Randon S.A. Implementos e Participaes CFA Institute Research - - PowerPoint PPT Presentation

Randon S.A. Implementos e Participações

CFA Institute Research Challenge Brazil

Student Research

November 21st, 2013

São Paulo, Brazil

6 7 8 9 10 11 12 13 14 15 16 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14

Summary

Target price: BRL 15.05

(end-of-2014)

Stock price: BRL 12.29

(as of 10/23/2013)

BUY

Randon’s stock price (history) and target.

Sour Source: Thomson Reuters and T ce: Thomson Reuters and Team’ eam’s estimates s estimates

22.5% upside

Stock quotes updated until 10/23/2013

Inimitable commercial strength Successful entry into auto parts Why Randon? Absorption of sectorial upsides Increasing ROICs Technology Margins Infrastructure and Roads

SECTION I: Company Overview SECTION II: Why Randon? SECTION IV: Valuation SECTION III: Financial Analysis SECTION V: Risks

Agenda

WRAP UP

Company Overview

• I. Company Overview

Special Vehicles and Road Equipment Auto Parts Financial Services Randon’s revenue breakdown per business unit. % of revenues 51.5% 46.2% 2.3%

Sour Source: Randon’ ce: Randon’s disclosur s disclosure Data relative to 9M2013.

Why Randon

• II. Why Randon?

Our investment thesis on a top-down approach: Upcoming investments in infrastructure Roadway network to be expanded Truck demand Randon’s competitive positioning: full exposure to market upsides

Why Randon Infrastructure

II.I. Why Randon? Infrastructure

Brazil’s infrastructure shortcomings largest domestic market largest domestic market 7th Public investments (in BRL billion) and regulatory updates 71st in overall infrastructur in overall infrastructure

Sour Source: WEF Global Competitiveness ce: WEF Global Competitiveness Report 2013-2014 Report 2013-2014

408 509 2009-2012 2014-2017

25%

Sour Source: BNDES ce: BNDES

­ New Ports Law ­ New Railroad model ­ Updates on the Law for PPPs

Why Randon Roadways

II.II. Why Randon? Roadways

Roadways are a natural pick for forthcoming investments.

Road 61.1% Rail 20.7% Water 13.6% Pipeline 4.2% Air 0.4%

Brazil’s freight transportation modes (% of TKUs) Road density (road km per 1000 km2)

Sour Source: CNT ce: CNT

1,427 671 428 186 India United States China Brazil

Source: CIA World Factbook, CNT, U.S. Highway Statistics

Why Randon Roadways

II.II. Why Randon? Roadways

Roadways are a natural pick for forthcoming investments.

Road 61.1% Rail 20.7% Water 13.6% Pipeline 4.2% Air 0.4%

Brazil’s freight transportation modes (% of TKUs) Road density (road km per 1000 km2)

Sour Source: CNT ce: CNT

1,427 671 428 186 India United States China Brazil

Source: CIA World Factbook, CNT, U.S. Highway Statistics

Why Randon Leadership

II.III. Why Randon? Leadership in Road Equipment

Long-tail consumer base.

Qualified Unqualified

II.III. Why Randon? Leadership in Road Equipment

The consumer profile at the tail encourages fiercer competition.

0.24 0.19 0.19 0.19 0.18 0.16 0.17 0.15 0.15 0.14 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Evolution of HHI

Source: Randon’s disclosure and FGV’s estimates

II.III. Why Randon? Leadership in Road Equipment

At the head, the demand is less price-elastic but more demanding.

30.4% 12.2% 10.4% 11.2% 9.7% 26.2% Randon Guerra Facchini Librelato Noma Others

Distribution of road equipment market share* (% of sales)

Source: Randon’s disclosure * Data from 2012

II.III. Why Randon? Leadership in Road Equipment

Randon leads the head: Number of distributors (Brazil) Consumer perception (grades 1 to 10)

8.6 8.7 8.9 7.8 7.7 7.8 Commercial Conditions Product General Satisfaction Randon Competition 90 51 50 42 30 Randon Noma Librelato Guerra Facchini

Source: Randon, Facchini, Guerra, Librelato & Noma disclosures.

II.III. Why Randon? Leadership in Road Equipment

Why Randon will keep the head in the future Not the largest ROIC (%) …

0.42 0.20 0.18 0.08 0.45 0.16 0.40 (0.05)

Facchini Randon Librelato Guerra

2010 2011

II.III. Why Randon? Leadership in Road Equipment

Why Randon will keep the head in the future Not the largest ROIC (%) …

0.42 0.20 0.18 0.08 0.45 0.16 0.40 (0.05)

Facchini Randon Librelato Guerra

2010 2011 49 134 5 (5) 61 93 20 (31)

Facchini Randon Librelato Guerra

2010 2011

… but the largest EVA

(BRL million)

Source: Valor 1000, Serasa, FGV’s calculations.

Why Randon Synergies

II.III. Why Randon? Exploitation of synergies

Randon covered all of its bases by going up the supply chain and into the auto parts business. Randon Auto Parts Road equipment manufacturers Randon Road Equipment Rivals Supplier Gains of scale Technology Tech control Intel

Why Randon Diversification

II.III. Why Randon? Successful diversification

However, Randon’s auto parts’ segment isn’t just a supplier to road equipment producers… Truck OEMs

Aftermarket Exports

Diversification Higher margins Randon’s EBITDA margins (per segment)

Source: Randon’s disclosure and FGV’s estimates

11.4% 3.0% 11.4% 11.7% 12.0% 12.5% 12.8% 13.0% 13.1% 15.3% 14.1% 15.3% 15.5% 15.7% 16.1% 16.3% 16.4% 16.4%

2011A 2012A 2013E 2014E 2015E 2016E 2017E 2018E 2019E Vehicles and Road Equipment Auto Parts

Randon Auto Parts Supplier

Financial Analysis Revenues

• III. Financial Analysis: Revenues

Revenue forecasts follow short and long-run factors. Road Equipment Auto Parts Financial Services Truck Licensing Truck Production Evolves with Prices Industrial GDP Soy production BNDES’ Finame

Financial Analysis Projections

• III. Financial Analysis: Revenues’ Projections

Projected revenues (in BRL billion)

Source: FGV’s estimates 4.2 3.5 4.2 4.8 5.3 6.0 6.7 7.4 8.1 2.1 1.8 2.3 2.6 2.9 3.3 3.7 4.1 4.6 2.0 1.6 1.8 2.1 2.3 2.6 2.8 3.1 3.4 2011A 2012A 2013E 2014E 2015E 2016E 2017E 2018E 2019E Consolidated Road Equipment Auto Parts

CAGR for Randon’s (consolidated) revenue growth

8.8% 8.2% 7.1% 2015 - 2019 2020 - 2045 Perpetuity

Financial Analysis Margins

• III. Financial Analysis: Margins

Randon’s EBITDA margins (%)

Source: FGV’s estimates 13.4% 8.2% 13.3% 13.5% 13.8% 14.1% 14.3% 14.6% 14.6% 2011A 2012A 2013E 2014E 2015E 2016E 2017E 2018E 2019E

Randon’s results for the third quarter of 2013 surpassed consensus.

2015E 2019E

Randon’s EBITDA (BRL billion)

CAGR 10% 15.5% 13.4% 3T13 3T13E* 176 139 3T13 3T13E*

Source: Bloomberg, Randon’s disclosure

EBITDA margins (%) EBITDA (BRL billion)

* Previous market consensus

Financial Analysis Invested Capital and Balance Sheet

• III. Financial Analysis: Invested Capital & Balance Sheet

Randon’s investment activity and indebtedness (consolidated basis)

0.0x 0.5x 1.0x 1.5x 2.0x 2.5x 3.0x 50,000 100,000 150,000 200,000 250,000 300,000 2010 2011 2012 9M2013 PP&E and Intangible CAPEX (BRL thousand) PP&E and Intangible CAPEX/D&A Net Debt/EBITDA

Source: FGV’s estimates

ROIC (%)

12.3% 12.8% 13.6% 14.1% 14.7% 15.0% 2014E 2015E 2016E 2017E 2018E 2019E

Discounted Cash Flow Set up

2046-+

IV.I. Discounted Cash Flow: Set-up

Sum-of-the parts DCF model, using six Objects of Assessment (OoAs) Three-stage forecasts Explicit period Convergence period Perpetuity

2014-2019 2020-2045

∞!

Vehicles and Road Equipment Auto Parts Financial Services Fras-le Master Jost Suspensys OoAs

Discounted Cash Flow Price Composition

IV.I. Discounted Cash Flow: Price Composition

DCF model’s final composition of target price.

Source: FGV’s estimates

BRL

15.27

BRL

7.27

BRL

7.67

BRL

0.33

Relative Valuation

IV.II. Relative Valuation

Peer multiple analysis.

Source: Bloomberg and FGV’s calculations

NTM Multiples EV/EBITDA Randon (RAPT4) 6.72 Median Auto parts 6.61 Median Road Equipment 7.22 Average Road Equipment and Auto Parts 6.92

+

BRL 14.19 Relative valuation target

6.61 6.61 Median Median Auto Parts Auto Parts 6.92 6.92 Average Median Auto Parts verage Median Auto Parts & Road Equipment & Road Equipment 7.22 7.22 Median Median Road Equipment Road Equipment

Valuation Target Price

• IV. Valuation: Final Target Price

Discounted Cash Flow Valuation Relative Valuation

BRL 15.27 BRL 14.19

80% 20% Target Price

BRL 15.05 Our valuation is based on DCF and Relative (Multiple) analyses (see below).

Source: FGV’s estimates

Risks

Lower Impact

• V. Risks

Exchange rate fluctuations Insufficient GDP growth Failure to reduce the infrastructure gap Euro VI Compromised Corporate Governance Truck OEMs pressing for price cuts

Higher Impact

Higher Probability Lower Probability

Source: FGV’s estimates

Downside Upside

Truck fleet renewal Greater than expected credit expansion Successful internationalization Drop in raw material prices Risk Classification Heavier investments in truck production Election’s Influence Lower Union Influence Reduction in credit availability

Risks 2

Lower Impact

• V. Risks

Exchange rate fluctuations Insufficient GDP growth Failure to reduce the infrastructure gap Euro VI Compromised Corporate Governance Truck OEMs pressing for price cuts

Higher Impact

Higher Probability Lower Probability

Source: FGV’s estimates

Downside Upside

Truck fleet renewal Greater than expected credit expansion Risk Classification Heavier investments in truck production Election’s Influence Lower Union Influence Reduction in credit availability Successful internationalization Drop in raw material prices

Sensitivity Analysis

V.I. Sensitivity Analysis

Source: FGV’s estimates

Metallic Raw Material Cost Metallic Raw Material Cost

• Gr

Growth

• wth

∎∎∎∎∎ ∎∎∎∎∎

23.9 23.5 23.2 22.8 22.4 22.1 21.9 21.7 21.4 21.2 21.0

∎∎∎∎ ∎∎∎∎∎

21.8 21.5 21.2 20.8 20.5 20.2 20.0 19.8 19.6 19.4 19.2

∎∎∎ ∎∎∎∎∎ ∎∎

20.1 19.8 19.5 19.2 18.9 18.6 18.4 18.2 18.1 17.9 17.7

∎∎ ∎∎∎∎∎ ∎∎∎

18.7 18.4 18.1 17.9 17.6 17.3 17.1 17.0 16.8 16.7 16.5

∎∎∎∎∎ ∎∎∎∎

17.5 17.2 17.0 16.7 16.5 16.2 16.0 15.9 15.8 15.6 15.4

∎∎∎∎∎ ∎∎∎∎∎

16.4 16.2 16.0 15.8 15.5 15.3 15.1 15.0 14.8 14.7 14.6

∎∎∎∎∎ ∎∎∎∎

14.7 14.5 14.3 14.0 13.8 13.6 13.5 13.4 13.2 13.1 13.0

∎∎ ∎∎∎∎∎ ∎∎∎

13.1 12.9 12.7 12.5 12.3 12.1 11.9 11.8 11.7 11.5 11.4

∎∎∎ ∎∎∎∎∎ ∎∎

11.6 11.4 11.2 11.0 10.8 10.5 10.4 10.3 10.1 10.0 9.9

∎∎∎∎ ∎∎∎∎∎

10.1 9.9 9.6 9.5 9.5 9.4 9.3 9.2 9.2 9.1 9.1

∎∎∎∎∎ ∎∎∎∎∎

9.0 9.0 8.9 8.8 8.7 8.6 8.5 8.5 8.4 8.4 8.3

4x gGDP 1x gGDP Best case Worst case

Sensitivity Analysis Bear and Bull

V.II. Sensitivity Analysis: Bear and Bull Cases

Metallic Raw Material Cost Metallic Raw Material Cost

• Gr

Growth

• wth

∎∎∎∎∎ ∎∎∎∎∎

23.9 23.9 23.5 23.5 23.2 23.2 22.8 22.8 22.4 22.4 22.1 22.1 21.9 21.9 21.7 21.7 21.4 21.4 21.2 21.2 21.0 21.0

∎∎∎∎∎ ∎∎∎∎∎

21.8 21.8 21.5 21.5 21.2 21.2 20.8 20.8 20.5 20.5 20.2 20.2 20.0 20.0 19.8 19.8 19.6 19.6 19.4 19.4 19.2 19.2

∎∎∎∎∎ ∎∎∎∎∎

20.1 20.1 19.8 19.8 19.5 19.5 19.2 19.2 18.9 18.9 18.6 18.6 18.4 18.4 18.2 18.2 18.1 18.1 17.9 17.9 17.7 17.7

∎∎∎∎∎ ∎∎∎∎∎

18.7 18.7 18.4 18.4 18.1 18.1 17.9 17.9 17.6 17.6 17.3 17.3 17.1 17.1 17.0 17.0 16.8 16.8 16.7 16.7 16.5 16.5

∎∎∎∎∎ ∎∎∎∎∎

17.5 17.5 17.2 17.2 17.0 17.0 16.7 16.7 16.5 16.5 16.2 16.2 16.0 16.0 15.9 15.9 15.8 15.8 15.6 15.6 15.4 15.4

∎∎∎∎∎ ∎∎∎∎∎

16.4 16.4 16.2 16.2 16.0 16.0 15.8 15.8 15.5 15.5 15.3 15.3 15.1 15.1 15.0 15.0 14.8 14.8 14.7 14.7 14.6 14.6

∎∎∎∎∎ ∎∎∎∎∎

14.7 14.7 14.5 14.5 14.3 14.3 14.0 14.0 13.8 13.8 13.6 13.6 13.5 13.5 13.4 13.4 13.2 13.2 13.1 13.1 13.0 13.0

∎∎∎∎∎ ∎∎∎∎∎

13.1 13.1 12.9 12.9 12.7 12.7 12.5 12.5 12.3 12.3 12.1 12.1 11.9 11.9 11.8 11.8 11.7 11.7 11.5 11.5 11.4 11.4

∎∎∎∎∎ ∎∎∎∎∎

11.6 11.6 11.4 11.4 11.2 11.2 11.0 11.0 10.8 10.8 10.5 10.5 10.4 10.4 10.3 10.3 10.1 10.1 10.0 10.0 9.9 9.9

∎∎∎∎∎ ∎∎∎∎∎

10.1 10.1 9.9 9.9 9.6 9.6 9.5 9.5 9.5 9.5 9.4 9.4 9.3 9.3 9.2 9.2 9.2 9.2 9.1 9.1 9.1 9.1

∎∎∎∎∎ ∎∎∎∎∎

9.0 9.0 9.0 9.0 8.9 8.9 8.8 8.8 8.7 8.7 8.6 8.6 8.5 8.5 8.5 8.5 8.4 8.4 8.4 8.4 8.3 8.3

Average bull price

BRL 21.60

Average bear price

BRL 9.20

+ 75.8%

upside

Source: FGV’s estimates

• 25.1%

downside

Monte Carlo

V.II. Monte Carlo

Monte Carlo simulation: resulting distribution of target prices.

200 400 600 800 1000 1200 1400 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46

Source: FGV’s estimates

Variables Sales volume growth Prices Capital efficiency WACC 84.5% above curr. price

Wrap up

• VI. Wrap up

Why invest in Randon? Full absorption of sectorial upsides Inimitable commercial strength Synergies, margins and technology Upside risks eclipse downside risks

Wrap up 2

• VI. Wrap up

Target price: BRL 15.05

(end-of-2014)

BUY

22.5% Why invest in Randon? Inimitable commercial strength Synergies, margins and technology Upside risks eclipse downside risks Full absorption of sectorial upsides

Thank you

Thank you!

Q&A Intro

Questions & Answers

Q&A Menu 1

Questions and Answers

DETAILED COMPANY OVERVIEW PUBLIC INVESTMENTS IN INFRASTRUCTURE ROADWAY INVESTMENTS BUILDING A BUSINESS MODEL TRUCK MANUFACTURERS AND MARKET POWER NET WORKING CAPITAL INORGANIC GROWTH & JOINT VENTURES COGS BREAKDOWN EURO STANDARD

Q&A Menu 2

Questions and Answers

TRUCK PRODUCTION AND LICENSING GDP GROWTH BNDES’S FINAME SOY OUTPUT MAIN DRIVERS FOR TRUCK DEMAND ROAD EQUIPMENT MARKET DATA EVOLUTION OF RANDON’S MARKET SHARE ROAD EQUIPMENT MARKET SHARES HERFINDAHL-HIRSCHMAN INDEX (HHI)

Q&A Menu 2

Questions and Answers

RANDON’S AUTO PARTS SALES PER DESTINATION BRAZIL’S INFRASTRUCTURE GAP BRAZIL’S ROADWAYS RAILWAYS GCI RANKINGS EBITDA MARGINS PER BUSINESS WACC PROJECTED FINANCIALS RELATIVE VALUATION: COMPLETE TABLE

Q&A Menu 2

Questions and Answers

FINANCIALS CORPORATE GOVERNANCE IMPLICIT MULTIPLES SEASONALITY PAYOUT INCOME STATEMENT BALANCE SHEET FREE CASH FLOW KEY FINANCIALS

Q&A Menu 2

Questions and Answers

FUTURE METALLIC PRICES MONTE CARLO SIMULATION

Detailed Company Overview

Detailed Company Overview: Road Equipment

Special Vehicles and Road Equipment Randon’s revenue breakdown per business unit. % of revenues 51.5% RETAIL

Sour Source: Randon’ ce: Randon’s disclosur s disclosure Data relative to 9M2013.

MENU

Auto Parts Randon’s revenue breakdown per business unit. % of revenues 46.2% OEMS

Detailed Company Overview: Auto Parts

Sour Source: Randon’ ce: Randon’s disclosur s disclosure Data relative to 9M2013.

MENU

Financial Services Randon’s revenue breakdown per business unit. % of revenues 2.3% Vendor, Compror, Capital de Giro, CDC, Desconto de Recebíveis, BNDES Finame Consórcio Nacional Randon SUPPORTING

Detailed Company Overview: Financial Services

Sour Source: Randon’ ce: Randon’s disclosur s disclosure Data relative to 9M2013.

MENU

Public Investments in Infrastructure

Public Investments in Infrastructure

Electric Energy Telecommunications Sanitation Roadway Railways Ports Airports 2009-2012 2014-2017* 171 93 40 54 28 15 7 176 125 45 62 59 34 8 Total

408

510

Sour Source: BNDES ce: BNDES

Government’s investments in infrastructure (realized 2009-2012 and planned 2014-2017) MENU

Roadway Investments

Roadway Investments

BRL 62 billion BRL

42

billion In highways for 2014-2017 Regulatory tweaks to please private investors Headline return rates from 5.5% to 7.2%* Easing financing guarantees requested by public banks BRL

23.5 billion

In 5 years BRL

18.5 billion

In 20 years

7,500

km Of planned concessions Public Investments Encouraging the Participation of the Private Sector

=

Sour Source: ce: Ministério Ministério dos dos Transportes ransportes

MENU

Building a Business Model

Building a Business Model

0% 2% 4% 6% 8% 10% 12% 14% Source: Randon’s disclosure, CVM

Evolution of Randon’s Sales Expenses/Revenues. MENU

Truck Manufacturers and Market Power

Truck Manufacturers and Market Power

Buyers of auto-parts are concentrated, but dependent on suppliers. Share of truck licensing per brand (% of units) Multinational firms that recognize the importance of high-quality components. Rationally assess the price-quality trade-off.

Source: Anfavea Data from January to October, 2013

Ford 13% Iveco 7% MAN (Volkswagen) 27% Mercedes-Benz 24% Scania 13% Volvo 14% Others 2%

Long-term contracts. MENU

Net Working Capital

Net Working Capital

Net Working Capital/Next Year Sales

24% 26% 34% 31% 29% 28% 26% 25% 23% 2010A 2011A 2012A 2013E 2014E 2015E 2016E 2017E 2018E Source: FGV’s estimates

MENU

Inorganic Growth & Joint Ventures

Inorganic Growth & Joint Ventures

Inorganic growth target of BRL 500 million (guidance 2012-2016) has already been met. Current joint ventures Acquisition Investment Date Controil BRL 10 mn 12/1/11 Suspensys BRL 450 mn 4/29/13 Brantech BRL 25 mn 10/31/11 Total BRL 485 mn Joint Ventures Participation Master 51% Jost 51%

Source: Randon’s disclosure

MENU

COGS Breakdown

COGS Breakdown

1.2% 1.1% 1.8% 2.3% 2.3% 9.2% 8.6% 8.4% 8.4% 8.1% 11.4% 10.6% 10.6% 12.5% 10.9% 78.3% 79.8% 79.2% 76.7% 78.7% 2009 2010 2011 2012 2013 Depreciation Other Labor Raw Material

52% 9% 39% Metallic Chemicals Other

MENU

Euro Standard

EURO Standard

EURO 5 or PROCONVE P7 in comparison to EURO 3 EURO 5 or PROCONVE P7 in comparison to EURO 3 Definition Technological update of trucks to be Main goals Reduce the emission of polluting gases Improve Brazilian vehicular technology Improve fuel characteristics Changes Engine functioning, making It 10-15% more expensive Required fuel (S-50) was more expensive (+BRL0.2/liter) and not readily available in all gas stations Trucks were more efficient, using 9% less oil Takeaways Aftermaths, users realized that the techonology was economically positive, with the efficiencies more than paying back the higher prices EURO 6 EURO 6 Perspectives The new technology adoption will have a smoother transition compared to the last A one step technological increase will take place, compared to the two-steps from Euro 5 Costs shocks won't be as large as before Users got familiar with the benefits of such technological update No gas standard change will take place

MENU

Truck Production and Licensing

Truck Production and Licensing

Truck production and licensing (units): realized and forecasted.

8,000 58,000 108,000 158,000 208,000 2009 2010 2011 2012 2013E 2014E 2015E 2016E 2017E 2018E 2019E Truck Production Truck Licensing

Source: Anfavea, FGV’s estimates

MENU

GDP growth

GDP Growth

• 06%
• 04%
• 02%

00% 02% 04% 06% 08% 10% 2008 2009 2010 2011 2012 2013E 2014E 2015E 2016E 2017E 2018E 2019E GDP Real Growth (%) Agriculture GDP Real Growth (%) Industry GDP Real Growth (%)

GDP real growth rates (overall, agriculture and industry): realized and forecasted.

Source: FOCUS report, Ipeadata, FGV’s estimates

MENU

BNDES’s Finame

BNDES’s Finame

5,000 15,000 25,000 35,000 45,000 55,000 65,000 75,000 85,000 95,000 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013E 2014E 2015E 2016E 2017E 2018E 2019E

• 20%

0% 20% 40% 60% 80% 100% 120% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013E 2014E 2015E 2016E 2017E 2018E 2019E

Finame’s credit concession (in BRL million) Growth of Finame’s credit concession (%) BNDES’s Finame data: realized and forecasted.

Source: BNDES, FGV’s estimates

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Soy output

Soy Output

50,000 60,000 70,000 80,000 90,000 100,000 110,000 120,000

• 15%
• 10%
• 5%

0% 5% 10% 15% 20% 25%

Soy output (in thousands of tons) Growth of soy output(%) Soy output data: realized and forecasted.

Source: Conab, FGV’s estimates

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Main drivers for truck demand

Main Drivers for Truck Demand

• 50%
• 30%
• 10%

10% 30% 50% 70% 90% 110% 2009 2010 2011 2012 2013E 2014E 2015E 2016E 2017E 2018E 2019E Truck Production Soy Industrial GDP Finame

Growth rates for the main drivers for truck demand (%): realized and forecasted.

Source: FGV’s estimates

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Road equipment market data

Road Equipment Market Data

20,000 40,000 60,000 80,000 100,000 120,000 2005 2006 2007 2008 2009 2010 2011 2012 2013E 2014E 2015E 2016E 2017E 2018E 2019E Market Realized Market Forecast 5,000 10,000 15,000 20,000 25,000 30,000 2005 2006 2007 2008 2009 2010 2011 2012 2013E 2014E 2015E 2016E 2017E 2018E 2019E Market Realized Market Forecast

Road equipment market size (units) Randon’s sales (units) Road equipment data: realized and forecasted.

Source: Anfir, Randon’s disclosure, FGV’s estimates

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Road Equipment Market Data

• 30%
• 20%
• 10%

0% 10% 20% 30% 40% 50% 2005 2006 2007 2008 2009 2010 2011 2012 2013E 2014E 2015E 2016E 2017E 2018E Market Realized Market Forecast

• 30%
• 20%
• 10%

0% 10% 20% 30% 40% 2005 2006 2007 2008 2009 2010 2011 2012 2013E 2014E 2015E 2016E 2017E 2018E Market Realized Market Forecast

Road equipment market growth rate (%) Randon’s sales growth rates (%) Road equipment data: realized and forecasted.

Source: Anfir, Randon’s disclosure, FGV’s estimates

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Evolution of randon’s market share

Evolution of Randon’s Market Share

27% 27%

26% 28% 30% 32% 34% 36% 38% 40% 2005 2006 2007 2008 2009 2010 2011 2012 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2045E Market Share Realized Market Share Forecast (Explicit) Perpetuity Market Share

Randon’s market share: realized and forecasted.

Source: Randon’s disclosure, FGV’s estimates

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Road equipment market share

Road Equipment Market Shares

42% 34% 36% 38% 37% 33% 35% 32% 33% 30% 19% 19% 19% 15% 15% 16% 15% 15% 11% 12% 13% 17% 14% 14% 13% 14% 11% 11% 12% 10% 1% 2% 3% 2% 3% 4% 5% 7% 9% 11% 10% 10% 8% 7% 6% 6% 7% 7% 7% 10% 15% 19% 20% 24% 25% 26% 26% 28% 28% 26% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Randon Guerra Facchini Librelato Noma Others

Evolution of market share for road equipment.

Source: Randon’s disclosure and Fenabrave

MENU

HHI

Herfindahl-Hirschman Index (HHI)

0.24 0.19 0.19 0.19 0.18 0.16 0.17 0.15 0.15 0.14 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Herfindahl–Hirschman Index (HHI) for the road equipment segment.

The Herfindahl-Hirschman Index (HHI) is a popular measure of industry concentration. A HHI below 0.15 implies decentralization. A HHI between 0.15 and 0.25 indicates moderate concentration.

Source: Randon’s disclosure, Fenabrave and FGV’s calculations.

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Randon’s Auto Parts Sales

Randon’s Auto Parts’ Sales per Destination

OEMs 69% Aftermarket 17% Exports 14%

Distribution of Randon’s sales of auto parts for 2012.

Source: Randon’s disclosure.

MENU

Brazil’s infra gap

Brazil’s Infrastructure Gap

1.87 2.49 2.51 2.35 2.04 5.1 3.2 4.8 2007 2008 2009 2010 2011 Benchmark Federal Govt State Owned Cos Private Cos Total

Investments in infrastructure as a % of GDP .

Colombia India Chile Source: Frischtak (2012)

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Brazil’s roadways

Brazil’s Roadways

Roadways Paved (km) Unpaved (km) Total (km) Federal 64.921 12.541 77.461 State coincident 17.788 5.232 23.020 State 110.842 111.334 222.176 Municipal 26.827 1.234.918 1.261.745 Total 220.378 1.364.025 1.584.402 Paved (km) Unpaved (km) Total (km) Federal 4,1% 0,8% 4,9% State coincident 1,1% 0,3% 1,5% State Municipal 1 1 Total 1 1 Paved (km) Unpaved (km) Total (km) Total USA 4.186.692 2.267.175 6.453.867 Total Brazil 220.378 1.364.025 1.584.402 Paved (km) Unpaved (km) Total (km) Total USA 64,9% 35,1% 100,0% Total Brazil 13,9% 86,1% 100,0% Source: CNT and ABCR

General Information on Brazil’s Roadways MENU

Brazil’s Roadways

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 89,552 km 90,945 km 92,747 km 95707 km 2009 2010 2011 2012 Great Good Regular Bad Terrible

Condition of Brazil’s roadways.

Source: CNT and ABCR

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Railways

Railways

Not conceded, 5% ALL, 39% FCA, 27% MRS, 5% Others, 24% Conceded 95%

Percentage of the total railway network extension per concessionaire.

Source: CNT

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GCI Rankings

GCI Rankings

1,841,717 2,013,263 2,014,776 2,252,664 2,435,174 2,612,878 3,399,589 5,959,718 8,358,363 15,684,800 10 9 8 7 6 5 4 3 2 1 India Italy Russian Federation Brazil United Kingdom France Germany Japan China United States

GDP (millions of PPP US dollars) for the ten largest economies in the world.

Source: WEF; Global Competitiveness Index Report.

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GCI Rankings

GCI ranking and overall score.

Source: WEF; Global Competitiveness Index Report.

54 55 56 57 58 59 60 61 62 63 Costa Rica Mexico Brazil Bulgaria Cyprus Philippines India Peru Slovenia Hungary

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GCI Rankings

Source: WEF; Global Competitiveness Index Report.

Chad 148 Peru 91 Argentina 89 Brazil 71 South Africa 66 Mexico 64 China 48 Chile 46 Russian Federation 45 Hong Kong SAR 1

Ranking of overall infrastructure quality. MENU

GCI Rankings

Source: WEF; Global Competitiveness Index Report.

Ranking of transportation infrastructure quality.

122 121 120 119 118 117 116 115 114 113 Egypt Benin Brazil Serbia Bangladesh Kazakhstan Cameroon Lesotho Honduras Liberia 105 104 103 102 101 100 99 98 97 96 Costa Rica Myanmar Brazil Peru Nigeria Burkina Faso Macedonia, FYR Senegal Malawi Liberia

Roadways Railways MENU

GCI Rankings

10 9 8 7 6 5 4 3 2 1 Italy France Russian Federation Brazil United Kingdom Germany Japan India China United States

Ranking of domestic market sizes.

Source: WEF; Global Competitiveness Index Report.

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EBITDA margins per business

EBITDA margins per business

24.40% 21.60% 12.90% 6.70% 11.70% Suspensys Jost Master Fras-le Vehicles and Equipment

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WACC

WACC

Auto parts Auto parts Road Equipment Road Equipment

Rrf 2.58% 2.58% CRP 1.93% 1.93% βl 1.10 1.06 MRP 4.85% 4.85% Ke 9.86% 9.67% Ius 2.20% 2.20% Kf 7.49% 7.31% Ibr 5.32% 5.32% Kebr 13.21% 13.02% Kd 11.25% 11.25% D/E 32% 32% WACC 11.34% 11.21%

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Projected financials

• 2

4 6 8 10 2014E 2015E 2016E 2017E 2018E 2019E Billions Overall Vehicles and Equipment Frasle Master

Forecasts of revenues for the explicitly modeled period, in BRL billion.

Source: FGV’s estimates

Forecasts of revenues for the explicitly modeled period, in BRL billion.

• 0.2

0.4 0.6 0.8 1.0 1.2 1.4 2014E 2015E 2016E 2017E 2018E 2019E Overall Vehicles and Equipment Frasle Master Jost Suspensys

Projected Financials

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1% 3% 5% 7% 9% 11% 13% 2014E 2015E 2016E 2017E 2018E 2019E Vehicles and Equipment Frasle Master Jost Suspensys

Forecasts of sales volume growth (%) Forecasts for revenue growth (%)

5% 7% 9% 11% 13% 15% 17% 2014E 2015E 2016E 2017E 2018E 2019E Vehicles and Equipment Frasle Master Jost Suspensys Source: FGV’s estimates

Projected Financials

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55% 55% 56% 56% 56% 56% 43% 43% 43% 42% 42% 42% 2014E 2015E 2016E 2017E 2018E 2019E Vehicles and Equipment Autoparts

Participation of each of Randon’s core segments on revenues (% of total revenues)

Source: FGV’s estimates

Projected Financials

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14% 14% 14% 14% 15% 15% 12% 12% 12% 13% 13% 13% 16% 16% 16% 16% 16% 16% 2014E 2015E 2016E 2017E 2018E 2019E Overall Vehicles and Equipment Autoparts

Projected Financials

EBITDA margins (%) NOPAT margins (%)

7% 7% 8% 8% 8% 8% 6% 7% 7% 7% 7% 7% 8% 8% 9% 9% 9% 9% 2014E 2015E 2016E 2017E 2018E 2019E Overall Vehicles and Equipment Autoparts Source: FGV’s estimates

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Projected Financials

Operating Cash Flow to Sales (%) FCF to Sales (%)

Source: FGV’s estimates 8% 8% 8% 9% 9% 10% 6% 7% 7% 8% 8% 8% 9% 10% 10% 10% 11% 11% 2014E 2015E 2016E 2017E 2018E 2019E Overall Vehicles and Equipment Autoparts 2% 2% 3% 3% 4% 4% 1% 1% 2% 2% 3% 3% 3% 3% 3% 4% 5% 5% 2014E 2015E 2016E 2017E 2018E 2019E Overall Vehicles and Equipment Autoparts

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12.4% 12.9% 13.7% 14.2% 14.8% 15.1% 12.6% 13.1% 13.9% 14.3% 14.9% 15.1% 12.2% 12.7% 13.5% 14.0% 14.6% 15.0% 2014E 2015E 2016E 2017E 2018E 2019E Overall Vehicles and Equipment Autoparts

Projected Financials

ROIC (%)

Source: FGV’s estimates

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Projected Financials

Vehicles and Equipment 48% Frasle 1% Master 3% Jost 4% Suspensys 42% Financial Services 2%

OoA’s value to Randon

• 1,000

1,000 2,000 3,000 4,000 Explicit Convergence Perpetuity Adjustments Value to Randon Vehicles and Equipment Frasle Master Jost Suspensys Financial Services Source: FGV’s estimates

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Projected Financials

Segment’s value to Randon

Source: FGV’s estimates Vehicles and Road Equipment 48% Auto Parts 50% Financial Services 2%

• 1000

1000 2000 3000 4000 5000 Explicit Convergence Perpetuity Adjustments Total Value Value to Randon Financial Services Auto Parts Vehicles and Road Equipment

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Relative valuation complete table

Relative Valuation: Complete Table

NTM Multiples NTM Multiples EV/EBITDA EV/EBITDA P/E P/E Randon Randon 6.72 6.72 12.75 12.75 Auto Parts Auto Parts Fras-Le Fras-Le 6.31 6.31 13.50 13.50 Iochpe Iochpe-Maxion SA

• Maxion SA

6.85 6.85 14.92 14.92 Mahle-Metal Leve SA Industria e Comer Mahle-Metal Leve SA Industria e Comercio cio 7.76 7.76 15.44 15.44 Autometal SA Autometal SA 7.15 7.15 10.85 10.85 American Axle & Manufacturing Holdings Inc American Axle & Manufacturing Holdings Inc 5.11 5.11 6.55 6.55 WABCO Holdings ABCO Holdings Inc Inc 10.28 10.28 14.79 14.79 Dana Holding Corp Dana Holding Corp 4.45 4.45 10.11 10.11 Martinr Martinrea ea Inter International national Inc Inc 4.90 4.90 8.02 8.02 Meritor Meritor Inc Inc 6.38 6.38 11.22 11.22 Allison T Allison Transmission Holdings ransmission Holdings Inc Inc 10.59 10.59 14.83 14.83 Median Auto parts Median Auto parts 6.61 6.61 12.36 12.36 Road Equipment Road Equipment Wabash National Corp abash National Corp 6.39 6.39 11.06 11.06 Superior Industries Inter Superior Industries International national Inc Inc 4.57 4.57 21.35 21.35 Thor Industries Inc Thor Industries Inc 8.06 8.06 13.81 13.81 Mar Marcopolo SA copolo SA 11.61 11.61 15.67 15.67 Median Road Equipment Median Road Equipment 7.22 7.22 14.74 14.74 Average Auto Parts and Road Equipment verage Auto Parts and Road Equipment 6.92 6.92 13.55 13.55

Peer multiple analysis.

• Sour

Source: ce: Bloomberg Bloomberg and FGV’ and FGV’s s calculations calculations

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financials

Financials

DCF - FCFF - DCF - FCFF - Randon Randon 2009 2009 2010 2010 2011 2011 2012 2012 2013 2013 2014 2014 2015 2015 2016 2016 2017 2017 2018 2018 2019 2019 Net Revenues BRL '000

2,469,544 3,718,972 4,156,396 3,501,921 4,237,262 4,786,048 5,326,807 6,006,427 6,659,722 7,369,110 8,136,471

(-) Cash Costs BRL '000

1,834,087 2,730,244 3,049,941 2,657,600 3,100,891 3,512,447 3,913,968 4,420,384 4,905,786 5,432,830 6,003,946

(-) Cash Expenses BRL '000

322,407 431,082 529,765 537,517 573,373 624,855 678,126 736,955 797,532 862,743 948,575

EBITDA BRL '000

313,050 557,646 576,690 306,805 562,998 648,746 734,714 849,088 956,404 1,073,537 1,183,950

(-) Depreciation, Amortization and Depletion BRL '000

57,264 82,104 87,463 112,260 108,764 117,894 130,815 146,466 162,418 179,958 199,187

EBIT BRL '000

255,786 475,542 489,227 194,545 454,234 530,852 603,898 702,622 793,986 893,579 984,763

(-) Taxes BRL '000

86,967 161,684 166,337 66,145 154,440 180,490 205,325 238,892 269,955 303,817 334,819

NOPAT BRL '000

168,819 313,858 322,890 128,400 299,794 350,362 398,573 463,731 524,030 589,762 649,944

(+) Depreciation, Amortization and Exhaustion BRL '000

57,264 82,104 87,463 112,260 108,764 117,894 130,815 146,466 162,418 179,958 199,187

Operating Cash Flow BRL '000

226,083 395,962 410,353 240,660 408,558 468,256 529,388 610,197 686,449 769,720 849,130

(-) ∆ Working Capital BRL '000

129,204 98,029 82,519 103,927 81,043 77,665 72,624

Net Operating Cash Flow BRL '000

279,354 370,227 446,870 506,270 605,406 692,055 776,506

(-) CAPEX BRL '000

111,904 285,669 346,002 352,665 387,769 425,103 460,048

FCFF FCFF BRL '000

167,451 84,558 100,867 153,605 217,637 266,952 316,458

TNOC TNOC BRL '000

1,447,755 1,748,087 2,267,490 2,614,015 2,746,359 3,012,163 3,309,868 3,619,994 3,926,387 4,249,197 4,582,683

ROIC ROIC %

21.10% 17.97% 5.33% 11.00% 12.30% 12.81% 13.62% 14.11% 14.68% 14.98%

EBITDA margin EBITDA margin %

12.7% 15.0% 13.9% 8.8% 13.3% 13.6% 13.8% 14.1% 14.4% 14.6% 14.6%

NOP NOPAT margin T margin %

6.8% 8.4% 7.8% 3.7% 7.1% 7.3% 7.5% 7.7% 7.9% 8.0% 8.0%

Financials

2009 2010 2011 2012 2009-2011 2009-2012 Consolidated Consolidated CAGR 2009/2011 CAGR 2009/2011 CAGR 2009/2012 CAGR 2009/2012 Gr Gross Revenue (R$)

• ss Revenue (R$)

4.342.744 4.342.744 5.244.528 5.244.528 4.662.324 4.662.324 3.130.871 3.130.871 2,4%

• 7,9%

Deduction in Gross Revenue (R$) (840.823) (1.088.132) (943.352) (661.327) Net Revenue (R$) Net Revenue (R$) 3.501.921 3.501.921 4.156.396 4.156.396 3.718.972 3.718.972 2.469.544 2.469.544 2,0%

• 8,4%

Cost of Sales and Services (R$) Cost of Sales and Services (R$) (2.769.743) (2.769.743) (3.137.503) (3.137.503) (2.812.368) (2.812.368) (1.891.357) (1.891.357) 0,5%

• 9,1%

Gr Gross Pr

• ss Profit (R$)
• fit (R$)

732.178 732.178 1.018.893 1.018.893 906.604 906.604 578.187 578.187 7,4%

• 5,7%

Operating Expenses (R$) (557.803) (549.698) (447.320) (334.555) Financial Income (R$) (35.767) 60.038 13.767 36.012 Operating Income (R$) Operating Income (R$) 138.608 138.608 529.233 529.233 473.051 473.051 279.644 279.644 Net Pr Net Profit for the Period (R$)

• fit for the Period (R$)

42.562 42.562 269.149 269.149 249.493 249.493 138.950 138.950 EBIT (R$) EBIT (R$) 174.375 174.375 469.195 469.195 459.284 459.284 243.632 243.632 38,1% 8,7% EBITDA (R$) EBITDA (R$) 286.635 286.635 556.658 556.658 541.388 541.388 300.841 300.841 23,6% 1,2% Gr Gross Margin (%)

• ss Margin (%)

20,9% 20,9% 24,5% 24,5% 24,4% 24,4% 23,4% 23,4% EBITDA Margin (%) EBITDA Margin (%) 8,2% 8,2% 13,4% 13,4% 14,6% 14,6% 12,2% 12,2% Net Margin (%) Net Margin (%) 1,2% 1,2% 6,5% 6,5% 6,7% 6,7% 0,0% 0,0% 2009 2010 2011 2012 Consolidated Consolidated Gr Gross Revenue (% V

• ss Revenue (% Var)

ar)

• 20,8%

20,8%

• 11,1%
• 11,1%
• 32,8%
• 32,8%

Net Revenue (% V Net Revenue (% Var) ar)

• 18,7%

18,7%

• 10,5%
• 10,5%
• 33,6%
• 33,6%

EBITDA % EBITDA % Var ar)

• 94,2%

94,2%

• 2,7%
• 2,7%
• 44,4%
• 44,4%

Financials

DCF - FCFF - V DCF - FCFF - Vehicles and ehicles and Equipment Equipment 2009 2009 2010 2010 2011 2011 2012 2012 2013 2013 2014 2014 2015 2015 2016 2016 2017 2017 2018 2018 2019 2019 Net Revenues BRL '000

2,469,544 3,718,972 4,156,396 3,501,921 4,237,262 4,786,048 5,326,807 6,006,427 6,659,722 7,369,110 8,136,471

(-) Cash Costs BRL '000

1,834,087 2,730,244 3,049,941 2,657,600 3,100,891 3,512,447 3,913,968 4,420,384 4,905,786 5,432,830 6,003,946

(-) Cash Expenses BRL '000

322,407 431,082 529,765 537,517 573,373 624,855 678,126 736,955 797,532 862,743 948,575

EBITDA BRL '000

313,050 557,646 576,690 306,805 562,998 648,746 734,714 849,088 956,404 1,073,537 1,183,950

(-) Depreciation, Amortization and Depletion BRL '000

57,264 82,104 87,463 112,260 108,764 117,894 130,815 146,466 162,418 179,958 199,187

EBIT BRL '000

255,786 475,542 489,227 194,545 454,234 530,852 603,898 702,622 793,986 893,579 984,763

(-) Taxes BRL '000

86,967 161,684 166,337 66,145 154,440 180,490 205,325 238,892 269,955 303,817 334,819

NOPAT BRL '000

168,819 313,858 322,890 128,400 299,794 350,362 398,573 463,731 524,030 589,762 649,944

(+) Depreciation, Amortization and Exhaustion BRL '000

57,264 82,104 87,463 112,260 108,764 117,894 130,815 146,466 162,418 179,958 199,187

Operating Cash Flow BRL '000

226,083 395,962 410,353 240,660 408,558 468,256 529,388 610,197 686,449 769,720 849,130

(-) ∆ Working Capital BRL '000

129,204 98,029 82,519 103,927 81,043 77,665 72,624

Net Operating Cash Flow BRL '000

279,354 370,227 446,870 506,270 605,406 692,055 776,506

(-) CAPEX BRL '000

111,904 285,669 346,002 352,665 387,769 425,103 460,048

FCFF FCFF BRL '000

167,451 84,558 100,867 153,605 217,637 266,952 316,458

TNOC TNOC BRL '000

1,447,755 1,748,087 2,267,490 2,614,015 2,746,359 3,012,163 3,309,868 3,619,994 3,926,387 4,249,197 4,582,683

ROIC ROIC %

21.10% 17.97% 5.33% 11.00% 12.30% 12.81% 13.62% 14.11% 14.68% 14.98%

EBITDA margin EBITDA margin %

12.7% 15.0% 13.9% 8.8% 13.3% 13.6% 13.8% 14.1% 14.4% 14.6% 14.6%

NOP NOPAT margin T margin %

6.8% 8.4% 7.8% 3.7% 7.1% 7.3% 7.5% 7.7% 7.9% 8.0% 8.0%

Financials

2009 2010 2011 2012 2009-2011 2009-2012 Special V Special Vehicles and Road Equipment ehicles and Road Equipment CAGR 2009/2011 CAGR 2009/2011 CAGR 2009/2012 CAGR 2009/2012 Gr Gross Revenue (R$)

• ss Revenue (R$)

1.488.754,00 1.488.754,00 2.313.143,00 2.313.143,00 2.613.940,00 2.613.940,00 2.267.226,00 2.267.226,00 20,6% 11,1% Deduction in Gross Revenue (R$) (291.449,00) (436.040,00) (586.185,00) (417.695,00) Net Revenue (R$) Net Revenue (R$) 1.197.305,00 1.197.305,00 1.877.103,00 1.877.103,00 2.027.755,00 2.027.755,00 1.849.531,00 1.849.531,00 19,2% 11,5% Cost of Sales and Services (R$) Cost of Sales and Services (R$) (963.076,00) (963.076,00) (1.459.879,00) (1.459.879,00) (1.531.110,00) (1.531.110,00) (1.566.429,00) (1.566.429,00) 16,7% 12,9% Gr Gross Pr

• ss Profit (R$)
• fit (R$)

234.229,00 234.229,00 417.224,00 417.224,00 496.645,00 496.645,00 283.102,00 283.102,00 28,5% 4,9% Operating Expenses (R$) (154.581,00) (214.322,00) (243.722,00) (267.542,00) Financial Income (R$) 7.121,00 (1.790,00) 38.720,00 (35.115,00) Operating Income (R$) Operating Income (R$) 86.769,00 86.769,00 201.112,00 201.112,00 291.643,00 291.643,00 (19.555,00) (19.555,00) Net Pr Net Profit for the Period (R$)

• fit for the Period (R$)

61.724,00 61.724,00 147.254,00 147.254,00 98.515,00 98.515,00 (19.448,00) (19.448,00) EBIT (R$) EBIT (R$) 79.648,00 79.648,00 202.902,00 202.902,00 252.923,00 252.923,00 15.560,00 15.560,00 47,0%

• 33,5%

EBITDA (R$) EBITDA (R$) 100.781,00 100.781,00 230.843,00 230.843,00 309.376,00 309.376,00 54.690,00 54.690,00 45,3%

• 14,2%

Gr Gross Margin (%)

• ss Margin (%)

19,6% 19,6% 22,2% 22,2% 24,5% 24,5% 15,3% 15,3% EBITDA Margin (%) EBITDA Margin (%) 8,4% 8,4% 12,3% 12,3% 15,3% 15,3% 3,0% 3,0% Net Margin (%) Net Margin (%)

• 7,8%

7,8% 4,9% 4,9%

• 1,1%
• 1,1%

2009 2010 2011 2012 Special V Special Vehicles and Road Equipment ehicles and Road Equipment Gr Gross Revenue (%

• ss Revenue (% Var

ar) #N/A #N/A 55,4% 55,4% 13,0% 13,0%

• 13,3%
• 13,3%

Net Revenue (% Net Revenue (% Var ar) #N/A #N/A 56,8% 56,8% 8,0% 8,0%

• 8,8%
• 8,8%

EBITDA % EBITDA % Var ar) #N/A #N/A 129,1% 129,1% 34,0% 34,0%

• 82,3%
• 82,3%

Financials

DCF - FCFF - Auto Parts DCF - FCFF - Auto Parts 2009 2009 2010 2010 2011 2011 2012 2012 2013 2013 2014 2014 2015 2015 2016 2016 2017 2017 2018 2018 2019 2019 Net Revenues BRL '000

1,226,376 1,790,685 2,027,906 1,572,363 1,835,714 2,065,269 2,285,228 2,561,653 2,827,710 3,115,031 3,425,702

(-) Cash Costs BRL '000

1,327,131 1,496,068 1,656,293 1,858,005 2,051,715 2,260,839 2,486,875

(-) Cash Expenses BRL '000

227,795 248,274 269,198 292,341 316,178 341,782 375,869

EBITDA BRL '000

280,788 320,927 359,737 411,307 459,818 512,409 562,958

(-) Depreciation, Amortization and Depletion BRL '000

60,294 64,854 70,873 78,083 85,458 93,489 102,257

EBIT BRL '000

156,772 252,239 261,804 157,760 220,494 256,072 288,864 333,224 374,360 418,921 460,701

(-) Taxes BRL '000

53,302 85,761 89,013 53,638 74,968 87,065 98,214 113,296 127,282 142,433 156,638

NOPAT BRL '000

103,469 166,478 172,791 104,121 145,526 169,008 190,650 219,928 247,078 276,488 304,063

(+) Depreciation, Amortization and Exhaustion BRL '000

60,294 64,854 70,873 78,083 85,458 93,489 102,257

Operating Cash Flow BRL '000

205,820 233,862 261,523 298,011 332,535 369,976 406,319

(-) ∆ Working Capital BRL '000

64,081 45,535 38,541 48,670 37,469 35,876 33,487

Net Operating Cash Flow BRL '000

141,740 188,327 222,983 249,341 295,067 334,100 372,832

(-) CAPEX BRL '000

50,948 133,067 159,384 163,050 177,546 193,841 209,076

FCFF FCFF BRL '000

90,792 55,260 63,598 86,291 117,521 140,259 163,757

TNOC TNOC BRL '000

1,385,380 1,499,128 1,626,180 1,759,816 1,889,373 2,025,601 2,165,907

ROIC ROIC %

12.20% 12.72% 13.52% 14.04% 14.63% 15.01%

EBITDA margin EBITDA margin %

15.3% 15.5% 15.7% 16.1% 16.3% 16.4% 16.4%

NOP NOPAT margin T margin %

7.9% 8.2% 8.3% 8.6% 8.7% 8.9% 8.9%

Financials

2009 2010 2011 2012 2009-2011 2009-2012 Auto Parts Auto Parts CAGR 2009/2011 CAGR 2009/2011 CAGR 2009/2012 CAGR 2009/2012 Gr Gross Revenue (R$)

• ss Revenue (R$)

1.591.249 1.591.249 2.292.195 2.292.195 2.613.940 2.613.940 1.987.626 1.987.626 18,0% 5,7% Deduction in Gross Revenue (R$) (364.940) (501.626) (586.185) (415.227) Net Revenue (R$) Net Revenue (R$) 1.226.309 1.226.309 1.790.569 1.790.569 2.027.755 2.027.755 1.572.399 1.572.399 18,3% 6,4% Cost of Sales and Services (R$) Cost of Sales and Services (R$) (928.281) (928.281) (1.352.489) (1.352.489) (1.531.110) (1.531.110) (1.197.286) (1.197.286) 18,2% 6,6% Gr Gross Pr

• ss Profit (R$)
• fit (R$)

298.028 298.028 438.080 438.080 496.645 496.645 375.113 375.113 18,6% 5,9% Operating Expenses (R$) (146.593) (192.869) (243.722) (225.536) Financial Income (R$) 28.564 14.954 38.720 (3.813) Operating Income (R$) Operating Income (R$) 179.999 179.999 260.165 260.165 291.643 291.643 145.764 145.764 Net Pr Net Profit for the Period (R$)

• fit for the Period (R$)

68.342 68.342 93.523 93.523 98.515 98.515 52.999 52.999 EBIT (R$) EBIT (R$) 151.435 151.435 245.211 245.211 252.923 252.923 149.577 149.577 18,6%

• 0,3%

EBITDA (R$) EBITDA (R$) 186.716 186.716 298.525 298.525 309.376 309.376 221.648 221.648 18,3% 4,4% Gr Gross Margin (%)

• ss Margin (%)

24,3% 24,3% 24,5% 24,5% 24,5% 24,5% 23,9% 23,9% EBITDA Margin (%) EBITDA Margin (%) 15,2% 15,2% 16,7% 16,7% 15,3% 15,3% 14,1% 14,1% Net Margin (%) Net Margin (%) 0,0% 0,0% 5,2% 5,2% 4,9% 4,9% 3,4% 3,4% 2009 2010 2011 2012 Auto Parts Auto Parts Gr Gross Revenue (%

• ss Revenue (% Var

ar)

• 44,1%

44,1% 14,0% 14,0%

• 24,0%
• 24,0%

Net Revenue (% Net Revenue (% Var ar)

• 46,0%

46,0% 13,2% 13,2%

• 22,5%
• 22,5%

EBITDA % EBITDA % Var ar)

• 59,9%

59,9% 3,6% 3,6%

• 28,4%
• 28,4%

Financials

2009 2010 2011 2012 2009-2011 2009-2012 Financial Services Financial Services CAGR 2009/2011 CAGR 2009/2011 CAGR 2009/2012 CAGR 2009/2012 Gr Gross Revenue (R$)

• ss Revenue (R$)

50.868 50.868 56.986 56.986 68.509 68.509 87.892 87.892 10,4% 14,7% Deduction in Gross Revenue (R$) (4.938) (5.686) (6.702) (7.901) Net Revenue (R$) Net Revenue (R$) 45.930 45.930 51.300 51.300 61.807 61.807 79.991 79.991 10,4% 14,9% Gr Gross Pr

• ss Profit (R$)
• fit (R$)

45.930 45.930 51.300 51.300 61.807 61.807 73.963 73.963 10,4% 12,6% Operating Expenses (R$) (33.381) (40.129) (50.386) (64.725) Financial Income (R$) 327 603 (333) 3.161 Operating Income (R$) Operating Income (R$) 12.876 12.876 11.774 11.774 11.088 11.088 12.399 12.399 Net Pr Net Profit for the Period (R$)

• fit for the Period (R$)

8.884 8.884 8.716 8.716 8.195 8.195 9.011 9.011 EBIT (R$) EBIT (R$) 12.549 12.549 11.171 11.171 11.421 11.421 9.238 9.238

• 3,1%
• 7,4%

EBITDA (R$) EBITDA (R$) 13.344 13.344 12.020 12.020 12.363 12.363 10.297 10.297

• 2,5%
• 6,3%

Gr Gross Margin (%)

• ss Margin (%)

0,0% 0,0% 23,0% 23,0% 17,9% 17,9% 92,5% 92,5% EBITDA Margin (%) EBITDA Margin (%) 29,1% 29,1% 23,4% 23,4% 20,0% 20,0% 12,9% 12,9% Net Margin (%) Net Margin (%) 0,0% 0,0% 17,0% 17,0% 13,3% 13,3% 11,3% 11,3% 2009 2010 2011 2012 Financial Services Financial Services Gr Gross Revenue (% V

• ss Revenue (% Var)

ar)

• 12,0%

12,0% 20,2% 20,2% 28,3% 28,3% Net Revenue (% V Net Revenue (% Var) ar)

• 11,7%

11,7% 20,5% 20,5% 29,4% 29,4% EBITDA % EBITDA % Var ar)

• 9,9%
• 9,9%

2,9% 2,9%

• 16,7%
• 16,7%

Corporate Governance

Corporate Governance

Members - Boar Members - Board Of Dir d Of Directors ectors Position Position Chosen by the Chosen by the contr controller

• ller

Raul Anselmo Randon Chairman Yes Alexandre Randon Vice-Chairman Yes Ruy Lopes Filho Board Member No Hugo Eurico Irugoyen Ferreira Board Member Yes Célia Maria Xavier Larichia Board Member No Members - Executive Members - Executive Boar Board Position Position Chosen by Chosen by the the contr controller

• ller

David Abramo Randon President Yes Alexandre Randon CEO Yes Erino Tonon Vice-CEO Yes Geraldo Santa Catharina IR Director Yes Members - Fiscal Council Members - Fiscal Council Chosen by Chosen by the contr the controller

• ller

Maria Tereza Casagrande Yes Imer José Puerari Yes João Carlos Sfreddo Yes Nilo José Panazzolo No Fernando Bevilacqua e Fanchin No

Influence of the controller in member selection. MENU

Corporate Governance

1 2 3 4

• A. COMMITMENT

TO CORPORATE GOVERNANCE

• B. STRUCTURE

AND FUNCTIONING OF THE BOARD OF DIRECTORS

• C. CONTROL

ENVIRONMENT AND PROCESSESS D. TRANSPARENCY AND DISCLOSURE E. SHAREHOLDERS LEVEL 1 - Understanding the need to professionalize the Company LEVEL 2 - First concrete steps toward best practices LEVEL 3 - Implementation of best practices LEVEL 4 - Leadership

Randon’s corporate governance according to IGC’s matrix.

Source: IGC, developed by FGV

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Implicit Multiples

Implicit Multiples

Randon DCF Relative Valuation Target Current NTM Ratio Implicit EV/EBITDA multiple 7,14 7,05 7,06 6,72 Implicit P/E multiple 15,09 14,16 14,88 12,75

Multiples implicit by our valuation method.

Source: FGV’s estimates

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Seasonality

Seasonality

1Q 2Q 3Q 4Q Description Revenues 22% 25% 26% 26% % of full year revenues, average 2003-2012 EBITDA 24% 25% 27% 23% % of full year EBITDA, average 2003-2012 EBITDA margin 1,07 1,00 1,05 0,89 Spread/reduction over full year EBITDA margin, average 2003-2012 Average seasonality in selected Randon’s financials.

Source: FGV’s estimates

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Payout

Payout

2010 ¡ 2011 ¡ 2012 ¡ 9M2013 ¡ Dividends ¡ 3.623 ¡ 32.815 ¡ 39.411 ¡ 9.562 ¡ Interest ¡Over ¡Equity ¡ 39.812 ¡ 53.389 ¡ 44.664 ¡ 59.090 ¡ Total ¡ 43.435 ¡ 86.204 ¡ 84.075 ¡ 68.652 ¡ Net ¡Income ¡ 351.366 ¡ 380.337 ¡ 101.052 ¡ 249.217 ¡ 2010 ¡ 2011 ¡ 2012 ¡ 9M2013 ¡ Total ¡Payout ¡ 12,36% ¡ 22,67% ¡ 83,20% ¡ 27,55% ¡ Dividend ¡Payout ¡ 1,03% ¡ 8,63% ¡ 39,00% ¡ 3,84% ¡ IOE ¡Payout ¡ 11,33% ¡ 14,04% ¡ 44,20% ¡ 23,71% ¡ 2010 ¡ 2011 ¡ 2012 ¡ 9M2013 ¡ Dividend/Total ¡ Payout ¡ 8,34% ¡ 38,07% ¡ 46,88% ¡ 13,93% ¡ IOE/Total ¡Payout ¡ 91,66% ¡ 61,93% ¡ 53,12% ¡ 86,07% ¡ Average ¡Total ¡Payout ¡ 20,86% ¡ Average ¡Dividend ¡Payout ¡ 4,50% ¡ Average ¡IOE ¡Payout ¡ 16,36% ¡ 2010 – 9M2013 (except 2012)

Source: FGV’s estimates

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Income statement

Randon Income Statement

Randon’ Randon’s Income Statement Income Statement 2013 2014 2015 2016 2017 2018 2019 Net Revenue Net Revenue BRL '000 BRL '000

4,237,262 4,237,262 4,786,048 4,786,048 5,326,807 5,326,807 6,006,427 6,006,427 6,659,722 6,659,722 7,369,110 7,369,110 8,136,471 8,136,471

Vehicles and Road Equipment BRL '000

2,317,057 2,631,371 2,946,968 3,345,148 3,726,956 4,143,298 4,593,950

Auto Parts BRL '000

1,835,714 2,065,269 2,285,228 2,561,653 2,827,710 3,115,031 3,425,702

Materials and Friction BRL '000

622,401 681,567 723,348 775,489 825,927 875,673 928,022

Brakes BRL '000

439,804 509,231 581,089 674,753 764,849 865,014 975,006

Acoplation Systems BRL '000

132,585 150,034 167,563 189,439 210,409 233,216 257,849

Suspension and Carriage Systems BRL '000

640,924 724,437 813,229 921,972 1,026,525 1,141,126 1,264,826

Financial Services and Others BRL '000

84,491 89,408 94,612 99,626 105,056 110,781 116,819

(-) Cost of Goods Sold (-) Cost of Goods Sold BRL '000 BRL '000

3,209,655 3,209,655 3,630,340 3,630,340 4,044,783 4,044,783 4,566,850 4,566,850 5,068,204 5,068,204 5,612,788 5,612,788 6,202,004 6,202,004

Cash costs BRL '000

3,100,891 3,512,447 3,913,968 4,420,384 4,905,786 5,432,830 6,002,817

Depreciation BRL '000

108,764 117,894 130,815 146,466 162,418 179,958 199,187

(=) Gr (=) Gross Pr

• ss Profit
• fit

BRL '000 BRL '000

1,027,607 1,027,607 1,155,707 1,155,707 1,282,024 1,282,024 1,439,577 1,439,577 1,591,518 1,591,518 1,756,321 1,756,321 1,934,467 1,934,467

(-) Sales Expenses (-) Sales Expenses BRL '000 BRL '000

191,485 191,485 215,013 215,013 238,283 238,283 267,203 267,203 295,132 295,132 325,426 325,426 358,163 358,163

(-) SG&A (-) SG&A BRL '000 BRL '000

381,888 381,888 409,842 409,842 439,843 439,843 469,752 469,752 502,400 502,400 537,317 537,317 590,413 590,413

Income fr Income from Operations

• m Operations

BRL '000 BRL '000

454,234 454,234 530,852 530,852 603,898 603,898 702,622 702,622 793,986 793,986 893,579 893,579 985,892 985,892

Financial Result BRL '000

(121,449) (141,390) (149,764) (157,091) (161,037) (161,896) (160,600)

Financial Income BRL '000

117,670 140,418 159,621 182,039 208,264 238,197 271,610

Financial Expenses BRL '000

239,118 281,808 309,384 339,130 369,301 400,093 432,210

Ear Earnings Befor nings Before T e Taxes axes BRL '000 BRL '000

332,785 332,785 389,462 389,462 454,135 454,135 545,531 545,531 632,948 632,948 731,683 731,683 825,291 825,291

Taxes BRL '000

(112,044) (131,252) (154,277) (185,345) (215,060) (248,622) (280,442)

Pr Profit (Loss) for the period

• fit (Loss) for the period

BRL '000 BRL '000

217,497 217,497 254,783 254,783 299,480 299,480 359,788 359,788 417,469 417,469 482,620 482,620 544,387 544,387

Balance Sheet

Randon Balance Sheet

Randon’ Randon’s Balance Sheet Balance Sheet 2013 2014 2015 2016 2017 2018 2019 Curr Current Assets ent Assets BRL '000 BRL '000 3,180,119 3,180,119 3,530,839 3,530,839 3,888,408 3,888,408 4,324,080 4,324,080 4,768,744 4,768,744 5,252,975 5,252,975 5,769,330 5,769,330 Cash and cash equivalents BRL '000 1,398,305 1,589,307 1,806,874 2,066,300 2,364,843 2,703,169 3,075,761 Receivables BRL '000 883,044 950,320 1,005,282 1,074,443 1,125,779 1,173,191 1,215,301 Inventories BRL '000 602,666 664,313 720,827 792,047 854,786 919,818 986,748 Tax receivables BRL '000 177,485 200,472 223,122 251,589 278,953 308,667 340,810 Others BRL '000 118,619 126,427 132,303 139,701 144,383 148,129 150,710 Long T Long Term Assets erm Assets BRL '000 BRL '000 1,667,459 1,667,459 1,849,597 1,849,597 2,078,937 2,078,937 2,302,924 2,302,924 2,545,373 2,545,373 2,809,085 2,809,085 3,090,031 3,090,031 Consortiums BRL '000 33,489 37,826 42,100 47,471 52,634 58,241 64,306 Deferred Taxes BRL '000 39,742 44,889 49,961 56,335 62,462 69,116 76,313 Other Long Term Assets BRL '000 37,670 42,549 47,357 53,399 59,207 65,513 72,335 Deposits BRL '000 15,671 15,671 15,671 15,671 15,671 15,671 15,671 Investments/Fixed Assets/Intagible Assets/Deferred Assets BRL '000 1,540,887 1,708,662 1,923,849 2,130,048 2,355,399 2,600,544 2,861,406 Total Asset

• tal Asset

BRL '000 BRL '000 4,847,577 4,847,577 5,380,436 5,380,436 5,967,345 5,967,345 6,627,003 6,627,003 7,314,117 7,314,117 8,062,060 8,062,060 8,859,361 8,859,361 Curr Current Liabilities ent Liabilities BRL '000 BRL '000 1,404,460 1,404,460 1,551,122 1,551,122 1,703,244 1,703,244 1,876,432 1,876,432 2,041,890 2,041,890 2,216,932 2,216,932 2,399,826 2,399,826 Suppliers BRL '000 231,181 251,247 268,525 290,308 307,889 325,147 341,794 Financial Institutions BRL '000 774,784 849,771 933,758 1,021,248 1,107,686 1,198,755 1,292,836 Wages and Social Charges BRL '000 68,745 77,649 86,422 97,448 108,047 119,556 132,006 Taxes BRL '000 43,852 49,532 55,128 62,162 68,923 76,264 84,206 Adiantamento Clientes e Outros (R$) BRL '000 285,897 322,925 359,411 405,266 449,346 497,209 548,985 Long T Long Term Liabilities erm Liabilities BRL '000 BRL '000 1,687,786 1,687,786 1,848,425 1,848,425 2,026,945 2,026,945 2,213,672 2,213,672 2,396,954 2,396,954 2,589,563 2,589,563 2,788,025 2,788,025 Financial Institutions BRL '000 1,614,548 1,770,811 1,945,828 2,128,146 2,308,271 2,498,047 2,694,099 Taxes BRL '000 34,700 39,194 43,622 49,188 54,538 60,347 66,631 Provisão p/ Letígios (R$) BRL '000 13,503 13,503 13,503 13,503 13,503 13,503 13,503 Other Liabilities BRL '000 25,036 24,917 23,992 22,835 20,642 17,666 13,792 Equity Equity BRL '000 BRL '000 1,755,331 1,755,331 1,980,888 1,980,888 2,237,157 2,237,157 2,536,899 2,536,899 2,875,273 2,875,273 3,255,565 3,255,565 3,672,255 3,672,255 Total Liabilities and Equity

• tal Liabilities and Equity

BRL '000 BRL '000 4,847,577 4,847,577 5,380,436 5,380,436 5,967,345 5,967,345 6,627,003 6,627,003 7,314,117 7,314,117 8,062,060 8,062,060 8,860,106 8,860,106

Free Cash Flow

Randon Free Cash Flow

Randon’ Randon’s Fr Free Cash Flow ee Cash Flow 2013 2013 2014 2014 2015 2015 2016 2016 2017 2017 2018 2018 2019 2019 Net Revenues BRL '000

4,237,262 4,786,048 5,326,807 6,006,427 6,659,722 7,369,110 8,136,471

(-) Cash Costs BRL '000

3,100,891 3,512,447 3,913,968 4,420,384 4,905,786 5,432,830 6,003,946

(-) Cash Expenses BRL '000

573,373 624,855 678,126 736,955 797,532 862,743 948,575

EBITDA BRL '000

562,998 648,746 734,714 849,088 956,404 1,073,537 1,183,950

(-) Depreciation and Amortization BRL '000

108,764 117,894 130,815 146,466 162,418 179,958 199,187

EBIT BRL '000

454,234 530,852 603,898 702,622 793,986 893,579 984,763

(-) Taxes BRL '000

154,440 180,490 205,325 238,892 269,955 303,817 334,819

NOPAT BRL '000

299,794 350,362 398,573 463,731 524,030 589,762 649,944

(+) Depreciation and Amortization BRL '000

108,764 117,894 130,815 146,466 162,418 179,958 199,187

Gross Operational Cash Flow BRL '000

408,558 468,256 529,388 610,197 686,449 769,720 849,130

(-) ∆ Working Capital BRL '000

129,204 98,029 82,519 103,927 81,043 77,665 72,624

Net Operational Cash Flow BRL '000

279,354 370,227 446,870 506,270 605,406 692,055 776,506

(-) CAPEX BRL '000

111,904 285,669 346,002 352,665 387,769 425,103 460,048

FCFF BRL '000

167,451 84,558 100,867 153,605 217,637 266,952 316,458

Key Financials

Randon Key Financials

Randon’s Key Financials 2013 2014 2015 2016 2017 2018 2019 EBITDA Margin % 13.29% 13.55% 13.79% 14.14% 14.36% 14.57% 14.57% TNOC BRL '000 2,746,359 3,012,163 3,309,868 3,619,994 3,926,387 4,249,197 4,582,683 ROIC % 11.00% 12.30% 12.81% 13.62% 14.11% 14.68% 14.98% Net Debt / EBITDA 1.76 1.59 1.46 1.28 1.10 0.93 0.77 Net Debt / (Net Debt + Equity) % 36.09% 34.24% 32.41% 29.92% 26.77% 23.38% 19.88% Dividend payout % 10.00% 12.25% 14.50% 16.75% 19.00% 21.25% 23.50%

MENU

Future Metallic Prices

Expectations on Future Metallic Prices

20 40 60 80 100 120 140 160 180 Chicago Consensus Maximum Minimum

Source: CBOE and Metal Expert Consulting; developed by FGV

Expected variation of metallic raw material prices. MENU

Monte Carlo

Monte Carlo

Monte&Carlo&Input&Variables&2&Distribution&and&properties Metalic(raw(material(prices .1 Analyst's(lower(price(forecast Distribution Min Mean Max Std(Dev 1 Analyst's(upper(price(forecast Truncated(Normal

• 1.00

0.00 1.00 0.50

CAPEX(efficiency Distribution Min Mean Max Std(Dev Normal

• ∞

0.00 +∞ 3.26%

Randon(variable(application: WACC Distribution Min Mean Max Std(Dev Normal

• ∞

0.00 +∞ 11.55%

Randon(variable(application: Explicit(revenue(growth Distribution Min Mean Max Triangular,(shifted(to(zero(average

• 27%

0% 18%

Randon(variable(application: Randon(variable(application: x%(+(33%(is(the(baseline (1+x%)(*(estimated(WACC(for(each(division Refers(to(percentage(variations(on(our(bps(growth(estimates(for(2019.(This(variation(is( not(uniformly(applied(to(all(growth(estimates(until(2019,(since(we(are(more(certain( about(the(short(term(than(the(long.(So(adjustments(are(made(for(time(uncertainty(while( growth(distribution(across(time(is(also(considered. .1/+1(defined(as(said.(Outcomes(in(between(are(used(for(a(weighted(average(between(

• ur(estimates(and(analyst's(upper(and(lower(forecasts,(according(to(the(case

Monte Carlo

Competitors Commercial Investments

2009 2009 2010 2010 2011 2011 2012 2012 Guerra Guerra Revenues 300 468 388 Commercial Expenses 31 38 43 Comm Exp/Revenues 10% 8% 11% Libr Librelato elato Revenues 268 346 353 Commercial Expenses 15 19 25 Comm Exp/Revenues 6% 5% 7% Facchini Facchini Revenues 666 775 Commercial Expenses 71 59 Comm Exp/Revenues 11% 8%