Equity Research

Earnings Review
ci

Consumer Discretionary Consumer Discretionary

3Q23 results: Better-than-expected results from SOMA and ALPA, November 9, 2023
while GUAR was the negative surprise
In a busy night, five consumer discretionary companies reported their earnings, with VIVA3
Rating Outperform
better-than-expected results from Grupo Soma and Alpargatas. In both cases, the positive
Current price R$ 27.3
surprise came mostly from lower-than-expected SG&A expenses, which led to an EBITDA 12M target price R$ 32.0
Upside potential 17%
beat (13% for SOMA and 192% for ALPA). However, in the case of SOMA, the soft top-line
performance (+5% YoY), although in line with our estimate, remains a concern, especially SOMA3
Rating Outperform
compared that of VIVA (+21% YoY) and ARRZ (+13%). As for ALPA, even though its EBITDA Current price R$ 5.8
margin was much higher than expected, it remains way below previous levels. Therefore, 12M target price R$ 14.6
Upside potential 151%
in our view, it is still too early to affirm that the company reached a turning point in its
results. On the flip side, the negative highlight was Guararapes, with an EBITDA miss due ALPA4
Rating Outperform
to lower margins in the retail and financial services segments. Vivara posted a quarter Current price R$ 8.0
with no surprises and in line with our estimate, while Grupo Casas Bahia had a mixed 12M target price R$ 12.0
Upside potential 50%
quarter, with better-than-expected EBITDA but a large miss in bottom line.
GUAR3
Rating Outperform
VIVA3: Another solid quarter. The company posted another quarter with positive results, Current Price R$ 5.4
with sales of R$581mn, up 21% YoY and just 1% above our estimate. As expected, the Life 12M target price R$ 10.5
Upside Potential 94%
segment was the highlight once again, growing 37% YoY and accounting for 33% of total
sales (compared to 29% in 3Q22). Physical store sales increased 16% YoY, driven by the BHIA3
Rating Outperform
opening of 57 stores in LTM. EBITDA reached R$115mn, up 22% YoY and 5% higher than Current price R$ 0.6
Safra’s number, with a margin improvement of 109bps YoY (90bps above our estimate) 12M target price R$ 2.2
Upside potential 286%
driven by a higher dilution of G&A expenses and other revenues of R$5mn, which offset
Vitor Pini
the pressure from higher marketing expenses (new stores) and lower gross margin +55 11 3175 1194
(poorer sales mix at Vivara). Excluding the positive impact from other revenues, which Vitor.pini@safra.com.br
was negligible in 3Q22, EBITDA would have been R$110mn, up 16% (in line with our
Tales Granello
estimate), with an EBITDA margin of 24%, flat YoY (in line with Safra). Net income of +55 11 3175 2066
R$77mn was up 12% YoY and 4% above our estimate. Lastly, in terms of cash flow, higher Tales.granello@safra.com.br
EBITDA margin and lower working capital needs led to an improvement in cash from Gabriela Ferrante
operations. Regarding leverage, the company remains with a sound balance sheet and a +55 11 3175 2359
net-debt-to-EBITDA ratio of 0.1x. Gabriela.ferrante@safra.com.br

SOMA3: Better-than-expected margins, but pace of growth is a concern. Soma posted a

5% YoY top-line growth to R$1.6bn, just 1% above our estimate, due to: (i) poorer sales
performance of B2B channels at Hering, on the back of a warmer-than-expected winter;
and (ii) weak performance of premium brands FARM (+6% YoY), and Animale and FARM
Global (+4% YoY). Sales breakdown: (i) SOMA ex Hering totaled R$965mn, up 7% YoY and
in line with Safra’s estimate; and (ii) Hering at R$595mn was 2% higher YoY and also in
line with our numbers. On top of that, stronger promotional activity and price markdowns,
coupled with higher taxes on sales (DIFAL) and an increase in the share of wholesale on
sales mix, led to gross margin pressure of 42bps YoY (44bps above our estimate). As a
result, gross margin stood at 57.8%. Adjusted EBITDA came in at R$213mn (down 1% YoY
and 13% above our estimates), with a margin of 15.6%, down 99bps YoY (but 160bps
above our estimate) on the back of the investments made in the FARM Global operations
and the lower gross margin. Lastly, net income came in at R$99mn, down 4% and 23%
above our estimate, owing to positive income taxes and lower-than-expected financial
expenses.

ALPA4: Has the company reached a turning point? Alpargatas’s 3Q23 earnings showed a
decent improvement in terms of EBITDA margin QoQ, since EBITDA came in nearly 3x
higher than expected, even though it remains way under par. Consequently, in our view,
it is too early to say that the company reached a turning point. The company reported a
consolidated net revenue drop of 18% YoY (2% above our estimate). The Havaianas
operation in Brazil reported net revenue of R$707mn, 15% lower YoY, as a result of a sales
volume decline of 20% YoY. Clients remain with a high level of inventories, which was
partially offset by an increase of 6% YoY in average price per pair. Regarding the
international operation, net revenue reached R$178mn, down 27% YoY, driven by a
decline of 41% YoY in sales volume, mainly due to logistics problems, although the average
price per pair grew 22% YoY. Consolidated EBITDA totaled R$77mn, 58% lower YoY but
192% above our estimate and compared to R$5mn in 2Q23. EBITDA margin reached 9%,
down 828bps YoY mainly due to lower SG&A expense dilution and higher storage costs.
The R$9mn net loss (compared to a net profit of R$44mn in 3Q22) includes a R$16mn loss
from Rothy’s in the quarter.

GUAR3: A tough quarter in terms of margins. Merchandise sales reached R$1.5bn, up 11%
YoY (+5% vis-à-vis Safra) due to a strong SSS print of +11% YoY. In addition, retail’s EBITDA
at R$137mn was down 18% YoY, with a 9% margin (-320bps YoY), as price markdowns—
combined with lower efficiency in manufacturing operation due to the implementation of
a new ERP—affected gross margin. With regards to Midway, the credit portfolio reached
R$5.5bn in 3Q23, down 3% YoY, reflecting the company’s stricter credit policy. It is
important to highlight that GUAR improved delinquency ratios YoY in younger vintages
(15–90D -120bps). However, the high level of provisions for doubtful accounts continued
to take its toll on margins: EBITDA at R$20mn was down 58% YoY, with an EBITDA margin
of 3.7%, from 8.3% in 3Q22. Consolidated figures. Net revenue totaled R$2.1bn, up 6%
YoY (+5% compared to Safra’s estimate), while consolidated adjusted EBITDA reached
R$184mn, down 22% YoY (-10% vi-à-vis Safra), with a 312bps YoY decrease in margins to
8.8%. Bottom line came in at a loss of -R$71mn vs. our estimate of -R$3mn and -R$18mn
in 2Q23, pressured by the poorer operational performance. Last but not least, GUAR
posted an operating cash generation after capex of R$266mn in the 9M23 compared to
consumption of -R$607mn in 9M22, on the back of a significant improvement in working
capital of +R$127mn vs. -R$347mn in 9M22 and a reduction in net investments.

BHIA3: Mixed results amid its turnaround. BHIA posted a 5% YoY reduction in gross
revenues (+1% compared to Safra’s estimate), driven by a 3% decline in B&M and an 11%
drop in 1P, as the market remains tough for home appliances and electronics, which was
partially mitigated by the 23% growth in 3P sales. Therefore, net revenue totaled R$6.6bn,
a 6% decrease YoY and 2% above our estimate. Gross profit totaled R$1.5bn, with a gross
margin of 23%, down 852bps YoY (291bps below our estimate), mostly due to the higher

2
level of discounts and promotions related to the inventory reduction plan. However, such
impact was partially offset by lower selling expenses, which led to an adjusted EBITDA
margin of 2%, 493bps lower than in 3Q22, but 106bps above our estimate. Consequently,
adjusted EBITDA totaled R$122mn, down 74% YoY but 137% above Safra’s number. BHIA
posted a net loss of R$836mn, compared to a loss of R$203mn in 3Q22 and our estimate
of a loss of R$669mn, due to higher financial expenses. The positive highlight of the
quarter, in addition to the turnaround plan, was the 27-day reduction in the inventory
cycle, which had a positive impact of R$759mn on working capital, supporting an
operating cash flow after capex of R$166mn, compared to a consumption of R$702mn in
3Q22.

Figure 1: VIVA3 financial highlights

R$mn 3Q23A 3Q23E A/E 3Q22A YoY 2Q23A QoQ
Gross revenue 581 577 0.8% 481 20.7% 702 -17.2%
Net revenue 457 450 1.6% 393 16.4% 560 -18.3%
Gross profit 309 308 0.4% 269 15.0% 390 -20.8%
Gross margin (%) 67.6% 68.4% -84bps 68.4% -85bps 69.7% -209bps
Adj. EBITDA 115 109 5.4% 95 21.7% 158 -27.4%
Adj. EBITDA margin (%) 25.1% 24.2% 90bps 24.1% 109bps 28.3% -315bps
Net income 77 74 3.8% 68 12.3% 110 -30.4%
Net margin (%) 16.7% 16.4% 35bps 17.3% -60bps 19.6% -291bps
Source: Safra and Company

Figure 2: SOMA3 financial highlights

R$mn 3Q23A 3Q23E A/E 3Q22A YoY 2Q23A QoQ
Gross revenue 1,560 1,550 0.7% 1,486 5.0% 1,505 3.7%
Hering 595 590 0.8% 582 2.3% 577 3.2%
Soma (ex-Hering) 965 960 0.6% 904 6.8% 928 4.0%
Net revenue 1,364 1,346 1.3% 1,290 5.8% 1,295 5.3%
Gross profit 788 772 2.1% 750 5.0% 744 5.9%
Gross margin (%) 57.8% 57.3% 44bps 58.2% -42bps 57.5% 30bps
Adj. EBITDA 213 189 12.9% 214 -0.5% 215 -1.1%
EBITDA margin (%) 15.6% 14.0% 160bps 16.6% -99bps 16.6% -102bps
Adj. net income 99 80 22.9% 103 -4.1% 102 -3.2%
Net margin (%) 7.2% 6.0% 127bps 8.0% -74bps 7.9% -64bps
Source: Safra and Company

Figure 3: ALPA4 financial highlights

R$mn 3Q23A 3Q23E A/E 3Q22A YoY 2Q23A QoQ
Net revenue 896 876 2.3% 1,090 -17.8% 926 -3.3%
Gross profit 363 310 17.1% 516 -29.7% 378 -3.8%
Gross margin (%) 40.5% 35.4% 511bps 47.4% -685bps 40.8% -25bps
Adj. EBITDA 77 26 192.0% 184 -58.2% 5 1500.1%
EBITDA margin (%) 8.6% 3.0% 557bps 16.9% -828bps 0.5% 806bps
Adj. net income (9) (53) n.a. 44 n.a. (53) n.a.
Net margin (%) -0.9% -6.0% 510bps 4.1% -501bps -5.7% 478bps
*Adj EBITDA: Excluding non-recurring expenses (R$18.3mn) from past M&As, simplification of the manufacturing structure, and other expenses
Source: Safra and Company

3
Figure 4: GUAR3 financial highlights
R$mn 3Q23A 3Q23E A/E 3Q22A YoY 2Q23A QoQ
Net revenue 2,099 1,998 5.1% 1,978 6.1% 2,139 -1.8%
Products 1,530 1,459 4.9% 1,373 11.4% 1,556 -1.6%
Midway financeira 543 515 5.5% 584 -6.9% 556 -2.3%
Midway mall 26 24 8.4% 21 23.6% 27 -5.5%
Gross profit 1,214 1,180 2.8% 1,165 4.2% 1,286 -5.6%
Gross margin (%) 57.8% 59.1% -126bps 58.9% -105bps 60.1% -230bps
Adj. EBITDA 184 204 -10.0% 235 -21.7% 239 -23.0%
EBITDA margin (%) 8.8% 10.2% -147bps 11.9% -312bps 11.2% -241bps
Net income (71) (3) n.a. 3 n.a. (18) n.a.
Source: Safra and Company

Figure 5: BHIA3 financial highlights

R$mn 3Q23A 3Q23E A/E 3Q22A YoY 2Q23A QoQ
Net revenue 6,590 6,460 2.0% 7,008 -6.0% 7,488 -12.0%
Gross profit 1,513 1,671 -9.5% 2,206 -31.4% 2,183 -30.7%
Gross margin (%) 23.0% 25.9% -291bps 31.5% -852bps 29.2% -619bps
Adj. EBITDA 122 51 137.4% 475 -74.3% 748 -83.7%
EBITDA margin (%) 1.9% 0.8% 106bps 6.8% -493bps 10.0% -814bps
Net income (836) (669) n.a. (203) n.a. (493) n.a.
Net margin (%) -12.7% -10.4% -233bps -2.9% -979bps -6.6% -610bps
Source: Safra and Company

4
 ANALYST DISCLOSURES

1. The analyst responsible for preparing this document, highlighted in bold, hereby certifies
that all opinions expressed in this report accurately, solely and exclusively reflect his/her
personal views and opinions regarding all of the issuers and securities analyzed herein and
were provided in this document independently and autonomously. Whereas the personal
opinions of investment analysts may diverge, Safra Corretora and/or Banco Safra and/or
any of their affiliated companies may have published or may publish other reports that are
inconsistent with and/or reach different conclusions than those provided herein.

2. The analyst responsible for preparing this report is not registered and/or not qualified as a
research analyst at the NYSE or FINRA and such analyst is not in any way associated with
Safra Securities LLC (“SSL”) and is, therefore, not subject to the provisions of Rule 2242 on
communications with researched companies, public appearances and transactions
involving securities held in a research analyst account.

3. An analyst’s compensation is based upon the total revenues of Safra Corretora, a portion
of which is generated through investment banking activities. Like all employees of Safra
Corretora, its subsidiaries and affiliates, analysts receive compensation that is impacted by
their overall profitability. For this reason, analysts’ compensation can be considered to be
indirectly related to this report. However, the analyst responsible for the content of this
report hereby represents that no part of his or her compensation was, is, or will be directly
or indirectly related to any specific recommendation or views contained herein or linked to
the pricing of any of the securities discussed herein. The analyst declares that (s)he does
not maintain any relationship with any individual affiliated with the companies or
governments mentioned herein and does not receive any compensation for services
rendered to or have any commercial relationship with the company or any individual or
entity representing the interests of the company. Neither the analyst(s) nor any member of
their household holds, directly or indirectly, more than 5% of their personal net worth in
any securities issued by the companies or governments analyzed in this report in his/her
personal investment portfolio, nor is (s)he personally involved in the acquisition, sale or
trading of such securities in the market. Neither the analyst(s) nor any member of their
household serves as an officer, director or member of the advisory board of the companies
analyzed in this report.

DISCLOSURE ITEMS

Analysts 1 2 3 4

1. The securities analyst(s) involved in preparing this report are associated with individuals who work
for the issuers addressed herein.

2. The securities analyst’s(s’) spouse(s) or partner(s) hold, either directly or indirectly, on their own
behalf or on behalf of third parties, the stocks and/or other securities discussed in this report.

3. The securities analyst(s) or their spouse(s) or partner(s) are directly or indirectly involved in the
purchase, sale or intermediation of the securities discussed in this report.

4. The securities analyst(s), their respective spouse(s) or partner(s) hold, either directly or indirectly,
any financial interest in the issuers of the securities analyzed in this report.

5
 IMPORTANT INFORMATION ABOUT SAFRA

Safra Corretora and/or its affiliates declare that they (i) have significant financial and commercial
relationships with and/or (ii) receive compensation for services rendered to the following company(ies)
and investment fund(s):

051 Agro Fazendas II FIAGRO-Imobiliário - 1ª emissão, Águas do Rio, AJ Malls FII – 1ª emissão, Aliança
Agrícola do Cerrado S.A., Alianz Trust Renda Imobiliária FII - 6ª emissão, Almacenes Éxito S.A., Ambipar
Participações e Empreendimentos S.A., Atacadão S.A., Atacadão S.A. – CRA 86ª emissão - 3 séries, AZ Quest
Sole Fiagro - 1ª emissão, B3 S.A., Banco Alfa S.A., Banco BTG Pactual, Banco GM S.A., Banco Volkswagen
S.A., BCBF Participações S.A., Bloxs Amazon Green Legacy Fundo de Investimento nas Cadeias Produtivas
Agroindustriais – Fiagro Imobiliário - 1ª emissão, BR Properties S.A., Bracell SP Celulose LTDA., Braskem
S.A., BRF S.A., BTG Pactual Dívida Infra FIC – 3ª emissão, BTG Pactual Logística FII - 12ª Emissão, Camil
Alimentos S.A., Canuma Capital Multiestratégia, Capitânia FIC FI Infra Renda Fixa CP – 5ª emissão, Cartesia
Recebíveis Imobiliários – FII, Cashme Soluções Financeiras S.A., Cereal Comércio Exportação e
Representação Agropecuária S.A., Chembro Química LTDA., Clave Índices de Preços FII – 2ª emissão, CM
Hospitalar S.A., Companhia Paranaense de Energia – COPEL, Companhia Siderúrgica Nacional – CSN,
Concessionária do Rodoanel Oeste S.A., CPX Distribuidora S.A., CSHG Logística FII - 9ª emissão, CSHG
Recebíveis Imobiliários - 9ª emissão, Direcional Engenharia S.A., DMA Distribuição S.A., Ecoagro I FIAGRO –
5ª emissão, Ecoagro I Fiagro Imobiliário - 4ª emissão, Ecovias do Cerrado, Empresa de Ônibus Pássaro
Marron S.A., Enauta Participações, Energisa S.A., Energisa Tocantins - Distribuidora de Energia S.A., Engie
Brasil Energia S.A., Equatorial Goiás Distribuidora de Energia S.A., Equatorial Participações e Investimentos
S.A., Eucatex S.A. Indústria e Comércio, Exes Araguaia Fiagro - 3ª emissão, F3 Fundshares FIM - 1ª emissão,
Farmácia e Drogaria Nissei, Fator Verita FII - 9ª emissão, Fator Verita Multiestrategia FII – 1ª emissão, Ferrari
Agroindústria S.A., FG Agro Fiagro - 3ª Emissão, Fiagro Asset Bank - Terra Investimentos, FII Guardian
Logística Única - 4ª emissão, FII Urca Prime Renda - 7ª emissão, Frigol S.A., Fundo de Investimento
Imobiliário Atrio Reit Recebíveis Imobiliários, Fundo Investimento Imobiliário TG Ativo Real, Fundo de
Investimento Imobiliário Riza Terrax, Furnas Centrais Elétricas, Genial Malls FII – 5ª emissão, GGR Covepi
FII - 6ª Emissão, GPA - Grupo Pão de Açucar, Grupo José Alves, Hedge Brasil Shopping FII - 9ª Emissão,
Hedge TOP FOF FII - 15ª Emissão, Hypera S.A., Iguá Rio, Iguatemi S.A., Iguatemi S.A., Inter Amerra Fiagro-
FII - 1ª emissão, Ipiranga Produtos de Petróleo S.A., ISA CTEEP Transmissora Energia Elétrica Paulista., Itaú
Asset Rural Fiagro - 3ª emissão, Itaú Tempus FII - 1ª emissão, J Macedo S.A., JBS S.A., JGP Crédito Fiagro -
2ª Emissão, JS Ativos Financeiros, Kallas Incorporações e Construções S.A., Karoon Petróleo e Gás Ltda,
Kinea Crédito Agro FIAGRO-Imobiliário - 3ª emissão, Kinea Crédito Agro FIAGRO-Imobiliário - 4ª emissão,
Kinea Hedge Fund FII, Kinea Unique HY CDI FII - 2ª emissão, Life Capital Partners FII - 4ª emissão, Localiza
Rent a Car S.A., Log Commercial Properties e Participações S.A., LOGCP Inter FII - 3ª Emissão, Marfrig Global
Foods S.A., Mauá Capital Hedge FII - 3ª emissão, Mauá Capital Recebíveis Imobiliários - 7ª emissão, Mav
Crédito - Fiagro Imobiliário - 1ª emissão, Maxi Renda FII - 8ª emissão, Mezzani Alimentos Ltda, Mobilize
Financial Services, More Recebíveis Imobiliários FII, Movida Participações S.A., MRV Engenharia e
Participação S.A., Multiplan Empreendimentos Imobiliários S.A., Multitécnica Industrial Ltda., NCH
Recebíveis do Agronegócio FIAGRO Imobiliário – 3ª emissão, Nitro Química S.A., Nortis Incorporadora e
Construtora S.A., Oncoclínicas do Brasil Serviços Médicos S.A., Órama FIC FI-Infra RF - 1ª emissão, Órama
High Yield II – 2ª emissão, Orizon Meio Ambiente S.A., Ourinvest Innovation Fiagro Imobiliário - 2ª emissão,
Parsan S.A., Patrimar Engenharia S.A., Petrobras - Petróleo Brasileiro S.A., Raízen Energia S.A., RBR Crédito
Imobiliário Estruturado – 6ª emissão, RBR Plus Multiestratégia Real Estate FII - 3ª emissão, Rede D’OR São
Luiz S.A., Rio Bravo Crédito Imobiliário High Yeld - 4º emissão, Rio Bravo ESG FIC FI Infra - 2ª Emissão, Rio
Bravo Renda Varejo RVBA – 4ª emissão, Riza Agro Fiagro - 2ª emissão, Riza Akin Fundo de Investimento
Imobiliário – FII, Santander Papéis Imobiliários FII – 1ª emissão, Sendas Distribuidora S.A., SFI Investimentos
do Agronegócio - Fiagro - 2ª emissão, Simpar S.A., SLC Agrícola S.A., Smartfit Escola de Ginástica e Dança
S.A., Solar Serra do Mel B S.A., Sparta Fiagro Cadeias Produtivas Agroindustriais - 2ª emissão, Sparta Infra
FIC FI - 2ª emissão, Sparta Infra FIC FI Infra RF CP - 3ª emissão, SPX Syn Multiestratégia FII - 2ª Emissão,
Suno Energias Limpas RO - 1ª Emissão, Super Quadra Empreendimentos Imobiliários S.A., Top Service
Serviços e Sistemas S.A., Transmissora Aliança de Energia, TRX Real Estate FII – 9ª emissão, Unimed
Investcoop Nacional FII - 3ª emissão, Urca Capital Partners – BDR, Urca Prime Renda FII - 8ª emissão, Valora
CRA - Fiagro - 4ª emissão, Valora CRI CDI - 6ª emissão, Vamos Locação de Caminhões S.A., VBI Consumo
Essencial FII - 6ª emissão, VBI Greenpower FII - 1ª emissão, VBI Logística, Vectis Datagro FIAGRO - 2ª
emissão, Vitru Brasil Empreendimentos Participação e Comércio S.A., Capital Regai FIP, Wickbold & Nosso

6
Pão Indústrias Alimentícias LTDA., XP Crédito Agrícola Fiagro - 4ª emissão, XP Infra II FIP - 4ª Emissão, XP
Malls FII - 9ª Emissão.

IMPORTANT GLOBAL DISCLOSURES

1. This report was prepared by Safra Corretora de Valores e Cambio Ltda. (“Safra Corretora”), a
subsidiary of Banco Safra S.A., a company regulated by the Brazilian Securities and Exchange
Commission (CVM). Safra Corretora is responsible for the distribution of this report in Brazil.

2. This report is for distribution only under such circumstances, as may be permitted by applicable
law. This report is not directed at you if Safra Corretora and/or Banco Safra is prohibited or
restricted by any legislation or regulation in any jurisdiction from making it available to you.
You should satisfy yourself before reading it that Safra Corretora and/or Banco Safra are
permitted to provide research material concerning investments to you under relevant
legislation and regulations.

3. This report is provided for informational purposes only and does not constitute or should not
be construed as an invitation, solicitation, offer or inducement to buy or sell any financial
instrument or to participate in any particular trading strategy in any jurisdiction.

4. The information herein was deemed reasonable on the date of its publication and was
obtained from reliable public sources. Safra Corretora does not ensure or guarantee, either
expressly or implicitly, that the information contained herein is accurate or complete. Safra
Corretora has no obligation to update, modify or amend this report and informs the reader
accordingly, except when terminating coverage of the companies discussed in the report. The
opinions, estimates, information and/or forecasts expressed in this report constitute the
current judgment of the analyst responsible for the content of this report as of the date in
which it was issued and are therefore subject to change without notice. The prices and
availability of the financial instruments are merely indicative and subject to change beyond the
control of Safra Corretora. Safra Corretora is not obligated to update, amend or otherwise alter
this report, or to inform readers of any changes in its content, except upon termination of
coverage of the issuers of the securities discussed herein.

5. Due to international regulations, not all financial services/instruments may be available to all
clients. You should be aware of and observe any such restrictions when considering a potential
investment decision.

6. The financial instruments discussed in this document may not be available to or suitable for all
investors. This report does not take under consideration the specific investment objectives,
financial situation or needs of any particular investor. Investors who intend to purchase or
trade the securities covered in this report must seek out the applicable information and
documents in order to decide whether to invest or not in such securities. Investors must
independently seek out financial, accounting, legal, economic and market guidance, based on
their personal profile, before making any investment decision regarding the securities of the
issuers analyzed in this report. Each investor must make the final investment decision based
on a range of related risks, fees and commissions. In all cases, investors should conduct their
own investigation and analysis of such information before taking or omitting to take any action
in relation to the securities or markets that are analyzed in this report.

7. The report should not be regarded by recipients as a substitute for the exercise of their own
judgment. The opinions, estimates and projections expressed herein constitute the current
judgment of the analyst responsible for the substance of this report as of the date on which
the report was issued and are therefore subject to change without notice and may differ or be
contrary to the opinions expressed by other business areas of Banco Safra as a result of their
use of different assumptions and criteria.

7
 8. If a financial instrument is expressed in currencies other than the one used by the investor,
exchange rate fluctuations may adversely affect the price, value or profitability. Yields of
financial instruments may vary, ultimately increasing or decreasing the price or value of
financial instruments, either directly or indirectly. Past performance is not necessarily
indicative of future results, and this report does not ensure or guarantee, either expressly or
implicitly, any possible future performance or any other aspect thereof. Safra Corretora and its
affiliated companies may not be held liable for any losses, either direct or indirect, arising from
the use of this report or its content. Upon using the content herein, investors undertake to
irrevocably and irreparably hold Safra Corretora and/or any of its affiliated companies harmless
from and against any claims, complaints and/or losses.

9. Any opinions, estimates and projections must not be construed as a representation that the
matters referred to therein will occur. The prices and availability of financial instruments are
indicative only and subject to change without notice. The Research department will initiate,
update and cease coverage solely at the discretion of Banco Safra.

10. This report may not be reproduced or redistributed to any other person, wholly or in part, for
any purpose, without the prior written consent of Safra Corretora. Additional information
relative to the financial instruments discussed in this report is available upon request.

Additional disclaimer for reports distributed to:

USA:
Safra Securities LLC (“SSL”), a FINRA/SIPC member firm, is distributing this report in the United States
and accepts responsibility for the content of this report. SSL assumes responsibility for this research
for purposes of U.S. law. Any U.S. investor who receives this report and intends to trade any of the
securities addressed herein must do so through Safra Securities LLC at 546 5th Ave, 2nd Floor, New
York, NY.

UK AND EUROPEAN ECONOMIC AREA (EEA):

The communication of this report is not being made and has not been approved by an authorized
person for the purposes of Section 21 of the United Kingdom Financial Services and Markets Act
2000 (“FSMA 2000”). Accordingly, the report is not being distributed to, and must not be passed on
to, the general public in the United Kingdom and is to be circulated only to persons outside the
United Kingdom or to persons within the United Kingdom falling within the definition of investment
professionals (as defined in Article 19(5) of the FSMA 2000 (Financial Promotion) Order 2005
(“Order”)) or to other persons to whom it may be lawfully communicated in accordance with the
Order.
While all reasonable efforts have been made to ensure that the information contained herein is not
untrue or misleading at the time of its publication, no representation is made as to its accuracy or
completeness, and it should not be relied upon as such. Past performances are not a guarantee of
future performances. All opinions expressed in the present document reflect the current context
and are subject to change without notice.

OTHER COUNTRIES:
This report and the securities discussed herein may not be eligible for distribution or sale in all
countries or to certain categories of investors. In general, this report may be distributed only to
professional and institutional investors. By accessing this report, you confirm that you are aware of
the laws in your jurisdiction relating to the provision and sale of financial service products and
acknowledge that this material contains proprietary information and that you are to keep this
information confidential. Additionally, you confirm that you understand the risks related to the
financial instruments discussed herein. Due to international regulations, not all financial
services/instruments may be available to all clients.

8
 RATINGS CRITERIA

Safra Corretora assigns specific ratings to the shares traded in the securities and exchange markets
based on the following criteria:

Safra Corretora sets a required rate of return for each share, calculated based on the cost of capital
in the local securities market. The target price of a particular share represents the fair value of the
respective company calculated by the analyst as of a specific date, which is currently set as the end
of 2023 or 2024. Such fair value is calculated based on various metrics, among which the discounted
cash flow is the most used one, followed by the models of residual profit, discounted dividends and
sum of the parts. Sector multiples are used to compare companies within the same sector. The
expected return is equivalent to the percentage difference between the current price and the target
price of the share added to the estimated dividend return.

The stock guide is an investment guide for the shares under Safra’s coverage universe. It covers the
most representative sectors of B3 and presents the main indicators followed by investors, such as
target price; expected return; rating; estimates for net income and cash generation; and market
multiples, including P/E, EV/EBITDA and dividend yield. The sectors analyzed currently comprise
financial services; capital goods; consumption and retail; education; health care; utilities and
sanitation; transportation; and natural resources.

Shares rated as OUTPERFORM are expected to report above-average performance in the stock
exchange within the coverage group defined under the stock guide. Shares rated as UNDERPERFORM
are expected to report below-average performance in the stock exchange within the coverage group
defined under the stock guide. Shares expected to report performances between the two
aforementioned ranges are rated as NEUTRAL.

Our ratings are continuously reviewed according to such ranges whenever a meaningful change
occurs (initiation of coverage, change in a volatility scenario or related to the target price).
Nevertheless—and although the ratings are subject to constant administrative revisions—, the
expected returns can fluctuate beyond the ranges as a result of normal fluctuations in share prices,
without a necessary change in their ratings.