Pão de Açúcar

Brazil | Outperform
June 27, 2022 | Company Update

Massive Discount to Current SOTP; Reinstating With OP

Ticker (local) PCAR3
In this report we are resuming coverage of PCAR3 with an outperform rating and a new YE22 Fair Value (YE22) BRL 32.0
fair value of BRL 32/share. Our constructive view on the stock is mainly supported by a sum-of-
the-parts (SOTP) analysis that indicates that, even with significant discounts for each business
unit (Brazilian operation, Éxito and Cnova), it offers a positive risk-reward value preposition. We
Stock Data
also discuss the company’s medium and long-term strategy and update our estimates.
Current price BRL 16.42
Even with the 50% discount on the current stock price of Éxito and Cnova, the implicit Upside (YE22) % 95
value of Grupo Pão de Açucar’s Brazilian operation is close to zero. The monetization of
52 Week high/low BRL 41.83/18.89
the group's non-core assets has been a recurring topic of discussion among investors,
Shares outstanding th 268,352
particularly after the successful spinoff of Assaí. Two assets have caught the market's attention:
Market capitalization BRL m 4,423
Éxito and Cnova. We ran a sensitivity analysis on the current price of PCAR3 and possible
monetization values for Éxito and Cnova in order to gauge the implicit value of the Brazilian 3-mth avg daily vol. BRL m 54

operation. We concluded that, even with the ~50% discount on the screen price of both assets, Performance (%) 1m 12m
the value attributed to the Brazilian operation is close to zero. We therefore believe that a Absolute 2.2 -45.8
potential monetization would generate value for PCAR3. Vs. Ibovespa -0.7 -38.7

However, rising concerns about potential labor provisions could be partially responsible
for PCAR’s pressured valuation. Although the sensitivity analysis clearly indicates that there is Company x Ibovespa
value to be unlocked for PCAR3, investors have raised some concerns, the main one being the 115
105
sale of the Extra operation. The transaction included the closure of some stores and a distribution 95
center (DC) as well as the dismissal of employees, which may require some labor provisions 85
75
ahead. While it is still too early to estimate the amount of these provisions, they could potentially 65

reach billions in BRL. That said, Grupo Pão de Açucar (GPA) is also expecting a significant cash- 55
45
in from the sale of Extra to Assaí, some PIS/Cofins and ICMS tax credits (our current model only Aug-21

Sep-21
Jul-21
Jun-21

Oct-21

Nov-21

Dec-21

Jan-22

Mar-22

Apr-22
Feb-22

May-22
includes the PIS/Cofins credits), and the share buyback just concluded by Éxito.
IBOV PCAR3

Source: Itaú BBA

The focus now is the company’s strategic positioning in the premium food retail
segment. The discontinuation of the hyper division in GPA’s operations marked the beginning
of a new cycle for the group, with a focus on improving the position of its core premium food
retail business. The company’s strategy to achieve this goal is based on six pillars: i) improving Valuation Multiples
the top line of the Pão de Açucar banner; ii) quality of service (NPS); iii) strengthening the 2022e 2023e 2024e
omnichannel network; iv) accelerating store openings across banners, with a focus on Proximity P/E 15.9 8.0 4.1
stores; v) improving profitability; and vi) bolstering the company’s commitment to ESG. We take
EV/EBITDA 3.5 2.5 1.9
a more in-depth look at each of these pillars in Section 2. Source: Itaú BBA

Investment implications. We are introducing a new YE22 fair value of BRL 32/share. Our
updated model assumes a 20% discount for Éxito’s current stock price, a 50% discount for
Cnova’s current market cap, and a BRL ~2.0 billion equity value for the Brazilian operation
(calculated using the free-cash-flow-to-firm methodology – see Section 3 for details on our
forecasts). All in, even with the discounts on the current share price for Éxito and Cnova, we CONSUMER TEAM
see upside of 95% for PCAR3 from current levels.
Thiago Macruz, CNPI
+55-11-3073-3034
New Vs. Old Estimates – GPA Brazil thiago.macruz@itaubba.com
2022 2023 2024
New Old Change (%) New Old Change (%) New Old Change (%)
Helena Villares, CFA
+55-11-3073-3138
SSS (%) 5.6% 3.6% 198 bps 9.5% 3.4% 608 bps 9.9% 3.4% 649 bps helena.villares@itaubba.com
Net revenues (BRL m) 17,781 31,117 -42.9% 20,078 32,296 -37.8% 22,008 33,592 -34.5%
Gross Margin (%) 27.0% 26.1% 97 bps 28.0% 26.1% 196 bps 29.0% 26.1% 296 bps
Maria Clara Infantozzi, CNPI
EBITDA (BRL m) 1,425 2,101 -32.2% 1,812 2,180 -16.9% 2,244 2,268 -1.1%
+55-11-3073-3199
EBITDA Margin (%) 8.0% 6.8% 126 bps 9.0% 6.8% 227 bps 10.2% 6.8% 344 bps
Net Income (BRL m) 1,224 264 n.m. -120 290 n.m. 300 358 n.m.
maria.infantozzi@itaubba.com
Source: Itaú BBA
Gabriela Moraes, CNPI
+55-11-3073-3056
Please refer to page 8 of this report for important disclosures, analyst certifications and additional information. Itaú BBA does and seeks to do business with
Companies covered in this research report. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of gabriela.moraes@itaubba.com
this report. Investors should not consider this report as the sole factor in making their investment decision. Itaú Corretora de Valores S.A. is the securities
arm of Itaú Unibanco Group. Itaú BBA is a registered mark used by Itaú Corretora de Valores S.A.
Pão de Açúcar – June 27, 2022

SUM-OF-THE-PARTS ANALYSIS SECTION 1

The monetization of GPA's non-core assets has been a recurring topic of discussion among
investors, particularly after the successful spinoff of Assaí. Two assets have caught the market's
attention: Éxito and Cnova. We ran a sensitivity analysis on the current price of PCAR3 and possible
monetization values for Éxito and Cnova in order to gauge the implicit value of the Brazilian
operation. We concluded that, even with the ~50% discount on the screen price of both assets, the
value attributed to the Brazilian operation is close to zero. We therefore believe that potential
monetization would generate value for PCAR3.

The Sensitivity Analysis

The SOTP analysis is a common tool for analyzing the potential value (and upside/downside) of
certain assets. It is, however, uncommon for various assets to not properly reflect the value of each
separate business unit. That said, in the context of a potential monetization of one or more of these
business units (BUs), the SOTP analysis tends to better reflect the value of the asset. The challenge
is the proper valuation of each business unit.

As such, we ran a sensitivity analysis to better understand the implicit market cap of GPA’s Brazilian
operation given the different valuation scenarios for Éxito and Cnova. The starting point of our
analysis is the current market cap of each business, since both are listed companies. We then
assessed the sensitivity of each under different discount scenarios, given the low liquidity of both
assets.

As previously mentioned, the impressive part is that only when we apply a 50% discount to both
Éxito and Cnova do we reach an implicit market cap of close to zero for GPA’s Brazilian operation.
We therefore conclude that any monetization of these assets would unlock value for PCAR3.

PCAR3 – SOTP Sensitivity Analysis

EXITO
a Current Stock Price (COP) 11,290 BZ Im plicit Market CNOVA Market Cap Value (EURm )
b Discount 0% Cap 1,660 1,494 1,328 1,162 996 830
c = a * (1 - b) Considered Stock Price (COP) 11,290 0% 10% 20% 30% 40% 50%
Exito Market Cap

d # of Shares (million) 432.6 4,884 0% -4,832 -4,519 -4,206 -3,894 -3,581 -3,268
e=d*c Adj. Market Cap (COP m) 4,884,296 4,396 10% -4,219 -3,906 -3,594 -3,281 -2,968 -2,656
(COPbi)

f COP / BRL 0.0013 3,907 20% -3,606 -3,293 -2,981 -2,668 -2,355 -2,043
g=e*f Adj. Market Cap (BRL m) 6,350 3,419 30% -2,993 -2,681 -2,368 -2,055 -1,743 -1,430
2,931 40% -2,380 -2,068 -1,755 -1,442 -1,130 -817
CNOVA 2,442 50% -1,768 -1,455 -1,142 -830 -517 -204
h Current Market Cap (EUR m) 1,660
i Discount 0%
j = h * (1 - i) Adjusted Market Cap (EUR m) 1,660
k EUR / BRL 5.54
l=j*k Adjusted Market Cap (BRL m) 9,196

SOP PCAR
m Exito Stake 96.5%
n=g*m PCAR Exito Stake (BRL m) 6,129
o Cnova Stake 34.0%
p=l*o PCAR Cnova Stake (BRL m) 3,127
q PCAR current share price 16.42
r Number of shares 269
s =q*r PCAR current market cap 4,424
t=s -n-p Implicit market cap BZ operation -4,832
Source: Company filings and IBBA estimates

Itaú BBA | 2
Pão de Açúcar – June 27, 2022

Where Might We Be Wrong?

Although the sensitivity analysis clearly indicates that there is value to be unlocked for PCAR3,
investors have raised some concerns, the main one being the sale of the Extra operation. The
transaction included the closure of some stores and a DC as well as the dismissal of employees,
which may require some labor provisions ahead. While it is still too early to estimate the amount of
these provisions, they could potentially reach billions in BRL. That said, GPA is also expecting a
significant cash-in from the sale of Extra to Assaí, some PIS/Cofins and ICMS tax credits (our
current model only includes the PIS/Cofins credits), and the share buyback just concluded by Éxito.

What Does Our Current Model Suggest?

With this in mind, we revised our YE22 fair value to BRL 32/share. Our model assumes a 20%
discount for Éxito’s current stock price, a 50% discount for Cnova’s current market cap, and a BRL
~2.0 billion equity value for the Brazilian operation (calculated using the free-cash-flow-to-firm
methodology – see Section 3 for details of our forecasts). All in, even with the discounts on the
current share price for Éxito and Cnova, we see upside of 95% for PCAR3 from current levels.

PCAR3 – IBBA YE22 Fair Value

a Enterprise Value 3,465

b Net Debt (YE2022) 4,691
c Tax Assets + Related Parties 3,052
d = (1 - e) * f * g Exito Stake 5,077
e Exito Discount 20.0%
f Exito (in BRLm) 6,575
g Exito Stake 96.5%
h = (1 - i) * j * k Cnova / Cdiscount 1,630
i Cnova Discount 50.0%
j Cnova / Cdiscount (in BRLm) 9,587
k Cnova / Cdiscount Stake 34.0%
l = a + b + c + d + h Equity Value (YE2022) 8,533
m Number of Shares 269.4
n=l/m Fair Value (YE2022) 32.0
o Current Stock Price 16.4
p=n/o-1 Upside % 95%
Source: Company filings and IBBA estimates

Itaú BBA | 3
Pão de Açúcar – June 27, 2022

IN-DEPTH LOOK AT THE NEW GPA SECTION 2

In this section we take a more in-depth look at the main pillars of GPA’s new strategic positioning.
A series of events over the past few months have led to a shift in GPA’s strategy. There are now
six pillars that support several group’s ongoing projects to improve the company’s positioning in the
premium food retail market, with a focus on improving the value proposition of the Pão de Açúcar
banner.

New Bottom-Up Dynamics

Discontinuation of hyper division allows management to focus on core business. The

discontinuation of the hyper division in GPA’s operations (for details click here) marked the
beginning of a new cycle for GPA. As a reminder, the hyper segment in Brazil had been consistently
losing share to other categories in the food retail space, led by the C&C format, which made up
45% of the market in 2021 (vs. 38% in 2020), according to Nielsen. The loss of share of the hyper
operation over the total food retail market had been pressuring GPA’s figures in the quarters leading
up to the announcement of the discontinuation of operations. This is relevant because GPA will now
be free to fully focus on enhancing its position in its core premium food retail segment.

In-house adjustments and definition of strategic positioning. This transformational change

initially affected GPA’s daily operations, translating into a higher rupture index in the results for
4Q21 and 1Q22 – a scenario that has since normalized somewhat. That said, during this period,
the company was able to develop an action plan to strengthen its position in the premium food retail
space. This plan is based on six pillars (the main one focused on the Pão de Açúcar banner) to
support several group’s ongoing projects. The new corporate structure was also marked by the
arrival of the company’s new CEO, Marcelo Pimentel, who will spearhead the rollout of GPA’s
strategic positioning.

Strategic Positioning Supported by 6 Main Pillars

1) Top line is the focus; all eyes on Pão de Açúcar. As previously mentioned, the hyper division
had been stealing some of the focus from enhancing GPA’s core business in recent quarters.
With the discontinuation of the hyper operation, GPA is now fully committed to enhancing the
Pão de Açúcar banner, with a focus on improving top-line performance. The initiatives
established to achieve this goal include: i) improving Pão de Açúcar’s assortment through an
in-depth analysis of shelf availability conducted by a third party, which has led to the addition of
a variety of new SKUs YTD; and ii) improving the supply chain, with a focus on reducing the
rupture index for staple items.

2) Leveraging NPS on a better shopping experience and boosting the loyalty program.
Together with its efforts to improve the assortment, GPA is working to distinguish Pão de Açúcar
for its differentiated shopping experience, which should translate into higher NPS levels. The
initiatives developed to achieve this goal include enhancing the store experience by offering a
wide range of services (bakery, butcher, fresh fish market) and better quality of service. Note
that Pão de Açúcar is a benchmark for loyalty programs in the retail space, and GPA is working
to improve the frequency of purchase as well as the penetration of its loyal clientele, which
could also boost its NPS figures.

3) Strengthening the omnichannel network. Pão de Açúcar has the highest digital penetration
in our food retail coverage, at 10% in 1Q22, which enhances its omnichannel network. GPA is
nonetheless committed to expanding this competitive advantage with efforts to improve the
penetration of omnichannel tools. Management sees opportunities to further strengthen the
omnichannel ecosystem, given the relevance of its digital sales made through the click-and-
collect tool. The company also sees potential for increased digital penetration, with a possible
long-term target of 20% digital penetration.

Itaú BBA | 4
Pão de Açúcar – June 27, 2022

4) Accelerating expansion; Proximity in the spotlight. GPA sees plenty of opportunities for
store openings, particularly for the Proximity banner, given its relatively new and smaller store
size. That said, GPA is also focused on expanding the other store formats in its portfolio,
including Pão de Açúcar. As the name suggests, the value proposition of the Proximity banner
is to offer a convenient shopping experience – with a focus on staple categories – within walking
distance from consumers (in verticalized, high-income neighborhoods in the large cities of
Brazil), initially concentrated in the Southeast region. Note that a rapid expansion of the banner
could also accelerate the omnichannel ecosystem and enhance GPA’s last-mile delivery tool.

5) Profitability. The discontinuation of the hyper segment shifted GPA’s economics toward
higher-profitability segments. Note also that more fluid negotiation with suppliers for a wider
assortment could contribute to a more favorable scenario for purchases. As such, a successful
rollout of the aforementioned initiatives, coupled with efficiency gains from the revision of the
internal corporate structure, could yield better long-term economics for GPA.

6) ESG. GPA reiterated its commitment to ESG. According to management, several metrics
related to the environmental and social tenets (with a focus on promoting diversity and human
rights as well as the transformation of the value chain through measures such as combating
deforestation and animal welfare) and the variable remuneration of eligible positions is linked
to specific ESG goals. In terms of corporate structure, the migration to the Novo Mercado
segment of B3 further enhanced the transparency of the company’s processes, and the three
independent members of its board of directors will help to sharpen its corporate governance
practices.

Itaú BBA | 5
Pão de Açúcar – June 27, 2022

UPDATING ESTIMATES SECTION 3

We are updating our estimates for GPA to incorporate our new macro scenario, new cost of equity
assumption and GPA’s new structure in Brazil. We are resuming coverage of PCAR3 with an
outperform rating and a YE22 fair value of BRL 32/share, which implies 95% upside potential.

Bear in mind that the main reason for the difference between our new and old estimates is the new
corporate structure following the divestment of the hyper division. We are therefore revising our top-
line estimates down to BRL 17.8 billion for 2022 (43% below our previous estimate) and BRL 20.0
billion for 2023 (38% below our previous estimate).

The focus on the premium food segment will enhance GPA’s profitability in Brazil. We raised our
gross margin estimates by 97 bps for 2022, to 27%, and 196 bps for 2023, to 28%, given our
expectation of more fluid negotiations with suppliers and the favorable mix format.

This improvement, coupled with a more efficient corporate structure (that reflects the company’s
efforts to optimize expenses), led to an upward revision of our EBITDA margin estimates of 126 bps
for 2022 (to 8%, from 6.8% previously) and 227 bps for 2023 (to 9%, from 6.8% previously), implying
an EBITDA of BRL 1.4 billion for 2022 and BRL 1.8 billion for 2023.

The proceeds from the divestment of the Extra operation raised our bottom-line forecast for 2022
to BRL 1.2 billion and more than offset the impact of a weaker net financial result (on higher interest
rates). For 2023, we expect the weaker financial result to weigh on the bottom line, leading to a net
loss of BRL 120 million.

GPA Brazil - New vs. Old Estimates

2022 2023 2024

New Old Change (%) New Old Change (%) New Old Change (%)

SSS (%) 5.6% 3.6% 198 bps 9.5% 3.4% 608 bps 9.9% 3.4% 649 bps
Net revenues (BRL m) 17,781 31,117 -42.9% 20,078 32,296 -37.8% 22,008 33,592 -34.5%
Gross Margin (%) 27.0% 26.1% 97 bps 28.0% 26.1% 196 bps 29.0% 26.1% 296 bps
EBITDA (BRL m) 1,425 2,101 -32.2% 1,812 2,180 -16.9% 2,244 2,268 -1.1%
EBITDA Margin (%) 8.0% 6.8% 126 bps 9.0% 6.8% 227 bps 10.2% 6.8% 344 bps
Net Income (BRL m) 1,224 264 n.m. -120 290 n.m. 300 358 n.m.

Source: Itaú BBA

Itaú BBA | 6
Pão de Açúcar – June 27, 2022

GPA Brazil – Model Output

Operational 2018 2019 2020 2021 2022e 2023e 2024e Margins 2018 2019 2020 2021 2022e 2023e 2024e
Total Stores 913 910 873 809 744 779 799 Gross Margin 28.1% 26.3% 28.2% 24.6% 27.0% 28.0% 29.0%
Pão de Açúcar 186 185 182 181 216 226 231 Operational expenses as % net revenues -20.4% -20.0% -18.4% -18.4% -19.1% -19.1% -18.9%
Extra 298 293 278 246 184 184 184 Selling as % net revenues -17.6% -17.3% -16.0% -16.0% -16.1% -16.1% -16.1%
Convenience 235 237 236 240 270 295 310 G&A as % net revenues -2.8% -2.7% -2.4% -2.4% -3.0% -3.0% -2.8%
Others 194 195 177 142 74 74 74 EBIT Margin 3.9% 2.2% 7.3% 2.8% 2.2% 3.1% 4.5%
Net Openings -3 -37 -64 -65 35 20 D&A as % of net revenues 3.7% 4.1% 4.1% 4.5% 5.8% 6.0% 5.7%
Pão de Açúcar -1 -3 -1 35 10 5 EBITDA Margin 7.6% 6.2% 11.4% 7.4% 8.0% 9.0% 10.2%
Extra -5 -15 -32 -62 0 0 Adj. EBITDA Margin 8.4% 7.2% 10.6% 6.9% 8.5% 9.6% 10.7%
Convenience 2 -1 4 30 25 15 EBT Margin 0.0% -0.9% 6.0% -1.0% -3.1% -1.0% 1.8%
Others 1 -18 -35 -68 0 0 Net Margin 0.0% -0.5% 4.1% 2.3% -1.7% -0.6% 1.4%
SSS growth % 3.5% 1.2% 12.4% -4.6% 5.6% 9.5% 9.9%

Income Statement 2018 2019 2020 2021 2022e 2023e 2024e Growth Momentum 2018 2019 2020 2021 2022e 2023e 2024e
Net revenues 26,490 26,654 29,170 26,863 17,781 20,078 22,008 Net Revenues 0.6% 9.4% -7.9% -33.8% 12.9% 9.6%
Cash COGS -18,950 -19,530 -20,825 -20,115 -12,898 -14,359 -15,527 COGS 3.2% 6.6% -3.3% -36.0% 11.4% 8.1%
D&A COGS -96 -118 -126 -150 -79 -94 -97 Gross Profit -5.9% 17.3% -19.7% -27.2% 17.1% 13.5%
COGS -19,046 -19,648 -20,952 -20,265 -12,977 -14,454 -15,624 Operational expenses -1.3% 1.0% -7.9% -31.4% 12.9% 8.5%
Gross Profit 7,444 7,006 8,219 6,599 4,805 5,624 6,385 Selling -0.9% 1.4% -7.9% -33.5% 12.9% 9.6%
Operational expenses -5,395 -5,324 -5,374 -4,948 -3,396 -3,835 -4,159 G&A -4.2% -2.1% -7.9% -17.0% 13.1% 2.3%
Selling -4,654 -4,613 -4,679 -4,308 -2,864 -3,234 -3,545 EBIT -44.5% 271.7% -64.4% -47.4% 53.5% 63.0%
G&A -741 -710 -695 -640 -531 -601 -615 Total D&A 9.8% 10.1% 2.0% -15.9% 17.0% 3.8%
Equity income 79 107 118 47 30 34 37 EBITDA -18.0% 100.6% -40.6% -28.0% 27.2% 23.8%
Other operational expenses and revenues -200 -248 240 130 -93 -105 -116 Adj EBITDA -14.2% 61.9% -40.2% -17.9% 26.3% 23.0%
D&A -892 -967 -1,069 -1,069 -946 -1,105 -1,148 Net financials -52.7% 169.5% -7.8% -15.3% -25.9%
EBIT 1,035 574 2,134 759 399 613 999 EBT -826.8% -116.0% 99.5% -64.5% -299.9%
Total D&A 988 1,085 1,195 1,219 1,025 1,199 1,245 Income Taxes -563.9% -262.6% -71.4% -69.6% -222.6%
EBITDA 2,023 1,659 3,329 1,977 1,425 1,812 2,244 Net income -1090.9% -47.1% -147.5% -59.9% -351.0%
Non-recurring effects 200 248 -240 -130 93 105 116 Consolidate net income 964.1% -69.4% 95.4% -109.8% -351.0%
Adj. EBITDA 2,223 1,907 3,088 1,848 1,518 1,918 2,359
Net financials -815 -386 -1,039 -959 -812 -601
EBT -241 1,748 -280 -559 -199 397
Income taxes 121 -559 909 260 79 -97
Net income -120 1,189 629 -299 -120 300
Net income discontinued operations 312 856 -2 1,523 0 0
Consolidate net income 192 2,045 626 1,224 -120 300

Balance Sheet 2018 2019 2020 2021 2022e 2023e 2024e Valuation 2018 2019 2020 2021 2022e 2023e 2024e
TOTAL ASSETS 37,865 36,287 26,203 23,693 21,221 21,393 21,808 PCAR - Share Price (BRL/share) 16.42 16.42 16.42 16.42 16.42 16.42 16.42
Current Assets 13,897 13,265 9,531 9,899 5,752 7,451 8,402 PCAR - Market Cap 4,423 4,423 4,423 4,423 4,423 4,423 4,423
Cash and Marketable Securities 4,369 4,773 4,962 4,706 2,220 3,988 5,022 EXITO - Share Price (COP/share) 11,290.0 11,290.0 11,290.0 11,290.0 11,290.0 11,290.0 11,290.0
Accounts Receivable 384 423 297 340 225 254 278 EXITO - Number of Shares 433 433 433 433 433 433 433
Inventories 5,909 6,206 3,542 2,340 1,498 1,669 1,804 EXITO - Market Cap (COP Million) 4,884,296 4,884,296 4,884,296 4,884,296 4,884,296 4,884,296 4,884,296
Recoverable Taxes 679 1,212 412 1,108 1,202 932 690 COP / BRL 0.0013 0.0013 0.0013 0.0013 0.0013 0.0013 0.0013
Noncurrent Assets for Sale 2,065 171 78 1,153 255 255 255 EXITO - Market Cap (BRL Million) 6,350 6,350 6,350 6,350 6,350 6,350 6,350
Prepaid Expenses and Other Accounts Receivable 491 480 240 252 353 353 353 Cdiscount - Market Cap (EUR million) 1,660 1,660 1,660 1,660 1,660 1,660 1,660
Noncurrent Assets 23,967 23,022 16,672 13,794 15,469 13,942 13,405 BRL / EUR 5.54 5.54 5.54 5.54 5.54 5.54 5.54
Accounts Receivable 4 1 1 1 3 3 3 Cdiscount - Market Cap (BRL Million) 9,196 9,196 9,196 9,196 9,196 9,196 9,196
Recoverable Taxes 2,745 2,703 3,100 2,410 1,761 1,366 1,012 Adjusted Market Cap -4,832 -4,832 -4,832 -4,832 -4,832 -4,832 -4,832
Deferred Income Tax and Social Contribution 301 338 0 567 451 451 451 Net Debt (including receivables) 6,820 8,740 10,957 9,802 9,534 7,983 7,114
Related Parties 34 41 97 447 1,518 18 -398 Enterprise Value 1,988 3,908 6,125 4,970 4,702 3,151 2,282
Judicial Deposits 776 795 560 730 733 733 733 P/E #DIV/0! -25.1 -2.4 -7.7 -3.9 40.4 -16.1
Prepaid Expenses and Other 188 261 723 575 549 549 549 EV / EBITDA 0.98 2.36 1.84 2.51 3.30 1.74 1.02
Investments 203 291 770 791 798 798 798 EV / Sales 0.08 0.15 0.21 0.19 0.26 0.16 0.10
Investment Properties 20 0 0 0 0 0 0
Property and Equipment 14,150 15,660 9,376 6,332 7,710 8,079 8,313 Returns 2018 2019 2020 2021 2022e 2023e 2024e
Property and Equipment - ex IFRS 16 10,729 14,355 5,094 3,596 4,522 4,681 4,765 EBIT x (1-t) #DIV/0! 286 1,452 -1,701 213 369 755
Right of use 3,421 11,421 4,282 2,736 3,189 3,398 3,547 Invested Capital 7,775 1,192 3,977 2,560 5,288 5,538 5,695
Intangible Assets 5,546 2,933 2,045 1,941 1,946 1,946 1,946 Fixed Assets 10,729 14,355 5,094 3,596 4,522 4,681 4,765
0 0 0 0 0 0 0 Working Capital -2,954 -3,047 -1,117 -1,036 766 857 930
TOTAL LIABILITIES + EQUITY 37,865 36,287 26,203 23,693 21,221 21,393 21,808 ROIC #DIV/0! 6.4% 56.2% -52.0% 5.4% 6.8% 13.4%
Current Liabilities 13,813 15,885 8,573 7,528 4,508 4,638 4,738 ROE 0.0% 1.9% 35.2% 18.1% 28.5% -2.5% 6.1%
Suppliers 9,246 9,676 4,956 3,715 957 1,066 1,152
Loans and Financing 916 904 37 154 199 199 199 Indebtedness 2018 2019 2020 2021 2022e 2023e 2024e
Debentures 1,068 2,287 1,220 1,089 1,085 1,085 1,085 Short Term Debt 2,496 3,832 1,827 1,790 1,866 1,887 1,901
Lease Liability 512 641 570 547 582 603 617 Long Term Debt 8,693 9,681 11,710 9,902 9,309 9,441 9,530
Payroll and Related Charges 686 685 510 413 329 329 329 Cash and Marketable Securities 4,369 4,773 4,962 4,706 2,220 3,988 5,022
Taxes and Social Contribution Payable 370 310 295 303 517 517 517 Net Debt 6,820 8,740 8,576 6,986 8,956 7,340 6,409
Dividends Proposed 57 156 0 0 0 0 0 Receivables Discounted 2,381 2,816 579 643 705
Financing and Purchase of Fixed Assets 149 180 55 84 68 68 68 Net Debt (inc. Receivables Discounted) 6,820 8,740 10,957 9,802 9,534 7,983 7,114
Rents 0 0 0 0 0 0 0 Net Debt / EBITDA 3.37 5.27 3.29 4.96 6.69 4.41 3.17
Related Parties 239 152 55 258 196 196 196
Advertisement 59 25 34 26 22 22 22
Provision for Restructuring 10 6 11 118 8 8 8
Early Revenue 250 238 18 46 44 44 44
Non-current Assets Held for Sale 0 0 0 62 0 0 0
Others 252 625 812 711 501 501 501
Long-Term Liabilities 11,886 12,017 14,390 12,469 11,815 11,947 12,036
Loans and Financing 313 1,084 2,943 3,039 3,073 3,073 3,073
Debentures 3,078 2,438 3,379 3,524 2,554 2,554 2,554
Related Parties 0 0 168 96 90 90 90
Lease Liability 5,302 6,159 5,388 3,339 3,683 3,815 3,904
Deferred Taxes and Social Contribution 1,099 312 156 6 6 6 6
Tax Installments 471 375 241 148 125 125 125
Provision for Judicial Demand 1,328 1,197 1,247 1,333 1,372 1,372 1,372
Early Revenue 13 26 19 65 62 62 62
Provision for loss on Investment in Associates 233 286 591 689 642 642 642
Others 49 140 257 231 210 210 210
Shareholders' Equity 12,166 8,385 3,240 3,696 4,898 4,808 5,033

Source: Itaú BBA

Itaú BBA | 7
Pão de Açúcar – June 27, 2022

DISCLAIMER

Itaú BBA is a registered trademark used by Itaú Unibanco S.A.

Ratings: Definitions, Dispersion and Banking Relations

Ratings (1) Definition (2) Coverage (3) Banking Relation (4)

The analyst expects the stock to perform better than

Outperform 70% 70%
market average.

The analyst expects the stock to perform in line with

Market Perform 26% 24%
market average.

The analyst expects the stock to perform below market

Underperform 4% 4%
average.

1. The ratings employed in this document (Outperform, Market Perform, and Underperform) basically correspond to Purchase,
Hold, and Sell, respectively.
2. The ratings represent the analyst’s assessment of the medium-term share price performance relative to the market average.
These ratings may be reviewed by the analyst based on new developments or simply due to variations in share prices (such
changes may occur at any time). Companies are grouped into sectors, based on similar characteristics. Sectors: (i) Banks
and Financial Services; (ii) Consumer Goods & Retail + Food & Beverage (iii) Healthcare + Education; (iv) Steel & Mining
+ Pulp & Paper; (v) Oil, Gas & Petrochemicals + Agribusiness; (vi) Real Estate & Construction; (vii) Telecommunications,
Media and Technology; (viii) Transportation, Capital Goods and Logistics; (ix) Public Utility Services; and (x) Strategy.
3. Percentage of companies covered by Itaú Unibanco S.A. in this rating category.
4. Percentage of companies included in this rating category that were provided services by Itaú Unibanco S.A. or any of its
affiliated companies.

Third-Party Disclosures

Recent Disclosure Items

Companies Mentioned Ticker
Price 1 2 3 4 5 6 7
Cia Brasileira De Distribuic PCAR3 16.42 - - - - -

1. Itaú Unibanco, its subsidiaries, controllers and/or companies under common control rendered services, including investment
services and investment banking services, to the company(ies) surveyed in this report over the previous 12 months, and/or
effectively received (or expect to receive) due compensation for such services over the previous 12 months.
2. Itaú Unibanco, its subsidiaries, controllers and/or companies under common control acted as a market-maker until the date
on which this report was issued, rendering services for the companies surveyed herein.
3. Itaú Unibanco, its subsidiaries, controllers and/or companies under common control hold securities of issuers surveyed in
this report, in addition to substantial ownership of such issuers’ share capital.
4. Itaú Unibanco, its subsidiaries, controllers and/or companies under common control, in the regular course of their business,
(i) have granted and may eventually grant loans and/or (ii) render and may eventually render financial services to the issuers
surveyed in this report, as well as related persons, receiving due compensation for such.
5. The issuers surveyed in this report, their subsidiaries, controllers and/or companies under common control hold substantial
ownership of Itaú Unibanco, its subsidiaries, controllers and/or companies under common control. (1)
6. Itaú Unibanco owns a net long position exceeding 0.5 % of the total issued share capital of the issuer.
7. Itaú Unibanco owns a net short position exceeding 0.5 % of the total issued share capital of the issuer.

(1)
Substantial ownership is defined as direct or indirect shareholding interest of over 5% (five percent) of any type or class of stock representing the share
capital of issuers surveyed in this report.

Material Information
1. This report was prepared by Itaú Unibanco, a company regulated by the Brazilian Securities and Exchange Commission (CVM), and distributed by
Itaú Unibanco, Itaú Corretora de Valores S.A. and Itaú BBA. Itaú BBA is a registered trademark used by Itaú Unibanco.
2. This report does not constitute an offer to buy or sell any financial instrument or to participate in any particular trading strategy under any jurisdiction.
The information herein was deemed reasonable on the date of publication and was obtained from reliable public sources. Neither Itaú Unibanco nor
any of its affiliated companies (“Grupo Itaú Unibanco”) ensure or guarantee, either expressly or implicitly, that the information contained herein is
accurate or complete. Furthermore, this report is not a complete or summarized representation of investment strategies, markets or developments
thereof. The opinions, estimates and/or forecasts provided in this report reflect the current opinion of the analyst responsible for the content herein on
the date of publication and are, therefore, subject to change without notice. The prices and availability of the financial instruments are merely indicative
and subject to change beyond the control of Itaú Unibanco. The prices used for the production of this report were obtained as of the close of the
relevant market. Neither Itaú Unibanco nor any of its affiliated companies are obligated to update, amend or otherwise alter this report, or to inform
readers of any changes in its content, except upon termination of coverage of the securities issuers discussed herein.
3. The analyst responsible for preparing this document, highlighted in bold, hereby certifies that all opinions expressed in this report
accurately, solely and exclusively reflect his/her personal views and opinions regarding all of the issuers and securities analyzed herein,
provided in this document independently and autonomously, including from Itaú Unibanco, Itaú Corretora, Itaú BBA, and any of their
affiliated companies. Whereas the personal opinions of the analyst may diverge, Itaú Unibanco, Itaú Corretora, Itaú BBA and/or any of their
affiliated companies may have published or eventually publish other reports that are inconsistent and/or reach different conclusions than
those provided herein.
4. The analyst responsible for preparing this report is not registered and/or not qualified as a survey analyst at the NYSE or FINRA, nor is such analyst
in any way associated with Itaú BBA USA Securities, Inc. and is, therefore, not subject to the provisions of Rule 2242 on communications with
researched companies, public appearances and transactions involving securities held in a research analyst account.
5. Part of the analysts’ compensation is determined based on the total top line of Itaú Unibanco and some of its affiliated companies, including revenues
arising from investment services and investment bank services. Nonetheless, the analyst responsible for the content in this report hereby certifies
that no part of his/her compensation is or will be directly or indirectly conditioned to any specific recommendations or opinions herein.
6. The financial instruments and strategies discussed in this document may not be suitable for all investors and certain investors may not be eligible to
purchase or participate in some or all of them. This report does not take under consideration the specific investment objectives, financial situation or
needs of any particular investor. Investors who intend to purchase or trade the securities covered in this report must seek out the applicable information
and documents in order to decide whether to invest in such securities. Investors must independently seek out financial, accounting, legal, economic
and market guidance, based on their personal characteristics, before making any investment decision regarding the securities of the issuers analyzed
in this report. Each investor must make the final investment decision based on a range of related risks, fees and commissions. In the event that a
financial instrument is expressed in currencies other than the one used by the investor, exchange rate variations may adversely affect the price, value

Itaú BBA | 8
Pão de Açúcar – June 27, 2022

or profitability. Financial instrument yields may vary, ultimately increasing or decreasing the price or value of financial instruments, either directly or
indirectly. Past performance is not necessarily indicative of future results, and this report does not ensure or guarantee, either expressly or implicitly,
any possible future performance or any other aspect thereof. Itaú Unibanco and its affiliated companies may not be held liable for eventual losses,
either direct or indirect, arising from the use of this report or its content. Upon using the content herein, investors undertake to irrevocably and
irreparably hold Itaú Unibanco and/or any of its affiliated companies harmless against any claims, complaints, and/or losses.
7. This report may not be reproduced or redistributed to third parties, either in whole or in part, for any reason whatsoever, without prior written consent
from Itaú Unibanco. This report and its contents are confidential.
8. In accordance with the rules of the Brazilian Securities and Exchange Commission, the analysts responsible for this report have described scenarios
of potential conflict of interest in the “Relevant Information” chart below.
9. Itaú Unibanco is not party to an agreement with the issuer(s) relating to the production of this report.
10. The description of the internal organizational and administrative arrangements and of the information barriers in place for the prevention and avoidance
of conflicts of interest with respect to the production of research reports are available at www.itaucorretora.com.br.
11. Material information regarding the proprietary models used by Itaú Unibanco are available at Itaú BBA Bloomberg page.
12. Other important regulatory information is available at https://disclosure.cloud.itau.com.br
Additional note for reports distributed in the (i) United Kingdom: This material has been prepared by Itaú Unibanco S.A. for informational purposes
only and it does not constitute or should be construed as a proposal for request to enter into any financial instrument or to participate in any specific
business trading strategy. The financial instruments discussed in this material may not be suitable for all investors and are directed solely at Eligible
Counterparties and Professional Clients, as defined by the Financial Conduct Authority. This material does not take into consideration the objectives,
financial situation or specific needs of any particular client. Clients must independently obtain financial, legal, tax, accounting, economic, credit, and
market advice on an individual basis, based on their personal characteristics and objectives, prior to making any decision based on the information
contained herein. By accessing this material, you confirm that you are aware of the laws in your jurisdiction relating to the provision and sale of
financial service products. You acknowledge that this material contains proprietary information and you are required to keep this information
confidential. Itaú BBA International plc (IBBAInt) exempts itself from any liability for any losses, whether direct or indirect, which may arise from the
use of this material and is under no obligation to update the information contained in this material. Additionally, you confirm that you understand the
risks related to the financial instruments discussed in this material. Due to international regulations, not all financial services/instruments may be
available to all clients. You should be aware of and observe any such restrictions when considering a potential investment decisions. Past
performance and forecast are not a reliable indicator of future results. The information contained herein has been obtained from internal and external
sources, and is believed to be reliable as of the date in which this material was issued, however IBBAInt does not make any representation or
warranty as to the completeness, reliability or accuracy of information obtained by third parties or public sources. Additional information relative to
the financial products discussed in this material is available upon request. Itaú BBA International plc has its registered offices at 100 Liverpool Street,
Level 2, London, EC2M 2AT, United Kingdom, and is authorized by the Prudential Regulation Authority and regulated by the Financial Conduct
Authority and the Prudential Regulation Authority (FRN 575225). For any queries, please contact your relationship manager; (ii) European
Economic Area: this report is distributed in the EEA by Itaú BBA Europe, S.A. (“IBBA Europe”), an affiliate of Itaú Unibanco with registered offices
at Rua Tierno Galvan, Torre III, 11 Piso, Lisbon, Portugal, authorized as a credit institution by the Bank of Portugal (registration number 195), and
as a financial intermediary by the Portuguese Securities Market Commission – CMVM (registration number 396). This material is informational only
and shall not be construed as a proposal to trade with financial instruments, nor any kind of personal recommendation of advice. This material is
directed solely at Professional Clients and Eligible Counterparties (as defined by Article 4, 1, (10) and Article 30 of Directive 2014/65/EU - MiFID II),
who possess the experience, knowledge and expertise to make its own investment decisions and properly assess the risks that they incur. Relevant
information regarding conflicts of interest contained in this material apply to IBBA Europe as an affiliate of Itaú Unibanco. IBBA Europe does not
exercise discretion as to the selection of the research reports to disseminate and exempts itself from any liability for any losses, whether direct or
indirect, which may arise from the use of this material and/or its content and has no obligation to update the information contained in this material.
The financial instruments/services discussed in this material may not be available to all clients and/or in their respective jurisdictions. Additional
information about the financial instruments discussed in this material are available upon request (iii) USA: Itaú BBA USA Securities, Inc., a FINRA
registered Broker Dealer and an SIPC member, is responsible for distributing this report and the content herein. Any U.S. investor who receives this
report and intends to trade any of the securities addressed herein must do so through Itaú BBA USA Securities, Inc. at 540 Madison Avenue, 24th
Floor, New York, NY 10022; (iv) Brazil: Itaú Corretora de Valores S.A., a subsidiary of Itaú Unibanco S.A., is authorized by the Central Bank of
Brazil and sanctioned by the CVM to distribute this report. Contact the Customer Service channel for more information: 4004-3131* (capital and
metropolitan regions) or 0800-722-3131 (other locations) during business hours (BRT). If additional service is required after contacting the
aforementioned channels, contact: 0800-570-0011 (business hours) or write to P.O. Box 67.600, São Paulo – SP, CEP (Postal Code) 03162-971.
*(Local costs apply.)

Relevant Information – Analysts

Disclosure Items
Analysts
1 2 3 4
Thiago Macruz
Helena Villares
Maria Clara Infantozzi
Gabriela Moraes
1. The securities analyst(s) involved in preparing this report are associated with individuals who work for the issuers addressed herein.
2. The securities analyst(s) spouse(s) or partner(s) hold, either directly or indirectly, on their own behalf or on behalf of third parties, stock and/or
other securities discussed in this report.
3. The securities analyst(s), spouse(s) or partner(s) are directly or indirectly involved in the purchase, sale or intermediation of the securities
discussed in this report.
4. The securities analyst(s), respective spouse(s) or partner(s) hold, either directly or indirectly, any financial interest related to the securities
issuers analyzed in this report.

Itaú BBA | 9