Thematic Research - Ecommerce Logistics

Logistics | Thematic Research
The Ecommerce Logistics

Compendium
Equity Research
BTG Pactual
Affiliate Research
Sector Note
February 2021
Lucas Marquiori
lucas.marquiori@btgpactual.com
+55 11 3383 9119
Fernanda Recchia
fernanda.recchia@btgpactual.com
+55 11 3383 3031
Equity Research
BTG Pactual Affiliate Research
Banco BTG Pactual S.A.
Latin America
Car Rental & Logistics
SectorNote
24 February 2021
The E-commerce Logistics Compendium
Industry breakdown - a sim plification to facilitate analysis Lucas Marquiori
Brazil – Banco BTG Pactual S.A.
We break dow n the logistics industry into three sub-segments: inbound, outbound and
lucas.marquiori@btgpactual.com
last-mile delivery. Throughout this report, w e try to identify the main characteristics and
+55 11 3383 9119
value drivers of each sub-segment. Our segmentation follow s a bottom-up criterion,
starting from inbound logistics and moving to the end of the value chain (last-mile Fernanda Recchia
Brazil – Banco BTG Pactual S.A.
delivery), reaching the end customer. We also provide a simplified function to help
fernanda.recchia@btgpactual.com
identify expected returns in the logistics industry, w here the implied average return is a
+55 11 3383 3031
function of four components: (i) volumes, (ii) technology, (iii) business model, and (iv)
netw ork pow er.
Our approach to verticalization – m ore of an opportunity than a threat
Many clients ask us if the verticalization trend of marketplaces poses a threat to 3PL
players like Sequoia. This verticalization cycle aims to capture transported volumes
from the public netw ork of Correios (Brazil’s postal office company), know n for
delivering a subpar service. The ecommerce boost should also bring major tec hnology
to the express-delivery segment, w hich favors companies w ith a robust IT platform to
adapt first to high-quality demand from large marketplaces (MGLU, Amazon). In that
sense, more volumes from these large players could mean additional volumes in the
hands of dedicated 3PL players since marketplaces are unable to operate a delivery
netw ork throughout Brazil, especially in the countryside.
An E-com m erce Logistics 101 & Sector Overview
In this report, w e replicate the ecommerce logistics 101 section used in our initiation
report on Sequoia. We provide a brief recap of the logistics sector, the main trends in
the ecommerce logistics industry, and the main differences betw een regular and
ecommerce logistics (including w hy it´s so difficult to migrate from one to another). We
also include a Sector Overview w here w e present information on the Brazilian
ecommerce market and trends in the local logistics industry´s transformation w ith the
boom of ecommerce. Lastly, w e recap recent events in the local and global ecommer c e
logistics industry in order to assess the main players´ business strategy (Industry
Footsteps sections).
How to play the sector in BZ: SEQL and JSLG are the best positioned players
Investors seeking ecommerce exposure via logistics names should find it in Sequoia
(~50% of company’s top line is dedicated to express delivery, w hich relates to
ecommerce) and in JSL Logistics, reflecting increasing exposure to this segment
(although much less than at Sequoia). We have a Buy on both companies.
ANALYST CERTIFICATION AND REQUIRED DISCLOSURES BEGIN ON PAGE 52

Banco BTG Pactual S.A. does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the
objectivity of this report. Investors should consider this report as only a single factor in making their investment decision . Any U.S. person receiving this report and wishing to effect any transaction in a security
discussed in this report should do so with BTG Pactual US Capital, LLC at 212-293-4600, 601 Lexington Avenue. 57th Floor, New York NY 10022.
24 February 2021 page 2
Contents
Breakdow n of logistics industry 3
Approach on verticalization 7
E- comm erce Logistics 101 9
The state of local players in ecommerce logistics 21
Industry’s footsteps #1 – Initiatives by other local players 24
Industry’s footsteps #2 – What’s happening abroad? 30
Sector Overview 43
Breakdown of logistics industry
A sim plification to facilitate industry analysis
Our simplified approach to the logistics industry is to break dow n the segment into three In our proposed simplification, w e div ide logistics
industry into three main segments: (i) inbound
major types of services: inbound, outbound and last-mile delivery. Although seemingly logistics, (ii) outbound logistics, and (iii) last-mile
similar in many w ays, these three sub-segments have different business delivery.
characteristics. We tried to identify the main characteristics and the value drivers for
each sub-segment. This breakdow n may seem blurred sometimes since most logistics
players have some sort of overlap, but the purpose here is to provide a more didactic
approach w hen studying the industry. Our segmentation follow s a bottom-up criterion,
starting from inbound logistics and moving to the end of the value chain (i.e. last-mile
delivery), reaching the end customer.
Figure 1: Simplified logistics industry breakdown
OEMs DCs Households
Inbound Logistics Outbound Logistics Last-Mile Logistics
Upstream Downstream
Source: BTG Pactual
(i) Inbound Logistics : this is defined as the supply and sourcing of the producing side (i) Inbound Logistics: the inbound logistic serv ice is
defined as the supply ing and sourcing of the producing
of the economy. Despite grow ing a lot in scale in recent decades, inbound logistics side of the economy .
retains many aspects from the time the logistics industry w as born, w hich is to provide
operating efficiency at large and complex production chains. In theory, logistics
represents the outsourcing of an important part of a manufacturer’s production chain,
so it still carries an intrinsic mindset of cost control and efficiency. Transported goods
in the inbound segment vary significantly, but mostly encompass capital goods, raw
materials, components, parts, and all other items that support the production line of
OEMs (automotive, electronics, food processors, etc.). Transported volumes in
inbound logistics are usually very large, especially in the oldest production chains such
as the automotive industry.
Figure 2: Inbound versus Outbound logistics dynamics
Source: AB European Real Estate
(ii) Outbound Logistics: this segment constitutes the distribution of the finished (ii) Outbound Logistics: outbound logistics
constitutes the distribution of the finished goods
goods produced by manufacturers. In this sense, the intrins ic mindset previously produced by the manufacturers.
dominated by cost control and production lines now comprises other features like
netw ork range, channel penetration, netw ork reach, distribution channels, access to
different regions, and so on. Although cost efficiency remains a key characteristic,
these other features change the value proposition offered by logistics providers. In
outbound logistics, the pow er of the distribution netw ork becomes the name of the
game. Another important change betw een inbound and outbound relates to the low er
average volume per client (volumes are still large but, intrinsically, units per client start
to decrease since w e are entering the B2B distribution channel and getting closer to
the end customer – w here volumes are, by definition, low er).
Figure 3: Representation of a last-mile delivery logistics
Source: ElgarOnline and BTG Pactual
(iii) Last-Mile Delivery: in this segment (also know n as B2C), produced goods finally (iii) Last-Mile Delivery: in the last-mile logistics (also
know n as B2C), produced goods finally reach the end
reach the end customer. This migration to the upstream of the industry brings another customer.
big reduction in terms of average volumes per client. Because of this intrinsically low er
volume, last-mile delivery is the segment that made famous the concept of parcel
delivery (first introduced by US-based 3PL players like UPS and FedEx). Another key
characteristic is the big step-up in required technology. As the segment is at the
forefront of the industry and dealing w ith the end customer (highly critical and
demanding top-speed delivery), the delivery system must be intensively integrated,
connected and agile, making the introduction of tech-enabled systems a priority for last-
mile logistics providers. Low er volumes per client demand a service know n as parcel
logistics, in w hich logistics players provide the less -than-truck load cargo. Players mix
cargos from different clients on the same delivery route to gain scale, w hich ultimately
increases demand for better and more integrated control systems. So, this is the
segment that fits the grow ing demand for ecommerce logistics.
How are returns distributed throughout the industry chain?
Although average returns in the logistics industry may change a lot, specific The economic return of a logistic play er is usually
determined by its: (i) volumes, (ii) technology, (iii)
components help us identify a company’s average return. Based on such components , business model, and (iv) network power.
w e ran a simplified function, helping us comprehend industry returns. The implied
average return is a function of four components: (i) volum es, meaning how muc h
volume a company can obtain from its client base. The simple rule of thumb says the
greater the volume, the better the return. Historically, the inbound logistics segment
w orks w ith larger volumes, but there are also large volume players in last-mile delivery;
(ii) technology, measured by how much flexibility, agility and control the 3PL player´s
system gives client. Usually, clients in the last-mile segment are prone to pay more for
technology, but again there are interesting tech initiatives in inbound logistics. A tech-
enabled business platform and innovative DNA are a key competitive advantage in
logistics; (iii) business m odel, meaning how capital-intensive a company is. In recent
years, asset-lighter companies have generated better returns; and (iv) network
pow er, meaning how differentiated a logistics company´s distribution channel is. On
average, players operating less dense routes have superior pricing pow er and, thus,
better returns.
Figure 4: In our view, the implied average return on logistics industry is a function of three main components
1 The greater the volume, the 2 Tech-enabled business

Volumes Technology
3 Asset-lighter
Business model
companies 4 Network power
Players that operate in less
better the return tends to be platform and holding an are generating better dense routes, have superior
innovative DNA is a key returns pricing power, and
competitive advantage in consequently, better returns.
logistics
Source: BTG Pactual

Approach on verticalization
Marketplace verticalization: m ore of an opportunity than a threat
In late 2020, an article from Valor Econômico commented that Amazon, one of the In our v iew , this v erticalization cy cle aims to bring
v olumes transported w ithin the public netw ork of
largest e-commerce companies in the w orld, took a fundamental step tow ards gaining Correios (Brazil’s postal office company ). Increasing
more relevance in the Brazilian retail market: it decided to sell logistics services to v olumes from such large play ers (MGLU, AMZ) could
sellers w ho use its platform. According to the new s, to gain relevance in the local represent additional v olumes in the hands of dedicated
3PL play ers.
market, w here marketplaces like B2W and Magazine Luiza already operate, Amazon
w ill not charge the customer part of the fees for one year. The service package includes
inventory management, storage, delivery and assistance in the retailer's commerc ial
strategy, w ith tools to help define prices. For one year, it w ill also exempt part of the
costs of shipping and storage, as a w ay to attract and retain retailers. Amazon’s
initiative joins recent efforts from other marketplaces to verticalize part of its logistics
chain, aiming at gaining efficiency in the express delivery process. Many clients have
been asking us if such verticalization trend from marketplaces poses a threat to 3PL
players like Sequoia. In our view , this verticalization cycle aims to bring volumes
transported w ithin the public netw ork of Correios (Brazil’s postal office company) ,
know n for delivering a service below the industry’s average. In that sense, increasing
volumes from such large players (MGLU, AMZ) could represent additional volumes in
the hands of dedicated 3PL players, such as Sequoia, since marketplaces are not
capable of operating a delivery netw ork throughout Brazil, especially in the countryside.
Figure 5: Marketplace verticalization cycle
Marketplace
Join the marketplace Logistics services
Sellers
Source: BTG Pactual
Access to capital and IT are key to navigate a disruptive industry
To w rap up, the logistics industry is going through a massive transformation.

Consolidation opportunities should be vast, as buyer companies (like Sequoia and JSL)
w ere recently capitalized, w hile selling players (mostly small, family businesses) w ere
rocked by the COVID crisis. The e-commerce boost should also bring major technology
to the express-delivery segment, w hich favors companies w ith a robust IT platform to
adapt first to high-quality demand from large marketplaces (MGLU, Amazon, etc.).
These large online retailers should accelerate their logistics netw ork expansion (w e´ve
seen strong new sflow on new DC openings in online retail), mostly to capture volumes
previously served by Brazil´s state-run post office (Correios). This netw ork migration
(from Correios to private, w ell-capitalized and high-tech marketplaces) represents
additional volume opportunities for 3PL players (third-party logistics providers) like
Sequoia.
Figure 6: Major marketplaces current logistics infrastructure
Comments
DCs (#) 18 22 27 8
Hubs/Cross docking (#) 3 200 120 n.a.
Available stores as hubs (#) 1,113 1,700 1,322 n.a
Total storage area (sqm) 539,000 600,000 1,000,000 375,000
Third party carriers (#) 2,000 3,000 200 n.a VVAR: proprietary vehicles
* VVAR has 90% of its products delivered by 3rd

% of shipments by Correios 10% 5% n.a.* n.a
parties
*of 1P sales / **made by MercadoEnvios |
Amazon: Started 2020 delivering in up to 48 hours
% of shipments in up to 48h 74%* 62% 0.47 n.a
to 102 cities and ended 2020 delivering to more
than 600 cities
Source: Companies and BTG Pactual
E-commerce Logistics 101
According to a recent study by the World Economic Forum, entitled “ Delivering the
Goods: e-commerce Logistics Transformation”, e-commerce has transformed the retail
sector over the past tw o decades. Well-know n players have faced restructuring, or
even bankruptcy, amid fierce competition from emergent online platforms. The latter The content on this chapter was based on the following
developed innovative business models based on the spread of the internet and other bibliography. For additional comments, please refer to
the original papers.
technologies – stores open 24/7 via a laptop or mobile device, the ability to compare
products and prices, and delivery to the consumer’s door or even their fridge. Last year, - Vantagens Competitivas no E-Commerce através
Walmart started piloting a service that w ill allow its delivery drivers entry to consumers’ da logística. Felippi Perez.
homes via a passcode and a “smart lock”. Amazon is also testing a similar service. - Vença os desafios da logística no e-commerce.
Revista Mundo Logística.
The new retail environment has led to shifts in the associated logistics and transport
- E-commerce in Logistics and Supply-
sector. Companies agile enough to embrace changing distribution channels w ith a host Management. Yasanur Kayikci.
of new services have prospered. Not least among these have been stakeholders
responsible for last-mile business to consumer (B2C) and consumer to consumer - E-commerce Trends and Challenges: A Logistics
and Supply Chain Perspective. John Choo et al, The
(C2C) deliveries. New logistics service providers large and small have been born. The Logistics Institute Asia Pacific.
postal sector has also changed dramatically in the past tw o decades, w ith some
- Delivering the Goods: E-Commerce Logistics
previously nationalized postal operators transformed into commercial independent
Transformation. World Economic Forum.
players, and some postal operations riding the e-commerce w ave offering services akin
to couriers.
Looking to the future, delivery times are getting ever shorter, w ith the number of same
day and one-or-tw o hours delivery services rising. The result is a knock-on effect on
customer expectations. End recipients are demanding greater flexibility as w ell as more
delivery options, fitting around their lifestyles, rather than around the operational
processes of parcel delivery companies. Technology is being harnessed to bridge the
gap – leading to more responsive customer service and convenience for both shippers
and end recipients. Technology solutions are, how ever, more frequently applied by
large firms due to the high costs involved. Alternative delivery solutions are being
developed. Lockers, in car and pick up/drop off netw orks are grow ing in popularity as
retailers face rising cost pressures to ensure e-commerce orders are delivered first
time. Many logistics providers have tailored value-added solutions for transport,
fulfilment and returns.
The introduction of e-commerce in Brazil strengthened w ith the new millenniu m,

starting in the 2000s and booming during the 2010s. Interestingly, e-commerce didn’t
change the regular trade rationale (it w ill connect buyers and sellers, just as physical
retail), but the insertion of electronic equipment transformed the w ay people exchange
information. The creation of this new marketplace w idened buying options materially ,
thus deeply transforming the w ay w e do shopping today.
The consequent need to deliver goods everyw here (including distant routes), at a
record-high speed, drove conventional logistics to evolve and adapt to serve the
demand of this new online shoppers. Such evolution led the so-called “e-commerc e
logistics” to migrate from a secondary activity to a fundamental pillar of competitiv e
advantage of any e-commerce marketplace. This is particularly true in a market
condition w here it is inherently challenging to create meaningful price or quality
differentiation, so the major advantage a marketplace can offer is based on the quality
of its services (transformed into broader concepts of Customer Experience – CX), in

w hich delivery logistics plays a key role.
The Evolution of Logistics: According to information collected by Brazilian

researcher Antonio Novaes, compiled by the author Felippi Novaes in his book
“Vantagens Competitivas no e-commerce Atráves da Logística”, there are four clear
phases of the logistics industry:
Figure 4: The Evolution of Logistics and its main phases
1st Phase - Segmented Role: Dates from the World War II, where the inventories
were an essential part of the logistics process since there were not advanced
information systems at the time. When orders were made, sellers would re-fill its
inventories and program a new order for the respective supplier. Inevitably, those
inventories carried elevated operating costs, such as labor-hours, high invested
capital and man-driven machinery. All participants from the supply-chain were
demanded to carry a relevant number of inventories, consequently damaging
working capital consumption.
2nd Phase - Hard Integration: Some historical events were decisive to start to
change the ongoing logistics dynamics, such as the oil crisis in the 1970s, which
abruptly drove fuel price up in the US, combined with structural urbanization and
higher vehicle fleet. All these elements forced the companies to optimize its
industrial process, introducing the operational planning. Manufacturing and retail
segments became intrinsically integrated, with retail informing sales forecasts to
producers, which would consequently adjust the supply-chain for the estimated
production volume. Despite creating a production rationale, the system was still
flawed, since production adjustments were usually delayed to changes in demand
dynamics.
3rd Phase – Flexible Integration: At the end of the 19080s, the development of the
information technology allowed for a much deeper integration among the different
layers of the industry (and the companies). In this stage, information exchange
became more frequent and players started to operate in a way to satisfy its
respective clients. This satisfaction was mostly seen as a constant desire to reduce
inventories to the minimum level possible. Such inventory reduction was made
famous globally through the so-called Toyotism production system, developed by
the giant Japanese industrial conglomerate.
4th Phase – Strategic Integration: In this phase, logistics becomes highly strategic
for the organizations, being widely discussed and planned to maximize the business
competitiveness. In the pursue of higher supply-chain efficiency, companies start to
share strategic (and somewhat confidential) information with members of its chain,
aiming at optimizing the product flow. In this late stage is born most of the logistics
concepts we use today, such as “just in time” (born in the 3rd phase).
Source: Vantagens Competitivas no e-commerce através da Logística, Felippi Perez e BTG Pactual
Figure 5: The Evolution of logistics ad supply chain
1970s
▪ Direct store replenishment by
suppliers or whosalers
Suppliers Shops
1980s
▪ “Centralization” of deliveries through Retail DCs
retail distribution centers
▪ Mainly domestic supplier Suppliers Shops
1990s Retail import center

Overseas
▪ Rise of global sourcing
Suppliers
Shops
Domestic
Suppliers
Retail DCs
2000s Home
delivery
▪ E-commerce model involving parcel Parcel Consolidation Parcel DCs
network E- Pick-up
hub centers or RDCs
▪ Home deliveries and returns Fulfilment point
Center
Shops
City hub
(Urban Logistics) Returns
Source: E-commerce in Logistics and Supply-Management, Yasanur Kayikci and BTG Pactual
What’s next? Beyond this latter stage, more recently w e have seen the rise of an
immense digitalization process. With the birth, grow th and boom of e-commerce, nearly
all layers of the supply-chain w ere migrated to the digital environment today. The
transformation pow er of such change is massive and includes trends like big data
(process of giant-sized information, at incredibly fast speeds), tightening the supply -
chain and delivery time, and strong expansion of the customer base.
Mapping logistics players
The logistics environment and its interaction w ith e-commerce is complex, w ith different
types of providers and services competing and cooperating. The various players can
simplify by categorizing into e-fulfilment providers; consolidators; last-mile delivery
operators; cross-border delivery; and reverse logistics (also know n as returns).
A) E-fulfilm ent providers: The fulfilment of orders placed online by a customer A) E-fulfilment providers: The fulfilment of orders
placed online by a customer can either be undertaken
can either be undertaken by the retailer (“in-house”) or by a third-party logistics by the retailer (“in house”) or by a third-party logistics
company (3PL) (“outsourced”). Some large retailers w ill undertake the order company (3PL) (“outsourced”).
processing, picking, packing, labelling and dispatch themselves in order to have a
greater level of control over the process, w hereas smaller e-retailers or
omnichannel outfits may opt to use 3PLs in order to benefit from their investment
in technology systems and operational know -how .
The market has become blurred in recent years as Amazon, a multinational e-

commerce marketplace, has also provided logistics services to other retailers.
“Fulfilment by Amazon”, as its offering is know n, allow s MSMEs to store their
products in Amazon w arehouses in various locations around the w orld. The
company w ill then take care of the w hole order process and distribution and w ill
manage the last-mile delivery. The move has brought Amazon into direct
competition w ith many 3PLs, although, for the time being, some have entered into
w hat has been termed “competitors” – w ith Amazon not only a competitor but also
a major customer of 3PLs. Incumbent logistics service providers (LSPs) – such as
UPS and FedEx – have also started to provide e-fulfilment services to MSMEs.
Figure 6: Logistics e-commerce arena
Logistics service providers
Major online retailers (largest

global e-fulfilment providers)
Start-ups
Other major online or multi-

Chanel retailers
Others
Source: www.ti‑insight.com, World Economic Forum and BTG Pactual
B) Consolidators: In view of the exponential grow th of small parcel shipments – B) Consolidators: In v iew of the ex ponential grow th
of small parcel shipment – w hich by default tend to be
w hich by default tend to be single item shipments – from B2C and C2C, there is single item shipments – from B2C and C2C, there is
an increasing need for tw o logistics solutions, notably consolidation and a “pipeline an increasing need for tw o logistics solutions, notably
approach” combined w ith local distribution centers. First, w ith countless small consolidation and a “pipeline approach” combined w ith
local distribution centers.
parcels travelling together over parts of the total journey, the classical role of the
freight forw arder to consolidate and deconsolidate the parcels becomes
increasingly important. Reducing handling at different trans -shipment locations by

combining parcels in larger units/containers w ill reduc e costs. Second, for goods
that are identical or can be substituted, there is a need to make larger use of
regional or local distribution centers. If a customer orders a book, a part, or a
banana online, the original product may come from abroad and from a
considerable distance, yet quick delivery is made possible if the same item is
stored closer to home. Once ordered, it w ill be delivered from the closest location;
how ever, a replacement is then delivered to the local distribution center through
the “pipeline”. The pipeline does not need to be that fast, nor does the item need
to be in a small parcel, and it can even make use of slow er modes of transport
such as sea or rail freight. These tw o concepts are nothing new , but w ill become
increasingly important in the context of the exponential grow th of small parcel
trade. Such solutions can be helped by both increased digitalization and the
exchange of data among carriers, ports and other logistics centers, and shippers.
C) Last-m ile delivery operators : Performing the last-mile delivery has become C) Last-mile delivery operators: Performing the last-
mile deliv ery has become increasingly critical as more
increasingly critical as more e-commerce end recipients look for quick, low cost, e-commerce end recipients look for quick, low cost,
convenient and high-quality delivery, requiring providers to reshape the w ay goods conv enient and high-quality deliv ery , requiring
are moved through the final stage of their journey. Operational differences from prov iders to reshape the w ay goods are moved
through the final stage of their journey ..
traditional trade, particularly in B2C contexts, include more stops per route; greater
spread of delivery locations; and a higher number of unsuccessful deliveries. A
failure to successfully deliver goods the first time round means the last-mile
provider usually incurs the expense of any subsequent delivery attempt. Higher
last-mile delivery costs inherent in some residential destinations have created new
players, including domestic regional carriers, local couriers and crow dsourced
independent contractors. Some e-commerce platforms are now using technology
advances to deploy in-house last-mile delivery solutions.
D) Cross-border delivery: Historically, the cross-border delivery market was D) Cross-border delivery: Historically , the cross-
border deliv ery market w as relativ ely concentrated,
relatively concentrated, particularly at the one-to-three-days premium end, w ith particularly at the one to-three day premium end, w ith
household names such as DHL, FedEx and UPS leading the pack. New household names such as DHL, FedEx and UPS
technologies and services offered by retailers and e-commerce platforms such as leading the pack.
Alibaba, Amazon or Walmart are pushing into the field too. Recipients may also
be w illing to accept a three-to-six day w ait time for delivery at low , if not free,
shipping prices. The low er end of the market is more diverse, w ith post offices
playing a more significant role alongside other market service providers. In
Europe, for example, w here cross-border delivery services by road are significant,
in addition to the three aforementioned integrators (DHL, FedEx and UPS) and
postal operators, DPD (a subsidiary of the French post office La Poste) and GLS
(a subsidiary of the British postal service Royal Mail) have also developed pan
European netw orks to participate in Europe’s grow ing e-commerce delivery
market.
E) Reverse logistics: Along w ith increased online purchases, so too come more E) Reverse logistics: Along w ith increased online
purchases, so too come more returns. Returns may be
returns. Returns may be shipped back to retailers or taken to physical locations, shipped back to retailers or taken to phy sical locations,
such as the retailer storefront, carrier retailer outlets or other acceptance locations. such as the retailer storefront, carrier retailer outlets or
In an effort to improve the online customer buying experience, retailers have other acceptance locations.
adopted solutions that facilitate smooth and efficient return services, including: (a)
pre-printed return labels and re-sealable packaging included in parcels; (b) an

automated refund process w ith simple instructions and clear procedures; (c) an
option to return merchandise to a physical location – either a bricks-and-mortar
outlet, a post office or a location in an alternative delivery netw ork, such as a parcel
store or locker.
Trends of e-com m erce logistics and supply-chain. According to a recent paper

w ritten by Mrs. Yasanur Kayikci, a researcher from the Turkish-German University, the
e-commerce context is changing at a steady rate in both B2B and B2C. Although it only
represents 10% of all new leasing around the w orld, this percentage has doubled
during the past three years, therefore companies have to anticipate strategies to
manage these changes in their favor. Recognizing online presence as one of the
biggest opportunities to expand and grow , many physical retailers have started to
establish and increase their online presence. An e-commerce platform not only
facilitates a transaction over the w eb, but it supports the creation and continuing
development of an online relationship. The emerging trends of enabling e-commerc e
systems have been subject to discussion in recent years:
Cloud Com puting: There are four basic service configurations which are
Software as-a-Service (SaaS), Platform-as-a-Service (PaaS), Infrastructure-as-a-
Service (IaaS) and Supply Chain-as-a-Service (SCaaS). In SaaS, the cloud user Cloud Computing
is able to access a software application hosted by an external provider over the
Internet, such as Google Apps. The PaaS model describes a virtual platform which
involves the use of an externally provided infrastructure to host the application, like
Apprenda, or Google App Engine. IaaS provides virtualized computing resources
over the Internet such as Amazon Web Services, Cisco Metapod, and Google
Compute Engine. SCaaS describes a framework for service-oriented SCM such
as OpenPMF SCaaS, or HCL SCaS.
Mobile Applications: Customer shopping habits have changed, driven in part by

increased use of mobile devices. Continued growth of tablets, smartphones, and
handheld devices boosts the amount of time customers spend online – and they’re Mobile Applications
more likely to shop there. With the proliferation of the Internet into daily life and
falling data prices, customers access mobile applications conveniently to shop
from any location like at airports, traffic signals, cafes or waiting in line. This ease
of ordering via mobile devices has further fueled impulse purchases. Companies
are investing more resources to optimize their mobile sites to enable customers to
have a seamless shopping experience across platforms.
Personalization for Custom er Engagem ent: Personalizing customer

experience is a key customer engagement tool and is expected to drive e-
Customer Engagement
commerce growth. With an increasing trend towards online shopping, brands are
becoming more sophisticated in their ability to collect information about customers
and using this data to deliver personalized recommendations, tailored offers and
delivering differentiated experiences each time.
Big Data: This has arguably been generated primarily from web and e-commerce
communities. Significant market transformations have been accomplished by
leading e-commerce vendors such as Amazon and Ebay through innovative and Big Data
highly scalable e-commerce platforms and product recommender systems. Major
internet companies such as Google, Amazon and Facebook continue to lead the
development of web analytics, cloud computing and social media platforms .
Social Netw orks: Social media has proven to be an effective platform for
customers to discuss and voice opinions about products and brands, as well as
for business to communicate with customers. Social media plays an important role.
Social Networks
There are four different segments where marketing channels fit along the customer
path to purchasing: awareness, consideration, intent, and decision. Despite not
being a direct sales channel, social media can support e-commerce logistics and
supply chains: Demand information: using the percentage of likes and dislikes
from social media exchanges as a measure of interest of customers in a product,
thus providing some potential insight into customer demand. Supplier choice: Data
mining of media such as Linked-In can provide important data to help infer
information about whether a company will continue in business. Logistics:
Information gathered over time about particular highways can help develop a
better understanding of likely highway conditions. Effectively, intuition can be
generated about routes and the likelihood of problems being encountered when
moving goods over those routes.
Figure 7: The lifecycle of a shipment is a complex process and technology investments are key to success
Source: Deutsche Post DHL Group and BTG Pactual
Main differences betw een conventional and e -com m erce logistics. There are Main Differences between conventional and e-
commerce logistics:
structural differences betw een conventional and the e-commerce logistics. The most (i) goods treatment
dramatic difference lies in the significant increase in the complexity of the logistics (ii) deliv ery time
chain. Another important change is the removal of intermediary layers of distributors (iii) low er v isibility
(iv) orders cancelling
and re-sellers, decreasing the transaction costs and increasing the delivery efficiency.
There are some particularities not present in regular logistics, such as: (i) goods
treatm ent, as orders w ith different nature are split in different batches for dispatch; (ii)
delivery tim e, as online customers demand a significantly reduced delivery time, w hich
in most cases are measured by hours or days; (iii) low er visibility to estimate demand,
since regular logistics used to w ork w ith pre-determined volume standards, w hile in e-
commerce logistics, volumes can change drastically depending on customer behavior
trends; (iv) order cancelling, as e-commerce clients are more prone to cancel their
order vs regular logistics.
Table 1: Differences between regular and e-commerce logistics clients

E-commerce consumer Conventional consumer
Expects that physical contact with the product or service will
In most cases, he knows exactly what he wants;
help in the definition;
Seldom accepts product substitutions; More open to eventual product substitutions;
Extremely objective and rational Less objective, often emotional;
Very well informed about the desired product or service; Needs reinforcement of information;
Time is not essential, sees the purchase as recreation.
Time is a key factor. It wants practicality;
Queues to stretch the car or to pay the bill are part of it;
Less tolerant to failures in products or services; More tolerant;
Do not bargain, because it have already compared prices Bargaining is part of it. Believes that the eye contact is an
through the Internet mechanisms; essential condition for closing the sale;
Relationship is fundamental. Wants to be heard, sometimes
Avoids physical contact and is averse to sellers;
seeks paparication;
More willing to complain if what was promised is not fulfilled; More flexible;
Adept to technological innovations; Fearful about the use or application of new technologies;
What the proper planning of e-commerce logistics brings to the table? The correct Benefits of e-commerce logistics planning:
(i) Agility
planning of e-commerce logistics creates material competitive advantages for (ii) Higher operations’ productiv ity
business, such as: (1) Agility, increased speed in the ordering process, picking, (iii) cost reduction
packaging and delivery. (2) Greater operational productivity, given limited resources (iv) business focus
(v) competitiv eness
available, so higher productivity offers a superior ability to serve plus operating scale (vi) sales conv ersion
gains. (3) Cost reduction, w hich drives low er prices and, consequently, greater (vii) process reliability
business competitiveness. (4) Business focus , as proper logistics planning gives (viii) better control
(ix) quality of the process
management available time to focus on its core business. (5) Com petitiveness, (x) standardization of the process
inherently higher, based on scale gains and cost reduction mentioned above. (6) Sales
conversion, as customers see the logistics service as part of the product value,
favoring companies offering better logistics. (7) Process reliability, as logistics
become a visible value for clients, it must become trustw orthy throughout the entire
delivery process. (8) Better control, all operations become more streamlined, more
efficient and considerably more controlled. (9) Quality of the process im proves
consequently, and (10) becomes a standard process , facilitating the scaling-up of
the business.
Figure 8: E-commerce activities

Last Mile Logistics
Small Boxes/ Re-

Container Pallet Big Boxes
circulating Boxes
Customer
Parcel Sortation Parcel Delivery Home
Hub Center Center
Manufacturer / Central Collection
Supplier Warehouse Point
Local Depot
(Urban Logistics) Delivery
Point
The client’s side. By definition, e-commerce logistics players usually provide

transportation services to cargo generating companies, or marketplaces, that connect
buyers and sellers of goods. We may refer to cargo generators (or marketplaces) as
off-takers. For these off -takers, it becomes vital to increase client retention, expand
market share and perpetuate the business, so logistics operators must have products
and services that offer such vital values to their clients. Logistics providers must offer
an efficient and w ide management of information and goods, providing a fast response
time, efficient product flow and superior quality of service. At first, logistics operators
must try to understand the end business of their off -taker clients, exploring how
horizontal or verticalized their product flow is, their w arehousing policy, availability of
distribution centers and so on. All-in, cost, delivery time, quality of service and mid-to-
long-term relationship are the characteristics that off -takers w ill use to choose the best
logistics.
Why is it so difficult to operate in the e -com m erce transportation? Over the past Reasons to explain the difficulties in operating in
the e-commerce logistics:
years, w e have seen successful players from traditional (or regular) logistics hesitant (i) netw ork and cargo complex ity
to enter e-commerce logistics. Other large players have also tried to enter e-commerc e (ii) elev ated customer ex pectation
logistics and have failed. But w hat makes e-commerce logistics so difficult? A (iii) urban mobility restrictions
(iv) logistics bottlenecks
combination of factors makes e-commerce transportation different (and often more
difficult) than regular cargo transportation: (i) netw ork and cargo complexity, (ii) high
level of required customer satisfaction, (iii) urban mobility and distribution restrictions,
and (iv) logistics bottlenecks. In a nutshell, recent history show s that most mistakes in
e-commerce arise w hen operators try to apply the same systems and mindset of
traditional logistics to e-commerce w ithout recognizing that solutions may be a lot
different for each case.
Business adjustments on migrating from regular to e-commerce logistics. Among the

major operating adjustments to be carried out by logistic players w hen migrating from
regular logistics to e-commerce logistics, we name the following:
Table 2: The challenges faced by the logistics companies when migrating from regular to e-commerce logistics
Major challenges w hen m igrating to e -com merce logistics
Due to the usually higher volume per client handled in traditional logistics, deliveries in such
segment usually are done through large distribution centers or clients, with a relatively well -set
(i) delivery process docking structuring. In e-commerce logistics, deliveries might range significantly, from residential
locations (houses, condos, residential buildings) to commercial buildings (stores, shopping malls,
manufactures, etc.), which may demand a special delivery process.
While traditional logistics focus on large volumes of similar goods (components, raw material,
finished or unfinished goods), e-commerce logistics features a wide array of cargo to be delivered
by the same operator. Online shopping deals with products of different size, value, weight, risk of
(ii) cargo types and volum es
robbery, among others. More recently, electronics sales gained traction through E-commerce,
which forces logistics operators to adjust routes and safety measures when transporting such high-
value goods.
As we wrote before, the e-commerce customer is more demanding in terms of quality of service.
This forces operators to adjust metrics such as delivery time (a key point when serving large online
marketplaces), customer experience, availability of informati on and digitalization. If the system
(iii) level of service communication between marketplace and logistics operator is highly efficient, the end customer is
well-served, increasing the potential volume growth for all parties. On the other hand, if the end
customer is disappointed with the delivery process, it might change its buying to a new
marketplace, harming the whole distribution channel.
The value added from the logistics operation changes from regular to E-commerce logistics and, in
that sense, pricing should change too. Clients in e-commerce are more prone to pay for technology
(iv) pricing and innovation than regular logistics clients since this directly impacts the customer experience of
its end client. On the other hand, traditional clients are more sensitive to cost reductions. So, the
migration to E-commerce logistics should help service differentiation be fully priced.
The game has clearly changed, and logistics players must join the strong drive towards the
digitalization of the industry or face obsolescence. As important as delivery, real-time information is
(v) technology
fundamental to improve the quality of the service. Delivering won’t be enough, now the logistics
player is also expected to provide information.
It’s very important that e-commerce logistics players can apply the right infrastructure dimension to
their operation, such as the volume of vehicles used, number of employees, network of terminals
(vi) logistics infrastructure’s
and DCs, quality of partners. At any sign of misfunctioning, the player should be able to adjust such
right sizing
infrastructure immediately, so it is very important to remain as flexible as possible in order to rapidly
expand or shrink the operating structure.
Players must be constantly in contact with their product and delivery flow, to be able to adjust
processes in a short time. As the e-commerce client is more demanding in terms of service, at any
(vii) constant m onitoring
sign of misfunction, it can change the marketplace. In that sense, operators must be always
checking and revising the process to guarantee a good quality of delivery.
As a relevant part of the operating focus changes from traditional to E-commerce logistics, players
(viii) Contracts are now evaluated differently. In that sense, it is important that logistics companies can put into
contract all the important variables of the service.
Source: Vantagens Competitivas no E-Commerce através da logística (Felippi Perez), Vença os desafios da logística no e-commerce (Revista Mundo Logística) and BTG Pactual
The different delivery m echanism s. To optimize logistics costs for delivery, e-

commerce can explore different options, as illustrated above. Traditionally, single or
multiple logistics services providers (LSPs) are engaged to do the deliveries, w hich
may incur a fixed cost for the e-commerce business. E-commerce businesses may
w ish to translate the fixed cost to a marginal cost through other options such as an
“Uber-like” model or a 4th-Party Milk Run.
Figure 9: Delivery Coordination Matrix
Fixed Cost Marginal or Variable Cost
Outsource to multiple companies Uber-like model

✓ The company has serveral outsourced ✓ Logistics asset providers (which include
contracts with diferente Logistics freelance providers or LPS) serve as
Service Providers (LSP) additional pool of available reources for
deliveries
Multiple parties ✓ Each contract has a fixed logistic cost
(monthly or yearly) ✓ There is no fixed contract with the
logistics asset providers
✓ The cost varies with the delivery location

and volume
Outsource to one company 4ᵗʰ Party Milk Run

✓ The company has one ✓ The company fulfils its delivery demang
dedicatedLogistics Service Providers existing networks/routes of a 4ᵗʰ Party
(LSP) for all the deliveries LSP
One party
✓ The contract would guarantee a certain ✓ The company utilizes the 4ᵗʰ Party LSP’s
number of deliveries for each month or excesso capacity
year
✓ The cost varies with delivery location and
✓ The contract has a fixed logistics cost volume
Traditional delivery method

Source: E-commerce Trends and Challenges: A Logistics and Supply Chain Perspective. John Choo et al, The Logistics Institute Asia Pacific.
“Uber-like” Model: The “Uber-like” model is a crow d-sourcing delivery mechanis m

w hich involves at least three stakeholders: an e-commerce platform ow ner or the
supplier, the customer or the recipient and the on-demand logistics assets provider.
The on-demand logistics assets provider supplies delivery resources to the supplier
w hen requested. The delivery request should indicate essential information such as
the start and end points, w eight and dimensions of the parcel, customers’ delivery time
w indow s, etc., so that available and suitable on-demand logistics assets providers can
take the delivery job. With this model, deliveries can be made based on customers’
delivery time w indow s, and the parcel can be tracked. This mechanism is used not only
as an alternative transportation solution but also as a temporary storage solution.
Tw o essential components to support this mechanism are a crow d-sourcing platform

and crow d-sourcing contract. To facilitate crow d-sourcing, a crow d-sourcing platform
that can visualize demand, manage coordination and collaboration, provide a dynamic
delivery schedule, and establish an interaction space for all stakeholders is essential.
This platform acts like the Uber mobile app to match the demand for logistics service
w ith the supply of available logistics assets and enables the tracking of parcels.
Crow d-sourcing contracts are essential to document w hat has been agreed upon.
These contracts betw een stakeholders in a crow d-sourcing mechanism are know n to
vary in nature and content from customer to customer and from product to product.
How ever, the more similar these contracts are for a given stakeholder group, the low er
the entry barriers become for the groups’ participation in the crow d-sourcing
mechanism.
The 4th-Party Milk Run: The 4th-Party Milk Run concept leverages the excess
capacities from a LSP that has existing routes and netw orks along the pick-up and
delivery locations of e-commerce deliveries. Some LSPs may have designated routes
that they need to serve periodically regardless of the delivery volume, and often these
deliveries are not at full capacity. e-commerce businesses can tap on the spare
capacities to translate their fixed delivery cost structure to a marginal or variable cost
structure. How ever, a potential concern w ith the 4th-Party Milk Run concept is that the
LSP may not have a direct route from the suppliers’ pick-up location to the delivery
location. It may need to go through several stops/hops/transit locations before it can
finally deliver the parcel to the end customer.
The state of local players in ecommerce logistics
How to play the industry through local nam es
Our logistics universe in Brazil features four listed companies from three groups: (i)
JSL Logistica, listed under the JSLG3 ticker, w hich is a subsidiary of Simpar, also listed
as SIMH3; (ii) Tegma, listed as TGMA3; and (iii) Sequoia, the youngest company in
the group, listed late last year, w ith the ticker SEQL3. Tegma is the only one w ithout a
relevant presence in the e-commerce segment. Interestingly, it w as the one to make
the first attempt in this industry in 2011, w ith the acquisition of Direct. This attempt
proved unsuccessful, and Tegma divested from the industry (more on this later). JSL
has made a big effort to gain a footprint in this industry recently, as their recent deals
added ecommerce exposure (Fadel and TPC; see below). We believe Sequoia has a
pure ecommerce logistics DNA, since the company w as founded as a tech-enabled
logistics platform for online retailing. Investors seeking ecommerce exposure via
logistics names should find it in Sequoia (as nearly half of the company’s top line is
dedicated to express delivery, w hich relates to ecommerce) and in JSL Logistics, given
the increasing exposure to such segment (although much less so than Sequoia).
Scanning each of the local players’ strategy
- JSL: After years of reluctance, gradually incr ease footprint on e -com merce
JSL Logística is the largest logistic player in the country, having the w idest product
portfolio of services in the industry. The company w as born in the commodity transport
business and quickly evolved to serve other types of products, such as automotiv e JSL is the largest logistic player in the country,
logistics, urban distribution and road cargo transportation. For a long period, the JSL holding a leading role in many segments. However,
company has historically avoided exposure to
Group avoided entering e-commerce logistics, preferring to remain in their field of
ecommerce. This mindset changed recently with
expertise, such as the activities mentioned above. The Group w as also going through the two acquisitions that increased company’s
a major transformation, allocating capital to the creation of other business units, such footprint in the segment: Fadel and TPC.
as Movida and Vamos, so management´s focus w as on another direction. More
recently, this positioning gradually changed, driven by the strong volume boost in
Brazilian e-commerce. Also, w ith the Group’s recent restructuring, the Logistics division
gained more autonomy to prospect acquisition targets, and one of JSL’s latest
purchases (Fadel Logística) show s that the Group is now w illing to have a footprint in
e-commerce. Fadel has a portion of its urban distribution operation dedicated to e-
commerce, w hich marks the beginning of JSL’s presence in such environment. We
recall, though, that the Group already serves e-commerce through its other business
divisions, such as Movida and Vamos.
Fadel’s brief snapshot: Founded in 2001, Fadel is one of the 20 largest logistics
providers in Brazil, with a presence in Paraguay as well, providing Urban Distributi on,
Dedicated Road Cargo Logistics and Internal Logistics services, and it is one of the
main urban distribution companies in Brazil. It operates in the beverage, food, JSL recently acquired Fadel, which gives the
company more exposure to fast-growth urban
consumer goods and e-commerce sectors, has a fleet of more than 1,600 own
delivery segment, as well to e-commerce logistics
operating assets (including trucks, heavy-duty trucks, trailers and light commercial
vehicles) and has 25 branches in Brazil and four in Paraguay. Fadel's revenue
continued growing during COVID due to the characteristics of its operating segments
and services.
A few w eeks ago, JSL announced another acquisition, of TPC, an asset-light logistic
player mostly serving the retail industry, including express and last-mile delivery
services. The acquisition also helps increase JSL’s footprint to the booming
ecommerce logistics market, as TPC provides services to the online retail market.
TPC’s brief snapshot: TPC Express w as founded in 2001 and operates an asset-light
business model focused on bonded and non-bonded w arehouses, in-house dedicated
logistics, cross-docking and integrated distribution management, w hich includes last- JSL‘s latest deal was the acquisition of TPC
mile and reverse logistics. It mainly serves cosmetics, fashion, retail, electronics, Express, an asset-light business model focused
telecom, pharma, hospital equipment, consumer goods, Oil & Gas and petrochemicals . on bonded and non-bonded warehouses, in-house
dedicated logistics, cross-docking and integrated
It operates in 24 states but is mainly positioned in the Southeast and Northeast. Its distribution management, which includes last-mile
client list includes large public and private clients such as Natura, Puma, Alpargatas, and reverse logistics.
3M, Braskem, and São Paulo city hall. As per available information, TPC has six BUs:
(i) Dedicated operations, similar to a relevant part of JSL’s businesses; (ii)
Government, serving in the states of São Paulo, Rio de Janeiro and Bahia; (iii)
Multiclient DCs; w hich provides w arehouses to several clients; (iv) Transport, to
operate freight services; (v) TPC Northeast, w hich offers bonded operations in Bahia;
and (vi) Fullcommerce, w hich provides services to online retail.
-Tegm a: after a frustrating attempt in the past; no exposure to e -commerce today
The company has alw ays been one of the leading players in new vehicle transportation
in the country. How ever, given its traditional relevant exposure to the auto industry, it
has tried to diversify its operations to other segments. One of these diversification The company has always been one of the leading
attempts w as in the e-commerce logistics segment. In March 2011, Tegma announced players in new vehicle transportation in the
the acquisition of logistics company Direct Express Logistica Integrada, headquartered country. However, given its traditional relevant
exposure to the auto industry, it has tried to
in the city of Barueri, close to the São Paulo metropolitan area. Tegma’s goal w ith the diversify its operations to other segments. After an
acquisition w as to increase its footprint in e-commerce logistics, since Direct was effort to enter in ecommerce logistics in 2011
serving clients focused on online shopping, such as Submarino, Americanas, Saraiva, (acquisition of Direct), Tegma decided to sell
Direct to the marketplace B2W, as the business
Netshoes, Samsung, and so on. Then, nearly three years later, Tegma decided to sell was not meeting its expectations.
Direct to the marketplace B2W, as the business w as not meeting its expectations. In
our view , a combination of factors explains the disappointing perf ormance in the eyes
of Tegma: (i) Brazilian e-commerce at the time didn’t have the strong volumes it has
today, and volume scale is crucial for any logistics player, (ii) difficulties to match the
e-commerce business mindset w ith Tegma’s traditional business, w hich has significant
differences. Management remains focused on diversifying from the automotiv e
industry, but the priority has been on non-e-commerce-related businesses, since they
have been focusing on retail and healthcare applications.
A trip to the past, remembering BTG Pactual’s Equity Research note on Tegma
from June 16th, 2014: “Investor enthusiasm on Tegma’s strategy to develop a fast-
growing consumer logistics network, after buying e-Direct three years ago, has been
replaced by disappointment at the subpar performance of the segment, which has
racked up hefty losses of late (2013 net loss of R$58mn), mainly due to an inflated cost Tegma acquired Direct in early 2011, in an attempt
to develop a fast-growing consumer logistics
structure (caused by spike in capacity and capillarity) and a growing number of cargo network. The unit was later sold to B2W, after
thefts/losses. And despite management efforts to turn the business around, Direct was frustrating performance.
expected to post negative EBITDA of ~R$25mn in 2014, thus remaining a major drag
on consolidated financials. The discontinuation/sale of this business was seen as an
upside risk, and, in our view, most investors attributed a relatively small value to Direct
(despite Tegma spending ~R$80mn to buy the company and R$100mn recently to
bolster its capital).”
-Sequoia: born for e-com m erce logistics; scaling sector expansion
Sequoia is a leading Brazilian tech-enabled logistics player focused on express

delivery and e-commerce solutions. It w as founded in 2010 by (current CEO) Armando
Sequoia is a leading Brazilian tech-enabled
Marchesan, w ho has vast experience in the logistics industry, and has a proprietary logistics player, with a focus on express delivery
and scalable technology platform delivering a compelling customer experience and and e-commerce solutions.
operational efficiency. In 2019, they had 30mn deliveries "door-to-door" and +1.4mn
deliveries on the same day of the order. Its B2C (express delivery) transportation
services include: (i) standard deliveries (delivery services provided to e-commerc e
platforms and direct sales to customers); (ii) express deliveries (deliveries in 24 hours
via its main distribution center in Embu das Artes, or another 10 DCs); (iii) same-day
deliveries (deliveries in up to four hours in the metropolitan regions of São Paulo and
Rio); (iv) reverse logistics; and (v) deliveries from multiple sources and shipment of
products from stores. The infrastructure of its B2C transport segment includes: (i) six
hubs and 228 operational bases (23 bases leased directly and 205 outsourced bases)
used in B2B and B2C transport services; (ii) 47 monitored vehicles dedicated to
collection and transfer; and (iii) 4,468 outsourced vehicles dedicated to last-mile
delivery.
Born for ecommerce – inherent advantage in B2C segment. Sequoia is a logistics

platform developed to offer solutions to the express delivery market. Its different
logistics solutions (B2B, logistics solutions, services from other types of businesses)
resulted in its highly competitive positioning. Solutions range from B2B to B2C
segments, also considering many sub -niches such as light and heavy goods transport.
This wide array of segments served, with a highly penetrated delivery network and a
tech & customer-oriented system, is the bedrock of Sequoia´s strong positioning.
Companies created with an e-commerce mindset have a naturally superior value
proposition to marketplace clients, especially versus players that operate traditional
logistics (inbound) willing to migrate to B2C (operational adjustments may take longer
than expected).
Industry’s footsteps #1 – Initiatives by other local players
Besides the listed players, w e decided to compile information on other relevant

companies in the Brazilian e-commerce logistics ecosystem. Tracking the footsteps of
these players helps us understand recent sector trends and the corporate strategy of
the main players.
Table 3: Summary of main recent initiatives noted by local players

Company Main initiatives
Loggi is monitoring the consolidation process of the logistics market and is also studying inorganic
Loggi
growth
Amazon Amazon opened 3 new DCs in the country, increasing the total number from 5 to 8
Jadlog is expanding its operations in the Northeast, once it’s still a lack of dedicated ecommerce
Jadlog
logistics transportation companies operating in such region
Start-ups Logistics startups are taking advantage of the postal office strike and the growth in e-commerce sales
GeoPost GeoPost increases stake in logistics operator Jadlog
DHL The pandemic scenario created major room for transport and logistics operators to gain market share
Fedex Fedex opens 7 new DCs in Brazil
Source: Companies, press and BTG Pactual
a) Loggi to focus on M&A and tech-investm ents in order to grow
In a recent interview to Valor Econômico, the founder and CEO of Loggi, Fabien
Mendez, gave some color on the company’s momentum and LT outlook. He stated that
Loggi is monitoring the consolidation process of the logistics market and is also Loggi is monitoring the consolidation process of
studying inorganic grow th. Loggi has no intention to go public in the short term (it the logistics market and is also studying inorganic
growth.
received a valuation of more than US$1bn in 2019) and w ill remain focused on its
current expansion plans. Today, the company operates in +3k municipalities and has
accelerated the opening of its ow n branches and distribution centers, totaling seven
DCs in São Paulo, Brasília, Porto Alegre, Belo Horizonte, Recife, Salvador and Rio de
Janeiro. Mendez said that 2020 w as a remarkable year for Loggi, w hen it grew over
360% y/y (vs. a grow th expectation of 75% at the beginning of the year) driven by the
e-commerce boost. For 2021-22, the company w ill invest R$600mn, equally divided
into technology upgrade and logistics infrastructure. Also in 2021, Loggi expects to
expand its national delivery service, w hich currently has an average delivery time of
1.3 days in all states and is mainly focused on large companies. Lastly, Mendes pointed
out that Brazil has the potential to multiply the volume of express deliveries more than
ten times. According to him, Brazil had 3mn orders in 2020 vs. an average of 350mn
daily deliveries registered in China last year.
Our take: Loggi’s investments in technology and inorganic grow th are in line w ith the
expansion strategy adopted by other e-commerce-exposed players like XPO and
Sequoia, both tech-enabled logistics companies (link for our recent comment on the
theme in here). We continue to see the logistics market in Brazil offering major room
for grow th, especially for companies that are investing in tech-solutions to optimiz e
their routes, pricing strategy and other important aspects of the service. Such tech-
investments should continue grow ing on the back of increasing demand to serve large
marketplaces.
b) Am azon opens three DCs and doubles categories
Last November, Amazon opened three new distribution centers in the country,
increasing the total number from five to eight, adding pressure on the competitiv e
environment among the major e-commerce platforms. According to local new s, the Amazon opened 3 new DCs in the country,
company more than doubled the number of categories sold in tw o years. Amazon increasing the total number from 5 to 8.
opened five centers in Brazil betw een 2019 and the end of 2020 - four in Cajamar and
one in Cabo de Santo Agostinho (PE) - adding to these three in November. As a result,
customers in the South and Midw est relied, until then, on the delivery of products from
these other units.
Our take: the move show ed how resilient the e-commerce w as during the crisis,
creating a clear opportunity for e-commerce logistics. We flag that Brazilian e-
commerce still heavily depends on Correios for delivery of their product, w hose service
of quality is very low especially w hen compared to private players. Therefore, we
expect Correios to dow nsize over the next years, creating sizeable opportunities for
large retailers and w ell-prepared 3PL-focused players in the country, w illing to expand
their netw ork of services tow ards the countryside.
Figure 7: Amazon’s distribution centers in Brazil
RR
AP
AM PA
MA CE
RN
PI PB
2
AC PE
TO AL
RO SE
BA
MT
3
DF
GO
1 4 – Cajamar/SP MG
MS 4 ES
2 1 – Cabo Santo Agostinho/PE
3 1 – Betim/MG SP
1 RJ
4 1- Nova Rita/RS
5 1 – Santa Maria/DF PR
SC
5
RS
Source: Amazon and BTG Pactual

c) Jadlog to expand operations to Northeast; show cases sector potential
Last November, New trade new sw ire commented on the expansion of e-commerc e
logistics player Jadlog to the Northeast region. The new s mentioned that the company
w as already interested in expanding its operations in the region as they see significant
grow th potential and there are still a lack of dedicated e-commerce logistics Jadlog is expanding its operations in the
Northeast, once it’s still a lack of dedicated
transportation companies operating in such region. How ever, the decision to invest ecommerce logistics transportation companies
almost R$8mn w as made due to the recent capture of contracts w ith large shippers operating in such region
that already have Distribution Centers in Northeastern cities. For its expansion, Jadlog
transformed its branches in Salvador and Recife into logistics hubs. Both w ill operate
w ith more than 30 local franchises and the Fortaleza branch. With the new netw ork
connecting all the state capitals and economic centers, Jadlog expects its delivery time
in the Northeast region, previously around one w eek, to fall by half, and in some cases
to one to three days.
Our take: We believe that Jadlog’s announcement during the pandemics show cased
Brazil’s logistics gap and the grow th opportunities that come from it, especially in a still
highly fragmented market. The country still lacks an appropriate logistics netw ork for
e-commerce, and the dedicated players able to establish efficient routes should benefit
from significant scale gains and grow ing volumes. In regard to Jadlog, w e also recall
that the company already had operations in the region, and now is consis tently gaining
scope, w hich w e see as a natural process. Lastly, w e believe highly dedicated e-
commerce logistics companies should continue exploring the grow th of e-commerc e
out of the large consumer centers in the country, like São Paulo and Rio, w here
marketplaces have a natural trend for verticalization.
Figure 8: Jadlog’s brief history
Year Jadlog was The turnover Implementation of Conquest of the Celebration of 10 Sale of 60% of the After 1 year, Pickups
founded. reaches R$ 100 new technological Época Reclame years of capital to the points are already
million. tools. Aqui Award. foundation. GeoPost group. over 2500 units.
It surpasses the Start of e-commerce Beginning of Creation of the Reaches the record of 7 It grew 80% in
120 franchise service. deliveries with Customer Portal. million orders transported volume of orders
mark. electric tricycle. and opens its new delivered during
headquarters and Black Friday.
Distribution Center, in an
area of 40 thousand m²
on Anhanguera Highway.
Source: Jadlog and BTG Pactual
d) Startups riding the w ave of postal office strike and ecom m erce growth
In September, a piece of new s from Exame commented that logistics startups w ere
taking advantage of the postal office strike (w hich completed lasted slightly more than
1 month) and the grow th in e-commerce sales. According to the piece of new s, the
strike of Correios’ (postal office company) employees, w hich w as requiring the Logistics startups are taking advantage of the
postal office strike and the growth in e-commerce
maintenance of the collective agreement signed in 2019, pressured e-commerce, sales.
w hich experienced a record year due to the changes in consumer behavior amid
COVID outbreak. In this scenario, giant marketplaces such as B2W and Magazine
Luiza increased investments in their ow n logistics arms. Despite this, many merchants
still depend on the infrastructure of Correios, present in more than 5,000 cities in the
country (according to research by startup Loja Integrada, 8 out of 10 small and medium-
sized virtual stores depend on the state-ow ned company to take products to customers'
homes). Without the availability of the Post Office, those merchants had to seek other
solutions for the delivery of their products, using logistics startups. The start-up Loggi
w as one of the most benefited companies by the COVID crisis.
Our take: Many logistics enablers took important steps during pandemics tow ards
taking the place of Correios in offering last-mile logistic delivery solutions. In our view,
there is still a relevant portion of ecommerce deliveries carried out by Correios, w hich
w e expect to dow nsize over time. Such dow nsizing w ill create sizeable opportunities
for large retailers and w ell-prepared 3PL-focused players in the country. We have a
constructive view on the development of ecommerce logistics in Brazil.
e) French GeoPost increases stak e in logistics operator Jadlog
In August, French logistics operator GeoPost announced that it increased its

investment stake in Brazilian transportation company Jadlog, as reported by Valor
Economico. GeoPost first invested in Jadlog in 2017, w hen it acquired 60% of the
company for a non-disclosed price. Now , the French company has increased its stake In August, GeoPost announced that it increased its
investment stake in Brazilian transportation
to 98%, by buying out the remaining stake from the founding members of Jadlog, José company Jadlog.
Afonso Davo and Nelson Jorge. According to a GeoPost executive, the controlling
company is highly sa tisfied w ith increasing its footprint in the country, as they seek to
expand their operations in Brazil. As per one executive of Jadlog, Bruno Tortorello,
Jadlog w as able to quadruple its transported volumes since the first investment by
GeoPost. Also, it has entered into ecommerce logistics, and B2C logistics (the last-
mile delivery, used in ecommerce) is already the main activity of the company. Jadlog’s
forecasted net revenues in FY20 is R$1bn, boosted by the changing demand pattern
during the pandemic, w hen individuals migrated to online shopping. According to Mr.
Tortorello, GeoPost’s investments in the next three years should amount R$100mn,
w hich should be used in innovation and technology.
Our take: GeoPost’s increasing bet on Jadlog only reinforces the positive momentum
for ecommerce logistics in the country, as already explained at the conference calls of
listed players. The sales migration pattern should substantially increase the demand
for suitable logistics, generating opportunities for the most prepared players.
f) E-com m erce logistics tracker - DHL benefiting from positive tailw inds
Last year, a piece of new s from Exame new swire commented that the pandemic
scenario, coupled w ith the consequent rise in e-commerce and the postal office
(Correios) strike, created major room for transport and logistics operators to gain The pandemic scenario created major room for
market share. According to the piece of new s, a good example is DHL Supply Chain, transport and logistics operators to gain market
share.
a German company that processes +130k packages/day in Brazil. With the closing of
physical stores, shopping centers, restaurants and even dealerships at the beginning
of the pandemic, the logistical demand of these businesses plummeted. In this
scenario, e-commerce sales have outperformed. According to Mr. Maurício Barros,
presid ent of DHL in Brazil, the company had a significant drop in volume in the first
months. But right after, they decided to boost the express mode, for routes of up to
1,000 kilometers, w hich boosted their sales. The objective of such modality is to offer
retailers a cheaper alternative than air transport and faster than traditional road trip.
Our take: There is still a relevant portion of e-commerce deliveries carried out by
Correios, w hich w e expect to dow nsize over time. Such dow nsizing w ill create sizeable
opportunities for large retailers and w ell-prepared 3PL-focused players in the country.
We have a constructive view on the development of ecommerce logistics in Brazil.
Figure 9: DHL’s portfolio of services for ecommerce
Source: DHL and BTG Pactual
Brazil’s logistic industry is still very fragmented (Logistics Association, ABOL estimates
+120k companies), w ith a strong presence of small and family -ow ned players (and thus
high informality betw een the smallest ones). Amid COVID-19, smaller logistics players
are struggling to survive, w hich could accelerate a long-aw aited consolidation
movement. Small players don’t have enough cash or access to capital to survive the
crisis. Working capital is also another key ST drag on small businesses. On the other
hand, large players like Simpar/JSL and Sequoia w ere recently capitalized, becoming
clear consolidators in such market.
Table 4: M&A track record in logistics industry

Year Aquirer Target Transaction Value (in R$mn) EV/EBITDA
2021 77 3.9x
2021 130 n.a.
2021 288 5.0x

(1)
2020 65-85 5-6x(1)
2020 82 n.a.
2020 56 7.8x
2020 52 n.a.
2020 22 n.a.
2020 310 5.3x

2020 159 5.2x
2019 100 4-6x(1)

2019 n.a. n.a.
2018 n.a. 4-6x(1)

2018 n.a. n.a.
2016 n.a. n.a.
2016 131 n.a.
2013 n.a. n.a.

2012 n.a. n.a.
2007 n.a. n.a.

Notes: (1) Based on BTG estimates
g) Fedex opens 7 new DCs in Brazil; ST m om entum remains strong
This w eek, NeoFeed commented that to keep up w ith the boost in demand for e-
commerce and react to the advance of new competitors, Fedex invested in seven new
distribution center units in Brazil, expanded the capacity of a center and added more
than 100k sqm to its netw ork in the country. According to the new s, to keep the pace
Fedex is growing capacity in Brazil to capture
w ith online shopping grow th, FedEx hired ~800 professionals and is running more volumes previously served by the state-run post
projects. Other relevant players like Magazine Luiza also invested heavily in expanding office, Correios
their netw ork: in addition to a netw ork of 21 logistics centers, MGLU invested in building
its ow n delivery structure in the last mile, through acquisitions, another front that has
been gaining relevance among its peers.
Our take: The new s show s that express delivery companies in Brazil such as Fedex
and marketplaces are grow ing capacity (either through opening new DCs or hiring new
employees) to capture volumes previously served by Brazil´s state-run post office
(Correios). As w e have already w rote, netw ork migration (from Correios to private, w ell-
capitalized and high-tech marketplaces) represents additional volume opportunities for
3PL players (third-party logistics providers).
Industry’s footsteps #2 – What’s happening abroad?
As w e did w ith the local market, w e compiled a list of events involving key players in
the global ecommerce logistics industry. Again, our goal is to shed light on the state of
the industry abroad.
Further afield, w e also present a brief snapshot of some of the benchmarks of the e-
commerce logistics industry w orldw ide: (i) XPO Logistics, (ii) UPS and (iii) FedEx, all
three of w hich are based in the US; (iv) DHL, headquartered in Germany, and (v)
Chinese player ZTO Express.
Table 5: Summary of main recent events noted abroad

Company Event
Ecommerce Positive momentum of e-commerce is leading to higher demand for LTL
UPS reported US$25bn in revenues (+21% y/y), at the 4Q with 26% growth in operating profit and net
UPS
profit before special charges of US$2.3bn (+26% y/y)
FedEx FedEx received the first turboprop ATR72-600 freighter as part of its fleet renewal program.
Pitney Bowes is using software-powered logistics to back its bid for a bigger part of the e-commerce
Pitney Bowe
market
At the end of 2020: (i) Fedex acquired ShopRunner, (ii) Penske Logistics acquired Black Horse and (iii)
M&As
J.B. Hunt Transport acquired Mass Movement
Traxion Traxion is benefiting from the upsurge in e-commerce sales (still very underpenetrated in Mexico)
Global logistics player Kuehne + Nagel acquired freight forwarder Apex International Corporation for an
Kuene + Nagel
undisclosed amount
a) Positive m om entum of e -commerce is leading to higher demand for LTL
Last w eek, The Wall Street Journal commented that a slice of the trucking industry Full Truckload and Less-than-Truckload are
common ex pressions in logistics industry , and
critical to retail and industrial supply chains is on a roll as the pandemic-driven boom represents the cargo mix w ithin the deliv ery
in online shopping reshapes U.S. distribution maps (new s in here). As per the news, truck/route.
companies like Old Dominion Freight Line, ArcBest Corp. and Saia are expanding as
businesses try to improve their supply chains to catch up to rapidly shifting consumer
demands. This is driving more freight into less -than-truckload operations, w here
trucking companies carry shipments from multiple customers on a single trailer,
boosting revenues and pricing leverage for carriers. As per Adam Satterfield, chief
financial officer at Old Dominion, these e-commerce trends w ill continue to be a tailw ind
for the industry going forw ard. “The large online retailers are opening w arehouses
w eekly and those w arehouses are getting closer and closer to the population centers,”
Yellow Chief Executive Darren Haw kins said, explaining their increasing demand to
stock these new w arehouses.
Our take: The new s show s that efforts to meet grow ing e-commerce consumer
demand involve less-than-truckload (LTL) carriers handling more freight, w hich often
ship products quicker. As highlighted, LTL gives retailers and e-commerce providers a
lot more flexibility in their supply chain.
Chart 1: Top 10 less-than-truckload carriers in 2020, by revenue

$7.5
$5.0
$2.5
$0.0
Source: SJ Consulting Group, WSJ and BTG Pactual
b) UPS posted strong results in Q4, confirm ing Q4 for ecom m erce logistics
Earlier this month, United Parcel Service’s (UPS) reported its 4Q20 earnings release.
The American logistics giant reported US$25bn in revenues, an increase of 21% y/y,
w ith 26% grow th in operating profit and net profit before special charges of US$2.3bn,
up 26% y/y. The strong results w ere mainly driven by higher fees and holiday volumes
UPS reported US$25bn in revenues (+21% y/y), at
during the pandemic combined w ith UPS’s strategy to focus on smaller customers to the 4Q with 26% growth in operating profit and net
improve profitability w hilst getting in deeper w ith big retailers. During the year, the profit before special charges of US$2.3bn (+26%
ecommerce giant Amazon paid US$11.3bn for UPS’s shipping services, corresponding y/y)
to 13% of all revenue for the year. No other customer contributed more than 10% to
the company’s top line. Volume for small- and medium-sized customers rose 28% in
the quarter, compared w ith 4% for the largest shippers in UPS´ portfolio. With additional
surcharges (the smaller companies don’t get volume discounts like larger shippers do),
UPS’ revenue per item shipped rose 7.8% in the quarter, the highest increase in more
than a decade. For the holiday season, UPS acted to ensure its delivery netw ork
w ouldn’t buckle under the stress of higher volumes, using strategies that included
holding its customers to agreed-upon shipping limits during the season.
Our take: The solid results posted by UPS prove the positive momentum for the
express delivery industry, especially for companies exposed to the ecommerce boom.
Its strategy of expanding its services for small-and medium-sized clients after
guaranteeing volumes w ith the largest ones is similar to Loggi’s initiatives in Brazil, as
w e recently commented in here. Sequoia has the same strategy, fomenting smaller
sellers.
Figure 10: UPS’s Q4 revenue increased by 17.4% y/y
Source: UPS and BTG Pactual
c) First ATR 72-600 freighter delivered to FedEx; increasing capacity
Last December, the first turboprop ATR72-600 freighter w as delivered to express

carrier FedEx as part of its fleet renew al program. According to the new s, the aircraft
is part of an agreement signed in 2017 for a firm order for 30 turboprop freighters. A
further six or seven aircrafts are expected to be delivered this year and the remainder FedEx received the first turboprop ATR72-600
freighter as part of its fleet renewal program.
over the next five years. FedEx also has options for an additional 20 ATR-600Fs .
According to Scott Struminger, Aviation EVP & CEO at FedEx Express, one of the main
benefits of this aircraft model is its large cargo door, w hich allow s freight to be loaded
on pallets, ULDs or as loose cargo. The first aircraft w ill undergo some modifications
by FedEx before it arrives at Shannon Airport, w here it w ill be operated by ASL Airlines
Ireland, a FedEx ATR operator since 2000, betw een Paris CDG and the Czech
Republic. The second aircraft w ill operate in the US and the next three w ill service the
Latin America region. According to ATR chief executive Stefano Bortoli, there w as an
increase in interest in the aircraft over the last few months, in line w ith demand for extra
freighter capacity.
Our take: Interesting to see logistics players like FedEx enhancing their delivery
netw ork and creating end-to-end solutions by increasing aircraft fleet. In Brazil, a large
online marketplace did a similar move, by introducing freighter aircrafts into its fleet,
besides signing a partnership agreement w ith local airline Azul. The airline is bullish on
the opportunities that ecommerce grow th in Brazil should br ing to them. Azul’s
management reinforced at their Investor Day yesterday that the airline’s w ide netw ork
in Brazil w ill be key to many online retailers w illing to improve their delivery logistics
solutions. Lastly, the new s also show s the potential demand for turboprops, a segment
w hich Embraer is w illing to explore, according to recent statements from the company .
Figure 11: FedEx ATR 72-600F model
Source: FedEx, ATR and BTG Pactual
In Brazil, Azul is a good partner for ecommerce players. This w as the main rationale
behind the company’s partnership w ith the largest ecommerce player in Latin America,
announced in August 2019.
Figure 12: Azul’s end-to-end logistics solutions
Source: Azul and BTG Pactual

d) Pitney Bow es expanded its softw are-powered logistics system
In December, the Wall Street Journal commented that Pitney Bow es, a logistics
company based in US, w as using softw are-powered logistics to back its bid for a bigger
part of the e-commerce market. According to the new s, the century -old company has Pitney Bowes is using software-powered logistics
invested heavily in data science and automation to support a makeover, as the provider to back its bid for a bigger part of the e-commerce
market
of postage-meter service reinvents itself w ith a broader array of digital capabilities. The
technology supports services developed over the past five years that manage parcel
deliveries for about 600 retailers w orldw ide, as w ell as returns. The new s commented
that such digital capabilities are in strong demand as companies retool their supply
chains to meet the increase in demand of online retail. Pitney Bow es reported in Q3
$410 million in revenue related to online business, up ~50% y/y. The company says
the pandemic has accelerated its e-commerce plans by three to four years.
Our take: the new s is consistent w ith our thoughts that COVID has sped up the
migration from physical to online stores as the industry is benefiting from a change in
consumer behavior. Within our coverage, Sequoia and JSL Logistica are the best
positioned to benefit from such trend. Sequoia also develops in-house most of its IT
and softw are solutions to ecommerce, w hich w e see as an important competitiv e
advantage for the company.
Figure 13: Pitney Bowes’ Commerce Services – Global Ecommerce Network
Source: Pitney Bowes and BTG Pactual

e) Several M&As announced in US m arket last year
At the end of 2020, some acquisitions in the freight market w ere announced in the US
logistics industry that called our attention: (i) Fedex acquiring ShopRunner, as an
initiative to expand its e-commerce capabilities; (ii) Penske Logistics acquired Black
Horse Carriers to complement its existing portfolio of customers and industries w ithin
At the end of 2020, some acquisitions in the freight
their dedicated contract carriage business, and (iii) truckload carrier J.B. Hunt market were announced in the US logistics
Transport acquired fitness equipment delivery specialist Mass Movement, as an industry:
opportunity to expand the company’s expertise in the last-mile delivery of big and bulky
(i) Fedex acquired ShopRunner,
products. We believe that such intense acquisition activity in such a short timeframe is (ii) Penske Logistics acquired Black Horse
explained by the fact that many players have been hit hard by COVID, and divestments (iii) J.B. Hunt Transport acquired Mass Movement
or consolidation represent an interesting solution to the impacts from the crisis.
Our take: In this sense, in line w ith the US, w e expect a strong consolidation w ave in
Brazilian logistics too. In fact, w e recall that the local logistics industry is a much more
fragmented industry than the US (top 10 players account for less than 2% in BZ vs.
36% in US), so w e expect an even stronger consolidation w ave here. All-in, w e believe
that players such as JSL and Sequoia are in a privileged position to address the market
consolidation trend expected for Brazil over the coming years, given their recently
reinforced cash position. We keep our Buy rating on both names.
Table 6: Recent M&As announced in the US logistics market

Buyer Seller Comment
Goal to expand its e-commerce capabilities

Opportunity to expand company’s expertise in the final mile delivery of
big and bulky products
Strategy to complement company’s existing portfolio of customers and
industries
f) Notes from w eb session with Mexican player Traxion
Last year, w e held a w eb session w ith Traxion’s Executive President & Co-Founder ,
Mr. Aby Lijtszain, and Antonio Tejedo, VP of Investor Relations, as part of BTG
Pactual´s Mexican Mobility Conference this w eek. Traxion is a leading company in the
distribution, logistics and ground transportation industry in Mexico. Among the main Traxion is a leading company in the distribution,
logistics and ground transportation industry in
topics discussed, w e highlight: (i) company is benefiting from the upsurge in e- Mexico.
commerce sales and management mentioned that e-commerce is still very
underpenetrated in Mexico, w ith lots of room to increase going forw ard. On this, they
flagged that e-commerce´s relevance in overall sales in the country increased from 5%
to 10% during the pandemics; (ii) asset-light business is performing better than other
cargo transportations due to their low er capex requirements, w hich is a trend w e see
taking place in Brazil too; (iii) many competitors are facing financial troubles amid
COVID and a consolidation movement in the market is expected. On this, management
reiterated that Traxion w ill remain focused on organic grow th, but in case they come
across good opportunities, they could consider performing M&As. Lastly (iv)
management highlighted that the company is performing w ell during the COVID crisis,
mainly due to its resilient business model, w ith a broad service portfolio, a variety of
economic sectors, and a flexible fleet.
Our take: Overall, the meeting reinforced our thoughts on the good momentum for
ecommerce logistics providers, w hilst also reinforcing the large room for consolidation
in the Latin American logistics industry.
Table 7: Traxion business overview
Source: Traxion and BTG Pactual

Figure 10: Key industry’s benchmarks - #1 XPO Logistics
Source: XPO Logistics and BTG Pactual
Chart 13: XPO Logistics top line evolution (USD bn) Chart 14: XPO Logistics stock price evolution (USD)
118.1
17
17
15
15
8
- 21
Oct-03
Oct-04
Oct-05
Oct-07
Oct-08
Oct-09
Oct-11
Oct-12
Oct-13
Oct-14
Oct-15
Oct-16
Oct-17
Oct-18
Oct-19
Oct-20
Oct-06
Oct-10
2015 2016 2017 2018 2019

Feb
Source: XPO Logistics and BTG Pactual Source: Bloomberg and BTG Pactual
Figure 11: Key industry’s benchmarks - #2 UPS
Source: UPS and BTG Pactual
Chart 15: UPS top line evolution (USD bn) Chart 16: UPS stock price evolution (USD)
74 160.1
72
67
62
58
2015 2016 2017 2018 2019
Source: UPS and BTG Pactual Source: Bloomberg and BTG Pactual
Figure 12: Key industry’s benchmarks - #3 FedEx
Source: FedEx and BTG Pactual
Chart 17: FedEx top line evolution (USD bn) Chart 18: FedEx stock price evolution (USD)
70 260.1
66
60
50
48
- 21
Apr-78
Apr-81
Apr-84
Apr-87
Apr-90
Apr-96
Apr-99
Apr-02
Apr-05
Apr-08
Apr-11
Apr-14
Apr-20
Apr-93
Apr-17
2015 2016 2017 2018 2019

Feb
Source: FedEx and BTG Pactual Source: Bloomberg and BTG Pactual
Figure 13: Key industry’s benchmarks - #4 DHL
Source: DHL and BTG Pactual
Chart 19: DHL top line evolution (USD bn) Chart 20: DHL stock price evolution (USD)
63
41.8
62
60
59
57
- 21
Nov-00
Nov-01
Nov-02
Nov-03
Nov-04
Nov-05
Nov-06
Nov-07
Nov-08
Nov-09
Nov-10
Nov-11
Nov-12
Nov-13
Nov-14
Nov-15
Nov-16
Nov-17
Nov-18
Nov-19
Nov-20
Feb
2015 2016 2017 2018 2019
Source: DHL and BTG Pactual Source: Bloomberg and BTG Pactual
Figure 14: Key industry’s benchmarks - #5 ZTO Express
Source: ZTO Express and BTG Pactual
Chart 21: ZTO Express top line evolution (USD bn) Chart 22: ZTO Express stock price evolution (USD)
22 34.7
18
13
10
6
Apr-18
Apr-19
Apr-20
Apr-17
Oct-16
Jul-17
Oct-17
Jul-18
Oct-18
Jul-19
Oct-19
Jul-20
Oct-20
- 21
Jan-17
Jan-18
Jan-19
Jan-20
Jan-21
Feb
2015 2016 2017 2018 2019
Source: ZTO Express and BTG Pactual Source: Bloomberg and BTG Pactual
g) Another big acquisition in logistics industry
This w eek, supply chain new sw ire The Load Star reported that global logistics player
Kuehne + Nagel acquired freight forw arder Apex International Corporation for an
undisclosed amount, although Bloomberg reported a deal value of US$1.5bn (new s in
Global logistics player Kuehne + Nagel acquired
here). Apex, w hich w as founded in China in 2001 and has expanded across Asia, freight forwarder Apex International Corporation
currently has around 1.6k employees and generates yearly turnover of US$2.3bn. Last for an undisclosed amount
year, it handled approximately 750k tons of air freight and 190kTEU of ocean
shipments. The deal potentially means Kuehne + Nagel overtaking DHL Global
Forw arding as the w orld’s largest air freight forw arder – in 2019, KN handled 1.6mn
tons of air freight compared w ith DHL’s 2.1mn tons. The acquisition is subject to
customary closing conditions, including merger clearance by antitrust authorities.
Our take: The deal adds to the recent mergers seen in the global logistics industry,
reinforcing the consolidation trend for the sector alongside positive volume momentum.
This is aligned w ith local companies’ grow th strategy, such as Sequoia, JSL and Loggi,
as w ell as w ith our view for the industry’s LT competition landscape.
Sector Overview
1- Key trends of the Brazilian e -com m erce m arket
a) Huge grow th avenue
As w e w rote before, Brazilian e-commerce has been grow ing at a fast pace in recent
years, but it is still in the early stages of development, especially w hen compared to
more mature economies. As w e have show n, e-commerce penetration in Brazil is only
7% (vs. 15% in US, 18% in UK and 27% in China). Looking ahead, ABECOMM expects
penetration to reach 16% by 2025e. Also, according to Ebit Forrester, the market is set
to at least triple by 2025, grow ing from R$107bn in 2019 to R$377bn in 2025.
Figure 15: The Evolution of logistics ad supply chain (online retail transaction value Worldwide in US$)
Russia
US$30bn
24% | 5%
Canada UK
US$55bn US$135bn
26% | 10% 14% | 18%
France
‘
USA China Japan
US$65bn
US$600bn ~US$1.5tn US$115bn
15% | 10%
15% | 15% 24% | 20% 5%| 9%
India
US$40bn
36% | 5%
Brazil
US$27bn
13% | 7%
Argentina
US$7bn
21% | 5%
CAGR 2017-2019 | % of total retail value in 2019 (US$)

Source: FGV , IBGE, eBit , Forrester and BTG Pactual Research
b) COVID has speed up the migration from physical to online stores
Besides this, w e flag that COVID has sped up the shift of physical retail volumes to e-
commerce. Such trend w as already happening before COVID, but the pandemic
accelerated it, as it forced local governments to apply quarantine restrictions and
prioritize social isolation, leading to changes in consumer behavior. As show n below,
logistics e-commerce has been performing strongly since COVID-19 (up by 109% y/y),
taking advantage of the deceleration of retail volumes (up by 5% y/y) in the period.
Looking ahead, w e expect e-commerce to continue to gain relevance over retail as we

see a lot of opportunities, especially from sellers w ho are currently much more offline.
Chart 23: Retail volumes y/y growth have decelerated since COVD… Chart 24: … mainly shifting to e-commerce (y/y volume growth)
15% 250%
10%
5% 200%
5%
0%
150%
-5% 109%
-10% 100%
-15%
50%
-20%
-25% 0%
Feb-18
Feb-19
Feb-20
Oct-18
Oct-19
Oct-20
Apr-18
Apr-19
Apr-20
Aug-18
Aug-19
Aug-20
Dec-18
Jun-19
Dec-19
Jun-20
Dec-20
Jun-18
Feb-18
Feb-19
Feb-20
Oct-18
Oct-19
Oct-20
Apr-18
Apr-19
Apr-20
Aug-18
Aug-20
Aug-19
Dec-18
Jun-19
Dec-19
Jun-20
Dec-20
Jun-18
Source: Master Card and BTG Pactual Source: Master Card and BTG Pactual
c) Consolidation trend already underway between a few potential winners
Lastly, w e highlight that there is a clear trend of consolidation underw ay among a few
potential w inners, especially after COVID crisis. Back in 2016, the three largest e-
commerce players accounted for 46% of the total online market. In 2019, this level
already reached 61%, and our Retail team expects that, by 2025, 78% of the market
w ill be in the hands of the w inning players (such as MGLU and B2W). According to
them, given the investments in service levels in recent years (w ith superior logistics
structure and development of payments platforms), as w ell as the increasing traffic and
assortment of the leading players, the consolidation trend should be quicker than
previously expected, w ith B2C operations migrating to become sellers in the bigger
marketplace platforms. But this is not a game of “w inner takes all”.
Chart 25: Market share – Brazilian e-commerce
13% 11%
20% 16%
25%
33%
47% 43%
54% 51% 29% 30%
27%
26%
23%
18%
12% Top 3 (89%)
8%
5% 6% 29% 30%
25% 27%
20% 22%
Top 3 (46%) 17% 18%
17%
21%
Company A
25% 28% 28% 29% 29% 30% 29% 29% 29%

Company A 20%
2016 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2025E
CompanyA
MELI B2W MGLU Others
Source: Companies, eBit, Forrester and BTG Pactual

2- Detailing logistics infrastructure in Brazil
a) Brazilian transportation is still highly dependent on highway
The logistics industry has become a fundamental engine for the entire production
chain, as agriculture and industry morph into a more complex, demanding and
sophisticated market. With Brazilian production grow ing at a fast pace, logistics
companies offer valuable solutions, generating cost efficiency and production
synergies. But local supply-demand infrastructure still falls short in comparison to more
developed countries.
Despite government efforts to raise investments for multimodal transport projects,

Brazil´s transportation has historically prioritized highw ay development. As per CNT
(National Confederation of Transportation), 60% of all cargo flow comes from highw ay
transportation (2013), w hile the remaining supply-demand is met by other solutions Despite government efforts to raise investments
for multimodal transport projects, Brazil´s
(railw ay and cabotage). Traditionally, three main categories compete for highw ay cargo transportation has historically prioritized highway
transportation: (i) companies; (ii) individual drivers; and (iii) cooperatives. According to development
CNT (Brazilian Transport Confederation), companies are 61% of the highw ay cargo
transport fleet, autonomous drivers 38% and cooperatives only 1%.
Chart 26: Transportation matrix (2018)
17%
23%
60%
Toll roads Railroads Hydro, Airplane, Pipeline and Others
Source: CNT and BTG Pactual
b) Investment in logistics in Brazil is very limited
Also, as per ABOL data, Brazil spends only 12% of GDP on logistics (transportation
services, infrastructure investments and storage), w ell below developed countries,
show ing (i) Brazil´s subpar infrastructure development and higher costs, and (ii) a
suitable addressable market for logistics operators. As per the World Bank’s logistics
performance index (2018), Brazil is 56th, behind Mexico, India and South Africa.
Table 3: Logistics Performance Index Rating Chart 27: Logistic expenses as % of GDP – comparison
LPI - Ranking 2010 2012 2014 2016 2018
China 18.00%
Germany 1 4 1 1 1 India 13.00%
Peru 12.50%
Sweden 3 13 6 3 2 Colombia 12.50%
Argentina 12.00%
Belgium 9 7 3 6 3 Mexico 12.00%
Venezuela 11.90%
Austria 19 11 22 7 4 Brazil 11.60%
Chile 11.50%
Japan 7 8 10 12 5 Vietna 10.70%
Thailand 10.70%
United States 14 15 9 10 14 Filipines 10.70%
Malasia 10.70%
India 47 46 54 35 44 Indonesia 10.70%
Australia 10.50%
South Africa 28 23 34 20 33 Espanha 9.70%
Mexico 50 47 50 54 51 Italia 9.70%
França 9.50%
Brazil 41 45 65 55 56 Canada 9.00%
Source: The World Bank and BTG Pactual Source: ABOL and BTG Pactual
c) Highly fragmented market
Brazil´s logistics market is highly fragmented (ABOL estimates +120k companies), w ith
a strong presence of small and family-ow ned players (and thus high ´informality´
amongst the smallest ones), autonomous truckers and players focused on just one or
several stages of the logistics chain in specific sectors. ABOL says 82% of logistics
player have revenues low er than R$400mn/year, show ing that the market is mainly
composed of medium/small players. Also, in Brazil the largest player has only 0.5%
market share, and the top 10% has less than 2% (vs. 34% in US and 32% in China) .
Due to COVID, smaller logistics players are struggling, w hich could acceler ate a long-
aw aited consolidation movement.
Chart 28: Highly fragmented market … (# ‘000 of companies) Chart 29: … mainly composed by medium / small companies
124 < R$1,201mm 3%
R$801mm-R$1,200mm 3%
82% of logistics players
R$601mm-R$800mm 6% have revenues lower
than R$400mn/year
R$401mm-R$600mm 6%
36
27 R$201mm-R$400mm 27%
0 0 1 0 R$101mm-R$200mm 24%
Railway Highway Highway Pipeline Waterway Airway Other

(passengers) (cargo) > R$100mm 30%
Source: ABOL and BTG Pactual Source: ABOL and BTG Pactual
d) Strong reliance on the national postal service and poor service level
As w e already mentioned, e-commerce in Brazil still has a high dependence on the

postal office company (Correios) as, according to ABCOMM, 89% of e-commerc e
players use their service. What is also surprising is that 77% of e-commerc e
businesses evaluate Correios service as “medium” or “really bad”, and 59% of E-commerce in Brazil still has a high dependence
on the postal office company (Correios) as,
complaints are related to delay in delivery. according to ABCOMM, 89% of e-commerce
players use their service.
Figure 16: E-commerce in Brazil with strong dependence on Correios

No
11%
E-commerce Players
that rely on Correios1
Yes
89%
77% of e-commerce businesses

evaluate Correios as “medium” or
“really bad”
Quality of
services 59% of complaints are related to
delay in delivery1
Average Delivery Times
Brazil Average Sequoia

~6 days ~48 hours
Source: MSER, Wall street research, ABCOMM and BTG Pactual
Note: 1For the year of 2019. Accordin g to ABCOMM
We flag that the postal office company is expected to go through a privatization process
by next year, as the government has finalized the bill that paves the w ay for Correios´
(Brazilian post-office company) privatization, expected to happen in 2021. The
privatization model or any specific terms of this process have not been defined yet.
According to recent new sflow, there are several private players interested in the
privatization process. We believe that Correios’ privatization could bring more agility
and quality to Brazilian e-commerce, as it still represents a big part of online shopping
deliveries in the country. Correios’ dow nsizing should also create sizeable
opportunities for large retailers and w ell-prepared 3PL-focused players in the country
keen to expand their netw ork of services tow ards the countryside, such as Sequoia.
Chart 30: Correios’ brief snapshot
161 4.96bn of delivered

packages in 2019, a
102 105 99 decrease of 13.3% y/y
11.1 thousand of service

18 18 agencies in the country,
being 6.1 thousand own
Net Revenues (in R$bn) Net Income (in R$mn) Employees (# '000) and 5 thousand
2018 2019
outsourced
Source: Correios, Valor Economico and BTG Pactual
d) Digitalization to drive the sector
The discussion on the shape of the industry w hen social isolation measures end is
incipient, and visibility is too low to make any clear assumption. But it seems consensus
that digitalization w ill be part of the logistics sector´s LT investment case. Due to
lockdow n, many companies w ere forced to adapt their logistics platforms to online
devices. So, the longer the pandemic lasts, the faster logistics companies w ill need to
adjust to navigate the next cycle, w hich w ill be much more digitalized. This digitalization
process has the follow ing business impacts: (i) favors early adopters (IT investment
w as not a priority in the industry pre-crisis), (ii) change in truck fleet profile, as bulk of
cargo may go to largest players (or platforms) and the % of autonomous drivers may
fall.
Figure 147: 12 focused technologies to accelerate deployment in the e-commerce logistics industry, according to DHL
Source: Deutsche Post DHL Groups and BTG Pactual

3 – Third party logistics (3PL) sector in Brazil
The 3PL sector in Brazil has grow n considerably over the past years and, looking
ahead, ABOL estimates it to reach US$41bn by 2022 (from US$33mn in 2019, up 7%).
In our view , the main drivers for further grow th in the 3PL sector are: (i) a grow ing e-
commerce industry; (ii) higher demand for reverse logistics; (iii) dow nsizing of Correios ABOL estimates that the 3PL sector in Brazil will
reach US$41bn by 2022 (from US$33mn in 2019)
(explained above) and (iv) expansion of logistics outsourcing activities. Regarding the
latter, w e highlight that outsourced logistics offers a low er cost, w ith faster order
fulfillment and response to changes in the consumer needs.
Chart 31: Third party logistics (3PL) market in Brazil (size in USDbn)
1
Consumer Goods Manufacturing Automotive Express Delivery Others
CAGR19-20 : 7% 40.9
38.1
35.6
9.0
33.4
31.5 8.5
8.0
7.6
7.3 7.7
7.4
7.1
6.8 3.9
6.6 3.6
3.3
3.1 7.6
2.9
7.1
6.6
5.8 6.2
11.5 12.7
8.9 9.7 10.6
2018 2019 2020 2021 2022

Source: Technavio, ABOL
Note: 1 Others include telecom, chemicals, healthcare, oil and gas, construction products, and information technology
(IT) hardware
Sequoia Logística 24 February 2021 page 50
Sequoia Log
í stica
Income Statement (R$mn) 12/2015 12/2016 12/2017 12/2018 12/2019 12/2020E 12/2021E 12/2022E
Revenue 0 0 288 362 527 997 1,619 2,152
Operating expenses (ex depn) 0 0 (249) (324) (462) (879) (1,406) (1,872)
EBITDA (BTG Pactual) 0 0 38 39 65 118 213 281
Depreciation 0 0 (19) (22) (40) (59) (69) (83)
Operating income (EBIT, BTG Pactual) 0 0 20 16 25 59 144 197
Other income & associates 0 0 0 0 0 0 0 0
Net Interest 0 0 (17) (17) (37) (42) (36) (25)
Abnormal items (pre-tax) 0 0 0 0 0 0 0 0
Profit before tax 0 0 3 (1) (12) 17 108 172
Tax 0 0 (0) (0) 5 (4) (19) (38)
Profit after tax 0 0 3 (1) (7) 13 89 134
Abnormal items (post-tax) 0 0 0 0 0 0 0 0
Minorities / pref dividends 0 0 0 0 0 0 0 0
Net Income (local GAAP) 0 0 3 (1) (7) 13 89 134
Adjusted Net Income 0 0 3 (1) (7) 13 89 134
Tax rate (%) 0 0 3 0 0 25 17 22
Per Share 12/2015 12/2016 12/2017 12/2018 12/2019 12/2020E 12/2021E 12/2022E
EPS (local GAAP) # # # # # 0.10 0.70 1.06
EPS (BTG Pactual) # # # # # 0.10 0.70 1.06
Net DPS # # 0.00 0.00 0.00 0.00 0.00 0.00
BVPS # # # # # 0.76 1.29 2.08
Cash Flow (R$mn) 12/2015 12/2016 12/2017 12/2018 12/2019 12/2020E 12/2021E 12/2022E
Net Income 0 0 3 (1) (7) 13 89 134
Depreciation 0 0 19 22 40 59 69 83
Net change in working capital 0 0 0 0 0 (64) 17 (23)
Other (operating) 0 0 0 0 0 0 0 0
Net cash from operations 0 0 22 22 33 7 175 195
Cash from investing activities 0 0 0 0 0 (97) (109) (120)
Cash from financing activities 0 0 0 0 0 311 225 (289)
Bal sheet chge in cash & equivalents 0 0 20 30 41 (25) 124 36
Balance Sheet (R$mn) 12/2015 12/2016 12/2017 12/2018 12/2019 12/2020E 12/2021E 12/2022E
Cash and equivale nts 0 0 20 51 92 67 191 227
Other current assets 0 0 57 79 122 307 297 371
Total current assets 0 0 77 129 213 374 488 598
Net tangible fixed assets 0 0 45 45 41 46 65 91
Net intangible fixed assets 0 0 113 109 307 212 221 224
Investments / other assets 0 0 34 33 52 307 422 464
Total assets 0 0 269 317 613 939 1,196 1,376
Trade payables & other ST liabilities 0 0 80 123 201 334 340 391
Short term debt 0 0 0 0 0 0 0 0
Total current liabilities 0 0 80 123 201 334 340 391
Long term debt 0 0 98 123 348 475 659 687
Other long term liabilities 0 0 35 37 67 117 117 117
Total liabilities 0 0 213 282 616 926 1,116 1,195
Equity & minority interests 0 0 72 90 86 97 163 264
Total liabilities & equities 0 0 285 372 702 1,022 1,279 1,459
Financial ratios 12/2018 12/2019 12/2020E 12/2021E 12/2022E

Company Profile: EBITDA margin 10.7% 12.3% 11.8% 13.1% 13.0%
Operating margin 4.5% 4.7% 6.0% 8.9% 9.2%
Sequoia is a leading tech-enabled logistics provider, focused on
ex press delivery and ecommerce solutions. We believe Sequoia Net margin -0.2% -1.3% 1.3% 5.5% 6.2%
has attractive fundamentals, key competitive advantages and a RoE -0.8% -8.0% 14.2% 68.4% 62.9%
strong market positioning, based on the following pillars: (i) RoIC 15.7% 17.9% 32.4% 62.6% 58.2%
ex posure to ecommerce industry, a high-growth and EBITDA / net interest 2.3x 1.8x 2.8x 5.9x 11.2x
underpenetrated market in Brazil; (ii) unmatched asset-light and Net debt / EBITDA 1.9x 3.9x 3.5x 2.2x 1.6x
flex ible business model, driving superior returns in its industry; Total debt / EBITDA 3.2x 5.3x 4.0x 3.1x 2.4x
(iii) proprietary and scalable technology platform, a key
Net debt / (net debt + equity) 44.5% 74.8% 80.8% 74.1% 63.5%
competitive advantage vs local peers; (iv) strong M&A track
record, coupled with bold pipeline opportunities; and (v) Source: Company reports and BTG Pactual estimates. Valuations: based on the last share price of that year(E)
unmatched growth profile trading at attractive valuation levels. based on share price as of 24 February 2021
JSL 24 February 2021 page 51
JSL
Income Statement (R$mn) 12/2015 12/2016 12/2017 12/2018 12/2019 12/2020E 12/2021E 12/2022E
Revenue 0 0 0 0 3,102 2,709 3,755 4,018
Operating expenses (ex depn) 0 0 0 0 (2,588) (2,283) (3,110) (3,298)
EBITDA (BTG Pactual) 0 0 0 0 514 426 645 719
Depreciation 0 0 0 0 (230) (196) (239) (253)
Operating income (EBIT, BTG Pactual) 0 0 0 0 284 231 407 467
Other income & associates 0 0 0 0 0 0 0 0
Net Interest 0 0 0 0 (299) (204) (65) (89)
Abnormal items (pre-tax) 0 0 0 0 0 0 0 0
Profit before tax 0 0 0 0 (15) 26 342 377
Tax 0 0 0 0 21 9 (91) (100)
Profit after tax 0 0 0 0 6 36 251 277
Abnormal items (post-tax) 0 0 0 0 0 0 0 0
Minorities / pref dividends 0 0 0 0 0 (2) (11) (11)
Net Income (local GAAP) 0 0 0 0 6 33 240 266
Adjusted Net Income 0 0 0 0 6 33 240 266
Tax rate (%) 0 0 0 0 0 0 27 27
Per Share 12/2015 12/2016 12/2017 12/2018 12/2019 12/2020E 12/2021E 12/2022E
EPS (local GAAP) # # # # 0.02 0.12 0.84 0.93
EPS (BTG Pactual) # # # # 0.02 0.12 0.84 0.93
Net DPS # # # # 0.00 0.00 0.00 0.00
BVPS # # # # (2.14) 4.42 5.02 5.14
Cash Flow (R$mn) 12/2015 12/2016 12/2017 12/2018 12/2019 12/2020E 12/2021E 12/2022E
Net Income 0 0 0 0 6 33 240 266
Depreciation 0 0 0 0 230 196 239 253
Net change in working capital 0 0 0 0 0 (2) (28) (59)
Other (operating) 0 0 0 0 0 0 0 0
Net cash from operations 0 0 0 0 236 227 451 460
Cash from investing activities 0 0 0 0 0 (257) (434) (382)
Cash from financing activities 0 0 0 0 0 (50) (79) (244)
Bal sheet chge in cash & equivalents 0 0 0 0 336 1,687 (51) (156)
Balance Sheet (R$mn) 12/2015 12/2016 12/2017 12/2018 12/2019 12/2020E 12/2021E 12/2022E
Cash and equivale nts 0 0 0 0 336 2,022 1,971 1,815
Other current assets 0 0 0 0 1,048 1,319 1,382 1,443
Total current assets 0 0 0 0 1,384 3,341 3,354 3,259
Net tangible fixed assets 0 0 0 0 1,481 1,646 1,708 1,796
Net intangible fixed assets 0 0 0 0 261 261 261 261
Investments / other assets 0 0 0 0 203 474 608 649
Total assets 0 0 0 0 3,328 5,723 5,930 5,965
Trade payables & other ST liabilities 0 0 0 0 81 126 161 163
Short term debt 0 0 0 0 0 0 0 0
Total current liabilities 0 0 0 0 81 126 161 163
Long term debt 0 0 0 0 1,639 3,245 3,285 3,285
Other long term liabilities 0 0 0 0 2,218 1,090 1,050 1,050
Total liabilities 0 0 0 0 3,938 4,461 4,496 4,498
Equity & minority interests 0 0 0 0 (610) 1,262 1,434 1,467
Total liabilities & equities 0 0 0 0 3,328 5,723 5,930 5,965
Financial ratios 12/2018 12/2019 12/2020E 12/2021E 12/2022E

Company Profile: EBITDA margin # 16.6% 15.7% 17.2% 17.9%
Operating margin # 9.2% 8.5% 10.8% 11.6%
JSL Logística has been Brazil´s leader in highway logistics for 19
years (more than twice the size of the second player), with a Net margin # 0.2% 1.2% 6.4% 6.6%
portfolio of diversified services and clients, which guarantees RoE # -1.9% 10.2% 17.8% 18.3%
resilience throughout economic cycles. The company is focused RoIC # 82.0% 15.4% 17.2% 18.6%
on outbound logistics (i.e. storing, transporting and distributing EBITDA / net interest # 1.7x 2.1x 9.9x 8.1x
goods to customers) and has the largest and most integrated Net debt / EBITDA # 2.5x 2.9x 2.0x 2.0x
portfolio of services in the sector. We believe the company has Total debt / EBITDA - 3.2x 7.6x 5.1x 4.6x
solid fundamentals, key competitive advantages and a strong
Net debt / (net debt + equity) - 188.1% 49.2% 47.8% 50.0%
market positioning, reflecting: (i) clear market leadership in Brazil
thanks to a nationwide scale of services; (ii) unparalleled level of Source: Company reports and BTG Pactual estimates. Valuations: based on the last share price of that year(E)
customer and sector diversification; (iii) highly synergic business based on share price as of 24 February 2021
model focused on “ asset-right” solutions; (iv) huge M&A
opportunities due to a highly fragmented market; and (v)
attractive valuation, all offering major upside on the back of a
gradual stock re-rating process.
Required Disclosures
This report has been prepared by Banco BTG Pactual S.A.

The figures contained in performance charts refer to the past; past performance is not a reliable indicator of future results.
BTG Pactual Definition Coverage *1 IB Services *2

Rating
Buy Expected total return 10% above the company’s sector 60% 52%
average.
Neutral Expected total return between +10% and -10% the 39% 32%
company’s sector average.
Sell Expected total return 10% below the company’s sector 1% 0%
average.
1: Percentage of companies under coverage globally within the 12-month rating category.
2: Percentage of companies within the 12-month rating category for which investment banking (IB) services were provided within the past 12 months.
Absolute return requirements
Besides the abovementioned relative return requirements, the listed absolute return requirements must be followed:
a) a Buy rated stock must have an expected total return above 15%
b) a Neutral rated stock can not have an expected total return below -5%
c) a stock with expected total return above 50% must be rated Buy
Analyst Certification
Each research analyst primarily responsible for the content of this investment research report, in whole or in part, certifies that:
(i) all of the views expressed accurately reflect his or her personal views about those securities or issuers, and such recommendations were elaborated independently, including in relation to Banco
BTG Pactual S.A. and/or its affiliates, as the case may be;
(ii) no part of his or her compensation was, is, or will be, directly or indirectly, related to any specific recommendations or views contained herein or linked to the price of any of the securities discussed
herein.
Research analysts contributing to this report who are employed by a non-US Broker dealer are not registered/qualified as research analysts with FINRA and therefore are not subject to the restrictions
contained in the FINRA rules on communications with a subject company, public appearances, and trading securities held by a r esearch analyst account.
Part of the analyst compensation comes from the profits of Banco BTG Pactual S.A. as a whole and/or its affiliates and, consequently, revenues ar isen from transactions held by Banco BTG Pactual
S.A. and/or its affiliates.
Where applicable, the analyst responsible for this report and certified pursuant to Brazilian regulations will be identified in bold on the first page of this report and will be the first name on the signature
list.
Statement of Risk
Sequoia Logística e Transportes S.A. [BRSEQL] (Primary) - Sequoia Logística e Transportes S.A. is exposed to macroeconomic and regulatory risk in Brazil. Its business depends on regulation for
growth and the company usually leverages its projects significantly to capture maximum shareholder value.
JSL S.A. [BRJSLG] - JSL SA is exposed to macroeconomic and regulatory risk in Brazil. Its business depends on regulation for growth and the company usually leverages its projects significantly to
capture maximum shareholder value.
Valuation Methodology
Sequoia Logística e Transportes S.A. [BRSEQL] (Primary) - Our 12-month forward target price is DCF-driven.
JSL S.A. [BRJSLG] - Our 12-month forward target price is DCF-driven.
Company Disclosures
Company Name Reuters 12-mo rating Price Price date

JSL 1, 2, 4, 6, 9, 18, 20 JSLG11.SA Buy R$9.05 23-2-2021
Sequoia Logística 1, 2, 4, 6, 9, 18, 20, 22 SEQL3.SA Buy R$29.54 23-2-2021
1. Within the past 12 months, Banco BTG Pactual S.A., its affiliates or subsidiaries has received compensation for investment banking services from this company/entity.
2. Banco BTG Pactual S.A, its affiliates or subsidiaries expect to receive or intend to seek compensation for investment banking services and/or products and services other than investment services
from this company/entity within the next three months.
4. This company/entity is, or within the past 12 months has been, a client of Banco BTG Pactual S.A., and investment banking services are being, or have been, provided.
6. Banco BTG Pactual S.A. and/or its affiliates receive compensation for any services rendered or presents any commercial relationships with this company, entity or person, entities or funds whi ch
represents the same interest of this company/entity.
9. Banco BTG Pactual S.A. has acted as manager/co-manager in the underwriting or placement of securities of this company/entity or one of its affiliates or subsidiaries within the past 12 months.
18. As of the end of the month immediately preceding the date of publication of this report, neither Banco BTG Pactual S.A. nor its affiliates or subsidiaries beneficially own 1% or more of any class of
common equity securities
20. Neither Banco BTG Pactual S.A. nor its affiliates or subsidiaries engaged in market making activities in the subject company's securities at the time this research report was published.
22. Banco BTG Pactual S.A. or its affiliates or subsidiaries do not expect to receive or intends to seek compensation for investment banking services from the companies within the next 3 months.
JSL
Stock Price (R$) Price Target (R$)
40.0
30.0
20.0
10.0
0.0
24-Feb-18
24-Feb-19
24-Feb-20
24-Feb-21
24-May-19
24-May-18
24-May-20
24-Aug-20
24-Aug-18
24-Aug-19
24-Nov-18
24-Nov-19
24-Nov-20
Buy
Neutral
Sell
No Rating
Source: BTG Pactual and Economatica. Prices as of 23 February 2021
Sequoia Logística
Stock Price (R$) Price Target (R$)
40.0
30.0
20.0
10.0
0.0
24-Feb-18
24-Feb-19
24-Feb-20
24-Feb-21
24-May-19
24-May-18
24-May-20
24-Aug-20
24-Aug-18
24-Aug-19
24-Nov-18
24-Nov-19
24-Nov-20
Buy
Neutral
Sell
No Rating
Source: BTG Pactual and Economatica. Prices as of 23 February 2021

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Thematic Research - Ecommerce Logistics

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Thematic Research - Ecommerce Logistics

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Logistics | Thematic Research

The Ecommerce Logistics

Our approach to verticalization – m ore of an opportunity than a threat

An E-com m erce Logistics 101 & Sector Overview

ANALYST CERTIFICATION AND REQUIRED DISCLOSURES BEGIN ON PAGE 52

E- comm erce Logistics 101 9

The state of local players in ecommerce logistics 21

Industry’s footsteps #1 – Initiatives by other local players 24

Industry’s footsteps #2 – What’s happening abroad? 30

Breakdown of logistics industry

A sim plification to facilitate industry analysis

Figure 1: Simplified logistics industry breakdown

OEMs DCs Households

Inbound Logistics Outbound Logistics Last-Mile Logistics

Source: BTG Pactual

Figure 2: Inbound versus Outbound logistics dynamics

Source: AB European Real Estate

Figure 3: Representation of a last-mile delivery logistics

Source: ElgarOnline and BTG Pactual

How are returns distributed throughout the industry chain?

1 The greater the volume, the 2 Tech-enabled business

Source: BTG Pactual

Marketplace verticalization: m ore of an opportunity than a threat

Figure 5: Marketplace verticalization cycle

Join the marketplace Logistics services

Source: BTG Pactual

Access to capital and IT are key to navigate a disruptive industry

To w rap up, the logistics industry is going through a massive transformation.

Figure 6: Major marketplaces current logistics infrastructure

Hubs/Cross docking (#) 3 200 120 n.a.

Available stores as hubs (#) 1,113 1,700 1,322 n.a

Total storage area (sqm) 539,000 600,000 1,000,000 375,000

* VVAR has 90% of its products delivered by 3rd

E-commerce Logistics 101

The introduction of e-commerce in Brazil strengthened w ith the new millenniu m,

of its services (transformed into broader concepts of Customer Experience – CX), in

The Evolution of Logistics: According to information collected by Brazilian

Figure 4: The Evolution of Logistics and its main phases

Figure 5: The Evolution of logistics ad supply chain

1990s Retail import center

Mapping logistics players

The market has become blurred in recent years as Amazon, a multinational e-

Figure 6: Logistics e-commerce arena

Logistics service providers

Major online retailers (largest

Other major online or multi-

Source: www.ti‑insight.com, World Economic Forum and BTG Pactual

increasingly important. Reducing handling at different trans -shipment locations by

pre-printed return labels and re-sealable packaging included in parcels; (b) an

Trends of e-com m erce logistics and supply-chain. According to a recent paper

Mobile Applications: Customer shopping habits have changed, driven in part by

Personalization for Custom er Engagem ent: Personalizing customer

Source: Deutsche Post DHL Group and BTG Pactual

Table 1: Differences between regular and e-commerce logistics clients

Figure 8: E-commerce activities

Small Boxes/ Re-

The client’s side. By definition, e-commerce logistics players usually provide

Business adjustments on migrating from regular to e-commerce logistics. Among the

The different delivery m echanism s. To optimize logistics costs for delivery, e-

Figure 9: Delivery Coordination Matrix

Fixed Cost Marginal or Variable Cost

Outsource to multiple companies Uber-like model

✓ The cost varies with the delivery location