perpetuity Exit Multiple 6.0 6.0x 3.5x 6.0x
Equity 2,081
Associates - Guacolda 11
Lands 30
Min. Interest
Equity 2,121
P/BV 2021E 0.7x
# Stocks (Mn) 10,380

P° Target 150
Upside (%) 21.1%
Div. Yield 21E 14.6%
32
COMMODITIES - SQM
January 18th, 2021
SELL SQM
Target Price: CL$ 35,184 Strong Growth Potential Already Priced in
SUMMARY What's new: We are updating our coverage of SQM, introducing a YE21 target price of CL$
Bloomberg SQM/B CC 35,184 with a SELL recommendation.
Reuters SQM.SN
Credit risk rating (local) -/Baa1/-
Investment thesis: (1) Attractive exposure to fast growing industries with strong compara-
ADVT 6M (US$Mn) 14.8 ble advantages. SQM is one of the global leading producers of Lithium and Lithium deri-
Free float (%) 36% vates, an industry with a strong growth potential during the next years driven by the transi-
# stocks (Mn) 120 tion to electric vehicles. In addition, the company has one of the lowest unitary production
Market Cap (US$ Mn) 13,538 costs, driven by its presence in the concession of the “Atacama Salar” and also because of
Current price (CL$) 41,450
its top management and efficiency. We also highlight, the recently announced Sustainabil-
Upside -15.1% ity plan focused on the reduction of water use, emissions, and brine extraction. (2) Expen-
Div. Yield (%) 0.5% sive valuations after recent rally. After a strong 75% stock rally during the LTM, the shares
Total Return -14.6% are trading above 17x and 14x EV/EBITDA 21YE and 22YE, respectively, which implies a
significant premium compared to the approx. 11x in both 5-year and 10-year average. In
RATIOS
addition, to justify current valuations, we need to assume that the company more than
2019 2020E 2021E 2022E
triple its current capacity, which in our view implies that most of the attractive growth po-
EV/EBITDA 18.4x 21.2x 17.0x 14.4x
EV/Sales 6.1x 6.9x 6.0x 5.3x tential is currently included in the stock price.
P/E 39.7x 74.1x 46.2x 33.2x
P/BV 5.3x 5.7x 5.3x 4.8x Outlook 2021: We expect a significant recovery in volumes in the Lithium segment in 2021.
Div. yield 2.5% 1.5% 0.5% 0.8%
We include the company’s current guidance which points to complete 63 Th MT in 20YE
STOCK PERFORMANCE and increase by +30% in 21YE. In terms of Lithium prices, we assume 4Q20 was the bottom,
2.0 so we include a gradual recovery to US$ 6,375 MMT average in 2021. We expect Lithium
cash costs ex royalty to continue showing efficiency improvements, while reaching an aver-
1.5
age US$ 3,000 MMT. On the other hand, we expect Iodine prices to remain stable com-
1.0
pared to last year but expect a volumes recovery, mainly on the gradual normalization of
0.5 demand post pandemic. Lastly, in the Potassium segment, we expect the company to be
0.0 able to sell 750 Th MT in 2021, still below last year guidance of 800 Th MT before the pan-
nov/20
sep/20
ene/20
mar/20
may/20
jul/20
demic.
IPSA SQM-B Risks: As main downside risks, we highlight (1) a lower-than-expected recovery in Lithium
sales volume, Lithium demand, or a delay in the company’s expected capacity increase. (2)
CONTACT The increase in the perception of regulatory risks in Chile, which could lead investors to
assign a lower probability of renewal of the “Atacama Salar” concession after 2030.
Aldo Morales E.
+(562) 2692 2576
33
COMMODITIES - SQM
January 18th, 2021
SQM-B
Soquimich (SQM) is a mining company with a strong global presence through its five business lines: Specialty Plant
Nutrition, Iodine and derivatives, Lithium and derivatives, Industrial and Potassium Chemicals. At its plants in north-
ern Chile, SQM processes two natural resources: caliche ore and salt brines, which constitute the raw material for its
product portfolio. According to the Chilean law, SQM does not have a controlling group, however, the main share-
SELL holders are the “Pampa group” (32%) linked to Julio Ponce; and the Chinese “Tianqui” group (26%).

REVENUES BREAKDOWN (%) FINANCIAL STATEMENTS (US$ million)

Potassium
11% 2% Sales 1,944 1,828 2,129 2,422
Chg% -14.2% -5.9% 16.4% 13.8%
Industrial
chemicals EBITDA 643 595 743 897
9% SPN Chg% -27.4% -7.5% 24.9% 20.6%
39%
EBITDA margin 33.1% 32.6% 34.9% 37.0%
Net Interest -51 -65 -72 -68
Lithium Associates 10 10 10 10
19%
Net Income 278 159 256 356
Iodine Chg% -35.9% -42.7% 60.5% 39.2%
20% Net Margin 14.3% 8.7% 12.0% 14.7%

Current Assets 2,682 2,769 2,808 2,928
GROSS MARGIN BREAKDOWN (%) Total Assets 4,684 4,848 5,102 5,442
Potassium Other Current Liabilities 777 775 775 789
5% 1% Total Liabilities 2,550 2,745 2,780 2,829
Potasio
9%
Equity 2,086 2,057 2,233 2,461
Liabilities + Equity 4,684 4,848 5,102 5,442
SPN
33%
FCFF 2019 2020E 2021E 2022E
Lithium
19% + EBIT 443 375 484 641
+ Dep and Amort 200 220 260 256
- Taxes -110 -76 -111 -154
Iodine - CAPEX -321 -312 -475 -475
33%
- Working Capital 21 -29 3 -213
Total 233 179 161 54

OWNERSHIP (%)
ROE 13.3% 7.7% 11.4% 14.5%
Profit Margin 14.3% 8.7% 12.0% 14.7%
15% Pampa
Group DEBT RATIOS 2019 2020E 2021E 2022E
32%
ADR EBITDA / Fin. Expenses 8.4x 7.1x 8.7x 10.6x
18% NFD / EBITDA 1.1x 1.3x 1.1x 1.0x
Kowa Source: Company reports, BICE Inversiones estimates

Tianqi
Potasio 26% Group
9% 2%
34
COMMODITIES - SQM
January 18th, 2021
VALUATION
Our target price is based on a 50/50 blended approach between (1) a 18x target EV/EBITDA 2021 multiple,
and (2) a 10-Yr discounted cash flow approach (DCF). In our valuation model we use an 8.8% WACC and 3%
nominal terminal growth. In our EV/EBITDA approach, we use a significant premium compared to the 11x
multiple in both 10-year and 5-year average, including the current positive momentum of all Lithium pro-
ducers in a context of increasing growth prospects for the EV industry.
VALUATION - SQM
Discount rate SQM
Country Risk
Free Risk Rate 0.9%
Spread (A) 1.6%
Kd 2.5%
Unlevered Beta 1.23
Levered Beta 1.3
Risk Premium 6.5%
Ke 9.6%
D/A 10.0%
E/A 90%
Tax 27.0%
WACC 8.8%
G 3.0%
DCF Valuation SQM

NPV 4,203
Perpetuity - Salar 8,338
Perpetuity - ex Salar 2,342
NFD 784
Associates 613
Min. Interest 180
Equity 12,864
P/BV 2021E 5.5x
# Stocks (Mn) 263

T.P. US$ - DCF 49
T.P. CL$ - DCF (1) 36,168
T.P. CL$ - 18x EV/EBITDA 21E (2) 34,199
T.P. - Blended (1)(2) 35,184
Current Price (CL$) 41,450
Upside (%) -15.1%
Div. Yield 20E 0.5%
Total Return (%) -14.6%
35
COMMODITIES - CAP
January 18th, 2021
HOLD CAP
Target Price: CL$ 11,537 Attractive Earnings Momentum to continue in the Short term
SUMMARY What's new: We are updating our coverage of CAP, introducing a YE21 target price of CL$
Bloomberg CAP CC 11,537 with a HOLD recommendation.
Reuters CAP.SN
Creeit risk rating A+(cl)/-/BBB-
Investment thesis: (1) Strong earnings delivery in the short term. We expect the company’s
ADVT 6M (US$Mn) 4.0
results to continue being benefited by the recent surge of Iron Ore prices (US$ 131 average
Free float (%) 49.1% 62% Fe 4Q20), which has surpassed all market estimates, coupled with decreasing cash
# stocks (Mn) 149 costs due to an inventory normalization (US$ 45 per ton YE21). (2) Attractive vehicle to play
Market Cap (US$ Mn) 1,887 the current recovery trends observed in the industrial sector in China. CAP’s core business
is the production of Iron Ore (83% of EBITDA LTM) which has been positively benefited in
Upside 24.5% the short-term by important economic stimulus on the demand in China (approximately
Div. Yield (%) 4.4% 69% of Iron Ore imports), which should remain at least during the 1H21, coupled with a
Total Return 28.8% steady supply until 2022, considering the delay of new production of larger players and
lower inventories. (3) Attractive valuations compared to historical average. According to
RATIOS
our estimates, CAP is trading around 4.2x EV/EBITDA 2021, which represent a significant
2019E 2020E 2021E 2022E
discount to both its last five and ten-year average multiples (around 7x EV/EBITDA). We
EV/Sales 2.1x 1.5x 1.4x 1.5x believe that the current positive earnings momentum supports higher valuations.
P/E -7.9x 6.4x 7.2x 12.1x
P/BV 0.7x 0.8x 0.8x 0.8x Outlook 2021: We expect Iron Ore volumes to be slightly higher than last year, surpassing
Div. yield 5.2% 2.7% 4.4% 4.1%
16,000 MT and foresee a progressive decrease of unitary cash costs from US$ 50 during the
1H21 to 45 in the 2H21 due to a complete normalization of inventories at the end of last
STOCK PERFORMANCE
year. The latter should be partially offset by a gradual decrease and normalization of Iron
1.9
Ore prices to US$ 79 at the end of 2021. On the other hand, the Steel processing unit
1.4 should improve results in 2021, considering that the company should be able to consolidate
the recent acquisitions (Ex. Promet) after a very abnormal year 2020. We include US$ 55
0.9 million EBITDA for GPA in 2021.
0.4
Risks: As main downside risks, we highlight (1) a lower-than expected evolution of China's
sep/20
nov/20
ene/20
mar/20
may/20
jul/20
economy, which could imply lower Iron ore and steel prices, affecting our estimates. Like-
wise, a potential abnormal operation of ports or any issue that could affect the company’s
IPSA CAP
ability to dispatch the expected volume.
CONTACT
Aldo Morales E.
+(562) 2692 2576
36
COMMODITIES - CAP
January 18th, 2021
CAP
“Compañía de Acero del Pacífico” (CAP) participates mainly in the production of Iron ore (83% of EBITDA LTM)
through its “CMP” subsidiary, the largest Iron Ore producer in the Latin American Pacific Coast. The company also
participates in the production and processing of Steel (Novacero) in Chile and Peru and holds ownership in different
Infrastructure businesses. CAP’s largest shareholder is “Invercap”, a holding company with approx. 34.8% ownership,
HOLD followed by Mitsubishi with 19.3%.

SALES BREAKDOWN (%) FINANCIAL STATEMENTS (US$ million)

Chile Revenues 1,590 2,532 2,509 2,270
7%
Other Chg% -17.1% 59.2% -0.9% -9.5%
8% EBITDA 199 907 837 625
Chg% -62.6% 355.0% -7.7% -25.4%
EBITDA margin 12.5% 35.8% 33.4% 27.5%
Net Interest -87 -76 -77 -67
Associates 0 0 0 0
China Net Income -167 274 260 159
85% Chg% -233.9% -264.1% -5.1% -38.9%
Net Margin -10.5% 10.8% 10.4% 7.0%

Current Assets 1,241 1,749 2,005 2,201
EBITDA BREAKDOWN (%)
Total Assets 5,479 6,088 6,391 6,582
Infrastruct Financial Debt 1,007 1,187 1,211 1,235
ure &
other
Steel 11% Equity 1,920 2,088 2,266 2,347
Procesing
6%
FCFF 2019 2020E 2021E 2022E

+ EBIT 20 701 634 415
+ Dep and Amort 179 206 203 210
Iron Ore
- Taxes -31 -178 -145 -89
83%
- CAPEX -249 -221 -251 -204
- Working Capital -83 -275 282 50
Total -163 232 724 382

OWNERSHIP (%)
ROE -8.7% 13.1% 11.5% 6.8%
Profit Margin -10.5% 10.8% 10.4% 7.0%
Invercap DEBT RATIOS 2019 2020E 2021E 2022E

Other 35%
46%
NFD / EBITDA 3.3x 0.7x 0.1x -0.3x
Mitsubishi Source: Company reports, BICE Inversiones estimates
19%
37
COMMODITIES - CAP
January 18th, 2021
VALUATION
Our target Price is based on a target EV/EBITDA multiple approach for each subsidiary, deducting net finan-
cial debt, and adjusting for the company’s ownership to reach the Equity economic. Additionally, we in-
clude Associates, lands and all net financial debt and expenses of the holding company. Finally, we apply a
15% holding discount. We use 3.5x EV/EBITDA, which is near to the low range of historical multiples in the
Iron Ore producers, considering that we expect a multiples compression in the context of a normalization
of Iron ore prices this year.
VALUATION - CAP
EV/EBITDA EBITDA EV NFD Equity Equity*
CAP Method 21E 21E 21E 21E 21E % stake 21E
CAP Minería (CMP) EV/EBITDA 3.5x 761 2,662 -58 2,720 75.0% 2,040
CAP Acero (CSH) EV/EBITDA -38 0 -157 157 99.0%
CAP Procesamiento (GPA) EV/EBITDA 5.0x 55 273 14 259 62.0% 160
CAP Infraestructura EV/EBITDA 8.0x 52 417 -51 469 51.0% 239
Holding & Other 8 104 310 -206 100.0% -206
Total 837 3,455 57 3,399 2,233
+ Associates 2
+ Lands & other 326
- Holdco - NPV SG&A 0
Equity 2,561
# Stocks (Mn) 149

Fair value 31-12-2021 13,573
- Holding discount (%) -15%
P° Target 11,537
Upside 24.5%
Total Return 28.8%
38
REAL ESTATE - PARQUE ARAUCO
January 18th, 2021
HOLD PARQUE ARAUCO

Target Price: CL$ 1,430 Normalization post Pandemic could take Time
SUMMARY What’s new: We are updating our coverage of Parque Arauco, introducing our YE21 target
Bloomberg PARAUCO CC price of CL$ 1,430, consistent with a HOLD recommendation.
Reuters PAR.SN
Investment Thesis: (1) Pure investment vehicle in the real estate business with the largest
ADVT 6M (USD M) 2.9 diversification in the Andean Region and with good quality assets. Parque Arauco is the
Free float (%) 66.0% local player with the higher GLA diversification on markets that have the highest growth
# stocks (M) 906 potential in the real estate area (Peru and Colombia represent more than 40% of total EBIT-
DA) and has also developed emblematic and top of the notch assets in each country
Current price (CL$) 1,150 (Kennedy, MegaPlaza Norte and La Colina). (2) Limited mid-term operational growth
Upside potential 24.4% outlook on lower GLA growth rates. We expect Parque Arauco to show the lowest revenue
Div. Yield (%) 0.0% CAGR between 2019-24e among its peers (around 1.5%) on a slowdown in new GLA (+1.1%
Total Return 24.4%
CAGR 2019-24e) being the main projects Kennedy expansion and Parque Alegra. On the
RATIOS other hand, given the higher level of indebtedness due to the pandemic, it hampers the
2019 2020E 2021E 2022E incorporation of new projects in the short term. (3) Valuation for 2021e looks fair
EV/EBITDA 17.5x 32.7x 15.8x 13.7x (measured by cap rate) incorporating the reduction in estimates due to the continued
P/FFO 14.9x 46.6x 12.4x 9.4x effect of quarantine measures on the normal operation. But we highlight that in terms of
P/E* 28.6x -87.3x 26.8x 17.5x
FFO yield is the one that looks the most appealing, and if we compared the spread between
P/BV 1.6x 1.0x 1.0x 0.9x
Div. yield 2.1% 2.2% 0.0% 2.3% the cap rate and the local interest rates, Chilean peers show a higher spread than Mexi-
cans, and Brazilians.
*P/E exclude asset revaluation.
STOCK PERFORMANCE Outlook 2021: We expect a year that will continue to be affected to some extent by the
1.2 quarantine measures imposed by the governments, in addition to certain areas of the mall
1.0 that will not yet open as movie theaters, entertainment areas, etc. (food&entertainment
0.8 15% of the GLA). Besides that, to take care of the vacancy (we expect less than 8%), the
0.6 company in the short term has had to renew some contracts at lower rates in the first
0.4 years, to then reach a normalized level in the coming years. However, as of 2Q21, we ex-
May/20
Jan/20
Nov/20
Jul/20
Mar/20
Sep/20
pect a more pronounced recovery partly due to the low comparison base, but it is in 2022
where we see a more normalized operation once a significant part of the population has
already been inoculated.
IPSA PARAUCO
Risks: As the main downside risks, we mention (1) that the situation worsens further in any
CONTACT country due to the pandemic (returning to malls operating levels at a minimum). (2) A
Paulina Vargas J. higher-than-expected level of vacancy either because of more financially stressed tenants
or because e-commerce potentially leads to more store closures. As potential upside risks,
+(562) 2692 3486
we highlight (1) announcements of new projects in the region that could drive greater
Aldo Morales E. growth; and (2) faster-than-expected recovery to pre-pandemic levels.
+(562) 2692 2576
39
January 18th, 2021
PARAUCO
Parque Arauco SA is a Chilean-based company involved in the development and operation of Shopping Centers,
Outlets and Stripcenters in the Andean region. In the case of Chile (~52% of EBITDA), the company has 9 shopping
centers, where we highlight Mall Parque Arauco Kennedy (GLA 112,000 sqm), one of the first malls in the country,
and the most important for the company. Meanwhile, in Peru (30% EBITDA) it maintains 15 malls, highlighting Mega-
HOLD plaza Norte and Larcomar. In Colombia, Parque Arauco operates three malls, where we highlight Parque La Colina
(2016). Additionally, the company maintains 7 outlets, 20 stripcenters and 9 mixed-use assets (offices, medical cen-
ters, hotels) in the Andean region. The controlling group owns ~25% of the property and is mainly related to the Said
Target Price: CL$ 1,430 Somavía family.

Revenues 205,613 124,863 190,847 208,151
Chg% 8.4% -39.3% 52.8% 9.1%
Colombia EBITDA 150,562 63,640 129,691 147,518
18% Chg% 9.3% -57.7% 103.8% 13.7%
EBITDA margin 73.2% 51.0% 68.0% 70.9%
Net Interest -28,602 -36,696 -32,880 -27,876
Chile
Peru 52% Net Income 93,394 -978 60,815 81,300
30% Chg% -20.8% -101.0% -6316.9% 33.7%
Net Margin 45.4% -0.8% 31.9% 39.1%
Net Income ex. Revaluation 58,485 -11,928 38,915 59,400
Chg% -27.9% -120.4% -426.2% 52.6%
Net Margin 28.4% -9.6% 20.4% 28.5%
REVENUES BREAKDOWN (%) BALANCE SHEET 2019 2020E 2021E 2022E

Current Assets 409,922 568,531 441,667 395,837
Total Assets 2,692,358 2,848,447 2,751,647 2,724,363
Financial Debt 1,162,351 1,418,447 1,274,720 1,213,944
Colombia Total Liabilities 1,517,101 1,727,800 1,564,881 1,473,597
15%
Equity 1,064,448 1,011,419 1,072,234 1,129,144
Chile
Peru FCF 2019 2020E 2021E 2022E
54%
31%
+ EBIT 145,803 58,301 120,204 142,093
+ Dep and Amort 4,759 5,339 5,332 5,425
- Taxes -36,820 -6,425 -26,029 -34,518
- CAPEX -105,943 -36,251 -35,396 -23,972
- Working Capital -6,909 1,478 3,113 -3,903
Total 890 22,442 67,225 85,125
OWNERSHIP (%)
ROE 8.8% -0.1% 5.7% 7.2%
Profit Margin 45.4% -0.8% 31.9% 39.1%
Controllin Asset Turnover 0.1 0.0 0.1 0.1
g Group Equity Multiplier 2.5 2.8 2.6 2.4
25%
Said Yarur
Other Family DEBT RATIOS 2019 2020E 2021E 2022E
51% 5% EBITDA/Fin. Expenses 3.8x 1.4x 3.1x 3.9x
Pension
Abumoho NFD/EBITDA 5.6x 14.6x 6.9x 5.8x
Funds
r Family Debt/Equity 1.1x 1.4x 1.2x 1.1x
16%
3%
40
January 18th, 2021
VALUATION
re we value each of the company’s subsidiaries (Chile, Peru, and Colombia) under a 10-Yr discounted cash
flow approach (DCF) in CL$ terms; and (2) 2022E target 7% cap rate (we use 2022 to have a more normali-
zed P&L after the pandemic, but at the same time we demand a higher cap rate than history). In our valua-
tion model we use a 6.5% equity risk Premium and 2.7% risk-free rate. We use a ~ 7.6% discount rate
(WACC), and in addition, we are using a perpetuity exit multiple for each subsidiary. According to our esti-
mates Parque Arauco is trading at 6.3% cap rate 2021E, which compares to 6.4% cap rate from its main
local peers and 6.5% from its history.
VALUATION - PARQUE ARAUCO
Parque Arauco Chile Peru Colom bia Total

% EBITDA Long-Term 55% 25% 20%
Risk-free Rate 2.7% 2.7% 2.7%

Spread (AA-) 2.7% 2.7% 3.4%
Pre-tax cost of Debt 5.5% 5.4% 6.1%
Levered Beta 1.30 1.28 1.28
Risk Premium 6.50% 6.50% 6.50%
Ke 11.2% 11.0% 11.7%
Economic D/A 50% 50% 50%
Economic E/A 50% 50% 50%
Tax 27.0% 29.5% 30.0%
WACC 7.6% 7.4% 8.0% 7.6%
G 3.0% 3.5% 3.5% 3.2%
NPV 397,351 163,488 122,056 682,895

Perpetuity 894,265 372,341 276,092 1,542,698
% 58% 24% 18%
Cap rate Cap rate Cap rate

2021E 5.8% 5.7% 4.9%
Perpetuity Exit Multiple 6.5% 7.0% 7.0% 6.7%
EV 2,225,593
- NFD 895,016
+ Landbank 72,263
Equity 1,354,398
# Stocks (MM) 906

T.P. 2021E - DCF (1) 1,495
T.P. - 7% cap rate 22E (2) 1,365
T.P. Blended (1)(2) 1,430
Upside (%) 24.4%
41
REAL ESTATE - MALL PLAZA
January 18th, 2021
HOLD MALL PLAZA

Target Price: CL$ 1,404 Attractive Growth compared to Local peers
SUMMARY What’s new: We are updating our coverage of Mallplaza, introducing our YE21 target price
Bloomberg MALLPLAZ CC of CL$ 1,404, while maintaining our HOLD recommendation.
Reuters MALP.SN
Credit risk rating AA+
Investment Thesis: (1) Market leader in having a higher percentage of GLA rented to com-
ADVT 6M (US$Mn) 0.7 plementary retail services and characterized by having only premium regional shopping
Free float (%) 12.3% centers and centralized administration. Mallplaza is the leader in mixed-use and retailtain-
# stocks (Mn) 1,960 ment having 35% of the surface for entertainment, food&beverage, offices, medical to-
wers, educational centers, among others, which we think is the future of the industry. Besi-
Current price (CL$) 1,135 des, the company only has premium regional shopping centers (malls that have more than
Upside 23.7% 75,000sqm of GLA) and a centralized administration which allowed operational efficiencies
Div. Yield (%) 0.0% and higher margins. (2) According to our estimates is the local player with higher growth for
Total Return 23.7% the next years. We expect Mallplaza to post the highest revenue and EBITDA CAGR bet-
RATIOS ween 2019-24e (3% and 4% respectively) because it has a greater number of projects and
2019 2020E 2021E 2022E malls recently opened to the public (Mallplaza Barranquilla, Calima, Comas, Cali, and
cap rate 5.8% 3.1% 6.6% 7.5% brownfield projects sum up 10% higher GLA) which we expect boosted the growth going
FFO yield 4.8% 2.2% 6.4% 7.3% forward upon reaching maturity. (3) Valuation for 2022e looks more compelling once the
P/E 30.9x 8134.9x 27.6x 23.3x
operation is fully recovered, while if we compared current spreads between the cap rate
P/BV 1.6x 1.2x 1.1x 1.1x
Div. yield 1.5% 1.4% 0.0% 1.1% and the the local interest rates, Chilean peers show a higher spread than Mexicans and
Brazilians.
STOCK PERFORMANCE Outlook 2021: We expect a gradual recovery throughout the year, where a main portion of
1.2 entertainment will keep closed probably the first semester, and quarantine measures could
1.1 still affect the normal operation during the week. In terms of vacancy, it should not exceed
1.0 8%, and about contract renegotiations with the tenants, these have been carried out on the
0.9
same terms as the previous contracts, only with a shorter duration in certain cases. We also
0.8
0.7 expect a lower provision for bad debt YoY, and therefore a subsequent recovery of the
0.6 EBITDA margin.
Oct/20
Jan/21
Dec/20
Nov/20
Jul/20
Sep/20
Aug/20
Risks: As the main downside risks, we mention (1) that the situation worsens further in any
IPSA MALLPLAZA country because of the pandemic (returning to malls operating levels at a minimum). (2) A
higher-than-expected level of vacancy either because of more financially stressed tenants
CONTACT or because e-commerce potentially leads to more store closures. (3) Risk of execution for
Paulina Vargas J. the projects under development, mainly outside Chile. As potential upside risks, we highli-
ght (1) a faster-than-expected recovery to pre-pandemic levels.
+(562) 2692 3486
Aldo Morales E.
+(562) 2692 2576
42
January 18th, 2021
MALL PLAZA
Plaza S.A. is a Chilean company involved in the development and operation of Mallplaza shopping centers in Chile,
Peru and Colombia. In the case of Chile, the company has 17 shopping centers, highlighting Mall Plaza Vespucio, Mall
Plaza Oeste and Mall Plaza Trébol among the most important. In Colombia (~5% of GLA) it manages 3 shopping cen-
ters with the recent opening of Mallplaza Barranquilla, and in Peru (~12% of GLA) it manages 3 shopping centers
HOLD through a 33.3% minority stake in the Mall society Plaza Perú SA, controlled by Falabella. The sources of growth of
Mall Plaza include both the development of projects (greenfield) and expansions of existing projects (brownfield),
with focus on regional premium shopping centers (average size > 75,000 sqm). Plaza S.A. is controlled by Falabella
Target Price: CL$ 1,404 S.A.C.I. with ~59.3% ownership.
GLA BREAKDOWN (%) FINANCIAL STATEMENTS (CL$ million)

Colombia INCOME STATEMENT 2019 2020E 2021E 2022E
4% Revenues 309,598 179,716 289,705 315,628
Chg% 0.1% -42.0% 61.2% 8.9%
Peru EBITDA 238,308 105,572 223,948 249,970
11%
Chg% -3.6% -55.7% 112.1% 11.6%
EBITDA margin 77.0% 58.7% 77.3% 79.2%
Net Interest -30,155 -24,837 -24,386 -27,023
Associates 2,997 92 2,465 3,227
Net Income 100,075 273 80,583 95,329
Chile
85% Chg% -14.7% -99.7% 29367.5% 18.3%
Net Margin 32.3% 0.2% 27.8% 30.2%

Current Assets 154,870 375,208 270,173 269,701
TENANT SALES BREAKDOWN (%) Total Assets 3,383,915 3,727,468 3,752,950 3,759,487
Colombia Financial Debt 893,753 1,249,132 1,155,338 1,066,559
9% Total Liabilities 1,471,344 1,827,069 1,768,237 1,700,162
Equity 1,766,507 1,753,979 1,834,480 1,905,634
Peru
13%
FCFF 2019 2020E 2021E 2022E
+ EBIT 188,222 51,150 166,364 188,897
+ Dep and Amort 50,086 54,422 57,584 61,073
Chile - Taxes -33,039 -13,810 -44,918 -51,002
78% - CAPEX -116,552 -146,657 -68,468 -68,082
- Working Capital 30,643 19,572 -29,438 -3,634
Total 119,360 -35,323 81,124 127,252

OWNERSHIP (%) ROE 5.7% 0.0% 4.4% 5.0%
Profit Margin 32.3% 0.2% 27.8% 30.2%
Free Float
Müller 15%
DEBT RATIOS 2019 2020E 2021E 2022E
Family
12%
Controllin
g Group
59%
Fürst Source: Company reports, BICE Inversiones estimates
Family
14%
43
January 18th, 2021
VALUATION
in CL$ terms, and (2) 2022E target 7% cap rate (we use 2022 to have a more normalized P&L after the pan-
demic, but at the same time we demand a higher cap rate than history). In our valuation model we use a
6.5% equity risk Premium and 2.7% risk-free rate. We use a ~ 7.7% discount rate (WACC) and a we used a
perpetuity exit multiple of 6.5% cap rate. According to our estimates Mallplaza is trading at 6.6% cap rate
2020E, which compares to 6.4% cap rate from its main local peers.
VALUATION - MALL PLAZA
Mallplaza - Discount rate Chile

Country Risk 147
Free Risk Rate 2.7%
Spread (A) 3.1%
Kd 5.8%
Leveraged Beta 0.93
Risk Premium 6.5%
Ke 8.8%
D/A 25%
E/A 75%
Tax 27.0%
WACC 7.7%
G 3.0%
Mallplaza - DCF Valuation

NPV 1,445,188
Perpetuity 2,606,841
2021E Cap rate 5.5%

Perpetuity Exit Cap rate 6.5%
EV 4,052,029
- NFD 1,027,862
+ Landbank 77,050
Equity 2,991,955
# Stocks (Mn) 1,960

T.P. 2021E - DCF (1) 1,527
T.P. - 7% cap rate 22E (2) 1,281
T.P. Blended (1)(2) 1,404
Upside (%) 23.7%
44
REAL ESTATE - CENCOSUD SHOPPING
January 18th, 2021
HOLD CENCOSUD SHOPPING

Target Price: CL$ 1,454 Significant Growth Potential but Lacking relevant Catalysts
SUMMARY What’s new: We are updating our coverage of Cencosud Shopping, introducing our YE21
Bloomberg CENCOSHO CC target price of CL$ 1,454, while maintaining our HOLD recommendation.
Reuters CENCOSHOPP.SN
Investment Thesis: (1) High level of operational profitability within an industry of stable
ADVT 20D (US$Mn) 0.9 flows and high cash generation. Although a common operational profitability metric cannot
Free float (%) 28% be made due to accounting differences in the treatment of costs and expenses, Cencosud
# stocks (Mn) 1,706 Shopping has the highest operating margins of the local industry. The foregoing would be
mainly explained by the maintenance of high occupancy rates in its leasable area, by the
Current price (CL$) 1,245 service contract that it maintains with Cencosud holding (back office, marketing, legal,
Upside 16.8% among others) which allowed it to have a lean organizational structure, and also its high
Div. Yield (%) 2.1% exposure to the format of power centers (40% of GLA), which in the particular case of Cen-
Total Return 18.9% cosud Shopping, has lower operational costs. (2) Despite the lack of new projects since the
RATIOS IPO (Jun-19), the company would increase its GLA by 11% (8% if we exclude the sqm of the
2019 2020E 2021E 2022E Costanera office towers). Cencoshopp has two projects under construction (La molina and
EV/EBITDA 6.2% 4.0% 6.2% 7.0% La 65 in Peru and Colombia), in addition to enabling extra sqm in the mall Costanera Cen-
P/FFO 5.8% 3.6% 6.1% 6.9%
ter. This would allow it to grow in revenue and EBITDA CAGR between 2019-24e by 3% and
P/E* 23.6x 37.5x 20.2x 17.7x
P/BV 1.1x 0.8x 0.8x 0.8x
2.5% respectively. It also has a suboptimal level of debt, so there could be announcements
Div. yield - 4.4% 2.1% 4.0% in the medium term that could further boost growth. (3) Valuation in line with local peers
and the historical average of the industry. Nevertheless, if we compared the spread bet-
ween the cap rate and the the local interest rates, Chilean peers show a higher spread than
STOCK PERFORMANCE Mexicans and Brazilians.
1.3
1.1 Outlook 2021: We expect a partial recovery throughout the year, with some discount for
0.9
tenants until the first quarter, and then a gradual normalization in terms of rents and inco-
0.7
me level. We estimated that the vacancy could reach 4%, mainly because of a higher vacan-
0.5
0.3 cy in Peru and Colombia. Regarding the office sqm of the Costaner tower, we expect an
May/20
Jan/20
Nov/20
Jul/20
Mar/20
Sep/20
occupancy between 65%-70%, and in 2022 could the third stage of 25,000 sqm be enabled.
We also expect a lower provision for bad debt YoY, and therefore a subsequent recovery of
the EBITDA margin.
IPSA CENCOSHOPP
Risks: As potential downside risks, we mention (1) that the situation worsens further in any
CONTACT country because of the pandemic (returning to malls operating levels at a minimum). (2) A
Paulina Vargas J. higher-than-expected level of vacancy either because of more financially stressed tenants
or because e-commerce potentially leads to more store closures. (3) Risks of execution or
+(562) 2692 3486
lower profitability than expected in the projects under development, as well as habilitation
Aldo Morales E. and occupancy levels of the Costanera Center tower. As potential upside risks, we highlight
aldo.morales@bice.cl (1) a faster-than-expected recovery to pre-pandemic levels. (2) Announcements of new
+(562) 2692 2576
projects in the region.
45
January 18th, 2021
CENCOSUD SHOPPING
Cencosud Shopping S.A. is a Chilean company involved in the development and administration of real estate assets,
mainly oriented to the Retail industry, with presence in Chile, Peru and Colombia. In Chile, (91% of GLA or Gross
Leasable Area) the company has 33 properties, reaching a 1,211,690 sqm GLA, in addition to having 4 properties in
Colombia (5% of GLA) and 4 in Peru (4% of GLA). It operates through different formats, including super-regional
HOLD shopping centers (GLA>80,000 sqm), regional, neighborhood, and power centers (~40% of GLA). Among the main
properties in Chile there’s “Alto Las Condes” (the company’s first mall, founded in 1993) and the mega-project
“Costanera-Center” that includes the tallest building in Latin America (300 meters; 62 floors), the second largest
Target Price: CL$ 1,454 shopping center in South America (130,000 sqm), and two office towers (109,000 sqm). Cencosud Shopping S.A. is
Current Price: CL$ 1,245 controlled by Cencosud S.A. with ~72.3% ownership.
GLA BREAKDOWN (%) FINANCIAL STATEMENTS (CL$ million)

PeruColombia INCOME STATEMENT 2019 2020E 2021E 2022E
4% 5% Revenues 228,990 136,007 197,104 220,978
Chg% -2.2% -40.6% 44.9% 12.1%
EBITDA 207,810 108,139 169,872 192,243
Chg% 0.1% -48.0% 57.1% 13.2%
EBITDA margin 90.8% 79.5% 86.2% 87.0%
Net Interest -32,983 -10,082 -10,343 -10,704
Net Income 402,798 79,064 118,450 133,259
Chg% 64.0% -80.4% 49.8% 12.5%
Chile
91% Net Margin 175.9% 58.1% 60.1% 60.3%
Net Income ex. Revaluation 119,545 56,631 105,331 120,325
Chg% 15.8% -52.6% 86.0% 14.2%
Net Margin 52.2% 41.6% 53.4% 54.5%
TENANT SALES BREAKDOWN (%) BALANCE SHEET 2019 2020E 2021E 2022E
Peru Colombia Current Assets 136,000 68,460 33,959 18,516
3% 2% Total Assets 3,804,442 3,745,831 3,772,451 3,818,584
Financial Debt 612,062 620,971 640,127 659,971
Total Liabilities 1,266,909 1,241,369 1,241,877 1,237,350
Equity 2,532,127 2,499,666 2,524,296 2,573,289
FCFF 2019 2020E 2021E 2022E

+ EBITDA 208,364 108,025 169,681 192,050
Chile
95% - Taxes -139,974 -29,332 -45,932 -51,991
- CAPEX -31,600 -5,401 -61,216 -61,674
- Working Capital 5,674 9,015 -8,540 -1,886
Total 42,464 82,309 53,993 76,499

Brokers Other ROE 4.7% 2.3% 4.2% 4.7%
Foreign 2% 1%
Institution Profit Margin 52.2% 41.6% 53.4% 54.5%
al Investor Asset Turnover 0.1 0.0 0.1 0.1
5%
Pension
Funds
20% DEBT RATIOS 2019 2020E 2021E 2022E
Cencosud NFD / EBITDA 2.5x 5.3x 3.6x 3.3x
S.A.
72%
46
January 18th, 2021
VALUATION
in CL$ terms, and (2) 2022E target 7% cap rate (we use 2022 to have a more normalized P&L after the pan-
demic, but at the same time we demand a higher cap rate than history). In our valuation model we use a
6.5% equity risk Premium and 2.7% risk-free rate. We use a ~ 7.8% discount rate (WACC) and a we used a
perpetuity exit multiple of 6.5% cap rate. According to our estimates Cencosud Shopping is trading at 6.2%
cap rate 2020E, which compares to 6.4% cap rate from its main local peers.
VALUATION - CENCOSUD SHOPPING
Cencoshopp - Discount rate Chile

Country Risk 147
Free Risk Rate 2.7%
Spread (A) 2.3%
Kd 5.0%
Leveraged Beta 1.1
Risk Premium 6.5%
Ke 9.6%
D/A 30%
E/A 70%
Tax 27.0%
WACC 7.8%
G 3.0%
Cencoshopp - DCF Valuation

NPV 1,092,083
2021E Implicit Cap rate 5.3%

Perpetuity Exit Cap rate 6.5%
EV 3,215,478
+ Related companies 0
- NFD 614,591
+ Landbank 120,297
Equity 2,714,906
# Stocks (Mn) 1,706

T.P. 2021E - DCF (1) 1,592
T.P. - 7% cap rate 22E (2) 1,317
T.P. Blended (1)(2) 1,454
Upside (%) 16.8%
47
RETAIL - FALABELLA
January 18th, 2021
HOLD FALABELLA
Target Price: CL$ 3,166 Market Leader in the Digital Transformation, but at the expense
Current Price: CL$ 2,720 of Profitability
SUMMARY What’s new: We are updating our coverage of Falabella, introducing our YE21 target price
Bloomberg FALAB CC of CL$ 3,166, consistent with a HOLD recommendation.
Reuters FAL.SN
Investment Thesis: (1) Retail market leader in the Andean region and a pioneer in invest-
ADVT 6M (USD M) 10.3 ments in the digital ecosystem. Falabella is a multi-format company that has a relevant
Free float (%) 29.0% position in the markets where it operates (mainly in the Andean region) and has focused its
# stocks (M) 2,509 strategy and investment plan around a digital ecosystem leveraging its vast network of
physical stores and credit business. However, this cycle of high investment has been
Current price (CL$) 2,720 clouded by external shocks such as the social crisis in Chile, and the 2020 pandemic, and it
Upside potential 16.4% requires scalability to be more profitable. (2) Good projects ahead but delivery remains to
Div. Yield (%) 0.0% be seen. In 2021 the company's main project will be to unify all e-commerce platforms in a
Total Return 16.4%
single mega-site (falabella.com), to concentrate all traffic, attract more sales, be a more
RATIOS attractive platform for sellers, and increase the SKU available to customers, generating a
2019E 2020E 2021E 2022E virtuous cycle. On the organizational side, the operational and commercial areas will be
EV/EBITDA 12.1x 20.5x 11.3x 9.7x integrated, as well as logistics and delivery will be unified. Other projects include the deve-
EV/Sales 1.5x 1.4x 1.3x 1.2x
lopment of the IKEA brand in the region that will be delayed until 2022, the gradual invest-
P/E 27.5x -122.6x 26.0x 21.8x
P/BV 1.5x 1.3x 1.3x 1.2x
ment in Mexico with home improvement stores, the Fpay virtual wallet, and the last mile
Div. yield 2.3% 1.3% 0.0% 1.2% supermarket app (Fazil). (3) Although 2020 will be a bottom line for the company, we belie-
ve that the recovery in net income will take longer, so 2022 valuations would still be above
STOCK PERFORMANCE their historical average (20x P/E). However, compared to regional peers, there is a greater
1.2 dispersion as Brazilian companies have a higher L3Y average of around 30x P/E, and Mexi-
1.0 can companies have a lower P/E average of around 11x.
0.8
Outlook 2021: We expect 2021 will show a relevant rebound YoY mainly on margins from
0.6 the business units more affected in the quarantines as D-Stores, shopping centers, and the
0.4 banking operation. Nevertheless, we expect a gradual and partial recovery during the year
Jan/20
May/20
Nov/20
Jul/20
Sep/20
Mar/20
since the second wave of contagion is expected in the first semester, but with improved
prospects as more people receive the vaccine. In D-Stores we expect a recovery in the gross
IPSA FALABELLA margin with a more normalized mix between the online and offline channel, as well as the
category mix between soft and hard goods. In the banking operation, we expect a growth in
CONTACT the loan portfolio in the second semester, coupled with a normalization of the cost of risk.
Paulina Vargas J. In Peru, we expect a major recovery at the top-line since the quarantines were stricter, as a
relevant improvement at the gross margin. Also is important to mention that the company
+(562) 2692 3486
in 2020 carried out a strong restructuring process at all levels of the company and in all
Aldo Morales E. businesses, to make the physical operation more efficient.
+(562) 2692 2576
Risks: As potential downside risks, we mention (1) the situation worsens further in any
country because of the pandemic (store closure and returning to malls operating levels at a
minimum). (2) Political uncertainty stemming from presidential elections in both, Chile and
Peru. (3) A more competitive scenario (digital or physical) in any country that harms sales.
(4) A lower-than-expected recovery of the business post-pandemic. As major upside risks,
we highlight (1) better delivery or higher-than-expected profit from the new projects of the
company.
48
RETAIL - FALABELLA
January 18th, 2021
FALABELLA
SACI Falabella is a Chilean retail holding company with presence in seven countries in Latin America. Its main subsidi-
aries are Chile (~ 64% of EBITDA), Peru (~ 26% of EBITDA), followed by Colombia, Argentina, Brazil, and Uruguay, and
stake in Mexico (through a Joint venture with Soriana). The company's main business segments are Department
Stores, Home Improvement through Sodimac, Supermarkets through Tottus and Hiperbodega (Peru), Financial Ser-
HOLD vices through Banco Falabella, and Shopping Centers through Mallplaza and Openplaza. On the other hand, during
2018 the company acquired the “Linio” marketplace and announced that they will operate the IKEA franchise in Chile,
Peru and Colombia. Falabella is controlled through a shareholder’s agreement, linked mainly to both, Solari and Del
Target Price: CL$ 3,166 Rio families with ~ 70.58% ownership together.

Brazil Other INCOME STATEMENT 2019 2020E 2021E 2022E
Colombia
9% 1% -1% Revenues 9,410,775 9,178,264 9,532,314 10,125,084
Argentina Chg% 1.9% -2.5% 3.9% 6.2%
1%
EBITDA 1,141,336 619,038 1,090,671 1,212,741
Chg% -5.2% -45.8% 76.2% 11.2%
EBITDA margin 12.1% 6.7% 11.4% 12.0%
Peru
26% Net Interest -182,510 -161,235 -182,065 -194,178
Chile Associates 1,172 -806 8,417 12,242
64% Net Income 295,474 -55,640 262,723 313,359
Chg% -38.2% -118.8% -572.2% 19.3%
Net Margin 3.1% -0.6% 2.8% 3.1%

Current Assets 3,403,047 3,867,977 3,700,399 3,453,612
REVENUES BREAKDOWN (%) Total Assets 18,333,671 18,053,707 17,838,133 17,563,953
Colombia Brazil Other Financial Debt 9,538,438 10,738,724 10,416,103 9,914,051
6% 2% 3% Total Liabilities 12,101,059 11,998,933 11,464,880 10,899,282
Argentina Equity 5,258,947 5,087,022 5,349,745 5,584,287
FCF 2019 2020E 2021E 2022E

Peru
+ EBIT 705,474 794,810 857,752 930,951
27% Chile + Dep and Amort 435,861 534,011 556,000 554,819
58%
- Taxes -144,747 -159,932 -177,551 -201,210
- CAPEX -367,168 -357,435 -394,063 -405,134
- Working Capital 1,543,506 23,100 27,713 25,265
Total 2,172,927 834,554 869,851 904,690

OWNERSHIP (%) ROE 5.6% -1.1% 4.9% 5.6%
Profit Margin 3.1% -0.6% 2.8% 3.1%
Free Float DEBT RATIOS 2019 2020E 2021E 2022E

Controllin
g Group NFD / EBITDA 7.6x 13.0x 7.2x 6.2x
71% Debt / Equity 1.8x 2.1x 1.9x 1.8x
49
RETAIL - FALABELLA
January 18th, 2021
VALUATION
re we value each of the company´s subsidiaries (Chile, Peru, Argentina, Colombia, Brazil, and Mallplaza)
under a 10 -Yr discounted cash flow approach (DCF), and for Chile’s bank we use a dividend discount model
(DDM), all in CL$ terms; and (2) 2022E target 20.0x P/E multiple (we use 2022 to have a more normalized
P&L after the pandemic). In our valuation model we use a 6.5% equity risk Premium and 2.7% risk-free rate.
In addition, we are using a perpetuity exit multiple for each subsidiary. According to our estimates, Falabe-
lla is trading at 23.6x P/E 2020E, which compares to 26.5x from its last 5 years.
VALUATION - FALABELLA
Falabella Chile Chile Mallplaza Perú Argentina Colom bia Brasil Total
Retail Bank
Country Risk 147 147 147 145 1,394 211 256
% EBITDA Long-Term 27% 26% 17% 22% 0% 7% 1%
Risk-free Rate 2.7% 2.7% 2.7% 2.7% 2.7% 2.7% 2.7%

Spread 4.0% 3.1% 4.0% 16.5% 4.6% 5.1%
Pre-tax cost of Debt 6.7% 5.8% 6.7% 19.2% 7.4% 7.8%
Beta 1.25 1.20 0.93 1.24 1.26 1.24 1.22
Risk Premium 6.5% 6.5% 6.5% 6.5% 6.5% 6.5% 6.5%
Ke 10.9% 10.5% 8.8% 10.8% 23.4% 11.4% 11.8%
D/A 35% 25% 35% 35% 35% 35%
E/A 65% 75% 65% 65% 65% 65%
Tax 27.0% 27.0% 29.5% 25.0% 30.0% 34.0%
WACC 8.8% 9% 7.7% 8.7% 20.3% 9.2% 9.5%
G 3.0% 3.0% 3.0% 4.5% 4.5% 4.5% 4.5%
NPV 1,247,245 1,209,889 1,445,188 1,153,234 -8,270 335,465 41,347 5,424,098

Perpetuity 1,976,914 1,461,915 2,606,841 1,744,216 966 532,307 72,800 8,395,959
% 23% 19% 29% 21% 0% 6% 1% 100%
EV/EBITDA P/E Cap rate EV/EBITDA EV/EBITDA EV/EBITDA EV/EBITDA

2021E 10.6x 15.5x 5.5% 11.8x 1.7x 13.7x 8.9x
Perpetuity Exit Multiple 9.0x 11.0x 6.5% 9.0x 4.0x 9.0x 8.0x
EV 13,820,057
+ Lands 787,893
+ Linio (1x EV/GMV 21E) 314,645
- NFD (ex Chile Bank) 4,447,032
- Minority interest 1,023,509
Equity 9,616,540
# Stocks (Mn) 2,509

T.P. 2021E - DCF (1) 3,833
T.P. - 20x P/E 22E (2) 2,498
T.P. Blended (1)(2) 3,166
Current Price 2,720
Upside 16.4%
Total Return 16.4%
50
RETAIL - CENCOSUD
January 18th, 2021
BUY CENCOSUD
Target Price: CL$ 1,748 Attractive New Strategy with a Higher Focus on the Core Busi-
Current Price: CL$ 1,440 ness
SUMMARY What’s new: We are updating our coverage of Cencosud, introducing our YE21 target price
Bloomberg CENCO CI of CL$ 1,748, while maintaining our BUY recommendation.
Reuters CEN.SN
Credit risk rating BBB-/Baa3
Investment Thesis: (1) Change in business strategy and focus on core formats have shown
ADVT 6M (USD M) 10.9 delivery on results and operational improvements. Since the company managed to de-
Free float (%) 47% leverage, a change in business strategy has become evident, by making the organizational
# stocks (M) 2,863 structure more efficient, improving the management of working capital, as well as disin-
vestment and restructuring in the less profitable businesses (department stores in Chile
Current price (CL$) 1,440 and Peru). At the same time, the company is focusing its resources on the core of the com-
Upside potential 21.4% pany, its supermarket business, where it has taken advantage of its strong position to gain
Div. Yield (%) 0.5% market share in the year of the pandemic and innovating in e-commerce with the launch of
Total Return 21.9%
its last mile App, as well as the alliance with Cornershop in August 2020, which has given it
RATIOS further growth. (2) An ambitious investment plan of US$ 1.8 billion for 2021-2023 would
2019 2020E 2021E 2022E deliver stronger growth. The investment plan includes the construction of 144 new stores
EV/EBITDA 8.5x 8.8x 8.5x 8.0x (19% of capex), remodeling of existing stores and malls (64%), and investment in technolo-
EV/Sales 0.7x 0.7x 0.8x 0.7x
gies, logistics, and e-commerce (17%). Besides, the company announced the launch of a
P/E* 24.6x 64.2x 18.3x 17.1x
P/BV 0.6x 1.0x 1.0x 0.9x new format of proximity in supermarkets (spid35) that seeks to reach a young audience,
Div. yield 1.0% 2.2% 0.5% 1.6% initially in Chile through Cornershop, and then with an own App and in all countries. Adding
this to our estimates, sales and EBITDA have a CAGR between 2019-2024e of 4% and 6.5%
respectively, over other local players. (3) Relevant upside by DCF and attractive valuation
STOCK PERFORMANCE against regional peers. If we exclude the implicit valuation of Cencosud Shopping, the rest
of the company (Supermarket, and Retail) is trading at 6.8x EV/EBITDA 22E which is below
1.3
regional peers (8x EV/EBITDA 22E).
1.1
0.9 Outlook 2021: We expect a mid-single-digit growth in EBITDA based on solid top-line
0.7 growth in Chile (high-single-digit) and margin improvements due to the partial recovery in
0.5 the retail business and shopping centers. The Cornershop alliance will also deliver sales
Jan/20
May/20
Nov/20
Jul/20
Sep/20
Mar/20
growth, where we estimate an additional $540 million in revenue for the company. The
above will be partially offset by the depreciation of currencies against the Chilean peso of
IPSA CENCOSUD the international subsidiaries, while in local currencies we expect a healthy top-line led by
resilient supermarket formats and new openings. In terms of EBITDA margin, we expect a
CONTACT slight recovery in Peru mainly due to the exit of the D-Stores business, and in Argentina, we
Paulina Vargas J. forecast a contraction in the EBITDA margin due to the challenging macro environment. All
in all, we expect an improvement of EBITDA margin YoY and a relevant increase at the
+(562) 2692 3486
bottom-line (excluding asset revaluation).
Aldo Morales E.
aldo.morales@bice.cl Risks: As potential downside risks, we mention (1) execution risk of the new investment
+(562) 2692 2576
plan which is aggressive regarding new openings; (2) An impairment in Argentina due to the
weak macroeconomic figures; (3) A lower-than-expected contribution from the Cornershop
alliance; and (4) lawsuits with unfavorable results for the company in Chile or Peru. As po-
tential main upside risks, we highlight (1) a successful IPO in Brazil; (2) lower-than-expected
depreciation of local currencies against the Chilean peso; and (3) further growth by the new
proximity format that will be launched in 2021 (Spid35).
51
RETAIL - CENCOSUD
January 18th, 2021
CENCOSUD
Cencosud is a Chilean retail holding with presence in five countries in Latin America. The most relevant are Chile (~
54% of EBITDA), Argentina (~ 20% of EBITDA), followed by Peru, Brazil, and Colombia. The main business segments of
the company are Supermarkets with presence in the five countries (being the second largest operator in Chile, Argen-
tina and Peru), Department Stores through “Paris” (presence in Chile (# 2) and Peru (# 4)), Home Improvement
BUY through “Easy” (in Chile (# 2), Argentina (# 1), and Colombia (# 2)), Shopping Centers (in Chile (# 2), Argentina (# 1),
Peru and Colombia), and Financial Services (through a joint venture in Chile and Peru (Scotiabank), Brazil (Bradesco),
Colombia (Colpatria), and in Argentina through its own business). Its most emblematic real estate project is Costanera
Target Price: CL$ 1,748 Center in Chile, the tallest building in Latin America (300 meters), which has a shopping center (6 floors), and 2 office
Current Price: CL$ 1,440 towers. Cencosud is controlled by the Paulmann family with ~ 53% ownership.

Colombia Revenues 9,491,362 9,845,533 9,914,345 10,386,359
5%
Brazil Chg% -2.7% 3.7% 0.7% 4.8%
9% EBITDA BICE 750,884 839,046 898,603 941,581
Peru
Chg% 23.8% 11.7% 7.1% 4.8%
12% EBITDA margin 7.9% 8.5% 9.1% 9.1%
Adj. EBITDA Cencosud 869,053 873,034 931,794 976,534
Chile
Argentina 54% Chg% 36.7% 0.5% 6.7% 4.8%
20% Adj. EBITDA margin 9.2% 8.9% 9.4% 9.4%
Net Interest -262,520 -257,573 -159,072 -160,369
Associates 15,099 -7,541 11,222 12,984
Net Income 243,511 35,588 239,944 350,358
Chg% -5.6% -85.4% 574.2% 46.0%
Net Margin 2.6% 0.4% 2.4% 3.4%
REVENUES BREAKDOWN (%) Net Income ex. Revaluation 115,161 64,235 225,344 240,858
Chg% 3.6% -44.2% 250.8% 6.9%
Net Margin 1.2% 0.7% 2.3% 2.3%
Brazil
14% BALANCE SHEET 2019 2020E 2021E 2022E
Colombia
9% Current Assets 3,211,830 2,490,734 2,414,830 2,712,616
Chile Total Assets 12,248,308 10,731,054 10,947,777 11,285,879
Peru 48%
Financial Debt 4,264,940 3,421,341 3,374,052 3,334,644
11%
Argentina Equity 4,442,538 4,052,364 4,258,438 4,431,693
FCFF 2019 2020E 2021E 2022E

+ EBIT 432,351 436,589 548,288 573,459
OWNERSHIP (%) + Dep and Amort 317,744 370,014 350,315 368,122
- Taxes -174,848 -84,543 -105,690 -147,950
- CAPEX -152,984 -79,197 -642,942 -408,439
- Working Capital 291,490 -173,754 -195,428 -94
Total 713,753 469,110 -45,456 385,098
Other
26%
Controllin
ROE 5.5% 0.9% 5.6% 7.9%
Pension g Group Profit Margin 2.6% 0.4% 2.4% 3.4%
Funds 53% Asset Turnover 0.8 0.9 0.9 0.9
21% Equity Multiplier 2.8 2.6 2.6 2.5
DEBT RATIOS 2019 2020E 2021E 2022E

52
RETAIL - CENCOSUD
January 18th, 2021
VALUATION
re we value each of the company´s subsidiaries (Chile, Peru, Argentina, Colombia, and Brazil) under a 10 -Yr
discounted cash flow approach (DCF) in CL$ terms; and (2) 2021E target 8.0x EV/EBITDA multiple. In our
valuation model we use a 6.5% equity risk Premium and 2.7% risk-free rate. In addition, we are using a
perpetuity exit multiple for each subsidiary. According to our estimates, Cencosud is trading at 8.5x EV/
EBITDA 2020E, which compares to 9-10x from its last 5 years.
VALUATION - CENCOSUD
Cencosud Chile Perú Colom bia Argentina Brazil Total
Country Risk 147 145 211 1394 256

% EBITDA Long-Term 69% 11% 6% 4% 10%
Free Risk Rate 2.7% 2.7% 2.7% 2.7% 2.7%

Spread 4.3% 4.3% 4.9% 16.8% 5.4%
Kd 7.0% 7.0% 7.7% 19.5% 8.1%
Beta 1.47 1.45 1.45 1.49 1.41
Risk Premium 6.5% 6.5% 6.5% 6.5% 6.5%
Ke 12.3% 12.1% 12.8% 24.9% 13.0%
D/A 50% 50% 50% 50% 50%
E/A 50% 50% 50% 50% 50%
Tax 27.0% 29.5% 30.0% 25.0% 34.0%
WACC 8.7% 8.5% 9.1% 19.8% 9.2% 9.2%
G 3.0% 4.0% 4.0% 4.0% 4.0% 3.3%
NPV 2,775,938 446,974 170,904 229,558 408,819 4,032,193

Perpetuity 3,510,538 470,342 189,454 44,705 292,418 4,507,458
% 74% 11% 4% 3% 8% 100%
EV/EBITDA EV/EBITDA EV/EBITDA EV/EBITDA EV/EBITDA EV/EBITDA

2021E 11.4x 9.8x 8.0x 2.2x 8.1x 9.5x
Perpetuity 9.7x 8.0x 6.0x 5.5x 6.0x 7.3x
EV 8,539,651
+ Lands 528,228
- NFD 2,939,324
Equity 5,681,276
# Stocks (Mn) 2,863

T.P. 2021E - DCF (1) 1,984
T.P. - 8x EV/EBITDA 21 (2) 1,512
T.P. Blended (1)(2) 1,748
Current Price 1,440
Upside 21.4%
Total Return 21.9%
53
RETAIL - RIPLEY
January 18th, 2021
BUY RIPLEY
Target Price: CL$ 311 Highly Attractive Valuations in 2022
SUMMARY What’s new: We are updating our coverage of Ripley, introducing our YE21 target price of
Bloomberg RIPLEY CI CL$ 311, consistent with an BUY recommendation.
Reuters RIP.SN
Investment Thesis: (1) Company highly exposed to the economic cycles in Chile and Peru
52 weeks high/low (CLP) 450/165
ADVT 6M (USD M) 0.8 that after two years with external shocks, foresees a better prospect. Ripley has been hit by
Free float (%) 39% the social outburst in both Chile and Peru, and strongly affected by the pandemic during
# stocks (M) 1,936 2020 with the closure of its retail stores and shopping centers. However, we believe that
Market Cap (USD M) 621
2020 was the bottom and a recovery in the level of sales is expected thereafter, coupled
Target price (CLP) 311
Current price (CLP) 235 with a structural efficiency plan mostly in the headcount, and the opening of new shopping
Upside potential 32.0% centers in Perú (Chiclayo recently opened, and two projects for 2022). (2) Despite the high
Div. Yield (%) 0.0% level of debt reached after the pandemic, the company complies with the covenants. Ripley
Total Return 32.0%
increased its liquidity level during the year to face the pandemic, so it has increased its debt
RATIOS level in the short term, however, it has room to comply with the covenants (liabilities/
2019 2020E 2021E 2022E equity), and according to our estimates, it should not break them. Besides, the company
EV/EBITDA* 14.6x 52.3x 18.4x 9.8x announced in September 2020 its interest in selling its minority stake in "Nuevos Desarro-
EV/Sales 1.3x 1.2x 1.1x 1.0x llos" (real estate vehicle) which we valued at US$ 235 million and would help reduce its
P/E* 24.3x -5.1x 28.4x 10.1x
debt level. (3) Attractive upside and cheap valuation for 2022. If we look at the valuation for
P/BV 0.6x 0.5x 0.5x 0.5x
Div. yield 3.5% 4.8% 0.0% 1.2%
2022 (where a normalization in earnings is expected), the company is trading at a relevant
*EV/EBITDA using company’s Adjusted EBITDA. discount from its historical average (14x P/E).
*P/E excluding asset revaluation
Outlook 2021: We expect 2021 will still be a transition year, mainly in the banks, where the
STOCK PERFORMANCE loan portfolio has been strongly reduced, but in Chile, after the withdrawal of 10% of the
pension funds there has been a reversal of provisions and the risk levels have been adjus-
0.9
ted downwards, so it could be expected that in the coming month credit origination will
0.7 resume. While Peru shows a lag to what has been seen in Chile mainly due to indications
from the regulator (freezing credits from March to August) and without having additional
0.5
monetary stimulus, so the company has already made voluntary provisions to face the wri-
0.3 te-offs in the portfolio in the coming months. In D-Stores (both in Chile and Peru) we expect
Jan/20
May/20
Nov/20
Jul/20
Sep/20
Mar/20
a recovery in sales and better margins YoY due to a change in both, the channel and cate-
gory mix. Lastly, in Shopping Centers Perú, mall Chiclayo recently opened with very positive
IPSA RIPLEY metrics, so we expect significant growth in this segment along with a gradual recovery of
the two malls.
CONTACT
Paulina Vargas J. Risks: As potential downside risks, we mention (1) Execution risks or lower-than-expected
profitability in its development projects in Peru; (2) that the situation worsens further in
+(562) 2692 3486
any country because of the pandemic (store closure and returning to malls operating levels
Aldo Morales E. at a minimum). (3) Risks and political uncertainty stemming from presidential elections in
aldo.morales@bice.cl both countries. As major upside risks, we highlight (1) that the sale of “Nuevos Desarrollos”
+(562) 2692 2576
is made at an attractive price (higher-than-expected).
54
RETAIL - RIPLEY
January 18th, 2021
RIPLEY
Ripley Corp is a Chilean-based company involved in Banking, Department Stores, and Shopping Centers, both in Chile
and Peru. In Chile the company manages 47 D-Stores, being the third largest local operator, and in the banking busi-
ness maintains loans for ~ CL $ 900,000 million. In Peru, Ripley has 30 department stores and maintains a portfolio
close to ~ CL $ 400,000 million. In the real estate business, the company owns ~ 336,598 sqm of GLA through its own
BUY malls in Peru (Mall Aventura in Santa Anita and Arequipa), and through minority stakes in “Inmobiliaria Mall Viña del
Mar” (50%) and “Nuevos Desarrollos” (22.5%). On the other hand, Ripley in addition to its online operation has its
own Marketplace (MercadoRipley.com) which was launched in Chile in 2017, and in Peru at the end of 2018. Ripley
Target Price: CL$ 311 Corp is controlled by the Calderón Volochinsky and Calderón Kohon family with ~ 50% and ~ 5.6% ownership, respec-
Current Price: CL$ 235 tively.

Revenues 1,727,426 1,475,175 1,653,258 1,758,629
Chg% 1.5% -14.6% 12.1% 6.4%
Other
-12% EBITDA 101,928 -10,301 55,760 134,645
Chile Chg% -13.6% -110.1% -641.3% 141.5%
68%
EBITDA margin 5.9% -0.7% 3.4% 7.7%
Net Income 100,683 -64,756 18,730 44,941
Chg% 44.5% -164.3% -128.9% 139.9%
Peru Net Margin 5.8% -4.4% 1.1% 2.6%
44%
Net Income ex. Revaluation 26,874 -90,014 16,029 45,036
Chg% -53.4% -434.9% -117.8% 181.0%
Net Margin 1.6% -6.1% 1.0% 2.6%

REVENUES BREAKDOWN (%)
Current Assets 1,586,664 2,113,865 2,313,646 2,321,795
Total Assets 3,602,459 3,840,787 4,030,261 4,020,143
Financial Debt 1,958,990 2,055,539 2,118,951 2,107,571
Peru Minority Interest 126 215 255 350
36% Equity 1,033,524 946,623 965,353 1,004,674
Chile
64%
FCFF 2019 2020E 2021E 2022E
+ EBIT 35,402 -80,261 26,396 64,634
+ Dep and Amort 66,526 69,960 68,926 70,011
- Taxes -32,942 20,558 -7,261 -17,422
- CAPEX -27,003 -20,860 -58,619 -51,744
- Working Capital 6,411 21,234 -41,529 10,361
OWNERSHIP (%) Total 48,394 10,631 -12,087 75,840

ROE 9.7% -6.8% 1.9% 4.5%
Other Profit Margin 5.8% -4.4% 1.1% 2.6%
22%
Calderon
Mutual Volochins Equity Multiplier 3.5 4.1 4.2 4.0
Funds ky Family
5% 43%
Pension
DEBT RATIOS 2019 2020E 2021E 2022E
Funds EBITDA / Fin. Expenses 2.8x -0.3x 1.4x 3.2x
23% Calderon NFD / EBITDA 9.2x -19.9x 50.5x 9.9x
Kohon Debt / Equity 1.9x 2.2x 2.2x 2.1x
Family
7% Source: Company reports, BICE Inversiones estimates
55
RETAIL - RIPLEY
January 18th, 2021
VALUATION
re we value each of the company´s subsidiaries (Retail Chile, Retail Peru and Shopping Center Peru) under a
10 -Yr discounted cash flow approach (DCF), and for Chile’s and Peru’s bank we use a dividend discount
model (DDM), all in CL$ terms; and (2) 2022E target 12.0x P/E multiple (we use 2022 to have a more nor-
malized P&L after the pandemic). In our valuation model we use a 6.5% equity risk Premium and 2.7% risk-
free rate. In addition, we are using a perpetuity exit multiple for each subsidiary. According to our estima-
tes, Ripley is trading at 28.4x P/E 2020E, which compares to 14.0x from its last 5 years.
VALUATION - RIPLEY
Ripley Chile Chile Peru Peru Peru Total
Retail Bank Retail Mall Bank
% EBITDA Long-Term 17% 33% 15% 21% 15% 100%
Risk-free Rate 2.7% 2.7% 2.7% 2.7% 2.7%

Spread 4.0% 4.0% 4.0%
Pre-tax cost of Debt 6.7% 6.7% 6.7%
Beta 1.52 1.25 1.50 1.26 1.30
Risk Premium 6.5% 6.5% 6.5% 6.5% 6.5%
Ke 12.6% 10.9% 12.5% 10.9% 11.2%
D/A 45% 45% 45%
E/A 55% 55% 55%
Tax 27.0% 29.5% 29.5%
WACC 9.1% 9.0% 8.1%
G 3.0% 3.0% 4.0% 4.0%
NPV 93,437 198,578 93,379 148,616 67,509 601,519

Perpetuity 128,325 190,379 109,685 304,731 55,056 788,176
% 16% 28% 15% 33% 9% 100%
EV/EBITDA P/E EV/EBITDA Cap rate P/E

2021E 14.2x 15.5x 5.4x 4.4% 237.1x
Perpetuity Exit Multiple 8.0x 11.0x 8.0x 7.0% 9.0x
EV 1,389,695
- NFD (ex Bank) 673,707
- Minority interest 255
-Headcount & Other 307,103
Equity 662,775
# Stocks (Mn) 1,936

T.P. 2021E - DCF (1) 342
T.P. - 12x P/E 22E (2) 279
T.P. Blended (1)(2) 311
Current Price 235.4
Upside 32.0%
Total Return 32.0%
56
WATER UTILITIES - AGUAS ANDINAS
January 18th, 2021
BUY AGUAS ANDINAS

Target Price: CL$ 295 Improved Financial Position Could Lead to Higher Dividend
Current Price: CL$ 226 Yield
SUMMARY What’s new: We are re-initiating our coverage of Aguas Andinas, introducing our YE21
Bloomberg AGUAS/A CC target price of CL$ 295, while upgrading to an BUY recommendation.
Reuters AGUAS-A.SN
Investment Thesis: (1) Improved financial position. The company presents a solid cash flow
ADVT 6M (US$Mn) 5.6 generation that allows a high return on dividends (7.2% 2021E) considering a return to the
Free float (%) 45.0% 100% dividend policy after receiving cash for US$ 92.3 million after the sale of ESSAL, that
# stocks (Mn) 6,119 according to our estimates, had an implied EV/EBITDA multiple of 8.9x, which in our view is
justified considering that said subsidiary operated at lower levels of EBITDA margin, with an
Current price (CL$) 226 46.4% EBITDA margin last 5-years vs. 60% EBITDA margin considering only operations in
Upside 30.2% Santiago. (2) Attractive CAGR growth for a water utilities company. According to our esti-
Div. Yield (%) 7.2% mates, we expect a 7.0% CAGR growth for the next 3 years considering a gradual normaliza-
Total Return 37.4%
tion of cost overruns related to Covid-19 in addition to the recognition of investments in
RATIOS tariffs. (3) Attractive valuations regarding its history. According to our estimates, Aguas
2019 2020E 2021E 2022E Andinas is trading with a 23% discount in EV / EBITDA multiple compared to its 5-year ave-
EV/EBITDA 9.9x 8.8x 8.3x 7.9x rage of 10.8x, and a 7% discount in the same multiple compared to the recent ESSAL tran-
EV/Sales 5.4x 4.4x 4.5x 4.3x saction.
P/E 13.8x 13.8x 12.2x 11.5x
P/BV 3.0x 1.7x 1.6x 1.6x
Div. yield 7.9% 7.9% 7.2% 8.2% Outlook 2021: We expect a year with revenue growth of around +6.5% only considering
operations in Santiago, with a sequential recovery in demand together with Pirque project
STOCK PERFORMANCE tariffs recognition during the year. On the other hand, we estimate a +15% EBITDA growth
reaching CL$ 273,256 million, leaded by a normalization of costs related to Covid-19 spe-
1.1
1.0 cially towards the second half of the year, and a slight improvement on operational costs
0.9 given the recent improvement seen in the El Yeso reservoir compared to 2019. We estima-
0.8 te that both effects should lead to a +400 bps improvements on operational margins. Fina-
0.7 lly, we expect earnings growth of +19.2%, reaching CL$ 113,839 million, considering a slight
0.6
-3.6% decrease in financial expenses.
0.5
Jan/20
May/20
Nov/20
Jul/20
Sep/20
Mar/20
Risks: (1) Normalization of the dividend policy slower than expected. (2) Regulatory risk
considering the current constitutional discussion related to the current water code. (3)
IPSA AGUAS-A
Deterioration of the current hydrological scenario, causing higher costs for the production
and collection of water. (4) Uncertainty regarding resolutions on the reform of the water
CONTACT
utilities law, where our base case scenario considers a regulated return of 6% starting in the
manuel.barrientos@bice.cl 2025 rate cycle.
+(562) 2692 1836
Aldo Morales E.
+(562) 2692 2576
57
January 18th, 2021
AGUAS-A
Aguas Andinas is the largest water utilities company in Chile, which provides services for raw water collection, the
production, transportation and distribution of drinking water (39% of LTM sales), in addition to the collection, treat-
ment and final disposal of sewage (48% of LTM sales), plus other unregulated services. The company operates the
Metropolitan Region trough three regulated companies: Aguas Andinas, Aguas Cordilleras and Aguas Manquehue.
BUY Aguas Andinas is controlled by the holding Inversiones Aguas metropolitanas (IAM), that’s owns 50.1% of the compa-
ny. In turn, IAM is controlled by the Spanish company Agbar, which belongs 100% to the French multinational Suez.

EBITDA BREAKDOWN (%) FINANCIAL STATEMENTS (CL$Mn)

Sales 544,684 505,154 503,043 535,932
Chg% 2.7% -7.3% -0.4% 6.5%
EBITDA 299,990 250,939 273,256 292,336
Chg% -3.1% -16.4% 8.9% 7.0%
EBITDA margin 55.1% 49.7% 54.3% 54.5%
Net Interest -24,546 -26,244 -24,137 -25,045
Associates 0 0 0 0
Net Income 141,737 100,220 113,839 121,815
Chg% 4.2% -29.3% 13.6% 7.0%
Chile
100% Net Margin 26.0% 19.8% 22.6% 22.7%

Current Assets 197,677 614,357 647,246 633,900
Non Other Financial Debt 1,042,780 1,074,376 1,107,519 1,141,852
regulated Regulated Total Liabilities 1,313,971 1,584,295 1,600,995 1,642,049
11% 4%
Equity 644,453 835,588 914,007 921,983
FCFF 2019 2020E 2021E 2022E

Sewage
Water + EBIT 223,738 175,164 195,468 210,976
46% + Dep and Amort 76,252 75,775 77,788 81,360
Drinking
Water - Taxes -49,663 -34,927 -42,105 -45,055
39% - CAPEX -141,943 -137,419 -140,019 -143,736
- Working Capital -3,646 16,674 -26,054 -1,131
Total 104,738 95,267 65,079 102,414

OWNERSHIP (%) ROE 22.0% 12.0% 12.5% 13.2%
Profit Margin 26.0% 19.8% 22.6% 22.7%
Other
DEBT RATIOS 2019 2020E 2021E 2022E
IAM
50%
CORFO
Pension
5%
Funds
5%
58
January 18th, 2021
VALUATION
Our target price is based on a blended 50%/50% between (1) 10-year discounted cash flow approach (DCF),
in CL$ terms; and (2) 2021E target 10.0x EV/EBITDA multiple. In particular, our DCF considers a 2.7% risk-
free rate, and a Beta of 0.7 which is consistent with a 7.2% discount rate (WACC). In addition, we are using
a perpetuity exit multiple of 10.0x EV/EBITDA. According to our estimates Aguas Andinas is trading at 23%
discount compared to its last 5-year EV/EBITDA 10.8x average.
VALUATION - AGUAS ANDINAS

Aguas Andinas - Discount rate
Country Risk 147
Free Risk Rate 2.7%
Spread (A) 2.5%
Unlevered Beta 0.70
Leveraged Beta 1.04
Risk Premium 6.5%
D/A 40%
E/A 60%
Tax 27.0%
WACC 7.2%
Aguas Andinas - DCF Valuation

NPV 733,400
NFD 890,377

Related companies 0
Min. Interest 0
Headcount & Other
Equity 1,763,646
P/E 2021E 15.6x

P/BV 2021E 2.1x
# Stocks (Mn) 6,119

T.P. 2021E - DCF (1) 288
T.P. - 10x EV/EBITDA 21E (2) 301
T.P. Blended (1)(2) 295
Upside (%) 30.2%
Div. Yield 21E 7.2%
59
CONGLOMERATES - IAM
January 18th, 2021
IAM
Inversiones Aguas Metropolitanas (IAM) is the controlling shareholder of Aguas Andinas S.A. and its subsidiaries,
holding 50.1% of the stake. Aguas Andinas is the largest water utilities company in Chile, providing services of raw
water collection, the production, transportation and distribution of drinking water, in addition to the collection,
treatment and final disposal of sewage, plus other unregulated services, supplying more than 8.7 million people at a
BUY national level. IAM is controlled by the French group Suez, which, through its subsidiary Agbar, maintains 50.1%
ownership of the Chilean holding.

REVENUES BREAKDOWN (%) HOLDING STRUCTURE

Non Other
regulated Regulated
11% 4%
IAM
Sewage 50.1%
Water
46%
Drinking
Aguas Andinas
Water
39%
OWNERSHIP (%) HISTORICAL DISCOUNT

25%
Foreign 20%
Investors
19%
15%
Suez-
IAGSA
50% Other
31% 10%
5%
SUMMARY 0%
Bloomberg IAM CC
2013 2014 2015 2016 2017 2018 2019 2020 2021
Reuters IAM.SN
Credit risk rating AA+ Dscto. NAV 10A 3A 1A
ADVT 6M (US$ million) 0.81 Source: Company reports, BICE Inversiones estimates
Free float (%) 49.9%
# stocks (million) 1,000
Market Cap (US$ million) 779
Current Price 572
Current Holding Discount 17.53%
10yr Average Descount 11.80%
Relative Preference Holding
+(562) 2692 1836
Aldo Morales E.
+(562) 2692 2576
60
INSURANCE & PENSION FUNDS - ILC
January 18th, 2021
BUY ILC
Target Price: CL$ 7,137 Strong Overreaction on Regulatory Risks
SUMMARY What´s new: We are updating our coverage of ILC, decreasing our YE21 target price to CL$
Bloomberg ILC CC 7,137 with a BUY recommendation.
Reuters ILC.SN
Credit risk rating AA+ Investment Thesis: (1) Liquid investment vehicle to gain local exposure to the health and
annuities business. The latter has significant growth potential in the long-term given the
ADVT 6M (US$ million) 0.4
Free float (%) 33% aging Chilean population; (2) Increased regulatory noises. On the one hand, the govern-
# stocks (million) 100 ment sent a pension reform bill to Congress a year ago that has failed to advance. The said
Market Cap (US$ million) 655 proposal does not represent significant changes to the AFP's business, in our opinion.
Moreover, in recent weeks, talks have been resumed in Congress to advance in the short-
Upside 48.4%
term. On the other hand, the health reform called "Mejor Fonasa" is focused on the public
Div. Yield (%) 5.5% mandatory health insurance instead of major reforms for private insurers. Although we
Total Return 53.9% believe that both industries' potential reforms should not generate abrupt changes in the
RATIOS system, regulatory noise will persist due to possible major changes derived from the new
2019 2020E 2021E 2022E constitution. (3) According to our estimates, the current market price would not be consid-
EV/EBITDA - - - - ering any value for both Habitat and Consalud subsidiaries, while it assigns an implicit valu-
EV/SALES - - - -
ation of 0.9x P/B to Confuturo. In our base scenario, Habitat represents ~ 28.2% of the sub-
P/E 9.1x 8.3x 5.8x 5.3x
P/BV - - - - sidiaries SOTP. However, we highlight that this value derived from our very conservative
Div. Yield 5.5% 4.7% 5.5% 8.9% DDM model is slightly below its "reserve" requirement value in Chile adjusted by deferred
STOCK PERFORMANCE liabilities (CL$ 357,056 million). For its part, Consalud only represents ~ 1.5% of the subsidi-
aries SOTP, where we highlight that corresponds to 0.6x its book value. All in all, we believe
1.1
that current valuations are an overreaction of the regulatory risk.
0.9
0.7
Outlook 2021: In ILC, we are expecting, segment-wise: (1) A challenging year for the health
0.5
segment, mainly attributable to Consalud where we are expecting a significant net loss of
0.3
CL$ -15,601 million related to a substantial increase in the loss ratio (+360bps YoY to 90.4%)
May/20
Jan/20
Nov/20
Jul/20
Mar/20
Sep/20
due to an expected increase in postnatal licenses (given a new regulation that allows in-
creasing the license term). The above will not be offset by both: the partial recovery in the
IPSA ILC healthcare activity and the promising prospects for Vida Camara because we still believe
that the loss ratio will be lower than an average year. (2) At Confuturo, we expect a signifi-
CONTACT cant recovery, reaching CL$ 32,569 million net income, mainly due to a better performance
in its investment portfolio. (3) For Habitat, we expect a 6.0% YoY EBITDAE growth driven by
Jonathan Fuchs N.
jonathan.fuchs@bice.cl the normalization of Chile's contribution rate and a margin expansion in Habitat Andina.
+(562) 2692 2527 Finally, (4) in the Bank, we expect a +18.8% YoY net income growth, mainly driven by a
significant drop in provisions expenses (-31.5%).
Aldo Morales E.
+(562) 2692 2576 Risk: As the main downside risk, we highlight (1) the uncertainty regarding possible new
regulations that could bring structural changes in both pension and mandatory health in-
surance businesses. On the other side, we believe that if the new constitution and reforms
are finally approved without being a "game-changer," it would dissipate regulatory noises,
which would boost a share price increase.
61
January 18th, 2021
ILC
Inversiones La Construcción (ILC) is a Chilean-based holding founded in 1980 as the investment arm of the Chilean
Chamber of Construction and it went public in 2012 being the largest IPO in Chile (~ US$ 468 million) at that date.
Currently the company operates in four different business areas; The first is the (1) Pension business (~ 28% of ILC’s
valuation) through its controlling stake in AFP Habitat; (2) the Life Insurance business (~ 31% of ILC’s valuation)
BUY through Confuturo; (3) the Health industry, through “Red Salud”, (healthcare provider subsidiary), “Consalud”, that
participates in the mandatory health insurance business (Isapre) and Vida Cámara (complementary health insurance);
and finally (4) the Banking industry through its stake in Banco Internacional. ILC is controlled by the Chilean Chamber
Target Price: CL$ 7,137 of Construction (CChC) with ~ 67% ownership.
NET INCOME BREAKDOWN (%) FINANCIAL STATEMENTS (CL$ million)

Peru Colombia HABITAT 2019 2020E 2021E 2022E
0% 4% Revenues 222,264 270,769 284,654 236,341
Chg% 13.2% 21.8% 5.1% -17.0%
EBITDAE 127,877 143,954 152,637 132,163
Chg% 10.8% 12.6% 6.0% -13.4%
EBITDA margin 57.5% 53.2% 53.6% 55.9%
RED SALUD 2019 2020E 2021E 2022E

Revenues 416,043 368,788 419,221 452,247
Chg% 7.7% -11.4% 13.7% 7.9%
EBITDA 46,390 17,713 42,759 50,313
Chile
96% Chg% 12.9% -61.8% 141.4% 17.7%
EBITDA margin 11.2% 4.8% 10.2% 11.1%
NET INCOME BREAKDOWN (%) CONSALUD 2019 2020E 2021E 2022E

Revenues 541,252 584,983 588,851 603,701
Chg% 9.9% 8.1% 0.7% 2.5%
EBIT -12,936 8,989 -22,739 -14,739
Bank
17%
Health Chg% -223.1% -169.5% -353.0% -35.2%
20%
EBITDA margin -2.4% 1.5% -3.9% -2.4%
Life
Insurance
-10% BANCO INTERNACIONAL 2019 2020E 2021E 2022E
Net Interest Income 56,415 69,032 76,355 89,172
Pensions Operating Income 89,803 96,158 95,023 109,838
53% Net Provisions -18,470 -29,328 -20,083 -21,372
Operating Expenses -40,071 -43,640 -45,005 -51,706
Total Loans 2,014,029 2,129,873 2,349,523 2,654,736
Productive Assets 2,481,456 2,624,185 3,038,250 3,233,767
Total Assets 3,309,877 3,500,256 4,055,407 4,316,379
OWNERSHIP (%)
Equity 177,804 207,362 223,346 242,289
NIM 2.6% 2.6% 2.8% 2.8%
LLP Ratio -0.9% -1.4% -0.9% -0.8%
Efficiency Ratio -44.6% -45.4% -47.4% -47.1%
ROE 14.1% 9.3% 10.2% 11.6%
Free Float TIER 1 7.8% 9.9% 8.9% 8.8%
33%
NET INCOME BREAKDOWN 2019 2020E 2021E 2022E

CChC Red Salud 5,796 -13,587 3,373 7,889
67%
Consalud -8,037 7,147 -15,601 -9,743
Vida Cámara Chile 3,452 21,302 11,006 12,891
Vida Cámara Perú -141 -1,295 912 307
Habitat 52,831 41,128 44,576 40,429
Inversiones Confuturo 30,831 305 32,569 30,204
Banco Internacional 16,401 12,764 15,338 18,835
Other -10,121 -9,900 -8,756 -9,275
ILC consolidated 91,011 57,864 83,416 91,537
Chg% -11.3% -36.4% 44.2% 9.7%
62
January 18th, 2021
VALUATION
Our target price is based on a sum of the parts (SOTP) methodology, where we separate (1) the healthcare
provider “Red Salud” business, which is valued from a 10-Year discounted cash flow model (DCF), using an
7.8% Cost of Capital (WACC); (2) the mandatory health insurance company, the pension fund management
company, and the Bank are valued from a 10-Year dividend discount model (DDM); finally (3) the insurance
company, and Vida Cámara are valued at 0.8x, and 1.0x P/BV 2020E respectively. In addition, we include (1)
Lands; and, (2) Net financial debt and (3) NPV of SG&A’s related to the Holdco. Finally, we include a 15%
liquidity discount.
VALUATION - ILC
ILC Red Salud Consalud Habitat Banco Int.
Free Risk Rate 2.7% 2.7% 2.7% 2.7%
Spread (AA-) 5.0% - - -
Kd 7.7% - - -
Levered Beta 1.2 1.1 1.0 1.3
Risk Premium 6.5% 6.5% 6.5% 6.5%
Ke 10.5% 9.9% 9.4% 11.5%
D/A 55% - - -
E/A 45% - - -
Tax 27.0% - - -
WACC 7.8% - - -
NPV 195,488 1,264 409,967 68,379

Perpetuity 317,022 17,588 476,029 228,585
ILC Method Equity % stake ILC Equity P/B 21E P/E 21E
Red Salud DCF 242,546 100.0% 242,546 1.6x 71.9x
Consalud DDM 18,853 100.0% 18,853 0.6x -1.2x
Habitat DDM 885,996 40.3% 357,056 1.7x 7.7x
Banco Internacional DDM 296,965 67.2% 199,471 1.3x 13.0x
Inversiones Confuturo 0.8x P/B 390,371 100.0% 390,371 0.8x 12.0x
Vida Cámara Chile 1.0x P/B 48,318 100.0% 48,318 1.0x 4.4x
Vida Cámara Perú 1.0x P/B 8,634 100.0% 8,634 1.0x 9.5x
Holdco - Lands 22,397

Holdco - NFD -396,586
Holdco - NPV SG&A -51,431
Total ILC 839,630
# Stocks (millions) 100

Target Price 8,396
- Liquidity discount 15%
Target Price 7,137
Current Price 4,810
Upside 48.4%
Total Return 53.9%
63
PENSION FUNDS - HABITAT
January 18th, 2021
HOLD HABITAT
Target Price: CL$ 753 Attractive Valuations but No Clear Catalysts
SUMMARY What’s new: We are rolling forward our Habitat model, increasing our YE21 target price by
Bloomberg HABITAT CC 1.1% to CL$ 753, while maintaining shares with a HOLD recommendation.
Reuters HABITAT.SN
Investment Thesis: (1) Stable cash flow generation (adjusted by reserve requirements) with
ADVT 6M (US$Mn) 0.1 one of the highest dividends yields within our companies under coverage (14.1% dividend
Free float (%) 20.0% yield for 2021E). (2) Attractive geographic diversification to diminish the negative effect of
# stocks (Mn) 1,000 regulatory noises in Chile. In December 2019, Habitat acquired Colfondos in Colombia,
Market Cap (US$ Mn) 736
becoming the second-largest pension player in the region. The above shows that its region-
al expansion strategy, which started in 2013 with the Peruvian market entrance, is begin-
Current price (CL$) 540
Upside 39.5% ning to consolidate. (3) Increased regulatory risk. A year ago, the government sent a new
Div. Yield (%) 14.1% pension bill that has not advanced in its congress discussion. This project includes, among
Total Return 53.5% other initiatives, increasing the competition, allowing other nonprofit players to participate
RATIOS in the managing of pensions, an increase in the contribution rate, etc. However, in our
2019 2020E 2021E 2022E opinion, this project does not put pressure on AFP’s profitability. Finally, although this pro-
ject advances in congress without structural changes to the industry, the regulatory noises
EV/Sales 3.3x 1.9x 1.8x 2.1x
P/E* 5.0x 4.8x 4.7x 5.3x will persist due to potentially significant changes from the new constitution. (4) Attractive
P/BV 1.5x 1.0x 1.0x 1.0x valuations, however, are justified by higher regulatory risk. According to our estimates,
Div. yield 9.7% 6.0% 14.1% 15.0% Habitat is trading with an 48% discount compared with its 5-year average (10.3 P/E Fwd.).
* Earnings includes reserve profits
However, we consider that the discount is justified given the higher regulatory risk.
STOCK PERFORMANCE
Outlook 2021: We are expecting Habitat to post a +6.0% YoY EBITDAE growth, mainly driv-
1.1
en by (1) a +5.4% YoY revenues increase given a normalization in the contribution rate in
0.9 Chile coupled with higher AUM in voluntary products. Also, we expect higher revenues
from Perú after the fund withdrawal affected the income generation. (2) a +110bps YoY
0.7 margin expansion at a consolidated level, boosted by both Chile and its foreign subsidiaries
given higher efficiency levels. All in all, we expect earnings to post a +8.0% YoY benefited
0.5
from higher reserve profits (CL$ 11,208 million 2020E vs. CL$ 13,604 million in 2021E).
Jan/20
May/20
Nov/20
Jul/20
Sep/20
Mar/20
Risks: As the main downside risk, we highlight that a potential pension reform with signifi-
IPSA Habitat
cant changes than expected could result in a considerable decrease in profitability. On the
CONTACT other hand, as a potential upside risk, given the funds' withdrawal during 2020E, the com-
Jonathan Fuchs N. pany may release reserve quotas resulting in additional dividends.
jonathan.fuchs@bice.cl
+(562) 2692 2527
Aldo Morales E.
+(562) 2692 2576
64
January 18th, 2021
HABITAT
Habitat is a Chilean-based pension fund management company (AFP) with operations in Chile (~ 73% of sales), Peru
and recently announced the entry to the Colombian market. AFP Habitat was founded by the Chilean Chamber of
Construction (CChC) at the beginning of the Chilean pension fund system in 1981. The company is the market leader
regarding assets under management (AUM), being at the same time leader in voluntary contributions (APV and CAV).
HOLD After the acquisition of Colfondos in Colombia it becomes the second largest pension management company within
the region. AFP Habitat is controlled with ~ 80% of the property by both ILC and "Prudential Financial" through an
equally divided (50/50) joint venture.
REVENUES BREAKDOWN (%) FINANCIAL STATEMENTS (CL$ million)

Revenues 222,264 270,769 284,654 236,341
Chg% 13.2% -17.0% -5.1% -6.0%
Colombia Adj. EBITDAE 127,877 143,954 152,637 132,163
15% Chg% 10.8% -13.4% -7.4% -8.4%
Peru EBITDAE margin 57.5% 55.9% 54.5% 53.2%
12%
Net Interest 816 -939 -1,994 -2,304
Associates 0 -35 -33 -31
Chile Net Income 135,207 106,153 114,689 101,339
73% Chg% 48.8% -11.6% -6.2% -6.9%
Net Margin 60.8% 42.9% 42.4% 41.9%

Current Assets 57,678 123,309 161,494 176,831
REVENUES BREAKDOWN (%) Total Assets 714,118 768,789 799,945 809,444
Financial Debt 112,336 111,026 114,451 117,999
Equity 445,361 497,209 520,146 540,414
Subsidiari
es FCFF 2019 2020E 2021E 2022E
29% + EBIT 181,759 145,038 155,595 137,689
Mandator + Dep and Amort 7,180 10,125 10,646 8,839
CAV y
2% - Taxes -48,123 -40,951 -42,434 -37,495
APV contributi
3% on - CAPEX -2,537 -3,314 -3,616 -3,002
66% - Working Capital 23,182 29,597 44,430 -12,900
Total 161,461 140,495 164,621 93,132

OWNERSHIP (%) ROE 30.4% 21.3% 22.0% 18.8%
Profit Margin 60.8% 39.2% 40.3% 42.9%
Free Float
20% ILC DEBT RATIOS 2019 2020E 2021E 2022E
40% EBITDA / Fin. Expenses -149.9x -68.4x -47.2x -39.7x
NFD / EBITDA 0.5x 0.0x -0.2x -0.3x
Pruedenti Debt / Equity 0.3x 0.2x 0.2x 0.2x
al
Financial
Inc.
40%
65
January 18th, 2021
VALUATION
Our target price is based on a 10-Yr dividend discount model (DDM). In our model we use a 6.5% Equity risk
Premium and a 2.7% risk-free rate, and a beta of 1.0 consistent with a 9.4% cost of equity (Ke). To estimate
the number of affiliates in the long term we use the estimates of labor force growth in Chile and we set a
target market share of 14%. Finally, we include a 15% liquidity discount.
VALUATION - HABITAT
HABITAT - DDM
Free Risk Rate 2.7%
Beta 1.0
Risk Premium 6.5%
Ke 9.4%
NPV Dividends 409,967

Perpetuity 476,029
# Stocks (MM) 1,000
P° Target - DDM 886
NPV Implicit P/B 2021E 1.7x

NPV Implicit P/E 2021E 7.7x
HABITAT - TARGET PRICE

Target Price 886
Target Price 753
Current Price 540
Upside 39.5%
Div. Yield 21E 14.1%
Total Return 21E 53.5%
66
TELECOM & IT - SONDA
January 18th, 2021
BUY SONDA
Target Price: CL$ 600 Highly Discounted Valuations and Significant Growth Opportuni-
Current Price: CL$ 463 ties Ahead
SUMMARY What’s new: We are re-initiating coverage of Sonda, introducing our YE21 target price of
Bloomberg SONDA CC CL$ 600, consistent with a BUY recommendation.
Reuters SON.SN
Investment Thesis: (1) Attractive growth in EBITDA with CAGR of + 11.8% 2020-2023.
ADVT 6M (US$Mn) 0.74 Growth plan includes strong margin expansion linked to greater focus on higher value-
Free float (%) 56.8% added services. Our base case scenario includes a more conservative margin recovery esti-
# stocks (Mn) 871 mate. (2) Attractive valuations with respect to its history. According to our estimates, Sonda
Market Cap (US$ Mn) 549
is trading at a discount of 42% compared to the EV / EBITDA multiple of 10.6x and of 44%
Current price (CL$) 463 compared to the EV / Sales multiple of 1.3x, both related to their last 5 years averages. (3)
Upside 29.7% Attractive pipeline of new business opportunities. At the end of 3Q20, the pipeline of po-
Div. Yield (%) 1.1% tential business opportunities reached US$ 5.2 bn, +39% compared to December 2019,
Total Return 30.8%
mainly highlighting opportunities in Brazil (US $ 2,664 million as of 3Q20), which would
RATIOS support growth expectations in the country.
2019 2020E 2021E 2022E
EV/EBITDA 7.8x 6.9x 6.3x 5.6x Outlook 2021: We expect a +7.2% increase in sales and +14.4% in consolidated EBITDA
EV/Sales 0.9x 0.8x 0.7x 0.7x mainly associated with (1) double-digit growth in revenues in Brazil and Mexico (+10.2%
P/E 24.5x 27.0x 14.4x 11.4x
and +17% respectively), where the first half of the year would be focused on the closing of
P/BV 1.1x 0.9x 0.8x 0.8x
Div. yield 1.9% 1.6% 1.1% 2.1% contracts that should reflect an acceleration in revenue growth towards the second half of
2021. On the other hand, we are estimating an improvement of +74bp in margins due to
STOCK PERFORMANCE the organizational restructure carried out during 2020 that would allow to cut expenses by
1.2
about US$ 20 million per year, coupled with a slight improvement in operating margins.
1.0
Risks: As main downside risks, we highlight: (1) Macroeconomic scenario more deteriora-
0.8 ted than expected, considering the exposure to regional currencies against the Chilean
0.6 peso. (2) Continuous problem with the operation in Mexico, where the lack of stability in
the commercial area has diminished the operational dynamics. As the main upside risks, we
0.4
highlight: (1) Execution of the strategic plan better than expected, considering that we only
Jan/20
May/20
Nov/20
Jul/20
Sep/20
Mar/20
include a part of the projections presented by the company. (2) Award of large contracts
not included in valuation, highlighting civil registry contract in Chile (US $ 400-480 million).
IPSA SONDA
CONTACT
+(562) 2692 1836
Aldo Morales E.
+(562) 2692 2576
67
January 18th, 2021
SONDA
Sonda S.A. is a Chilean-based company focused on providing Information Technology (IT) solutions and services in 10
Latin American countries, highlighting Chile (56% of LTM EBITDA), Brazil (19% of LTM EBITDA), Mexico and OPLA
(other countries of Latin America). The company participates in three main operating segments: (1) IT Services (~46%
of LTM sales), which includes support, consulting and advice related to IT. (2) Platforms (~45% of LTM sales) related to
BUY the supply of hardware, software and communication equipment infrastructure, and (3) Applications, dedicated to
making own or third-party software solutions. The company is controlled by the Navarro Haeussler family with 38%
ownership.

Revenues 846,550 778,507 834,661 916,073
Chg% 5.8% -8.0% 7.2% 9.8%
ROLA
EBITDA 93,197 85,535 97,839 109,689
24% Chg% 2.1% -8.2% 14.4% 12.1%
EBITDA margin 11.0% 11.0% 11.7% 12.0%
Mexico Net Interest -10,463 -9,009 -10,291 -5,397
1%
Chile Associates 984 784 784 784
Brazil 56% Net Income 23,107 15,307 26,517 36,250
19% Chg% 116.2% -33.8% 73.2% 36.7%
Net Margin 2.7% 2.0% 3.2% 4.0%

Current Assets 525,738 481,083 489,701 512,594
Applicatio Financial Debt 317,640 336,427 346,806 357,557
ns Total Liabilities 559,645 528,687 548,675 568,203
9%
Equity 532,156 474,994 496,918 525,213
FCFF 2019 2020E 2021E 2022E

IT Services
45% + EBIT 53,469 48,065 57,554 66,472
Platforms + Dep and Amort 39,728 37,470 40,285 43,217
46% - Taxes -35,808 -2,469 -11,545 -16,078
- CAPEX -61,659 -70,000 -74,000 -69,413
- Working Capital -23,967 29,512 -20,899 -8,694
Total -28,236 42,578 -8,605 15,503

OWNERSHIP (%) ROE 4.3% 3.2% 5.3% 6.9%
Profit Margin 2.7% 2.0% 3.2% 4.0%
Others Navarro
26% Haeussler DEBT RATIOS 2019 2020E 2021E 2022E
Family EBITDA / Fin. Expenses 5.2x 4.9x 5.4x 8.3x
38% NFD / EBITDA 1.7x 2.1x 2.0x 1.8x
Institution Debt / Equity 0.6x 0.7x 0.7x 0.7x
al
19% Source: Company reports, BICE Inversiones estimates
Pension KOYAM
Funds 5%
12%
68
January 18th, 2021
VALUATION
Our target price is based on a blended 50%/50% between (1) 10-year discounted cash flow approach (DCF),
in CL$ terms; and (2) 2021E target 7.0x EV/EBITDA multiple. In particular, our DCF considers a 2.7% risk-
free rate, a beta of 1.0 beta which is consistent with a 9.9% discount rate (WACC). In addition, we are using
a perpetuity exit multiple of 7.0x. According to our estimates, Sonda is trading at a 42% discount when
compared to its 5-year average of EV/EBITDA 10.6x.
VALUATION - SONDA
Sonda - Discount rate
Country Risk 147
Risk-free Rate (Rf) 2.7%
Spread 3.3%
Unlevered Beta 0.95
Levered Beta 1.0
Risk Premium 6.5%
D/A 10%
E/A 90%
Tax 30.2%
WACC 9.9%
Sonda - DCF Valuation

NPV 264,414
Perpetuity 477,300
NFD 196,946


- Min. Interest 5,347
Equity 551,407
P/E 2021E 19.2x

P/BV 2021E 1.1x
# Stocks (Mn) 871

T.P. 2021E - DCF (1) 633
T.P. - 7.0x EV/EBITDA 21E (2) 568
T.P. Blended (1)(2) 600
Upside (%) 29.7%
Div. Yield 21E 1.1%
69
FINANCIALS - BANCO DE CHILE
January 18th, 2021
HOLD BANCO DE CHILE

Target Price: CL$ 88.1 Discounted Valuations are Justified on the Lower Profitability
SUMMARY What´s new: We are updating our coverage of Banco de Chile, introducing our YE21 target
Bloomberg CHILE CC price of CL$ 88.1, while downgrading shares from BUY to HOLD.
Reuters CHILE.SN
Credit risk rating A
Investment Thesis: (1) One of the most profitable and capitalized banks in the industry with
52 weeks high/low (CLP) 86.5/57.0
ADVT 6M (US$ million) 8.7 the highest coverage ratio. Its higher-than-peers profitability is based on its lower funding
Free float (%) 44.0% cost and more diversified loan portfolio. Also, it has the highest capital ratios leaving it in a
# stocks (million) 101,017 healthy position to fulfill Basel III requirements. Finally, the bank holds the highest coverage
Market Cap (US$ million) 10,803 ratio within the industry (2.5x vs. 1.6 industry as of November 2020), allowing it to better
Target price (CLP) 88.1
face the challenging macro scenario during 2021. The above results from a superior asset
Current price (CLP) 78.5
Upside potential 12.3% quality with the lowest NPL 90-days ratios among the Chilean banks (1.0% vs. 1.7% industry
Div. Yield (%) 3.0% as of November 2020) and an important stock of voluntary provision. (2) Significant efforts
Total Return 15.3% made to improve efficiency. This plan started in 2019 and included the optimization of its
branch network; new self-service model attention in branches; and a new customer service
RATIOS
2019 2020E 2021E 2022E
model, which has already begun to bear fruits (OPEX grew by -2.6% in 2020E and is ex-
P/E 13.6x 16.8x 14.0x 12.3x pected to grow below inflation during 2021E). The above, coupled with the digitalization
P/B 2.3x 2.2x 2.0x 2.0x process where we highlight the “FAN” account, which will lead the further growth at a very
Div. yield 4.4% 4.4% 3.0% 3.6% low cost, will improve efficiency levels by ~ 145bps in the medium term. Finally, (3) Alt-
ROAE 17.4% 13.1% 14.9% 16.4%
hough the bank is currently trading with a discount compared with its 5-year average multi-
RORWA 1.8% 1.4% 1.7% 1.9%
ples (2.6x P/B), we believe, given the lower profitability expected in 2021E compared with
STOCK PERFORMANCE its history, the shares seem to be at fair value.
1.1
Outlook 2021: We are expecting a loan growth acceleration compared to 2020, especially
0.9
in loans to individuals. In particular, we expect a 5.4% YoY loan growth, which will be driven
0.7 mainly by mortgage loans (+8.8% YoY), followed by consumer loans (+6.8% YoY), and will be
partially offset by commercial loans (+3.4% YoY) due to the significant indebtedness in-
0.5
crease in companies during 2020. Regarding earnings, we expect a +19.7% YoY net income
May/20
Jan/20
Nov/20
Jul/20
Mar/20
Sep/20
increase, consistent with an ROE of 14.4%, which will be driven by (1) a -29bps YoY cost of
risk decrease to 1.2% consistent with a -16.5% provision expenses decrease; (2) Operating
IPSA BANCO DE CHILE
revenues will grow 4.3% YoY boosted by higher NII due to loan growth and NIM expansion
(~ 9bps YoY) based on higher inflation and better mix, partially offset by a normalization in
CONTACT income from intermediation and lower growth in fees income (+3.2% YoY), which will be
Jonathan Fuchs N. affected by lower revenues from the Chubb joint venture and; and finally (3) we expect a ~
jonathan.fuchs@bice.cl 73bps YoY efficiency improvement.
+(562) 2692 2527
Aldo Morales E. Risk: As the main upside risk, we highlight (1) a higher-than-expected loan growth given we
aldo.morales@bice.cl are incorporating a scenario where Banco de Chile will grow below the industry levels; (2) a
+(562) 2692 2576 better-than-expected development in delinquencies rates, which will imply a lower cost of
risk. On the other hand, we are very cautious on the main downside risk, highlighting: (3) a
lower-than-expected inflation rate could affect NIMs to a greater extent than its peers. And
(4) political uncertainty could affect Chilean GDP growth in 2021E and consequence loan
growth.
70
January 18th, 2021
CHILE
Banco de Chile is a leading Chilean financial institution established in 1893. The bank is characterized by offering a
wide range of traditional financial products such as loan, cash management, financial advisor, stock brokerage, fund
management among other. Currently is the one of the largest banks in Chile measured by total loans, with ~ 15.5%
market share, and is one of the most profitable within industry with (~ 13.9% of ROAE LTM). The bank holds loans for
HOLD more than ~ US$ 40.9 billion, which are divided ~ 58% in the commercial segment, followed by ~ 29% in mortgages
and ~ 13% in Consumer. Banco de Chile is controlled by the holding company "LQ Inversiones Financieras (LQIF)" with
51% ownership. In turn, LQIF is controlled in equal parts (50/50) by the holding company "Quiñenco" related to the
Target Price: CL$ 88.1 Luksic group, and the U.S. financial holding "Citigroup."

P&L 2019 2020E 2021E 2022E
Net Interest Income 1,369,375 1,312,467 1,400,123 1,560,333
Intermediation 147,295 154,142 134,226 160,731
Net commisions 457,302 449,691 464,256 496,950
Other 5,389 3,422 4,405 4,909
Operating Revenues 1,979,361 1,919,722 2,003,010 2,222,923
Net Provisions -347,274 -471,065 -393,543 -413,622
Net operating Income 756,242 595,371 733,711 837,943
Chile Related companies 6,450 427 6,082 6,946
100%
Tax -169,683 -123,632 -174,778 -201,106
Minority Interest 1 1 1 1
Net Income 593,008 472,165 565,014 643,782
Net Margin 30.0% 24.6% 28.3% 29.0%
LOANS BREAKDOWN (%) % YoY -0.3% -20.4% 19.7% 13.9%

Loans 30,019,470 31,184,688 32,882,144 34,484,504
Investments 3,230,201 3,355,583 5,553,688 5,832,847
Mortage Productive Assets 33,249,671 34,540,271 38,435,831 40,317,351
29%
Total Assets 41,273,333 42,875,374 47,608,558 49,923,815
Commercial Total Liabilities 37,745,111 39,189,770 43,696,948 45,985,870
58% Equity 3,528,222 3,685,604 3,911,610 3,937,945
Consumer
13% Equity + Liabilities 41,273,333 42,875,374 47,608,558 49,923,815
RATIOS 2019 2020E 2021E 2022E

NIM 4.2% 3.7% 3.8% 3.9%
LLP Ratio (Net provision to Loans) -1.2% -1.5% -1.2% -1.2%
OWNERSHIP (%) ROAE 17.4% 13.1% 14.9% 16.4%
ROAA 1.5% 1.1% 1.2% 1.3%
TIER I 10.9% 11.0% 11.9% 11.4%
Other
39%
LQIF S.A
51%
Ergas
Group Local Pension Funds
5% 5%
71
January 18th, 2021
VALUATION
Our target price is based on a blended 50%/50% between (1) 10-year dividend discount model (DDM); and
(2) a 2021E 13.5x P/E target multiple. In particular, our DDM considers a 2.7% risk free rate (based on local
BCP10), and a Beta of 0.9 which is consistent with an 8.6% Cost of Equity (Ke). In addition, we are using a
perpetuity exit multiple of 2.3x P/B. Finally, we are adjusting our discounted dividends by a targeted 10.0%
TIER I in 2025 (based on new BASEL III standards considering a CET1 of 4.5%, additional CET1 of 1.5%, a
conservation buffer of 2.5%, and finally a systemic buffer of 1.48%), so dividends will be affected upward or
downward depending on current TIER I ratio.
VALUATION - BANCO DE CHILE

BANCO DE CHILE - VALUATION
Free Risk Rate 2.7%
Levered Beta 0.90
Risk Premium 6.50%
Ke 8.6%
NPV Dividends 4,126,808

# Stocks (MM) 101,017
Target Price - DDM (1) 100.8

Target Price - 13.5P/E 2021E (2) 75.5

Perpetuity Exit Multiple (P/B) 2.3x
CHILE - BLENDED TARGET PRICE

Target Price (1)(2) 88.1
Current Price 78.5
Upside 12.3%
Div. Yield 21E 3.0%
72
FINANCIALS - BANCO SANTANDER
January 18th, 2021
BUY BANCO SANTANDER

Target Price: CL$ 45.3 Strong Fundamentals. Top Pick Among the Banking Sector
SUMMARY What´s new: We are updating our coverage of Banco Santander, introducing our YE21 tar-
Bloomberg BSAN CC get price of CL$ 45.3, which implies a total return of 18.9%, consistent with a BUY recom-
Reuters BSANTANDER.SN mendation.
ADVT 6M (US$ million) 7.3
Investment Thesis: (1) Leading bank in efficiency, which, coupled with other structural
Free float (%) 33.0% variables such as low funding cost and diversified loan portfolio mix, allows it to have one
# stocks (million) 188,446 of the industry's highest ROE. It maintains the second-largest coverage ratio within the
Market Cap (US$ million) 10,122 banks in our coverage (1.9x as of November 2020), boosted by the constitution of CL$
126,000 million voluntary provisions since December 2019, that will allow it to be better
Upside potential 14.9% prepared than the industry average to face the challenging 2021. (2) Top digital strategy in
Div. Yield (%) 4.0% the industry. Banco Santander has successfully developed a 3-Year (2019 – 2021) invest-
Total Return 18.9% ment plan of US$ 380 million with a clear focus on its digital initiatives. Among those initia-
RATIOS tives, we highlight "Life," a checking account with a digital onboarding focused in the mass
2019 2020E 2021E 2022E segment. It has the particularity that gives benefits to customers that have shown good
P/E 14.7x 14.8x 12.9x 11.8x
payment behavior. Currently, the bank has opened more than 300.000 Life accounts being
P/B 2.4x 2.0x 1.9x 1.8x
Div. Yield 4.4% 4.5% 4.0% 4.7%
the bank with the highest number of accounts opened in the industry monthly. On the oth-
ROAE 16.7% 14.1% 15.1% 15.5% er hand, "Superdigital" is a digital account focused on unbanked people, including a prepaid
RORWA 1.6% 1.4% 1.7% 1.7% card that allows the customer to buy through the internet. Finally, "Klare," a digital insur-
STOCK PERFORMANCE ance brokerage that currently represents 25% of the total premium sold by the bank. The
above, coupled with other digital initiatives, will allow Santander to increase its client base
1.0 and fee income generation while maintaining its high-efficiency level. Finally, (3) Attractive
Valuations. According to our estimates, the bank is currently trading with a 11% discount
0.8
compared to its historical average (14.5 P/E Fwd). Meanwhile, its pair trade over Banco de
0.6
Chile makes us to maintain a relative preference for Santander.
0.4
May/20
Jan/20
Nov/20
Jul/20
Mar/20
Sep/20
Outlook 2021: We expect a 5.9% YoY loan growth, which will be mainly boosted by mort-
gage loans (8.8% YoY), benefiting from low rates environment, followed by a growth accel-
IPSA SANTANDER eration in consumer loan (+7.5% YoY) expected for the 2H21. Finally, we are expecting a
significant deceleration in commercial loans (+3.4% YoY). On the other hand, we expect a
CONTACT +15.2% YoY net income increase, consistent with an ROE of 14.6%. The above is mainly due
to a -11.0% YoY provision expenses decrease, given the high comparable basis (CL$ 110.000
Jonathan Fuchs N.
jonathan.fuchs@bice.cl million in voluntary provisions). Operating revenues are expected to grow by +4.5% YoY,
+(562) 2692 2527 mainly boosted by commission income growth, partially offset by NII, and income from
intermediation. Finally, we foresee a 39.4% efficiency ratio for the whole year, which im-
Aldo Morales E.
plies a + 2.9% YoY OPEX increase.
+(562) 2692 2576
Risk: On the one hand, as a main bullish risk, we highlight (1) a higher-than-expected fees
generation mainly due to Getnet (acquiring business). On the other hand, as the main
downside risk, we emphasize that (2) local political uncertainty could detriment economic
growth for the current year leading to a downward revision in loan growth; and (3) a de-
crease in dividend payout policy as we saw in some banks during 2020.
73
January 18th, 2021
SANTANDER
Banco Santander is on of the largest bank in Chile measured by total loans with ~ 17% market share and is one of the
most profitable within the industry (~ 14.5% of ROAE LTM). The bank has had a presence in Chile since 1978 when
Santander Spain opened its first branch in the Country. Currently the bank maintains loans by more than ~ US$ 45.2
billion which are divided ~ 51% in the commercial segment, followed by ~ 35% in mortgages and ~ 14% in Consumer.
BUY In addition to traditional banking services, the Bank also offers a variety of financial products such as stock broker,
fund management, financial leasing, insurance broker, among others. Banco Santander Chile is controlled by the
Spanish Santander Group with ~ 67% ownership.

P&L 2019E 2020E 2021E 2022E
Intermediation 207,019 148,124 129,384 137,854
Net commisions 287,086 262,778 286,294 319,504
Other -37,450 -69,312 -42,379 -46,544
Net Provisions -420,447 -514,599 -457,920 -497,886
Chile Related companies 1,146 1,374 1,851 2,045
100% Tax -150,168 -131,050 -173,841 -200,429
Minority Interest 2,083 4,513 6,553 7,240
Net Income 552,093 501,111 577,288 629,495
Net Margin 28.9% 25.2% 28.2% 28.0%
LOANS BREAKDOWN (%) % YoY -6.7% -9.2% 15.2% 9.0%
BALANCE SHEET 2019E 2020E 2021E 2022E

Loans 32,716,883 34,672,038 36,711,485 39,118,404
Investments 4,280,476 3,849,557 4,075,992 4,212,471
Mortage
35% Total Assets 50,578,246 61,001,348 59,368,554 59,407,185
Commercial Total Liabilities 47,187,423 57,287,599 55,423,889 55,239,095
51% Equity 3,390,823 3,713,750 3,944,665 4,168,090
Equity + Liabilities 50,578,246 61,001,348 59,368,554 59,407,185
Consumer
14%
RATIOS 2019E 2020E 2021E 2022E
NIM 4.1% 4.0% 4.1% 4.1%
LLP Ratio (Loan Loss Provision) -1.3% -1.5% -1.3% -1.3%
OWNERSHIP (%) ROAE 16.7% 14.1% 15.1% 15.5%
ROA 1.2% 0.9% 1.0% 1.1%
TIER I 10.1% 10.7% 11.6% 11.2%
Other Source: Company reports, BICE Inversiones estimates

15%
ADR
13%
Santander
Local Group
Pension 67%
Funds
5%
74
January 18th, 2021
VALUATION
Our target price is based on a blended 50%/50% between (1) 10-year dividend discount model (DDM); and
(2) a 2020E 13.5x P/E target multiple. In particular, our DDM considers a 2.7% risk free rate (based on local
BCP10), and a Beta of 1.1 which is consistent with an 9.9% Cost of Equity (Ke). In addition, we are using a
perpetuity exit multiple of 2.3x P/B. Finally, we are adjusting our discounted dividends by a targeted 10.1%
TIER I in 2025 (based on new BASEL III standards considering a CET1 of 4.5%, additional CET1 of 1.5%, a
conservation buffer of 2.5%, and finally a systemic buffer of 1.58%), so dividends will be affected upward or
downward depending on current TIER I ratio.
VALUATION - SANTANDER
BANCO SANTANDER - VALUATION
Free Risk Rate 2.7%
Beta 1.10
Risk Premium 6.50%
Ke 9.9%
NPV Dividends 3,514,175

# Stocks (MM) 188,446

Target Price - 13.5P/E 2021E (2) 41.4

SANTANDER - BLENDED TARGET PRICE

Current Price 39.4
Upside 14.9%
Div. Yield 21E 4.0%
75
FINANCIALS - BCI
January 18th, 2021
HOLD BCI
Target Price: CL$ 37,092 Highly Oriented to Become the First Digital Bank in Chile
SUMMARY What´s new: We are updating our coverage of BCI, introducing our YE21 target price of CL$
Bloomberg BCI CC 37,092, consistent with a HOLD recommendation.
Reuters BCI.SN
Investment Thesis: (1) Attractive geographic diversification that limits its exposure to
52 weeks high/low (CLP) 35,358/22,086
ADVT 6M (US$ million) 3.2 Chile's current political uncertainty. The bank has a subsidiary in Florida (U.S), representing
Free float (%) 36.3% the ~ 37.5% LTM net income and the ~ 26.9% of the consolidated loan book. We expect
# stocks (million) 149 that CNB will drive BCI's earnings growth for the upcoming years (9.4% CAGR 2019 – 2022
Market Cap (US$ million) 6,587 vs. 5.2% at consolidated level). Additionally, the bank's management announced its inten-
Target price (CLP) 37,092
tion to enter the Peruvian market in the short term. Moreover, we highlight that in both
Current price (CLP) 32,500
Upside potential 14.1% countries, the bank has prepared to face the significant portfolio risk challenges in 2021E,
Div. Yield (%) 2.2% making a substantial amount of voluntary provisions (CL$ 148.6 billion as of December
Total Return 16.4% 2020), which led to an increase in its coverage ratio to 1.7x. Finally, we especially highlight
RATIOS the large number of provisions made in CNB (CL$ 46.3 billion), which corresponds to 2.4x
2019 2020E 2021E 2022E the total provisions made in 2019; (2) MACH will become the first digital bank in Chile. With
P/E 12.0x 15.8x 12.7x 9.9x its 2.7 million active accounts, it would be the second-largest bank in Chile, only behind
P/B 1.3x 1.2x 1.2x 1.1x
Div. yield 2.9% 3.1% 2.2% 2.6%
Banco Estado (100% state-owned bank). According to the management, they have not
ROE 10.6% 7.8% 9.3% 10.9% achieved its break-even yet, however, significant progress has already been made to mone-
RORWA 1.1% 0.8% 0.9% 1.1% tize the app. We highlight its Marketplace (in-app purchases) and its payment environment,
STOCK PERFORMANCE including the issuance of cards and a new acquiring network (MACH Pay). We expect other
1.1 products to come, such as loans, investments, among others. Finally, (4) After the recent
rally, BCI seems to be trading in line with its P/E Fwd average (12.0x).
0.9
Outlook 2021: We expect consolidated loan growth of 6.4% YoY, where we expect a +6.5%
0.7
YoY growth in the Chilean bank and +6.0% YoY in CNB (+8.2% YoY in USD). Regarding earn-
0.5 ings, we are expecting a +23.7% YoY increase, mainly boosted by a -13.6% YoY provision
Jan/20
May/20
Nov/20
Jul/20
expenses decrease, consistent with a -34bps YoY improvement in cost of risk to 1.5%. On
Sep/20
Mar/20
the other hand, operating revenues are expected to remain flat YoY, where the commission
IPSA BCI
income growth (+10.4% YoY) will be offset by lower income from intermediation (-32.1%
YoY). In the same sense, we expect NIM and efficiency ratio to remain stable YoY.
CONTACT
Risk: As a potential upside risk, we highlight (1) higher-than-expected fees income related
Jonathan Fuchs N.
jonathan.fuchs@bice.cl to entry into operation of its acquiring network called “BCI pagos.” (2) A faster-than-
+(562) 2692 2527 expected recovery in its subsidiary Financial services could boost margins and loan growth
in Chile. Meanwhile, as the main downside risk, we highlight higher investments in its digi-
Aldo Morales E.
tal transformation process, putting pressure on efficiency ratios during 2021.
+(562) 2692 2576
76
FINANCIALS - BCI
January 18th, 2021
BCI
BCI is a full financial institution founded in 1937 with a clear focus on SME’s financing. Currently, is the largest bank in
Chile in terms of Assets. The bank maintains loans by more than ~ US$ 47.6 billion, which are divided ~ 67% in the
commercial segment, followed by ~ 24% in mortgages and ~ 9% in Consumer. In particular, BCI divides its loans in
Chile (~ 73%), and the U.S. (~ 27%) through its subsidiary "City National Bank of Florida" (CNB) acquired in 2015. In
HOLD 2018 BCI acquired TotalBank in Florida in order to strengthen its presence in the U.S and acquired Walmart Financial
Services to boost its credit card business. In addition, in 2019 announced the acquisition of its third bank in the U.S.
the Executive Bank. BCI is controlled by the Yarur family (BCI’s founding family) with ~ 63% ownership.
LOANS BREAKDOWN (%) FINANCIAL STATEMENTS (CL$ million)

P&L 2019 2020E 2021E 2022E
Intermediation 165,471 209,807 142,499 158,469
Net commisions 351,760 346,379 382,501 429,569
USA
27% Other 9,016 -6,506 -5,252 74,039
Net Provisions -415,519 -654,324 -565,170 -561,789
Operating Expenses -913,684 -924,480 -917,928 -1,098,677
Chile Net operating Income 518,538 392,731 480,089 635,642
73% Related companies 12,638 1,410 1,060 1,427
Tax -128,437 -87,098 -101,447 -148,359
Minority Interest 94 73 99 133
Net Income 402,645 306,970 379,604 488,577
Net Margin 21.9% 15.5% 19.3% 22.0%
LOANS BREAKDOWN (%) % YoY 1.7% -23.8% 23.7% 28.7%

Loans 33,880,778 36,209,201 38,520,760 41,293,256
Investments 6,230,655 6,355,593 8,093,534 8,425,231
Mortage
24% Productive Assets 40,111,433 42,564,793 46,614,294 49,718,486
Total Assets 50,336,620 53,269,954 59,561,525 62,015,610
Consumer Total Liabilities 46,545,142 49,359,219 55,460,962 57,547,373
9% Commercial Equity 3,791,478 3,910,734 4,100,563 4,468,237
67% Equity + Liabilities 50,336,620 53,269,954 59,561,525 62,015,610
RATIOS 2019 2020E 2021E 2022E

NIM 3.5% 3.2% 3.2% 3.3%
OWNERSHIP (%) ROAE 11.1% 8.0% 9.5% 11.4%
ROAA 0.9% 0.6% 0.7% 0.8%
TIER I 9.8% 9.5% 9.8% 9.8%
Other
28%
Yarur
Familly
63%
Local
Pension
Funds
9%
77
FINANCIALS - BCI
January 18th, 2021
VALUATION
Our target price is based on a blended 50%/50% between (1) a SOTP model, valuing each business with a
10-year dividend discount model (DDM); and (2) a 2021E 11.5x P/E target multiple. In particular, our DDM
considers a 2.7% risk free rate (based on local BCP10) for Chilean bank and a 2.3% for U.S subsidiary. We
incorporate a Beta of 1.15 for the Chilean operations and 1.25 for the U.S. The Cost of Equity (Ke) used in
Chile is 10.2%, meanwhile is 10.4% in the U.S. In addition, we are using a perpetuity exit multiple of 1.5x P/
B for the Chilean bank and 1.3x P/B for CNB. Finally, we are adjusting our discounted dividends by a target-
ed 9.84% TIER I in 2025 (based on new BASEL III standards considering a CET1 of 4.5%, additional CET1 of
1.5%, a conservation buffer of 2.5%, and finally a systemic buffer of 1.34%), so dividends will be affected
upward or downward depending on current TIER I ratio.
VALUATION - BCI
BCI - VALUATION CHILE USA TOTAL
Country Risk 147 100
% Loans 73% 27%
Free Risk Rate 2.7% 2.3%

Levered Beta 1.15 1.25
Risk Premium 6.50% 6.50%
Ke 10.2% 10.4% 10.3%
NPV Dividends 1,911,850 489,084 2,400,935

Perpetuity 2,778,758 1,491,101 4,269,859
% 70.3% 29.7%
# Stocks (millions) 149
Target Price - DDM (1) 44,840

Target Price - 11,5P/E 2021E (2) 29,344

Perpetuity Exit Multiple Chile (P/B) 1.5x
Perpetuity Exit Multiple CNB (P/B) 1.3x
BCI - BLENDED TARGET PRICE

Target Price (1)(2) 37,092
Current Price 32,500
Upside 14.1%
Div. Yield 21E 2.2%
78
FINANCIALS - ITAÚ CORPBANCA
January 18th, 2021
SELL ITAÚ CORPBANCA

Target Price: CL$ 2.9 Storm Passed… but Still too Far from Seeing the Sun Rise
SUMMARY What´s new: We are updating our estimates and recommendation for Itaú Corpbanca,
Bloomberg ITAUCORP CC introducing our YE21 target price of CL$ 2.9 downgrading shares from HOLD to SELL.
Reuters ITAUCORP.SN
Credit risau rating BBB+
Investment Thesis: (1) Setback in the consolidation of its long-term strategy. Since 2019,
52 weeaus high/low (CLP) 4.2/1.8
ADVT 6M (US$ million) 1.9 Itaú was in the process of better balancing its loan portfolio by increasing its market share
Free float (%) 33.3% in consumer loans and increasing the diversification within its corporate clients to reduce
# stocks (million) 512,407 risk. However, with the pandemic, the strategy was paused due to the consumer segment's
Market Cap (US$ million) 1,807.9
significant contraction. In 2021, we expect it to resume its strategy leveraging in its im-
proved customer satisfaction and new client segmentation. With this, margins should pick
Upside potential 10.6% up, allowing a ~ 450bps efficiency ratio improvement in the medium-term, bringing its
Div. Yield (%) 0.0% profitability to reach levels of ~ 10.0%; (2) Lower asset quality and tight capital ratios than
Total Return 10.6% the industry. The bank is in a worse position to face the challenging macro scenario in 2021
RATIOS given its higher-than-industry NPLs (2.3% vs. 1.7% of the industry, as of November 2020).
2019 2020E 2021E 2022E On the other hand, its delicate capital adequacy leaves it challenging to meet Basel III re-
P/E 17.6x -1.5x 14.9x 8.5x
quirements. Besides, considering that in 2022 the bank will have to acquire Corpgroup's
P/TB 1.3x 0.8x 0.8x 0.7x
Div. Yield 2.3% 9.6% 0.0% 2.0% minority interest in the Colombian subsidiary (~ US$ 405 million), putting higher pressure
ROTE 5.9% -47.2% 4.6% 7.0% on its already low capital ratios. Given the above, we are expecting a capital increase of ~
RORWA 0.5% -3.7% 0.4% 0.6% US$ 750 - 850 million to fulfill the minimum requirements of Basel III. Finally, (4) according
STOCK PERFORMANCE to our estimates, the bank is trading with a highly discounted valuation compared to its
book value. However, we justified that discount based on its lower-than-industry profitabil-
1.0 ity levels, higher portfolio risk, and potential capital increase.
0.8
0.6
Outlook 2021: We are expecting a consolidated loan growth of 6.3% YoY. We expect a
0.4
+6.1% YoY loan growth for the bank in Chile, mainly boosted by loans to individuals; mean-
0.2
while, we expect a 7.5% YoY loan growth in Colombia (in CLP). In terms of profitability, we
May/20
Jan/20
Nov/20
Jul/20
Mar/20
Sep/20
hope the bank to return to positive figures with a ROtE of 4.6%, consistent with a CL$
89,042 million net income, which corresponds ~ 93.2% to the bank in Chile. The main driv-
IPSA Itaucorp ers of the recovery in results are a -35.5% YoY decrease in provision expenses and a -7.5%
YoY drop in OPEX consistent with a consolidated efficiency ratio of 57.6%.
CONTACT
Risk: For Itaú Corpbanca, we consider the main upside risk a higher-than-expected delivery
Jonathan Fuchs N.
jonathan.fuchs@bice.cl in its corporate strategy that could boost margins. Meanwhile, as the main downside risk,
+(562) 2692 2527 higher odds than its peers to present credit risk events due to its portfolio mix is more ex-
posed to commercial loans that can finally impact the cost of risk.
Aldo Morales E.
+(562) 2692 2576
79
January 18th, 2021
ITAUCORP
Itaú Corpbanca is the fifth largest private bank in Chile measured by total loans. The company arises from the merger
between Itaú Chile and CorpBanca banks in 2016. Currently the merged bank maintains loans by more than ~ US$
30.3 billion which are divided by ~ 81% in Chile, and ~ 19% in Colombia. In particular, Itaú’s loan portfolio is divided by
~ 68% in commercial loans, followed by ~ 22% mortgages, and ~ 10 consumer segment. According to the Company,
SELL Itaú Corpbanca will be the platform for a future expansion of the Itaú brand in Latin America especially in Chile, Co-
lombia, Peru and Central America. The bank is controlled through a controlling pact between both the Brazilian hold-
ing "Itaú Unibanco" and CorpGroup, linked to Saieh family with ~ 39% and ~ 28% ownership, respectively.
LOANS BREAKDOWN (%) FINANCIAL STATEMENTS (CL$ million)

P&L 2019 2020E 2021E 2022E
Net Interest Income 846,718 820,625 849,801 953,324
Intermediation 169,060 102,129 122,765 140,499
Colombia
Net commisions 174,404 143,100 173,131 196,125
19% Other -20,817 -805,019 -53,539 28,338
Operating Revenues 1,169,365 260,836 1,092,157 1,318,286
Net Provisions -322,693 -561,419 -361,598 -352,185
Net operating Income 172,416 -981,650 101,506 207,203
Chile
81% Related companies 6,832 -2,456 1,140 2,259
Tax -46,784 94,108 -13,339 -51,708
Minority Interest 5,399 -11,805 264 700
Net Income 127,065 -878,193 89,042 157,053
Net Margin 10.7% -82.4% 7.8% 12.2%
LOANS BREAKDOWN (%) % YoY -26.1% -791.1% -110.1% 76.4%

Loans 23,199,360 23,303,621 24,722,393 26,278,722
Investments 3,890,288 4,034,073 4,264,949 4,352,549
Mortage
22% Productive Assets 27,089,648 27,337,694 28,987,342 30,631,271
Total Assets 33,785,687 34,007,808 37,099,927 38,439,294
Consumer Total Liabilities 30,439,585 31,653,449 34,683,238 35,690,584
10% Commercial Equity 3,346,102 2,354,359 2,416,689 2,748,710
68%
Equity + Liabilities 33,785,687 34,007,808 37,099,927 38,439,294
RATIOS 2019 2020E 2021E 2022E

NIM 3.3% 2.9% 3.0% 3.1%
LLP Ratio (Loan Loss Provision) -1.4% -2.4% -1.5% -1.3%
OWNERSHIP (%) ROTE 5.9% -47.2% 4.6% 7.0%
ROA 0.4% -2.6% 0.2% 0.4%
TIER I 6.9% 6.8% 6.7% 7.4%
Other
33% Itaú
Unibanco
39%
Saieh
Family
28%
80
January 18th, 2021
VALUATION
Our target price is based on a blended 50%/50% between (1) a SOTP model, valuing each business with a
10-year dividend discount model (DDM); and (2) a 2021E 11x P/E target multiple. In particular, our DDM
considers a 2.7% risk free rate (based on local BCP10) for Chilean bank and a 3.4% for Colombian subsidi-
ary. We incorporate a Beta of 1.3 for both operations. The above is consistent with a Cost of Equity (Ke) of
11.2% in Chile and a 11.8% in Colombia. In addition, we are using a perpetuity exit multiple of 1.3x P/B for
Chile and 1.1x P/B for Colombia. Finally, we are adjusting our discounted dividends by a targeted 9.5% TIER
I in 2025 (based on new BASEL III standards considering a CET1 of 4.5%, additional CET1 of 1.5%, a conser-
vation buffer of 2.5%, and finally a systemic buffer of 1%), so dividends will be affected upward or down-
ward depending on current TIER I ratio.
VALUATION - ITAU CORPBANCA
ITAUCORP - VALUATION CHILE COLOMBIA TOTAL
Country Risk 147 211
% Loans 81% 19%
Free Risk Rate 2.7% 3.4%

Levered Beta 1.30 1.30
Risk Premium 6.50% 6.50%
Ke 11.2% 11.8% 11.3%
NPV Dividends 61,044 -156,489 -95,445

Perpetuity 1,662,126 389,063 2,051,189
% 88.1% 11.9%
# Stocks (millions) 512,407

Target Price - 11x P/E 2021E (2) 1.9
NPV Implicit P/TB 2021E 1.2x

Perpetuity Exit Multiple Chile (P/TB) 1.3x
Perpetuity Exit Multiple Colombia (P/TB) 1.1x
ITAUCORP - BLENDED TARGET PRICE

Current Price 2.6
Upside 10.6%
Div. Yield 21E 0.0%
81
FINANCIALS - GRUPO SECURITY
January 18th, 2021
BUY GRUPO SECURITY

Target Price: CL$ 182 Recently Capitalized and Highly Discounted in Valuation
SUMMARY What´s new: We are updating our estimates and recommendation for Grupo Security, in-
Bloomberg SECUR CC troducing our YE21 target price of CL$ 182, consistent with a BUY recommendation.
Reuters SECURITY.SN
Investment Thesis: (1) Recently filled with fresh capital, which will allow the company to
ADVT 6M (US$ million) 0.3 sustain its banking subsidiary growth and meet Basel III capital requirements. During 3Q20,
Free float (%) 28.0% the company made a capital increase of ~ CL$ 52 billion (77.6% of the total offer), while the
# stocks (million) 4,017 remainder of the shares offered may be subscribed for 18 months period at CL$ 160. The
Market Cap (US$ million) 848
use of funds is mainly addressed to its banking subsidiary to sustain future growth, focusing
Target price (CLP) 182
Current price (CLP) 155
on its digitization process. Also, it will allow maintaining healthy capital ratios according to
Upside potential 17.7% the new Basel III regulatory framework. The above will sustain a positive earnings momen-
Div. Yield (%) 6.3% tum at consolidated levels in the mid-term (+14.0% 2020 – 2023 CAGR); (2) Attractive
Total Return 24.0% 2021E dividend yield. According to our estimates, the company is currently offering a 6.3%
RATIOS dividend yield, one of the highest compared with our sample under coverage. The above is
2019 2020E 2021E 2022E consistent with a 60% payout ratio; Finally, (3) The company is currently trading with a 38%
P/E 8.9x 9.5x 7.9x 7.0x discount compared with its historical average (1.2x P/B). Although we believe a discount is
P/B 0.9x 0.7x 0.7x 0.7x
Div. yield 6.3% 7.1% 6.3% 7.6%
partially justified given the significant challenges ahead such as its digital transformation,
ROE 10.5% 7.5% 8.6% 9.5% low rates environments affecting the life insurance business, among others; however, we
believe that current valuations are pricing an extreme scenario and represents a good entry
STOCK PERFORMANCE
point.
1.1
1.0
0.9 Outlook 2021: We expect Grupo Security to post a +19.7% YoY net income growth, driven
0.8 by (1) +17.6% YoY net income increase in the bank subsidiary, mainly boosted by a signifi-
0.7
cant 218bps YoY efficiency improvement to 46% coupled with a -6.3% YoY provision ex-
0.6
0.5 penses decrease. On the other hand, we foresee a 5.0% YoY loan growth below the indus-
May/20
Jan/20
Nov/20
Jul/20
Mar/20
Sep/20
try levels and balanced among the three segments. (2) a recovery in its Travel agency. After
a very tough 2020, we expect it to return to positive figures, but with very low profitability
(7.1% ROE vs. 49.1% in 2019). Finally, (3) in Vida Security, we expect a +8.4% YoY net in-
IPSA SECURITY
come growth mainly attributable to higher returns in its investment portfolio, while we
CONTACT expect a similar year regarding premium sales.
Jonathan Fuchs N.
jonathan.fuchs@bice.cl Risk: As the main upside risk, we highlight a possible inorganic growth in Peru following the
+(562) 2692 2527 current strategy of replicating its Chilean operations in that country. On the other side, as
the main downside risk, we highlight a lower payout ratio, decreasing its dividend yield.
Aldo Morales E.
+(562) 2692 2576
82
January 18th, 2021
SECURITY
Grupo Security is a Chilean-based financial holding that participates in (1) the banking business through Banco Securi-
ty; (2) life insurance business through Vida Security and Protecta Security in Peru; (3) investments through Valores
Security (stock brokerage company) and Security AGF (fund management company); (4) real estate business, and (5)
travel agency through Travel Security and Travex in Peru. Since 2012, the Group has operations in Peru. It currently
BUY has 2 subsidiaries in that country; Travex (Travel Security subsidiary with a 75% stake) and in 2015 acquired 61% of
Protecta (Life insurance company). Grupo Security does not have a controlling shareholders group according to Chile-
an law. However, its founding shareholders have ~ 72% ownership, and actively participate in the company´s manage-
Target Price: CL$ 182 ment.

P&L BANCO SECURITY 2019 2020E 2021E 2022E
1% Net Interest Income 182,435 197,920 207,889 220,642
Intermediation 34,539 30,384 30,449 33,427
Net commisions 67,277 57,459 60,895 69,731
Insurance
Investmen 20% Other -7,884 -6,767 -7,011 -7,441
t Operating Revenues 276,367 278,996 292,224 316,360
3% Net Provisions -41,891 -69,080 -64,726 -67,132
Financing
76%
Related companies 18 12 17 20
Tax -24,582 -14,509 -21,382 -24,617
Minority Interest -6 2 3 3
Net Income 76,963 60,900 71,598 77,969
Net Margin 27.1% 21.3% 23.9% 24.1%
BANK LOANS BREAKDOWN (%) % YoY 5.9% -20.9% 17.6% 8.9%
BALANCE SHEET BANCO SECURITY 2019 2020E 2021E 2022E

Consumer Loans 6,051,247 6,308,266 6,625,560 7,057,021
7% Mortage
Investments 880,357 917,749 963,910 922,955
11%
Total Assets 8,264,770 8,615,805 9,049,165 9,397,819
Commerci
Equity 617,274 658,774 687,413 686,315
al Equity + Liabilities 8,264,770 8,615,805 9,049,165 9,397,819
82%
RATIOS BANCO SECURITY 2019 2020E 2021E 2022E
NIM 2.8% 2.7% 2.7% 2.8%
OWNERSHIP (%) ROE 12.5% 9.2% 10.4% 11.4%
ROA 0.9% 0.7% 0.8% 0.8%
TIER I 8.4% 8.7% 8.8% 8.7%
Other
17% GRUPO SECURITY 2019 2020E 2021E 2022E
Institution Net Income 81,156 65,527 78,416 89,234
al Equity 769,754 871,784 915,069 939,668
Investors ROE 10.5% 7.5% 8.6% 9.5%
Founding 11%
Sharehold Source: Company reports, BICE Inversiones estimates
ers
72%
83
January 18th, 2021
VALUATION
Our target price is based on a sum of the parts (SOTP) methodology, where we separate (1) the Banking
subsidiary, which is valued using a 10-Year dividend discount model (DDM), using an 10.9% cost of Equity
(Ke); and (2) the rest of the subsidiaries which are valued at 2021E target P/BV multiples. In particular, the
insurance company is valued at 0.8x P/BV 2020E. In addition, we include (1) Lands and projects under de-
velopment; (2) both net financial debt and NPV of SG&A related to the Holdco. Finally (3) we add a 15%
liquidity discount.
VALUATION - GRUPO SECURITY

Banco Security - DDM
Free Risk Rate 2.7%
Beta 1.25
Risk Premium 6.50%
Ke 10.9%
NPV Dividends 401,155

Perpetuity 506,056
Total Equity 907,211
Equity Security
Grupo Security Method % stake % P/B 21E P/E 21E
Value Equity
Banco Security DDM 907,211 100.0% 907,211 74.1% 1.3x 12.7x
Factoring 1.3x P/B 77,276 100.0% 77,276 6.3% 1.3x 7.9x
Vida Security 0.8x P/B 185,650 99.0% 183,793 15.0% 0.8x 7.5x
Real Estate 1.0x P/B 28,709 100.0% 28,709 2.3% 1.0x 16.2x
Travel Security 1.0x P/B 5,896 83.0% 4,894 0.4% 1.0x 14.1x
Protecta Security 0.8x P/B 36,468 61.0% 22,245 1.8% 0.8x 14.8x
Total subsidiaries 1,224,129 100%
+ Lands & Projects under development 79,203

+ Holdco - NFD -282,881
+ Holdco - NPV SG&A -158,805
Grupo Security 861,646
# Stocks (Mn) 4,017

P° Target 214
P° Target 182
Current Price 155
Upside 17.7%
Total Return 24.0%
84
CONGLOMERATES - QUIÑENCO
January 18th, 2021
QUIÑENCO
Quiñenco is a Chilean holding company founded in 1957 as the investment vehicle of the Luksic Group in the Financial
and Industrial sector. Currently manages assets for more than US$ 86 billion, has an aggregate annual revenues from
its operating companies for more than US$ 31 billion and has operation in more than 129 countries. The company has
a presence in the Financial (Banco de Chile), beverages (CCU), manufacturing (Invexans, Techpack), energy (Enex) and
HOLD transport (CSAV, Hapag-Lloyd, SM Saam) sectors. Its main asset is Banco de Chile, where holds ~ 26% of the stake, and
being its controlling shareholders thought LQIF a joint venture with Citi group. The company is controlled by the
Luksic family with a 83% of the ownership.
NAV BREAKDOWN (%) HOLDING STRUCTURE

Other Cash Manufact
beverages 5% 3% oring
and Food
14% Quiñenco
12%
Port 50% 51%

Services LQIF Banco de Chile
6%
Financial 100%
Transport
Services Enex
14%
33%
Energy
13% 62% 30%
CSAV Hapag-Lloyd
52%
OWNERSHIP (%) SM SAAM
99%
Invexans
Other
17%
100%
Techpack
50% 60%
IRSA CCU
Luksic
Group
83%
SUMMARY HISTORICAL DISCOUNT

Bloomberg QUINENC CC 60%
Reuters QNN.SN
Credit risk rating AA 55%
52 weeks high/low (CL$) 1530/875 50%
ADVT 6M (US$ million) 0.60 45%
Free float (%) 19.0%
# stocks (million) 1,663 40%
Market Cap (US$ million) 3,108 35%
Current Price 1,372
30%
Current Holding Discount 52.28%
10yr Average Descount 32.05% 25%
Relative Preference Holding 20%
15%
2013 2014 2015 2016 2017 2018 2019 2020 2021
Jonathan Fuchs N.
jonathan.fuchs@bice.cl Dscto. NAV 10A 3A 1A
+(562) 2692 2527

Aldo Morales E.
+(562) 2692 2576
85
RESEARCH TEAM
EQUITY RESEARCH ECONOMICS & FIXED INCOME STRATEGY

Aldo Morales E. Sebastián Senzacqua B. Cynthia Urrutia C.
Head of Equity Research Head of Economics & Strategy Strategist
aldo.morales@bice.cl sebastian.senzacqua@bice.cl cynthia.urrutia@bice.cl
+(562) 2692 3481 +(562) 2692 7954 +(562) 2692 7982
Paulina Vargas J. Marco Correa S. Mariela Bastías I.
Senior Equity Research Analyst Chief Economist Strategist
paulina.vargas@bice.cl marco.correa@bice.cl mariela.bastias@bice.cl
+(562) 2692 3486 +(562) 2692 2976 +(562) 2692 7943
Jonathan Fuchs N. Jose Pablo Gonzalez B.
Senior Equity Research Analyst Strategist
jonathan.fuchs@bice.cl jose.gonzalezb@bice.cl
+(562) 2692 2527 +(562) 2692 2576
Equity Research Analyst
+(562) 2692 1836
SALES & TRADING
EQUITIES LOCAL FIXED INCOME INTERNATIONAL FIXED INCOME

Felipe Figueroa E. Andrés de la Cerda G. Carlos Schneider
Head of Equity Sales Head Trader Fixed Income and FX Head Trader Int. Fixed Income
ffigueroa@bice.cl adelacer@bice.cl carlos.schneider@bice.cl
+(562) 2692 2810 +(562) 2692 2576 +(562) 2520 7915
Mario Vinagre Z. Javiera Escudero M. José Miguel Alcalde R.
Equity Sales & Trading Fixed Income Trader Fixed Income Trader
mario.vinagre@bice.cl javiera.escudero@bice.cl jose.alcalde@bice.cl
+(562) 2692 2558 +(562) 2692 2946 +(562) 2520 7905
Carlos Hornauer M. Paulina González T.
Equity Sales & Trading Fixed Income Trader
carlos.hornauer@bice.cl paulina.gonzalez@bice.cl
+(562) 2692 2811 +(562) 2692 2812
Claudio Zelada A. Sergio Lizama C.
Equity Sales Fixed Income Trader
claudio.zelada@bice.cl slizama@bice.cl
+(562) 2520 7949 +(562) 2520 7912
Daniel Colodro E.
Fixed Income Trader
daniel.colodro@bice.cl
+(562) 2692 2573
86
This report has been prepared solely for the purpose of providing information to customers of BICE Inversiones Cor-
redores de Bolsa S.A. This report is not a solicitation or an offer to buy or sell stocks, bonds or other instruments men-
tioned in it. This information and where it is based has been obtained from public information sources on our best
knowledge and that according to our belief seems reliable. However, this does not guarantee that they are accurate or
complete. The forecasts and estimates presented in this report have been prepared with the best information and tools
available, but this does not guarantee that they will be fulfilled. All opinions and expressions contained in this report may
be modified at any time without notice. BICE Inversiones Corredores de Bolsa S.A. and any company or person related to
it and its controlling shareholders may at any time have short and long term investments in any of the instruments men-
tioned in this report or related with companies or markets mentioned and can buy or sell those same instruments.
BICE Inversiones Corredores de Bolsa S.A. could eventually recommend purchases and / or sales of shares for trading
positions. Such actions could be incorporated into other recommended portfolios. The projections and estimates present-
ed in this report should not be the sole basis for the adoption of an appropriate investment decision and each investor
must make its own assessment based on their personal situation, investment strategy, risk tolerance, tax situation, etc.
The result of any financial transaction carried out with the support of this report is the sole responsibility of the person
who performs it. Foreign securities and issuers that can be referenced in this report, and are not currently registered in
the Securities Registry by the Chilean Superintendence of Securities and Insurance, are not applicable laws and regula-
tions governing domestic stock market, therefore is the sole responsibility of investors to get their own information re-
garding such securities and foreign issuers before making any investment decision. The frequency of the publication of
the reports, if any, is at the discretion of BICE Inversiones Corredores de Bolsa S.A. It is not allowed to quote or reproduce
in whole or in part this report without the express permission of BICE Inversiones Corredores de Bolsa S.A.
At the date of publication of this report, none of the members of the Research Department holds, directly or indirectly,
links to the issuer analyzed in it. The members of the Research Department expressly declare that no part of their com-
pensation was, is or will be directly or indirectly related to specific recommendations or views expressed in this report.
BICE Inversiones Corredores de Bolsa S.A. and members of the Research Department expressly declare that there is no
commercial relationship with the issuer analyzed in this report. BICE Inversiones Corredores de Bolsa S.A. and / or any
company or person associated with it, may at any time have a position in any of the financial instruments mentioned in
these reports and may buy or sell those same instruments, in which case they should be guided by the “Manual for share
transactions and other securities by staff and BICECORP SA and its subsidiaries” and is available in
www.biceinversiones.cl.
At the date of publication of this report, Mr. Jonathan Fuchs holds, directly or indirectly, investments in SQM, LTM, San-
tander and BCI.
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EQUITY RESEARCH - CHILE

CHILE EQUITY STRATEGY 2021

1. CHILE EQUITY MARKET — INVESTMENT CASE

IPSA INDEX vs. MSCI EMERGING MARKETS

1.1. TARGET IPSA 2021

1.2. SECTORIAL OVERVIEW 2021

CHILEAN EQUITY VALUATION - BICE ESTIMATES

CHILEAN EQUITY VALUATION - BICE ESTIMATES

Source: BICE Inversiones

2. CHILE MACROECONOMIC OUTLOOK

GDP GROWTH — CHILE

ECONOMIC FORECAST — BICE ESTIMATES

2019 2020E 2021E 2022E

GDP (% YoY) 1.2% -6.0% 5.2% 4.8%

Inflation (YoY) 3.1% 2.8% 3.1% 3.3%

Monetary Policy Rate (EoP) 1.75% 0.50% 0.50% 0.75%

Unemployment Rate (Average) 7.0% 11.5% 10.0% 9.5%

Trade Balance (US$ million) 1,783 13,983 11,950 13,477

HOLD EMBOTELLADORA ANDINA

EBITDA BREAKDOWN (%) FINANCIAL STATEMENTS (CL$ million)

BALANCE SHEET 2019 2020E 2021E 2022E

DUPONT ANALYSIS 2019 2020E 2021E 2022E

Pension Coca Cola

Andina Chile Brasil Argentina Paraguay Total

Risk-free rate 2.7% 2.7% 2.7% 2.7%

NPV 700,882 376,727 130,895 181,778 1,390,283

EV/EBITDA EV/EBITDA EV/EBITDA EV/EBITDA

# Stocks A-series (Mn) 473.3

P° Target A-series 2,278

EBITDA BREAKDOWN (%) FINANCIAL STATEMENTS (CL$ million)

BALANCE SHEET 2019 2020E 2021E 2022E

Internatio FCF 2019 2020E 2021E 2022E

OWNERSHIP (%) DUPONT ANALYSIS 2019 2020E 2021E 2022E

DEBT RATIOS 2019 2020E 2021E 2022E

EV/EB ITD A EV/EB ITD A EV/EB ITD A

BUY VIÑA CONCHA Y TORO

REVENUES BREAKDOWN (%) FINANCIAL STATEMENTS (CL$ million)

BALANCE SHEET 2019 2020E 2021E 2022E

VOLUME BREAKDOWN (%) Current Assets 642,488 666,759 673,039 732,824

OWNERSHIP (%) DUPONT ANALYSIS 2019 2020E 2021E 2022E

VALUATION - CONCHA Y TORO

Concha y Toro Chile Argentina USA Total

Free Risk Rate 2.7% 2.7% 2.7%

# Stocks (MM) 747.0

HOLD ENEL AMERICAS

Target Price: CL$ 144

EBITDA BREAKDOWN (%) FINANCIAL STATEMENTS (US$ million)

BALANCE SHEET 2019 2020E 2021E 2022E

DUPONT ANALYSIS 2019 2020E 2021E 2022E

VALUATION - ENEL AMERICAS

# Stocks (Mn) 107,282

HOLD ENEL CHILE

Target Price: CL$ 70.9

EBITDA BREAKDOWN (%) FINANCIAL STATEMENTS (CL$ billion)

BALANCE SHEET 2019 2020E 2021E 2022E

DUPONT ANALYSIS 2019 2020E 2021E 2022E

DEBT RATIOS 2019 2020E 2021E 2022E

VALUATION - ENEL CHILE

Enel Chile - DCF Valuation Enel Dx Enel Gx EGP Total

Stake 99.1% 93.6% 100.0%

P/E 2021E 15.0x

# Stocks (Mn) 69,167

HOLD ENGIE ENERGÍA CHILE