INSPER TEAM CFA INSTITUTE - CFA Society...

INSPER TEAM

CFA INSTITUTE

RESEARCH CHALLENGELocaliza Rent a Car S.A. (RENT3)

ANA PAULA PORTO

FERNANDO GOMIDE

LEONARDO ACHILLE

LUCAS GIANESI

WENDERSON OLIVEIRA

Reasons to

BUY

Summary &

Overview

Financial &

ValuationRisks Conclusion

Recommendation

BUY Target Price

BRL 50.00Current Price*

BRL 40.40

Upside

24%

0

5

10

15

20

25

30

35

40

45

50

May-05 May-06 May-07 May-08 May-09 May-10 May-11 May-12 May-13 May-14 May-15 May-16

24%

* As of 10/17/2016 Div Yld: 1.7%

Market Cap.

BRL 8.4 bn

Reasons to

BUY

Summary &

Overview

Financial &


Company Overview

Founded in 1973

Leading Rent a Car Company

More Than its Three

Main Peers Combined

Revenues’ Market Share in Brazil

12%

4%

4%

3%

77%

Source: ABLA (2015).

Reasons to

BUY

Summary &

Overview

Financial &


Revenues Breakdown

Reasons to

BUY

Summary &

Overview

Financial &


50%

20%

15%

15%

Monthly Rentals

Insurance Replacement

Leisure

Corporate

32%

15%

52%

1%

Revenues Breakdown

Longer Contracts

Higher Margins

Car

Rental

Fleet

Rental

Used Car

Sales

Strengthens the

Cash Flow

30%

62%

-1%

Car Rental Fleet Rental Used Car Sales

EBIT Margin

Franchising

Strategic, but not

Financially Relevant

Reasons to

BUY

Summary &

Overview

Financial &


1,5061,821

2,9183,506

3,928

2007 2009 2011 2013 2015

Net Revenues (mn)

346276

596652

736

2007 2009 2011 2013 2015

EBIT (mn)

18%16%

13%

8%

EBIT Margin

12.7% CAGR 9.8% CAGR

Source: Company’s data.

Consistent Past Results

IPI

Reasons toBuy

Reasons to

BUY

Summary &

Overview

Financial &


BUY

Competitive Advantages

Car Rental Expansion

Fleet Rental Penetration

Confirmative Valuation

Reasons to Buy

Reasons to

BUY

Summary &

Overview

Financial &


Purchasing

Renting

Fundraising

Selling

Purchasing

Renting

Fundraising

Selling

Cost of Debt

CDI + 1.14%

CDI + 1.93%

CDI + 2.50%

CDI + 3.17%


Fitch

AAA

A-

AA-

AA-

Source: O Boticário’s franchisees

Best Rating

Lowest Cost of Debt

Source: Company’s data (as of 2Q16).

Reasons to

BUY

Summary &

Overview

Financial &


Purchasing

Renting

Fundraising

Selling

High purchasing discounts…


…due to its scale…

…and increasing bargaining power.Localiza

~25%Peers

~15%

Higher Margins

111

5243

32

Localiza Movida Unidas Locamerica

Fleet Size (thousand cars)

Source: Companies’ data, industry players.

2.1%2.6%

3.6%4.2%

2012 2013 2014 2015

Localiza’s share of main OEM’s sales

Reasons to

BUY

Summary &

Overview

Financial &


Purchasing

Renting

Selling

105

389

Airports Off Airports

326

6

9

1

6

19

41

64

54

240

95

116 145 157 196 211

116110 108

108 9382

156 166

476 477 476 494 494

2012 2013 2014 2015 1H16

Unidas Hertz Movida Localiza


Fundraising

Biggest network of agencies…

Top of

Mind

…and a well-known brand.Source: Companies’ data.

Reasons to

BUY

Summary &

Overview

Financial &


Broad Sales Network

47% of Sales to the

Final Customer

Purchasing

Renting

Fundraising

Selling


78Used Car Stores

Assertive

Depreciation ValueSource: Companies’ data.

54 Stores

44 Stores

Localiza’s footprint

3

2

726

8

1

1

2 11

3

4

44

3

212

21

Reasons to

BUY

Summary &

Overview

Financial &


12%

16% 17%

15%

3%

6%

8% 8%

3%4%

2012 2013 2014 2015

ROIC

Purchasing

Renting

Fundraising

Selling


Source: Companies’ data.

Supercharged Mechanics

Reasons to

BUY

Summary &

Overview

Financial &


BUY





Reasons to Buy

Reasons to

BUY

Summary &

Overview

Financial &


Number of Cars


Cities that Localiza is present:

325Number of cities in

line with company’s

criteria:

724

GDP

PopulationGrowth Potential:

~120%

Assumption: Considering 10% could not be profitable

Source: Team’s estimates, companies’ data.

Localiza’s potential cities

Reasons to

BUY

Summary &

Overview

Financial &



Market Share

Expansion

Source: Team’s estimates, companies’ data.

Localiza’s potential cities

70%Explored

4

11

9

31103

40

5

6

17

9

3

5 14

6

15

4

5

1

48

3225

4 2

Reasons to

BUY

Summary &

Overview

Financial &


BUY





Reasons to Buy

Reasons to

BUY

Summary &

Overview

Financial &


11%

Increase in Fleet Rental Penetration

+900bps in 6 Years

Benefits of Fleet

Outsourcing

Source: Company’s data, team’s estimates, ABLA, Datamonitor, SINDILOC (2010).

Fleet Rental

Companies

Own

Resources

Savings of ~20%

5%8%

11%

2013 2014 2015

Cars Production

CAGR2008-2013

3%

Corporate Fleet

CAGR2016-2021

3%

Fleet Size

CAGR2008-2013

12%

Fleet Size

CAGR2016-2021

12%

Reasons to

BUY

Summary &

Overview

Financial &


BUY





Reasons to Buy

Financials & Valuation

Reasons to

BUY

Summary &

Overview

Financial &


ROIC Rent a Car = 16.6%NPV Rent a Car = BRL 4,534

Understanding Localiza’s Economics

DCF for ONE Car Output

NPV per Car = BRL 1,226

NPV Used Car Sales = BRL -3,308

ROIC = 15.8%

ROIC Used Car Sales = -0.8%

Source: Team’s estimates, company’s data.

Used Car Sales do not contribute... ...but preserve Localiza’s returns

10%

14%

18%

22%

30 32 33 35 37

RO

IC

Selling Price (thousand)

1,779

1,455

1,122

780

429

13%

14%

15%

16%

17%

12%

13%

13%

14%

14%

15%

15%

16%

16%

17%

0

500

1000

1500

2000

20% 21% 22% 23% 24%

Depreciation per Car ROIC

Purchasing Discount

Reasons to

BUY

Summary &

Overview

Financial &


Strong Growth Perspective

2015A 2016E 2017E 2018E 2019E 2020E 2021E

Used Car Sales RaC Fleet Rental + Franchising

81% of Revenues

CAGR is due to

volume

11.4%

CAGR

Growth Driven by

Volume

Boosted by Flat Tariffs

Increases

Expansion


CAGR

2010-2015

9.4%

CAGR

2016-2021

11.4%

Localiza’s Net Revenues (BRL mn)

3,928 4,0854,322

4,930

5,574

6,259

7,006

Reasons to

BUY

Summary &

Overview

Financial &


Flat Margins

19% 19% 20% 19% 19% 20% 21%

-10%

10%

30%

50%

70%

2015A 2016E 2017E 2018E 2019E 2020E 2021E

RaC Margin Fleet Margin Used Car Sales Margin Consolidated Margin

100%

64%

13%5%

19%

NetRevenues

COGS SG&A D&A EBIT

100%

62%

10%7%

21%

NetRevenues

COGS SG&A D&A EBIT


EBIT Margin Decomposition (2015) EBIT Margin Decomposition (2021)

EBIT Margin

Reasons to

BUY

Summary &

Overview

Financial &


Squeezing the Competition


Market Consolidation

Better off on the Long Term

14.8%14.0%

13.0% 13.1% 13.2% 13.2% 13.3% 13.4% 13.5% 13.6% 13.8%

10.4%

8.7%7.9% 7.5% 7.3%

6.7% 6.2% 6.2% 6.2% 6.2%6.2%

5%

7%

9%

11%

13%

15%

17%

2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E

ROIC Expected Kd after taxes WACC

4.4%

Spread 5.9%

Spread 7.6%

Spread

ROIC vs Kd After Tax

Reasons to

BUY

Summary &

Overview

Financial &


79 84 90 92 94 101112

126140

154169

19%

9%

3% 3%3%

7%

11% 12% 11% 10% 10%

0

50

100

150

200

0%

5%

10%

15%

20%

25%

2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Average Operational Fleet (RHS) - Thousands Total Dailies YoY (LHS)

236 247272

304 320 335363

391419

447 475

2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Number of Owned Agencies (LHS)

Revenue Driven by Volume


No Productivity Gains

About 28 New Agencies

per Year

Growth Decomposition

Reasons to

BUY

Summary &

Overview

Financial &


79 84 90 92 94 101112

126140

154169

19%

9%

3% 3%3%

7%

11% 12% 11% 10% 10%

0

50

100

150

200

0%

5%

10%

15%

20%

25%

2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Average Operational Fleet (RHS) - Thousands Total Dailies YoY (LHS)

236 247272

304 320 335363

391419

447 475

2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E


Revenue Driven by Volume


No Productivity Gains

About 28 New Agencies

per Year

Growth Decomposition

Total impact: BRL 1.6 bn; ~19% of RENT’s Market Cap.

Reasons to

BUY

Summary &

Overview

Financial &


Sustainable Growth

1.7x1.4x 1.5x 1.4x

1.7x 1.7x2.0x 2.1x 2.2x 2.2x 2.3x

2011A 2012A 2013A 2014A 2015A 2016E 2017E 2018E 2019E 2020E 2021E

Source: Team’s estimates, company’s data

Credit Rating Cap of 2.5x

Covenant of 4.0x

Net Debt / Fleet Value

Net Debt / EBITDA

2.6 2.5 2.7 3.2 3.6 4.04.7

5.56.4

7.08.3

51% 49% 48%

40%45% 44%

47% 49% 51% 52% 53%

0

2000

4000

6000

8000

10000

12000

14000

00x

00x

00x

00x

00x

01x

01x

01x

2011A 2012A 2013A 2014A 2015A 2016E 2017E 2018E 2019E 2020E 2021E

Fleet Value (BRL billion) Net Debt / Fleet Value

Reasons to

BUY

Summary &

Overview

Financial &


Discounted Cash Flow


368282

366447

559

686

826

984

1,160

1,382

2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E

Free Cash Flow to Equity (BRL mn)

15.8%

CAGR

Decrease in the purchasing discount

Reasons to

BUY

Summary &

Overview

Financial &


(-) Net CAPEX(-) Net CAPEX

(+) Used Car Sales’ COGS(+) Used Car Sales’ COGS

(-) Used Car Sales’ Revenues(-) Used Car Sales’ Revenues



(=) NOPAT

(-) D Working Capital

(+/-) Change in Debt

(-) Interest Expenses

Inflation Differential 3.48%

Risk Free Rate 1.81%

Re-levered Beta 0.94

Market Risk Premium 6.70%

Country Risk Premium 3.13%

Cost of Equity of 15.1%

Long-Term Growth Rate of 5.5%

Ke and Long-Term Growth

(+) Tax Shield

(=) FCFE

Free Cash Flow Adjustments

Reasons to

BUY

Summary &

Overview

Financial &


24.5

25.5

50.0

RENT 10 years + 2017 CashValue

Perpetuity Target Price

Recommendation


BUYTarget Price

BRL 50.00Current Price

BRL 40.40 24%

* As of 10/17/2016

Reasons to

BUY

Summary &

Overview

Financial &


Multiple Analysis

Exit Strategy – P/E Forward +1Y

Avg 18.5x

10x

14x

18x

22x

26x

Ke = 15.1%

Carry Over Effect

Exit Multiple 2020

18.5x

IRR = 17.2%

> Ke = 15.1%

Market Est. EPS2016-2019 = 9.8%Team’s Est. EPS2016-2019 = 15.3%

Current Price

BRL 40.40

BRL 58.3

Team’s Est.

Earnings 2020

Implied 2019

Forward P/E

17.6x 18%De-rating

Oct 2016 Fwd

21.5x

Reasons to

BUY

Summary &

Overview

Financial &


BUY





Reasons to Buy

Reasons to

BUY

Summary &

Overview

Financial &


IOCInterest

Rate

IPI

Succession

Risk

Tech Risk

Purchasing

Discount

Increased

Competition

Impact

Probability Market Macroeconomic Legal Operational

Risks To Our Valuation

Reasons to

BUY

Summary &

Overview

Financial &


Technology Disruption - Uber

Insurer’s Economy by Changing Localiza to

Uber

Boosted Monthly Rentals

Long-term Threat to Insurance

Replacement

Uber does not have Capillarity

50%

20%

15%

15%

Monthly Rentals


Leisure

Corporate

Localiza’s Car Rental Revenues Breakdown

Daily km necessity per client

-40%

-20%

0%

20%

40%

60%

80%

10 15 20 25 30 35 40 45 50

Break-even of

38 km per day

Source: Team’s estimates, industry players, company’s data.

Reasons to

BUY

Summary &

Overview

Financial &


1.7x2.2x

3.7x

Localiza Unidas Movida

Net Debt/EBITDA

113156

424

271

75

Cash(3Q16)

2016 2017 2018 2019

Unidas’ Debt Profile

Number of agencies

Increase in Competition

IPO would Relieve Leverage Levels

Profitability is Key

Localiza still has much more

Capillarity


Reasons to

BUY

Summary &

Overview

Financial &


12%

16% 17%

15%

3%

6%

8% 8%

3%4%

2012 2013 2014 2015

ROIC





Capillarity


Reasons to

BUY

Summary &

Overview

Financial &


150

96

Localiza Peers

Number of cities

361

246

221

166

Localiza Peers

494

387

Number of agenciesNet Debt/EBITDA





Capillarity


Reasons to

BUY

Summary &

Overview

Financial &


Monte Carlo Simulation

4.14% 31.87% 63.98%

Monte Carlo Target Price: BRL 47.8Current Price: BRL 40.4

SELL HOLD BUY

Source: Team’s estimates.

Reasons to

BUY

Summary &

Overview

Financial &


Conclusion

BUY





Appendix I

Corporate Governance

Board Of Directors

Executive Directors

Founders I

Founders II

Founders III

Management Compensation

Shareholder Structure

Localiza’s Business Model

Founders IV

Macro Growth Drivers I

Macro Growth Drivers II

Macro Growth Drivers III

Macro Growth Drivers IV

Macro Growth Drivers V

Car Rental Market I

Car Rental Market II

Car Rental Market III

Car Rental Market IV

Porter I

Porter IIUnidas Acquisition

Movida

Fleet Outsourcing Gains I

Fleet Outsourcing Gains III

Fleet Outsourcing Gains II

Feet Rental Growth I

Fleet Rental Growth II

Expansion Analysis I

Fleet Mix

Network of Agencies

Franchising Analysis

Main Suppliers

Market Profile M&A Analysis

Interest Rate Analysis

Uber Analysis I

Purchasing Discount I

IPI Analysis I

JSL’s Reestructuring

IPI Analysis II

Uber Analysis II

Insurance Replacement I

Purchasing Discount II

Peers’ IPO Analysis I

Peers’ IPO Analysis II

Peers’ IPO Analysis III

Insurance Replacement II

Company’s Comparables II

Tariffs Analysis

Company’s Comparables III

Company’s Comparables IExpansion Analysis II

Fleet Rental Growth III

Top of Mind Company

Appendix II

Income Statement I

Income Statement II

Balance Sheet I

Balance Sheet II

Statement of Cash Flow I

RaC’s Income Statement I

Fleet Rental’s Income Statement I

Fleet Rental’s Income Statement II

RaC’s Income Statement II

Statement of Cash Flow II

Used Car Sales’ Income Statement I

Used Car Sales’ Income Statement II

Franchising’s Income Statement II

Franchising’s Income Statement I

Macroeconomic Assumptions

DCF FCFE I

DCF FCFE III – Stress Test

DCF FCFE II

Scenario Analysis I

Analysts Coverage

Scenario Analysis II

Revenue Build Up

Agencies Projections

Used Car Stores Projections

Capex Build Up

Capex I

Capex II

Working Capital I

Working Capital II

Car Prices

Costs

Debt Amortization

S&A

Covenants

Debt Breakdown

Dividends

WACC Decomposition

Cost of Equity I

Cost of Equity II

Gains on Tariffs

Ratio Used Car Stores / Agencies

Appendix IIIMargins, Profitability, CF Ratios and Solvency Ratios I

Margins, Profitability, CF Ratios and Solvency Ratios II

Market Ratios, and Asset Management Ratios

Operational Indicators I

Operational Indicators II

Operational Indicators III

ROIC Scenario I

Growth per Segment

Margins per Segment

ROIC Scenario II

Dupont Analysis

ROIC Decomposition

Appendix IV

Historical Multiples 1 Year Forward

National Peers II (EV/EBITDA)

Market Consensus vs Team’s Estimates I

Reasons to Explain the Premium I

National Peers I - LCAM3

National Peers Football Field

Multiples – Peer Car Rental P/E I

Multiples – Peer Car Rental P/E II

Multiples – Peer Automotive Retailers P/E I

Multiples – Peer Automotive Retailers P/E II

Market Consensus vs Team’s Estimates II

National Peers III (P/E)

Multiple Analysis - Scenarios

Multiples – Peer Car Rental EV/EBITDA I

Multiples – Peer Automotive EV/EBITDA I

Multiples – Peer Companies EV/EBITDA Football Field

DCF per Car – Fleet III

DCF per Car – Fleet I

DCF per Car – Fleet II

DCF per Car – Fleet IV

DCF per Car – Sensitivity

Analysis

DCF per Car – RaC I

DCF per Car – Rac II

DCF per Car – Rac III

DCF per Car – RaC IV

Monte Carlo I

Monte Carlo II

Reasons to Explain the Premium II

Reasons to Explain the Premium III

DCF per Car – Fleet V

Market Profile

HOME

RENT3Localiza Rent a Car S.A.

At a Glance

Market Capitalization (BRL bn) 8,414

Shares Outstanding (mn) 208.40

52w Price Range (BRL/share) 19.98 – 43.92

Average Daily Volume (BRL mn) 857.40

0

10

20

30

40

50

60

May-05 May-06 May-07 May-08 May-09 May-10 May-11 May-12 May-13 May-14 May-15 May-16 May-17

• Car Rental Services

• Listed in 2005

Source: Bloomberg

Sources: Companies data, bloomberg.

Localiza’s Business Model

HOME

Dealers;

Retailers;

Auto Malls

O.E.M.

Other Rental

Operators

Consumer

Consumer

Franchising

Fleet Rental

Rent a Car

Sells car after ~1 year

Sells car after ~2.5/3 years

Used Car SalesConsumer

Company

Responsible for

selling its own

cars

Sources: Company’s Data

Corporate Governance

HOMESources: Companies data, team’s estimates.

Corporate and Social Responsability

Board of Directors

Audit and RiskManagement

Personnel andOrganizationalDevelopment

Strategic

CO

MM

ITT

EES

Normal Wash 83L/car

Dry Wash 100 mL/car

Stefano Bonfiglio

16 years in Localiza

Leticia Costa

9 years in Localiza

José Galló


Oscar Bernardes


Board Of Directors

HOMESources: Company’s Data

Salim Mattar


Eugênio Mattar


Flávio Resende


Antônio Resende


Heros Di Jorge

Used Car Sales Director


Edmar Vidigal Paiva

Controller Director

9 years in Localiza

Eugênia de Oliveira

Car Rental Director


Executive Directors

HOMESources: Company’s Data

Eugênio Mattar

President Director, 63


Roberto Mendes

CFO and RI Director


Bruno Andrade

Franchising Director


Founders I

HOME

Salim MattarCo-Founder, chairman

and Board Member

Eugenio Mattar Co-Founder, CEO and

Board Member

Flavio ResendeCo-Founder and Board

Member

Antônio ResendeCo-Founder and Board

Member


Founder, Chairman and controlling shareholder of Localiza.

Graduated in Business Administration from FUMEC.

Locapar Participações Director, Haras Saharas Partner, SM Participações Partner, OMNI

Taxi Aéreo Partner, Board Member of Pottencial Seguradora,

He founded Localiza in 1973 at the age of 24.

Founders II

HOME


and Board Member

Eugenio MattarCo-Founder, CEO and

Board Member



Member


Member

CEO, Founder and member of Board of Directors and controlling shareholder of

Localiza.

Graduated in Civil Engineering from UFMG.

Locapar Participações Director , Board Member of OMNI Taxi Aéreo, Board Member of

Pottencial Seguradora


Founders III

HOME


Member



and Board Member


Board Member


Member

Founder, member of the Board of Directors and controlling shareholder of Localiza.

Graduated in Civil Engineering from Kennedy School of Engineering.

FRB Participações Partner, FRJR Empreendimentos Imobialiários (Real State) Partner.


Founders IV

HOME


Member



and Board Member


Board Member


Member

Founder, member of Board of Directors and controlling shareholder of Localiza.

Graduated in Business Administration from UNA.

ACBR Participações Partner, Resende Piscicultura e Pecuária Partner.


Management Compensation

HOME

Board of Directors

Executive Directors

Year Fixed Bonus Benefits

2015 93% 0% 7%

2014 90% 0% 10%

2013 86% 0% 14%

Year Fixed Bonus Benefits

2015 69% 9% 22%

2014 71% 16% 13%

2013 63% 19% 18%


“Top Executive Compensation” by

HayGroup


HOME


Antônio Resende 9.0%

Eugênio Mattar 6.5%

Salim Mattar 6.4%

Flávio Resende 6.1%

Lazard Asset Management 13.3%

Invesco 5.0%

Treasury Shares 1.7%

Others 52.0%


211,793,400 Total Shares

1,931 Individual Shareholders

691 Corporate Shareholders

342 Institutional Shareholders

148,806,618 Outstanding Shares

Main Suppliers

HOME

21%

18%

39%

11%

10%

1%

GM

VW

Fiat

Ford

Reanult

Others

OEM’s Share on Localiza’s Purchases (2013*)

*Most recent available data


Network of Agencies


116 145 157 196 211

116110 108

108 9382

156 166

476 477 476 494 494

2012 2013 2014 2015 1H16

Unidas HertzMovida Localiza

Players’ Number of Agencies

105

389

Airports Off Airports

326

6

9

1

6

19

Own

320

41

64

54

240

95

Franchises

244Used Car Stores

78

Localiza’s Stores Network

Franchising Analysis


Localiza Franchising- Agencies in Brazil

Localiza Franchising- Agencies Abroad

326

6

9

1

6

19

167181

202 202 193172 174

2009 2010 2011 2012 2013 2014 2015

71

61

47 50

63 6470

2009 2010 2011 2012 2013 2014 2015

Franchises 2015

Argentina 26

Bolivia 0

Chile 9

Colômbia 19

Ecuador 6

Paraguai 6

Peru 1

Uruguay 3

Minimum Investment

BRL 130,000

Cost to Open a Localiza Franchise

Royalties

6% of revenues

Marketing

2.5% of revenues

Break-even

24 months

Minimum Investment

BRL 110,000

Cost to Open a Unidas Franchise

Break-even

36 months

Fleet Mix

HOMESources: Company data.

63.1% 63.4% 65.9%

36.1%46.1%

36.9% 36.6% 34.1%

63.9%53.9%

2011 2012 2013 2014 2015

Economic Other

Rent a Car Fleet Rental

42.6% 40.0% 38.0% 35.0% 34.9%

57.4% 60.0% 62.0% 65.0% 65.1%

2011 2012 2013 2014 2015

Economic Other

Customers choose the fleet model.There was a change in the mix of products

with more added value, which facilitates

renting and selling.

Tariffs Analysis

HOME

Economic Car (Uno, Gol or similar) 4 days rental 7 days rental D

Localiza 58.2 40.9 -30%

Unidas 67.5 62.6 -7%

Movida 46.5 35.3 -24%

Hertz 55.9 47.9 -14%

Avis 46.7 42.3 -9%

Luxury Car (Duster or similar) 4 days rental 7 days rental D

Localiza 108.0 87.2 -19%

Unidas 226.2 213.8 -5%

Movida 110.9 88.3 -20%

Hertz 140.9 120.8 -14%

Avis 104.2 97.0 -7%

Daily tariff comparison in main Brazilian airports (R$)

Sources: Team’s estimates.

HOME

14%

18% 18% 18% 19% 18%

8%

14%16% 16% 16%

14%16%

13% 12%

9%

2012 2013 2014 2015 1T16 2T16

Localiza Unidas

1Q16 2Q16

12%

16% 17% 15%

3%

6%8% 8%

3%4%

2012 2013 2014 2015


54 59 62 63 64 65

9 11 15 17 17 172 13

27 30 29

2012 2013 2014 2015 1T16 2T16


30 31 31 32 31 31

1619 18 18 18 1917 15 15 14

24 23 24 23 24 25

2012 2013 2014 2015 1T16 2T16

Localiza Unidas Movida Locamerica

EBIT Margin (%) ROIC (%)

Localiza’s Comparable Companies I

Operational Fleet – RaC (‘000) Operational Fleet – Fleet Rental (‘000)

1Q16 2Q16 1Q16 2Q16

HOME

71%

67%

70% 69%

73%74%

70%

73%75% 75%

77%79%

71%

63%65% 64%

74%

2012 2013 2014 2015 1T16 2T16Localiza Unidas

97% 97%

94%96%

97%

98%

100% 100% 100% 100% 100% 100%

92%

96%

99%

96%96%

97%

2012 2013 2014 2015 1T16 2T16Localiza Unidas

Localiza’s Comparable Companies IIUtilization Rate – RaC (%) Utilization Rate – Fleet Rental (%)

Average Daily Tariff – RaC (BRL) Average Daily Tariff – Fleet Rental BRL)

1Q16 2Q16 1Q16 2Q16

82 85 88 85 84 7987 83 80 77 77 72

0

99 92 91 9686

2012 2013 2014 2015 1T16 2T16


1Q16 2Q16

52 54 56 56 58 5857 54 52 50 50 4742 47 50 54 52 53

2012 2013 2014 2015 1T16 2T16Localiza Unidas Locamerica

1Q16 2Q16

Localiza’s Comparable Companies III

Operational Data


Stores 643 209 256 14

RaC 565 166 118

Car Sales 78 43 138 14

Fleet ('000) 110 43 46 28

RaC 65 29 19 -

Fleet Management 31 14 24 28

Franchising 14 - 3 -

Number of Dailies ('000) 4,308 1,905 1,025 2,141

Revenues Breakdown as 2Q16

49%58%

48% 46%

17%

10%

26%

34%

32%

26%

54%

963.1

480.2

294.9191.3


Used Car Sales GTF RaC Consolidated

105

5948

3822 26

Localiza Movida Unidas Hertz Avis Others

Airport Agencies as 2Q16

HOME

Top of Mind Company

HOMESources: Team’s estimates.

25th Place in Brazil (2015)

R$350,000,000.00

Minas Gerais

+15 Top of Mind Prizes

Macro Growth Drivers I

HOMESources: IBGE, team’s estimates, FGV and IPEA Data.

19,87811,157

24,12126,445

28,046 28,876

2010 2011 2012 2013 2014 2015

45.26%

Brazil’s GPD per capitaBrazil’s GPD growth

7.5%

3.9%

1.9%

3.0%

0.1%

-3.9%-3.0%

1.0%

2010 2011 2012 2013 2014 2015 2016 2017E E

60

80

100

120

140

160

180

2007 2008 2009 2010 2012 2013 2014 2015

ICC (Consumer confidence in Brazi)

2016 2007 2008 2009 2010 2011 2012 2013 2014 2015 201660

70

80

90

100

110

120

130

Brazil's Industrial Confidence Index (ISA)

Macro Growth Drivers II

HOMESources: IBGE, PIM-PF, FGV and IPEA.

Brazil Industrial Production Growth

Brazil Real Investment Growth

-20%

-10%

0%

10%

20%

30%

2007 2008 2009 2010 2012 2013 2014 2015 2016

-30%

-15%

0%

15%

30%

45%

2007 T1 2008 T3 2010 T1 2011 T3 2013 T1 2014 T3 2016 T1

60

70

80

90

100

110

120

130

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Brazil's Industrial Confidence Index (ISA)

69

72

75

78

81

84

87

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Industrial survey of capacity utilization levels

Macro Growth Drivers III

HOMESources: ANAC 2010 – 2015, IATA-Air Passenger Forecast Global Report 04/10, Ministério do Turismo, Getúlio Vargas and

Itaú BBA.

39 43

47 50 57

70

82 89 90

96 96

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

-

20

40

60

80

100

120

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Qtde de passageiros transp. ('000) Var. YoY - RHS

Brazil’s Domestic Flights

Passengers transported. (‘000)

643

711746

718

657

481

663

478

391365 368 385 368

335

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Real domestic flights' fares

2.5% 5.3% 4.8% 3.0% 6.6%

31.7%25.4% 27.4% 23.8% 17.1%

65.8% 69.3% 67.8% 73.2% 76.3%

Feb2012 Feb2013 Feb2014 Feb2015 Feb2016

Undecided International Domestic

Brazil Consumer Survey: Travel Plans

1.7

2.3

1.7 1.61.8

2.02.3

2.6

3.9

2007 2008 2009 2010 2011 2012 2013 2014 2015

Exchange R$/US$

Macro Growth Drivers IV

HOMESource: IBGE.

10.64%

10.87%

6.94%

9.78%11.51%

14.14%

2010 2011 2012 2013 2014 2015

Interbank Deposit Certificate Rate (CDI )

Growth Consumer Price Index (IPCA) x Growth fares

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

IPCA Fleet Rental avg. daily retal rate - YoY chg. Car Rental avg. daily rental rate - YoY chg.

International Localiza Enterprise Hertz Avis

S&P BB+ B+ BB-

Moody's Ba2 Baa1 Ba3

Fitch BB+

National Localiza JSL Locamerica Unidas

S&P brAA+ BB

Moody's Aa1.br

Fitch AAA(bra) AA-(bra) A-(bra) AA-(bra)

Localiza JSL Locamerica Unidas

Cost of DebtCDI +

1.14%

CDI +

1.93%

CDI +

2.50%

CDI +

3.17%

Rating and Cost of Debt vs. Peers’

Macro Growth Drivers V

HOMESource: IBGE.

-10%

0%

10%

20%

30%

40%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

GDP YoY chg. Car Rental YoY revenue chg. - RHS

-10%

0%

10%

20%

30%

40%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

GDP YoY chg. Fleet Rental YoY revenue chg. - RHS

Car Rental Fleet Rental

Fleet Rental

-5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Growth GDP Growth Localiza' Revenues

Car Rental Market I

HOMESources: Euromonitor.

Retail Value US$ mn Current Prices | Fixed 2015 Exchange Rates

27,009.1

7,321.2

2,972.4 2,483.71,158.0 969.1 112.3 106.9 20.5 10.2 8.4

USA China France Germany Canada Brazil Chile Argentina Ecuador Peru Colombia

2,095.4

789.2

221.1 168.9 106.3

357.5

8.50 10.3 3.5 1.4 5.3

USA China France Germany Canada Brazil Chile Argentina Ecuador Peru Colombia

Number of cars (‘000 cars)

Car Rental Market II

HOMESources: Companies data and ABLA.

24% 27% 27% 28%

13% 12%

4%5% 5% 5%

3%3%

7%7% 7%

9%

4%4%

2% 4%

64%61% 60% 58%

77% 77%

2010 2011 2012 2013 2014 2015

Localiza* Locamerica Unidas* Movida Others

Revenues Market Share Car Rental

*Including only the stake of Localiza and Unidas on franchising.

Fleet Size Market Share Rent a Car

Fleet Size Market Share Fleet Rental

2010 2011 2012 2013 2014 2015

Localiza 34% 32% 31% 32% 23% 20%

Unidas 7% 6% 6% 7% 7% 6%

Movida 6% 10%

Others 60% 62% 63% 61% 64% 64%

2010 2011 2012 2013 2014 2015

Localiza 15% 16% 15% 15% 10% 9%

Locamerica 9% 11% 10% 9% 7% 7%

Unidas 7% 8% 7% 7% 5% 4%

Movida 4% 3%

Others 72% 68% 71% 73% 76% 79%

Car Rental Market III

HOMESources: Euromonitor

24%27%

32%28%

36%43%

49%44% 46%

42%

4%4%

5%6%

7%

6%

7%9% 6%

6%

7%7%

7%6%

7%

6%

7%7% 7%

7%

2%3%

3%2%

3%

3%

3%3% 3%

3%

6% 14%63%

59%54%

58%

48%42%

35% 37%33%

28%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Localiza Unidas Hertz Avis Movidas Others

Revenues Market Share Rent a Car

- 35 p.p.

+18 p.p.

Car Rental Market IV


EUA Revenues Market Share RaC - 2006 EUA Revenues Market Share RaC - 2015

21%

14%

02%12%06%

48%

Europcar Groupe SA

D'Ieteren AS

Avis Budget Group Inc

Hertz Corp, The

Sixt AG

Enterprise Holdings, Inc

Others

21%

16%

14%

10%09%

46%

Europcar Groupe SA


Hertz Corp, The

Sixt AG


Others

Europe Revenues Market Share RaC - 2015Europe Revenues Market Share RaC - 2006

19%

22%

33%

11%

07%

9%

Hertz Corp, The


Enterprise Rent-A-Car Co

Vanguard Car Rental USAInc

Dollar Thrifty AutomotiveGroup Inc

Others

51%

23%

18%

8%


Hertz Corp, The


Others

Fleet Outsourcing Advantages I

0 1 ... 11 12 13 ... 23 24 25

Fleet Value 24,444 24,323 ... 23,109 22,988 22,745 ... 21,652 21,530 21,409

Purchasing Cost -24,444 - ... - - - ... - - -

Selling Revenue - - ... - - - ... - - 21,409

Depreciation - -121 ... -121 -121 -121 ... -121 -121 -121

Licensing -1,022 - ... - -961 - ... - -900 -

Insurance -2,600 - ... - -2,446 - ... - -2,291 -

Sinister - -47 ... -47 -44 -44 ... -44 -42 -38

Monthly Maintenance - -259 ... -259 -259 -259 ... -259 -259 -259

Fleet Administration -149 -149 ... -149 -149 -149 ... -149 -149 -149

Replacement Fleet -166 -166 ... -166 -166 -166 ... -166 -166 -166

Opportunity Cost - -247 ... -323 -360 -377 ... -456 -492 -319

Total -28,381 -868 ... -944 -4,385 -995 ... -1,074 -4,299 20,478

Present Value -28,381 -861 ... -861 -3,962 -844 ... -844 -3,509 16,572

-38,480

Own Fleet

0 1 ... 11 12 13 ... 23 24 25

Rent Cost - -1,275 ... -1,275 -1,275 -1,275 ... -1,275 -1,275 -

Opportunity Cost - -11 ... -124 -136 -148 ... -274 -287 -290

Total - -1,286 ... -1,399 -1,411 -1,423 ... -1,549 -1,562 -290

Present Value - -1,275 ... -1,275 -1,275 -1,275 ... -1,275 -1,275 -234

-30,834

Rented Fleet

Sources: Team’s estimates, Syndicate of Paraná State (SINDILOC). HOME

Fleet Outsourcing Advantages II

Cash Flow Analysis: Variables

i) Purchasing Cost. Current market value of the car.

ii) Selling Revenue. Equal to the initial purchasing cost minus the depreciation value during

the utilization period.

iii)Depreciation. It was used an annualized depreciation rate of 5.96% for Palio Fire,

considering available data from FIPE – Institute of Economic Research.

iv) Costs:

— Licensing, property taxes and others

— Non-Compulsory Insurance.

— Claims.

— Monthly Maintenance

— Fleet Management Costs

— Courtesy Cars.

v) Opportunity Cost. It was considered a monthly tax of 0.85% (In line with the monthly SELIC

Tax of 2010).

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Fleet Outsourcing Advantages III

Savings from changing…

Licensing

Vehicles’ Logistics distribution

Insurance

Replacement Parts

Maintenance Stuff

Courtesy Car

24 Hour Assistance

Loss through Theft

Sinister Costs

Opportunity Cost

Taxes

Cost over Fleet’s Idle Capacity

Fleet Renewal Investments

Administrative Efficiency Gains

Better Cash Flow Controls

Savings of 20%

HOME

156 175 189232 245

279307

441478

2007 2008 2009 2010 2011 2012 2013 2014* 2015*

Fleet Rental Growth I

HOMESource: Anfavea, ABLA and team’s estimates.

Automotive Production in millions

Corporate Fleet in millions

Fleet Size (Thousand cars) – Fleet Rental

CAGR

3%CAGR

12%

3.9

4.0 4.0 4.0

4.1

4.2

4.2

4.3

4.4

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

Corporate Fleet

502562

629705

789

884

2016E 2017E 2018E 2019E 2020E 2021E

Fleet size - Fleet Rental

Fleet Size (Thousand cars) – Fleet Rental

CAGR

12%

CAGR

3%

2.4 2.5 2.6 2.7 2.6 2.83.0

2.5

2.0

2007 2008 2009 2010 2011 2012 2013 2014 2015

Fleet Rental Growth II

HOMESource: Team’s estimates.

+900bps in 6 Years

8%

11%12% 13%

14%15%

17%18%

20%

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

Source: Team’s estimates, Company’s data

Number of Clients

Fleet Rental Growth III

About 40 new clientes per year

687 729 760 798849

910 954 998 1042 1086 1130

-

20

40

60

80

100

0

200

400

600

800

1000

1200

2011A 2012A 2013A 2014A 2015A 2016E 2017E 2018E 2019E 2020E 2021E

Number of Clients (RHS) Average Fleet per Client (LHS)

Total impact: BRL 0.4 bn; ~5% of RENT’s Market Cap’

Growth in Line with Penetration No Gains in Market Share

0%

5%

10%

15%

20%

25%

0

10,000

20,000

30,000

40,000

50,000

60,000

2014A 2015A 2016E 2017E 2018E 2019E 2020E 2021E

Localiza Fleet Fleet Penetration (LHS)

Porter I

HOME

1. Threat of Substitute Products (Rate 2):

• Although it seems intuitive that these

technologies will expand exponentially

worldwide, the lack of infrastructure, such as

precarious roads, and the lack of a culture of

lending and sharing vehicles should be major

obstacles for these companies’ expansion plans

in Brazil.

• In the short term, Localiza’s business should

not be heavily affected by substitute products,

but there is a greater risk when analyzing the

long term scenario.

2. Bargaining Power of Suppliers (Rate 1):

• In 2015, Localiza bought 4.2% of its main

suppliers new vehicles sales: General Motors,

Fiat, Volkswagen, and Renault.

3. Threat of New Entrants (Rate 2):

• Despite being a market with relatively low

entry barriers, becoming a relevant player is a

significant challenge for new and small

players.

• Localiza has coverage, know-how about the

market, profitability and scale that makes

strong entry barriers.

0

1

2

3

4

Threat ofSubstituteProducts

BargainingPower ofSuppliers

Threat of NewEntrants

BargainingPower of

Customers

CompetitiveRivalry within

Industry

Average Competitor Localiza

* The higher the number, the bigger the threat.

Sources: Companies data and team’s estimates.

Porter II

HOME

1. Bargaining Power of Customers (Rate 3):

• Besides the high number of players in the

industry, the services offered are barely

differentiated between them.

• Since RENT is one of the biggest clients for

the main OEMs in Brazil, the above-the-

market discount is partially translated to its

costs, maintaining its margins even with

competitive daily tariff

2. Competitive Rivalry within Industry (Rate 3):

• The competitors should not be able to

become profitable, since the economic

conditions of its suppliers should now

improve and Localiza’s strategy of keeping

its prices at low levels will start to hurt

rival’s performance.

• Localiza, holding the lowest financial

leverages among the key players, higgest

coverage and your know about the market,

has the opportunity to expand and

consolidate its presence in these new

locations before competition arises.

0

1

2

3

4

Threat ofSubstituteProducts

BargainingPower ofSuppliers

Threat of NewEntrants

BargainingPower of

Customers

CompetitiveRivalry within

Industry

Average Competitor Localiza

* The higher the number, the bigger the threat.


51 53 66 79 84 90 92 94 101 112 126 140 154 169

2008 2009 2010 2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Average Operational Fleet (Thousands)

Expansion Analysis I

HOMESources: Companies data and team’s estimates.

Number of Cars

Cities that Localiza is present:

325Number of cities in

line with company’s

criteria:

724

GDP

PopulationGrowth Potential:

~120%

Assumption: Considering 10% could not be profitable

70%Explored

236 247 272 304 320 335 363 391 419 447 475

2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E


6.3% CAGR

10.9% CAGR2016-2021

9.1% CAGR2008-2015

Expansion Analysis II

HOME

Collecting all the data of the cities in Brazil and

those which Localiza is in.

Organized them by GDP and excluded the last 10%

of Localiza’s footprint.

Analyzed all the Brazilian cities above Localiza’s

GPD profitability limit.

Potential of expansion the company still has of

399 cities.


Number of RENT agencies by Brazil GDP (mn)

Minimum requirements

28% 33% 38%15% 16%

52% 41%46%

52% 56%

8% 17% 11%22% 19%

12% 9% 3% 10% 7%3% 2% 1%

Norte Nordeste Centro Oeste Sudeste Sul

100 - 1,000 1,000 - 5,000 5,000 - 15,000

15,000 - 50,000 50,000 - 500,000

North Northeast Midwest Southeast South

North Northeast Midwest Southeast South

GDP 650,142 501,431 432,301 841,580 762,317

GDP Per capita 6,617 3,303 4,242 6,275 7,528

Population 26,277 575 4,505 6,233 19171

Number of cars 3,349 5755 7,197 15,626 9,974

33%47% 49% 49% 51%

11%

19% 18% 20% 27% 23%7% 8%7%

22% 21% 18% 19% 18%

9% 6% 5% 6% 8%

2006 2007 2011 2012 2015Enterprise Vanguard Hertz

Dollar Avis Others

22.6% 22.9% 22.8% 22.4%

4.1% 4.7% 6.1% 6.0%1.0% 5.1% 9,9%

73.2% 71.4% 66.0% 61.7%

2012 2013 2014 2015

Localiza Unidas Movida Others

M&A Analysis

HOME

Scale

Capillarity

Companies Stores Fleet

Market Total 5,624 7,348 773,222

Localiza 1 328 77,573

Unidas 1 199 44,486

Movida 1 156 53,429

Fleet/company 137

Stores/company 1.3

U.S. Car Rental’s Market ShareBrazilian Car Rental’s Market ShareAverage purchase price (R$

‘000)35.5

Total fleet (‘000 cars) 111

Fleet market value 3,933

(+) Working capital 377

(+) Other PP&E 314

(+) Intangible 89

Estimated replacement cost 4,714

% of Enterprise Value 45.5%

RENT’s Replacement Cost Estimate

0

5

10

15

20

25

30

35

40

45

50

maio-05 maio-06 maio-07 maio-08 maio-09 maio-10 maio-11 maio-12 maio-13 maio-14 maio-15 maio-16

Interest Rate Analysis

HOME

Cost of Debt

CDI + 1.14%

50.149.0

Target Price Slower CDI Decrease

Target Price

Down

2.20%

0

5

10

15

20

25

SELIC

RENT3

IPI Analysis I

HOME

0

1,000

2,000

3,000

4,000

5,000

6,000

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

IPI tax break IPI tax break

Average Annual Depreciation per car –

Car Rental (R$)

Average Annual Depreciation per car –

Fleet Rental (R$)

23%

17%15%

20%

15%

19%

2007A 2008A 2009A 2010A 2011A 2012A 2013A 2014A 2015A

IPI Analysis II

HOME

Consolidated EBIT Margin

50.1

49.5

Base Case IPI tax break

Target Price

Down

1.20%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

-150

-100

-50

0

50

100

150

30%

35%

40%

45%

50%

Fiscal Net Debt as a % of GDP (LHS)

Government Fiscal Result (BRL bn) (RHS)

Fiscal Scenario

Uber Analysis I

50%

15%

15%

20%

Monthly Rentals

Corporate

Leisure


Localiza’s Car Rental Revenue Breakdown

Uber Analysis II

HOME

Uber’s presence:

26 cities

Total cities:

19,505Uber’s presence:

204 cities

Total cities:

5,525Localiza’s presence:

361 cities

In Brazil…

…in United States

Insurance Replacement Analysis I

Insurance Companies’ Cost Reduction Sensitivity Analysis

Discount to the insurer

30% 25% 20% 15% 10%

km

per

Cle

int

per

Day

5 82% 83% 84% 85% 86%

10 67% 69% 71% 72% 74%

15 52% 55% 58% 60% 62%

20 36% 41% 44% 48% 51%

25 21% 27% 31% 35% 39%

49.248.3

47.446.5

45.6

41.2

10% 20% 30% 40% 50% 100%

% Decrease in Insurance Replacement Revenues after 2020

Target Price Sensitivity Analysis

Insurance Replacement Analysis II

HOME

COST PER TRAVEL (BRL)

Service No traffic Traffic

UberX 28.85 51.20

BREAK-EVEN DISTANCE (km)

Service No traffic Traffic

UberX 37.88 31.10

INPUTS (BRL)

Service Fixed Per min Per km

UberX 2.00 0.26 1.40

ASSUMPTIONS

Average speed &

distance:Prices:

No traffic: 40km/h Average daily R$ 85.00

Traffic: 20km/h Discount 20%

Number of days 10

Distance: 15Km Total Cost (BRL) 680.00

Cost reduction:

~50%

Car Production in Brazil (mn)

1.0 1.01.1

1.31.4

1.1

1.31.31.4

1.31.4

1.21.3

1.51.4

1.31.2

1.1

0.9 0.9

Jun-06 Jun-08 Jun-10 Jun-12 Jun-14 Jun-16

Purchasing Discount I

Car Rentals’ Share Over OEMs’ Car Sales

Source: ABLA, Fenabrave, ANFAVEA, team’s estimates.

8%

11%

9% 9%9%

8%8%

12%

14%

2007 2009 2011 2013 2015

Purchasing discount from 2018 on

Share Price Sensitivity Analysis (BRL)

53.7 51.950.1

47.3

36.7

30% 25% 22% 19% 15%

Localiza’s Share over OEM’s Car Sales

2.1%2.6%

3.6%4.2%

2012 2013 2014 2015

HOME

Purchasing Discount II

HOME

Selling Price

Purc

hasi

ng P

rice 32,550 32,750 32,950 33,150 33,350

31,200 1,080 923 765 607 450

31,400 1,252 1,094 937 779 621

31,600 1,423 1,266 1,108 950 793

31,800 1,595 1,437 1,279 1,122 964

32,000 1,766 1,608 1,451 1,293 1,135

Purchasing Discount

24% 23% 22% 21% 20%

Depreciation per Car 424 770 1,108 1,436 1,757

NPV per Car 1,743 1,510 1,284 1,063 848

ROIC 17.0% 16.3% 15.6% 14.9% 14.3%

Depreciation per Car Sensitivity Analysis

Key Financials Sensitivity Analysis

Peers’ IPO Analysis I

HOME

Net Debt (thousand)

1.7x2.2x

3.7x


Net Debt/EBITDA

856 783

Movida Unidas

Unidas’ Debt Profile

156

424

270

75

2016 2017 2018 2019

Peers’ IPO Analysis II

ROIC (%)

12%

16% 17%15%

3%

6%8% 8%

3%4%

2012 2013 2014 2015

Localiza

Unidas

Movida

HOME

78

5444

Localiza Movida Unidas

Number of Used Car Sales Stores

Peers’ IPO Analysis III

Target Price Sensitivity Analysis

Annual Decrease in Car Rental Revenues

2% 4% 6% 8% 10%

Purc

hasi

ng

Dis

count

25% 49.1 48.1 47.1 46.1 45.1

22% 48.5 47.5 46.5 45.5 44.5

19% 47.8 46.8 45.8 44.8 43.8

16% 47.2 46.2 45.2 44.2 43.2

13% 46.5 45.5 44.5 43.6 42.6

JSL’s Corporate Reestructuring

HOME

Movida Gestão e

Terceirização de Frota

S.A.

99.9%

Movida

Participações

S.A.

Movida Locação de

Veículos S.A.

99.9%

99.9%

Potential Acquisition- Unidas

HOME

Synergies (Increase in EBITDA - BRL Mn)

18.7

33.2

17

SG&A Cuts Better Efficiency inUsed Car Sales

Closing in NearAgencies

Synergies (Increase in EV - BRL Mn)

147.4

261.5

135.9

SG&A Cuts Better Efficiency inUsed Car Sales

Closing in NearAgencies

Do not consider overlapping in airports

Sinergies would account for 5% EV

Sources: Team’s estimates.

Movida

HOMESources: Companies data, team’s estimates, Fenabrave and ANFAVEA.

69 80 101 123 143 149 178 199 222 21514

3438

4979

146167

190214

281

1Q14 3Q14 1Q15 3Q15 1Q16

Used car Rental

CAGR

1Q14 – 2Q16

39.5 %

13.4 %

Movida ConsequencesCurrent Scenario

10%

6%6%

3%

4%

3%

5%

4% 4%

3%

Mar-14 Dec-14 Sep-15 Jun-16

49%

31%

25%28% 28%

18%20%

18% 17%

13%

Mar-14 Dec-14 Sep-15 Jun-16

dec/14 sep/15

dec/14 sep/15

OEMs’ Car Production in Brazil

(millions of cars)

0.0

0.3

0.6

0.9

1.2

1.5

Jun-06 Jun-08 Jun-10 Jun-12 Jun-14 Jun-16

Movida’s operational fleet growth Movida’s EBITDA margin evolution

-8%-5%

19%

67%

34%

53%48%

31%

19%

31%

6%12%

-5%2Q13¹ 4Q13¹ 2Q14 4Q14 2Q15 4Q15 2Q16

Ratio used to new commercialized cars Movida’s revenue breakdown (BRL mn) Movida’s Quarterly ROIC evolution

2.6x2.5x2.6x

3.0x

4.0x

4.8x4.9x

4.6x4.8x

5.0x5.0x5.2x

2011 2013 2015 Jan-16Mar-16 May-16

Jul-16

Used to New - Commercialized

Macroeconomic Assumptions

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2021E 2022E 2023E 2024E 2025E 2026E

IPCA (%) 4.5% 4.5% 4.5% 4.5% 4.5% 4.5%

IGPM (%) 4.5% 4.5% 4.5% 4.5% 4.5% 4.5%

US CPI (%) 2.3% 2.3% 2.3% 2.3% 2.3% 2.3%

Brazilian GDP (% YoY) 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%

Average SELIC (%) 8.5% 8.5% 8.5% 8.5% 8.5% 8.5%

2015A 2016E 2017E 2018E 2019E 2020E

IPCA (%) 10.7% 7.3% 5.1% 5.0% 4.5% 4.5%

IGPM (%) 10.5% 8.2% 5.6% 5.0% 4.9% 4.5%

US CPI (%) 0.7% 1.3% 2.3% 2.3% 2.3% 2.3%

Brazilian GDP (% YoY) -3.8% -3.2% 1.4% 2.0% 2.0% 2.0%

Average SELIC (%) 13.5% 14.2% 11.9% 10.8% 10.3% 10.0%

Sources: Team’s estimates, Focus.

Balance Sheet I

HOMESource: Team’s Estimates, Company’s data.

In BRL Millions 2015A 2016E 2017E 2018E 2019E 2020E

Cash & Equivalents 1,385 1,856 2,146 2,226 2,287 2,327

Receivables 486 488 518 591 668 750

Other Current Assets 135 109 115 132 149 168

Current Assets 2,006 2,454 2,779 2,948 3,104 3,244

Long Term Assets 4,117 4,603 5,363 6,206 7,104 8,077

Total Assets 6,123 7,057 8,142 9,154 10,208 11,322

ST Debt 422 456 551 622 696 773

Suppliers 691 707 728 832 923 1,016

Other Current Liabilities 243 253 268 306 346 389

Short Term Liabilities 1,356 1,416 1,548 1,760 1,965 2,178

LT Debt 2,597 3,181 3,844 4,338 4,856 5,393

Other Non Current Liabilities 328 228 235 239 247 354

Long Term Liabilities 2,825 3,409 4,079 4,577 5,103 5,647

Total Liabilities 4,181 4,825 5,627 6,337 7,068 7,824

Total Equity 1,942 2,232 2,515 2,818 3,140 3,497

Total Liabilities and Equity 6,123 7,057 8,142 9,154 10,208 11,322

Balance Sheet II


In BRL Millions 2021E 2022E 2023E 2024E 2025E 2026E

Cash & Equivalents 2,340 2,323 2,272 2,175 2,019 1,792

Receivables 840 939 1,048 1,169 1,301 1,454


Current Assets 3,368 3,471 3,554 3,604 3,610 3,569

Long Term Assets 9,158 10,359 11,690 13,166 14,802 16,614

Total Assets 12,526 13,830 15,244 16,771 18,413 20,184

ST Debt 856 947 1,046 1,155 1,274 1,405

Suppliers 1,131 1,258 1,399 1,553 1,723 1,915


Short Term Liabilities 2,422 2,692 2,988 3,313 3,671 4,073

LT Debt 5,970 6,601 7,294 8,053 8,886 9,800

Other Non Current Liabilities 254 253 264 261 265 269

Long Term Liabilities 6,224 6,854 7,550 8,314 9,151 10,069

Total Liabilities 8,646 9,546 10,538 11,627 12,822 14,143

Total Equity 3,880 4,284 4,706 5,144 5,591 6,041

Total Liabilities and Equity 12,526 13,830 15,244 16,771 18,413 20,184

Income Statement I



Gross revenues 4,002 4,170 4,418 5,042 5,703 6,405

Tax on revenues -74 -85 -96 -112 -129 -146

Net revenues 3,928 4,085 4,322 4,930 5,574 6,259

% YoY 1% 4% 6% 14% 13% 12%

COGS -2,500 -2,558 -2,672 -3,097 -3,483 -3,890

Gross profit 1,428 1,528 1,650 1,833 2,091 2,369

Gross margin 36% 37% 38% 37% 38% 38%

SG&A -494 -506 -526 -572 -624 -678

EBITDA 935 1,021 1,124 1,261 1,466 1,690

EBITDA margin 24% 25% 26% 26% 26% 27%

Car D&A -164 -201 -226 -283 -327 -374

Other D&A -36 -39 -43 -48 -53 -59

EBIT 736 781 855 929 1,086 1,257

EBIT margin 19% 19% 20% 19% 19% 20%

Financial Results -203 -237 -235 -226 -252 -296

EBT 533 544 619 703 834 961

Taxes -130 -153 -174 -197 -234 -270

% of EBT 24% 28% 28% 28% 28% 28%

Net income 402 391 445 506 600 691

Net margin 10% 10% 10% 10% 11% 11%

Income Statement II



Gross revenues 7,172 8,018 8,951 9,979 11,111 12,409

Tax on revenues -166 -188 -212 -239 -268 -302

Net revenues 7,006 7,830 8,739 9,740 10,843 12,107

% YoY 12% 12% 12% 11% 11% 12%

COGS -4,332 -4,820 -5,356 -5,947 -6,597 -7,335

Gross profit 2,674 3,011 3,383 3,793 4,246 4,771

Gross margin 38% 38% 39% 39% 39% 39%

SG&A -735 -796 -863 -934 -1,012 -1,102

EBITDA 1,939 2,214 2,520 2,859 3,233 3,670

EBITDA margin 28% 28% 29% 29% 30% 30%

Car D&A -429 -490 -549 -614 -684 -759

Other D&A -65 -71 -79 -86 -95 -104

EBIT 1,445 1,653 1,892 2,158 2,454 2,806

EBIT margin 21% 21% 22% 22% 23% 23%

Financial Results -345 -402 -467 -540 -625 -722

EBT 1,100 1,251 1,426 1,617 1,829 2,084

Taxes -309 -351 -400 -454 -514 -585

% of EBT 28% 28% 28% 28% 28% 28%

Net income 791 900 1,025 1,163 1,316 1,499

Net margin 11% 11% 12% 12% 12% 12%

RaC’s Income Statement I



Gross revenues 1,317 1,447 1,681 1,967 2,263 2,578

Tax on revenues -59 -57 -66 -77 -88 -101

% of Rev. 4% 4% 4% 4% 4% 4%

Net revenues 1,258 1,391 1,615 1,890 2,175 2,477

% YoY -2% 11% 16% 17% 15% 14%

COGS -618 -654 -760 -889 -1,023 -1,165

% YoY 7% 6% 16% 17% 15% 14%

Gross profit 640 736 855 1,001 1,152 1,312

Gross margin 51% 53% 53% 53% 53% 53%

SG&A -240 -255 -283 -315 -349 -384

EBITDA 400 482 573 686 803 927

EBITDA margin 32% 34% 36% 36% 37% 37%

Other D&A -22 -25 -27 -30 -33 -36

EBIT 378 457 546 656 770 891

EBIT margin 30% 32% 33% 35% 35% 36%

RaC’s Income Statement II



Gross revenues 2,924 3,305 3,723 4,181 4,684 5,287

Tax on revenues -114 -129 -146 -163 -183 -207

% of Rev. 4% 4% 4% 4% 4% 4%

Net revenues 2,810 3,175 3,577 4,018 4,501 5,081

% YoY 13% 13% 13% 12% 12% 13%

COGS -1,322 -1,494 -1,683 -1,890 -2,117 -2,390

% YoY 13% 13% 13% 12% 12% 13%

Gross profit 1,488 1,682 1,894 2,128 2,384 2,691

Gross margin 53% 53% 53% 53% 53% 53%

SG&A -423 -465 -511 -561 -616 -680

EBITDA 1,065 1,216 1,383 1,567 1,768 2,011

EBITDA margin 38% 38% 39% 39% 39% 40%

Other D&A -40 -44 -49 -54 -59 -65

EBIT 1,025 1,172 1,334 1,513 1,709 1,946

EBIT margin 37% 37% 37% 38% 38% 38%

Fleet Rental’s Income Statement I



Gross revenues 620 675 741 857 989 1,138

Tax on revenues -11 -22 -24 -28 -32 -37

% of Rev. 2% 3% 3% 3% 3% 3%

Net revenues 609 653 717 828 956 1,100

% YoY 6% 7% 10% 16% 15% 15%

COGS -189 -210 -231 -267 -308 -355

% YoY -1% 11% 10% 16% 15% 15%

Gross profit 419 442 486 561 648 746

Gross margin 68% 66% 66% 66% 66% 66%

SG&A -41 -43 -46 -50 -55 -60

EBITDA 379 400 440 511 593 685

EBITDA margin 62% 61% 61% 62% 62% 62%

Other D&A -2 -2 -3 -3 -3 -4

EBIT 376 397 438 508 590 682

EBIT margin 62% 61% 61% 61% 62% 62%

Fleet Rental’s Income Statement II



Gross revenues 1,305 1,492 1,701 1,935 2,196 2,488

Tax on revenues -43 -49 -56 -63 -72 -82

% of Rev. 3% 3% 3% 3% 3% 3%

Net revenues 1,262 1,443 1,645 1,871 2,124 2,406

% YoY 15% 14% 14% 14% 14% 13%

COGS -407 -465 -530 -603 -685 -776

% YoY 15% 14% 14% 14% 14% 13%

Gross profit 855 978 1,115 1,268 1,439 1,631

Gross margin 66% 66% 66% 66% 66% 66%

SG&A -66 -72 -80 -87 -96 -106

EBITDA 789 905 1,035 1,181 1,343 1,525

EBITDA margin 63% 63% 63% 63% 63% 63%

Other D&A -4 -4 -5 -5 -6 -6

EBIT 785 901 1,030 1,175 1,337 1,519

EBIT margin 62% 62% 63% 63% 63% 63%

Used Car Sales’ Income Statement I

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Gross revenues 2,048 2,029 1,976 2,196 2,428 2,664

Tax on revenues -3 -5 -5 -6 -6 -7

% of Rev. 0% 0% 0% 0% 0% 0%

Net revenues 2,045 2,024 1,971 2,191 2,421 2,657

COGS -1683 -1,684 -1,672 -1,930 -2,141 -2,358

Gross profit 362 340 299 260 280 299

Gross margin 18% 17% 15% 12% 12% 11%

SG&A -212 -208 -197 -206 -220 -233

EBITDA 150 131 102 54 60 66

EBITDA margin 7% 7% 5% 3% 3% 3%

Car D&A -164 -201 -226 -283 -327 -374

Other D&A -11 -12 -13 -14 -16 -18

EBIT -25 -81 -137 -244 -283 -326

EBIT margin -1% -4% -7% -11% -12% -12%

Source: Team’s Estimates, Company’s data.

Used Car Sales’ Income Statement II

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Gross revenues 2,916 3,193 3,497 3,829 4,194 4,595

Tax on revenues -7 -8 -9 -10 -11 -12

% of Rev. 0% 0% 0% 0% 0% 0%

Net revenues 2,909 3,185 3,488 3,820 4,184 4,583

COGS -2,591 -2,847 -3,129 -3,438 -3,778 -4,152

Gross profit 318 338 359 381 406 432

Gross margin 11% 11% 10% 10% 10% 9%

SG&A -245 -258 -271 -285 -300 -315

EBITDA 73 80 88 97 106 117

EBITDA margin 3% 3% 3% 3% 3% 3%

Car D&A -429 -490 -549 -614 -684 -759

Other D&A -20 -22 -24 -26 -29 -31

EBIT -376 -431 -485 -544 -607 -674

EBIT margin -13% -14% -14% -14% -15% -15%


Franchising’s Income Statement I



Gross revenues 18 19 20 22 24 25

Tax on revenues -1.2 -1.2 -1.2 -1.3 -1.4 -1.5

% of Rev. 7% 6% 6% 6% 6% 6%

Net revenues 17 18 19 21 22 24

% YoY -6% 8% 7% 7% 7% 7%

COGS -9 -9 -10 -10 -11 -12

Gross profit 7 9 10 10 11 12

Gross margin 42% 47% 47% 47% 47% 47%

SG&A -0.6 -0.6 -0.7 -0.7 -0.7 -0.8

EBITDA 7 8 9 10 10 11

EBITDA margin 41% 47% 47% 47% 47% 47%

Other D&A -0.4 -0.4 -0.5 -0.5 -0.6 -0.7

EBIT 6 8 9 9 10 11

EBIT margin 39% 44% 44% 44% 44% 44%

Franchising’s Income Statement II



Gross revenues 27 29 31 34 36 39

Tax on revenues -1.6 -1.8 -1.9 -2.0 -2.2 -2.3

% of Rev. 6% 6% 6% 6% 6% 6%

Net revenues 26 27 29 32 34 36

% YoY 7% 7% 7% 7% 7% 7%

COGS -13 -14 -15 -16 -17 -18

Gross profit 13 14 15 16 17 18

Gross margin 47% 47% 47% 47% 47% 47%

SG&A -0.8 -0.8 -0.9 -0.9 -1.0 -1.0

EBITDA 12 13 14 15 16 17

EBITDA margin 47% 47% 47% 47% 47% 47%

Other D&A -0.7 -0.8 -0.9 -1.0 -1.1 -1.2

EBIT 11 12 13 14 15 16

EBIT margin 44% 44% 44% 44% 44% 44%

Statement of Cash Flow I



Net income 402 391 445 506 600 691

Non-cash adjustments (D&A) 199 240 269 331 380 433

Change in working capital -212 49 1 52 36 35

D Receivables -27 -2 -29 -73 -77 -82

D Decommissioning cars -14 2 -2 -5 -5 -5

D Other Current Assets -8 24 -5 -12 -12 -13

D Suppliers -138 16 22 104 91 93

D Other Current Liabilities -26 10 15 38 40 43

Cash Flow From Operating Activities 390 681 715 889 1,016 1,159

Changes in Long Term Assets -582 -726 -1,029 -1,175 -1,278 -1,406

D PP&E and Intangible (Capex) -642 -724 -1,027 -1,173 -1,276 -1,404

D Other Non Current Assets 61 -2 -2 -2 -2 -2

Cash Flow From Investing Activities -582 -726 -1,029 -1,175 -1,278 -1,406

D Debt 307 618 759 564 593 614

D ST Debt 122 34 95 71 74 77

D LT Debt 185 584 664 493 519 537

D Other LT Liabilities -4 0 7 4 7 7

D Income Reserve (Dividends and IOC) -112 -101 -163 -203 -278 -334

D Capital Reserve and Special Dividends -5 0 0 0 0 0

D Other Equity 0 0 0 0 0 0

Cash Flow From Financing Activities 187 517 603 366 323 287

Net Cash Flow -5 471 289 80 61 40

Statement of Cash Flow II



Net income 791 900 1,025 1,163 1,316 1,499

Non-cash adjustments (D&A) 494 561 628 701 779 863

Change in working capital 52 57 63 69 76 86

D Receivables -90 -99 -109 -120 -133 -152

D Decommissioning cars -6 -6 -7 -7 -8 -9

D Other Current Assets -14 -16 -18 -19 -21 -24

D Suppliers 116 127 140 154 170 193

D Other Current Liabilities 47 51 57 62 69 79

Cash Flow From Operating Activities 1,337 1,519 1,716 1,933 2,171 2,448

Changes in Long Term Assets -1,575 -1,761 -1,959 -2,177 -2,415 -2,675

D PP&E and Intangible (Capex) -1,573 -1,759 -1,957 -2,175 -2,413 -2,673

D Other Non Current Assets -2 -2 -2 -2 -2 -2

Cash Flow From Investing Activities -1,575 -1,761 -1,959 -2,177 -2,415 -2,675

D Debt 659 722 792 868 953 1,045

D ST Debt 83 91 99 109 119 131

D LT Debt 576 632 692 759 833 914

D Other LT Liabilities 1 -2 3 4 4 3

D Income Reserve (Dividends and IOC) -408 -496 -603 -726 -868 -1,049

D Capital Reserve and Special Dividends 0 0 0 0 0 0

D Other Equity 0 0 0 0 0 0

Cash Flow From Financing Activities 251 225 192 147 88 0

Net Cash Flow 13 -18 -51 -97 -156 -227

DCF FCFE I

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EBITDA 935 1,021 1,124 1,261 1,466 1,690

(-) Car Sale Net Revenue -2,045 -2,024 -1,971 -2,191 -2,421 -2,657

(+) COGS (Used Car Sales) 1,683 1,684 1,672 1,930 2,141 2,358

EBITDA Adj. 573 682 825 1,000 1,186 1,391

(-) Taxes -130 -153 -174 -197 -234 -270

(-) D Working Capital -74 33 -21 -52 -55 -58

Cash Flow Before Capex 369 562 630 751 897 1,063

(+) Car Sale Net Revenue 2,045 2,024 1,971 2,191 2,421 2,657

(-) Capex -2,457 -2,492 -2,707 -2,928 -3,227 -3,536

Vehicles capex -2,275 -2,476 -2,693 -2,992 -3,273 -3,580

Other PP&E -30 -32 -35 -40 -44 -49

Change in Suppliers Account -121 16 22 104 91 93

New HQ Investments -31 0 0 0 0 0

(+/-) Change in debt 307 618 759 564 593 614

(-) Interest expenses -370 -356 -396 -412 -444 -493

(+) Tax shield 91 100 111 116 125 142

FCFE -4 114 368 282 366 447

Terminal Growth Rate 5.5%

Ke 15.1%


DCF FCFE II

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EBITDA 1,939 2,214 2,520 2,859 3,233 3,670

(-) Car Sale Net Revenue -2,909 -3,185 -3,488 -3,820 -4,184 -4,583

(+) COGS (Used Car Sales) 2,591 2,847 3,129 3,438 3,778 4,152

EBITDA Adj. 1,621 1,877 2,161 2,477 2,828 3,238

(-) Taxes -309 -351 -400 -454 -514 -585

(-) D Working Capital -63 -70 -77 -85 -93 -107

Cash Flow Before Capex 1,249 1,455 1,684 1,938 2,220 2,545

(+) Car Sale Net Revenue 2,909 3,185 3,488 3,820 4,184 4,583

(-) Capex -3,873 -4,256 -4,677 -5,139 -5,648 -6,200

Vehicles capex -3,935 -4,325 -4,754 -5,225 -5,743 -6,312

Other PP&E -53 -58 -63 -69 -75 -81

Change in Suppliers Account 116 127 140 154 170 193

New HQ Investments 0 0 0 0 0 0

(+/-) Change in debt 659 722 792 868 953 1,045

(-) Interest expenses -546 -604 -667 -737 -813 -896

(+) Tax shield 161 183 207 234 264 305

FCFE 559 686 826 984 1,160 1,382

Terminal Value 18,952


DCF FCFE III – Sensitivity Test

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In BRL Millions FCFE¹ Market²

Equity value 10,435 8,414

Shares outstanding 208.27 208.27

Target Price R$ 50.1 R$ 40.4

Upside/Downside 24.0%

Forecast Stock Return 25.3%

Notes

¹As of 12/31/2017

²As of 10/17/2016


Terminal Growth

Ke

4.5% 5.0% 5.5% 6.0% 6.5%

13.6% 50.8 52.4 54.3 56.5 58.9

14.4% 48.9 50.4 52.2 54.2 56.6

15.1% 47.0 48.5 50.1 52.0 54.2

15.9% 45.2 46.6 48.2 50.0 52.1

16.7% 43.5 44.8 46.3 48.0 49.9


12.1% 9.4%Revenue CAGR

FCFE CAGR¹ 15.8% 8.4%

EBIT Margin 19.8% 19.3%

ROIC 14.0% 13.7%

Target Price BRL 50.00 BRL 35.40

Upside/

Downside24% -12%

Base Case Bear Case

367262 295 323 387

458533

613700

8271

20

71124

172

228

293

371

461

555

2017E 2020E 2023E 2026E

Bear Case Base Case Addition

Bear Case

CAGR¹ of 8.4%

8.4%

BRL 35.40

-12%

FCFE CAGR

Target Price

Upside/

Downside

Bear Case Output

Scenario Analysis I


368282

366447

559686

826984

1160

1382

589

6449

68

86

108

135

167

207

2017E 2020E 2023E 2026E

Base Case Bull Case Addition


12.1% 13.3%Revenue CAGR

FCFE CAGR¹ 15.8% 8.4%

EBIT Margin 19.8% 21.4%

ROIC 14.0% 15.1%

Target Price BRL 50.00 BRL 35.40

Upside/

Downside24% -12%

Base Case Bull Case

Bull Case

CAGR¹ of

17.5% 17.5%

BRL 55.70

37.8%

FCFE CAGR

Target Price

Upside/

Downside

Bull Case Output

Scenario Analysis II


Analysts Coverage

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Consensus

Buys 37.5% - 6 analysts

Holds 37.5% - 6 analysts

Sells 25.0% - 4 analysts

12M Tgt Px 37.45

Firm Analyst Action Recommendation Tgt Px Date

EVA Dimensions Timothy Stanish M sell 09/22/16

Bradesco BBI Victor Mizusaki M outperform 42 09/13/16

UBS Rogerio Martins U buy 50.6 09/07/16

Itau BBA Securities Renato Salomone M market perform 42 08/25/16

Grupo Santander Bruno Amorim M buy 35 08/09/16

Morgan Stanley Josh Milberg M Underwt/In-Line 30 07/27/16

J.P. Morgan Fernando Abdalla M neutral 39 07/26/16

Banco do Brasil SA Mario Bernardes Junior M market perform 36 07/25/16

Goldman Sachs Marcio Prado M Sell/Neutral 29.6 07/22/16

Banco BTG Pactual SA Renato Mimica M neutral 34 07/22/16

Votorantim CTVM Research Sami Karlik M outperform 39 07/22/16

Brasil Plural Bernardo Carneiro M underweight 29 07/21/16

Nau Securities Ltd Luis Prieto M buy 37 05/16/16

HSBC Alexandre Falcao M reduce 29 05/03/16

Banco Safra de Investimento Lucas Marquiori M neutral 26.5 04/26/16

Credit Suisse Felipe Vinagre M neutral 33 07/31/15

Source: Bloomberg.

Cost of Equity I

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Comparable Companies

Beta

Company name Currency Total debt Mkt cap. D / E Tax rate Levered Unlevered

Hertz Global Holdings Inc USD 15,907 3,925 405% 40% 2.40 0.70

Avis Budget Group Inc USD 12,321 3,534 349% 40% 2.52 0.81

Sixt SE USD 1,987 2,458 81% 30% 0.95 0.61

CAR Inc USD 1,311 2,354 56% 25% 1.21 0.85

Europcar Groupe SA USD 2,265 1,280 177% 33% 0.92 0.42

Herc Holdings Inc USD 137 929 15% 40% 0.81 0.75

eHi Car Services Ltd USD 427 702 61% 25% 1.31 0.90

United International Transp USD 173 447 39% 20% 1.08 0.83

Average 0.73

Inflation adjustment Levered beta calculation

Long term inflation differential 3.48% Unlevered betas median 0.73

BR IPCA - 2016E-2026E 5% Target D / E 43%

US CPI - 2016E-2026E 2% Tax rate 34%

Re-levered beta 0.94

Source: CNBC, Ibbotson, IPEA Data, Reuters, KPMG, Team’s Estimates.

Cost of Equity II

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Ke

Risk free rate(1) 1.81%


Market risk premium(2) 6.70%

Country risk premium(3) 3.13%

Ke (USD) - nominal 11.26%

Ke (BRL) - nominal 15.13%

Notes:

(1) US Treasury 10-year bond yield as of October 13th, 2016. Source: CNBC

(2) Source: Ibbotson

(3) Measured by the EMBI+ as of October 13th, 2016. Source: Ipea Data

(4) As of September 27th, 2016. Source: Reuters

(5) Source: KPMG

WACC Decomposition

Cost of equity (Ke)

Risk free rate(1) 1.81%


Market risk premium(2) 6.70%

Country risk premium(3) 3.13%

Ke (USD) - nominal 11.26%

Ke (BRL) - nominal 15.13%

Comparable companies(4)

Company name Total debt Market Cap D / E Tax rate Levered Unlevered

Hertz Global Holdings 15,907 3,925 405% 40% 2.40 0.70

Avis Budget Group Inc 12,321 3,534 349% 40% 2.52 0.81

Sixt SE 1,987 2,458 81% 30% 0.95 0.61

CAR Inc 1,311 2,354 56% 25% 1.21 0.85

Europcar Groupe SA 2,265 1,280 177% 33% 0.92 0.42

Herc Holdings Inc 137 929 15% 40% 0.81 0.75

eHi Car Services Ltd 427 702 61% 25% 1.31 0.90

United International 173 447 39% 20% 1.08 0.83

Average 0.73

Inflation adjustment

Long term inflation differential 3.48%

BR IPCA - 2016E-2026E 5%

US CPI - 2016E-2026E 2%

Levered beta calculation

Unlevered betas median 0.73

Target D / E 43%

Tax rate 34%


Cost of debt (Kd)

Average cost of debt 13.19%

Tax rate 34%

Post tax cost of debt 8.70%

Market cap 8,414

Target capital structure 30.2%

WACC 13.19%

Notes:¹US Treasury 10-year bond yield, as of October 13th, 2016. Source: CNBC.

²Source: Ibbotson.

³Measured by the EMBI+ as of October 13th, 2016. Source: Ipea Data.4As of October 13th, 2016. Source: Bloomberg..

Revenue Build Up

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Total

Average

Operational

Fleet

Number of

Dailies per

Operational

Car

Number of

Dailies

Total Average

Operational

Fleet

Number of

Dailies

Average

Daily

Tariff

Gross

Revenues

BoP FleetCars

BoughtCars SoldEoP Fleet

Source: Team’s Estimates.

Small Gains on Tariffs

Average Rent a Car Daily Tariff (YoY)

3.6%

2.1%

3.4%

-3.6%

1.5%

3.5%

2010 2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

RaC tariff

Inflation 4.5%

Source: Team’s estimates, Company’s data

236 247272

304320

335363

391419

447475

503531

558586

614

2011A 2012A 2013A 2014A 2015A 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E

Agencies Projections

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6.3% CAGR

6.3% CAGR

Reach 70% of total Market potential in 10 years


Ratio Used Car Stores / Agencies

4.4

3.7 3.7

4.1

4.34.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2


Used Car Stores Projections

HOME

54

66

73 74 7580

8693

100106

113120

126133

140146


6.8% CAGR

12.8%

CAGR


Capex Build-Up

HOME

Number of

Purchased Cars

Purchasing

Price

Number of

Sold Cars

Selling Price

Net Car

Capex

Other

PP&ED Suppliers

Total Capex

Source: Team’s Estimates.

Capex I

HOME

2015A 2016E 2017E 2018E 2019E 2020E

Car purchasing

Number of purchased cars 64,032 69,001 73,587 78,609 82,676 86,954

Average acquired car price (‘000 BRL) 35.53 35.89 36.60 38.07 39.59 41.17

Fleet investment -2,275 -2,476 -2,693 -2,992 -3,273 -3,580

Used car sales

Number of cars sold 64,305 63,089 59,742 62,458 66,615 70,544

Average sold car price (‘000 BRL) 28.54 28.86 29.78 31.86 33.14 34.46

Used car sales revenues 1,835 1,821 1,779 1,990 2,208 2,431

Used car sales SG&A -212 -208 -197 -206 -220 -233

Used car sales revenues (ex-SG&A) 2,048 2,029 1,976 2,196 2,428 2,664

Other PP&E

Suppliers account change -121 16 22 104 91 93

Other PP&E Capex -30 -32 -35 -40 -44 -49

Net car Capex -230 -452 -722 -802 -852 -923

Total Capex -412 -468 -736 -737 -805 -878


Capex II

HOME

2021E 2022E 2023E 2024E 2025E 2026E

Car purchasing

Number of purchased cars 91,454 96,189 101,170 106,410 111,923 117,724

Average acquired car price (‘000 BRL) 43.03 44.96 46.99 49.10 51.31 53.62

Fleet investment -3,935 -4,325 -4,754 -5,225 -5,743 -6,312

Used car sales

Number of cars sold 74,177 77,998 82,016 86,243 90,689 95,365

Average sold car price (‘000 BRL) 36.01 37.64 39.33 41.10 42.95 44.88

Used car sales revenues 2,671 2,935 3,226 3,544 3,895 4,280

Used car sales SG&A -245 -258 -271 -285 -300 -315

Used car sales revenues (ex-SG&A) 2,916 3,193 3,497 3,829 4,194 4,595

Other PP&E

Suppliers account change 116 127 140 154 170 193

Other PP&E Capex -53 -58 -63 -69 -75 -81

Net car Capex -1,026 -1,140 -1,266 -1,405 -1,559 -1,729

Total Capex -964 -1,071 -1,189 -1,320 -1,464 -1,617


Car Prices


1.11 1.11

1.131.14

1.20

1.241.24

1.23

1.19 1.19 1.19

1.19

2010 2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Mix Change

63.40%65.90% 63.90%

46.10% 46.10% 46.10%

40% 38%35% 34.90% 34.90% 34.90%

1Q13 1Q14 1Q15 1Q16 2Q16 3Q16

RaC Fleet

% of Economic Cars

Purchase price/selling price

Working Capital I

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2015A 2016E 2017E 2018E 2019E 2020E

Total Working Capital 377 344 365 416 471 529

Change in Working Capital 74 -33 21 52 55 58

Working Assets 621 597 633 722 817 918

Receivables 486 488 518 591 668 750

Days of sales 45 42 42 42 42 42

Decommissioning cars to fleet renewal 32 30 32 37 41 47

Days of sales 3 3 3 3 3 3



Working Liabilities 243 253 268 306 346 389

Suppliers* 691 707 728 832 923 1,016

Days of COGS 99 99 98 97 95 94


Days of sales 22 22 22 22 22 22

*Not considered in working capital

calculation


Working Capital II

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2021E 2022E 2023E 2024E 2025E 2026E

Total Working Capital 592 662 739 824 918 1,025

Change in Working Capital 63 70 77 85 93 107

Working Assets 1,027 1,149 1,282 1,429 1,592 1,778

Receivables 840 939 1,048 1,169 1,301 1,454

Days of sales 42 42 42 42 42 42

Decommissioning cars to fleet renewal 52 58 65 72 81 90




Working Liabilities 435 486 543 605 674 753

Suppliers* 1,131 1,258 1,399 1,553 1,723 1,915

Days of COGS 94 94 94 94 94 94


Days of sales 22 22 22 22 22 22

*Not considered in working capital

calculation


Costs

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-1683

-164

-356

-21

-217

-83-165

Cost of Cars Sold Car Deppreciation Cars Maintenance, IPVA

D&A of other PP&E Wages Rent of Real State

Other

-21

-30

-37

-10-10

-78

D&A and otherPP&E

Profit Shares

Third partyservices

Water, Energyand Telefone

Travel

Other

2015A


-207

-86

-69

-44

-39

-32-26

Wages Other Third party services

Rent of Real State Publicity Profit shares

Comissions

SG&A

HOME

2015A


100

523

299

620

770673

2016 2017 2018 2019 2020 2021

1,169

Cash

2016

Debt Amortization

1As of 30/09/16

Source: Company’s DataHOME

Accounts for 70% of Total Debt

Debt Breakdown

Debt (BRL mn) Interest Rate 2016 2017 2018 2019 2020 2021 Total

6th IssueCDI + 0,95%

ann.30 30 120 120 300

7th Issue 110.95% CDI 75 75 75 100 100 425

8th Issue 109.5% CDI 250 250 500

9th Issue 113.2% CDI 50 150 300 500

10th Issue 113.9% CDI 100 100 200

CCBI –

Headquarters98.8% CDI 47.5 95 47.5 190

SWAP 105.5% CDI 225 225

HOMESource: Company’s Data

Covenants

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Net Debt / EBITDA EBITDA / Net Financial Expenses

1.7x1.7x

2.0x 2.1x2.2x 2.2x

2.3x 2.3x 2.4x 2.4x 2.4x

2.4x

0x

1x

1x

2x

2x

3x

3x

4x

4x

2015A 2017E 2019E 2021E 2023E 2025E

Covenant of 4.0x

4.61x

4.31x4.78x

5.57x

5.82x

5.71x

5.62x

5.51x

5.40x

5.29x

5.17x

5.08x

0x

1x

2x

3x

4x

5x

6x

7x

2015A 2017E 2019E 2021E 2023E 2025E

Covenant of 1.5x

Healthy Position Considering Covenant Level

Dividends

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Cash DestinationDividends Distribution

27%

101%

26% 28% 28%32%

36% 40% 45%

0%

20%

40%

60%

80%

100%

120%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

2012A 2013A 2014A 2015A 2016E 2017E 2018E 2019E 2020E

Dividend Yield Payout

0.2

0.3 0.30.3 0.3 0.3 0.3

0.3

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

0

0.5

1

1.5

2

2.5

2015A 2016E 2017E 2018E 2019E 2020E 2021E 2022E

DPS CFO / (Capex + Dividends)

Team’s Est. EPS2016-2019 = 15.3%High Growth Profile Company

Margins, Profitability, CF Ratios and Solvency Ratios I

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2015A 2016E 2017E 2018E 2019E 2020E

Margins (%)

Gross margin 36% 37% 38% 37% 38% 38%

EBITDA margin 24% 25% 25% 25% 26% 27%

EBIT margin 19% 19% 19% 18% 19% 20%

Net margin 10% 10% 10% 10% 11% 11%

Profitability (%)

ROA 7% 6% 6% 6% 6% 6%

ROE 21% 18% 18% 18% 19% 20%

ROIC 17% 15% 14% 13% 13% 13%

ROIC - Kd x (1-tax) 4% 5% 5% 6% 6%

Expected Kd after taxes 10% 9% 8% 8% 7%

Solvency

Net debt / EBITDA 1.7x 1.7x 2.0x 2.1x 2.2x 2.2x

Net Debt / Fleet value 0.5x 0.4x 0.5x 0.5x 0.5x 0.5x

Current ratio 1.5x 1.7x 1.8x 1.7x 1.6x 1.5x

Interest coverage ratio 2.0x 2.2x 2.2x 2.3x 2.4x 2.5x

Cash coverage ratio 2.5x 2.9x 2.8x 3.1x 3.3x 3.4x

D/E 1.56x 1.63x 1.75x 1.76x 1.77x 1.76x


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2021E 2022E 2023E 2024E 2025E 2026E

Margins (%)

Gross margin 38% 38% 39% 39% 39% 39%

EBITDA margin 27% 28% 28% 29% 29% 30%

EBIT margin 20% 21% 21% 22% 22% 23%

Net margin 11% 11% 12% 12% 12% 12%

Profitability (%)

ROA 6% 7% 7% 7% 7% 7%

ROE 20% 21% 22% 23% 24% 24%

ROIC 13% 13% 13% 14% 14% 14%

ROIC - Kd x (1-tax) 7% 7% 7% 7% 7% 8%

Expected Kd after taxes 6% 6% 6% 6% 6% 6%

Solvency

Net debt / EBITDA 2.3x 2.3x 2.4x 2.4x 2.5x 2.5x

Net Debt / Fleet value 0.5x 0.5x 0.6x 0.6x 0.6x 0.6x

Current ratio 1.4x 1.3x 1.2x 1.1x 1.0x 0.9x

Interest coverage ratio 2.6x 2.7x 2.8x 2.9x 3.0x 3.1x

Cash coverage ratio 3.6x 3.7x 3.8x 3.9x 4.0x 4.1x

D/E 1.76x 1.76x 1.77x 1.79x 1.82x 1.85x

Margins, Profitability, CF Ratios and Solvency Ratios II


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2015A 2016E 2017E 2018E 2019E 2020E

P / E 20.9x 21.5x 18.9x 16.6x 14.0x 12.2x

EV / EBITDA 10.9x 10.0x 9.1x 8.1x 7.0x 6.0x

P / BV 4.3x 3.7x 3.3x 2.9x 2.6x 2.4x

P / Sales 2.1x 2.1x 1.9x 1.7x 1.5x 1.3x

Dividend Yield 1.3% 1.3% 1.7% 2.2% 2.9% 3.7%

FCF Yield 0.0% 1.4% 4.4% 3.4% 4.4% 5.4%

EPS (R$) 1.93 1.88 2.14 2.43 2.88 3.32

2021E 2022E 2023E 2024E 2025E 2026E

P / E 10.6x 9.3x 8.2x 7.2x 6.4x 5.6x

EV / EBITDA 5.3x 4.6x 4.0x 3.6x 3.2x 2.8x

P / BV 2.2x 2.0x 1.8x 1.6x 1.5x 1.4x

P / Sales 1.2x 1.1x 1.0x 0.9x 0.8x 0.7x

Dividend Yield 4.6% 5.7% 7.0% 8.5% 10.3% 12.5%

FCF Yield 6.7% 8.3% 10.0% 11.9% 14.0% 16.7%

EPS (R$) 3.80 4.32 4.92 5.58 6.32 7.20

Market Ratios, and Asset Management Ratios


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Operational Indicators I


57 61 65 68 72 75 79 83 87 91 96

12 13 14 14 15 16 17 18 19 20 22

2016E 2018E 2020E 2022E 2024E 2026E


Number of Purchased Cars (‘000) Number of Sold Cars (‘000)

53 49 53 57 60 63 66 69 73 77 80

10 11 10 10 11 11 12 13 13 14 15

2016E 2018E 2020E 2022E 2024E 2026E


Price of Purchased Cars (BRL) Price of Sold Cars (BRL)

29 30 32 33 35 36 38 40 41 43 4539 40 42 43 45 47 49 52 54 56 59

2016E 2018E 2020E 2022E 2024E 2026E


29 30 32 33 35 36 38 40 41 43 45

29 29 31 32 33 35 36 38 40 41 43

2016E 2018E 2020E 2022E 2024E 2026E


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Operational Indicators II


EoP Fleet (‘000) Average Operational Fleet (‘000)

Average Rented Fleet (BRL) Utilization Rate (%)

81 92 105116128140153167181196

212

36 38 42 46 51 56 61 67 73 79 86

2016E 2018E 2020E 2022E 2024E 2026E


67 77 87 96 106116127138150163176

34 36 40 44 48 53 58 63 69 75 81

2016E 2018E 2020E 2022E 2024E 2026E


47 54 62 68 75 83 90 98 107115125

32 34 39 43 47 51 56 61 67 73 79

2016E 2018E 2020E 2022E 2024E 2026E


70%70%71%71%71%71%71%71%71%71%71%

96%96%97%97%97%97%97%97%97%97%97%

2016E 2018E 2020E 2022E 2024E 2026E


HOME

Operational Indicators III


Number of Dailies (‘000) Number of Dailies per Operational Car (Unit)

Average Daily Ticket (BRL) Average Depreciation per Car (BRL ‘000)

17 19 22 24 27 29 32 3538

41 44

12 13 14 15 17 19 20 22 24 26 28

2016E 2018E 2020E 2022E 2024E 2026E


251251251251251251251251251251251

352352352352352352352352352352352

2016E 2018E 2020E 2022E 2024E 2026E


86 87 90 93 97 100103107111115120

57 59 62 64 67 70 73 77 80 84 87

2016E 2018E 2020E 2022E 2024E 2026E


1.1 1.21.5 1.6 1.6 1.7 1.8 1.8 1.8 1.8 1.8

3.8 3.7 3.7 3.8 4.0 4.2 4.4 4.6 4.8 5.0 5.2

2016E 2018E 2020E 2022E 2024E 2026E


Dupont Analysis

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ROE

2014A 2015A 2016E 2017E 2018E 2019E 2020E 2021E

24.8% 20.7% 17.5% 17.7% 17.9% 19.1% 19.8% 20.4%

Financial Leverage

2014A 2015A 2016E 2017E 2018E 2019E 2020E 2021E

3.44 3.15 3.16 3.24 3.25 3.25 3.24 3.23

ROA

2014A 2015A 2016E 2017E 2018E 2019E 2020E 2021E7.2% 6.6% 5.5% 5.5% 5.5% 5.9% 6.1% 6.3%

Asset Turnover

2014A 2015A 2016E 2017E 2018E 2019E 2020E 2021E

0.68 0.64 0.58 0.53 0.54 0.55 0.55 0.56

Net Margin

2014A 2015A 2016E 2017E 2018E 2019E 2020E 2021E

10.5% 10.2% 9.6% 10.3% 10.3% 10.8% 11.0% 11.3%


Growth per Segment

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CAGR 2005 – 2010 2010 - 2015 2015 - 2020 2021 - 2026

Gross Revenues - Consolidated 24% 9% 10% 12%

Operational Fleet 20% 5% 9% 9%

Net Revenues 24% 10% 10% 12%

Gross Profit 20% 10% 11% 12%

EBITDA 19% 8% 13% 14%

EBIT 15% 9% 11% 14%

Net Profit 19% 10% 11% 14%

Gross Revenues - RaC 25% 10% 12% 13%

Operational Fleet - RaC 21% 5% 10% 9%

Tariff - RaC 0% 2% 2% 4%

EBIT - RaC 24% 2% 14% 14%

Gross Revenues - Fleet Rental 20% 11% 11% 14%

Operational Fleet - Fleet Rental 18% 5% 7% 9%

Tariff - Fleet Rental 1% 4% 3% 4%

EBIT - Fleet Rental 22% 9% 11% 14%

Gross Revenues - Used Car Sales 24% 7% 6% 10%

EBIT - Used Car Sales -240% -27% 32% 12%

Gross Revenues - Franchising 9% 7% 6% 7%

EBIT - Franchising 14% 1% 6% 7%


Margins per Segment

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Gross Margin EBITDA Margin

EBIT Margin

53%53%53%53%53%53%53%53%53%53%53%

66%66%66%66%66%66%66%66%66%66%66%

17%15%12%12%11%11%11%10%10%10% 9%

2016 2018 2020 2022 2024 2026


32% 33% 35% 35% 36% 36% 37% 37% 38% 38% 38%

61% 61% 61% 62% 62% 62% 62% 63% 63% 63% 63%

-4% -7% -11% -12% -12% -13% -14% -14% -14% -14% -15%

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026


34%35%36%37%37%38%38%39%39%39%40%

61%61%62%62%62%63%63%63%63%63%63%

6% 5% 2% 2% 2% 2% 3% 3% 3% 3% 3%

2016 2018 2020 2022 2024 2026


Used Car Sales


ROIC Scenario I

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RENT Scenario

17.0%

ROIC Tax Burden EBIT Margin Invested Capital Turnover

76% 19% 1.2

Unidas Scenario

8.8% 76% 16% 0.7

Unidas Scenario – EBIT Margin

14.5% 76% 16% 1.2

Unidas Scenario – Invested Capital

10.0% 76% 19% 0.7


ROIC Scenario II

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RENT Scenario

17.0%

ROIC Tax Burden EBIT Margin Invested Capital Turnover

76% 19% 1.2

Movida Scenario

5.4% 76% 12% 0.6

Movida Scenario – EBIT Margin

11.3% 76% 12% 1.2

Movida Scenario – Invested Capital

8.2% 76% 19% 0.6


ROIC Decomposition

HOME

19% 19%19%

20%

19%

19% 20%

0%

5%

10%

15%

20%

25%

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

2014A 2015A 2016E 2017E 2018E 2019E 2020E

Invested Capital Turnover Operational Margin

ROIC DecompositionROIC Evolution

18.3%17.0%

14.8%14.0%

13.0% 13.1% 13.2%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

2014A 2015A 2016E 2017E 2018E 2019E 2020E

Shrinking ROICConservative Assumptions

A larger share of fleet rental

Historical 1 Year Forward P/E

Exit Multiple 21.0

Multiple Analysis – Scenarios

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DCF Exit Strategy Implied Exit Strategy

IRR = 17.2%> Ke = 15.1%

IRR = 20.9%> Ke = 15.1%

Carry Over Effect

Avg 18.48x

10x

12x

14x

16x

18x

20x

22x

24x

Exit Multiple 18.5 FWD YE19 = 17.6

Oct 2016 FWD = 21.518.3% de-rating

Hist. Avg. FWD P/E = 18.54.9% de-ratingJustified by:

Team’s Est. CAGR EPS2019-2023 = 14.3%

Team’s Est. CAGR ROE2019 -> 2023 = 19.1% -> 21.8%

Team’s FWD YE17

20.6xMarket’s FWD YE17

18.1x

Multiples – Peer Car Rental P/E I

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CAR RENTAL

Ticker Company P/E YE16 P/E YE17 EPS CAGR2016-2018

Team’s

Estimates LOCALIZA RENT A CAR* 21.5 18.9 13.6%

Market

Estimates LOCALIZA RENT A CAR** 21.5 19.8 9.1%

HTZ US

Equity Hertz Global Holdings 13.8 9.4 N / A

CAR US

Equity AVIS BUDGET GROUP INC 11.8 10.3 10.8%

SIX2 GR

Equity SIXT SE 18.6 16.1 12.6%

699 HK

Equity CAR INC 15.7 14.3 6.5%

EUCAR FP

Equity EUROPCAR GROUPE SA 9.7 9.1 9.2%

Sector Average 13.9 11.8 9.8%

Multiples – Peer Car Rental P/E II

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CAR RENTAL

Ticker Company P/E YE16 P/E YE17 ROIC

Team’s


Market


HTZ US

Equity Hertz Global Holdings 13.8 9.4 3.0%

CAR US


SIX2 GR


699 HK


EUCAR FP


Sector Average 13.9 11.8

Multiples – Peer Automotive Retailers P/E I

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AUTOMOTIVE RETAILERS

Ticker Company P/E YE16 P/E YE17 EPS CAGR2016-2018

Team’s


Market


KMX US

Equity CarMax Inc 16.5 15.2 7.6%

AN US

Equity AutoNation, Inc 11.2 10.1 6.8%

PAG US

Equity Penske Automotive Group Inc. 12.4 11.4 4.4%

LAD Us

Equity Lithia Motors, Inc. 11.9 10.9 9.6%

GPI US

Equity Group 1 Automotive, Inc. 8.1 7.6 2.3%

SAH Us

Equity Sonic Automotive 8.7 8.0 8.1%

Sector Average 11.5 10.5 6.5%

Multiples – Peer Automotive Retailers P/E II

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AUTOMOTIVE RETAILERS


Team’s


Market


KMX US

Equity CarMax Inc 16.5 15.24.7%

AN US

Equity AutoNation, Inc 11.2 10.16.6%

PAG US

Equity Penske Automotive Group Inc. 12.4 11.46.4%

LAD Us

Equity Lithia Motors, Inc. 11.9 10.98.5%

GPI US

Equity Group 1 Automotive, Inc. 8.1 7.66.5%

SAH Us

Equity Sonic Automotive 8.7 8.05.0%

Sector Average 11.5 10.5

3 Reasons to Explain the Premium

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Purchasing Discounts – Depreciation and Returns

ROIC

3

2

Uncomparable Purchasing

Discounts

Uncomparable Used Car Sales

Channel

8x

10x

12x

14x

16x

18x

20x

0% 2% 4% 6% 8% 10% 12% 14% 16%

YE17 P

/E

ROIC


HOME


ROIC

3

EPS Growth Perspectives

Different Markets

Different Growth Perspectives

8x

10x

12x

14x

16x

18x

20x

5% 7% 9% 11% 13% 15%

EPS2016-2018

YE17 P

/E

Capital Intensity


HOME


ROIC

EPS Growth Perspectives

8x

10x

12x

14x

16x

18x

20x

0% 20% 40% 60% 80% 100%

YE17 P

/E

Depreciation / EBITDA

1,779

1,455

1,122

780

429

13%

14%

15%

16%

17%

12%

13%

13%

14%

14%

15%

15%

16%

16%

17%

0

500

1000

1500

2000

20% 21% 22% 23% 24%

Depreciation per Car ROIC

Purchasing Discount

Multiples – Peer Car Rental EV/EBITDA I

HOME

CAR RENTAL

Ticker Company EV/EBITDA YE16 EV/EBITDA YE17EBITDA CAGR2016-

2018

Team’s


Market


HTZ US

Equity Hertz Global Holdings 19.4 15.9 12.4%

CAR US


SIX2 GR


699 HK


EUCAR FP


Sector Average13.0 12.0 6.7%

Multiples – Peer Automotive Retailer EV/EBITDA I

HOME

AUTOMOTIVE RETAIL


2018

Team’s


Market


KMX US

Equity CarMax Inc 17.5 16.5 12.3%

AN US

Equity AutoNation, Inc 11.1 10.6 4.4%

PAG US

Equity Penske Automotive Group Inc. 13.3 12.6 3.8%

LAD Us

Equity Lithia Motors, Inc. 10.7 9.9 10.8%

GPI US

Equity Group 1 Automotive, Inc. 10.8 10.2 4.9%

SAH Us

Equity Sonic Automotive 10.9 10.5 6.2%


Multiples – Peer Companies EV/EBITDA Football Field

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Historical Multiples 1 Year Forward

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Historical 1 Year Forward P/E

Avg. 18.48x

10x

12x

14x

16x

18x

20x

22x

24x

5.5x

6.5x

7.5x

8.5x

9.5x

10.5x

Oct-02-2012 Sep-24-2013 Sep-24-2014 Oct-05-2015 Oct-17-2016

Historical 1 Year Forward EV/EBITDA

Avg. 8.21x

Market Consensus vs Team’s Estimates I

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Bloomberg vs Team’s Estimates

2016E 2017E 2018E

Revenue 4207 4654 5063

Team’s Estimates 4,170 4,418 5,042

EBITDA 1000 1091 1219

Team’s Estimates 1,021 1,124 1,261

EBIT 763 817 928

Team’s Estimates 781 855 929

Implied D&A 237 274 291


NI 390 427 499


EPS 1.85 1.96 2.20

Team’s Estimates 1.88 2.14 2.43

Market Consensus vs Team’s Estimates II

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Bloomberg vs Team’s Estimates

2016E 2017E 2018E

P/E 21.91 20.1 17.15


P/BV 3.92 3.47 3.11


EV/EBITDA 10.27 9.42 8.43


Dividend Yield 1.3% 1.8% 2.6%

Team’s Estimates 1.3% 1.7% 2.2%

National Peers – I LCAM3

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Historical 1 Year Forward EV/EBITDA

Avg. Vol. 61,233

≈BRL 300,000

2x

3x

4x

5x

6x

7x

8x

9x

10x

11x

LCAM RENT

LCAM

RETAIL BRAZIL


2018

Team’s


Market


RADL3 BZ

Equity Raia Drogasil 22.8 18.7 16.9%

LREN3 BZ

Equity Lojas Renner 13.1 10.9 18.6%

ARZZ3 BZ

Equity Arezzo 13.0 11.1 17.1%


National Peers – II (EV / EBITDA)

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RETAIL BRAZIL

Ticker Company P/E YE16 P/E YE17 PEG

Team’s

Estimates LOCALIZA RENT A CAR* 21.5 18.9 1.02

Market

Estimates LOCALIZA RENT A CAR** 21.5 19.8 0.93

RADL3 BZ

Equity Raia Drogasil 43.8 35.6 1.41

LREN3 BZ

Equity Lojas Renner 24.8 20.0 1.25

ARZZ3 BZ

Equity Arezzo 19.9 16.8 1.43

Sector Average 29.5 24.1 1.36

National Peers – III (P/E)

RETAIL BRAZIL


Team’s


Market


RADL3 BZ

Equity Raia Drogasil 43.8 35.6 15.3%

LREN3 BZ

Equity Lojas Renner 24.8 20.0 15.5%

ARZZ3 BZ

Equity Arezzo 19.9 16.8 14.7%

Sector Average 29.5 24.1HOME

0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0


DCF

Retail Brazil

EV/EBITDA YE17

P/E YE17

25th to Median Median to 75th

National Peers Football Field

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DCF per Car – RaC I

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Car Rental Resutls

Net Revenues 25,088 100%

COGS -11,127 -44%

SG&A -4,327 -17%

EBITDA 9,634 38%

Non Vehicle Depreciation -125 -1%

EBIT 9,508 38%

Taxes -3,233 -13%

Net Income 6,276 25%

Used Car Sale Results

Car Sold 33,368 98%

Additional Revenue 734 2%


COGS -30,691 -90%

SG&A -2,558 -8%

EBITDA 853 2%

Vehicle Depreciation -1,309 -4%

EBIT -456 -1%

Financial Results -1,501 -4%

Taxes 666 2%

Net Income -1,292 -4%

Consolidated Results

Net Revenue59,190 100%

COGS-

41,819 -71%

SG&A-

6,885 -12%

EBITDA10,486 18%


Non Vehicle Depreciation-

125 0%

EBIT9,052 15%

Financial Expenses -1,501 -3%

Taxes -2,567 -4%

Net Income4,984 8%


Period (in months) 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14

( + ) Car Rental Revenue2,016 2,029 2,042 2,056 2,070 2,083 2,097 2,111 2,125 2,139 2,153 2,167

( - ) Car Rental COGS and

SG&A

-

1,242-1,250-1,258-1,266 -1,275 -1,283 -1,292 -1,300 -1,309 -1,318 -1,326 -1,335

( + ) Used Car Sale

Revenues - - - - - - - - - - - - 34,102

( - ) Used Car Sale SG&A - - - - - - - - - - - - -2,558

( - ) Financial Expenses

(Cost of Debt) -107 -107 -107 -107 -107 -107 -107 -107 -107 -107 -107 -107 -107 -107

( - ) Taxes -269 -269 -269 -269 -269 -269 -269 -269 -269 -269 -269 -269 666

Operating Cash Flow397 403 408 413 418 423 429 434 439 445 450 456 -107 32,120

( - ) Car Purchased Capex-

32,000

( - ) Non Vehicles Capex -9 -9 -9 -9 -9 -9 -9 -9 -9 -9 -9 -9 -9 -9

Investing Cash Flow-

32,000 -9 -9 -9 -9 -9 -9 -9 -9 -9 -9 -9 -9 -9 -9

( + ) Debt Acquisition 9,657

( - ) Debt Amortization - - - - - - - - - - - - - -9,657

Financing Cash Flow 9,657 0 0 0 0 0 0 0 0 0 0 0 0 0 -9,657

FREE CASH FLOW TO

EQUITY

-

22,343 388 394 399 404 409 414 420 425 430 436 441 447 -116 22,436

Discount Factor 1.00 1.01 1.02 1.04 1.05 1.06 1.07 1.09 1.10 1.11 1.12 1.14 1.15 1.16 1.18

DISCOUNTED FCFE-

22,343 384 384 385 385 386 386 387 387 387 387 388 388 -100 19,035

NPV PER CAR 1,226

DCF per Car – RaC II

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DCF per Car – RaC III

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Valuation assumptions

Ke (nominal in BRL) 15.1% Funding Source (%) 100.0%

Kd (nominal in BRL) 13.2% Equity (%) 69.8%

Tax Rate -34.0% Debt (%) 30.2%

Net Kd 8.7%

G - perpetuity growth 5.5%

π – Inflation 8.2%

Operational Assumptions

Vehicles Car rental

Localiza Purchase Price Discount (%) -22% Number of rental days 270

Average car purchasing price 32,000 Utilization Rate (%) 75%

Average car selling price (ex selling expenses) 33,368 Average daily rental revenue 89.0

Car Price Spread: Purchased - Sold (BRL) -1,368 Car Rental EBITDA Margin (%) 38%

Car Price Spread: Sold / Purchased (%) 4.3%

Non Vehicle Capex (% of total

revenues) -1%

Average age of sold fleet (months) 14

Average operation fleet age (months) 6 Used car

Number of days to sell used car 60 Addition revenues (% of revenues) 2%

Number of days operating 360 SG&A (as % of net revenues) -8%

Annualized average depreciation (BRL) 1,122

Selling Price as a % of Purchase Price 104.3%

DCF per Car – RaC IV

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DCF per Car Return and NPV for Car Rental

Invested Capital 32,000

NOPLAT 5,975

ROIC (annualized) 15.8%

Spread ROIC - Kd after taxes 7.1%

Equity 22,343

Net Income 4,984

ROE (annualized) 18.8%

Spread ROE - Ke 3.7%

NPV Per Car (R$) 1,226

(40,000)

(30,000)

(20,000)

(10,000)

0

10,000

20,000

30,000

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14

Monthly COGS, SG&A, Financial Expenses and Non-vehicles Capex

Car Purchased

Discount Rate Effect

Debt Acquistion

Monthly Rental Revenue

Car Sold

Debt Amortization

DCF per Car – Fleet I

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Car Rental Resutls


COGS -20,540 -31%

SG&A -4,416. -7%

EBITDA 41,102 63%

Non Vehicle Depreciation -1,304 -2%

EBIT 39,798 61%

Taxes -13,531 -21%

Net Income 26,266 40%

Used Car Sale Results

Car Sold 33,615 98%

Additional Revenue 672 2%


COGS -30,859 -90%

SG&A -2,743 -8%

EBITDA 686 2%


EBIT -6,455 -19%

Financial Results -5,161 -15%

Taxes 3,950 12%

Net Income -7,667 -22%

Consolidated Results

Net Revenue99,530 100%

COGS -51,399 -52%

SG&A -7,159 -7%

EBITDA40,972 41%


Non Vehicle Depreciation -1,305 -1%

EBIT32,526 33%

Financial Expenses -5,161 -5%

Taxes -9,582 -10%

Net Income17,783 18%

Period (in months) 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

( + ) Car Rental Revenue1,776 1,787 1,799 1,811 1,823 1,835 1,847 1,860 1,872 1,884 1,897 1,909 1,922 1,935 1,947


SG&A (657) (661) (666) (670) (675) (679) (683) (688) (693) (697) (702) (706) (711) (716) (721)

( + ) Used Car Sale

Revenues - - - - - - - - - - - - - - -

( - ) Used Car Sale SG&A - - - - - - - - - - - - - - -


(Cost of Debt) -143 -143 -143 -143 -143 -143 -143 -143 -143 -143 -143 -143 -143 -143 -143

( - ) Taxes -398 -398 -398 -398 -398 -398 -398 -398 -398 -398 -398 -398 -398 -398 -398

Operating Cash Flow577 585 592 600 607 615 622 630 638 646 654 661 669 677 685

( - ) Car Purchased Capex-

38,000

( - ) Non Vehicles Capex -9 -9 -9 -9 -9 -9 -9 -9 -9 -9 -9 -9 -9 -9 -9

Investing Cash Flow-

38,000 -9 -9 -9 -9 -9 -9 -9 -9 -9 -9 -9 -9 -9 -9 -9

( + ) Debt Acquisition 11,468

( - ) Debt Amortization - - - - - - - - - - - - - - -

Financing Cash Flow 11,468 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

FREE CASH FLOW TO

EQUITY

-

26,532 568 576 583 591 598 606 613 621 629 637 645 652 660 668 676

Discount Factor 1.00 1.01 1.02 1.04 1.05 1.06 1.07 1.09 1.10 1.11 1.12 1.14 1.15 1.16 1.18 1.19

DISCOUNTED FCFE-

26,532 562 562 563 564 564 565 565 565 566 566 566 567 567 567 567

NPV PER CAR 8,245

DCF per Car – Fleet II

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DCF per Car – Fleet III

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Period (in months) 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

( + ) Car Rental Revenue1,960 1,973 1,986 1,999 2,013 2,026 2,039 2,053 2,066 2,080 2,094 2,108 2,122 2,136 2,150


SG&A (725) (730) (735) (740) (745) (750) (755) (760) (765) (770) (775) (780) (785) (790) (795)

( + ) Used Car Sale

Revenues - - - - - - - - - - - - - - -

( - ) Used Car Sale SG&A - - - - - - - - - - - - - - -


(Cost of Debt) -143 -143 -143 -143 -143 -143 -143 -143 -143 -143 -143 -143 -143 -143 -143

( - ) Taxes -398 -398 -398 -398 -398 -398 -398 -398 -398 -398 -398 -398 -398 -398 -398

Operating Cash Flow694 702 710 718 727 735 743 752 760 769 778 786 795 804 813

( - ) Car Purchased Capex

( - ) Non Vehicles Capex -9 -9 -9 -9 -9 -9 -9 -9 -9 -9 -9 -9 -9 -9 -9

Investing Cash Flow -9 -9 -9 -9 -9 -9 -9 -9 -9 -9 -9 -9 -9 -9 -9

( + ) Debt Acquisition

( - ) Debt Amortization - - - - - - - - - - - - - - -

Financing Cash Flow 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

FREE CASH FLOW TO

EQUITY 685 693 701 709 718 726 734 743 751 760 769 777 786 795 804

Discount Factor 1.21 1.22 1.24 1.25 1.26 1.28 1.29 1.31 1.33 1.34 1.36 1.37 1.39 1.41 1.42

DISCOUNTED FCFE 567 567 567 567 567 567 567 567 567 567 566 566 566 566 565

DCF per Car – Fleet IV

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Period (in months) 31 32 33 34 35 36

( + ) Car Rental Revenue2,164 2,178 2,193 2,207


SG&A (801) (806) (811) (817)

( + ) Used Car Sale

Revenues - - - - 34,288

( - ) Used Car Sale SG&A- - - - (2,743)


(Cost of Debt) -143 -143 -143 -143 -143 -143

( - ) Taxes -398 -398 -398 -398 3,950

Operating Cash Flow822 831 840 849 (143) 35,351

( - ) Car Purchased Capex

( - ) Non Vehicles Capex -9 -9 -9 -9 -9 -9

Investing Cash Flow -9 -9 -9 -9 -9 -9

( + ) Debt Acquisition

( - ) Debt Amortization - - - - - -11,468

Financing Cash Flow 0 0 0 0 0 -11,468

FREE CASH FLOW TO

EQUITY 813 822 831 840 -152 23,874

Discount Factor 1.44 1.46 1.47 1.49 1.51 1.53

DISCOUNTED FCFE 565 564 564 564 -101 15,643

DCF per Car – Fleet V

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Valuation assumptions

Ke (nominal in BRL) 15.1% Funding Source (%) 100.0%

Kd (nominal in BRL) 13.2% Equity (%) 69.8%

Tax Rate -34.0% Debt (%) 30.2%

Net Kd 8.7%

G - perpetuity growth 5.5%

π – Inflation 8.2%

Operational Assumptions

Vehicles Car rental

Localiza Purchase Price Discount (%) -22% Number of rental days 1000

Average car purchasing price 38,000 Utilization Rate (%) 98%

Average car selling price (ex selling

expenses) 33,615 Average daily rental revenue 60

Car Price Spread: Purchased - Sold (BRL) 4,385 Car Rental EBITDA Margin (%) 63%

Car Price Spread: Sold / Purchased (%) -11.5%

Non Vehicle Capex (% of total

revenues) -2%

Average age of sold fleet (months) 36

Average operation fleet age (months) 17 Used car

Number of days to sell used car 60

Addition revenues (% of

revenues) 2%

Number of days operating 1,020 SG&A (as % of net revenues) -8%

Annualized average depreciation (BRL) 2,380

DCF per Car – Sensitivity Analysis

Discount

-24% -23% -22% -21% -20%

Depreciation per Car 429 780 1,122 1,455 1,779

-24% -23% -22% -21.00% -20%

ROIC 17.0% 16.3% 15.6% 14.9% 14.3%

-24% -23% -22% -21.00% -20%

NPV 1,691 1,456 1,226 1,003 785

0%

10%

20%

30%

40%

0 Km 0 1 2 3 4 5

Years

Car Rental

Fleet Rental

Depreciation Curve

Depreciation per Car

Selling Price

Purc

hase

Pri

ce 1,122 32550 32750 32950 33150 33350

31200 1080 923 765 607 450

31400 1252 1094 937 779 621

31600 1423 1266 1108 950 793

31800 1595 1437 1279 1122 964

32000 1766 1608 1451 1293 1135

ROIC

Daily Tariff

EBIT

DA

Marg

in 15.8% 79 84 89 94 99

35% 12.6% 13.5% 14.3% 15.2% 16.1%

36.5% 13.2% 14.1% 15.0% 15.9% 16.8%

38% 13.8% 14.7% 15.7% 16.6% 17.5%

39.5% 14.4% 15.3% 16.3% 17.3% 18.3%

41% 14.9% 16.0% 17.0% 18.0% 19.0%

Source: Team’s Estimates, FIPE.

15.8%

10.7%8.3%

18.8%

9.1%

4.2%


ROIC ROE

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Monte Carlo I

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Mean Std. Error Max-Min Distribution

Number of Cars Bought Growth (YoY)

Rent a Car 2019E 5.00% - 6.00%-3.00% Triangular

Fleet Rental 2018E 6.00% - 7.00%-3.00% Triangular

Used Car Sales

RaC Price - Purchasing/Selling 2018E 1.06 - 1.16-1.04 Triangular

Fleet Rental Price - Purchasing/Selling 2018E 1.36 - 1.46-1.32 TriangularDaily Tariff Growth (YoY)

Rent a Car 2018E 3.00% - 4.00%-1.00% Triangular

Fleet Rental 2018E 4.00% - 5.00%-2.00% Triangular

Macroeconomic

IPCA 2019E 4.50% 1.00% - Normal

Interest Rate 2021E 8.50% 1.50% - Normal

Assumptions:

Monte Carlo II

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1.49%

26.25%

72.26%

Mean Std. Error Max-Min Distribution

Perpetuity Growth Rate

g 5.5% 2.0% - Normal

Assumptions:

INSPER TEAM CFA INSTITUTE - CFA Society...

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