March 18, 2014

CETIP
Initiating Coverage with
Overweight

Data Bridge to Earnings

Eduardo Nishio
eduardo.nishio@brasilplural.com
+55 11 3206-8240

Felipe Salomão
felipe.salomao@brasilplural.com
+55 11 3206-8241

Vito Ferreira
vito.ferreira@brasilplural.com
+55 11 3206-8251

Brasil Plural CCTVM does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the company may have a
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analyst certification and other important disclosures, refer to the Disclosure Section, located at the end of this report.
Content

INVESTMENT THESIS AND BUSINESS MODEL Ratios: Attractive Risk/Return Profile 14

Cetip: Data Bridge to Earnings 3 Target Price Sensitivity to Competition Shows Small
15
Downside
Cetip Fact Sheet: Diversified Revenues 4
Valuation: Good Margins and EPS Growth at a
16
Financial Unit Fact Sheet: How It Works 5 Discount

The Overhang Is Now Gone 6 Cetip Trades at a Good Discount to Peers 17

Despite Concerns, Cetip Has Delivered EPS Growth 7

Competitive Foothold: 80% of Revenues Seem THEMES FOR DISCUSSION

8
Impenetrable
Recurrent Revenues Reduces Vulnerability to Business
18
Competitive Landscape: Concerns Might Be Cycles
Overpriced 9
Strong Cash Flow Generation and Economies of Scale 19
Why We Like Cetip: Strength and Opportunities 10
Financial Deleveraging Helps EPS Growth and
What Are the Risks? 11 Dividends 20

Global Trends and Implications 21

VALUATION AND FORECAST Drivers 22

DCF Fair Value: 38% Upside 12

Financials: EPS Growth of 16% 13

Cetip | Financial Services | Brasil Plural Equity Research | 2

Cetip: Data Bridge to Earnings CTIP3 | Initiating Coverage
Stock Rating: OVER WEIGHT
Our enthusiasm for well-run, high-yield, asset-light businesses Our stress tests of major segments where competition has been
is a recurring theme in our investment thesis for the financial a threat shows that even if Cetip collapses in these businesses, YE 2014 Target Price: R$34.00/share
sector. High 70% EBITDA margins, low capital intensity, diversity for which we see no evidence, there would still be a 26% upside
of products, high entry barriers for competition among core on the stock per our DCF sensitivity – a fair-value floor of Price (March 14, 2014): R$24.54/share
products, defensive attributes and a 38% discount to DCF fair R$31/share. Upside/Downside: 38.4%
value all support our Overweight rating as we initiate our
• Cetip is set to deliver average EPS growth of 16% for the next
coverage of Cetip. Market Cap (R$ billion): 6.39
three years. Our assumptions are driven by a combination of
Misplaced concerns about competitive threats to Cetip‘s 14% top-line growth, successful deleveraging and gains in Avg. Daily Value (R$ million): 47.2
revenue base offer an investment opportunity. The economies of scale. Despite increasing competition, Cetip
conventional market fear is that Cetip will be attacked and that delivered an EPS CAGR of more than 20% per year in the last 52-Week Range: R$21.0 – R$25.8
its market share of 100% in many businesses can only decline. couple of years.
We argue that investors need to consider the regulatory forces
that created Cetip, and the proprietary data and systems
• Digitalization of auto loan contracts (Sircof) is a competitive Price Performance
business, but it is only 12% of the company’s revenues. With 105 CTIP3 IBOV
responsible for the recurrence of approximately 50% of its
a more flexible new product (Sircof Light), Cetip is gaining
revenues that sustain its future earnings. 95
market share again.
A major barrier of entry is that the data Cetip has accumulated is 85
• BVMF’s new product has a limited threat. We estimate a total
proprietary in most businesses and difficult to replicate for a
impact of only 1.5% of revenues if two out of the four largest 75
reasonable ROI. We believe products dependent on custody
banks decide to move 50% of their CDB and LCI businesses to
and databases are extremely resistant to new entrants, as many 65
BVMF.

Jan-13

Mar-13

May-13

Jan-14

Mar-14
Feb-13

Sep-13

Feb-14
Jul-13

Dec-13
Apr-13

Jun-13

Aug-13

functions – such as trading or data consultation – are very
difficult to execute on multiple systems and it can take years for
a new entrant to match Cetip’s capability and turn a good profit.
Cetip’s ability to satisfy core clients and meeting Central Bank
requirements combined with its scale, knowledge and
relationships with banks discourages new entrants into roughly
80% of its revenue base, where it dominates with 95%-100%
market share, despite the constant presence of competitors.
Cetip was created at the request of the Central Bank and out of
need by the commercial banks to comply. We cannot find
economic merit in reinventing the wheel when such capital and
management attention can be better put to use in banks core
businesses. So as long as Cetip’s pricing and services continue to
represent a compelling value to the banks, we doubt they will
fund another similar company. Cetip’s board (its key clients, the
banks) surely must keep them aware. We argue that the total
cost of Cetip’s services for the banks is little compared with its
benefits. We estimate that, on average, Cetip costs amounts to
only c0.6% of banks profits.
• If power rationing were to happen, this is one of the
defensive names that would outperform. Credit will continue
to grow at high single digits if GDP falls to zero and 50% of
Cetip’s revenues come from recurring sources.
• We see space for the company to increase its dividend payout
and buyback program, given its high cash generation. Today,
Cetip’s payout ratio runs close to 50% of earnings, but we
believe the company might increase this to 70-80%, implying
an attractive dividend yield of 4.8%.
• Recovery of private banks. We expect a gradual recovery of
credit from private banks, its primary customers, to increase
the demand for services.
• Cetip shares today trade at an attractive 38% discount to DCF
fair value. The DCF fair value of R$34 implies a 16.2x forward
P/E multiple, return of 38%, plus a dividend yield of 4.8%.
Oct-13
Nov-13
Company Summary
Cetip integrates and controls financial information
for banks, insurers and end customers. The
company offers a broad range of products, broken
into two main segments: financials and securities.
The latter offers registration, custody, settlement
and trading services through a vertically integrated
platform for fixed income and OTC derivatives, and
the company enjoys a majority of market share.
The financial unit has 100% of the auto lien market,
which is essential for granting auto loans, and
considerable share of digital auto contracts.

Cetip | Financial Services | Brasil Plural Equity Research | 3

Source: Bloomberg, Company reports, and Brasil Plural Research
Cetip Fact Sheet: Diversified Revenues
Cetip Gross Revenue Breakdown

Securities Unit Financing Unit Gross Revenue Total

R$ 661 mn R$ 365 mn R$ 1.03 bn
64% of total gross revs 36% of total gross revs for last 12 months
4%
21% 15% 11% 10% 3.3% 3.7% 18% 13%
0,3% Cetip integrates information
that is essential for the

Market data / Solutions Development

SNG (SNG Lien Vehicles)

Sircof (GRV Contracts)

Custody

Other Securities
Transactions
Registration
Monthly Utilization

Other Financing
Electronic Banking Transfer (TED)
financial community,
improving business security
and streaming processes for
1.8% its clients.
8.5% 4.6% 3.2% 2.1% 1.2% 6.6% 4.0%
It has a fee-based business
Other Assets

Fixed Income
Debentures

Comitentes
Derivatives

Fund Quotas

OTC Derivatives
Financial Bills

model, with a diversified set

of services. A portion of the
business is based on the
balance of assets under
2.8% 0.8% custody, rather than charges
1.7% 1.
1.3%
on the volume flow of these
CDBs1
DIs2

Other Fixed Income

Real State

assets. This provides Cetip

with a resilient quality of
revenues.
Consolidated Drivers:
Fixed income market growth;
Custody services (interest, Monthly fee from clients for Registration of fixed income Lien registration of vehicle as Digitalization of auto loan auto lending; need to use
amortization, redemptions) the utilization of the system and OTC derivatives part of a national database contracts OTC derivatives.
after registration Driver: Number of clients instruments Driver: Number of auto loans Driver: Number of States
Driver: Balance size of fixed Fee: R$ per month and usage Driver: Growth of credit, fixed Fee: One-time charge per lien. adhering to Cetip’s platform Main Clients:
income and other assets under income and OTC derivative The size of the loan is irrelevant. Fee: One time charge per
custody instruments contract
Banks, brokers, asset
Fee: Monthly fee as a % of Fee: One time charge as a % of managers.
volume under custody R$ registered

Notes: 1. Bank Certificate Deposits; 2. Interbank Deposits. Cetip | Financial Services | Brasil Plural Equity Research | 4
Source: Company reports, Brasil Plural Research
Financial Unit Fact Sheet: How It Works
SNG SIRCOF
National vehicle registration database cross checks fraud for credit granting and Digitalization of auto contracts helps
insurance banks to gain scale and speed

2. Pricing:
1. Dealer checks if 3. Sircof: R$ 37/ contract
Client interested car can be Bank checks auto
in financing a car. financed. in the Cetip Sircof Light: R$ 23/ contract
Car dealer database.
Bank Paid by: Customer
4.
If okay, bank
pre-approves
auto loan.
Costumer PE
Auto SE
Cetip
Pricing: 5. MG
Client registers 6. SP
SNG: R$ 28/ unit the car at the DETRAN
DVMs check PR RJ

DMV. auto in Cetip SC

RS
Paid by: Dept. of motor database.
vehicles (DMV)
Customer Sircof SircofSircof Light Sircof Light
7.
SNG lien granted.
100% Cetip Market Share 63% Cetip Market Share

Customer proceeds from SNG and Sircof services are shared among Cetip, Febraban (insurance association), and Detrans

Source: Company and Brasil Plural Research Cetip | Financial Services | Brasil Plural Equity Research | 5
The Overhang Is Now Gone
Shareholder composition has changed dramatically, which we believe has impacted share prices and the execution of Cetip strategy

2009-end: After the IPO 1Q11: After acquisition of GRV Current: After ICE acquired 12% stake
Advent fund, 10% ICE Overseas,
Free float, 28.2% Advent fund, Free float; 60% Free float, 84% 12.1%
18.1% Itau Unibanco, 6% Board and
management,
Bradesco, 4%
Santander, 1% ICE acquired 3.9%
Advent reduced
Itau Unibanco, 12.44% in 2011;
stake; GRV Board, 1%
10.5% banks have
acquisition was
Federated divested their
partially
Kauffman fund, stakes;
financed with
Bradesco, 4% 10% Federated left in
equity swap
mid 2013
Santander, 3%
Board, 1% ex GRV
Other financial shareholders, 8%
Federated
institutions Kauffman Fund,
(potential new Large banks are no longer shareholders
9.2%
free float), 26%

Cetip Stock Prices

40
Before the IPO Sep-11: ICE acquires 12.44% of Mid 2013: Federated Fund Jan-14: As part of a
Cetip from Advent begins divestments restructuring, Cetip announces
35 1984: Founded by a consortium of Brazilian banks the departure of three
supported by the Central Bank, to promote a executive officers
standardized and safe environment for the
30 trading of private fixed income instruments
2008: Demutualization
25 Beginning 2009: Advent private equity acquires
32% stake
20
Oct-09: IPO
15 Dec-10: Cetip acquires GRV Mar-13: CEO (Luiz Fleury) Jul-13: New CEO announced
resigned (Gilson Finkelsztain)
10
Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14

Source: Company Reports, Economatica, Brasil Plural Research Cetip | Financial Services | Brasil Plural Equity Research | 6
Despite Concerns, Cetip Has Delivered EPS Growth
Cetip PE evolution
30
28 Sep-11: ICE acquires 12.44% of Jan-14: As part of a
Cetip from Advent restructuring, Cetip announces
26 Mid 2013: Federated Fund the departure of three
24 begin divestment executive officers

22
Jul-13: New CEO announced
20 (Gilson Finkelsztain)
18
Dec-10: Cetip acquires GRV
16
14
Mar-13: CEO (Luiz Fleury)
12 resigned
10
Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14

Earnings and EPS Growth The Stock Has De-Rated Over Time; Concerns Overpriced
• Trading at 13.2 PE14, we believe that markets are overpricing concerns.
44% • Despite decent earnings growth for the past few years, the stock de-rated, mainly because:
– Increasing competition from BVMF
– Reduction of Sircof market share and weak auto lending
24% – Large change in shareholders composition
18% – Slowdown of credit growth for the entire financial system to 15% YoY from 30% in
17% mid-’00s and 20% in beginning-’10
412.9 483.8 – Changes in management taking more time than expected
272.4 327.3
169.6 • Before acquiring GRV, Cetip used to trade at 25-30x forward PE
2010 2011 2012 2013 2014E
• Cetip acquired GRV for approximately 14.8x forward PE for R$2bn in a equity and cash
leveraged buyout in Dec-2010.
Adjusted Earnings EPS Growth

Source: Company Reports, Economatica, Brasil Plural Research Cetip | Financial Services | Brasil Plural Equity Research | 7
 Competitive Foothold: 80% of Revenues Seem Impenetrable
FIXED INCOME Competition always existed,
BVMF has re-launched its FI platform. New products include: CDB (time deposit), LCI (mortgage-backed securities) and COE (structured notes) and we do not overlook to
Bank Funding Interbank Deposits Corporate Bonds and Quotas of Funds Other the potential damages it can
% of revs 2Q12

Instruments Securitization bring to Cetip, but we believe

Instruments 21.6% markets are pricing in
excessively this threat.
11.9% 11.1%
3.6% 6.6% Fixed Income Segment:
• We believe that products
with custody (corporate
Cetip ‘12 market share

bonds, fund quotas and

100% 100% 97% 100% 100% letras financeiras) are
difficult for newcomers to
BVMF new platform might BVMF does not offer DI Cetip is the dominant player, Cetip is the default place for steal Cetip’s legacy
intensify competition on CDB registration yet. We don’t with legacy custody of fund quotas custody, making presence.
and LCI. But they only think DI is a priority for BVMF, debentures. As such, we see any attempt for BVMF a
represent 2.5% of gross but with risks in the future. limited vulnerability coming difficult task. • BVMF new platform with
revs today. from BVMF. CDB and LCI represents
only 2.5% of the
OTC DERIVATIVES
FUND TRANSFER AUTO LOANS registration of revenues.
This segment is where BVMF has traditionally been more competitive.
OTC Derivatives Segment:
% of revs 2Q12

Swaps Forwards Options TEDs Liens Contracts

• Competition always
23.6% existed, but BVMF was not
12.5% able to grab majority
3.0% 3.2% market share, and we do
1.9% 1.1% not see that situation
changing in the near term.
Cetip ’12 market share

Auto Loans Segment:

71% 100% 63% 94% 100% 67%
• With a more flexible new
Sircof Light product, Cetip
BVMF has the remaining BVMF has the remaining Cetip has been the With a 25-year agreement Market share dropped to is gaining market share.
29% market share. 37% market share. provider for electronic and a legacy database, we 58% in Aug/13. With Sircof We conservatively forecast
fund transfers for many see limited space for Light, its share recovered
years. The Central Bank has competitors. to 62%. Main competition flat market share in our
the remaining 6% share. is FDL. model.

Source: Cetip, Brasil Plural Research. Last competitive figures available as of 2Q12. Cetip | Financial Services | Brasil Plural Equity Research | 8
Competitive Landscape: Concerns Might Be Overpriced
SECURITIES UNIT: Real Competition Limited to Small Portion of Revs
Main competitor: BM&F Bovespa (BVMF)
While BVMF’s core businesses largely remain exchanges of equities and
standardized derivatives, it has re-launched its fixed income and OTC derivatives
platform recently. With 2.7x the size of Cetip's earnings for 9M13, concerns are
that BVMF would intensify initiatives in fixed income and OTC derivatives by
overwhelmingly investing and slashing prices. We think that pricing will be more
rational and market share will depend on how relationship with main clients
(banks) are handle. Competition in these segments always existed, and Cetip was
able to build a good footprint.
We believe competition with BVMF might intensify on products that do not depend
on custody or legacy databases, such as time deposit (CDB), mortgage-backed
securities (LCI), and interbank deposits (CDI). However, we believe the additional
impact should be small. BVMF does not offer interbank deposit services yet, and
registration revenues of CDB and LCI correspond to only 2.5% of total gross
revenues – perhaps a bit more if we include indirect impacts on transaction and
monthly utilization revenues – which is still small, particularly if we consider that
Cetip loses only a portion of its market share. We estimate a total impact of only
1.5% of revenues if two out of the four largest banks decide to move 50% of their
CDB and LCI businesses to BVMF.
For products with assets under custody (e.g. debentures, fund quotas, SNG), the
FINANCING UNIT: Well Entrenched, Sircof Business to Recover
In the SNG segment, Cetip has 100% market share, with a 25-year agreement with
FENASEG/Detrans (DMVs) that expires in 2020. A legacy database encompassing
existing vehicles nationwide is essential to check fraud for loan granting and other
financial services. This guarantees a high barrier of entry, as new competitors won’t
be able to check existing data.
With Sircof (electronic auto contracts), Cetip has nearly 62% market share today. Its
main competitor here is FDL, which is present in four States (Alagoas, Mato Grosso,
Piauí, Tocantins). Digitalization of auto contracts is a regulatory requirement that all
State Detrans need to implement. With the Sircof Light solution, Cetip recovered a
portion of its market share, but it might cannibalize a more profitable Sircof
product. With Sircof Light, we think Cetip can aim to gain few more states, with
potential market share of c80%.
SNG and Sircof generated several by-products that are starting to ramp up, such as:
data intelligence tools; collateral electronic registration of vehicles; and
confirmation and monitoring of vehicle guarantees for credit assignment.
New Sircof Light Helped Recover Market Share
75% 550
Aug/13:
Sircof Light 500
70%

contract additions ('000)

legacy data information serves as natural barriers for new entrants, as secondary Introduction

market share %
trading works better in the same environment where custody is placed. Also, 450
legacy client penetration on fixed income and OTC derivatives sets Cetip as a 65% 400
default platform for these items.
60% 350
Most recently, Cetip’s new management has been focusing on deepening
customer relationship, especially with bank clients. We believe this is key to 300
avoiding a gain of market share by BVMF. 55%
250
contract additions market share
Although the company denies this, Cetip could eventually enter the equity
50% 200
exchange business or exchange derivatives as a last resort to compete with BVMF.
May-10 Dec-10 Jul-11 Feb-12 Sep-12 Apr-13 Nov-13
Outside Brazil, Cetip’s peers are Euroclear, Clearstream and DTCC. Cetip is tied to Source: Brasil Plural
ICE, its largest shareholder, and has also developed commercial agreements with
Clearstream.
Source: Company reports, Brasil Plural Research Cetip | Financial Services | Brasil Plural Equity Research | 9
Why We Like Cetip: Strength and Opportunities
High Barriers of Entry: For certain products where
custody and a central database are key – such as
debentures, auto liens and financial bills (letras
financeiras) – we see that the dominant network of
clients and systems creates a naturally high barrier of
entry for new players.
Dominant Fixed Income and OTC Derivatives
Platform: Cetip enjoys a dominant market share with
a platform considered the default choice in Brazil for
registration and custody of fixed-income securities
and OTC derivatives.
Diversification and Recurrence of Revenues: c50%
of Cetip’s total gross revenues are fairly resilient –
custody, monthly utilization, fixed income trading
and money transfer fees. Different from traditional
exchanges, in some segments Cetip earns revenues
based on the balance of assets under custody,
making it less dependent on market conditions (less
revenue volatility than equity exchanges). We also
like the upside potential to fully capture revenues
when the business cycle is favorable as the high
barriers of entry create protection against client
churn. Cetip has diversified products, with none of its
main businesses representing more than 20% of
revenues, protecting cash generation from volatility
in individual segments. Diversification of products
and recurrence of revenues provides the company
with good earnings visibility.
Robust Cash Flow Generation and Low Capital
Needs: The business model enjoys strong cash
generation, with a powerful combination of low
CAPEX (3-5% of revs), net margins over 50% and
EBITDA margins close to 70%.
Source: Company Reports, Brasil Plural Research
Economies of Scale: While the company resides in
the financial services industry, it heavily applies
technology, making costs grow at a slower pace than
revenues in the long term.
Vertically Integrated: On fixed income (FI), Cetip
maintains a full-service platform that handles
registration, custody, settlement and trading
integration -- providing a one-stop shop for FI and
OTC derivatives.
Upside on Dividends: We see space for Cetip to
increase its payout ratio to 70-80% from today's
50%, and also reinforce its buyback program.
Reduced Pressure on Pricing: We also believe the
pricing environment in key products to be fairly
protected, as: (i) large scale allows competitive
pricing; (ii) legacy lower prices from the era when
Cetip was a non-profit organization; and (iii) high
barriers of entry.
Increasing Demand for Corporate Bonds: We believe
that corporate bond issuance will remain strong, as
evidenced over the past few years as Brazilian
corporate moves away from traditional loans to
debentures. Corporate bonds are registered and
generally held in custody by CETIP. Local mutual
funds have only 3.8% of AuM invested in debentures
– a number that has been flattish for the past five
years despite the increasing amount of debenture
issuance. In short, Cetip offers leverage to the
growing non-government fixed income activity in
Brazil.
Asset Light: While Cetip serves as a clearinghouse, it
does not bear counterparty risk in fixed income nor
OTC derivative instruments, and as a consequence, it
incurs less risk and lower capital investment. Typical
vertically integrated exchanges need to keep a fair
amount of cash to back their clearing services.
OTC Derivatives Secular Trend: In Brazil, roughly
20% of derivatives volume is traded over-the-
counter vs. 80% in exchanges. In developed
countries, this is reversed. With macro stability,
increasing debt duration and lower interest rates, we
believe there will be an increased use of OTC
derivatives to hedge banks balance sheets,
increasingly requiring tailor made risk and hedging
solutions.
Fixed Income (FI) Secular Trend: While annual loan
growth has decelerated to approximately 15%, it
should still provide Cetip with reasonable growth in
the FI segment. In the long-run, lower interest rates
and macro stability supports sustainable growth
potential with a positive combination of: (i)
extension of FI duration; (ii) financial innovation; (iii)
a gradual increase in the leverage of banks balance
sheets and the need to hedge them with OTC
derivatives.
New Products: The company is constantly launching
new products. These are rarely very noticeable at
inception, but they gradually add to the bottom line.
We conservatively do not forecast extraordinary
results for current pipeline of new products.
Cross-Selling: A strong position in key segments (e.g.,
SNG, fixed income, OTC derivatives) enables Cetip to
offer clients complementary services (e.g. collateral
management, Sircof, business intelligence).
Cetip | Financial Services | Brasil Plural Equity Research | 10
What Are the Risks?
Increasing Competition (But It Always Existed):
Cetip’s largest competitor, BVMF, has re-launched its
FI and OTC derivatives platform, with new
capabilities including the registration of CDB (time
deposits), COE (structured notes) and LCIs (asset-
backed securities). Effectively, this represents
roughly xx% of Cetip’s revenues, in addition to areas
where Cetip and BVMF already compete (e.g.
debentures, OTC derivatives) but Cetip has
maintained a dominant market share. For now, we
see a limited threat for products where Cetip has a
dominant share in custody or database. Other than
BVMF, we do not see another relevant new entrant
in Cetip’s core securities market. In the financing
unit, we see competition coming from independent
providers of electronic contracts (Sircof) that have
negotiated direct agreements with local DMV’s
(locally known as Detrans), hampering Cetip’s
penetration plan. However, we believe Cetip has a
more efficient service and over time it should
recover market share to 70-80% from its current
level of 62%.
Concentration of Clients and Pricing: As of 3Q13,
Cetip’s Top 3 clients (financial groups) represented
approximately 40% of revenues. Pressure from
clients can intensify in the future, particularly if
BVMF cuts its prices.
Alignment of Interest With Primary Clients: Cetip’s
primary clients are banks. Today, the company does
not have any major bank in its shareholders
composition, which lessens the potential for conflict
of interest, but at the same time might open space
for competitors to enhance their relationships with
Source: Company Reports, Brasil Plural Research
banks. However, large banks (Itau, Bradesco,
Santander, Votorantim/BB) are still represented on
Cetip’s board of directors. This might aid in better
addressing the needs of the banks and result in
improved client retention. If banks decide to shift
away from Cetip for any reason, we see downside
risks.
Agreement With FENASEG/Detrans: SNG business
relies on a 25-year exclusivity agreement with
FENASEG (insurance association) and the DMVs
(Detrans), ending in 2028. There is no guarantee that
the agreement will be renewed under the same
conditions. But we believe FENASEG interests align
with Cetip’s, which was recently proven when the
creation of Cetip’s Sircof Light product was
orchestrated by FENASEG. There are also a few
things that help us believe the contract will be
honored: (i) a multi-billion Reais penalty for contract
termination; (ii) SNG and Sircof revenues are
relevant for FENASEG.
CIP Contract Renewal: Cetip is the sole provider in
Brazil of same-day electronic money transfer for the
entire national interbank system, represented by CIP
(Camera Interbancaria de Pagamentos). At present,
CIP interbank transfer represents 3.3% of total
revenues. The current contract expires in 2020, with
no guarantees it will be renewed under the same
conditions.
Regulation: Cetip is regulated by CMN, CVM and the
Central Bank as it is an important service provider for
the entire financial system. In the past few years,
however, regulation has actually worked in favor of
Cetip, with regulators asking financial institutions for
an increase in registry and custody of assets. We
believe the government pressure on spreads has
indirectly impacted Cetip’s revenues.
Cannibalization of Revenues: Clients might migrate
from the Sircof to the Sircof Light product. Sircof
Light is still very profitable, but has lower margins.
Parana State Detran is in the process of migration.
Delays on New Product Launches: While we are not
forecasting a large upside from new products, we
think that some investors might be counting on
those projects. Disappointments are usually related
to the size of contribution and timing of completion
of the new initiatives, such as collateral management
and Sircof for real estate.
Higher Interest Rates: Higher interest rates,
combined with eventual slowdown of the economy,
might inhibit the credit market.
Technological Change/Fail: Despite Cetip’s low
Capex needs, large technological change could lead
to greater investment. Also, the company is subject
to fraud and electronic viruses that could disrupt its
operations, like in any technology company. But,
Cetip's track record is good, and we believe concerns
should be minimal.
Growth Slows More Than Expected: Our central
thesis is based on credit growing double digits. This
might come under pressure if energy rationing
impacts economic growth more than expected, or
the banking sector comes under greater regulatory
and government pressure.
Cetip | Financial Services | Brasil Plural Equity Research | 11
DCF Fair Value: 38% Upside
2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E P
EBIT 560,0 644,8 735,8 841,2 962,9 1.090,9 1.237,4 1.391,7 1.561,1 1.744,3 1.941,7 2.158,6
Tax Shield - (21,4) (16,3) (9,3) (2,9) - - - - - - -
Income Taxes (155,2) (193,5) (224,2) (265,6) (311,4) (359,0) (412,8) (469,5) (531,8) (599,2) (671,8) (752,2)
NOPLAT 404,8 429,9 495,3 566,2 648,6 731,9 824,7 922,2 1.029,4 1.145,2 1.269,8 1.406,4
Non-Cash Stock Option Expenses 20,6 22,8 25,8 29,4 33,4 38,0 43,2 49,0 55,5 62,9 71,2 80,5
Δ Working Capital (7,9) (6,0) (2,7) (5,8) (7,0) (6,4) (6,9) (8,0) (8,0) (8,3) (8,5) 1,6
Δ Other Assets / Liabilities 66,3 33,5 19,9 12,2 12,4 12,5 12,4 12,2 11,9 11,5 11,0 10,3
Capex (47,3) (53,6) (60,3) (65,0) (70,0) (74,8) (80,0) (85,1) (90,3) (95,6) (101,0) (89,5)
Depreciation and Amortization 75,2 80,5 86,3 92,5 98,6 104,6 110,5 116,5 122,4 128,4 134,4 140,4
Free Cash Flow to Firm 511,7 507,1 564,2 629,6 715,9 805,8 903,9 1.006,8 1.120,9 1.244,0 1.376,9 1.549,6
Financial Results (44,5) (20,1) (14,6) 4,4 17,6 26,7 35,1 44,0 53,7 64,1 75,4 89,1
Δ Debt (302,8) (157,9) (157,9) (159,2) (132,0) - - - - - - -
Tax Shield - 21,4 16,3 9,3 2,9 - - - - - - -
Free Cash Flow to Equity 164,4 350,5 408,0 484,2 604,5 832,5 938,9 1.050,9 1.174,6 1.308,1 1.452,2 1.638,7
Number of Shares 260 261 262 263 265 266 268 270 272 275 278 281
Free Cash Flow to Equity per Share 0,63 1,34 1,56 1,84 2,28 3,13 3,51 3,89 4,32 4,76 5,23 5,84 63,89
NPV of Remaining Goodwill per Share 0,01
NPV of FCFE per Share 1,34 1,37 1,43 1,56 1,89 1,86 1,82 1,78 1,73 1,67 1,64 15,87

Ke Fair Stock Price

Risk-free Rate 3.00% • Our YE 2014 target price is based on a discounted free cash flow to
NPV of FCFE per Share 18.10
equity model, with a cost of equity of 13.5% in BRL nominal terms and
Country Risk 2.50% NPV of Perpetuity per Share 15.9 sustainable long-term growth of 4.0%.
Mkt Premium 5.0%
2014 target price 34.0 • We discounted the free cash flow to equity per share to take into
Beta 0.90 account further dilutions to current shareholders from the issuance of
Current Price 24.54 stock options.
Inflation Dif US/BZ 3.5%
Potential Upside 38.4% • In the perpetuity, we also added the remaining value of the tax benefit
Cost of Equity 13.5% from intangible asset amortization (acquisition of GRV), amounting to
Perpetuity Growth Dividend Yield 4.7% R$0.01/share.
Nominal, in R$ 4.0% Total Return 43.1%

Source: Company Reports, Brasil Plural Research Cetip | Financial Services | Brasil Plural Equity Research | 12
Financials: EPS Growth of 16% Revenue expansion for the Securities Unit has always been strongly
correlated with the pace of loan growth in the Brazilian financial system –
Cetip basically does the registration and custody of funding instruments for
2013E/ 2014E/ 2015E/ 2016E/ banks. Therefore, we assumed that revenues from the Securities Unit should
2012 2013E 2014E 2015E 2016E
2012 2013E 2014E 2015E grow at a similar pace to loans – at roughly 15% in the coming years, with a
INCOME STATEMENT smooth deceleration after that. However, each revenue source was
Securities Unit 585 693 830 952 1.094 18% 20% 15% 15% estimated separately, assuming no price increase and volumes growing in
Registration 104 114 132 150 171 10% 16% 13% 14% line with the system.
Custody 184 231 278 325 380 25% 20% 17% 17%
Transactions 91 106 130 152 178 16% 23% 17% 17% Revenues growth for the Financing Unit is expected to stabilize after market
Monthly Utilization 140 162 198 222 251 16% 22% 12% 13% share losses in 2012 and the normalization of the auto loan market. SNG
Other Revenues 66 80 92 103 114 20% 15% 12% 11% Liens should grow in line with the auto loan market, while Sircof should
Financing Unit 332 375 391 433 478 13% 4% 11% 11% grow at a slower pace due to the migration to Sircof Light products.
SNG (SNG Lien Vehicles) 182 188 198 221 247 3% 6% 12% 12% The great bulk of Operating Expenses at Cetip are easy to predict, without
Sircof (GRV Contracts) 106 142 145 160 177 34% 2% 10% 10% significant dependence on large suppliers or third-party service providers,
Market Data and Development of Solutions 40 42 45 48 51 5% 7% 7% 7% and with strong bargain power. In 2012, 47% of OPEX was related to
Other Revenues 66 80 92 103 114 20% 15% 12% 11% employee remuneration (including stock options) and 21% was related to
GROSS REVENUES 917 1.068 1.221 1.384 1.572 16% 14% 13% 14%
depreciation and amortization, while only 20% was related to third-party
Other Deductions -33 -57 -66 -76 -88 74% 16% 15% 16%
services. We expect this breakdown to remain unchanged going forward.
Sales Taxes -94 -109 -130 -148 -169 16% 20% 14% 14%
Employee remuneration should grow at roughly 10-12%, following an
NET REVENUES 791 902 1.026 1.160 1.315 14% 14% 13% 13%
annual salary increase of 8% (in line with past year), together with a
Personnel -119 -135 -152 -172 -196 13% 13% 13% 14%
Stock Option Non Cash Expense -26 -21 -23 -26 -29 -20% 10% 13% 14% marginal increase in headcount to support company growth. Depreciation
Third Party Services -63 -72 -83 -94 -105 15% 15% 13% 12% and amortization is expected to grow by 7% in the coming years, following
IT Rental -1 -2 -3 -3 -3 201% 10% 10% 10% an expansion of fixed assets.
G&A -33 -36 -39 -43 -47 11% 7% 10% 10% Financial Results are expected to become positive in 2016 when most of the
Depreciation & Amortization -67 -75 -81 -86 -93 13% 7% 7% 7% debenture amortization should have already taken place. In 2014, however,
Other Income and (Expenses) 0 -1 -1 -1 -1 -314% 10% 10% 10% financial expenses should already be 67% lower YoY, thanks to a higher Selic
One-offs 0 0 0 0 0 n.m. n.m. n.m. n.m. rate boosting financial revenues and also because of the amortization of c.
OPERATING EXPENSES -308 -342 -381 -425 -474 11% 11% 11% 12% R$140 million on debt, reducing financing costs.
OPERATING RESULTS 483 560 645 736 841 16% 15% 14% 14%
Equity in the Results of Associate 0 1 1 1 1 168% -20% 0% 0% The deleveraging process should be mainly responsible for Earnings Growth
Financial Revenues, net -96 -44 -19 -5 14 -54% -58% -73% -380% in 2013 and 2014 of more than 20%. Starting in 2015, however, with a lower
EARNINGS BEFORE TAX (EBT) 387 516 627 731 856 33% 21% 17% 17% debt position and lower financial expenses, earnings growth should
Income Taxes -112 -155 -194 -226 -267 39% 25% 17% 18% decelerate to c.15%. We are adjusting Cetip earnings to the non-cash
Tax Rate -29% -30% -31% -31% -31% amortization of intangible assets generated by the GRV acquisition. The
NET INCOME (REPORTED) 275 361 433 505 588 31% 20% 17% 16% amortization of R$52 million per year brings a tax benefit of R$17.7 million
(+) Amortization Intangible Acquisition GRV 52 52 52 52 52 0% 0% 0% 0% per year, remaining until 2028.
ADJUSTED EARNINGS, BRASIL PLURAL 327 413 485 557 640 26% 17% 15% 15%
In the pipeline of new products are: the introduction of Central
EBITDA (Reported) 550 635 725 822 934 15% 14% 13% 14%
Counterparty (CCP) for fixed income securities lending and OTC derivatives;
(+) Non-recurring Expenses (IPO,
registration and identification of end-investors for certain assets; the launch
Restructuring, Acquisitions) - - - - -
(-) Equity in the Results of Associate (0,25) (0,66) (0,52) (0,52) (0,52) 168% -20% 0% 0%
of the structural note platform; mortgage lien and collateral management
ADJUSTED EBITDA, BRASIL PLURAL 550 635 725 822 933 15% 14% 13% 14% platform. But we conservatively do not factor these into our valuation.

Source: Company Reports, Brasil Plural Research Cetip | Financial Services | Brasil Plural Equity Research | 13
Ratios: Attractive Risk/Return Profile
2012 2013E 2014E 2015E 2016E
2013E/ 2014E/ 2015E/ 2016E/ Trading at an Adjusted PE14 of 13.2x, an EV/EBITDA14 of 8.6x
2012 2013E 2014E 2015E with EPS growth of 17% in 2014 and a dividend yield of 4.7%,
PER SHARE DATA Cetip figures to be one of the companies with the best
Shares Outstanding. (m) 255.8 260.1 261.0 262.1 263.3 1.7% 0.4% 0.4% 0.5% risk/return profile in our universe of coverage.
Dividends per Share (R$) 0.54 0.69 1.16 1.52 1.98 28.9% 66.9% 31.2% 30.7% Shares outstanding are forecast to increase slightly, by 0.4%
EPS ($ - per 1,000 shares) 1.08 1.39 1.66 1.90 2.20 29.3% 18.9% 14.6% 16.1% every year, to maintain the current stock-option program. In
Adjusted EPS ($ - per 1,000 shares) 1.28 1.59 1.86 2.10 2.40 24.5% 16.5% 13.0% 14.6% 2012, stock-option expenses represented 21.5% of personnel
Book Value per Share 5.58 6.18 6.74 7.19 7.49 10.7% 9.1% 6.7% 4.2% expenses. We assumed the costs of the stock-option program
FCFE per Share 0.43 0.63 1.34 1.56 1.84 47% 112% 16% 18% to represent 15% of personnel expenses going forward, with
new shares being issued at the current stock price of R$24.70
share.
MULTIPLES AT CURRENT PRICE Dividends per share should jump more than 70% in 2014,
Accounting P/E 22.8x 17.6x 14.8x 12.9x 11.1x -23% -16% -13% -14% following higher earnings growth and payout ratio.
Adjusted P/E 19.2x 15.4x 13.2x 11.7x 10.2x -20% -14% -11% -13%
FCFE per share increases 112% in 2014 due to lower debt
P/B 4.4x 4.0x 3.6x 3.4x 3.3x -10% -8% -6% -4%
repayment vs. 2013. In the 2Q13, Cetip had a R$219 million
EV/EBITDA 10.5x 9.5x 8.6x 7.8x 7.0x -10% -9% -9% -10%
cash disbursement with the liquidation of a debt called
EV/adj. EBITDA 10.5x 9.5x 8.6x 7.8x 7.0x -9% -9% -9% -10% “Purchase Price”, related to the GRV acquisition. Starting from
Dividend Yield 2.2% 2.8% 4.7% 6.2% 8.1% 63p.p 189bps 147bps 190bps 2014, we do not expect any other extraordinary cash
EPS Growth 18.4% 24.5% 16.5% 13.0% 14.6% 33% -33% -21% 12% disbursement to occur.
FCFE Yield 1.8% 2.6% 5.5% 6.3% 7.5% 82bps 290bps 87bps 115bps
ROIC, currently at 20%, is expected to increase in the coming
years, while Cetip continues to amortize the intangible assets
created with the acquisition of GRV.
PROFITABILITY RATIOS
ROIC 18% 20% 19% 22% 26% 189bps -52bps 304bps 328bps Due to scale gains, we forecast a small increase on margins
ROE 21% 24% 26% 27% 30% 267bps 186bps 165bps 280bps
going forward.
Recurring ROE 25% 27% 29% 30% 33% 212bps 153bps 142bps 264bps Payout ratio, currently at 50%, is expected to increase to 100%
ROA 11% 14% 17% 19% 22% 333bps 278bps 230bps 320bps by 2017, when Cetip will finish the amortization of its
Recurring ROA 13% 16% 19% 21% 24% 334bps 279bps 227bps 320bps debentures. As an asset-light business, Cetip can sustain top-
EBITDA Margin 70% 70% 71% 71% 71% 85bps 32bps 13bps 13bps line growth with very low Capex needs. In fact, due to the
Recurring EBITDA Margin 70% 70% 71% 71% 71% 81bps 34bps 14bps 13bps amortization of intangible assets from GRV, Cetip’s non-cash
Net Margin 35% 40% 42% 43% 44% 519bps 209bps 78bps 126bps expenses with depreciation and amortization are higher than
Recurring Net Margin 41% 46% 47% 47% 48% 438bps 140bps 19bps 73bps Capex, allowing the company to generate cash even with a
Payout Ratio 50% 50% 70% 80% 90% 00bps 2,000bps 1,000bps 1,000bps payout of 100%.

Source: Company Reports, Brasil Plural Research Cetip | Financial Services | Brasil Plural Equity Research | 14
Target Price Sensitivity to Competition Shows Small Downside
SECURITIES UNIT: Potential Downside of R$1.5/share FINANCING UNIT: Potential Downside of R$1.5/share

• We believe that competition with BVMF might intensify on products that do not
depend on custody or legacy databases, such as time deposits (CDB), mortgage-
backed securities (LCI) and interbank deposits (CDI).
• However, we argue that the potential impact should be minor, BVMF does not
offer interbank deposit services yet, and registration revenues of CDB and LCI
correspond to only 2.5% of total gross revenues – perhaps a bit more if we
include indirect impacts on transaction and monthly utilization revenues – but
still small, particularly if we consider the loss to Cetip’s market share.
• To simulate the potential impact on valuation of increasing competition from
BVMF on these three products only, we ran a conservative sensitivity analysis in
our model, assuming ZERO registration revenues from CDB and LCI beginning in
4Q13. The impact on our fair value is immaterial – only R$1.50/share.
• In the Sircof segment, Cetip has nearly 62% market share today. Its main
competitor here is FDL, which is present in four states (Alagoas, Mato Grosso,
Piauí, Tocantins).
• Despite competition from other players, the major concern today comes from
potential in-house cannibalization, with states migrating their Sircof contracts to
Sircof Light.
• In our model, we are already assuming conservative assumptions where Sircof
Light gains market share from Sircof over time. In the 3Q13, Sircof Light
additions represented 11% of all SNG additions. In 2024, the last year of our
projections, this ratio reaches 63%.
• If we stressed our model, assuming that starting from 4Q13 all the new additions
of SNG are made through Sircof Light only, our target price would be reduced by
the same R$1.5/share to R$32.5, still reflecting a comfortable upside of 31.5%
from current levels.

2013E/ 2014E/ 2015E/ 2016E/ 2013E/ 2014E/ 2015E/ 2016E/

Sensitivity Analysis - BVMF Competition 2013E 2014E 2015E 2016E Sens. Analysis - Full Migration to Sircof Light 2013E 2014E 2015E 2016E
2012 2013E 2014E 2015E 2012 2013E 2014E 2015E

NET REVENUES - Base Case 902 1,026 1,160 1,315 14% 14% 13% 13% NET REVENUES - Base Case 902 1,026 1,160 1,315 14% 14% 13% 13%
NET REVENUES - BVMF Competition 890 979 1,110 1,260 12% 10% 13% 14% NET REVENUES - Full Migration to Sircof
Light 890 977 1,108 1,258 13% 10% 13% 14%

Adj. EBITDA - Base Case 635 725 822 933 15% 14% 13% 14%
Adj. EBITDA - Base Case 635 725 822 933 15% 14% 13% 14%
Adj. EBITDA - BVMF Competition 622 678 771 878 13% 9% 14% 14%
Adj. EBITDA - Full Migration to Sircof Light 623 676 769 876 13% 9% 14% 14%

Adj. Earnings - Base Case 413 484 550 632 26% 17% 14% 15%
Adj. Earnings - Base Case 413 484 550 632 26% 17% 14% 15%
Adj. Earnings - BVMF Competition 405 452 516 596 24% 12% 14% 15% Adj. Earnings - Full Migration to Sircof Light 405 451 514 594 24% 11% 14% 16%

Target Price - Base Case 34.0 Target Price - Base Case 34.0
Target Price - BVMF Competition 32.5 Target Price - Full Migration to Sircof Light 32.5
- Change; R$/share 1.5 - Change; R$/share 1.5
- Change; % -4.4% - Change; % -4.4%

Source: Company Reports, Brasil Plural Research Cetip | Financial Services | Brasil Plural Equity Research | 15
Valuation: Good Margins and EPS Growth at a Discount
Stock Market P/E EBITDA EBITDA Margin (%) EV/EBITDA Div Yield (%) EPS growth (%)
Bloomberg
Companies Price Cap
Ticker 13E 14E 15E 13E 14E 15E 13E 14E 15E 13E 14E 15E 13E 14E 15E 13E 14E 15E
(US$) (US$ mn)
BM&F Bovespa BVMF3 BZ 4.4 8,368 14.0x 13.8x 12.4x 1,552 1,453 1,637 70.5% 67.4% 68.7% 10.4x 11.1x 9.9x 5.0% 5.0% 6.0% -14.0% 1.8% 11.0%
CETIP CTIP3 BZ 10.5 2,739 15.4x 13.2x 11.7x 272 311 352 70.3% 70.7% 70.8% 10.6x 9.0x 7.8x 2.8% 4.7% 6.2% 24.5% 16.5% 13.0%
Brazil 14.7x 13.5x 12.1x 912 882 994 70.4% 69.1% 69.8% 10.5x 10.1x 8.8x 3.9% 4.9% 6.1% 5.2% 9.1% 12.0%
Bolsa Mexicana de Valores SA de CV BOLSAA MM 1.8 1,078 19.0x 18.5x 16.5x 1,045 1,109 1,243 47.0% 47.1% 48.1% 11.8x 11.1x 9.9x 4.7% 4.9% 5.4% 6.1% 2.4% 12.1%
Mexico 19.0x 18.5x 16.5x 1,045 1,109 1,243 47.0% 47.1% 48.1% 11.8x 11.1x 9.9x 4.7% 4.9% 5.4% 6.1% 2.4% 12.1%
Chicago Mercantile Exchange CME US 75.9 25,483 24.7x 21.3x 18.8x 1,887 2,111 2,348 64.1% 65.5% 66.7% 13.7x 12.2x 11.0x 3.4% 4.1% 4.7% 1.6% 15.9% 13.3%
Intercontinental Exchange ICE US 205.9 23,693 25.3x 18.4x 15.0x 1,079 2,218 2,584 64.2% 58.7% 64.7% 26.0x 12.7x 10.9x 0.3% 1.3% 1.5% 8.4% 37.5% 22.7%
NASDAQ NDAQ US 38.5 6,523 14.9x 12.9x 11.5x 894 994 1,074 47.3% 46.7% 48.1% 9.6x 8.6x 8.0x 1.4% 1.4% 1.4% 4.6% 15.7% 12.6%
United States 21.6x 17.5x 15.1x 1,244 1,642 1,840 52.9% 52.7% 56.4% 16.4x 11.2x 9.9x 1.7% 2.2% 2.5% 11.0% 22.3% 15.8%
TSX Group X CN 46.8 2,534 15.9x 14.3x 12.6x 326 365 390 47.1% 50.0% 50.4% 9.1x 8.1x 7.6x 3.1% 3.1% 3.1% 6.1% 11.3% 13.5%
Canada 15.9x 14.3x 12.6x 326 365 390 47.1% 50.0% 50.4% 9.1x 8.1x 7.6x 3.1% 3.1% 3.1% 6.1% 11.3% 13.5%
London Stock Exchange LSE LN 1,191.3 3,230 20.2x 19.4x 17.7x 456 524 562 54.3% 45.7% 45.7% 13.6x 11.8x 11.0x 1.5% 1.6% 1.7% 0.6% 4.1% 9.4%
Deutsche Boerse DB1 GR 40.8 7,866 16.3x 14.6x 13.1x 1,057 1,144 1,246 55.7% 53.6% 54.3% 11.4x 10.5x 9.6x 3.7% 3.9% 4.1% -2.2% 11.8% 11.5%
Bolsas y Mercados Espanoles SA BME SM 21.4 1,786 17.7x 17.2x 16.9x 205 209 214 67.4% 67.6% 67.7% 10.9x 10.6x 10.4x 5.8% 5.7% 5.7% 2.6% 2.4% 2.2%
Europe 18.1x 17.1x 15.9x 573 626 674 59.2% 55.6% 55.9% 11.9x 11.0x 10.3x 3.7% 3.7% 3.8% 0.3% 6.1% 7.7%
Dubai Financial Market DFM UH 0.8 6,687 90.3x 47.2x 38.4x 283 474 654 65.3% 72.6% 82.7% 81.2x 48.5x 35.2x 1.1% 1.7% 2.6% 240.0% 91.2% 23.1%
JSE Exchange JSE SJ 812.4 706 14.5x 13.1x 11.4x 754 748 846 47.3% 44.2% 45.0% 8.3x 8.3x 7.4x 4.1% 4.3% 4.9% 39.7% 11.3% 14.2%
EMEA 52.4x 30.1x 24.9x 519 611 750 56.3% 58.4% 63.9% 44.7x 28.4x 21.3x 2.6% 3.0% 3.8% 139.8% 51.2% 18.6%
ASX Ltd ASX AU 39.6 7,660 18.2x 18.2x 17.0x 475 509 544 76.2% 76.3% 77.0% 12.5x 11.7x 11.0x 4.7% 4.9% 5.3% 1.7% 0.3% 6.8%
Hong Kong Exchange and Clearing 388 HK 14.9 17,291 28.2x 25.9x 21.8x 6,114 6,790 8,053 69.4% 70.2% 72.0% 14.2x 12.8x 10.8x 3.2% 3.5% 4.3% 4.9% 8.9% 18.8%
Singapore Exchange SGX SP 5.3 5,679 21.4x 20.7x 18.6x 439 444 490 62.9% 61.6% 61.4% 14.7x 14.6x 13.2x 4.4% 4.4% 4.8% 10.6% 3.5% 11.1%
Bursa Malaysia Bhd BURSA MK 2.3 1,220 21.9x 20.7x 18.8x 280 297 323 62.9% 59.7% 60.1% 10.0x 9.5x 8.7x 6.0% 4.6% 5.0% 20.0% 5.8% 10.5%
Asia 22.5x 21.4x 19.1x 1,827 2,010 2,352 67.9% 67.0% 67.6% 12.9x 12.1x 10.9x 4.6% 4.3% 4.8% 9.3% 4.6% 11.8%
GEM 35.3x 25.5x 21.8x 1,574 1,751 2,073 61.6% 61.7% 64.2% 25.7x 18.7x 15.1x 3.7% 3.7% 4.3% 63.0% 24.1% 15.5%
Latin American Market Exchange Averages 16.1x 15.2x 13.6x 956 957 1,077 62.6% 61.7% 62.5% 10.9x 10.4x 9.2x 4.2% 4.9% 5.8% 5.5% 6.9% 12.0%
Global Exchange Averages 23.6x 19.3x 17.0x 1,073 1,232 1,407 59.3% 58.7% 60.5% 16.7x 13.2x 11.4x 3.4% 3.7% 4.2% 22.6% 15.3% 13.0%

Source: Bloomberg, Brasil Plural Research Cetip | Financial Services | Brasil Plural Equity Research | 16
As of Mar/18/2014
 Cetip Trades at a Good Discount to Peers
Our TP implies a stock rerating to 16x PE from 13.2x
PE vs. EBITDA Margins PE vs. EPS Growth
30x 28x

28x 26x
Hong Kong Exhange
Hong Kong Exhange
and Clearing
and Clearing
26x
24x

24x
22x
Chicago Mercantile Chicago Mercantile
Singapore Exchange
22x Exchange Exchange
Bursa Malaysia Bhd
Bursa Malaysia Bhd
20x

P/E 14
London Stock
P/E 14

Singapore Exchange Interncontinental

Exchange
20x London Stock Bolsa Mexicana de Exchange
ASX Ltd
Exchange Bolsas y Mercados Valores SA de CV
Interncontinental
Bolsa Mexicana de 18x Espanoles SA
Exchange
18x Valores SA de CV ASX Ltd
Bolsas y Mercados
Espanoles SA CETIP (PE15 at
CETIP (PE15 at 16x Target Price)
16x Target Price)
TSX Group
Deutsche Boerse
TSX Group Deutsche Boerse BM&F Bovespa 14x
14x BM&F Bovespa CETIP
NASDAQ CETIP
NASDAQ JSE Exchange
JSE Exchange 12x
12x

10x 10x
45% 50% 55% 60% 65% 70% 75% 80% 1% 4% 7% 10% 13% 16% 19% 22%
EBITDA Margin 2015 EPS Growth 2015

Notes: Excluding Dubai Financial Market

Source: Bloomberg, Brasil Plural Research Cetip | Financial Services | Brasil Plural Equity Research | 17
As of Mar/18/2014
Recurrent Revenues Reduces Vulnerability to Business Cycles
Cetip Gross Revenues Breakdown (%)

4.4% 4.0% 3.7% Others

4.8% 4.3% 3.6%
13.8% 13.4% 11.9% Market Data and Development of Solutions

16.4% Sircof
17.8%
22.7% SNG
12.2%
10.7% Registration
12.0% 49.7% 9.6%
9.4% Transactions
42.2% 3.9%
9.1% 3.6%
3.6% 14.8% 15.6% CIP
15.4% Monthly Utilization
21.9% 23.1% Custody
14.1%

1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13E 1Q14E 2Q14E 3Q14E 4Q14E

Recurrence and Better Visibility on Revenues Underlying Assets in Each Business Activity (as % of Total Revs)
Nearly 50% of the revenues are less dependent on business cycles, providing more • REGISTRATION (10.7%)
visibility to earnings than most exchanges. Custody revenues (22% of total revenues) – Financial Institutions: time deposits, interbank deposits, loan participants
are dependent on the balance of assets under custody, which grows every year. (CCB), real estate financing (CCI, LCI), agribusiness financing (LCA, CCA),
Monthly utilization revenues are based on the number of clients, which also export financing, others
constantly grows. Fixed income transactions are also considered dependent on – Corporations: debentures, corporate bonds, commercial papers
number of clients and assets under custody. CIP (TED – electronic money transfer) – OTC derivatives
also contributes stable growth. • CUSTODY (21.9%): Debentures, quota of funds, OTC derivatives, other assets
We recognize that the acquisition of GRV brought volatility to results, but with the • MONTHLY UTILIZATION (14.8%): connectivity fee
growth of recurrent revenues outpacing other instruments, we believe overall • TRANSACTIONS (9.4%)
results will become more resilient. Registration, SNG and Sircof revenues are
• SNG (17.8%): auto liens
dependent on the flow of business, and therefore more cyclical than those
• SIRCOF (13.4%): digitalization of auto contracts
aforementioned. Most recently, with the deceleration of auto loans, SNG revenues
have been under pressure. Also, Sircof faced increasing competition from local • CIP (3.6%): electronic fund transfers
providers, but the new Sircof Light product should halt or even reverse deterioration. • MARKET DATA AND SOLUTIONS (4.3%)

Source: Company reports, Brasil Plural Research Cetip | Financial Services | Brasil Plural Equity Research | 18
Strong Cash Flow Generation and Economies of Scale
Revenues Growing Faster Than Costs; Low CAPEX Needs

Headcount (number of employees) OPEX (R$mn) Cash Flow (R$mn) and CF Yield (%)
600 CAGR 3Q10-3Q13: 6.0% 70 CAGR 3Q10-3Q13: 11.7% 600 CAGR 2011-2015E: 40% 7%

500 60 500 6%

50 5%
400 400
40 4%
300 300
3%
30
200
200 2%
20
100 1%
100 10
- 0%
0 - 2011 2012 2013E 2014E 2015E
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13

1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
Cash Flow CF Yield

Gross Revenues (R$mn) Adjusted EPS Growth (R$/share) CAPEX (R$mn) and CAPEX as % of Gross Revs
300 CAGR 3Q10-3Q13: 17.7% 0.45 CAGR 3Q10-3Q13: 29.6% 50 Asset Light: 8%
Capex as % of Net Revs 7%
0.40
250 40 ranges between 4 to 6%
0.35 6%
200 0.30 5%
30
0.25
150 4%
0.20 20 3%
100 0.15
2%
0.10 10
50
0.05 1%
0 0.00 - 0%
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13

1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
2009 2010 2011 2012 9M13
Capex CAPEX as % of Net Revenues

Source: Company reports, Brasil Plural Research Cetip | Financial Services | Brasil Plural Equity Research | 19
Financial Deleveraging Helps Net Debt, Net Debt/EBITDA

1.8x
EPS Growth and Dividends
1.1x
Current Debt Structure Under Review: Upside to EPS Growth
 Leverage Background. In December 2010, Cetip acquired GRV for R$2.0 billion, 929.4 0.6x
paid as follows: R$1.0 billion cash, R$445 million in Cetip share swap, R$555 614.5 0.2x
million seller’s note (at inflation +2% paid in three installments over three years). 356.9
In order to raise enough cash, Cetip issued a R$900 mn debenture (at interbank 150.2
rate, DI + 2%, with a duration of seven years).
2011 2012 2013E 2014E
 Debenture. In our opinion, rates of DI + 2% for an asset-light company like Cetip
seems expensive, and we see opportunities to optimize its debt structure, Net Debt Net Debt/EBITDA
ultimately supporting EPS growth. The company has already pre-paid R$200 mn
and amortized R$50.4 mn, leaving an outstanding balance of R$649.6 mn.
 Deleveraging Benefits. We argue that deleveraging benefits are two-fold: First, Current Debenture Structure: Expensive for an Asset-Light
deleveraging helps EPS growth. The company has pre-paid R$200 mn of the Company
debentures, completed the seller’s note payments (last payment made in May
2013), and might restructure the remaining debt with better rates. Second, with Debentures:
Nominal Value = R$ 900 mm
net debt declining substantially, dividend payments should rise with payout (-) Pre-payment = R$ 200 mm
- DI + 2%
(-) Amortization = R$ 50.4 mm
ratios increasing – current 50% moving to 70-80% or even 100%, as the company - 7 years
Balance as of 3Q13 = R$ 649.6 mm
does not need much capital to grow.
~R$ 14.3 mm
~R$13.2 mm 2.04%
R$100 mm R$100 mm

~R$5.6 mm

1.88%
0.80%

2010 2011 2012 2013E 2014E 2015E 2016E 2017E

R$ 900 mm

Source: Company reports and Brasil Plural Research Cetip | Financial Services | Brasil Plural Equity Research | 20
Global Trends and Implications

 In this section, we analyze global trends in the exchange Global Trends and Rationale: The Road Map for EPS Growth
industry and the rationale behind them.
 The story of exchanges as publicly listed equity DEMUTUALIZATION,
 Efficiency gains
investments is relatively new. Typically, exchanges were RESTRUCTURING,
non-profit organizations controlled by market  Unlock value for shareholders
participants to provide liquidity and a common place for RATIONALIZATION, IPO
trading. The increasing pressure for growth and higher
profits increased after the IPOs. Cetip story was no  Economies of scale
different: demutualization followed by an investment by M&AS AND  Geographic diversification
a private equity (Advent), rationalization, restructuring INTERNATIONALIZATION  Operational agreements, cross-shareholding as a method
and IPO in 2009. to protect competitive advancements
 The increasing use of technology in the industry also had
several implications. Suddenly, the need for a physical
 Economies of scale
place for trading was no longer necessary. Technological
intensity also brought gains in efficiency, and the VERTICAL  Increase barriers of entry → one-stop shop
combination of merger and technology advancements INTEGRATION  Increase exposure to segments with higher profitability
increased economies of scale (e.g. BM&F’s merger with  Diversification of revenues
Bovespa).
 Internationalization was then a natural step to continue  Gains in efficiency and scale
the path of M&A, scale gains and EPS growth (e.g. ICE  Cope with substantial increase in liquidity and number of
stake in Cetip, CME stake at BVMF). TECHNOLOGICAL
players
INTENSITY
 Verticalization of operations (trading, custody, registry,  Increasing regulatory requirements and necessity to
clearing) to gain scale, diversify revenues and increase improve risk control
barriers of entry also triggered more M&A activity.
 Competition was inevitable with bigger and bigger  Increasing pressure for lower prices from customers
players. COMPETITION AND  Consolidation
REGULATORY PRESSURES  Increasing regulatory requirements and anti-trust
regulation

Source: Company reports and Brasil Plural Research Cetip | Financial Services | Brasil Plural Equity Research | 21
Drivers Credit Growth (YoY%) Debentures (balance in R$mn)
100,000
40%
Cetip has so many different products that, 80,000
30%
at first glance, one could find it difficult to
60,000
identify the main variables driving its 20%
businesses. 40,000
10%
We believe Cetip’s businesses are broadly 20,000
related to the growth of banking credit, 0%
corporate debt and OTC derivatives. -

Jan-04
Jul-04
Jan-05

Jan-06

Jan-07

Jan-08

Jan-09

Jan-10

Jan-11

Jan-12

Jan-13
Jul-05

Jul-06

Jul-07

Jul-08

Jul-09

Jul-10

Jul-11

Jul-12

Jul-13

2004
1996
1997
1998
1999
2000
2001
2002
2003

2005
2006
2007
2008
2009
2010
2011
2012
2013
Eventually, Cetip revenues could grow
faster than these if the company
successfully introduces new products. Financial Bills (letra financeira, balance in R$bn) Deposits (balance in R$bn)
Overall, we believe main drivers are: 250 2,000
SECURITIES UNIT
200 1,500
• Banking Asset Side: credit growth,
corporate debt/debentures 150 1,000
• Banking Liability Side: deposits, financial 100 500
bills (letras finaceiras)
50 -
• OTC Derivatives

2002

3Q13
2001

2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
• Processing of interbank transfers (DOCs) -
and electronic fund transfers (ETFs) 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13
FINANCING UNIT TED (electronic fund transfer, monthly flow in Vehicles Financed (monthly flow in units)
• Number of cars financed '000 transfers)
• Penetration of Sircof 20,000 1,000,000
• Data services 800,000
15,000
• New products 600,000
10,000
Even with a slowdown in the credit cycle, 400,000
the bottom line can grow faster than 5,000
200,000
revenues as costs usually grow at a slower - -
pace given Cetip’s asset-light business
Jan-07

Jan-08

Jan-09

Jan-10

Jan-11

Jan-12

Jan-13
Jul-07

Jul-08

Jul-09

Jul-10

Jul-11

Jul-12

Jul-13

Jan-07

Jan-08
Jul-08
Jan-09

Jan-10

Jan-11

Jan-12

Jan-13
Jul-07

Jul-09

Jul-10

Jul-11

Jul-12

Jul-13
model.

Source: Central Bank, Company reports, Brasil Plural Research Cetip | Financial Services | Brasil Plural Equity Research | 22
 | CTIP3
March 18, 2014

Disclosure
GENERAL DISCLAIMER

This report has been produced by the research department (“Brasil Plural Research”) of Brasil Plural Corretora de Câmbio, Títulos
e Valores Mobiliários S.A. (“BRASIL PLURAL CCTVM”). BRASIL PLURAL is a brand name of BRASIL PLURAL CCTVM.
This report may not be reproduced, retransmitted, displayed or re-published to any other person, in whole or in part, for any
purpose, without the prior written consent of BRASIL PLURAL CCTVM, which consent may be sought by contacting the principal
analyst, who is going to be responsible for obtaining the Control Room´s approval. BRASIL PLURAL CCTVM accepts no liability
whatsoever for the actions of third parties in this respect.
This research report is for distribution only under such circumstances as may be permitted by applicable law. This research report is
not tailored to the specific investment objectives, financial situation or particular needs of any specific recipient, even if sent only to
a single recipient. This research report is not guaranteed to be acomplete statement or summary of any securities, markets, reports
or developments referred to in this research report. Neither BRASIL PLURAL CCTVM nor any of its directors, officers, employees
or agents shall have any liability, however arising, for any error, inaccuracy or incompleteness of fact or opinion contained in this
research report or lack of care in this research report’s preparation or publication, or any losses or damages which may arise from
the use of this research report.
BRASIL PLURAL CCTVM may rely on information barriers, such as “Chinese Walls” to control the flow of information within the
areas, units, divisions, groups, or affiliates of BRASIL PLURAL CCTVM.
Investing in any of the non-U.S. securities or related financial instruments (including ADRs) discussed in this research report may
present certain risks. Non-US securities mentioned, recommended, offered, or sold by Brasil Plural CCTVM or its affiliates are not
insured by the Federal Deposit Insurance Corporation and are subject to investment risks, including the possible loss of the entire
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The value of any investment or income from any securities or related financial instruments discussed in this research report
denominated in a currency other than U.S. dollars is subject to exchange rate fluctuations that may have a positive or adverse
effect on the value of or income from such securities or related financial instruments.
Past performance is not a guarantee of future results and no representation or warranty, express or implied, is made regarding
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Any recommendation or opinion contained in this research report may become outdated as a consequence of changes in the
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The locally listed shares of Brazilian companies may only be purchased by investors outside of Brazil who are “eligible investors”
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STOCK RATINGS
Ratings Definition Coverage Banking Relationship
(i) (ii) (iii) (iv)
Overweight stocks are expected to have a total return of
Overweight at least 15% and are the most attractive stocks within the 48.98 10.42
industry.
Equal weight stocks are expected to remain flat or increase in
Equal Weight 30.61 3.33
value and are less attractive than Overweight stocks.
Underweight stocks are the least attractive stocks within the
Underweight 20.41 20.00
industry.
(i) For disclosure purpose only, in accordance with FINRA requirements, we include the category headings of BUY, HOLD and SELL
alongside our ratings of Overweight, Equal Weight and Underweight, respectively. Overweight, Equal Weight and Underweight
are not the equivalent of BUY, HOLD and SELL but represent recommended relative weighting.

(ii) Investment ratings reflect the analyst’s assessment of a stock’s absolute total return and its attractiveness relative to other
stocks within the industry. The Industry is comprised of stocks covered by a single analyst or two or more analysts sharing a
common segment, geographic region or other classification(s). The industries we cover are: 1) Agribusiness; 2) Banking and
Financial Services; 3) Basic Materials (Steel & Mining and Pulp & Paper); 4) Consumer Goods, Retail and Food & Beverage; 5)
CETIP: Initiating Coverage with Overweight Brasil Plural Equity Research | 23
 | CTIP3
March 18, 2014

Healthcare and Education; 6) Oil & Gas and Petrochemicals; 7) Real Estate; 8) Telecommunications, Media and Technology; 9)
Transportation, Industrials and Logistics; 10) Utilities; and 11) Equity Strategy.
(iii) Percentage of companies covered by BRASIL PLURAL CCTVM within this rating category.
(iv) Percentage of companies within this rating category for which BRASIL PLURAL CCTVM provided investment banking services
over the last 12 (twelve) months, or which maybe provided during the next 3 (three) months.

ANALYST(S) DISCLOSURES AND CERTIFICATION

The analysts hereby certify that the views expressed in this research report accurately reflect their personal views about the subject
securities or issuers and it was prepared in an independent manner, including with respect to the person and to BRASIL PLURAL.
The analyst’s compensation is, directly or indirectly, determined by income from BRASIL PLURAL´s business and financial
operations.
In addition, the analysts certify that no part of their compensation was, is, or will be directly or indirectly related to the specific
recommendations or views expressed in this research report.
The compensation of the analyst who prepared this report is determined by research management and senior management (not
including investment banking). Analyst compensation is not based on investment banking revenues, however, compensation may
derive from the business and financial operations revenues of BRASIL PLURAL CCTVM, its affiliates and/or subsidiaries as a whole,
of which investment banking, sales and trading are a part. Compensation paid to analysts is the sole responsibility of BRASIL PLURAL
CCTVM.
The principal analyst Felipe Salomão is responsible for the content of this report and for meeting the requirements of Securities
and Exchange Commission of Brazil (CVM) Instruction 483/2010.
Unless otherwise stated, the individuals listed on the cover page of this report are research analysts.

COMPANY SPECIFIC DISCLAIMERS

Companies Mentioned Ticker Recent Price Rating
Cetip CTIP3 R$24.54 Overweight
The subject company and/or its subsidiaries are currently (or were within the past 12 months) a client of the firm.
BRASIL PLURAL and/or its affiliates may have interests, or long or short positions, and may at any time make purchases or sales as
a principal or agent of the following securities referred to herein: CTIP3, BBAS3, BBDC4, ITUB4 and SANB11.
Rating and Price Target History for CTIP3 as of 03/18/2014

25.40

25.20

25.00

24.80

24.60

24.40

24.20

24.00 Cetip
May/11

Jul/11

Sep/11

Nov/11

Jan/12

Mar/12

May/12

Jul/12

Sep/12

Nov/12

Jan/14

Mar/14
Jan/13

Mar/13

May/13

Jul/13

Sep/13

Nov/13

CTIP3 Target Price Created By BlueMatrix

CETIP: Initiating Coverage with Overweight Brasil Plural Equity Research | 24

 | CTIP3
March 18, 2014

Rating and Price Target History for BBAS3 as of 03/18/2014

OW: $31 OW: $33.6 OW: $33.8 OW: $30.4 OW: $25
05/02/12 09/17/12 05/15/13 08/13/13 02/13/14
35

30

25

20

15 Banco do Brasil
May/11

Jul/11

Sep/11

Nov/11

Jan/12

Mar/12

May/12

Jul/12

Sep/12

Nov/12

Jan/14

Mar/14
Jan/13

Mar/13

May/13

Jul/13

Sep/13

Nov/13
BBAS3 Target Price Created By BlueMatrix

Rating and Price Target History for BBDC4 as of 03/18/2014

OW: $39 OW: $43.6 OW: $37 OW: $33
06/15/12 09/17/12 08/13/13 01/30/14
45

40

35

30

25

20 Bradesco
May/11

Jul/11

Sep/11

Nov/11

Jan/12

Mar/12

May/12

Jul/12

Sep/12

Nov/12

Jan/14

Mar/14
Jan/13

Mar/13

May/13

Jul/13

Sep/13

Nov/13

BBDC4 Target Price Created By BlueMatrix

CETIP: Initiating Coverage with Overweight Brasil Plural Equity Research | 25

 | CTIP3
March 18, 2014

Rating and Price Target History for ITUB4 as of 03/18/2014

EW: $41 EW: $40.9 EW: $33.9 EW: $34 OW: $39.4
08/27/12 04/30/13 07/30/13 08/13/13 10/29/13
45

40

35

30

25 Itau
May/11

Jul/11

Sep/11

Nov/11

Jan/12

Mar/12

May/12

Jul/12

Sep/12

Nov/12

Jan/14

Mar/14
Jan/13

Mar/13

May/13

Jul/13

Sep/13

Nov/13
ITUB4 Target Price Created By BlueMatrix

Rating and Price Target History for SANB11 as of 03/18/2014

UW: $19 UW: $18.6 UW: $16.6 UW: $14.3 UW: $16.6 UW: $14.3
03/22/12 08/27/12 04/25/13 07/22/13 07/30/13 08/13/13
22

20

18

16

14

12

10 Santander Brasil
May/11

Jul/11

Sep/11

Nov/11

Jan/12

Mar/12

May/12

Jul/12

Sep/12

Nov/12

Jan/14

Mar/14
Jan/13

Mar/13

May/13

Jul/13

Sep/13

Nov/13

SANB11 Target Price Created By BlueMatrix

Additional Disclosure
The sole purpose of this document is to provide information about companies and their securities.
The information contained herein is provided for informational purposes only and does not constitute an offer to buy or sell, and
should not be construed as a solicitation to acquire, any securities in any jurisdiction. The opinions expressed herein with regard
to the purchase, sale or holding of securities, or with respect to the weighting of such securities in a real or hypothetical portfolio,
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opinions, estimates and projections contained in this document are based on current data and are subject to change. Prices and

CETIP: Initiating Coverage with Overweight Brasil Plural Equity Research | 26

 | CTIP3
March 18, 2014

availability of financial instruments are indicative only and subject to change without notice. BRASIL PLURAL CCTVM is under no
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This research report was prepared by Brasil Plural CCTVM, a company authorized to engage in securities activities in Brazil. Brasil
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Brasil Plural Securities LLC accepts responsibility for the content of this research report, subject to the terms set out below, to the
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The analyst whose name appears in this research report is not registered or qualified as a research analyst with the Financial
Industry Regulatory Authority (“FINRA”) and may not be an associated person of Brasil Plural Securities LLC and, therefore, may
CETIP: Initiating Coverage with Overweight Brasil Plural Equity Research | 27
 | CTIP3
March 18, 2014

not be subject to applicable restrictions under FINRA Rules on communications with a subject company, public appearances and
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liability whatsoever for any loss howsoever arising from any use of this document or its contents or otherwise arising in connection
therewith.
Any opinions, forecasts or estimates in this document constitute a judgment as at the date of this report. There can be no
assurance that future results or events will be consistent with any such opinions, forecasts or estimates. This information is subject
to change without notice and its accuracy is not guaranteed. It may be incomplete or condensed and it may not contain all
material information concerning the company. BRASIL PLURAL shall have no obligation to update the information contained in
this document.
BRASIL PLURAL (or its affiliates, officers, directors or employees) may, to the extent permitted by law, have acted upon or used the
information herein contained before the publication of this report and may have a position in securities issued by the companies
and may make a market or act as a principal in any transactions in any such securities. BRASIL PLURAL may from time to time
perform investment banking or other services to, or solicit investment banking or other business from, the companies.
THIS DOCUMENT HAS BEEN FORWARDED TO YOU SOLELY FOR YOUR INFORMATION AND MAY NOT BE REPRODUCED OR
REDISTRIBUTED TO ANY OTHER PERSON. BY ACCEPTING THIS DOCUMENT YOU AGREE TO BE BOUND BY THE FOREGOING
LIMITATIONS.
This document is exempt from the general restriction in section 21 of the Financial Services and Markets Act 2000 (“FSMA”) on
the communication of invitations or inducements to engage in investment activity on the grounds that it is made to a certified
sophisticated investor, being a person who (a) has a current certificate signedby an authorized person to the effect that he is
sufficiently knowledgeable to understand the risks associated with the investment type or (b) has signed a statement in the form
prescribed in article 50 of the FSMA 2000 (Financial Promotion) Order 2005.
The content of this document has not been approved by an authorized person, as would be required under FSMA if the above
exemption did not apply. This document should not be relied on in connection with, or act as an inducement to enter into, any
contract or commitment whatsoever. To do so may expose you to a significant risk of losing all of the property invested and/or
incurring additional liability. If you are in any doubt about the securities which are described in this document, you should consult
an authorized person who specifies in investments of this type.

IMPORTANT DISCLOSURES FOR CHINA

THIS DOCUMENT IS FOR DISTRIBUTION IN PEOPLE’S REPUBLIC OF CHINA (THE “PRC”, FOR THE PURPOSE OF THIS DOCUMENT,
EXCLUDING HONG KONG SPECIAL ADMINISTRATIVE REGION, MACAU SPECIAL ADMINISTRATIVE REGION AND TAIWAN) ONLY TO
THE SPECIFIC QUALIFIED DOMESTIC INSTITUTIONAL INVESTORS AS DEFINED IN THE TRIAL MEASURES FOR THE ADMINISTRATION
OF SECURITIES INVESTMENT OUTSIDE THE PRC BY QUALIFIED DOMESTIC INSTITUTIONAL INVESTORS (《合格境内机构投资者
境外资券投资管理资行资法》) PROMULGATED BY THE CHINA SECURITIES REGULATORY COMMISSION (“CSRC”) ON 18 JUNE 2007,
CHINA INVESTMENT CORPORATION (中国投资有限资任公司), NATIONAL SOCIAL SECURITY FUND (全国社会保障基金), QUALIFED
DOMESTIC INSURANCE COMPANIES, AND QUALIFIED DOMESTIC BANKS (COLLECTIVELY, THE “QUALIFIED DOMESTIC INVESTORS”),
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March 18, 2014

WHICH HAVE BEEN APPROVED BY RELEVANT PRC GOVERNMENT AUTHORITIES TO INVEST IN THE OFFSHORE STOCK MARKETS.
OTHER PERSONS SHOULD NOT ACT OR RELY ON THIS DOCUMENT OR ANY OF ITS CONTENTS. NO PUBLIC MEDIA OR OTHER
MEANS OF PUBLIC DISTRIBUTION OR ANNOUNCEMENT WILL BE USED WITHIN THE PRC IN CONNECTION WITH THE DELIVERY
OR DISTRIBUTION OF THIS DOCUMENT. THIS DOCUMENT IS CONFIDENTIAL AND IS BEING SUPPLIED TO YOU SOLELY FOR YOUR
INFORMATION AND MAY NOT BE REPRODUCED, REDISTRIBUTED, DISCLOSED OR PASSED ON, IN ANY WAY, TO ANY OTHER PERSON
OR PUBLISHED, IN WHOLE OR IN PART, FOR ANY OTHER PURPOSE. NEITHER THIS DOCUMENT NOR ANY PART OF IT IS INTENDED
AS, OR CONSTITUTES PROVISION OF ANY CONSULTANCY OR ADVISORY SERVICE OF SECURITIES INVESTMENT. SUBJECT TO THE
FOREGOING, THE DISTRIBUTION OF THIS DOCUMENT DOES NOT CONSTITUTE A PUBLIC OFFER OF THE SHARES AS PRESCRIBED
IN ARTICLE 10 OF THE PRC SECURITIES LAW (《中资人民共和国资券法》) PROMULGATED ON 29 DECEMBER 1998, AMENDED ON
27 OCTOBER 2005 AND EFFECTIVE ON 1 JANUARY 2006, AND IS NOT INTENDED AS, AND DOES NOT CONSTITUTE, PROVIDING
CONSULTING OR ADVISORY SERVICE OF SECURITIES INVESTMENT AS DEFINED UNDER THE PRC LAWS.

IMPORTANT DISCLOSURES FOR SWITZERLAND

This document is not intended to constitute an offer or solicitation to purchase or invest in the securities described herein. This
material and the securities or other financial products referred to therein, are not intended for public distribution in or from
Switzerland but are only intended to “qualified investors” within the meaning of, and in accordance with the private placement
exemptions under, the Swiss Federal Act on Collective Investment Schemes (“CISA”). Neither this document nor any other offering
or marketing material relating to the securities or other financial products may be publicly distributed or otherwise made publicly
available in Switzerland who is not a “qualified investor” within the meaning of article 10(3) of CISA. By accepting to receive this
document you acknowledge that you are such a qualified investor. This material may not be copied or handed over to any person
other than the recipient except with the prior written consent of the Company. The issuer is not subject to the supervision of
the Swiss Financial Markets Supervisory Authority (FINMA). Therefore, holders of the securities will not benefit from the specific
investor protection under CISA and the supervision by the FINMA.

IMPORTANT DISCLOSURES FOR CANADA

THIS DOCUMENT IS STRICTLY CONFIDENTIAL TO THE RECIPIENT, MAY NOT BE DISTRIBUTED TO THE PRESS OR OTHER MEDIA AND
MAY NOT BE REPRODUCED IN ANYFORM. THIS DOCUMENT IS DIRECTED ONLY AT PERSONS WHO ARE “CANADIAN PERMITTED
CLIENTS” UNDER EITHER SECTIONS 8.18(1) OR 8.26(1) OF NATIONAL INSTRUMENT 31-103 – REGISTRATION REQUIREMENTS, AS
APPLICABLE. BRASIL PLURAL (OR AN AFFILIATE) IS RELYING UPON, AND COMPLIES WITH, THE INTERNATIONAL DEALER EXEMPTION
UNDER SECTION 8.18 OF NATIONAL INSTRUMENT 31-103 – REGISTRATION REQUIREMENTS AND/OR THE INTERNATIONAL ADVISER
EXEMPTION UNDER SECTION 8.26 OF NATIONAL INSTRUMENT 31-103 – REGISTRATION REQUIREMENTS, AS APPLICABLE.
BRASIL PLURAL (or an affiliate) hereby notifies the reader that:
a. BRASIL PLURAL (or an affiliate) is not registered as a “dealer” or “adviser” in any Canadian Jurisdiction.
b. The head office or principal place ofbusiness of BRASIL PLURAL (or an affiliate) is located at São Paulo, SP, Rua Surubim, 373
- 1º andar - CEP 04571-050.
c. All or substantially all of the assets of BRASIL PLURAL (or an affiliate) are situated outside of Canada.
d. An investor may experience difficulty in enforcing legal rights against BRASIL PLURAL (or an affiliate) because ofthe above.
e. The agent for service of BRASIL PLURAL (or an affiliate) in Canada is:

Perley-Robertson, Hill & McDougall LLP

90 SparksSt., Ste. 400
Ottawa,OntarioK1P 1E2
Attention:M.A.Gerrior
Dentons Canada LLP
1 PlaceVille-Marie, 39th Floor
Montreal,Québec H3B 4M7
Attention:Charles R. Spector

THE DISTRIBUTION OF THIS DOCUMENT IN OTHER JURISDICTIONS MAY BE RESTRICTED BY LAW AND PERSONS INTO WHOSE
POSSESSION THIS DOCUMENT COMES SHOULD INFORM THEMSELVES ABOUT, AND OBSERVE, ANY SUCH RESTRICTIONS. ANY
FAILURE TO COMPLY WITH THESE RESTRICTIONS MAY CONSTITUTE A VIOLATION OF THE LAWS OF ANY SUCH OTHER JURISDICTION.

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March 18, 2014

This document does not constitute or form part of any offer for sale or subscription of, or solicitation of any offer to buy orsubscribe
for, any securities nor shall it or any part of it form the basis of, or be relied on in connection with, or act as an inducement to enter
into, any contract or commitment whatsoever. Any decision on whether or not to purchase or subscribe for the Securities should
be taken solely on the basis of the offering particulars prepared in connection with the Offer (the “Offering Document”) only.
While the information in this document and the opinions are based on sources believed to be reliable, BRASIL PLURAL has not
independently verified the accuracy of such sources. Accordingly no representation or warranty, express or implied, is made as to,
and no reliance should be placed on the fairness, accuracy, completeness or correctness of the information and opinions contained
in this document, and neither Plural nor any of its affiliates, directors, members, officers or employees shall have any liability
whatsoever for any loss howsoever arising from any use of this document or its contents or otherwise arising in connection there
with.
BRASIL PLURAL (or its affiliates, officers, directors or employees) may, to the extent permitted by law, have acted upon or used the
information herein contained before the publication of this report and may have a position in securities issued by the Company and
may make a market or act as a principal in any transactions in any such securities. BRASIL PLURAL may from time to time perform
investment banking or other services to, or solicit investment banking or other business from, the Company.
Any opinions, forecasts or estimates in this document constitute a judgment as at the date of this report. There can be no
assurance that future results or events will be consistent with any such opinions, forecasts or estimates. This information is subject
to change without notice and its accuracy is not guaranteed. It may be incomplete or condensed and it may not contain all
material information concerning the Company. BRASIL PLURAL shall have no obligation to update the information contained in
this document.
THIS DOCUMENT HAS BEEN FORWARDED TO YOU SOLELY FOR YOUR INFORMATION AND MAY NOT BE REPRODUCED OR
REDISTRIBUTED TO ANY OTHER PERSON. BY ACCEPTING THIS DOCUMENT YOU AGREE TO BE BOUND BY THE FOREGOING
LIMITATIONS.

IMPORTANT DISCLOSURES FOR GERMANY

This report may not be reproduced or redistributed to any other person, in whole or in part, for any purpose. BRASIL PLURAL
CCTVM accepts no liability whatsoever for the actions of third parties in this respect.
The information has been obtained from sources believed to be reliable but BRASIL PLURAL CCTVM does not make any express or
implied representation or warranty as to the completeness, reliability or accuracy of such information. BRASIL PLURAL CCTVM is
under no obligation to update or revise this document or to advise of any changes in such data.
The information contained herein does not qualify as a public offer.
Distribution into Germany may be prohibited by regulatory laws and statutes.

IMPORTANT DISCLOSURES FOR FRANCE

This research report is for information purposes only and does not, nor is it intended to, constitute an offer, an invitation or a
solicitation to buy, sell, subscribe or underwrite any investment. In particular, the research report does not constitute or comprise
a prospectus for the purposes of the Directive 2003/71/EC and the relevant implementing measures in France, and shall not form
the basis of, nor may it accompany nor form part of, any right or contract to buy, sell, subscribe or underwrite any investment.
The information contained herein is strictly confidential and intended for the addressees only. The research report is not intended
for distribution to the public. It does not constitute a personal recommendation and does not take into account the particular
investment objectives, financial situation, experience or knowledge of the addressees. The research report has been made available
to the addressees in France on the conditions that (i) the addressees are qualified investors (investisseurs qualifiés) other than
individuals and acting for their own account, as defined in, and in accordance with, Article D. 411-1 of the French Code monétaire
et financier, and (ii) the research report shall not be published, passed on, disclosed, distributed or made available, directly or
indirectly, to any other person nor reproduced, in whole or in part, for any purpose, by the addressees.
Copyright 2014 Brasil Plural CCTVM and/or its affiliates. All rights reserved.

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