Poli USP Team R Presentation

Magazine Luiza S/A
Brazilian Hardline Retail
Gabriel Teodoro
Gustavo Faria
João Vitor Zuardi
Lucas Nascimento
Luiz Lira
CFA Institute Research Challenge 2017

1
Ready To Take Off
Current Price FY18E Target Price Upside

LONG
BRL 69.9 BRL 98.9 +41.4%
Stock Chart
160
140
120 Target Price
100
BRL
80
60
40
20
0
Source: Bloomberg
Overview High Top-Line Growth Margins & Cash Excess Returns Valuation & Risks
2
Company
Reasons toOverview
LONG
Magazine Luiza Is aFrase de Company

Growth Impacto
3
Core Business: Multi-channel Focused on Electronics and Home Appliances
Net Revenues Breakdown by Product Type Net Revenues Breakdown by Channel
Other
8% E-commerce
Technology 24%
Furniture
14% 30%
Electronics and
house appliances
Sound &
Image Household
19% Appliances Brick & Mortar
29% 76%
Source: Company Filings, Team Estimates
4
Other
8% E-commerce
Technology 24%
Furniture
14% 30%
393 Stores
Southeast
221 Stores Electronics and

South house appliances 829 Physical Stores
197 Stores
Northeast
Sound & 701 Conventional Stores
18 Stores
Image
Midwest
Household
19%
9 Distribution
Appliances
129 Virtual Stores Brick & Mortar
Centers 29% 76%
5
Magazine Luiza E-commerce GMV

3422
3063
2724
Other 2059
1403
1876
8% E-commerce
1280
Technology 24%
Furniture
14% 30%
2012 2013 2014 2015 2016 1Q17 2Q17
E-commerce GMV Breakdown (2Q17)

Electronics and
house appliances(B2C)
Business-to-Consumer
95% GMV
Sound &
Image
Marketplace Household
19% 5% GMV Appliances Brick & Mortar
29% 76%
Gross-Merchandise-Volume (LTM): BRL 12.5 bn
6
Financial Services Are North of ~30% of Net Income
Net Income Breakdown by Segment (BRL mn)
70% 100%
187
26% 268
4% 70
11
Remaining Net Income (LTM)
50%/50% 50%/50%
with Itaú with Cardif
7
New Life for Magalu’s Strategy After Turnover
Same Store Sales
Digital Inclusion
+36 p.p.
Digitalization of Stores
4Q2013
3Q2013
1Q2014
2Q2014
3Q2014
4Q2014
1Q2015
2Q2015
3Q2015
4Q2015
1Q2016
2Q2016
3Q2016
4Q2016
1Q2017
2Q2017
Multi-Channel
EBITDA Margin
+2.4 p.p. Digital Platform

7,1%
5,5% 5,4%
4,7% 4,7%
3,7%
Digital Culture
2011 2012 2013 2014 2015 2016 Source: Company Filings, Team Estimates
8
Reasons
ReasonstotoGo LONG
LONG
ReadyFrase de Impacto
To Take Off
9
Reasons to Go LONG
High Top-Line Growth
Margin Improvement & Cash

Generation
Excess Returns
10
Reasons to Go LONG
High top-line growth
Margin improvement & Cash

What Are the Main Growth Drivers for
generation Magalu?
Excess Returns
11
Consumption Drivers Are Coming Back
Growing Purchasing Power and Low Inflation Rates Unemployment Reversal and Job Creation
14% 3 8%
2
9%
1 3%
3% 0
3%
-1 -2%
-2% -2
-2% -3 -7%
Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17
June-12 June-14 June-16
IPCA YoY Food IPCA YoY Retail Hardline IPCA YoY
Falling Interest Rates for Consumers Hardline Sales Rising with Customer Confidence
90 13%
Hardline Retail Sales

25%
Consumer Confidence
40% 10%
20%
Household Interest
30% 80 0%
15% 82
SELIC
YoY
Index
10% 20% -10%
70
Rates
5% 10% -20%
0% 0% 60
-24% 65 -30%
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Apr-13
Oct-13
Apr-14
Oct-14
Apr-15
Oct-15
Apr-16
Oct-16
Apr-17
Jul-13
Jul-14
Jul-15
Jul-16
Jul-17
Feb-16
Feb-17
Oct-15
Dec-15
Oct-16
Dec-16
Apr-16
Apr-17
Aug-15
Aug-16
Jun-16
Jun-17
SELIC Household Interest Rates
Consumer Confidence Index Hardline Retail Sales YoY
Source: Bloomberg, Euromonitor, IBGE Overview High Top-Line Growth Margins & Cash Excess Returns Valuation & Risks
12
Hardline Retail is Ready to Surf on the Macro Tailwinds
Hardline Retail Volume Growth vs. Household Consumption
Sales Growth per Segment (YoY) Growth
30%
20% 18%
15% Beta = 2.7
20%
10%
5% 2%
0% 10%
-5%
-10% 0%
-15%
-20% -10%
-25%
-20%
Retail Oil and Gas Food and beverage -9% -4% 1% 6% 11%
Supermarkets Clothing Hardline
Drugstores Books and Magazines Technology
Source: Bloomberg, Euromonitor, IBGE
13
Room For Higher E-commerce Penetration
Consumer Goods Online Sales (BRL bn) E-commerce Sales as % of Total Sales (by Country)
65 40%
31%
55
27% 26% India 2%
16% Growth
20%
14%
8% Brazil 3%
45
5%
0%
Japan 7%
35
CAGR 2011-2017 = 15%
-20% Germany 7%
25
21
16
19 20
-40%
USA 8%
15 13
8
10 UK 17%
-60%
5
China 19%
-5
2011 2012 2013 2014 2015 2016 2017E -80%
Source: E-bit, Euromonitor
14
Base Case Top-Line Snapshot: 20% CAGR 2018-2022
Gross Revenues Breakdown (BRL mn) CAGR 2018-2022 = 20%

Total
30.236
27.154 CAGR
23.770 1.329
B&M B2C Marketplace 20.155 1.056 94%
809
16.851 346 12.668
12.078
94
10.911 25%
8.878
11.268 17 6.879
11.438 10.427 5.117
3.833
1.876 2.724
2.059
11.640 12.930 14.083 15.187 16.239 9%
9.562 8.368 8.562 10.057
2014 2015 2016 2017E 2018P 2019P 2020P 2021P 2022P
15
Two-Stage B&M Estimates: Stronger Short-Term Pace
+200 Stores SSS Growth of 10%
CAGR = 8%
SSS = 9% 20.500
CAGR = 13% 19.469
18.367
SSS = 12% 17.299
16.239
15.187
14.083
12.930
11.640
10.057
2017E 2018P 2019P 2020P 2021P 2022P 2023P 2024P 2025P 2026P
BRL mn Source: Company Filings, Team Estimates
16
Two-Stage B&M Estimates: Slower Long-Term Pace
+200 Stores SSS Growth of 10% +40 Stores CPI-like SSS

CAGR = 6% SSS = 6%
CAGR = 8%
SSS = 9% 20.500
CAGR = 13% 19.469
18.367
SSS = 12% 17.299
16.239
15.187
14.083
12.930
11.640
10.057
2017E 2018P 2019P 2020P 2021P 2022P 2023P 2024P 2025P 2026P
BRL mn Source: Company Filings, Team Estimates
17
Two-Stage Growth B2C Estimates
B2C Gross Revenues (BRL mn)

CAGR 2022-2026 = 13%
CAGR 2018-2022 = 25%
20.855
19.266
16.753
14.568
12.668
10.911
8.878
6.879
5.117
3.833
2017E 2018P 2019P 2020P 2021P 2022P 2023P 2024P 2025P 2026P
Source: Statista, E-bit, Team Estimates
18
Two-Stage Growth B2C Estimates: Stronger Short-Term Pace
B2C Gross Revenues (BRL mn) Double-Digit Growth

CAGR 2022-2026Top-Notch
= 13% Integration
CAGR 2018-2022 = 25%
High Quality Service 20.855
19.266
16.753
14.568
12.668
10.911 Macro Conditions Rebound
8.878
6.879
5.117
3.833
15% Spread to Sector Growth

2017E 2018P 2019P 2020P 2021P 2022P 2023P 2024P 2025P 2026P
19
Two-Stage Growth B2C Estimates: Slower Long-Term Pace
US-LIKE MATURING GROWTH B2C Gross Revenues (BRL mn)

B2C Gross Revenues
US E-commerce Sales
CAGR 2022-2026 = 13%
BRL mn
15% CAGR2002-2017
20.855
CAGR 2017-2022 = X% 19.266
16.753
14.568
12.668
10.911
8.878
6.879
5.117
2.004
Dec-02
Aug-03
Dec-04
Dec-06
Dec-08
Dec-10
Dec-12
Dec-14
Dec-16
Apr-04
Apr-06
Apr-08
Apr-10
Apr-12
Apr-14
Apr-16
Aug-05
Aug-07
Aug-09
Aug-11
Aug-13
Aug-15
2017E 2018P 2019P 2020P 2021P 2022P 2023P 2024P 2025P 2026P
20
Understanding Marketplace Economics
GROSS REVENUES GMV TAKE-RATE
Source: Team Estimates
21
Constant
22
Similar Operations
~11% Take-Rate
Aggressive Pricing Policy
Source: B2W, Team Estimates
23
Marketplace Growth Driver
24

GMV/Traffic¹
Magazine Luiza 0.3x
B2W 2.2x
Mercado Libre 3.5x
Via Varejo 2.7x

Source: B2W, Via Varejo, Magazine Luiza, Mercado Libre, Team’s Estimates. Note: (1) Marketplace, 2016
25
2014 2015 2016 MGLU3 Marketplace

VVAR11 Marketplace
GMV/Traffic = 2.7x
vs GMV/Traffic = 0.3x
Traffic¹ 292 444 520
Mkt. GMV² - - 1400
GMV/Traffic - - 2.7x
Marketplace
Launch
Source: Company Filings, Team’s Estimates. Notes: (1) in million visits, (2) in BRL millions.
26
2014 2015 2016 MGLU3 Marketplace

VVAR11 Marketplace
GMV/Traffic = 2.7x
vs GMV/Traffic = 0.3x
Traffic¹ 292 444 520
Mkt. GMV² - - 1400
GMV/Traffic - - 2.7x 2019E GMV/Traffic = 2.7x

Marketplace
Launch Which Means a GMV of ~ BRL 950 mn by 2019
Source: Company Filings, Team’s Estimates. Notes: (1) in million visits, (2) in BRL millions.
27
Marketplace Estimates: 94% CAGR2018-2022
Gross Merchandise Value (BRL mm) Gross Revenues (BRL mm)
CAGR 2018-2022 = 94% CAGR 2018-2022 = 94%

12.189
9.692 1.329
1.056
7.422 809
3.179 346
862 94
2018 2019 2020 2021 2022 2018E 2019E 2020E 2021E 2022E
Source: Team’s Estimates
28
Magazine Will Gain 9% of Market-Share in E-commerce
19%
22%
19%
22%
19%
Sector’s CAGR 17-22
~13%
vs MGLU3 CAGR 17-22
~30%
19% 19%
16% 16% 17%

18%
15%
15%
17% 14%
16% 13%
12%
10%
8% +900 bps
7%
5% 5% 5% 6%
4%
5%
4%
3% 3% 3%
2012 2013 2014 2015 2016 2017E 2018P 2019P 2020P 2021P 2022P
29
Why We Believe It
Magalu’s Competitive Advantages
Magalu’s Seasoned and Innovative Management
30
Hardline Retail Peers
Net Revenues 9.5 bn 19.8 bn 18.1 bn 7.1 bn¹ 3.3 bn
Stores 830 966 1200 1000 245
Same-Store-Sales 27% 19% 3% - -
Gross Margin 31% 34% 30% 27%1 44%
EBITDA Margin 8% 5% 15% -1%1 12%

Source: Company Filings. Notes: (1) 2015
31
What Are Magalu Competitive Advantages?
Economies of Scale Customer Captivity
“For economies of scale to serve as a competitive advantage, then, they need to be

coupled with some degree of incumbent customer captivity.” Bruce Greenwald
Source: “Competition Demystified”, Team Estimates
32
What Really Matters For Customers?
Price
Customer Service
Other
Variety of
7%
Variety of Products brands
Timeliness of 3%
Timeliness of Delivery delivery
5%
Price
Variety of products
40%
8%
Customer
Service
37%
Source: Nielsen (2017)
33
Large Scale Gives Magalu Better Bargaining Power With Suppliers
Price
Customer Service
Variety of Products Hardline market share E-commerce market share

Timeliness of Delivery 38
27%
3%
7% Price 22%
19%
5%
11% 10% 11%
8%
40% 5% 6%
3% 3%
1%
Via Varejo Magazine Luiza Máquinas de Fast Shop Lojas CEM B2W MELI VVAR MGLU Netshoes Máquina Out
Vendas de Vendas
37%
Source: Bloomberg, Euromonitor
34
Focus On Consumer Experience Creates a Competitive Edge
Price
Customer Service
Variety of Products
Consumer centric Technology Better customer
Timeliness of Delivery
culture Investments experience
Close-knit approach in
3%
7% R&D Center Fast freight services
social media
5%
Strict selection of High customer service

8%
Talent investments
40% sellers grades
37%
Service Source: Team Estimates
35
Magalu is Increasing Product Assortment
Price
Customer Service
Variety of Products 118%

1200
Timeliness of Delivery 587%
550 SKUs (thous.)

3%
7% 500
Variety
250
80 50 Marketplace's
8% Sellers
40%
4Q16 2Q17 3Q17
HIGH SKU INCREASE + GROWING NUMBER OF SELLERS

37%
36
Integrated Logistics and Timeliness Of Delivery
Price
Customer Service
Variety of Products 9 Distribution Centers
Timeliness of Delivery
+800 stores
7%
Timeliness
5%
Integrated Logistics Stores DC
8% 9 Distribution
40% Centers
Better timeliness of delivery

37%

37
Why We Believe It
38
Best-In-Class Management
Family business open to new
Hardline Retail Expertise 1957 Successful
Companyturnaround
Foundation Foundation Cycle
opportunities
1986 First Distribution Center (Luiza Trajano)
50+ years of experience in
the Hardline Retail 2000 E-commerce launch Growth Cycle
2001 Luizacred JV with Itaú (Luiza Helena Trajano)
Several Business Cycles 2011 Company IPO Consolidation Cycle

(Marcelo Silva)
2014 Luizalabs creation
2016 Marketplace launch Digtal Transformation

Long-term vision 2017 Acquisition of Integracommerce (Frederico Trajano)

39
Best-In-Class Management
Family business open to new
It’s Hardline Retail Expertise
Frederico Trajano Top-notch Execution
opportunities
took over as CEO
Frederico
300
X years of experience in10%
8%
Successful Digital Trajano
250 the Hardline Retail 6% Transformation CEO
200 4%
2%
150 0%
Outstanding E-commerce
Several Business Cycles -2%
100
-4% Results
50 -6% André
-8% Fatala
0 -10%
Successful Channels CTO
Jul-14
Nov-14
Nov-15
Nov-16
Jul-15
Jul-16
Mar-14
Mar-15
Mar-16
Mar-17
Integration
EBITDA EBITDA Margin
40
Why We Believe It
41

Generation
Excess Returns
42
High top-line growth
Margin improvement & Cash

Will Growth Come With Profitability?
generation
Value Creation
43
Base Case 5-Year Estimates
Gross Margin
~200bps Increase Due to Marketplace Margin Effect

2017-2022
EBITDA Margin
~50bps Due to Higher Productivity and Marketplace Margin Effect
44
Breaking Down Gross Margin
B2C
Consolidated
Gross Margin
E-commerce
Marketplace
31%
B&M
45
B2C Margin Estimate
Gross Margins For Magalu’s B2C E-commerce
B2W 2012 2013 2014 2015 2016

Gross Margin 22% 23% 22% 21% 24%
Why This Proxy:

B2W 2012 Operation Was Fully 1P
Similar B2C’s Product Mix Than Magalu’s B2C One
2012’s Macro Conditions Not Far From Today’s

Source: B2W, Team’s Estimates
46
B2C
Consolidated
Gross Margin
E-commerce
Marketplace 100%
31%
B&M
47
B2C
Consolidated
Gross Margin
E-commerce
Marketplace
31%
B&M
48
We Estimate A 33% B&M Gross Margin
Gross Margin
34% Gross Margin

For Magalu’s B&M Why This Proxy:
27%¹ Average: Similar Product Mix
33% Biggest B&M Players

44%
30% Source: Company Filings, Team Estimates. Notes: (1) 2015
49
Gross Margin Estimates
MARKETPLACE MARGIN = 100%
33% 33% 33% 33% 33% 33% B&M
16.000,0
30,5% 30,6% 31,0% 31,9% 32,0% 32,2% CONSOLIDATED
30%
14.000,0
25%
12.000,0
10.000,0
22% 22% 22% 22% 22% 22% B2C20%
8.000,0 7.425
6.484 15%
5.331 8.321
6.000,0
4.385 10%
3.597
4.000,0 GROSS PROFIT
5%
2.000,0
- 0%
2017 2018 2019 2020 2021 2022
50
Base Case 5-Year Estimates
Gross Margin
~200bps Increase Due to Marketplace Margin Effect

2017-2022
EBITDA Margin
~50bps Due to Higher Productivity and Marketplace Margin Effect
51
Still Room For Efficiency
MOBILE MOBILE FAST

Store Productivity ESTOQUISTA VENDAS CHECKOUT
Complete rollout by late 2018
RETIRA LOJA STORAGE STORE INTO

20% of e-commerce AREA
Shoppable DC sales 30% of total sqm
SHOPPABLE DC
Vs. 40% Best Buy Room for 50% Complete rollout
by late 2019
52
Marketplace EBITDA Margin Estimate
Source: Mercado Libre, Team’s Estimates
Estimated EBITDA Margin

(Brazil, ex-complementary services)
34%
Why This Proxy:
Represents A Mature 3P-Only Brazilian Peer
Global 3P Peers’ Margins At ~32%

53
…and a Flattish Pace In The Long-Run
Sales Expenses Efficiency Gains Sales Expenses

as 18% of Net as 17% of Net
Revenues 1H17 Revenues 2018P
~18% of Net Revenues

2019-2022
Due To Marketplace Advertising Ramp-Up
54
Base Case Consolidated EBITDA Estimates
EBITDA Margin EBITDA
CAGR18-22 = 15%
2.420
9,6% 9,4% 9,4%
9,4% 9,4% 2.171
9,2% CAGR14-18 = 23%
1.910
1.622
7,5% 1.379
1.081
6,2% 715
605
465
5,2%
2014 2015 2016 2017 2018 2019 2020 2021 2022 2014 2015 2016 2017 2018 2019 2020 2021 2022
55
Gross Margin
~200bps increase due to marketplace margin effect

2017-2022
Will Magalu Generate Cash?

EBITDA Margin
~50bps due to higher productivity and marketplace margin effect
2017-2022 Source: Company Filings, Team Estimates

56
Working Capital: Lower Inventory Days Due to E-commerce
Days of Receivables (post-sec)
23
Working Capital (post-securitization of receivables)
22 21 21
20 20 20 20
18
318
2014 2015 2016 2017 2018 2019 2020 2021 2022
Days of Inventory
89
76 77 2014 2015 2016 2017 2018 2019 2020 2021 2022
71 69 68 67 65 64 (61)
2014 2015 2016 2017 2018 2019 2020 2021 2022
(320)
(381)
Days of Payables (474) (506)
131
(585)
(659)
108 111 109 108 107 105
(711)
104
92 WK (Post Secutirization)
2014 2015 2016 2017 2018 2019 2020 2021 2022 Source: Company Filings, Team Estimates
57
Working Capital: Pre-Sec Figures Reflect A Better Picture
Days of Receivables (pre-sec)
68
57 58 61 65 67 65 64 64 Working Capital
Post-Sec Pre-Sec
23 18,7%
18 22 21 20 21 20 20 20
15,1% 15,5% 14,4% 15,3% 14,9% 14,6% 14,7%
2014 2015 2016 2017 2018 2019 2020 2021 2022 13,3%
3.794
Days of Inventory 3.384
3.022
89 2.627
76 77
71 69 68 67 65 2.072
64 1.833 1.832
2014 2015 2016 2017 2018 2019 2020 2021 2022
1.357 1.267
Days of Payables
131
108 111 109 108 107 105 104 2014 2015 2016 2017 2018 2019 2020 2021 2022
92
WK (Pre Securitization) WK as % of Revenues
2014 2015 2016 2017 2018 2019 2020 2021 2022 Source: Company Filings, Team Estimates
58
We Expect A ~1.6bn CFO and ~70% Conversion to EBITDA by 2022
92% 92%
64% 65% 66% 66% CFO/EBITDA

59% 56%
3.500 3.000
2.420
2.171
3.000 2.500
2.500 1.910
1.622 2.000
2.000
1.379 1.440 1.605 1.500
1.500 1.081 1.240
715 657 818 915
694
1.000
465
1.000
428
500 500
- -
2015 2016 2017E 2018E 2019E 2020E 2021E 2022E
CFO EBITDA
59
Better-Than-Peers Generation Even Adjusting Discounted Receivables
113%
Via Varejo CFO¹ = BRL -0.2 bn
Lojas Americanas CFO¹ = BRL -2.6 bn
68% B2W CFO¹ = -1.7 bn
46% 47% CFO/EBITDA
35% 40%
3.500 3.000
20% 2.420
2.171
3.000 2.500
2.500 6% 1.910
1.622 2.000
2.000
1.379 1.500
1.500 1.081
715 1.000
465 526
1.000
1.004 1.144 500

765
500
-
487 485 329 -
69
2015 2016 2017E 2018E 2019E 2020E 2021E 2022E
CFO Higher Bar Receivables

Securitized EBITDA
Adjustment EBITDA
Source: Company Filings, Team Estimates; Notes: (1) 2016
60

Generation
Excess Returns
61
Can Magalu Sustain Returns Above Its Cost of Capital?
62
Continued Investment In Tech and a Less Capital Intensive Business
Capital Expenditures
2.2% 1.1%
of net revenues
274 282 269 294
257 255
31%
152 158
124
50%
of CAPEX in
Tech
2014 2015 2016 2017 2018 2019 2020 2021 2022

Technology Reform New Stores Logistics Others
63
High Returns On The Way
NOPLAT Margin Invested Capital Turnover ROIC
x12,8
3,6% 3,7% x10,7
x8,9 46,8%
x7,3 39,0%
2,2% 2,3% x6,3
20,1%
0,8% 14,2%
5,9%
2014 2015 2016 2017 2018 2014 2015 2016 2017 2018
2014 2015 2016 2017 2018
NOPLAT MARGIN EXPANSION

ROIC WILL REACH
+ 47% in 2018
IMPROVED CAPITAL EFFICIENCY
64
Excess Returns Even Adjusting For Discounted Receivables
NOPLAT Margin Invested Capital Turnover ROIC (Adjusted)
5,6% 3,9x 21,9%
5,3%
3,6x 3,6x 18,7%
3,4x
4,0% 3,2x
14,5%
3,3% 11,7% 11,3%
13,0% 12,8% 12,9%
2,5% 10,6%
8,4%
2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018
NOPLAT MARGIN EXPANSION

Avg. ROIC-WACC
+ spread of 10%
IMPROVED CAPITAL EFFICIENCY
65
Best-In-Class Pre-Sec ROIC Compared To Peers
NOPLAT Margin Inveted Capital Turnover Adjusted ROIC

7,9% 4,4x 22,9%
7,4%
3,6x
2,8x 2,9x
14,5%
4,0%
9,9% 10,5%
2,4% 1,3x
-1,2%
-3,5%

66

Generation
Excess Returns
67
Valuation
Reasons to LONG
Magazine Luiza Is aFrase de Company

Growth Impacto
68
10-year FCFE Methodology: Ke & Base Case Target Price
Cost of Equity FY18E Target Price Waterfall
BRL 45.0 BRL 98.9
Risk free rate 2,9%
Beta Adjusted ERP 5,7% 46%

CRP 3,7% BRL 18.1
BRL 35.7 18% 100%

Inflation Differential 1,5%
Cost of Equity 13,8% 36%
Terminal Growth Rate of 6.3%

Source: Bloomberg, NYU Stern, Team Estimates
69
Multiple-based Valuation
Exit Multiple 2020 Approach Peer Comps Approach

37 Forward 1yr. P/E (BRL) High Growth
Expectations Global Hardline Retailers Domestic General Retailers
32
27
Operational Turnaround Effect
22 Forward P/E 18E Median Forward P/E 18E Median
Deleverage Period + Strong Results
with Historical Discount with Historical Premium
17
12
7 22.6x 38.2x
2
-3
Nov-14
Nov-15
Nov-16
Sep-15
Mar-16
May-15
May-16
Sep-16
May-17
Sep-17
Jan-15
Jul-15
Jan-16
Jul-16
Jan-17
Jul-17
Mar-15
Mar-17
Fwd P/E 2020 = 23.5x IRR = 24.6% BRL 70.0 BRL 112.8
Source: Bloomberg, Team
Estimates
70
Risks
DR1 Execution Risks
DR2 Amazon Effect
UR2 DR3 Precarious Brazilian Logistics Infrastructure

DR2
DR4 Higher-than-expected Time for Families to
UR1 Deleverage
UR4 DR1
DR5 Lower-than-expected Benefits from Omni-
Channel Integration
DR4 UR1 Higher-than-expected Recovery of Economy
DR3
UR2 Reform in Correios
DR5 UR3 New Technologies and LuizaLabs
UR3
UR4 Maintenance or Increase in Tax Incentives
Source: Team Estimates Overview High Top-Line Growth Margins & Cash Excess Returns Valuation & Risks
71
Amazon: For Magalu, The Bark is Worse Than The Bite
Anti-amazon moat GMV Breakdown by Product Type
MGLU VVAR B2W MELI
Different Product Mix
Home
42% 24% NA NA
Appliances
Challenges Regarding Logistics
Electronics 32% 42% 50% 41%
Furniture NA 17% NA 17%
Peculiarities of the Hardline Retail
Others 26% 17% 50% 42%
Amazon weapons Amazon Investment in Comparison to

Indian Peers
Blank Check
3,622
Capacity for Customization (Benchmark: Amazon Entrance in India) 3,15
1,378 1,54
Amazon Consumer-Centric Culture Amazon Flipkart Snapdeal
72
Monte Carlo Simulation: Low Uncertainty to Our Model
SELL HOLD Target Price BUY 1,000,000 simulations
50 Stressed Variables
45
40
35
81% Risk Free Rate ERP
Certainty
Probability (%)
30
25 Country Risk LT GDP

20
15 Store Openings SSS

10
5 B2C spread-to-
Margins
0 sector growth
73
Thank you
Q&A
74
Appendix A: Index
• Appendix A: Income Statement
• Appendix K: Management and Board
• Appendix 1: Bull Scenario
• Appendix L: Field Research
Consolidated • Appendix 2: Bear Scenario
• Appendix M: M&A Historic
• Appendix A.2: Income Statement • Appendix 3: Adjusted ROIC Breakdown
• Appendix N: SWOT Analysis
Marketplace P&L • Appendix 4: Income Tax Payment Breakdown
• Appendix O: Porter Five Forces • Appendix 5: Board Compensation
• Appendix A.3: B&M and B2C Gross Margin
• Appendix P: Peers Multiples • Appendix 6: Management Compensation
• Appendix B: Balance Sheet
• Appendix Q: Main Competidors Overview • Appendix 7: Forward Multiples
• Appendix C: Cash Flow Statement
• Appendix R: Appliances Penetration in • Appendix 8: Historical Multiples
• Appendix D: Free Cash Flow to Equity
Brazil • Appendix 9: Market Profile
• Appendix D.2: ROE Dupont Analysis • Appendix 10: Implied Multiples
• Appendix S: Brazilian E-commerce
• Appendix E: Cost of Equity Calculation • Appendix 11: How We Differ From Consensus
Overview
• Appendix F: Beta Regression • Appendix 12: Reduced Reliance on Financial Services
• Appendix T: American Hardline Retail
• Appendix G: Historical adjusted ROIC • Appendix 13: 3Q17
Benchmark – Best Buy
breakdown • Appendix 14: Stock Price Since the Report
• Appendix U: Amazon • Appendix 15: Tornado Analysis
• Appendix H: E-commerce Growth Analysis
• Appendix V: Sensitivity Analysis • Appendix 16: Luizalabs
• Appendix I: Multiples Analysis
• Appendix W: IBM Watson Data Processing • Appendix 17: E-commerce Rationality
• Appendix J: Macroeconomic Assumptions
Analysis • Appendix 18: Board of Directors
• Appendix 19: Hardline Market-share
75
Appendix A: Index
• Appendix 20: Sanity Check
• Appendix 21: What Is Priced In?
• Appendix 22: What Is Priced In?
• Appendix 23: Management
• Appendix 24 : Historical Adjusted ROIC
• Appendix 25: CAPEX
• Appendix 26: Global Peers
• Appendix 27: Logistics CAPEX
76
Appendix A: Index
• Appendix A: Recommendation
• Appendix A.2: High Top Line Growth
• Appendix A.3: Margin Improvement
• Appendix B: Excess Returns
• Appendix C: Valuation
• Appendix D: Risks
77
Appendix A: Consolidated P&L
P&L 2014 2015 2016 2017E 2018P 2019P 2020P 2021P 2022P 2023P 2023P 2025P 2026P
Gross Revenues 11.505 10.498 11.372 13.998 16.935 20.256 23.888 27.291 30.386 33.623 37.132 41.039 43.846
Deductions (1.725) (1.520) (1.863) (2.201) (2.591) (3.075) (3.585) (4.081) (4.529) (4.999) (5.513) (6.084) (6.498)
Ne t R e ve n u e s 9.779 8.978 9.509 11.796 14.344 17.181 20.304 23.209 25.858 28.624 31.619 34.955 37.348
COGS (7.087) (6.400) (6.586) (8.199) (9.959) (11.850) (13.820) (15.785) (17.537) (19.389) (21.433) (23.712) (25.342)
G ro s s Pro f i t 2.692 2.579 2.923 3.597 4.385 5.331 6.484 7.425 8.321 9.235 10.185 11.243 12.006
Sales Expenses (1.746) (1.721) (1.776) (2.063) (2.442) (3.004) (3.683) (4.240) (4.775) (5.421) (6.177) (7.043) (7.743)
G&A (443) (458) (482) (553) (695) (851) (1.051) (1.194) (1.329) (1.473) (1.636) (1.821) (1.975)
E B IT 491 339 581 940 1.219 1.443 1.712 1.954 2.183 2.313 2.367 2.390 2.319
D&A (114) (126) (134) (142) (160) (179) (198) (217) (237) (258) (282) (307) (334)
E B ITD A 605 465 715 1.081 1.379 1.622 1.910 2.171 2.420 2.571 2.649 2.697 2.653
Financial Result (361) (486) (504) (458) (436) (463) (357) (335) (329) (323) (304) (294) (262)
EBT 130 (147) 77 487 800 1.004 1.387 1.659 1.902 2.045 2.127 2.168 2.136
Tax payments (4) 82 9 (122) (234) (299) (424) (510) (585) (624) (636) (636) (610)
Tax rate 3% 55% -12% 25% 29% 30% 31% 31% 31% 31% 30% 29% 29%
Ne t In co me 129 (66) 87 365 566 704 963 1.149 1.317 1.421 1.490 1.532 1.526

Home
78
Appendix A.2: Marketplace P&L
Marketplace P&L 2017E 2018P 2019P 2020P 2021P 2022P 2023P 2023P 2025P 2026P
Gross Revenues 17 94 346 809 1.056 1.329 1.588 1.826 2.100 2.273
Discounts -1 -5 -17 -40 -53 -66 -79 -91 -105 -114
% of Net Revenues 5% 5% 5% 5% 5% 5% 5% 5% 5% 5%
Net Revenues 16 89 329 769 1.004 1.262 1.509 1.735 1.995 2.160
Gross Profit 16 89 329 769 1.004 1.262 1.509 1.735 1.995 2.160
Gross Margin 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Total Expenses -12 -70 -250 -578 -733 -911 -1.056 -1.214 -1.397 -1.512
Sales Expenses -9 -49 -175 -404 -513 -638 -739 -850 -978 -1.058
as % of Total Expenses 70% 70% 70% 70% 70% 70% 70% 70% 70% 70%
as % of Net Revenues 55% 55% 53% 53% 51% 51% 49% 49% 49% 49%
G&A Expenses (4) (21) (75) (173) (220) (273) (317) (364) (419) (453)
as % of Total Expenses 30% 30% 30% 30% 30% 30% 30% 30% 30% 30%
EBIT 4 20 79 191 271 351 453 520 599 648

D&A 0 -3 -10 -23 -30 -38 -45 -52 -60 -65
EBITDA 4 22 89 214 301 389 498 572 658 713
EBITDA Margin 25% 25% 27% 28% 30% 34% 34% 34% 34% 34% Home
Source: Team Estimates 79
Appendix B.1: Total Assets
Assets 2014 2015 2016 2017E 2018P 2019P 2020P 2021P 2022P 2023P 2023P 2025P 2026P
SHORT-TE RM ASSE TS
Cash & Equivalents 863 1.115 1.418 2.374 2.791 3.131 3.451 3.801 4.151 4.508 4.865 5.220 5.170
Receivables 618 435 581 691 796 979 1.127 1.263 1.408 1.548 1.707 1.885 1.972
Inventory 1.473 1.353 1.597 1.598 1.892 2.198 2.514 2.805 3.080 3.382 3.711 4.072 4.265
Correlated Parts 93 86 64 47 47 47 47 47 47 47 47 47 47
Tax Receivables 296 334 212 183 183 183 183 183 183 183 183 183 183
Other Assets 53 37 48 90 90 90 90 90 90 90 90 90 90
To ta l Sho r t-Ter m As s ets 3.396 3.361 3.920 4.984 5.799 6.628 7.413 8.190 8.958 9.758 10.603 11.497 11.728
LONG TE RM ASSE TS
Bonds & Securities - 47 - - - - - - - - - - -
Receivables 5 3 4 4 4 4 4 4 4 4 4 4 4
Deferred Income Tax & IoE 146 229 242 237 237 237 237 237 237 237 237 237 237
Tax Receivables 106 177 224 182 182 182 182 182 182 182 182 182 182
Legal Deposites 210 248 292 297 297 297 297 297 297 297 297 297 297
Other Assets 52 54 52 41 41 41 41 41 41 41 41 41 41
Investments on Controlleds 281 297 294 312 312 312 312 312 312 312 312 312 312
Net PP&E & Intangibles 1.055 1.085 1.073 1.190 1.304 1.380 1.464 1.516 1.574 1.635 1.703 1.770 1.818
Accumulated D&A (608) (730) (859) (970) (1.130) (1.309) (1.507) (1.724) (1.961) (2.219) (2.501) (2.808) (3.142)
Gross PP&E & Intangibles 1.663 1.815 1.932 2.160 2.434 2.689 2.971 3.240 3.535 3.854 4.204 4.578 4.960
To ta l Lo ng -Ter m As s ets 1.855 2.141 2.181 2.262 2.376 2.452 2.536 2.588 2.646 2.707 2.775 2.842 2.890
TOTAL ASSE TS 5.251 5.502 6.101 7.245 8.175 9.080 9.949 10.778 11.604 12.465 13.378 14.339 14.617 Home
Appendix B.2: Total Liabilities
Liabilities 2014 2015 2016 2017E 2018P 2019P 2020P 2021P 2022P 2023P 2023P 2025P 2026P
SHORT-TE RM LIABILITIE S
Suppliers 1.790 1.894 2.365 2.487 2.977 3.498 4.042 4.544 5.014 5.535 6.107 6.741 7.059
Short Term Debt 591 568 838 719 719 719 719 719 719 719 719 719 719
Social Benefits 167 154 188 192 192 192 192 192 192 192 192 192 192
Tax Payables 45 31 40 46 46 46 46 46 46 46 46 46 46
Correlated Parts 80 68 73 60 60 60 60 60 60 60 60 60 60
Tax Splitted-Up 7 0 0 0 0 0 0 0 0 0 0 0 0
Deferred Revenues 38 41 40 43 43 43 43 43 43 43 43 43 43
Dividends Payable 18 0 12 0 0 0 0 0 0 0 0 0 0
Other Payables 95 118 115 163 163 163 163 163 163 163 163 163 163
Sho r t-Ter m Lia b ilities 2.831 2.875 3.672 3.709 4.200 4.721 5.265 5.766 6.237 6.758 7.330 7.964 8.281
LONG-TE RM LIABILITIE S
Long-Term Debt 1.120 1.255 1.011 663 663 663 663 663 663 663 663 663 663
Tax, Civil and Labor Provs 266 243 284 287 287 287 287 287 287 287 287 287 287
Deferred Revenues 316 551 509 489 489 489 489 489 489 489 489 489 489
Other Payables 50 2 3 3 3 3 3 3 3 3 3 3 3
Lo ng -Ter m Lia b ilities 1.752 2.052 1.807 1.441 1.441 1.441 1.441 1.441 1.441 1.441 1.441 1.441 1.441
TOTAL LIABILITIE S 4.583 4.926 5.479 5.151 5.641 6.162 6.706 7.208 7.678 8.199 8.771 9.405 9.723
Home
Appendix B.3: Total Equity
Equity 2014 2015 2016 2017E 2018P 2019P 2020P 2021P 2022P 2023P 2023P 2025P 2026P
E QUITY
Capital 607 607 607 1.721 1.721 1.721 1.721 1.721 1.721 1.721 1.721 1.721 1.721
Capital Reserves 10 15 19 22 22 22 22 22 22 22 22 22 22
Treasury Shares -20 -10 -29 -29 -29 -29 -29 -29 -29 -29 -29 -29 -29
Legal Reserve 16 16 20 21 21 21 21 21 21 21 21 21 21
Profit Retention's Reserve 57 0 3 0 0 0 0 0 0 0 0 0 0
Patrimonial-Test Adjust -1 -2 1 2 2 2 2 2 2 2 2 2 2
Accumulated Profits (Losses) 0 -50 0 359 797 1.181 1.506 1.834 2.190 2.530 2.870 3.198 3.158
Total Equity 668 576 622 2095 2533 2918 3242 3570 3926 4266 4607 4934 4895
Lia b ilities & E quity 5.251 5.502 6.101 7.245 8.175 9.080 9.949 10.778 11.604 12.465 13.378 14.339 14.617
As s ets 5.251 5.502 6.101 7.245 8.175 9.080 9.949 10.778 11.604 12.465 13.378 14.339 14.617
Home
Appendix C: Consolidated Cash Flow Statement
Cash Flow 2014 2015 2016 2017E 2018P 2019P 2020P 2021P 2022P 2023P 2023P 2025P 2026P
Net Income 129 (66) 87 365 563 695 935 1.096 1.231 1.298 1.327 1.324 1.268
Depreciation & Amortization 114 126 134 142 160 179 198 217 237 258 282 307 334
Receivables (149) 113 (190) (133) (104) (183) (148) (136) (144) (141) (158) (178) (88)
Inventory (240) 55 (300) (40) (294) (306) (316) (291) (275) (302) (329) (361) (193)
Tax Receivables (23) (110) 76 71 - - - - - - - - -
Other Assets (51) (17) (45) (22) - - - - - - - - -
Change in Operating Assets (464) 41 (459) (124) (398) (489) (464) (427) (419) (443) (488) (539) (281)
Suppliers 138 104 471 122 491 521 544 501 471 521 573 634 318
Other Liabilities (38) (31) 51 9 - - - - - - - - -
Change in Operating Liabilities 100 73 522 130 491 521 544 501 471 521 573 634 318
CASH FROM OPERATIONS (CFO) 91 428 657 694 816 906 1.213 1.387 1.520 1.634 1.694 1.726 1.638
Total Capex (152) (158) (124) (257) (274) (255) (282) (269) (294) (319) (351) (374) (381)
CASH FROM INVESTING (CFI) (153) 60,8 (136) (254) (274) (255) (282) (269) (294) (319) (351) (374) (381)
Change in Gross Debt 225 (141) (229) (577) - - - - - - - - -
Dividends paid (31) (33) - (22) (125) (311) (611) (768) (876) (958) (986) (997) (1.307)
Treasury Shares Acquired (40) (16) (36) (0) - - - - - - - - -
CASH FROM FINANCING (CFF) 153 -190 -265 515 -125 -311 -611 -768 -876 -958 -986 -997 -1.307
Beginning Cash & Equivalents 1.681 2.485 3.292 4.949 8.793 10.038 10.947 11.983 13.123 14.291 15.470 16.622 17.082
Ending Cash & Equivalents 2.544 2.737 3.595 5.904 9.210 10.378 11.267 12.332 13.472 14.648 15.828 16.977 17.032
Change in Cash & Equivalents 863 252 303 956 417 340 320 350 349 357 357 355 -50
Home
Appendix D: Free Cash Flow
Free Cash Flow 2014 2015 2016 2017E 2018P 2019P 2020P 2021P 2022P 2023P 2023P 2025P 2026P
CF From Operations 4.412 (80) 532 1.067 1.892 2.180 2.375 2.480 2.622 2.815 2.993 3.166 2.596
NOPAT 442 13 (449) 717 863 1.014 1.190 1.356 1.517 1.615 1.672 1.707 1.686
Net Working Capital 3.881 (198) 860 234 889 1.010 1.008 929 889 963 1.060 1.173 598
Depreciation & Amortization 114 126 134 142 160 179 198 217 237 258 282 307 334
Deferred Revenues (25) (20) (14) (26) (20) (23) (21) (22) (21) (22) (22) (22) (22)
CF From Investing (152) (158) (124) (257) (274) (255) (282) (269) (294) (319) (351) (374) (381)
Capex (152) (158) (124) (257) (274) (255) (282) (269) (294) (319) (351) (374) (381)
CF From Financing 156,7 32,9 549 (826) (315) (340) (281) (293) (323) (360) (395) (439) (480)
Financial Result (361) (486) (504) (461) (444) (482) (403) (420) (463) (514) (557) (612) (658)
Change In Debt 482 112 25 (467) - - - - - - - - -
Interest Burden 35 407 1.027 102 128 142 121 127 140 154 162 173 178
FCFF 4.261 (237) 407 1.255 1.618 1.925 2.093 2.211 2.327 2.496 2.642 2.791 2.215
FCFE 4.417 (204) 956 1.097 1.302 1.584 1.812 1.918 2.004 2.136 2.248 2.352 1.735
Home
Appendix D.2: ROE Dupont Analysis
EBIT Margin Asset Turnover Interest Burden ROA (pre-tax) Leverage Ratio
1,9x
8,0% 8,5% 9,5% 9,6x 9,8x
1,7x 7,9x
6,1% 6,6%
5,0% 1,6x 1,6x
3,8% 1,6x 3,5x 3,1x
2014 2015 2016 2017 2018 2,5%
1,3%
- - -
- - - 2016 2017 2018
2014 2015 2014 2015 2016 2017 2018
2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 6,9% 6,3% 5,3% 2,7%
8,8% 8,2%
ROE
ROE (pre-tax) 1 - Income Tax Rate
18,9% 21,1%
29,8% 17,2%
23,0% 112,3% 13,9%
19,5% 97,1%
12,4% 74,9% 70,7%
44,6%
2014 2015 2016 2017 2018

2014 2015 2016 2017 2018 2014 2015 2016 2017 2018
- -
25,6% 11,4%
LT Average
ROE-Ke spread
of +10% Home
- 30%
70%
90%
110%
130%
150%
50%

10%
15%
20%
0%
5%
Jun-14
Jun-14
Sep-14
Sep-14
Dec-14
Dec-14
Mar-15
MGLU3
MGLU3
Mar-15
Jun-15 Jun-15
Sep-15 Sep-15
Dec-15 Dec-15
LAME3
EBIT Margin
LAME3
Mar-16 Mar-16
Jun-16 Jun-16
Income Tax Burden (1-t)

Sep-16 Sep-16
Dec-16 Dec-16
VVAR3
VVAR3
Mar-17 Mar-17
Jun-17 Jun-17
0%
5%
10%
15%
-5%
-10%
0,0x
0,5x
1,0x
1,5x
2,0x
2,5x
3,0x
Jun-14 Jun-14
Sep-14 Sep-14
Dec-14 Dec-14
Mar-15
MGLU3
MGLU3
Mar-15
Jun-15 Jun-15
Sep-15
Sep-15
Dec-15
Dec-15
LAME3
LAME3
Mar-16
Mar-16
Jun-16
Asset Turnover
Jun-16
ROA (pre-tax)
Sep-16
Sep-16
Dec-16
VVAR3
VVAR3
Dec-16
Mar-17
Mar-17
Jun-17
Jun-17
0,0x
0,0x
-0,2x
-0,1x
-0,1x
-0,1x
-0,1x
-0,1x
0,0x
2,0x
4,0x
6,0x
8,0x
10,0x
12,0x
Jun-14 Jun-14
Sep-14 Sep-14
Dec-14 Dec-14
Mar-15 Mar-15
MGLU3
MGLU3
Jun-15 Jun-15
Sep-15 Sep-15
Dec-15 Dec-15
LAME3
LAME3
Mar-16 Mar-16
Interest Burden
Jun-16 Jun-16
Leverage Ratio
Sep-16 Sep-16
VVAR3
VVAR3
Dec-16 Dec-16
Mar-17 Mar-17
Jun-17 Jun-17
Home
86
Return On Equity
40%
30%
20%
10%
0%
-10%
-20%
-30%
-40%
Jun-14
Jun-15
Jun-16
Jun-17
Dec-14
Mar-15
Dec-15
Mar-16
Dec-16
Mar-17
Sep-14
Sep-15
Sep-16
MGLU3 VVAR3 LAME3
Home
Appendix F: Beta Regression
For the Beta calculation, the team has calculated the weekly return of the stock MGLU3 versus the weekly return of IBOV, for the last 3
years, reaching the value of 1.02 unadjusted (or raw) Beta and 1.01 for the adjusted Beta.
1,2 Beta
Raw Beta 1.02
1,15 Adjustd Beta 1.01
1,1
Note: For the Beta adjustment the Team used the
Blume Adjustment:
2 1
1,05 𝐴𝑑𝑗𝑢𝑠𝑡𝑒𝑑 𝑏𝑒𝑡𝑎 = 𝑅𝑎𝑤 𝐵𝑒𝑡𝑎 +
3 3
Regression Statistics
1
Multiple R 37%
R Square 14%
0,95
Adjusted R Square 13%
Standard Error 8%
0,9
0,70 0,90 1,10 1,30 1,50 1,70
Home
0%
2%
4%
6%
8%
10%
12%
Jun-14
Aug-14
Oct-14
Dec-14
Feb-15
Apr-15
MGLU3

Jun-15
Aug-15
Oct-15
Dec-15
Feb-16
VVAR3
Apr-16
Jun-16 NOPLAT Margin
Aug-16
Oct-16
Dec-16
Feb-17
LAME
Apr-17
Jun-17
0,00%
2,00%
4,00%
6,00%
8,00%
10,00%
12,00%
14,00%
Jun-14
Aug-14
Oct-14
Dec-14
Feb-15
MGLU3
Apr-15
Jun-15
Aug-15
Oct-15
Dec-15
Feb-16
VVAR3
Apr-16
Jun-16
Aug-16
Oct-16
Appendix G: NOPLAT Breakdown
Dec-16
Adjusted EBIT Margin
LAME
Feb-17
Apr-17
Jun-17
50%
60%
70%
80%
90%
100%
110%
120%
130%
150%
140%
Jun-14
Aug-14
Oct-14
Dec-14
Feb-15
Apr-15
MGLU3
Jun-15
Aug-15
Oct-15
Dec-15
Feb-16
VVAR3
Apr-16
Jun-16
Aug-16
Tax Burden (1-t)
Oct-16
Dec-16
Feb-17
LAME
Home
Apr-17
Jun-17
89
0%
1%
2%
3%
4%
Jun-14

Sep-14
Dec-14
Mar-15
MGLU3
Jun-15
Sep-15
Dec-15
Mar-16
VVAR3
Jun-16
Sep-16
Dec-16
Mar-17
LAME
Jun-17
Disc. Receivables Cost/Revenues

0,00%
2,00%
6,00%
8,00%
10,00%
12,00%
14,00%
4,00%
Jun-14
Aug-14
5%
10%
15%
20%
25%
30%
35%
Oct-14
Jun-14 Dec-14
Sep-14 Feb-15
MGLU3
Dec-14 Apr-15
Jun-15
Mar-15
MGLU3
Aug-15
Jun-15
Oct-15
Sep-15
Dec-15
Dec-15 Feb-16
VVAR3
Mar-16 Apr-16
VVAR3
Jun-16
Gross Margin
Jun-16
Aug-16
Sep-16
Adjusted EBIT Margin
Oct-16
Dec-16
Dec-16
LAME
Mar-17
Feb-17
LAME
Jun-17 Apr-17
Jun-17
25%
27%
29%
31%
33%
35%
37%
39%
Appendix G: Adjusted EBIT Breakdown
Jun-14
Sep-14
Dec-14
Mar-15
MGLU3
Jun-15
Sep-15
Dec-15
Mar-16
VVAR3
Jun-16
Expenses/Revenues
Sep-16
Dec-16
Mar-17
LAME
Jun-17
Home
90
0,0
2,0
6,0
4,0
8,0
10,0
12,0
Jun-14
Aug-14
Oct-14
Dec-14
Feb-15
MGLU3
Apr-15

Jun-15
Aug-15
Oct-15
Dec-15
Feb-16
Apr-16
VVAR3
Jun-16
Aug-16
Oct-16
Dec-16
Feb-17
LAME
Invested Capital Turnover
Apr-17
Jun-17
0%
5%
10%
15%
20%
25%
-5%
Jun-14 -10%
Sep-14
Dec-14
Mar-15
MGLU3
Jun-15
Sep-15
Dec-15
Mar-16
VVAR3
Jun-16
Sep-16
Dec-16
Mar-17
LAME
Working Capital/Revenues
Jun-17
5%
15%
25%
35%
45%
55%
65%
Jun-14
Aug-14
Oct-14
Dec-14
Feb-15
MGLU3
Apr-15
Jun-15
Aug-15
Oct-15
Dec-15
Feb-16
Apr-16
VVAR3
Jun-16
Aug-16
Oct-16
Appendix G: Invested Capital Turnover Breakdown
Dec-16
Fixed Assets/Revenues
Feb-17
LAME
Apr-17
Home
Jun-17
91
0%
5%
10%
15%
20%
25%
30%
35%
45%
40%
Jun-14
Aug-14
Oct-14
Dec-14
Feb-15
MGLU3
Apr-15

Jun-15
Aug-15
Oct-15
Dec-15
Feb-16
Apr-16
VVAR3
Jun-16
Aug-16
Adjusted ROIC
Oct-16
Dec-16
Feb-17
LAME
Apr-17
Jun-17
0%
2%
4%
6%
8%
10%
12%
Jun-14
Sep-14
Dec-14
Mar-15
MGLU3
Jun-15
Sep-15
Dec-15
Mar-16
VVAR3
Jun-16
NOPLAT Margin
Sep-16
Dec-16
Mar-17
LAME
Jun-17
2,0
4,0
6,0
8,0
0,0
10,0
12,0
Appendix G: Adjusted ROIC Breakdown
Jun-14
Sep-14
Dec-14
Mar-15
MGLU3
Jun-15
Sep-15
Dec-15
Mar-16
VVAR3
Turnover
Jun-16
Sep-16
Invested Capital
Dec-16
Mar-17
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LAME
Jun-17
92
Appendix H: E-commerce Growth Analysis
Take-rate assumption: B2W proxy MGLU Take Rate: ~10,9%

calculation
MGLU Marketplace has a more

Take-rate = GMVmarketplace premium service
Sellers revenues
The germinal phase could drive
down its take-rate in order to
attract vendors
Sellers revenues = Total GMV – E-commerce Revenues
Sensibility analysis on Appendix
X
Home
Appendix H: E-commerce Growth Analysis
Marketplace ramp-up projection: VVAR proxy
M GLU3 2014 2015 2016
Site tr a ffic 182,5 232 198,5
GMV ma r ketp la ce * 50
Magazine Luiza Marketplace GMV/Traffic is well below its main
GMV ma r ketp la ce/ Traffic 0,3
peers...
BTOW3 2014 2015 2016

Site tr a ffic 592,5 882 978
GMV ma r ketp la ce 2179 ... thus, we projected the case in which Magalu increase its Traffic the
GMV ma r ketp la ce/ Traffic 2,2 same way VVAR11 did and also reach VVAR current GMV/Traffic. That
gave us the following MGLU projected numbers:
M E LI 2014 2015 2016
Site tr a ffic 1220
GMV ma r ketp la ce 4312
GMV ma r ketp la ce/ Traffic 3,5 Mar ketplace GMV 2yr E 951,1
VVAR11 2014 2015 2016 Tr affic 2yr E 353,3
Site tr a ffic 292,2 444,5 520
GMV ma r ketp la ce 1400
GMV ma r ketp la ce/ Traffic 2,7 Which we adopted for out valuation.
(1): MGLU 2016YE marketplace GMV was estimated to be 5% of total GMV, as the management estimated in
quarterly result conference
Home
Appendix I: Multiples Analysis
Peer Multiples 2: General Retailers
Forward P/E Forward P/E E V / Forward E B ITD A E V / Forward E B ITD A
Company Name ( Current) ( Hi stori cal Average) ( Current) ( Hi stori cal Average)
MGLU3 BZ Equity 37,30 x 13,65 x 14,23 x 3,86 x
PCAR4 BZ Equity 34,29 x 19,00 x 9,76 x 5,55 x
LREN3 BZ Equity 33,72 x 15,90 x 18,00 x 8,82 x
RADL3 BZ Equity 47,00 x 24,61 x 22,62 x 10,41 x
NATU3 BZ Equity 23,77 x 16,08 x 9,89 x 8,06 x
ARZZ3 BZ Equity 32,51 x 15,35 x 21,39 x 9,52 x
HYPE3 BZ Equity 24,87 x 16,00 x 16,68 x 11,62 x
HGTX3 BZ Equity 19,84 x 10,04 x 18,00 x 7,75 x
LAME4 BZ Equity 65,90 x 27,78 x 11,76 x 7,87 x
LLIS3 BZ Equity 79,03 x 36,83 x 8,38 x 6,79 x
GUAR3 BZ Equity 29,75 x 9,99 x 14,16 x 5,19 x
AMAR3 BZ Equity 94,40 x 43,75 x 7,42 x 4,99 x
ALPA4 BZ Equity 18,28 x 8,80 x 12,88 x 6,07 x
GRND3 BZ Equity 11,48 x 8,47 x 12,29 x 7,79 x
TECN3 BZ Equity 9,10 x 5,34 x 6,30 x 5,60 x
Maximum 94,40 x 43,75 x 22,62 x 11,62 x

75th Percentile 43,82 x 23,21 x 17,67 x 8,63 x
Median 32,51 x 15,90 x 12,88 x 7,75 x
25th Percentile 21,80 x 10,01 x 9,82 x 5,57 x
Minimum 9,10 x 5,34 x 6,30 x 3,86 x
Home
Source: Team Estimates, Bloomberg 95
Appendix J: Macroeconomic Assumptions
2013 2014 2015 2016 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E Long run
GDP 2,3% 2,3% 2,3%

3,0% 0,5% -3,8% -3,6% 0,8% 3,0% 3,4% 2,4% 2,2% 2,3%
GDP per capta 2,1% -0,4% -4,6% -4,4% -0,2% 0,5% 0,7% 1% 1% 1% 1% 1% 1%
IPCA
5,9% 6,4% 10,7% 6,3% 3,0% 3,8% 3,8% 3,7% 3,8% 3,9% 3,9% 3,9% 3,9%
IGP-M 3,9% 3,9% 3,9%
5,5% 3,7% 10,5% 7,2% -1,2% 4,2% 3,9% 3,7% 3,8% 3,9%
SELIC (FY) 7,2% 7,2% 7,2%
10,0% 11,7% 14,2% 13,7% 7,0% 6,5% 6,5% 7,0% 7,0% 7,0%
Real Interest Rate 3,9% 5,0% 3,2% 7,0% 3,9% 2,6% 2,6% 3,1% 3,1% 3,0% 3,0% 3,0% 3,0%
CDI (12M) 6,7% 6,7% 6,7%

9,7% 11,5% 14,1% 13,6% 7,0% 6,3% 6,3% 6,8% 6,8% 6,8%
Unemployment 5,4% 4,8% 6,9% 12,6% 12,5% 12% 10,5% 9% 8% 7% 7% 7% 7%
1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17E 4Q17E 1Q18E 2Q18E 3Q18E 4Q18E 1Q19E 2Q19E
GDP (yoy)
-5,4% -3,6% -2,9% -2,5% -3,6% -0,4% 0,3% 1,2% 2,1% 0,8% 2,2% 2,5% 2,5% 2,5%
IPCA (monthly)
2,6% 1,7% 1,0% 0,7% 6,3% 1,0% 0,2% 0,5% 1,2% 3,0% 1,4% 0,9% 1% 1%
SELIC (FY)
14,3% 14,3% 14,3% 13,8% 13,8% 12,3% 10,3% 8,3% 7,0% 7,0% 6,5% 6,5% 6,5% 6,5%
Unemployment
11,2% 11,6% 11,8% 12% 13,6% 13% 12,8% 12,5% 12,5% 12,5% 12% 12% 10,5% 10,5%
Home
Source: Team Estimates, Itaú BBA 96
0
200
300
400
500
600
100
160.000
165.000
170.000
175.000
180.000
185.000
190.000
195.000
Jan-11
mar/12
Apr-11
jun/12 Jul-11
set/12 Oct-11
Jan-12
dez/12
Apr-12
mar/13
Jul-12
jun/13
Source: Team Estimates, JP Morgan, IBGE

Oct-12
set/13 Jan-13
Apr-13
dez/13
Jul-13
mar/14
Oct-13
jun/14 Jan-14
set/14 Apr-14
Jul-14
dez/14
Oct-14
mar/15 Jan-15
jun/15 Apr-15
set/15 Jul-15
Oct-15
dez/15
Figure J.3: Real wage (R$)
Jan-16
Figure J.1: EMBI + Brazil-Risk
mar/16 Apr-16
jun/16 Jul-16
set/16 Oct-16
Jan-17
dez/16
Apr-17
mar/17 Jul-17
jun/17 Oct-17
0
5
10
15
20
25
30
35
Mar-11
R$-
R$0,50
R$1,00
R$1,50
R$2,50
R$3,00
R$3,50
R$4,00
R$4,50
R$2,00
Jun-11
jan/11 Sep-11
abr/11 Dec-11
jul/11 Mar-12
out/11
Jun-12
jan/12
Sep-12
abr/12
Dec-12
jul/12
out/12 Mar-13
jan/13 Jun-13
abr/13 Sep-13
jul/13 Dec-13
out/13
Figure J.4: BRL x USD (R$)
Mar-14
jan/14
Jun-14
abr/14
Figure J.2: % of families in Default
Sep-14
Appendix J: Macroeconomic Assumptions
jul/14
Dec-14
out/14
jan/15 Mar-15
abr/15 Jun-15
jul/15 Sep-15
out/15 Dec-15
jan/16 Mar-16
abr/16
Jun-16
jul/16
Sep-16
out/16
Dec-16
jan/17
abr/17 Mar-17
jul/17 Jun-17
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97
Appendix K: Management & Board
Name Background
Frederico Trajano* Mr. Trajano holds a degree in business administration from FGV, and he has a master's degree in finance
Chief Executive Officer from University of California – Berkeley. He started his career in the retail and consumer goods
department of Deutsche Bank Securities from1998 and 1999. He worked in the technology, Internet and
telecommunications segments of Westsphere Equity Investors from 1999 and 2000. He joined the
Magazine Luiza in 2000, at which time he was responsible for the e-commerce department. In 2002 Mr.
Rodrigues became the Head of the Marketing Department. In 2005, he was elected statutory
Commercial Executive Officer, and in 2010, he was elected Executive Officer for Sales and Marketing. In
2015 he became the President of the Company.
André Fatala Mr. Fatala graduated as a Data Processing Technician from the Etec / SP. He began his professional
Chief Technology Officer career in 2000 in Submarino as a developer where he participated in the construction of a large scale
ecommerce platform. He was product manager of Predicta. He started his career in Magazine Luiza in
2010 in the e-commerce technology team. In 2011 he was responsible for the development of Magazine
Você and afterwards for the Research and Development area of the Company - who came to become
Luizalabs. In 2015, he became Luizalabs Director and started to lead the development of sales channels -
e-commerce and physical stores - delivering Digital Transformation projects such as Mobile Sales and
the Marketplace platform. He is currently Chief Technology Officer.
Home
Name Background
Mr. Garcia has a degree in business administration from Uni FACEF and completed a postgraduate programme in business
Fabrício Bittar Garcia* administration at USP. He started his career at Magazine Luiza in commercial department in 1996. He served as Assistant
Manager of Purchasing in 2003, and he was promoted to Assistant Officer of Purchasing. He served as Senior Officer of
VP of Operations Purchasing from 2006 and 2009. In August 2010, he became head of the Commercial Department. In 2016 he was elected VP
of Operations.
Mr. Bellíssimo Rodrigues obtained a degree in administration FGV. He started his career in the capital markets department of
Roberto Belissimo Rodrigues Bradesco BBI where he worked from 1997 to 2001. He joined Magazine Luiza in May 2001, holding the position of Head of
the Budget Department, Manager Controller, Chief Controller, and in 2010 he became the Chief Financial Officer and Investor
Chief Financial Officer and IRO
Relations Officer.
Maria Isabel Bonfim de Oliveira Ms. Oliveira obtained a degree in technical accounting from Instituto Francano de Ensino in 1982. She joined Magazine Luiza
in 1982 as accountant and in 1992 became Budget Department Manager. She became Chief Controller in 2001, and in 2010
Chiel Controller Officer she became the Administrative Officer and Controller.
Mr. Galanternick has a degree in business administration from PUC-Rio, has an Executive MBA from FAAP. He began his
Eduardo Galanternick career in Carrefour.com and then had his first stint as director in e-commerce Magazine Luiza. He held the position of CMO in
Director of E-commerce B2W, before returning to Magazine Luiza to lead the e-commerce area. Currently, Eduardo Galanternick is Executive Director
of E-commerce
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Name Background
Ms. Rodrigues has a bachelor’s degree in Law from the Law School of Franca in 1972.
Figure K.2 – Board She is Frederico Trajano´s mother, current CEO of the Company, and niece of the
founders Luiza Trajano Donato and Pelegrino José Donato. Joined Magazine Luiza S.A.
in 1960, her first professional position, and passed through all of our departments,
Member Title Election Office Term Ends Luiza Helena Trajano* including Collections, Administration, Sales and Procurement. She assumed the
Chairman position of superintendent in 1991 after taking part in the creation of the Holding,
which was set up to professionalise the company and define the process of successor
Luiza Helena Trajano Chairman 2015 Until AGM 2018 at the group. She has been a member of the board of directors following its creation in
June 2005. From 2009 to 2015 she held the position of President. She then became
Marcelo Silva Vice Chairman 2016 Until AGM 2018 CEO of the Company and IDV (Retail Sales Development Institute) for the 2009-2010
term, and in 2011, she was elected vice-chairman. Ms. Rodrigues has been part of the
Company’s Board since its creation in June 2005. She is currently chairman of the
Carlos Renato Donzelli Board Member 2009 Until AGM 2018 Board. In 2008, she was part of Sadia’s board. She is also the current Chairman of the
board of directors at LuizaSeg and Luizacred after respectively being appointed to the
posts in 2005 and 2002. Ms. Rodrigues also attends many conferences where she talks
José Antônio Palamoni Board Member 2005 Until AGM 2018
much about her experiences in managing people among other themes.
Betânia Barros Independent Advisor 2017 Until AGM 2018

Marcelo Silva Mr. Ferreira e Silva obtained a bachelor degree in economics from Universidade
Federal de Pernambuco – UFPE in 1972, and in accounting from Universidade Católica
Inês Corrêa de Souza Independent Advisor 2009 Until AGM 2018 Vice Chairman
de Pernambuco – UNICAP. He also has a degree in Financial Administration from
Fundação de Ensino Superior de Pernambuco – FESP. Mr. Ferreira e Silva started his
José Paschoal Rossetti Independent Advisor 2016 Until AGM 2018 career at the audit firm Arthur Andersen & Co where he worked from 1971 to 1978. He
worked in the financial department of Bompreço Group company between 1978 and
2001. He held the position of Superintendent Officer at G. BARBOSA in 2002 and at
Casas Pernambucanas from 2002 to 2009. Since 2009 he has been our Superintendent
Officer.
Home
Figure K.3 – Top 5 Institutional Investors
Figure K.4 – Holder Type Analysis
Institution % of Free Float Activism
Wasatch Advisors, Inc. 2,1% Low
Acadian Asset Management 1,7% Very Low
Macquarie Investment Trust 1,0% Very Low
22% 17% 19% 18% 17% 21% 21% Dimensional Fund Advisor 1,0% Very Low
23% 26%
Alaska Investimentos Ltda. 0,9% Very Low
9% 7% 9% 9% 4% 4%
6% 3% 7%
Figure J.5 – Top Institutional Types

75% 75%
4% 1%
72% 72% 72% 74% 74% 74% 74%
10%
Investment Adviser
Mutual Fund Adviser
3Q2015 4Q2015 1Q2016 2Q2016 3Q2016 4Q2016 1Q2017 2Q2017 3Q2017

Pension Fund Manager
Hedge Fund Manager
Insider Institution Other Free Float
85% Private Banking
Home
Appendix L: Field Research
Grade 6.09 7.05 6.96 7.71 7.92

Complaints
89% 92% 99% 96.4% 99.6%
answered
Would go
54.6% 73.3% 69.1% 74.3% 63.4%
back?
Solution Index 82.9% 91.1% 84.6% 91.3% 86.1%
Home
Ponto Frio – PontoFrio Casas Bahia – Casas Bahia
PontoFrio.com CasasBahia.com
Physical Store Marketplace Physical Store Marketplace
Grade 6.5 3.8 4.66 5.96 3.6 4.24

Complaints
98.5% 99% 97.9% 99% 98.9% 97.7%
answered
Would go back? 54.8% 38.8% 45.9% 54.5% 35.9% 40.8%
Solution Index 86.6% 65.2% 76.8% 80.9% 63% 74.2%
Ricardo Eletro – Americanas –

RicardoEletro.com Fast Shop Americanas.com Submarino
Physical Store Physical Store
Grade 3.66 4.3 7.02 7.56 7.51 7.45

Complaints
97.1% 96% 100% 99.8% 99.8% 99.8%
answered
Would go back? 32.6% 46.4% 71.6% 81.2% 78.7% 78.1%
Solution Index 63.5% 76.6% 81.4% 90.9% 91.3% 91.1%
Home
Table K.2: Refrigerator : Electrolux Frost Free Inox - Duplex 380L Painel Touch DW42X11089
São Paulo - SP Rio de Janeiro - RJ Belo Horizonte - MG Brasília - DF Uberlândia - MG

Shipping Timeliness Shipping Timeliness Shipping Timeliness Shipping Timeliness Shipping Timeliness
Price of Delivery Price of Delivery Price of Delivery Price of Delivery Price of Delivery
MGLU R$21,00 10 days R$21,00 12 R$21,00 4 R$220,00 15 R$31,00 16
VVAR - 21 days - 23 - 22 R$23,32 26 - 25
Ricardo
- 9 days - 10 - 10 - 12 - 14
Eletro
Table L.3: Microwave: Consul CMA30AFANA - 30L

MGLU R$21,00 6 R$21,00 6 R$21,00 4 R$59,93 9 R$31,00 11
VVAR R$21,30 8 R$21,30 9 R$41,75 13 R$58,39 13 R$48,70 15
Ricardo
- 8 - 11 - 10 - 12 - 15
Eletro
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Table K.4: Mobile: Smar tphone Motorola Moto G5 32GB Platinum - Dual Chip 4G Câm. 13MP + Selfie 5MP Tela 5"

MGLU R$7,90 6 R$7,90 6 R$7,90 4 R$15,00 7 R$7,90 5
VVAR R$0,99 5 - 6 R$0,99 7 R$14,90 8 R$0,99 9
Ricardo
- 7 - 8 - 7 - 8 - 8
Eletro
Table K.5: Tablet: Tablet Samsung Galaxy Tab E 8GB 9,6” Wi -Fi - Android 4.4 Proc. Quad Core Câm. 5MP + Fronta

MGLU R$5,00 5 R$5,00 5 R$5,00 3 R$47,00 6 R$9,50 4
VVAR R$8,90 5 R$8,90 6 R$11,90 7 R$25,80 8 R$12,90 9
Ricardo
- 6 - 8 - 6 - 8 - 7
Eletro
Home
Appendix L: Sector M&A Track record
Magazine Luiza
acquires Lojas
Maia
Máquina de
Vendas: merger of
Merger of Merger of
Insunuante and
americanas.com americanas.com
Ruicardo Eletro;
and submarino and submarino
Máq. De Vendas
acquires City Lar
2005 2007 2009 2011 2013 2015 2017

2006 2008 2010 2012 2014 2016
Magazine acquires
Lojas Base, Madol CBD acquires B2W acquires
and Killar: 100 Ponto Frio Magazine Luiza Magazine acquires
Direct and
stores. Entrance Merger CBD and acquires Lojas Baú Integra Commerce
ClickRodo
into the state of Casas Bahia
SC
Home
Appendix N: SWOT Analysis
Strengths Weaknesses
Strengths
Brand power
30 Large Scale
High logistics dependence
Low Pricing Power
25 Experienced Management Low Product differentiation
High capillarity Exposure to the economy
20 Innovation Capability cyclicity
Channels Integration
15 Regionalized brand recognition
Consumer Centric Marketing dependency
10 High exposure to delinquency
5 rates
Threats 0 Weakness
Opportunities
Fragmented Sector Threats
Low Internet penetration in Low entry barriers
Brazil Slow rebound of the economy
Resumption of consumption War pricing
Reduction of Interest Rates End of government benefits
End of the analog Signal Tougher Competition
Acquisition of Start-ups International Competition
Opportunities Increase in credit card Limited number of suppliers
subscriptions
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Appendix N: SWOT Analysis
Strenghts Weaknesses
High logistic
Brand power dependence
5 5
Consumer 4 High exposure to 4 Low Pricing
3 Large Scale 3
centric deliquency rates power
2 2
1 1
0 0
Channels Experienced Marketing Low Products
Integration Management dependency differentiation
Regionalized Exposure to
Innovation
High capilarity brand recognition economy cyclicity
Capabilities
Opportunities Threats
Fragmented Sector
5 Low entry barriers
Increase in credit 4 Low Internet 5
3 Limited number of 4 Slow rebound of
card subscriptions penetration in Brazil
2 suppliers 3 the economy
1 2
0 1
Acquisition of Start- Resumption of 0
ups consumption International
War pricing
Competition
Reduction of Interest
End of analog signal Tougher End of government
Rates
Competition benefits
Home
Appendix O: Porter Five Forces
Supplier power
5
4
3 Bargaining power of Suppliers MODERATE
Rivalry Among 2 Bargaining power of Customers HIGH
Buyer power
Competitors
1
Thraet of New Entrants HIGH
0
Threat of substitute services MODERATE
Rivalry Among Competitors VERY HIGH

Very Low 1
Low 2
Moderate 3
Substitute Services New Entrants
High 4
Hardline Retail Magazine Luiza Very High 5
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Appendix P: Peers Multiples
Ticker Mkt Cap (BRL mn) PE EV/EBITDA Net Inc Growth DVD Yield Net Debt / EBITDA ROE
TTM 17 TTM 17 1Y 17 TTM TTM
BR e-commerce
BTOW3 BZ Equity 9.565 - - 21,6 18,4 30,1 0,0 3,7 (15,2)
NETS US Equity 1.290 - - - - - - - (73,4)
Median - - 30,1 0,0 3,7 (44,3)
BR Hardline
MGLU3 BZ Equity 14.144 63,3 39,9 19,0 16,1 257,3 0,3 0,6 28,4
VVAR11 BZ Equity 9.951 806,5 47,2 11,9 10,5 320,7 0,6 2,5 1,0
Median 434,9 43,6 15,4 13,3 289,0 0,4 1,6 14,7
BR retail
PCAR4 BZ Equity 19.984 21,6 35,3 11,0 9,7 215,6 0,5 1,2 1,3
LREN3 BZ Equity 25.710 39,2 34,0 20,7 18,3 15,8 1,1 0,9 25,3
RADL3 BZ Equity 24.779 55,7 45,3 25,3 22,6 9,0 0,8 0,4 15,5
NATU3 BZ Equity 13.455 21,4 24,5 10,8 10,4 91,9 1,7 1,4 58,4
ARZZ3 BZ Equity 4.488 33,5 31,5 22,4 21,2 21,9 1,9 (1,0) 20,3
HYPE3 BZ Equity 20.358 23,3 23,0 16,6 16,1 30,9 4,7 (1,2) 4,4
HGTX3 BZ Equity 4.604 19,5 19,4 19,9 17,9 18,8 4,1 (0,8) 19,5
LAME4 BZ Equity 28.801 242,3 70,3 8,7 9,1 101,8 0,5 2,5 3,8
LLIS3 BZ Equity 1.895 - 158,0 10,4 12,5 119,5 0,9 2,4 (1,6)
GUAR3 BZ Equity 9.216 20,2 28,7 11,5 9,5 7,0 1,8 0,8 13,1
AMAR3 BZ Equity 1.914 - - 12,5 11,7 78,2 0,0 2,4 (6,0)
ALPA4 BZ Equity 7.012 16,9 16,9 13,0 12,4 18,7 3,1 0,3 21,1
GRND3 BZ Equity 8.038 12,1 11,6 22,6 6,3 8,7 4,8 (3,4) 23,5
TECN3 BZ Equity 359 58,5 8,8 16,6 16,1 4719,3 14,9 2,4 1,4
Median 22,5 28,7 14,8 12,5 26,4 1,8 0,8 14,3
International E-commerce
BABA US Equity 1.398.802 61,9 34,8 43,7 27,4 45,5 0,0 (1,3) 19,2
AMZN US Equity 1.460.391 243,6 85,8 35,9 25,6 28,7 0,0 0,2 9,7
EBAY US Equity 130.174 26,7 19,0 15,2 12,8 1,3 0,0 0,8 82,7
JD US Equity 172.545 - 117,5 94,7 75,1 301,3 0,0 (2,8) (6,5)
MELI US Equity 36.157 69,0 84,8 45,1 48,9 (2,6) 0,2 (1,1) 35,0
Median 65,4 84,8 43,7 27,4 28,7 0,0 (1,1) 19,2
International Specialty Electronics

BBY US Equity 53.891 14,8 14,0 6,1 5,7 8,3 2,4 (0,9) 27,6
DC/ LN Equity 9.490 7,6 7,1 4,1 4,4 (19,9) 5,3 0,4 10,0
FNAC FP Equity 8.069 25,0 16,5 8,3 7,3 73,3 0,3 1,5 (3,6)
493 HK Equity 7.719 49,2 31,1 16,0 14,8 58,9 1,3 6,0 1,5
MVID RM Equity 411.094 12,8 12,4 6,7 6,4 7,9 4,8 (0,6) 37,5
SNH SJ Equity 60.358 - 11,7 - 10,3 22,4 3,4 - -
Median 14,8 13,2 6,7 6,9 15,3 2,9 0,4 10,0
Home
Appendix Q: Main Competitors Overview
Via Varejo
VVAR
The largest hardline retailer in Brazil. Via Varejo came from the merger between two strong hardline retail brands: Casas Bahia (750 stores)
and Pontofrio (220 stores). The Company is controlled by the GPA, which recently put the company on sale. Created in 1952, Casas Bahia
(750 stores in 2016) was ranked as the 2nd most valuable brand in Brazil (Best Retail Brands). It acts in the e-commerce through the
CNOVA (merger between), of which it has majority participation Taking a leaf out of Magazine Luiza’s book. Its main competitive
advantages are: (i) leadership in the sector, with a larger scale, (ii) valuable brands in the Brazilian hardline retail and, (iii) a large
distribution and storage network. The company always reach the lowest prices in the market. Despite this, the Company has been
following in the footsteps of the MGLU improving its omnichannel and betting on new, more flexible store formats (smart stores, virtual
stores and premium stores).
Máquina de Vendas
Private Company
Caught up by the crisis. It emerged in 2010 as a result of the merger between retailers Insinuante and Ricardo Eletro. From then on, the
Company expanded to new regions through M&A, reaching the following brands: Ricardo Eletro, Insinuante, City Lar, Salfer, and
Eletroshopping. Strongly affected by the crisis, the network shrank from 810 units in 2016 to 750 stores in2017. It has about BRL 1.4 bn in
debt and is negotiating the restructuring of its debt through the creation of a holding controlled by the creditors. Strategy based on
regional peculiarities. Its business model initially valued the regional brands and the knowledge of each new partner. In 2016, the
Company announced that it will unify its brands into Ricardo Eletro in order to strengthen the company's' performance. The strategy is
also based on the recognition of the region peculiarities through service, products mix and the customized offers.
Home
Lojas Cem
Private Company
It’s the 3rd largest in the sector, currently with 247 stores. With 65 years of existence Lojas CEM is marked by its history of strictly organic
growth, strong financial conservatism and family management. It is a regional network (São Paulo, Minas Gerais, Rio de Janeiro and
Paraná) and has been growing in recent years, opening stores even during the recession. The company is marked by conservatism, with
low leverage and financing most of its operations solely with its profit. The expansion of the company is strictly organic, the network does
not accept M&A proposals, even rejecting a proposal from Magazine Luiza in 2011. This conservatism is one of the reasons for the
Company's high profitability. However, the limitation of capital sources, may limit a magnitude of the expansion of the Company, which, in
a context of consolidation of the sector. In addition to financial conservatism, the company also has resistance from entering the e-
commerce, as it would affect its margins.
Fast Shop
Private Company
With more than 90 stores, it operates in the home appliance and electronics market in Brazil, with A/B classes as its target audience, which
pay cash. Its goal is to bring consumer experience through and a differentiated service and experimentation of products in its stores. For
the manufacturer, it is important to have your brand in the company’s stores, which functions as a showroom of what it offers in the latest
technology.
Home
B2W
BTOW
The Company is the result of the merger between Americanas.com and Submarino in 2006. B2W Digital is the leader in e-commerce in
Latin America in terms of sales volume. The Company operates strictly online (B2C and Marketplace), through strong brands: (i) Lojas
Americanas (www.americanas.com.br), (ii) Submarino (www.submarino.com.br), (iii) Shoptime (www.shoptime.com.br) and (iv) SouBarato
(www.soubarato.com.br), with a rapidly growing Marketplace operation. B2W's strategy is to grow the entry barriers of the sector,
consolidating itself with (i) the strength of its brands (it operates with different brands - and websites - to reach different audiences and
maintain customer loyalty) (ii) robust logistics and technological infrastructure, (iii) a large assortment of products and (iv) a better offer of
service for sellers. Cash burn model funded by Lojas Americanas ("rich dad") refers to Amazon's US market-winning strategy.
Home
Appendix Q: Competitors’ Target Customers
(B&M)
A/B
Class
(52
MM)
C Class
(96MM)
D/E
Class
(56MM)
Home
Appendix R: Appliances Penetration in Brazil
Figure R.1: Smartphones Penetration Figure R.2: Laptop penetration in Brazil Figure R.3: average household appliance
replacement time (Change in MGLU’s mix of
products)
80%
48,9% 48,0%
70%
Mobile 3 years
60% 39,4%
Photografic camera 3,8 years
50%
38% 30,6% Printer 4 years
40%
23,9% Computer 4 years
30%
20% Microwave 5,2 years
12,6%
10% Refrigerator 9,5 years
0% Television 7,6 years
Australia
UK
Sweden
Japan
France
Russia
Iran
Peru
Chile
Mexico
Turkey
Brazil
South Korea
Canada
USA
Argentina
Colombia
Stove 8,3 years
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Washing machine 7,4 years
Source: Newzoo’s Global Market Report Source: PNAD - IBGE Source: IDEC
Home
Source: Team Estimates, Ebit 115
Appendix S: Brazilian E-commerce Overview
Figure S.1: ecommerce sales Figure S.2: active e-consumers (mm)
(consumer goods)
25,5
35 40% 23,1
30
31% 18,9
30% 17,6
25 28% 21 75,4%
26% 18,6 19,6 14,1
20 16,1
20%
15 12,7
10,2 16%
8,4 14%
10 10%
5 8%
5%
24,6%
0 0%
2011 2012 2013 2014 2015 2016 2017 1H13 1H14 1H15 1H16 1H17
Sales (R$ Bi) Var. (%)
Figure S.3: Average Ticket Figure S.4: Most commercialized products
700 20,0%
12,9% Games 3%
600 7,7% 7,1% 3,5% 0,0% Sport 5%
-6,8% -5,5% -7,4%
500 418 Electronics 6%
403 -20,0%
353 377 House and decoration 7%
400 334 333
309 -40,0% Computing 7%
300
-60,0% Books 8%
200 Cell phones 8%
100 -80,0% Home appliances 12%
0 -100,0% Healthcare 15%
2011 2012 2013 2014 2015 2016 2017 clothing and accessories 17%
Avreage Ticket (R$) Var.
Source: e-bit
Home
Source: Team Estimates, Ebit 116
Appendix T: American Hardline Retail Benchmark – Best Buy
Revenue (US$ Bn)
30,0%
60 24,8%
23,3% 24,0%
50,705 25,0% 22,8% 22,4%
50
42,41 20,0%
40,339 39,528 39,403
40
15,0%
30
10,0%
6,5%
4,5% 5,3% 5,2%
20 4,2%
5,0%
10 0,0%
2H12 1H14 1H15 1H16 1H17
0
Gross Margin EBITDA margin
Domestic Comparable Sales 2H12 1H14 1H15 1H16 1H17
,50% ,50%
,30%
(,40%) “When you are fighting Amazon, good customer service is the key to
keeping a competitive edge”
(1,70%) (1,70%) Hubert Joly, Best Buy CEO
(2,10%)
FY11 FY12 FY13 FY14 FY15 FY16 FY17
Home
Source: Team Estimates, Best Buy 117
Appendix U: Amazon entrance in Brazil: should we care?
Figure 1: Amazon investment in Figure 2: Impact of AMZN’s
comparison to Indian peers Investments in India on its
Margins
40
5,50% 34 30
4,80%
Figure U.1 – Amazon Footprint 28
3,622 4,50% 20
2,20%
3,50%
2,60%
10
3,15 1,90%
6
1,50% 0
1,378 1,54
1Q2014 1Q2015 1Q2016
Bps of Margin Impact from India
Amazon Flipkart Snapdeal Amazon Consolidated Margins
ex-India
Figure 3: Amazon large scale:

investments in non-core
6
businesses
4,3 4,5
4
2,5
Home
Source: Team Estimates, Amazon 118
Appendix V: Sensitivity Analysis
Sensitivity Analysis: Perpetuity Growth / Cost of equity (Ke)
Cost Of Equity (%)

Perpetuity Growth (%) 9896,1% 10,8% 11,8% 12,8% 13,8% 14,8% 15,8% 16,8%
3,3% 116,64 103,75 93,52 85,20 78,29 72,45 67,46
4,3% 125,86 110,30 98,33 88,82 81,07 74,63 69,19
5,3% 138,42 118,87 104,42 93,30 84,44 77,23 71,22
6,3% 156,54 130,53 112,38 98,96 88,61 80,37 73,64
7,3% 184,98 147,37 123,23 106,36 93,88 84,25 76,57
8,3% 236,02 173,79 138,88 116,45 100,77 89,16 80,18
9,3% 354,45 221,21 163,44 131,01 110,17 95,58 84,76
Sensitivity Analysis: Take rate / GMV Penetration of Marketplace as % of e-commerce GMV by 2022
Marketplace GMV as % of e-commerce GMV by 2022
9896,1% 30,0% 44,0% 46,0% 48,0% 50,0% 52,0% 54,0% 56,0%
8,9% 91,0 94,6 95,1 95,7 96,2 96,8 97,3 97,9
Take-rate (%)
9,9% 91,8 95,8 96,4 97,0 97,6 98,2 98,8 99,5

10,9% 92,6 97,0 97,6 98,3 98,96 99,6 100,3 101,0
11,9% 93,4 98,2 98,9 99,6 100,3 101,1 101,8 102,6
12,9% 94,2 99,4 100,2 100,9 101,7 102,5 103,3 104,2
13,9% 95,0 100,6 101,4 102,3 103,1 104,0 104,9 105,7
14,9% 95,8 101,8 102,7 103,6 104,5 105,4 106,4 107,3
Note: Figures In BRL/Share.

Home
119
Appendix W: IBM Watson Data Processing Analysis
18000
16.577
16000
Team R used Watson Analytics to analyze Magalu’s online

14000
12000
presence and how it is making use of social media. We
determined that there has been an uptick in the company’s
10000 twitter activity the past month (Figure Watson), with the
company engaging with other Twitter users through the
8000
6792,546948
“favorite” button in Twitter. This shows how fast it is adapting
to the digital world. Through the usage of social media, the
6000 company is able to manufacture customer engagement and
thus improve customer loyalty.
4000
2000
0
Jul-15 Jan-16 Jul-16 Jan-17 Jul-17
-2000
Home
Appendix X: Debt Coverage Ratio
Debt Coverage Ratio
4,5
3,9
3,5
2,8
2,2
1,4 1,4
1,1 1,1
0,6 0,8 0,6
0,4
0,1
-0,2
2014 2015 2016 2017 2018 2019 2020 2021 2022
-0,9 -1,1
-1,4 -1,3 -1,5
-1,7 -1,9 -1,8
-2,0 -2,3 -2,0
-2,7
Net Debt/ EBITDA Net Debt & Equivalents / EBITDA Net Debt/Adjusted EBITDA

Appendix Y: Discounted Receivables Rates
10.000 25%
21% 20%
19% 19%
20%
8.000
18%
14%
15%
6.000
13% 13%
10%
4.504
4.043
3.608
3.132
4.000 5%
2.546
2.213
1.588
0%
2.000
1.516 1.418
-5%
(219,8) (275,3) (309,7) (350,2) (470,7) (529,7) (470,5) (506,6) (570,4)

0
-10%
2014 2015 2016 2017 2018 2019 2020 2021 2022

(2.000) -15%
Securitized Receivables Securitization Expenses Securization Rates

Appendix Z: Payout Ratio
Dividends 2014 2015 2016 2017E 2018P 2019P 2020P 2021P 2022P 2023P 2023P 2025P 2026P
Payout Ratio 24% - - 6% 22% 45% 65% 70% 71% 74% 74% 75% 100%
Dividends Paid (31) (33) - (22) (125) (311) (611) (768) (876) (958) (986) (997) (1.307)

Appendix 1: Bull Scenario Output
Free Cash Flow to Equity (BRL mn)
BULL BEAR Bull Case, CAGR18-22 = 18%
Revenue CAGR¹ 18% 8%
FCFE CAGR¹ 17% 10%

3.439
3.098
9.3% 8.5%
2.787
EBITDA Margin² 2.502
2.171
2.134
1.906
1.649
1.316
1.097
Target Price BRL 109.6 BRL 58.6
2017E 2018P 2019P 2020P 2021P 2022P 2023P 2024P 2025P 2026P
Upside/Downside +57% -16%
Notes: (1) 2018-2022, (2) 2022 Projected.
Appendix 2: Bear Scenario Output
Free Cash Flow to Equity (BRL mn)
BULL BEAR Bear Case, CAGR18-22 = 8%
Revenue CAGR¹ 18% 8%
FCFE CAGR¹ 17% 10%
9.3% 8.5% 1.171 1.178 1.190 1.208 1.210

EBITDA Margin² 1.045
1.115
883 919
791
Target Price BRL 109.6 BRL 58.6
Upside/Downside +57% -16% 2017E 2018P 2019P 2020P 2021P 2022P 2023P 2024P 2025P 2026P
Notes: (1) 2018-2022, (2) 2022 Projected.

Appendix 3: Adjusted ROIC Breakdown
Magalu’s Disclose BRL mn Our View BRL mn
Adjusted ROIC Breakdown 2Q17 LTM ROIC Breakdown 2Q17 LTM
EBIT 200.9 EBIT 200.9
Discounted Receivables Costs (76.1) Discounted Receivables Costs -
(=) Adjusted EBIT 124.7 (=) EBIT 124.7
Discounting Tax-Adjustment (11.3) Discounting Tax-Adjustment -
Income Tax (19.2) Income Tax (19.2)
(=) NOPLAT 94.2 (=) NOPAT 94.2
Working Capital (w/Discounting) (110.5) Working Capital (No Discounting)
Fixed Assets 1,377.2 Fixed Assets 1,377.2
(/) Total Invested Capital 1,266.6 (/) Total Invested Capital
(=) Adjusted ROIC 29.8% (=) ROIC

Appendix 4: Income Tax Payment Breakdown
Tax Breakdown 2014 2015 2016 2017E 2018P 2019P 2020P 2021P 2022P 2023P 2023P 2025P 2026P
Earnings Before Taxes 130 (147) 77 487 800 1.004 1.387 1.659 1.902 2.045 2.127 2.168 2.136
Ma r gina l Ta x Ra te 34% 34% 34% 34% 34% 34% 34% 34% 34% 34% 34% 34% 34%
E xp ected Ta x Pa yment (44) 50 (26) (166) (272) (341) (472) (564) (647) (695) (723) (737) (726)
Interest On Equity 5 - - - - - - - - - - - -
Governamental Subsidy - 6 21 13 - - - - - - - - -
Equity Income Exclusion 36 26 21 31 38 42 47 54 62 71 87 101 116
Other Exclusions 0 (0) (6) - - - - - - - - - -
E ffective Ta x Pa yment (4) 82 9 (122) (234) (299) (424) (510) (585) (624) (636) (636) (610)
E ffective Ta x Ra te 3% 55% -12% 25% 29% 30% 31% 31% 31% 31% 30% 29% 29%

Appendix 5: Board Compensation
Board 2014 2015 2016 2017E
Fixed 0,4 0,4 2,9 3,5
Salaries 0,3 0,3 2,4 2,9
Benefits 0,0 0,0 0,0 0,0
Others 0,1 0,1 0,5 0,6
Variable 0,4 0,4 2,5 2,5
Goals met 0,0 0,0 0,0 0,0
Stock option 0,4 0,4 2,5 2,5
Variable + Fixed 0,8 0,8 5,4 5,9
# of individuals 6 6 6,58 6,67

Fixed 0,1 0,1 0,4 0,5
Variable 0,1 0,1 0,4 0,4
Total per individual 0,1 0,1 0,8 0,9
Appendix 6: Management Compensation
Management 2014 2015 2016 2017E

Fixed 8,4 8,8 6,4 6,5
Salaries 7,5 7,7 4,8 4,8
Benefits 0,1 0,1 0,1 0,1
Others 0,8 0,9 1,4 1,6
Variable 8,9 2,9 5,1 7,0
Goals met 6,0 0,0 4,2 5,5
Stock option 2,9 2,9 0,9 1,5
Variable + Fixed 17,3 11,7 11,5 13,5
# of individuals 6 6 4 4
Fixed 1,4 1,5 1,6 1,6
Variable 1,5 0,5 1,3 1,7
Total per individual 2,9 2,0 2,9 3,4

Appendix 7: Forward Multiples
EV/EBITDA 1yr. Forward (x) P/E 1yr. Forward (x)

15 35
13 30
11 25
9 20
7 15
5 10
3 5
1 0
Source: Bloomberg 130

0
2
4
6
8
10
12
14
16
18
20
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Source: Bloomberg
Apr-13
Jul-13
Oct-13
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
Apr-15
Jul-15
Oct-15
Trailing EV/EBITDA(x)
Jan-16
Apr-16
Jul-16
Oct-16
Jan-17
Apr-17
Jul-17
Oct-17
0
10
30
40
50
60
70
80
20
Mar-13
May-13
Jul-13
Sep-13
Appendix 8: Historical Multiples
Nov-13
Jan-14
Mar-14
May-14
Jul-14
Sep-14
Nov-14
Jan-15
Mar-15
May-15
Jul-15
Sep-15
Nov-15
Trailing P/E (x)
Jan-16
Mar-16
May-16
Jul-16
Sep-16
Nov-16
Jan-17
Mar-17
May-17
Jul-17
Sep-17
131
Appendix 9: Market Profile
Market Profile
Market Cap (bn) 11.2
Net Debt (bn) 0.5
Enterprise Value (bn) 10.7
Shares Outstanding (mn) 189
52-Week High | Low 11.6 | 87.3
ADTV (mn) 2.5
FCF yield (%) 12
Dividend Yield (%) 0.2
P/E (TTM, x) 50.6
EV/EBITDA (TTM, x) 13.8
EPS (TTM, x) 1.2
Source: Bloomberg 132
Appendix 10: Implied Multiples
Implied Metrics 2017E 2018P 2019P 2020P 2021P 2022P 2023P 2023P 2025P 2026P
EV/EBITDA 11,4x 8,6x 6,9x 5,5x 4,4x 3,5x 2,8x 2,3x 1,8x 1,3x
P/E 51,7x 33,3x 26,8x 19,6x 16,4x 14,3x 13,3x 12,7x 12,3x 12,4x
EPS 1,9x 3,0x 3,7x 5,1x 6,0x 6,9x 7,5x 7,8x 8,0x 8,0x

Appendix 12: Reduced Reliance on Financial Services
2000 50%
28% 25%
30%
1500
08% 07% 06% 05% 05% 05%
10%
-10%
1000 -30%
-50%
500 -70%
-90%
0 -110%
2014 2015 2016 2017E 2018E 2019E 2020E 2021E 2022E -130%
-500
Core business net income Financial Services % of Net Income -150%

Appendix 13: 3Q17
Revenues E-commerce Gross Profit
+ 16 stores vs 2Q17 Revenues: BRL 1.02 bn (+55% vs Gross Profit: BRL 883 mn (+23%
3Q16) vs 3Q16)
Gross Revenue: BRL 3.4 bn (+27
% vs 3Q16) 30% in total revenues
SSS 25% (15% in B&M)
SG&A EBITDA and Net Profit CFO

SG&A: - 1.6 p.p EBITDA: BRL 205 mn (+39% vs CFO: BRL 974 mn (LTM)
3Q16)
23% of Net Revenues WC: - BRL 390 mn
EBITDA Margin: 8.8%
Net Profit: BRL 92 mn
ROE: 43%
Home
Source: Company Filings
Appendix 14: Since the Report
MGLU (BRL) since (10/20) Reasons

75
Amazon Starts to Sell Eletronics in Brazil (10/18)
70
65
Realization of Profits After Stock Rally
60 Poor Hardline 3Q Results

55
Risk Averse Environment
50
45
40
1-Nov
3-Nov
5-Nov
7-Nov
9-Nov
11-Nov
13-Nov
15-Nov
17-Nov
20-Oct
22-Oct
24-Oct
26-Oct
28-Oct
30-Oct
Home
Appendix 15: Tornado Analysis
Target Price
70,00 80,00 90,00 100,00 110,00
B2C Gross Margin 19,6% 24,0%
ERP 6,2% 5,1%
Risk Free 5,1% 4,2%
Country Risk 2,8% 2,3%
Conventional Stores SSS per sqm growth (YoY) 4,5% 5,5%
B2C spread to ecommerce sector growth (YoY) 23% 28%
PIB LP 2,2% 2,7%
Total store openings guidance per year 45,00 55,00
Virtual Stores SSS per sqm growth (YoY) 9,0% 11,0%
Marketplace EBITDA Margin 22,5% 27,5%
Vantagem Desvantagem Home

Appendix 16: LuizaLabs
Projects
BOB
Big Data application for Magazine Luiza Stores
(B&M and E-commerce). Deliver purchase
suggestions by e-mail and displays net
Core of Research and Development of
Magazine Luiza Magazine Voce
First brazilian social e-commerce. Everyone can
open a store and sell Magazine Luiza products
Technology and Innovation Lab
Quero de Casamento
Presents lists integrated with Facebook
Create products and services focused
on retail, offering customers more
benefits and a better shopping
Magazine Luiza Mobile
experience. Magazine Luiza m-commerce
Home
Appendix 17: E-commerce Rationality
Free Shipping Average Ticket
450
418 30,0%
44% 403
43% 42% 400 377
40% 40% 40% 353
25,0%
38% 38% 334 333

43% 36% 35% 350
20,0%
33%
30% 300
27% 28% 15,0%
26% 250 12,9%

22% 209 10,0%
19% 18% 200 7,7% 7,1%

5,0%
150 3,5%
0,0%
100
50 -5,5% -5,0%
-6,8% -7,4%
0 -10,0%
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 2011 2012 2013 2014 2015 2016 2017
e-commerce Top 10 Average Ticket Var.
Home
Appendix 18: Board of Directors
Board Position Since Age Experience

Luiza Helena Trajano Chairman 1976 66 Magazine Luiza
Marcelo Silva Vice Chairman 2009 58 Casas Pernambucanas
Carlos Renato Donzelli Board member 1995 49 Magazine Luiza, ALE
José Antonio Palamoni Board member 1991 55 Magazine Luiza
Betânia Barros Independent Advisor 2009 53 MRV Engenharia
Inês Corrêa de Souza Independent Advisor 2009 58 UBS, General Eletric
José Paschoal Rosseti Independent Advisor 2016 44 Fleury, Bematech

Appendix 19: Hardline Market-Share Forecast
Hardline Sales Market-Share
29,8%
28,9%
27,7% 27,1%
Sector’s CAGR 17-22
~4%
vs MGLU3 CAGR 17-22
~10%
26,8%
+200 bps
12,7% 13,1%
11,6% 12,2%
10,8% 11,3% 10,8%
10,4% 9,7%
9,7% 9,4%
7,0% 9,9% 10,1%
9,4% 9,2%
4,7% 4,8%
3,7% 3,9% 3,7%
3,1% 3,4%
2,7% 2,6% 2,5%
2012 2013 2014 2015 2016 2017E 2018P 2019P 2020P 2021P 2022P

Appendix 20: Sanity Check
Assumptions Check 1Q17 2Q17
Reported Gross Profit 832 835
B&M 668 647
B2C 177 172
Marketplace 2 5
Consortium 7 8
Total 853 831
Delta 21 -4
Reported Expenses -629 -615
All ex-Marketplace -624 -610
Marketplace -5 -5
Marketplace EBITDA Margin 22% 22%
Total -629 -615

Appendix 21: What Is Priced-In?
Consensus Base Case

K ey Metr ics 2017C¹ 2018C 2017P² 2018P FY18E Sp r ea d
Net Revenues 11.351 12.336 11.796 14.344 16% Higher
Gr o s s Ma r g in 30.2% 30.1% 30.5% 30.6% 50 bps Higher
E BITDA Ma r g in 8.5% 8.7% 9.2% 9.6% 90 bps Higher
E BIT 821 920 939 1219 33% Higher
Net Inco me 314 455 364 565 24% Higher
Source: Team Estimares, Bloomberg. Notes: (1) Consensus as of. (2) Team Estimates’ Base Case.
143
Appendix 22: What Is Priced-In?
Current Price 2020 Targets

Net Revenue CAGR¹ 15,7%
Gross Margin 31,5%
EBITDA Margin 7,5%
Net Margin 3,2%
Reported ROIC 39,9%
FY18E BRL 69,9²
Source: Team Estimates. Notes: (1) 2017-2020 CAGR. (2) As of...
144
Appendix 23: Management
Dir ecto r s Po s itio n E xper ience

Frederico Trajano CEO Magazine Luiza
Fabrício Bittar VP Operations Magazine Luiza
Roberto Belissimo CFO & IRO Magazine Luiza, Bradesco BBI
Maria Isabel Bonfim CCO Magazine Luiza
Eduardo Galanternick E-commerce Director B2W, Carrefour
André Fatala CTO Predicta, Submarino

Appendix 24: Historical Adjusted ROIC
NOPAT Margin
5,3%
5,6% 5,5% 5,6% 5,6% 5,6%
Adjusted ROIC
4,0%
3,3%
3,1%
25,4%
2,5% 24,8%
2,2% 23,6%
1,6% 22,1%
21,9%
18,7%
11 12 13 14 15 16 17 18 19 20 21 22
14,5%
Invested Capital Turnover
4,5x 4,6x 10,6%
4,1x
4,2x 10,1%
3,9x 4,0x 8,9%
3,6x 3,6x 8,4%
3,4x 3,3x 3,2x 3,4x
5,2%
11 12 13 14 15 16 17 18 19 20 21 22
11 12 13 14 15 16 17 18 19 20 21 22

Appendix 25: Capex
Less Capital Intensive Business Total Capex Capex vs. D&A

Model
420 400
389 381
357 350
Synergies of B&M and B2C 310
330
operations 286 300

257 253
250
215
BRL mn
200
Perpetuity
Shared Distribution Centers Growth
150
100
Growth in Perpetuity 50
2017E 2018P 2019P 2020P 2021P 2022P 2023P 2024P 2025P 2026P
Total Capex D&A
Home
Appendix 26: Global Peers
Company Forward PE 18
MGLU3 BZ Equity 30.213
VVAR11 BZ Equity 25.366
TELE IJ Equity 13.58
LEW SJ Equity 7.012
493 HK Equity 21.862
n.a.
BTOW3 BZ Equity
JD US Equity 52.472
MVID RM Equity 11.901
HMPRO TB Equity 30.769
Median 23.614
Source: Team Estimates, Bloomberg

8
Sep-17

Nov-17
9
Jan-18
9
Mar-18
May-18
9
Jul-18
9
1.5% of Net
Sep-18
Sales Expenses
Nov-18
11
Jan-19
LOGISTICS CAPEX (BRL mn)
10
Mar-19
May-19
10
Jul-19
11
Sep-19
Appendix 25: Logistics
Nov-19
13
Jan-20
12
Mar-20
May-20
12
Jul-20
13
Sep-20
Nov-20
15
Jan-21
14
Mar-21
May-21
14
Jul-21
15
Sep-21
Nov-21
17
Jan-22
16
Mar-22
May-22
16
Jul-22
16
Sep-22
Nov-22
18
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Magazine Luiza S/A

Brazilian Hardline Retail

João Vitor Zuardi

CFA Institute Research Challenge 2017

Current Price FY18E Target Price Upside

Magazine Luiza Is aFrase de Company

Net Revenues Breakdown by Product Type Net Revenues Breakdown by Channel

Net Revenues Breakdown by Product Type Net Revenues Breakdown by Channel

221 Stores Electronics and

Magazine Luiza E-commerce GMV

E-commerce GMV Breakdown (2Q17)

+2.4 p.p. Digital Platform

High Top-Line Growth

Margin Improvement & Cash

High top-line growth

Margin improvement & Cash

Hardline Retail Sales

Source: E-bit, Euromonitor

Gross Revenues Breakdown (BRL mn) CAGR 2018-2022 = 20%

2014 2015 2016 2017E 2018P 2019P 2020P 2021P 2022P

Source: Company Filings, Team Estimates

+200 Stores SSS Growth of 10%

+200 Stores SSS Growth of 10% +40 Stores CPI-like SSS

B2C Gross Revenues (BRL mn)

Source: Statista, E-bit, Team Estimates

B2C Gross Revenues (BRL mn) Double-Digit Growth

15% Spread to Sector Growth

Source: Statista, E-bit, Team Estimates

US-LIKE MATURING GROWTH B2C Gross Revenues (BRL mn)

GROSS REVENUES GMV TAKE-RATE

Source: Team Estimates

GROSS REVENUES GMV TAKE-RATE

Source: Team Estimates

GROSS REVENUES GMV TAKE-RATE

Source: B2W, Team Estimates

GROSS REVENUES GMV TAKE-RATE

Marketplace Growth Driver

GROSS REVENUES GMV TAKE-RATE

Magazine Luiza 0.3x

Mercado Libre 3.5x

Via Varejo 2.7x

GROSS REVENUES GMV TAKE-RATE

2014 2015 2016 MGLU3 Marketplace

Mkt. GMV² - - 1400

GROSS REVENUES GMV TAKE-RATE

2014 2015 2016 MGLU3 Marketplace

Mkt. GMV² - - 1400

GMV/Traffic - - 2.7x 2019E GMV/Traffic = 2.7x

Gross Merchandise Value (BRL mm) Gross Revenues (BRL mm)

CAGR 2018-2022 = 94% CAGR 2018-2022 = 94%

Source: Team’s Estimates

16% 16% 17%

Magalu’s Competitive Advantages

Magalu’s Seasoned and Innovative Management

Net Revenues 9.5 bn 19.8 bn 18.1 bn 7.1 bn¹ 3.3 bn

Stores 830 966 1200 1000 245

Same-Store-Sales 27% 19% 3% - -

Gross Margin 31% 34% 30% 27%1 44%

EBITDA Margin 8% 5% 15% -1%1 12%

Economies of Scale Customer Captivity

“For economies of scale to serve as a competitive advantage, then, they need to be

Source: “Competition Demystified”, Team Estimates