òa value stock with high growth potential · 0,0 5,0 10,0 15,0 20,0 25,0 brl source:...

Davih Carvalho Pedro Carvalho Rafael Monnerat Raymond Shayo Victor Assis

“A value stock with high growth potential”

0,0

5,0

10,0

15,0

20,0

25,0

BRL

Source: Company's data

Reference date

16-oct

Market cap. 2.88 bn

52 week price range

10.10 – 13.74

Governance Level

Nível 1

Source:Company’s data

Reasons to BUY

Valuation & Financials

Risk Analysis Conclusion Company Overview

Market price

BRL 13.15

0,0

5,0

10,0

15,0

20,0

25,0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

BRL

Source: Company's data

Target Price

BRL 18.1

Upside 37.6%

Market price

BRL 13.15

Target price

BRL 18.1

Reasons to BUY



Reasons to BUY



Randon: World’s five largest towed vehicles producers

10%

12%

12%

29%

Librelato

Guerra

Fachinni

Randon

Truck trailers market share

Source:Company’s data Source:Company’s data

89%

75%

53%

51%

Fifth Wheel

Axles and Suspensions

Brakes

Heavy Tarps

Auto parts - Market Share

Truck trailers: 49,80%

Auto parts: 48%

Financial services: 2,20%

Reasons to BUY



Randon: World’s five largest towed vehicles producers

Source:Company’s data

Reasons to BUY



Source: Team’s analysis

Wide

distribution

network

Premium

products

Flexible

production

International

reach

Market

leadership

Successful strategies

2.021 2.470 3.502

5.871

7.071

Net Revenue (BRL mn)

2006 2009 2012 2015E 2018E

Source: Company data and Bloomberg


66 78 72

120

151 EBITDA (BRL mn)

2Q12 3Q12 4Q12 1Q13 2Q13

18% CQGR 2Q12-2Q13

11% CAGR2006-2018

Reasons to BUY




Wide

distribution

network

Premium

products

Flexible

production

International

reach

Market

leadership

Successful strategies

2.021 2.470 3.502

5.871

7.071

Net Revenue (BRL mn)

11% CAGR2006-2018


2006 2009 2012 2015E 2018E

10.8% 8.2% 7.6%

-2.5% -5.2%

Facchini Randon Librelato AmstedMaxion

Guerra

EBITDA Margin


Reasons to BUY



SUCCESSFUL BUSINESS MODEL

GROWTH OPPORTUNITIES

CONFIRMATIVE VALUATION

Catalyst for recommendation

Reasons to BUY



Product mix flexibility

Intercompany synergy

Sales strategy

Business Model

Reasons to BUY





Sales strategy

Distribution network

Branding

Distribution point

Source: Company’s data

Reasons to BUY





Sales strategy


Branding

Outstanding sales assistence

Tap more consumers

Premium position

Power of brand

Entry barriers

Reasons to BUY





Sales strategy

Flexible assembly line

Truck trailers

Railcars

Higher consumption

potential

Economies of scope

Reduce threats of substitute

products

Reasons to BUY





Sales strategy

LOGISTIC COSTS REDUCTION

ADMINISTRATIVE COSTS REDUCTION

MARGIN PRESERVATION

Reasons to BUY





Sales strategy

Reasons to BUY






Sales Strategy Flexibility Intercompany synergy

Reasons to BUY



Investments in Infrastructure

New markets

Agribusiness expectations

Growth Opportunities

Reasons to BUY



With insufficient rail infrastructure…

…trucks are needed to transport harvest to export gates

Paranaguá

Santos

Tubarão

Ponta da madeira

Santarem

3 8 9 19 23

67 68 72

118 122

Density of railways (Km/1000 km2)

Soy/corn production area

Sugar production area

Ports

Source: ICONE and Aliceweb Source: Worldstat


New markets



New markets

44

64

84

104

124

144

164

184

204

Mil

lio

n T

on

s

Source: CONAB

Brazilian Harvest

25.0

27.7

Soy Area (MHA)

Reasons to BUY



Current national harvest represents an all time record Investments in Infrastructure

New markets


2013 Crop

186 million tons 10.8%

Source: CONAB

2011/12 2012/13

44

64

84

104

124

144

164

184

204

Mil

lio

n T

on

s

Source: CONAB

Brazilian Harvest

Reasons to BUY



Current national harvest represents an all time record Investments in Infrastructure

New markets


2013 Crop

186 million tons

Source: CONAB

2011/12 2012/13

7.6

8.9

Corn Area (MHA)

17.1%

Reasons to BUY




New markets

Agribusiness expectations Brazil’s infrastructure has room to improve

15 68 70 104 134

52 59 80 93 135

22 27 30 48 100

42 54 86 123 136

1 = Best performer

144 = Worst performer

Source: World Economic Forum

Reasons to BUY




New markets


Ports, BRL24bn

Roadways, BRL69bn

Railways, BRL77bn

Telecom, BRL102bn

Energy, BRL166bn

Airports, BRL9bn

Water, BRL42bn

BNDES investments until 2016

The government is committed to Invest BRL 500 billions

Source: LOGIT and BLUM/Outlook Brazil

0

20

40

60

80

100

120

BRL bn

PAC investments over the years

Highways Railways Pipeline Waterways

Source: BNDES

52%

42%

Reasons to BUY




New markets


Ports, BRL24bn

Roadways, BRL69bn

Railways, BRL77bn

Telecom, BRL102bn

Energy, BRL166bn

Airports, BRL9bn

Water, BRL42bn

Source: BNDES

0

20

40

60

80

100

120

BRL bn

PAC investments over the years


Source: BNDES

Demand for Trucks

Eliminate Bottlenecks

Reduce Logistics

costs

The government is committed to Invest BRL 500 billions

Reasons to BUY




New markets


85.2% 78.2%

32% 28%

14% 18%

6% 2%

Mercosul+ Chile

Nafta Africa S&CAmerica

Others Europe

Export Markets: 2012

Diversify Exposure

Unexplored Regions

2017

Exports

Net Revenue Breakdown 2012

7.5%

25%

14.3% 78.2%

Source: Company’s Data and Team’s estimates Foreign

Operations

Source: Company’s Data and Team’s estimates

53.2%

Reasons to BUY







Agribusiness Infrastructure New Markets

Reasons to BUY



Valuation: 10y projected FCFF + Terminal Value

Revenue

Capacity raise

Minorities acquisitions

International expansion

Investment plan

574

799 853

1.274

1.692 EBITDA (BRL mn)

2013E 2015E 2017E 2020E 2022E

4.238 5.871 6.316

8.687

10.481 Net Revenue (BRL mn)

Reasons to BUY



Revenue CAGR2013E-2022E: 10.5%

EBITDA CAGR2013E-2022E: 12.8%

Net Profit CAGR2013E-2022E: 13.9%

Bumper Crop Fleet Renovation

Integrated Business Planning (via ERP) Consolidation of past acquisitions

Deleverage Lower minority interests

2013E 2015E 2017E 2020E 2022E Source: Team’s estimates.

Source: Team’s estimates.

2013E 2015E 2017E 2020E 2022E

Reasons to BUY





Net Profit CAGR2013E-2022E: 13.9%




2013E 2015E 2017E 2020E 2022E Source: Team’s estimates.


13,5% 13,6% 13,5% 14,7%

16,1%

6,0% 6,2% 5,5% 6,6%

7,8%

EBITDA Margin Net Profit Margin

252

362 349

572

816 Net Profit (BRL mn)

2013E 2015E 2017E 2020E 2022E

Reasons to BUY





CAGR2013E-2022E: 13.9%






252

362 349

572

816 Net Profit (BRL mn)

ROIC2013E-2022E

15.1% → 21.3%

ROE2013E-2022E

17.3% → 22.0%

Net Profit

244.370

93.190

202.094 163.279

279.363 282.640

364.885

463.600

573.090

702.345

812.094

2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E

Free cash flow to firm (BRL mn)

Target Price

BRL18.1

Market Price

BRL13.15

Assumptions (nominal terms)

WACC 11.3%

g 5.5%


CAGR2012E-2022E: 11.3%

BUY UPSIDE

37.6%

Reasons to BUY



244.370

93.190

202.094 163.279

279.363 282.640

364.885

463.600

573.090

702.345

812.094

2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E

Free cash flow to firm (BRL mn)

Assumptions (nominal terms)

WACC 11.3%

g 5.5%


CAGR2012E-2022E: 11.3%

Reasons to BUY



BRL 1.2

Financial Services

BRL 5.8

Truck Trailers

BRL 19.1

Auto parts

BRL 5.0

Minorities per share

BRL 3.1

Net Debt per share

BRL 18.1

Target Price

Reasons to BUY



Multiples

EV/EBITDA LTM

High 13.1x

Median 8.6x

Low 6.6x

RAPT4 6.8x

Discount 21.1%

EV/EBITDA Company LTM

RAPT4 6.8x MYPK3 8.6x AUTM3 6.6x POMO4 13.1x LEVE3 8.9x Median 8.6x

*LTM: Last 12-months Source: Bloomberg.

Source: Bloomberg.

Source: Bloomberg.

4,2x

5,8x

9,5x

6,7x

5,6x 6,0x

6,8x

4,7x

5,7x

9,7x

7,7x

13,1x

7,7x 7,7x 8,6x

2005 2006 2007 2008 2010 2011 2012 Oct-13

Historical EV/EBITDA

RAPT4 Median

Reasons to BUY



Multiples

32.8%

Considering peer’s target multiples…

UPSIDE Multiple’s Target

Price

BRL 17.5

Market Price

BRL13.15

Avg Peer Target EV/EBITDA

7.2x

EBITDA E14

BRL 750mn

Net debt E14

BRL 840mn

Reasons to BUY



DCF Multiples






Reasons to BUY



Investment Risks

Source: Team analysis

Fluctuation of commodities

price

Fluctuation of exchange rate

End of

government stimulus

Operational leverage impact

Increase on international

players

Drop in GDP

growth

Increase in domestic

competition

International economic

turmoil

Scarcity credit lines

Decrease in Brazilian supply of

crops

Impact

Probability H

igh

M

od

era

te

Lo

w

Severe Moderate Insignificant

Operational

Macroeconomics

Market

Political

Drop in GDP

growth

End of government

stimulus

Truck Production

& Sales

INFLATION

AGRIBUSINESS FOREIGN

EXCHANGE

Reasons to BUY



Drop in GDP growth

-60%

-30%

0%

30%

60%

90%

120%

-2%

0%

2%

4%

6%

8%

∆GDP ∆Truck Production GDP

Source: Team analysis Source: IBGE and Anfavea data

Reasons to BUY



End of government stimulus

-40%

-20%

0%

20%

40%

60%

0

20000

40000

60000

80000

100000

120000

140000

2009 2010 2011 2012

Financing (BRL MM) vs. Sales Growth (%)

Amouted financed by FINAME (R$MM) Truck sales growth

66% 69% 70% 75%

0%

50%

100%

2009 2010 2011 2012

Brazil Commercial Vehicles Sales Payment

Consorcium FINAME Leasing Funding Cash

FINAME PSI

Final products made with more than 60%

domestic parts

Interest rate around 4% a.a.

Source: BNDES and Anfavea data

Source: Anef data

Source: BNDES data and Team estimates (BRL mn)

Reasons to BUY



Monte Carlo Simulation Variables Distribution

GDP growth (%) Normal

Agribusiness Production (%) Normal

Labor Force Cost (%) Normal Infrastructure Investment (%) Normal

Exchange Rate - BRL/USD Lognormal

0

100

200

300

400

500

600

700

800

900

1000

3 6 9 12 15 18 21 24 27 30 33 36

Fre

qu

en

cy (

x)

Target Price Source: Team estimates

SELL: 7% HOLD: 25% BUY: 68%

Distribution of estimated Target Prices

Reasons to BUY








DCF Multiples

“A value stock with high growth potential”


Thank You

Q&A Session 1

Company Data 1. Balance Sheet – 2011A-2017E – Assets 2. Balance Sheet – 2011A-2017E – L & E 3. Balance Sheet – 2018E-2023E – Assets 4. Balance Sheet – 2018E-2023E – L & E 5. Income Statement – 2011A-2017E 6. Income Statement – 2018E-2023E 7. Cash-Flow Statement – 2011A-2017E 8. Cash-Flow Statement – 2018E-2023E 9. FCFF – 2011A-2017E 10. FCFF – 2018E-2023E 11. Debt in details (4 slides)

Industry Overview 1. Industry - Trucks 2. Market Share – TT 3. Competition – TT 4. Competition TT (description) 5. Industry – AP 6. Competition & Market Share – AP 7. Infrastructure (PAC) 8. PAC investments in Railways 9. Porter’s five forces analysis 10. SWOT analysis 11. Truck production & GDP 12. Brazil’s logistics (map) 13. Brazil vs. BRICS (Infrastructure) 14. Importance – Performance Matrix 15. Emission Patterns

Business Description 1. Regional and Global Units 2. Distribution Centers 3. Strategies 4. Strengths 5. Holding Structure (2 slides) 6. Shareholder description (2 slides) 7. Investment Plan (04’- 09’) 8. Current Investment Plan 9. Corporate Governance (Board)

Q&A Session 2

10. Corporate Governance (profile 1) 11. Corporate Governance (profile 2)

Valuation & Financials 1. Revenue Model 2. Inflation 3. GDP

4. CAPEX 5. CAPEX Breakdown 6. D&A 7. COGS Breakdown (components) 8. COGS Breakdown (Segment) 9. Change in WC 10. Net debt/EBITDA 11. WACC Assumptions 12. Beta Calculation 13. Sensitivity Analysis 14. Add: Librelato’s acquisition 15. Add: Novo Mercado Premium 16. DuPont Analysis 17. Margins 18. ROIC, ROE, ROE 19. Peers – Profitability 20. Expenses –SG&A evolution 21. EPS 22. CFO/CAPEX 23. Cash flow statement evolution 24. Revenue Growth Drivers 25. Gross Margin Exposure 26. Margins by Segment 27. Debt Ratios

Q&A Session 2 Valuation & Financials 28. Cash Generation 29. Competitors – Gross Margin 30. Competitors – EBITDA Margins 31. Competitors – Net Revenue 32. Multiples – P/E - discount 33. Multiples – P/E - target 34. Peers 1 35. Peers 2

Main Menu

Risks 1. Risk’s Matrix 2. Bullish Case – Result 3. Bullish Case – Variables 4. Bearish Case – Result 5. Bearish Case – Variables 6. Monte Carlo Simulation – Results 7. Monte Carlo Simulation – Assumptions 8. Corporate Governance – Ups and downs 9. Corporate Governance – Requirements 10. Stocks Liquidity 11. Drop in GDP growth 12. FINAME PSI - Description 13. FINAME PSI – Possible scenario 14. FINAME PSI – Sensitivity Analysis

Static slides (1)

1. Recommendation I

2. Recommendation II 3. Overview I 4. Overview II 5. Strategy I 6. Strategy II 7. Reasons to Buy 8. Sales Strategy I 9. Sales Strategy II 10. Flexibility 11. Intercompany Synergy I 12. Intercompany Synergy II 13. Intercompany Synergy III 14. Growth Opportunities 15. Agribusiness I 16. Agribusiness II 17. Agribusiness III 18. Infrastructure I 19. Infrastructure II 20. Infrastructure III 21. New Markets 22. Valuation I 23. Valuation II

24. Valuation III 25. Valuation IV 26. Valuation V 27. Valuation VI 28. Multiples I 29. Multiples II 30. Risk Matrix 31. Risk I 32. Risk II 33. Monte Carlo 34. Conclusion

Balance Sheet (BRL mn) 2011 2012 2013E 2014E 2015E 2016E 2017E

Total Assets 4,019,641 4,321,295 4,880,157 5,456,123 5,994,342 6,318,597 6,706,566

Current Assets 2,543,758 2,676,222 2,795,408 3,123,704 3,410,807 3,480,453 3,610,271

Cash and Cash Equivalents 1,104,150 1,099,438 1,441,201 1,470,544 1,535,305 1,421,706 1,591,427

Receivables 616,495 764,255 645,420 788,195 894,093 945,048 961,984

Inventories 591,310 533,298 485,349 592,100 671,883 736,223 723,831

Other Current Assets 231,803 279,231 223,438 272,866 309,527 377,476 333,030

Non Current Assets 1,475,883 1,645,073 2,084,749 2,332,419 2,583,534 2,838,143 3,096,294

Property/Plant/Equipment 1,183,373 1,352,120 1,791,796 2,039,466 2,290,581 2,545,190 2,803,341

Other Non Current Assets 292,510 292,953 292,953 292,953 292,953 292,953 292,953

Balance Sheet 2011A-2017E - Assets

Source: Company’s data and team’s estimates

Main Menu

Balance Sheet 2011A-2017E - Liabilities

Balance Sheet (BRL mn) 2011 2012 2013E 2014E 2015E 2016E 2017E

Total Liabilities 2,158,283 2,463,638 2,845,877 3,193,044 3,478,033 3,655,972 3,799,649

Current Liabilities 1,064,087 1,372,852 1,555,091 1,752,258 1,912,247 1,990,186 2,083,863

Accounts Payable (Suppliers) 189,134 207,305 201,747 246,120 279,284 328,985 300,877

Short-Term Debt 474,049 835,983 885,983 935,983 985,983 1,035,983 1,085,983

Other Current Liabilities 400,904 329,564 467,361 570,155 646,980 625,218 697,003

Non Current Liabilities 1,094,196 1,090,786 1,290,786 1,440,786 1,565,786 1,665,786 1,715,786

Long-Term Debt 1,009,639 1,025,455 1,225,455 1,375,455 1,500,455 1,600,455 1,650,455

Other Non Current Liabilities 84,557 65,331 65,331 65,331 65,331 65,331 65,331

Total Equity 1,861,358 1,857,657 2,034,281 2,263,079 2,516,308 2,662,624 2,906,916

Equity 1,354,272 1,369,496 1,546,120 1,774,918 2,028,147 2,174,463 2,418,755

Non Controlling Participation 507,086 488,161 488,161 488,161 488,161 488,161 488,161


Main Menu

Balance Sheet (BRL mn) 2018E 2019E 2020E 2021E 2022E 2023E

Total Assets 7,106,532 7,546,355 8,027,147 8,573,545 9,184,427 9,872,716

Current Assets 3,888,184 4,200,641 4,548,519 4,956,218 5,422,363 5,959,612

Cash and Cash Equivalents 1,629,562 1,691,519 1,788,629 1,918,318 2,103,222 2,343,744

Receivables 1,076,948 1,197,619 1,319,442 1,456,298 1,596,251 1,743,493

Inventories 808,845 896,898 983,670 1,077,445 1,170,282 1,268,794

Other Current Assets 372,829 414,605 456,778 504,157 552,607 603,581

Non Current Assets 3,218,347 3,345,715 3,478,627 3,617,327 3,762,065 3,913,105

Property/Plant/Equipment 2,925,394 3,052,762 3,185,674 3,324,374 3,469,112 3,620,152

Other Non Current Assets 292,953 292,953 292,953 292,953 292,953 292,953

Balance Sheet 2018E-2023E - Assets

Source: Team’s estimates

Main Menu

Balance Sheet 2018E-2023E - Liabilities

Balance Sheet (BRL mn) 2018E 2019E 2020E 2021E 2022E 2023E

Total Liabilities 3,991,851 4,188,242 4,382,867 4,587,146 4,790,132 5,000,942

Current Liabilities 2,276,065 2,472,456 2,667,081 2,871,360 3,074,346 3,285,156

Accounts Payable (Suppliers) 336,216 372,817 408,886 447,866 486,455 527,404

Short-Term Debt 1,160,983 1,235,983 1,310,983 1,385,983 1,460,983 1,535,983

Other Current Liabilities 778,867 863,656 947,212 1,037,512 1,126,908 1,221,768

Non Current Liabilities 1,715,786 1,715,786 1,715,786 1,715,786 1,715,786 1,715,786

Long-Term Debt 1,650,455 1,650,455 1,650,455 1,650,455 1,650,455 1,650,455

Other Non Current Liabilities 65,331 65,331 65,331 65,331 65,331 65,331

Total Equity 3,114,680 3,358,114 3,644,280 3,986,398 4,394,295 4,871,775

Equity 2,626,519 2,869,953 3,156,119 3,498,237 3,906,134 4,383,614

Non Controlling Participation 488,161 488,161 488,161 488,161 488,161 488,161 Source: Team’s estimates

Main Menu

Income Statement 2011A-2017E

2011 2012 2013E 2014E 2015E 2016E 2017E

Net Revenues 4.156 3.502 4.238 5.175 5.871 5.592 6.316

COGs (3.138) (2.770) (3.202) (3.914) (4.442) (4.396) (4.804)

Gross Income 1.019 732 1.036 1.262 1.429 1.195 1.512

SG&A (550) (558) (585) (719) (815) (822) (890)

D&A (53) (69) (76) (100) (114) (128) (143)

EBIT 469 174 451 543 614 373 622

Financial Result 60 (36) (38) (8) (22) (31) (51)

EBT 529 139 413 535 592 342 571

Income Taxes (139) (31) (111) (144) (160) (92) (154)

Minorities (111) (58) (41) (53) (59) (34) (57)

Profir Sharing (9) (6) (8) (10) (11) (6) (11)

Net Income 269 43 252 327 362 209 349


Main Menu

Income Statement 2018E-2023E

2018E 2019E 2020E 2022E 2023E

Net Revenues 7.071 7.864 8.687 10.481 11.448

COGs (5.366) (5.940) (6.524) (7.723) (8.366)

Gross Income 1.705 1.923 2.164 2.758 3.082

SG&A (983) (1.072) (1.167) (1.368) (1.473)

D&A (157) (164) (171) (186) (194)

EBIT 722 851 997 1.390 1.609

Financial Result (43) (55) (61) (56) (47)

EBT 680 796 936 1.335 1.562

Income Taxes (184) (215) (253) (360) (422)

Minorities (68) (80) (94) (133) (156)

Profir Sharing (13) (15) (18) (25) (29)

Net Income 416 487 572 816 955


Main Menu

Cash Flow Statement 2011A–2017E

Cash Flow Statement (BRL mn)

2011

2012

2013E

2014E

2015E

2016E

2017E

Net Profit 269,149 42,562 252,319 326,855 361,756 209,023 348,989

D&A 87,463 112,260 122,794 162,724 185,216 208,022 231,144

Change in Net Working Capital (345,167) (190,345) 354,815 (151,786) (112,352) (155,306) 83,580

Non Controlling Participation 61,389 (18,925)

Other (61,071) 326,393

CFO 11,763 271,945 729,929 337,793 434,620 261,738 663,713

CAPEX (248,273) (276,881) (562,470) (410,394) (436,332) (462,631) (489,295)

Other Investments - 34,465

CFI (248,273) (242,416) (562,470) (410,394) (436,332) (462,631) (489,295)

Interest Paid (69,129) (99,440)

Net Changes in Debt 78,551 273,050 250,000 200,000 175,000 150,000 100,000

Dividends Paid (32,815) (39,411) (75,696) (98,057) (108,527) (62,707) (104,697)

Other (53,389) (44,664)

CFF (76,782) 89,535 174,304 101,943 66,473 87,293 (4,697)

Change in Cash (313,292) 119,064 341,763 29,343 64,762 (113,599) 169,721

Beginning Balance of Cash 1,049,483 736,191 855,255 1,197,018 1,226,361 1,291,122 1,177,523

Ex-Ending Balance of Cash 736,191 855,255 1,197,018 1,226,361 1,291,122 1,177,523 1,347,244 Source: Company’s data and team’s estimates

Main Menu

Cash Flow Statement 2018E–2023E Statement of Cash Flow (BRL mn)

2018E

2019E

2020E

2021E

2022E

2023E

Net Profit 415,528 486,867 572,332 684,237 815,794 954,959

D&A 254,589 265,673 277,240 289,311 301,907 315,051

Change in Net Working Capital (122,576) (129,109) (131,143) (148,730) (153,255) (160,918)

Non Controlling Participation

Other

CFO 547,540 623,431 718,429 824,818 964,446 1,109,092

CAPEX (376,642) (393,040) (410,153) (428,010) (446,645) (466,091)

Other Investments

CFI (376,642) (393,040) (410,153) (428,010) (446,645) (466,091)

Interest Paid

Net Changes in Debt 75,000 75,000 75,000 75,000 75,000 75,000

Dividends Paid (207,764) (243,433) (286,166) (342,119) (407,897) (477,479)

Other

CFF (132,764) (168,433) (211,166) (267,119) (332,897) (402,479)

Change in Cash 38,135 61,957 97,110 129,689 184,904 240,521

Beginning Balance of Cash 1,347,244 1,385,379 1,447,336 1,544,446 1,674,135 1,859,039

Ex-Ending Balance of Cash 1,385,379 1,447,336 1,544,446 1,674,135 1,859,039 2,099,561 Source: Company’s data and team’s estimates

Main Menu

DCF (BRL mn) 2011 2012 2013E 2014E 2015E 2016E 2017E

EBIT 469,195 174,375 451,001 542,667 613,766 372,967 621,827

Income Taxes (123,657) (39,125) (121,770) (146,520) (165,717) (100,701) (167,893)

NOPAT 345,538 135,250 329,231 396,147 448,049 272,266 453,934

D&A 87,463 112,260 122,794 162,724 185,216 208,022 231,144

Chg. Working Capital (345,167) (190,345) 354,815 (151,786) (112,352) (155,306) 83,580

Capex (chg in PPE) (248,273) (276,881) (562,470) (410,394) (436,332) (462,631) (489,295)

FCFF (160,439) (219,716) 244,370 (3,309) 84,582 (137,649) 279,363

FCFF (2011A – 2017E)


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DCF (BRL mn) 2018E 2019E 2020E 2021E 2022E 2023E

EBIT 722,287 851,180 996,789 1,178,794 1,390,014 1,608,710

Income Taxes (195,018) (229,819) (269,133) (318,274) (375,304) (434,352)

NOPAT 527,270 621,362 727,656 860,519 1,014,710 1,174,358

D&A 254,589 265,673 277,240 289,311 301,907 315,051

Chg. Working Capital (122,576) (129,109) (131,143) (148,730) (153,255) (160,918)

Capex (chg in PPE) (376,642) (393,040) (410,153) (428,010) (446,645) (466,091)

FCFF 282,640 364,885 463,600 573,090 716,717 862,400

FCFF (2018E – 2023E)


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Long term debt in BRL (mn) Index Interest YoY Currency $

FINEP TJLP TJLP + 3.1% BRL 93,822

Financing CDI CDI + 1.2% BRL 242,563

BNDES TJLP TJLP + 3.25% BRL 54,402

Fundopem IPCA IPCA + 3% BRL 136,010

Open market TJLP TJLP + 2% BRL 29,377

Open market TJLP TJLP + 5.1% BRL 72,547

Financing LIBOR USD + Libor + 3.35% USD 360,586

Working Capital Badlar Badlar + 9.8% USD 11,609

BNDES USD USD + 2.5% USD 24,539

TOTAL long term debt (2012) - - - BRL 1,025,455


Debt in details (1)

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Debt in details (2) Short term debt in BRL (mn) Index Interest YoY Currency $

FINAME TJLP TJLP + 5.5% BRL 65,575

FINEP TJLP TJLP + 3.15% BRL 26,710

Financing CDI CDI + 1.2% BRL 12,803

Fundopem IPCA IPCA + 3% BRL 1,198

BNDES TJLP TJLP + 3.15% BRL 66,627

BNDES - 6.5% BRL 504,710

Open market TJLP TJLP + 2.5% BRL 12,860

Open market - 5,1% BRL 25,599

FX USD/LIBOR USD + LIBOR + 2.25% USD 46,449

FX USD/LIBOR USD + LIBOR + 3.35% USD 60,237

Working capital Badlar Badlar + 9.8% USD 4,211

BNDES USD USD + 2.25% USD 9,004

TOTAL short term debt (2012) - - - BRL 835,983


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Debt in details (3) Debt Breakdown (2012) BRL [mn]

Short Term 835.98

Long Term 1025.46

Total Debt 1861.44

Cash & Equivalents 1099.43

Net Debt 762.00

Interest Burden Average

Index: BRL 5.4% a.a.

Index: Libor USD + 4.1% a.a.

Index: Badlar USD + 9.8% a.a.

Net Debt / EBITDA 1.86

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0

500

1000

1500

2000

Short Term Long Term Total Debt Cash &Equivalents

Net Debt

Debt in details (4)

72,2%

25,1%

0,8% 1,8%

BRL

Libor

Badlar

Others


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Internal distribution centers: > 100 Foreign distribution centers: 65

Brazil

Argentina

Andean States

Southern Cone

Middle East

East Africa

West Africa

Maghreb

Central America and Caribe

Distribution centers worldwide


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Industrial sites

International offices

Outsourced Industrial units

Distribution centers

Regional and Global units


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CAGR2006-2012 = 10.58%

Truck Industry

26 38

52 59 42

55 53 51 69 74 66 66

83 80 76 98

122 110

158 173

139

1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Truck sales in Brazil – 2012 (000’ units)

1.704

583 270 268 164 147 140 133

Truck Production by country -2012 (000’ units)

Source: OICA

Source: ANFAVEA

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Randon’s Market Share – Truck Trailers

36% 38% 37% 33% 35% 32% 33% 30% 29%

19% 15% 15%16% 15%

15% 11% 12% 12%

14% 14% 13%14% 11%

11%12% 10% 12%

7% 9% 11% 10%

8%7% 6% 6% 7% 7% 7% 10% 9%

20% 24% 25% 27% 26% 28% 28% 26% 28%

2005 2006 2007 2008 2009 2010 2011 2012 2013

Randon Guerra Fachinni Librelato Noma OutrosOthers

The company has focused on high unit value products, a market demand that few players can supply. When market share is calculated based on the revenue size, Randon’s market share displays a positive short-term trend explained by the factors already announced. (45% 1H13)


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Truck trailer’s competitors – biggest 4

28%

29%

12%

12%10%

9%

Price Segment

Pro

du

ctQ

ua

lity

High

Low

PremiumLow

Randon Facchini Guerra

Librelato Noma Others

Market Share % - Size of the circle

28%

9%

10%

12%

12%

29%

0% 10% 20% 30% 40%

Others

Noma

Librelato

Guerra

Fachinni

Randon

Source: Company’s data and team’s analysis

Main Menu

Domestic competitors – Truck trailers

Origin Country

Differentiation Net Revenue

2012 Market

Leadership Main

product

Randon Brazil Premium products

BRL 3.4 bn

Truck trailers and auto parts

Librelato Brazil Good

cost-benefit BRL

0.18 bn


Facchini Brazil Focus on VUC’s BRL

0.66 bn Light truck

trailers

Guerra Brazil Low-end products

BRL 0.36 bn

Bulk

Source: Bloomberg and Companies’ data

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Auto Parts

Source: Sindipeças

1.193

13.441 15.191 16.358 18.806 17.230

20.197 24.339

27.988 33.136

40.938

54.254

61.464 61.800

68.283

75.171 75.320

86.387 91.264

81.715

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Industry’s Revenue (BRL mn)

CAGR2003-2012 = 7.98%

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Friction materials: • Bendix (USA) • Cobreg (GER) • Thermoid (BR) • Duroline (BRA)

Auto part’s competitors

89%75%

53% 51%

Fifth Wheel Axles and

Suspensions

Brakes Heavy Tarps

Brakes: • Knorr (GER) • Wabco (USA) • Boechat (BRA) • Silpa (BRA) Articulation system: • Fontaine (USA) • Amsted Maxion (USA and

BRA) • George Fisher (SUI) • Fuwa (CHN) Suspension • Fuwa (CHN) • SAF holland (USA and GER) • Hendrikson (USA) • HBZ (BRA) • Guerra (BRA)


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0

20

40

60

80

100

120

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

BR

L B

illi

on

s

PAC expected investments (BRL bn)


Highways 52%

Railways 40%

Pipeline 4%

Waterways 4%

% of Total Investment

Source: BNDES, FIESP

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Porter’s five forces analysis

1

2

3

4

5

Threat of SubstituteProducts

Bargaining Power ofSuppliers

Threat of new EntrantsBargaining Power of

Customers

Competitive Rivalrywithin Industry

Average Competitor Randon

Scale: 1: Less favorable to Randon 5: Most favorable to Randon

Source: Company’s data and team’s analysis

Main Menu

Correlation between truck production and GDP

Source: ANFAVEA, BCB

-60%

-40%

-20%

0%

20%

40%

60%

80%

-5,0% -3,0% -1,0% 1,0% 3,0% 5,0% 7,0% 9,0% 11,0% 13,0% 15,0%

∆Truck Prod. = ∆1.328GDP – 0,1042

∆T

ruck

Pro

du

ctio

n

∆GDP

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Brazilian Transportation Logistics

Source: CNT

Source: ICONE, Aliceweb

Paranaguá

Santos

Tubarão

Ponta da madeira

Sugar production area

Soy/corn production area

Iron ore production area

Ports

Lucas do Rio Verde

Santarem

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Brazil’s infrastructure gap against BRICS


1 = Best performer

144 = Worst performer

15

68

70

104 134

52

59

80

93 135

22

27

30

48 100

42

54

86

123 136


Ranking of infraestructure quality

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Government requirements

37%

-29%

25%

12%

-10%

21%

-15%

24%

44%

-20%

19

94

19

96

19

98

20

00

20

02

20

04

20

06

20

08

20

10

20

12

Source: ANFAVEA

EURO I

EURO II

EURO III EURO V

Industry sales and new emission patterns

* Current pattern that defines the acceptable limits for pollution emission standards.

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Randon’s strategies Market leadership:

• Auto parts and truck trailers. International reach:

• Possible defense against Brazil’s Business cycles; • New markets worldwide; • Unexplored regions -> Further potential

Flexible production line: • Attend segment w/ higher consumption Potential; Dilute fixed costs.

Premium products: • Differentiation • Trend to more value added products

Wide distribution network: • Tap new consumers • Supporting Randon’s premium strategy


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Randon’s

Strategies

Market leadership

International reach

Flexible production

line

Premium products


Randon’s

Strengths

Dominant position

Vertical integration

Strong brand equity

Flexible assembly

line Innovation

focus

Strategic partners

Wide distribution

network

Economies of scale in auto parts

Randon’s Strengths


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Randon’s holding structure


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100%

Dramd

(Controling Group)

Randon Brantech

Randon Argentina

Banco Randon

Randon Investimentos

Suspensys

Master

JOST

Fras-le

Castertech

Randon S.A.

Implementos e

Participações

Truck trailers, Railcars &

Special vehicles Auto parts Financial services

40.4%

100%

51%

51%

45%

100%

100%

100%

100%

100%

Randon Implementos

Randon S.A Implementos e Participações: Produces trailers and railcars.

Randon Argentina: Produces trailers and semi-trailers.

Randon Veículos: Produces off-road/special vehicles.

Fras-le: Produces brakes and components

Master: Produces air brakes for trucks and buses.

Suspensys: Produces suspension systems.

JOST: Produces coupling systems that links the truck to the trailer.

Castertech: Produces nodular iron castings for Randon Companies.

Randon Consórcios: Provide customers with a form of financing Randon’s end products.

Banco Randon: Develops financial products and services for Randon’s companies.

Randon’s holding structure


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1%

40%

35%

15%

9% Treasury shares

Controlling group

Institutional

investors

Foreign investors

Others


TOTAL SHARES 243,785,452

161,897,158 preferential shares (RAPT4)

81,888,294 ordinary shares (RAPT3)

---------------------------------Free Float 57.5%

Tag along 80%

Randon’s shareholders structure and characteristics


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Randon’s shareholders structure characteristics


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Randon S.A. %ON %PN %TOTAL

Dramd 78.58% 21.14% 40.43%

CSHG Dividendos Master FII 0.2% 0.0% 0.07%

Green Fund. Llc 1.32% 0% 0.44%

CSHG Verde Master FIM 4.34% 0% 1.46%

CSHG Valor Dividendos FII 0.04% 0% 0.01%

CSHG Verde Equity Master FII 2.21% 0% 0.74%

Green li Fund Llc 0.09% 0% 0.03%

Banco do Brasil 10.07% 5.12% 6.79%

Others 3.15% 72.04% 48.9%

Treasury shares 0% 1.7% 1.13%


BRL 119mn

BRL 294mn

+147%

2004 2009

2004 2009Consolidated exports

1,274

2,256

1,032

2,145

2004 2009

Autopart revenue Truck trailer revenue

BRL 4,468mn

BRL 2,361mn

+89%

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New investment plan


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BRL 2.5bn

60% Equity

40% Debt

4,000 new

employees

BRL 1.5bn

BRL 0.5bn

BRL 0.5bn

Organic growth Inorganic growth

Working capital

∆(exports/revenue) =

11000bps

+60% of gross revenue in

5 years

Ruy Lopes Filho

Counselor

Hugo Ferreira

Counselor

Raul Randon

Chairman

Alexandre Randon

Vice-Chairman

Célia Larichia

Counselor

Board of directors

Executive Boards

Corporate Governance - Boards

Independent counselor


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Erino Tonon

Vice President director

David Randon

CEO

Alexandre Randon

Vice President Director

Geraldo Santa Catharina

IR Director

Short Biography

Raul Randon

The Chairman and Founder started to work with 14 years old and

with 19 joined the army. Three years later Raul created its first

business with his brother, a small engine shop. Mr. Randon’s effort

and successful was rewarded when named the 23º most noticed

Brazilian business man in 2012.

Position Chairman

Time on Board 21 years

Age 84 years old

David Randon Mr. Raul’s son, David Randon is a mechanical engineer by

Pontifícia Universidade Católica do Rio Grande do Sul. He started

his career as an intern at Meritor – USA, at the time, one of

Randon’s JV partners. After this, Mr. David became the president

of the Câmera de Indústria, Comércio e Serviços de Caxias do Sul.

Position CEO

Age 52 years old

Corporate Governance - Profile


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Short Biography

Alexandre Randon Mr. Alexandre began his career in 1983 and, at Randon, in

1986, exercising positions such as Administrative and

Financial Director, Corporate Director and Member of the

Board of Directors, is Vice President of Randon Implementos e

Participações S.A and General Manager of Randon Consórcios

Ltda.

Time on Board 4 years

Position Vice - Chairman

Age 51 years old

Erino Tonon Erino is a mechanical engineer by Faculdade de Engenharia de

Joinville and is related to Randon since the last 20 years. Mr.

Tonon is a Board Member at Lupatech, a company engaged in

produce parts and equipment for Oil extraction, and Ex-CEO

at Fras-le S.A, one of Randon’s companies.

Position Vice - President

Age 68 years old

Corporate Governance – Profile 2


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Current Rail Infrastructure

Source: ANTT, ILOS and ministry of transportation

PAC Investments in Railways New railways planned by PAC

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Domestic competitors – Truck trailers

Origin Country

Differentiation Net Revenue

2012 Market

Leadership Main

product

Randon Brazil Premium products

BRL 3.4 bn


Librelato Brazil Good

cost-benefit BRL

0.18 bn


Facchini Brazil Focus on VUC’s BRL

0.66 bn Light truck

trailers

Guerra Brazil Low-end products

BRL 0.36 bn

Bulk


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Bearish Case: Results

0,0

5,0

10,0

15,0

20,0

25,0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Bearish Case

BRL 10.1

Bullish Case

BRL 20.2

Target Price

BRL 18.1

DOWNSIDE

-23.2%

Market Price

BRL 13.15

Bearish Case

BRL 10.1

SELL

Market Price

BRL 13.15


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Bearish Case: Variables

Bearish case (Bear)

Bear target price (BRL)

10.1

Bear downside -23.2%

Assumptions Impact

Complete end of FINAME PSI

• Increase in financial expenses; • Decrease on demand level; • Increase in replacement auto parts revenue; • Market share lost.

GDP below expected • Decrease on demand level; • Less investments in infrastructure; • Decrease in product’s prices.


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Bullish Case: Results

0,0

5,0

10,0

15,0

20,0

25,0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Bearish Case

BRL 10.1

Bullish Case

BRL 20.2

Target Price

BRL 18.1 Market Price

BRL 13.15

UPSIDE

+53.6%

Market Price

BRL 13.15

Bearish Case

BRL 18.1

BUY Source: Team’s estimates

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Bullish Case: Variables

Bullish case (Bull)

Bull target price (BRL) 20.2

Bull downside 53.6%

Assumptions Impact

FINAME renovation on 4% • Keep with same financial expenses level; • No downturn on industry demand

GDP above expected • Additional demand; • Dilute fixed costs.

Librelato acquisition • Share price increase in BRL 1.2 • 10% market share increase + synergy gains

Novo Mercado migration • Increase liquidity


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Monte Carlo Simulation Variables Distribution

GDP growth (%) Normal Agribusiness Production (%) Normal

Labor Force Cost (%) Normal

Infrastructure Investment (%) Normal


0

100

200

300

400

500

600

700

800

900

1000

3 6 9 12 15 18 21 24 27 30 33 36

Fre

qu

en

cy (

x)

Target Price Source: Team estimates

SELL: 7% HOLD: 25% BUY: 68%

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Probab.

Time

P0

Price

t σ t

2 -

0T

2

eS S

i

Normal and Lognormal distributions

• 10,000 iterations • Mean: BRL18.77 • St. Dev: BRL4.96 • Median: BRL18.19 • Interval (95%): [7.20;46.82]

Geometric Brownian Motion (GBM)

Monte Carlo simulation

Variables Distribution

GDP growth (%) Normal

Agribusiness Production (%) Normal

Labor Force Cost (%) Normal

Infrastructure Investment (%) Normal


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Investment Risks


Fluctuation of commodities

price

Fluctuation of exchange rate

End of

government stimulus

Operational leverage impact

Increase on international

players

Drop in GDP

growth

Increase in domestic

competition

International economic

turmoil

Scarcity credit lines

Decrease in Brazilian supply of

crops

Impact

Probability H

igh

M

od

era

te

Lo

w

Severe Moderate Insignificant

Operational

Macroeconomics

Market

Political

Drop in GDP

growth

End of government

stimulus

Main Menu

Drop in GDP growth

Source: BCB and Anfavea

-3%

-1%

1%

3%

5%

7%

9%

11%

13%

15%

-50%

-25%

0%

25%

50%

75%

100%

125%

19

98

20

00

20

02

20

04

20

06

20

08

20

10

20

12

20

14

E

20

16

E

∆Truck Production (%) ∆GDP (%)

Correlation

62.8%

Exports

Diversification

Unexplored regions

Demand for replacement

Main Menu

Corporate Governance – Up and downsides

Downsides Upsides

• Defensive corporate governance in

a cyclical industry;

• Manager’s money invested in the

company;

• Manager’s experience and know-how.

• Nível 1 Less liquidity (BRL14 mn);

• 80% tag along

• No audition committee to oversee the

management

• However, two independent

counselor


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Novo Mercado Randon

Stock classes Only ON ✗

25% free float Yes ✓

Public stock distribution Share dilution effort ✓

Board members At least 1 of 5 independent members ✓

Board posts Non accumulation of posts between boards ✓

Annual meeting and corporative events calendar

Yes ✓

Additional info announcement Yes ✓

Tag along 100% for ON ✗

Câmara de arbitragem do mercado

Compulsory ✗

Source: BMF & Bovespa and Company’s Data

Corporate Governance – Novo Mercado Requirements

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FINAME PSI

Actual rate

4.0%

Possible rate

≈ 6.0%

Expected effects:

2014E 2014E*

Interest expenses (BRL) 148,500 192,540

Net Revenue (BRL) 5,175,336 3,924,968

% of FINAME 70% 50%

% of replacement items 20% 35%

Auto parts market share - -

Target Price

16.3

Source: Team’s estimates and company’s data

Upside 24.0%

Recently announced IPI = 0% until 12/31/2017

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TARGET PRICE FINAME PSI Interest rate

4% 6% 8% End

GDP 1,5% 16.4 15.3 14.1 13.4

(13' - 17') 2,5% 18.1 16.3 15.2 13.6

3,5% 18.9 17.1 15.8 14.0

UPSIDE FINAME PSI interest rate

4% 6% 8% End

GDP 1,5% 24.7% 16.3% 7.2% 1.7%

(13' - 17') 2,5% 37.6% 24.0% 15.6% 3.4%

3,5% 43.7% 30.0% 20.2% 6.5%

FINAME PSI – Sensitivity Analysis

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2010

BRL 6.8 mn

1H13

BRL 13.7 mn +101%

Stock liquidity

4,2 3,6

6,8

8,6

12,0 13,7

2008 2009 2010 2011 2012 1H13

BRL mn


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Free Float

57.5%

Valuation : Sales and price forecast - Our Revenue Model

𝑹𝒂𝒏𝒅𝒐𝒏′𝒔 𝒕𝒓𝒖𝒄𝒌 𝒕𝒓𝒂𝒊𝒍𝒆𝒓 𝒑𝒓𝒐𝒅𝒖𝒄𝒕𝒊𝒐𝒏 𝒕𝒐𝒕𝒂𝒍 𝒕= 𝝋 ∗ 𝑯𝒂𝒓𝒗𝒆𝒔𝒕 ∗ 𝟎. 𝟓𝟏 + 𝜽 ∗ 𝑰𝒏𝒅𝒖𝒔𝒕𝒓𝒊𝒂𝒍 𝑮𝑫𝑷 ∗ 𝟎. 𝟑𝟐 + 𝝉 ∗ 𝑺𝒆𝒓𝒗𝒊𝒄𝒆 𝑮𝑫𝑷 ∗ (𝟎.𝟏𝟗)

𝝋𝒕 =

𝑹𝒂𝒏𝒅𝒐𝒏′𝒔 𝒕𝒓𝒖𝒄𝒌 𝒕𝒓𝒂𝒊𝒍𝒆𝒓 𝒑𝒓𝒐𝒅𝒖𝒄𝒕𝒊𝒐𝒏 𝒇𝒐𝒓 𝒑𝒓𝒊𝒎𝒂𝒓𝒚 𝒔𝒆𝒄𝒕𝒐𝒓𝒕

𝑯𝒂𝒓𝒗𝒆𝒔𝒕 𝒕𝒐𝒏 𝒕

𝟐𝟎𝟏𝟐𝒕=𝟐𝟎𝟎𝟎

𝟐𝟎𝟏𝟐 − 𝟐𝟎𝟎𝟎

𝜽𝒕 =


𝑰𝒏𝒅𝒖𝒔𝒕𝒓𝒊𝒂𝒍 𝑮𝑫𝑷𝒕

𝟐𝟎𝟏𝟐𝒕=𝟐𝟎𝟎𝟎

𝟐𝟎𝟏𝟐 − 𝟐𝟎𝟎𝟎

𝝉𝒕 =


𝑺𝒆𝒓𝒗𝒊𝒄𝒆 𝑮𝑫𝑷𝒕

𝟐𝟎𝟏𝟐𝒕=𝟐𝟎𝟎𝟎

𝟐𝟎𝟏𝟐 − 𝟐𝟎𝟎𝟎

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Source: Company data and Team’s estimates.

Valuation : Truck Trailers Production

13.000

18.000

23.000

28.000

33.000

38.000

43.000

48.0002

00

5

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

E

20

14

E

20

15

E

20

16

E

20

17

E

20

18

E

20

19

E

20

20

E

20

21

E

20

22

E

Truck Trailers Production

Base Case Best Case Worst Case


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Metals

41%

Chemicals

31%

Other Components

7%

Labor

11%

Depreciation & Amortization

2%

Others8%


Valuation : COGs breakdown

Main Menu


56,56%

53,70%

52,71%

52,23%

52,91%

53,39%

52,95%

52,45%

51,83%

51,17%

50,57%

43,23%

46,16%

47,15%

47,63%

46,95%

46,47%

46,91%

47,41%

48,03%

48,69%

49,29%

2012

2013E

2014E

2015E

2016E

2017E

2018E

2019E

2020E

2021E

2022E

Truck trailers Auto parts Financial services

Valuation : COGs breakdown

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Valuation : Expected inflation rate

Source: BCB and team’s estimates.

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5,83 5,91 5,56

5,27 5,23 5,08 4,94 4,79 4,65

4,50

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

CPI - IPCA [YoY %]

Valuation : GDP Growth

Sourcee:: BCB

0,9%

2,4% 2,2%

2,6%

3,1% 3,2%

3,60%

2012 2013E 2014E 2015E 2016E 2017E 2018E

Brazil expected GDP growth (%)

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Valuation : CAPEX


(190.526)

(248.273)

(276.881)

(562.470)

(410.394)

(436.332)

(462.631) (489.295)

(376.642) (393.040)

(410.153)

(428.010)

(446.645)

CAPEX (BRL '000)

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Suspensys acquisition


Valuation : CAPEX breakdwon

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Maintenance

Acquitions

Expansion

Suspensys acquisition

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1st stage – Investment Plan

2st stage

Valuation : D&A

-

50.000,00

100.000,00

150.000,00

200.000,00

250.000,00

300.000,00

350.000,00

20

10

20

11

20

12

20

13

E

20

14

E

20

15

E

20

16

E

20

17

E

20

18

E

20

19

E

20

20

E

20

21

E

20

22

E

20

23

E

D&A [BRL '000]


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Valuation : Change in Working Capital

(400.000,00)

(300.000,00)

(200.000,00)

(100.000,00)

-

100.000,00

200.000,00

300.000,00

400.000,002

01

0

20

11

20

12

20

13

E

20

14

E

20

15

E

20

16

E

20

17

E

20

18

E

20

19

E

20

20

E

20

21

E

20

22

E

20

23

E

∆ Working Capital [BRL'000]


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Valuation : NET Debt/EBITDA

0,00%

50,00%

100,00%

150,00%

200,00%

250,00%

300,00%

20

10

20

11

20

12

20

13

E

20

14

E

20

15

E

20

16

E

20

17

E

20

18

E

20

19

E

20

20

E

20

21

E

20

22

E

20

23

E

Net Debt /EBITDA


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Valuation : WACC Assumptions

CAPM

Risks

Risk-Free Rate 2.6%

Market Risk Premium 5.5%

Country Risk Premium 2.5%

Prices

Inflation US 2,0%

Inflation BR 4.5%

Equity

Company's Beta 1.11

Cost of Equity 13.7%

WACC

After-tax Cost of Debt 7.26%

D/E 0.61

D/D+E 0.38

Perpetual Growth 5.5%

WACC 11.26%

Cost of Equity:

• Risk free rate : geometric average of 1929-2012 returns of 10-years-T-Bond.

• Expected market risk premium: geometric average returns of S&P 500 since 1929.

• Beta: we use the average unleveraged beta of Randon's peers in the global market and leveraged by the company capital structure.

• Country risk premium: historical geometric average of Credit Default Swap of Brazil.

• Inflation Differential: American inflation (CPI YoY%) subtracted from Brazilian inflation (IPCA YoY%).

Cost of Debt:

• We used the weighted average rate paid on Randon most recent debt issued.

• Current average tax rate of Randon in the last 4 years.

Source: Bloomberg and team’s estimates

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Valuation : Sensitivity Analysis

TARGET PRICE

Perpetual Growth (%)

WA

CC

(%

)

6.5% 6.0% 5.5% 5.0% 4.5%

12.3% 15.9 14.4 13.1 11.9 11.0

11.8% 18.9 17.0 15.4 14.0 12.8

11.3% 22.5 20.1 18.1 16.4 14.9

10.8% 26.9 23.8 21.3 19.2 17.4

10.3% 32.6 28.5 25.2 22.6 20.4


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Valuation : Beta Calculation

Beta Calculation

Comparable Peers Average Unleveraged Beta 0.60

Debt/Equity 0.61

Effective Taxes 24%

RAPT Levered Beta 1.11


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Additional Upside: Librelato’s Acquisition

2012 2013E 2014E 2015E 2016E 2017E

EBIT 16,368 45,613 47,485 49,434 51,462 53,574

Income taxes (4,020) (11,203) (11,663) (12,141) (12,640) (13,158)

NOPAT 12,348 34,410 35,822 37,292 38,823 40,416

D&A 10,540 10,540 11,042 12,827 14,473 16,060

Chg. Working Capital (15,924) 35,367 (982) (1,022) (991) (1,182)

Capex (chg in PPE) (44,100) (14,702) (15,305) (15,933) (16,587) (17,268)

FCFF (37,136) 65,615 30,577 33,164 35,718 38,026

10yr. FCFF 153,229

Terminal Value 540,381

EV 693,610

10 p.p. market share increase

9% additional upside

BRL 1.2/share increase

Source: Jornal da manhã Criciuma and team’s estimates

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Additional Upside: Corporate Governance – Novo Mercado premium


P/E – Current Non Novo Mercado average

15.8x

P/E – Current Novo Mercado average

17.7x

= Novo Mercado Upside

12%

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Du Pont Analysis

Equity Multiplier

Tax Burden

Interest Burden

Operational Margin

Asset Turnover

2012 2013E 2014E 2015E 2016E 2017E

4.98% 10.64% 10.49% 10.15% 6.67% 9.84%


2012 2013E 2014E 2015E 2016E 2017E

0.84 0.92 1.00 1.03 0.91 0.97

2012 2013E 2014E 2015E 2016E 2017E

30.71% 61.13% 61.13% 61.13% 61.13% 61.13%

2012 2013E 2014E 2015E 2016E 2017E

79.49% 91.52% 98.53% 96.42% 91.68% 91.81%

2012 2013E 2014E 2015E 2016E 2017E

3.06 3.16 3.11 3.01 2.93 2.84

ROE

2012 3.13%

2013 17.31%

2014E 19.68%

2015E 19.02%

2016E 9.95%

2017E 15.2%

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25,57% 26,08%

26,52% 27,25%

22,74%

24,38% 24,51%

20,91%

19,56% 19,54% 19,33% 19,17% 19,05%

19,49%

20,13%

20,76% 21,38%

22,01% 22,58%

12,01% 12,51%

13,51%

14,88%

9,19%

12,35%

11,29%

4,98% 6,64% 6,73% 6,52% 6,37% 6,06%

6,45% 7,15% 7,84% 8,52%

9,20% 9,80%

14,22% 14,86%

16,28% 17,82%

12,32% 15,56%

14,49%

8,77% 9,48% 9,60% 9,71% 9,82% 9,71% 10,24% 10,78%

11,32% 11,85% 12,39% 12,93%

6,12% 6,60% 6,85% 7,55%

5,47% 6,71%

6,48% 1,22% 3,15%

3,78% 3,44% 3,16% 2,85% 2,90% 3,24% 3,62% 4,01% 4,40% 4,76%

0,00%

5,00%

10,00%

15,00%

20,00%

25,00%

30,00%

2005 2007 2009 2011 2013E 2015E 2017E 2019E 2021E 2023E

Gross Profit Margin EBIT Margin EBITDA Margin Net Profit Margin

Financials: Margins


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0,00%

5,00%

10,00%

15,00%

20,00%

25,00%RAPT

POMO

LEVE

MYPK

AUTM

FRAS

ROIC

ROA

ROE

Financials: Profitability – Peers Comparison

RAPT: Randon S.A.; FRAS: Fras-Le S.A.; AUTM: Autometal S.A.; MYPK: Iochpe-Maxion S.A.; LEVE: Mahle Metal Leve S.A.; POMO: Marcopolo

Source: Company data

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-600000

-400000

-200000

0

200000

400000

600000

800000

BRL

CFO CFI CFF

Financials: Cash Flow Statement Evolution


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-12,00%

-7,00%

-2,00%

3,00%

8,00%

13,00%

18,00%

23,00%

28,00%

-30,00%

-20,00%

-10,00%

0,00%

10,00%

20,00%

30,00%

40,00%

50,00%

60,00%

70,00%

2007 2008 2009 2010 2011 2012

Truck Trailers & Vehicles Sales (YoY): Domestic Market

Net Revenues (YoY): Randon Trucks Trailers & Vehicles

Brazil GDP (YoY)

Financials: Net Revenue Growth Drivers


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100

120

140

160

180

200

220

240

260

20,00%

21,00%

22,00%

23,00%

24,00%

25,00%

26,00%

27,00%

28,00%

29,00%

30,00%

2005 2006 2007 2008 2009 2010 2011 2012

Gross Margin

Metals Price Index, 2005 = 100, includes Copper, Aluminum, Iron Ore, Tin, Nickel, Zinc, Lead, and Uranium Price Indices

Financials: Gross Margin Exposure


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0,00%

2,00%

4,00%

6,00%

8,00%

10,00%

12,00%

14,00%

16,00%

18,00%

20,00%

0,00%

5,00%

10,00%

15,00%

20,00%

25,00%

30,00%

Truck Trailer - Gross Margin Truck Parts - Gross Margin

Truck Trailer - EBITDA Margin Truck Parts - EBITDA Margin

Financials: Segment Margins’


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Financials: Debt Ratios

0

0,5

1

1,5

2

2,5

3

3,5

4

4,5

5

5,5

Cash Ratio EBITDA to Net Debt Ratio


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0

200000

400000

600000

800000

1000000

1200000

1400000

1600000

1800000

BRL

EBITDA

FCO

Financials: Cash Generation


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0,00%

5,00%

10,00%

15,00%

20,00%

25,00%

30,00%

2011 2012

Randon Guerra Facchini Librelato Amstead Maxion

Financials: Competitors Gross Margins

Source: Company data and Competitors data

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-7,00%

-2,00%

3,00%

8,00%

13,00%

18,00%

23,00%

2011 2012

Randon Guerra Facchini Librelato Amstead Maxion

Financials: Competitors EBITDA Margins


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0

500000

1000000

1500000

2000000

2500000

3000000

3500000

4000000

0,00% 5,00% 10,00% 15,00% 20,00% 25,00%

Randon Guerra Facchini Librelato Amsted Maxion

Financials: Competitors Net Revenues x Gross Margins


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Net Revenue (BRL ‘000)

Gross Margin

Financials: CFO / CAPEX

0

0,5

1

1,5

2

2,5

2007 2009 2011 2013E 2015E 2017E 2019E 2021E

CAPEX Ratio


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Financials: Profitability

4,93%

7,56% 8,42% 8,43%

5,54%

7,48% 8,11% 8,69%

9,34% 10,18%

11,06% 11,83%

3,13%

17,31%

19,68%

19,02%

9,95%

15,20%

16,47% 17,72%

19,00%

20,57%

22,04% 23,04%

7,00%

15,14%

16,40%

16,02%

8,55%

13,06%

14,30% 15,78%

17,34%

19,24%

21,29%

23,16%

0,00%

5,00%

10,00%

15,00%

20,00%

25,00%

ROA

ROE

ROIC


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Financials: Earnings Per Share (EPS)

0

0,5

1

1,5

2

2,5

3

3,5

4

4,5

2012 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E

BRL


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Financials: COGS Margin and Operating Leverage

0,00

1,50

3,00

4,50

6,00

7,50

9,00

69,00%

72,00%

75,00%

78,00%

81,00%

COGS Margin (%) Operating Leverage


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Financials: Expenses – SG&A Margin Evolution

13,02%

12,37%

13,55%

12,03%

13,23%

15,93%

13,81%

13,89%

13,89%

14,71%

14,09%

13,90%

13,43%

13,23%

13,05%

12,87%

10,00%

11,00%

12,00%

13,00%

14,00%

15,00%

16,00%

17,00%


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Valuation peers

Buses Auto parts Railcars

Source: Companies’ website

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Valuation peers

Origin Country

Market Cap.

Net Revenue 2012

Market Leadership

Main product

Randon Brazil BRL

2,812 mn BRL 3.4 bn


Iochpe-Maxion Brazil/EUA BRL

2,520 mn BRL 1.5 bn

Auto parts and railcars

Autometal Brazil BRL

2,266 mn BRL 1.7 bn

Engine components

MAHLE Metal Leve Germany/

EUA BRL

3,593 mn BRL 2.1 bn

Pistons and Bearings

Marcopolo Brazil BRL

4.807 mn BRL 3.5 bn Bus body


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9,7x 11,6x

15,9x

4,3x 7,6x

30,0x

12,7x 10,3x 11,4x

14,1x

4,8x

12,0x 9,3x

19,2x 16,6x

2005 2006 2007 2008 2010 2011 2012 2013E

Historical and expected P/E

RAPT4 Median

Multiples EV/EBITDA

Company LTM

RAPT4

MYPK3

AUTM3

POMO4

LEVE3

Median *LTM: Last 12-months Source: Bloomberg.

Source: Bloomberg.

Source: Bloomberg.

P/E Company LTM

RAPT4 12.7x

MYPK3 24.5x

AUTM3 11.9x

POMO4 17.6x

LEVE3 16.6x

Median 16.6x

P/E LTM

High 24.5x

Median 16.6x

Low 11.9x

RAPT4 12.7x

Discount 23.5%

71.9x

. . .

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Multiples

36.5%

Considering peer’s target multiples…

UPSIDE Multiple’s Target

Price

BRL 17.8

Market Price

BRL13.15

Avg Peer Target P/E

13.3x

EPS E14

BRL1.34


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Thank You

òa value stock with high growth potential · 0,0 5,0 10,0 15,0 20,0 25,0 brl source:...

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