Daily Roadmap #804 | October 19, 2023

Summary:
Views & Thoughts

WEG: Read across from ABB’s Q3 results

RANDONCORP: Suspensys expansion; R$7bn contract announced
HIDROVIAS DO BRASIL: Our two cents on J&F's mining investment
LOCALIZA&CO: Q3 preview – Gradually improving results; depreciation still the focus
ECORODOVIAS: Q3 Preview – Solid Q3 results driven by strong traffic volumes
MEXICAN AIRLINES: Mexicana suspends the sale of tickets

Infrastructure IRRs (last 5 days)

LatAm Capital Goods and Transportation Stock Guide

Upcoming Events (next 2 weeks)

Latest 10 reports

VIEWS & THOUGHTS

WEG: Read across from ABB’s Q3 results

Source: BTG Pactual

ABB, WEG's biggest rival in the motor industry, reported its Q3 results today (available here), leading the stock to fall
6% during the trading session in Zurich. The Swiss giant's revenues increased by 8% y/y (11% on a comparable base)
to ~US$7.97bn and benefited primarily from increased volumes via execution of the order backlog and strong price
hikes. EBITA (as reported by ABB) increased by 13% y/y, with its margin up 80bps y/y to 17.4%. We use ABB's results
as a proxy for WEG's performance, particularly the motion business, which is closely related to WEG's core products
like electric motors. While we have noted global order intakes slowing (reflected in the softer top line expansion in our
Q3 forecast), operating trends remain quite robust, given the strong price hikes in recent quarters (our Q3 preview for
WEG is available here). Despite the weaker earnings momentum, we keep our BUY rating on the name. (See our report
here)

ABB's Motion division performance in Q3 (Source: Company and BTG Pactual)

RANDONCORP: Suspensys expansion; R$7bn contract announced
Source: BTG Pactual

Randoncorp announced today a new contract with one of Brazil's largest truck and bus OEMs to manufacture front
axles via its Suspensys subsidiary (link here). The contract involves the acquisition of assets and the construction of a
new factory in Mogi Guaçu (SP), expected to start operations in 1Q25. The contract runs for ten years and is expected
to generate up to R$7bn in revenues. The deal is subject to approval by CADE (Brazil's antitrust regulator). We see the
announcement as positive for Randon as it: (i) adds exposure to auto parts, (ii) broadens its product range, (iii) requires
relatively little capex (estimated at ~R$120mn, divided in 2-3 years), and (iv) reaffirms Suspensys' status as a premier
auto parts supplier, having secured a contract with a premium OEM. Trading at a cheap valuation of 6.0x PE24, we
maintain our BUY rating on RAPT. (See our report here)

HIDROVIAS DO BRASIL: Our two cents on J&F's mining investment

Source: BTG Pactual

A local news outlet mentioned that J&F, the Batista family's holding company, intends to invest over US$1bn to expand
capacity at the mines acquired from Vale last year (see article here). J&F Investimentos purchased Vale's iron ore and
manganese mines in Mato Grosso do Sul (Corumbá), marking its entry into the metals industry. The company is also
preparing to enhance its transportation capacity, including further vertical integration of iron ore logistics, such as the
acquisition of barges. It's worth noting that since the acquisition of the mines, the market has started to consider a
potential extension of J&F's contract as free optionality for Hidrovias do Brasil. Based on our preliminary analysis, we
believe J&F might employ ship-to-ship operations in Corumbá, involving smaller barges (lower scale) and implying a
different logistics solution than HBSA (which we continue to view as the most competitive solution in the region). We
remain BUYers of HBSA, an exciting vehicle to gain exposure to Brazil's solid grain production outlook. (See our report
here)

LOCALIZA&CO: Q3 preview – Gradually improving results; depreciation still the focus

Source: BTG Pactual // Bloomberg

We expect Localiza to post better results in Q3 after somewhat softer-than-expected Q2 figures, highly influenced by
the federal government’s affordable car program. During the Q, RAC and GTF demand remained resilient, also helped
by better seasonality than last Q (July is usually a good month for leisure travel). On the positive side, corporate traffic
is bouncing back steadily post-pandemic, driving higher GTF tariffs. Our forecasts: (i) average RAC tariff up 2% q/q,
with 64% EBITDA margin; (ii) average fleet management tariff up 2% q/q and volumes up 3%, with 72% EBITDA margin;
and (iii) in seminovos, we expect the sale of 57k vehicles, yielding an average price of R$60k and a 2.7% margin. We
estimate consolidated revenue of R$7.1bn (+4% q/q; +16% y/y) and R$2.7bn in EBITDA (+16% q/q; +20% y/y). Our
bottom line estimate is R$628mn (vs. R$681mn in 3Q22). Going into Q4, we expect favorable seasonality, continued
demand recovery, and lower interest rates to drive faster earnings expansion. Finally, we believe investors will continue
monitoring pricing dynamics, margin performance, leverage, and depreciation trends.

RENT's quarterly preview (source: Bloomberg and BTG Pactual)

3Q23E 3Q22A 2Q23A
(BRLmn, IFRS)
BTGP Consensus % RENT y/y RENT q/q
Net Revenues 7,141 7,768 -8% 6,137 16% 6,846 4%
EBITDA 2,728 2,813 -3% 2,278 20% 2,346 16%
EBITDA margin 38% 36% 2.0p.p. 37% 1.1p.p. 34% 3.9p.p.
Adj. Net Income 628 636 -1% 681 -8% -89 -807%
Adj. Net margin 9% 8% 0.6p.p. 11% -2.3p.p. -1% 10.1p.p.

ECORODOVIAS: Q3 Preview – Solid Q3 results driven by strong traffic volumes

Source: BTG Pactual // Bloomberg

ECOR already disclosed its Q3 traffic figures (+7% y/y like-for-like and +45% y/y on a consolidated basis, with the
difference stemming from EcoRio Minas, Ecovias do Araguaia, and EcoNoroeste). We recall that ECOR’s 1H23 results
showed solid operating execution (meaning pretty solid EBITDA margin), which we expect to continue going forward.
The improvement is driven by a tight leash on cash costs, which continue to grow below inflation. On a consolidated
basis, we forecast revenues (ex-construction) of R$1.2bn (+60% y/y and 10% q/q) and EBITDA of R$1.0bn (+82% y/y
and vs. R$918mn last Q), sustaining a solid 72% margin. Finally, our bottom line estimate is R$198mn (vs. R$121mn
in 3Q22 and R$124mn last quarter), still impacted by higher financial results. All told, we continue to expect an
improvement in Ecorodovias’ operating performance, backed by higher traffic volumes and tariffs, sustaining solid
margins. On the other hand, we acknowledge that capex commitments and high leverage remain ST headwinds.
ECOR's quartely preview (Source: Bloomberg and BTG Pactual)
3Q23E 3Q22A 2Q23A
(BRLmn, IFRS)
BTGP Consensus % ECOR y/y ECOR q/q
Net Revenues (ex-const) 1,417 1,746 -19% 886 60% 1,282 10%
Adj. EBITDA 1,014 967 5% 557 82% 918 10%
EBITDA margin 72% n.m. n.m. 63% 8.7p.p. 72% 0.0p.p.
Net Income 198 132 49% 121 64% 124 60%
Net margin 14% 8% 6.4p.p. 14% 0.3p.p. 10% 4.3p.p.
Note: For BTG considers net revenues without construction while consensus considers total revenues

MEXICAN AIRLINES: Mexicana suspends the sale of tickets

Source: Reforma // BTG Pactual

Yesterday, Reforma mentioned that Mexicana, the state airline, suspended ticket sales (see article below). According
to the article, the decision stems from the state company’s lack of an Air Services Operator Certificate (AOC) from the
Federal Civil Aviation Agency (AFAC). President Andrés Manuel López Obrador had announced that the airline was
expected to start operations by December 2, but that now seems unlikely.

The certificate establishes a series of requirements that must be met, such as detailing the airline’s organic structure,
what types of aircraft will be used, maintenance workshops, frequencies, routes and rates, and points of sale, among
others. It is estimated that the AOC takes at least one year.

Also, for the airline to begin offering airfares, it requires a concession granted by the Ministry of Infrastructure,
Communications and Transportation (SICT). Once granted, the concession must be published in the Federal Gazette
(DOF), which has not yet occurred.

Our Take: The postponement of Mexicana's startup was expected, considering the airline's decision to sell tickets
without the required certifications. However, the delay could potentially alleviate regulatory uncertainties in the Mexican
aviation sector, as one theory about AMLO's decision to reduce TUAs was to facilitate the ramp-up of Mexicana's
operations. Regarding Volaris, we do not anticipate any impact due to this news, given the limited overlap between the
airlines.

LATAM CAPITAL GOODS AND TRANSPORTATION IRRs

(Last 5 trading days)

DATE NTNB - 10 STBP PORT HBSA RAIL ECOR CCRO ASURB GAPB OMAB CAAP
11-Oct-23 5.14% 11.89% 5.96% 13.40% 9.07% 11.35% 10.35% 12.24% 10.04% 12.87% 15.40%
13-Oct-23 5.78% 12.44% 6.14% 13.94% 9.24% 11.95% 10.67% 12.53% 10.43% 13.16% 16.11%
16-Oct-23 5.73% 12.26% 6.06% 13.91% 9.22% 11.99% 10.69% 12.47% 10.33% 13.20% 16.18%
17-Oct-23 5.80% 12.49% 6.00% 13.65% 9.42% 12.24% 10.82% 12.40% 10.55% 13.19% 16.34%
18-Oct-23 5.80% 12.95% 6.16% 13.68% 9.61% 12.46% 11.01% 12.46% 10.55% 12.80% 16.68%

Evolution of Brazilian infra Real IRR spread over NTN-B 10 (Source: ANBIMA, Bloomberg and BTG Pactual)

18.50%

13.50% 7.88%
6.67%
8.50% 7.15%
5.21%
3.50%
3.81%
0.36%
-1.50%

STBP HBSA ECOR CCR WSON RAIL

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LATAM CAPITAL GOODS AND TRANSPORTATION STOCK GUIDE

Price Mkt. Net

Price Upside Rating ADTV EV P/E EV/EBITDA Dividend Yield Net Debt/EBITDA
Company Target Cap Debt
Local $ Local $ % (US$ mn) US$ mn US$ mn US$ mn 2023E 2024E 2023E 2024E 2023E 2024E 2023E 2024E
Airports Average 11.7x 10.3x 7.6x 6.9x 7.3% 9.1% 0.9x 0.9x
GAP 239.63 399.0 66.5% Neutral 19.2 6,637 1,377 8,086 12.9x 11.8x 8.3x 7.4x 3.9% 6.3% 1.4x 1.3x
Asur 389.29 791.0 103.2% Buy 18.8 6,401 (92) 6,715 11.0x 9.5x 6.6x 6.0x 9.1% 10.5% -0.1x 0.0x
OMA 155.29 289.0 86.1% Buy 14.0 3,287 649 3,946 11.1x 9.7x 8.0x 7.2x 9.0% 10.3% 1.3x 1.5x
CAAP 11.54 20.0 73.3% Buy 1.7 1,856 1,091 2,947 13.2x 9.4x 5.4x 4.7x 0.0% 4.5% 2.0x 1.8x
Airlines Average 15.9x 8.3x 5.0x 3.8x 1.3% 0.9% 3.4x 2.4x
Copa 82.36 165.0 100.3% Buy 58.4 3,258 748 4,006 6.0x 4.5x 3.9x 3.2x 6.7% 4.5% 0.9x 0.7x
Azul 12.92 20.0 54.8% Neutral 36.4 882 4,234 5,116 n.m. 7.8x 5.9x 4.5x 0.0% 0.0% 4.9x 3.5x
GOL 7.24 10.0 38.1% Neutral 19.4 483 4,389 4,872 4.4x 4.9x 5.8x 3.9x 0.0% 0.0% 5.3x 3.2x
Latam 7.20 9.0 25.0% Buy 6.4 4,352 356 4,708 33.6x 17.7x 5.6x 4.6x 0.0% 0.0% 3.0x 2.4x
Volaris 6.20 36.0 480.6% Buy 6.0 13,189 113 13,302 19.8x 6.5x 3.9x 3.0x 0.0% 0.0% 3.0x 2.2x
Capital Goods Average 11.8x 9.6x 7.3x 6.4x 4.4% 7.3% 1.8x 1.7x
Aeris 0.80 4.0 400.0% Neutral 1.2 121 173 294 6.0x 3.8x 3.6x 3.3x 8.3% 18.5% 2.1x 2.0x
Embraer 14.06 19.0 35.1% Buy 17.7 2,603 1,672 4,388 23.5x 15.8x 7.8x 7.1x 2.0% 3.0% 3.0x 2.9x
Fras-le 14.79 20.0 35.2% Buy 1.3 791 72 863 15.2x 13.3x 8.7x 7.8x 4.9% 5.7% 0.7x 0.7x
Iochpe-Maxion 11.85 20.0 68.8% Neutral 3.9 357 895 1,252 3.5x 2.5x 2.9x 2.6x 11.3% 14.8% 2.1x 1.9x
Marcopolo 5.38 5.5 2.2% Buy 6.6 1,008 233 1,242 8.7x 8.2x 7.2x 6.3x 2.1% 6.1% 1.4x 1.2x
Randon 10.65 16.0 50.2% Buy 4.5 729 683 1,581 6.7x 6.0x 4.9x 4.1x 4.5% 5.0% 2.1x 1.5x
TUPY 25.12 35.0 39.3% Buy 3.4 717 699 1,416 7.4x 6.8x 4.5x 4.4x 0.8% 0.9% 2.2x 2.3x
WEG 34.29 50.0 45.8% Buy 59.7 28,491 (243) 28,325 26.8x 24.1x 19.9x 17.1x 1.9% 2.9% -0.2x -0.1x
Infrastructure Average 19.6x 14.1x 6.9x 6.3x 2.4% 3.4% 2.4x 2.4x
CCR 11.80 19.0 61.0% Buy 22.7 4,718 4,728 9,509 17.1x 10.9x 5.2x 5.2x 1.5% 2.3% 2.6x 2.6x
Ecorodovias 7.06 10.0 41.6% Buy 7.4 972 2,336 3,267 12.6x 7.9x 5.3x 5.2x 2.0% 3.2% 3.8x 3.8x
Hidrovias do Brasil 3.86 6.0 55.4% Buy 8.6 581 659 1,240 19.0x 13.8x 7.2x 6.1x 0.1% 1.8% 3.8x 3.2x
Wilson Sons 13.65 13.0 -4.8% Buy 1.1 879 278 1,157 20.2x 17.1x 7.7x 7.3x 2.5% 3.0% 2.3x 2.8x
Santos Brasil 7.50 13.0 73.3% Buy 7.1 1,282 (58) 1,224 11.2x 10.8x 6.0x 5.5x 7.1% 8.3% -0.3x -0.2x
Rumo 21.30 27.0 26.8% Buy 69.4 7,818 2,483 10,301 37.7x 24.1x 9.8x 8.5x 1.3% 2.1% 2.4x 2.1x
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Car Rental Average 14.4x 9.1x 6.0x 5.4x 2.6% 4.3% 2.3x 2.5x
Movida 9.38 28.0 198.5% Buy 8.88 673 2,710 3,383 2.9x 2.5x 3.9x 4.1x 8.6% 9.9% 3.1x 3.4x
Localiza 51.07 90.0 76.2% Buy 74.6 10,319 5,867 16,187 23.8x 14.0x 7.3x 6.7x 1.4% 2.2% 2.6x 2.6x
Vamos 8.10 20.0 146.9% Buy 17.26 1,771 1,804 3,574 11.1x 8.2x 5.6x 5.4x 1.8% 3.1% 2.8x 3.2x
Armac 12.31 20.0 62.5% Buy 1.6 843 285 1,128 23.2x 13.1x 8.5x 6.9x 0.0% 0.0% 2.1x 2.2x
Mills 10.60 19.0 79.2% Buy 2.39 517 87 603 10.8x 7.8x 4.6x 3.9x 1.0% 6.4% 0.7x 1.0x
Logistics Average 12.5x 8.5x 6.1x 5.4x 3.8% 5.1% 1.9x 1.9x
GPS 15.66 23.0 46.9% Buy 7.5 2,069 174 2,244 16.1x 12.3x 9.0x 7.0x 3.1% 4.1% 0.7x 0.6x
JSL Logística 8.36 12.0 43.5% Buy 0.36 471 710 1,181 6.8x 5.6x 5.0x 4.9x 3.7% 4.4% 3.0x 3.1x
Simpar 7.14 17.0 138.1% Buy 5.7 1,185 6,506 7,691 3.9x 2.7x 4.4x 4.4x 6.4% 9.3% 3.7x 3.9x
Sequoia 0.43 n.a n.a UR 1.64 12 136 148 n.a n.a n.a n.a n.a n.a n.a n.a
Tegma 23.37 23.0 -1.6% Buy 1.0 305 4 310 10.5x 9.2x 6.4x 5.7x 5.7% 7.6% 0.1x 0.0x
TRAXIÓN 27.06 45.0 66.3% Buy 2.53 842 515 1,357 25.1x 12.7x 5.4x 4.7x 0.0% 0.0% 2.1x 1.9x
Source: BTG Pactual estimates, Bloomberg as of 10/18/2023 for the Brazilian market and as of 10/18/2023 for the foreign market.

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UPCOMING EVENTS
(Next 2 weeks)

October 5 6 2 3 4
Thursday Friday Monday Tuesday Wednesday
19th 20th 23th 24th 25th
ASURB, GAPB, and TRAXIONA TRAXIONA Conf call - 12:00 VOLARA Conf call - 11:00
results
VOLARA results GAPB Conf call - 14:00

WEG results

26th 27th 30th 31th 1th

GOLL results LTM results LTM Conf call - 10:00 POMO Conf call - 10:00

WEG Conf call - 11:00 CCRO, POMO, VAMO results VAMO Conf call - 10:00

CCRO Conf call - TBC

Notes: the events with TBC are based on our best estimate of dates, but are subject to changes.

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LATEST 10 REPORTS

- WEG: Read across from ABB’s Q3 results

- RANDONCORP: Suspensys expansion; R$7bn contract announced
- HIDROVIAS DO BRASIL: Our two cents on J&F's mining investment
- TRAXIÓN: Model Update - Nearshoring thesis strengthened
- MEXICAN AIRPORTS: What level of tariff reduction is priced in?
- CCR: Updates on TIC Eixo Norte; auction expected for 1Q24
- TRANSPORTATION & CAPITAL GOODS: NYC Conference wrap-up
- MEXICAN AIRPORTS: Tariff review not as bad as feared
- MEXICAN AIRPORTS: Blurred lines: Unexpected regulatory headwind
- SIMPAR: New auto deal broadens brand mix and reach

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Lucas Marquiori
Brazil – Banco BTG Pactual S.A
lucas.marquiori@btgpactual.com
+55 11 3383 9119

Fernanda Recchia
Brazil – Banco BTG Pactual S.A
fernanda.recchia@btgpactual.com
+55 11 3383 3031

Read the research report for complete information including important disclaimers, company disclosures and analyst certifications.

LEGAL DISCLAIMERS & DISCLOSURES:

www.btgpactual.com/research/Disclaimers/Overview.aspx

This email presents only a part of the mentioned report. The full report has to be observed with special attention to the disclosure items before
any decision. A complete set of disclosure statements associated with the companies discussed will be by the end of the full report or in the
website (www.btgpactual.com/research/Disclaimers/Overview.aspx), including information on valuation and risk.

Statement of Risk

WEG. [BRWEGE] - Downside risks include (1) significant commodity price volatility, which could jeopardize margins until achieving full pass through; (2) technical and
managerial personnel shortage delaying international expansion; and (3) a continuous deterioration of global industrial production output, leading to a stiffer competitive
scenario. Upside risks include (1) a faster ramp up of investments in production facilities, driving higher margins; (2) significant market share gains, offsetting a pale global
growth scenario; and (3) continuous international expansion, either via local agreements and selective M&A.

Randoncorp. [BRRAPT] - Main downside risks are (1) lower than expected GDP growth in Brazil; (2) lower than expected auto sector credit availability; (3) competition from
imports or international players; (4) potential M&A execution (5) flight to liquidity, as average daily trading volume is limited; Main upside risks are (1) stronger than expected
economic activity and infrastructure deployement; (2) government incentives to the auto sector; (3) M&A and international expansion.

Hidrovias do Brasil. [BRHBSA] - HBSA retains the rights to operate waterway concession and current leases may be terminated prior to their expiration, and HBSA may not
get adequate compensation for the value of the assets or loss of profits. Additionally, downturn in certain cyclical market sectors in which HBSA’s customers operate could
have an adverse effect on the company’s business.

Ecorodovias. [BRECOR] - Ecorodovias is exposed to macroeconomic and regulatory risk in Brazil. Its business depends on regulation for growth and the company usually leverage
shareholder value.

Localiza&Co. [BRRENT] - Localiza is subject to local macroeconomic conditions. Negative economic dynamics such as weak GDP growth, an inflation spike and a hike in interest rates co
cost of growth and execution strategies.

Volaris. [MXVOLARA] - Mexican airlines retain significant FX exposure, as approximately 60% of its costs are either Dollar-linked or Dollar-denominated (including fuel, aircraft leasi
Geopolitical instability could lead to significant jet fuel price volatility, which in turn could trigger volatility in the stock's performance. Fuel accounts for roughly 40% of total operating cost

Valuation Methodology
WEG. [BRWEGE] - Our 12-month forward target price is DCF-driven.

Randoncorp. [BRRAPT] - Our 12-month forward target price is DCF-driven.

Hidrovias do Brasil. [BRHBSA] - Our 12-month forward target price is DCF-driven.

Ecorodovias. [BRECOR] - Our 12-month forward target price is DCF-driven.

Localiza&Co. [BRRENT] - Our 12-month forward target price is DCF-driven.

Volaris. [MXVOLARA] - Our 12-month TP is based on a fair EV/EBITDAR multiple.

Company Disclosures

7. Within the past 12 months, neither Banco BTG Pactual S.A., nor its affiliates or subsidiaries, has received compensation for investment banking services from this
company/entity.

8. Neither Banco BTG Pactual S.A, nor its affiliates or subsidiaries, expect to receive or intend to seek compensation for investment banking services and/or products and
services other than investment services from this company/entity within the next three months.

9. This company/entity is not, or within the past 12 months has not been, a client of Banco BTG Pactual S.A., and investment banking services are not being, or have been,
provided.

10. Banco BTG Pactual S.A. has not acted as manager/co-manager in the underwriting or placement of securities of this company/entity, its affiliates nor subsidiaries within
the past 12 months.

11. Banco BTG Pactual S.A. is not acting as manager/co-manager, underwriter, placement or sales agent in regard to an offering of securities of this company/entity, one of
its affiliates nor subsidiaries.

12. Directors or employees of Banco BTG Pactual S.A., its affiliates or subsidiaries are not directors of this company.

13. Directors or employees of Banco BTG Pactual S.A., its affiliates or subsidiaries do not take part on the board of directors of this company.

14. As of the end of the month immediately preceding the date of publication of this report, neither Banco BTG Pactual S.A. nor its affiliates or subsidiaries beneficially own
1% or more of any class of common equity securities.

15. Neither Banco BTG Pactual S.A., nor its affiliates or subsidiaries, including the funds, portfolios and investment clubs in securities managed by them, beneficially own
directly or indirectly 5% or more of a class of the subject company common equity.

16. Investment strategists have not contributed in the preparation of this company’s section. Investment strategists should not be considered as research analysts and are
not registered or qualified as such in their local market.

17. Banco BTG Pactual S.A., its affiliates or subsidiaries are market makers in the securities of this company.

Localiza&Co RENT3.SA Buy R$51.07/US$10.11 2023-10-19

Ecorodovias ECOR3.SA Buy R$7.06/US$1.40 2023-10-19
Volaris VOLARA.MX Buy US$6.20 (ADR) 2023-10-19
Randoncorp RAPT4.SA Buy R$10.65/US$2.11 2023-10-19
WEG WEGE3.SA Buy R$34.29/US$6.79 2023-10-19
Hidrovias do Brasil HBSA3.SA Buy R$3.86/US$0.76 2023-10-19