#1POLI FINANCE Petz TEAM 7 CFA Institute 2021 RESEARCH CHALLENGE Petz S aberto até mela-notte#2Petz at a Glance 2 What is Petz? Petz is the largest pet retail company in Brazil, which aims to be the most significant pet ecosystem globally... A National Company... Petz has a great store-opening track-record... ...With an Increasing Revenue... ...and One-Stop-Shop Solution... Petz' Store Evolution; [# of stores] 161 A high increase in revenue in line with stores... Net Revenue Evolution; [BRL mn] And is creating the largest Brazilian pet ecosystem... 133 105 80 63 46 27 34 27 1,437 986 768 597 414 318 CANSE I DE SER GATO 13' 14' 15' 16' 17' 18' 19' 20' 11/21 15" 16' 17" 18' 19' 20' ...with its stores concentrated in São Paulo state... Petz' Store Concentration; [%] ...with a huge dominance of food and non-food.... Revenue Breakdown 20%; [%] 1% 1% 2% 1% 2% 7% 1% 57% 4% 1% 50% 45% 5% Food Non-Food Services The Non-Food line has shown the greatest growth, while the Food line represents the greatest recurrence... S Petz Câu Cidadão Offering products, veterinary services, bathing, grooming, adoption, digital engagement, and pet training. Thus, the company generates cross-sell and synergies that retain the customer in its base.... 5% Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks Source: Company's Data#3Petz at a Glance 3 What is Petz? Petz is the largest pet retail company in Brazil, which aims to be the most significant pet ecosystem globally... A National Company... Petz has a great store-opening track-record... ...With an Increasing Revenue... ...and One-Stop-Shop Solution... Petz' Store Evolution; [# of stores] 161 A high increase in revenue in line with stores... Net Revenue Evolution; [BRL mn] And is creating the largest Brazilian pet ecosystem... 133 105 80 63 46 27 34 27 1,437 986 768 597 414 318 CANSE I DE SER GATO 13' 14' 15' 16' 17' 18' 19' 20' 11/21 15' 17' ...with its stores concentrated in São Paulo state... Petz' Store Concentration; [%] 16' ...with a huge dominance of food and non-food... Revenue Breakdown 20'; [%] 18' 19' 20' 1% 1% 2% 1% 2% 7% 1% 57% 4% 5% 1% 50% 45% 5% Food ■Non-Food Services The Non-Food line has shown the greatest growth, while the Food line represents the greatest recurrence... S Petz Câu Cidadão Offering products, veterinary services, bathing, grooming, adoption, digital engagement, and pet training. Thus, the company generates cross-sell and synergies that retain the customer in its base.... Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks Source: Company's Data#4Petz at a Glance 4 What is Petz? Petz is the largest pet retail company in Brazil, which aims to be the most significant pet ecosystem globally... A National Company... Petz has a great store-opening track-record... ...With an Increasing Revenue... A high increase in revenue in line with stores... Net Revenue Evolution; [BRL mn] I ...and One-Stop-Shop Solution... And is creating the largest Brazilian pet ecosystem... Petz' Store Evolution; [# of stores] 161 133 105 80 63 46 27 34 27 1,437 986 768 597 414 318 13' 14' 15' 16' 17' 18' 19' 20' 11/21 15' 16' 17' 18' 19' 20' ...with its stores concentrated in São Paulo state... Petz' Store Concentration; [%] ...with a huge dominance of food and non-food... Revenue Breakdown 20'; [%] 1% 1% 2% 1% 2% 7% 1% 57% 4% 5% 1% 50% 45% 5% Food ■Non-Food Services 8 S Petz CANSE I DE SER GATO Cão Cidadão The Non-Food line has shown the greatest growth, while the Food line represents the greatest recurrence... | Offering products, veterinary services, bathing, grooming, adoption, digital engagement, and pet training. Thus, the company generates cross-sell and synergies that retain the customer in its base... Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks Source: Company's Data#5PETZ3 - BUY We see Petz trading significantly lower than its fair value and with a secure margin of safety that ensure our buy recommendation BRL 33 BRL 30 BRL 27 BRL 24 BRL 21 BRL 18 BRL 15 BRL 12 11/20 01/21 03/21 05/21 07/21 09/21 11/21 11/22 39% DCF 24% IRR#6Promissing Industry A resilient and fragmented sector with a secular growth Assertive Hub-and-Spoke Strategy Best-in-class operations when compared to mom & pop Expansion to Outpace Organic and sustainable expansion Healthy and Solid Ecosystem A one-stop-shop solution for pets#7A Great Industry 7 Resilience + Growth = Success The industry witnessed a double-digit growth in the last five years, much higher than GDP and other retails segments... The industry has been showing resilience over macro downturns... Real Growth Comparison; [%] ...and we believe that will continue to grow as it has in the past... Pet Retail Evolution; [BRL bn] Retail Growth Pet Retail Growth GDP Growth 15% 10% 5% 0% -5% +592bps spread from GDP 50.5 45.5 41 37 33.1 27.8 23.5 20.8 18.6 16.9 -10% 12' 13' 14' 15' 16' 17' 18' 19' 20' CAGR (16-20)= 13% CAGR (21E-25E) = 12% Why? 88% of the sector's revenue comes from pet food, something essential in this industry... 16' 17" 18 19' 20' 21E 22E 23E 24E 25E Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks Source: Euromonitor; IBGE; Team 7#8A Great Industry 8 Resilience + Growth = Success The industry witnessed a double-digit growth in the last five years, much higher than GDP and other retails segments... The industry has been showing resilience over macro downturns... Real Growth Comparison; [%] ...and we believe that will continue to grow as it has in the past... Pet Retail Evolution; [BRL bn] Retail Growth Pet Retail Growth GDP Growth 15% 10% 5% 0% -5% +592bps spread from GDP 50.5 45.5 41 37 33.1 27.8 23.5 20.8 18.6 16.9 -10% 12' 13' 14' 15' 16' 17' 18' 19' 20' CAGR (16'-20) 13% CAGR (21E-25E) = 12% Why? 88% of the sector's revenue comes from pet food, something essential in this industry... 16' 17' 18' 19' 20' 21E 22E 23E 24E 25E Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks Source: Euromonitor; IBGE; Team 7#99 A Great Industry Resilience + Growth = Success The industry witnessed a double-digit growth in the last five years, much higher than GDP and other retails segments... The industry has been showing resilience over macro downturns... Real Growth Comparison; [%] GDP Growth 15% Retail Growth Pet Retail Growth ...besides that, it is already one of the biggest market in the world........ Revenue & Average Expenditure per Pet in 2019; [BRL bn & BRL/y] 1,255 Market Size Avg. Expenditure per Pet 1,443 10% 5% 0% -5% +592bps spread from GDP 1 267 193 202 -10% 12' 13' 14' 15' 16' 17' 18' 19' 20' 36 25 23.5 Why? 88% of the sector's revenue comes from pet food, something essential in this industry... 978 22 22 Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks Source: Euromonitor; IBGE; Team 7 213 6 802 5#1010 Strong Secular Growth What is behind that size and growth? The secular growth will be the main industry driver, increasing the expenditure and number of pets in the country... Pets Humanization is being mainly driven by: 1 1 The newest generation is more likely to spend more and acquire pets... Spending with Pets per Gen; [%] Number of Dogs and Cats/Children; [mn] Demographic and Cultural Changes Continuous Moderated Conscious Dogs and Cats Children (0-14) 17% 19% 27% 24% 116 2 42% 88 45% Enhanced Access to Information 52% 57% 45 44 44 44 41% 36% 21% 19% Mille nals Gen X Boomers Constructors 15' 19' 23E 26E The result? Relation with Pets; [%] 2019 2021 2 As a child As family Just as a Pet 85 60 60 35 Main Terms Related to Pets; Google Trends Average of Terms We searched all the terms we see as linked to humanization, such as accessories and non- recurring products on Google Trends, showing accelerated growth since 2016 in terms... 10 16' 17' 18' 19' 20' 21' Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks Source: Euromonitor; COMAC; IBGE; Google Trends; Team 7#11Highly Fragmented 11 Room for Consolidation Besides being a resilient high growth industry, pet retail is also fragmented... The Brazilian market is still highly fragmented, when compared... Product Sales by Channel in 21E; [%] ...despite showing a recent consolidation movement... Specialized Channels Evolution; [%] Megastores E-commerce Food Retailers Pet Shops and Vet Clinics Others Megastores E-commerce 6% 10% 17% 23% 7% 48% 29% 40% 6% 8% 4% 3% 21% 29% 2% 2% 13% 11% 15% 8% 8% 8% 6% 6% 13% 16% 18% Source: Euromonitor 16' 17' 18' 19' 20' 21E Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks#12Highly Fragmented 12 Room for Consolidation Besides being a resilient high growth industry, pet retail is also fragmented... The Brazilian market is still highly fragmented, when compared... Product Sales by Channel in 21E; [%] ...despite showing a recent consolidation movement... Specialized Channels Evolution; [%] Megastores E-commerce Food Retailers Pet Shops and Vet Clinics Others Megastores E-commerce 6% 10% 17% 23% 7% 48% 29% 40% 8% 6% 4% 3% 21% 29% 2% 2% 13% 11% 15% 8% 8% 8% 6% 6% 13% 16% 18% 16' 17' 18' 19' 20' 21E Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks Source: Euromonitor#13Highly Fragment 13 Room for Consolidation Besides being a resilient high growth industry, pet retail is also fragmented... The Brazilian market is still highly fragmented, when compared... Product Sales by Channel in 21E; [%] ...despite showing a recent consolidation movement... Specialized Channels Evolution; [%] So, which is the best model to consolidate this sector? 11% 15% 8% 8% 8% 6% 6% 13% 16% 18% 16' 17' 18' 19' 20' 21E Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks Source: Euromonitor#14Promissing Industry A resilient and fragmented sector with a secular growth Assertive Hub-and-Spoke Strategy Best-in-class operations when compared to mom & pop Expansion to Outpace Organic and sustainable expansion Healthy and Solid Ecosystem A one-stop-shop solution for pets#15Field Research 15 What does really matter in this industry? To understand it better, we decided to perform a survey to see the customers' decision factors... Physical Preferences Digital Preferences Source: Team 7 61% Product Price 50% 30% Store Location Product Variety 60% Product Price 41% 39% Delivery Time Shipping Price Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks#16Field Research 16 What does really matter in this industry? To understand it better, we decided to perform a survey to see the customers' decision factors... Physical Preferences Digital Preferences Source: Team 7 61% Product Price 50% 30% Store Location Product Variety 60% Product Price 41% 39% Delivery Time Shipping Price Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks#17Physical Competition 17 Product Price: The Lower, The Better Price is the most important factor in a customer's decision. In this aspect, we see the megastores well positioned... Megastores have the second best pricing policy in the industry... Normalized Basket Price; [base 1000] ...because they have a better bargaining power with suppliers... Supplier Price Dynamics 952 Food Retailers Petz 1000 Cobasi 1010 Mom & Pop Channels Source: Team 7 Petland 1075 Buy Directly Lower Price Pass-Through Megastores Suppliers Buy from Ressellers Mom & Pop Higher Prices Buy Standard Itens Directly Suppliers Lower Price with Discounts 1130 Food Retailers Suppliers Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks#18Physical Competition 18 Store Location: A1 Positioning We see that megastores have a privileged position, being close to the areas with the highest traffic of people... In our analysis, we studied the megastores' lowest distance from malls, subways and their position in the wealthiest areas of São Paulo city... Petz Cobasi Malls Subways Avg. Income 0 10,000 Source: QGIS; IBGE; Google Maps; Geo Sampa; Team 7 Subways Malls 100% 80% % of Petz % of Cobasi 60% 40% 20% 0% 200 600 1,000 1,400 1,800 2,200 2,600 3,000 4,000 5,000 % of Petz % of Cobasi 100% 80% 60% 40% 20% 0% 200 600 1,000 1,400 1,800 2,200 2,600 3,000 4,000 5,000 Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks#19Physical Competition 19 Product Variety: Megastores' Main Head Megastores have an advantage due to their size, which guarantees companies a larger stock of products... When analyzed, we see that megastores have more SKUs... Estimated SKUs per Store; [#] 5% Private Label 15,000 ...mainly due to the large inventory of these business model... Inventory to Sales Ratio; [%] Petz Cobasi 14% 13% 13% 13% 10% 10% 11% 95% 12,000 17' 18' 19' 20' Regarding its size, megastores are more efficient in SKUs allocation... Cobasi Mom & Pop Petz 14.1 SKUS/m² 12.2 SKUS/m² 9.3 SKUS/m² 785 Petz Cobasi Mom & Pop Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks Source: Company's Data; Diário Oficial; Euromonitor#2020 20 Field Research What does really matter in this industry? To understand it better, we decided to perform a survey to see the customers' decision factors... Physical Preferences Digital Preferences 61% ווי 50% 30% Product Price Store Location Product Variety 60% Product Price 41% 39% Delivery Time Shipping Price Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks Source: Team 7#21Digital Competition 21 Product Price: All Aligned for the Customer... The product price, especially for specialized online players, is the same, as the customer can compare them in an instant... Prices are commoditized in the online channel, without differentiation... Standard Price Comparison; [BRL] ...but pet players have been making moves to captivate customers... Companies Signature Models Petz Cobasi Petlove Zee.Now Subscription Program GoldeN MEGA BRL 153.99 BRL 153.90 BRL 153.90 BRL 163.90 Petz 10% for all products Cobasi 10% for all products Petlove 10% for all products +5% for Pick-Up +5% for Pick-Up GRAN PLUS BRL 55.90 BRL 55.90 BRL 55.90 BRL 66.90 BRL 90.99 BRL 95.28 BRL 89.90 N/A If all are pretty similar, which one can take the most advantage? Discount Simulation; [%] A Gross Margin Petz Cobasi Petlove Petz + Zee.Dog PIPICAT BRL 55.90 BRL 55.50 BRL 55.90 BRL 72.90 5% Discount Increase 10% Discount Increase 15% Discount Increase -2.7% -3.2% -3.7% -5.7% -6.7% -7.9% -9.0% -10.6% -2.6% -5.4% -12.5% -8.6% Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks Source: Company's Data; Diário Oficial; Team 7#22Digital Competition 22 Product Price: All Aligned for the Customer... The product price, especially for specialized online players, is the same, as the customer can compare them in an instant... Prices are commoditized in the online channel, without differentiation... Standard Price Comparison; [BRL] ...but pet players have been making moves to captivate customers... Companies Signature Models Petz Cobasi Petlove Zee.Now Subscription Program GoldeN MEGA BRL 153.99 BRL 153.90 BRL 153.90 BRL 163.90 Petz 10% for all products Cobasi 10% for all products Petlove 10% for all products +5% for Pick-Up +5% for Pick-Up GRAN PLUS BRL 55.90 BRL 55.90 BRL 55.90 BRL 66.90 BRL 90.99 BRL 95.28 BRL 89.90 N/A If all are pretty similar, which one can take the most advantage? Discount Simulation; [%] A Gross Margin Petz Cobasi Petlove Petz + Zee.Dog PIPICAT BRL 55.90 BRL 55.50 BRL 55.90 BRL 72.90 5% Discount Increase 10% Discount Increase 15% Discount Increase -2.7% -3.2% -3.7% -5.7% -6.7% -7.9% -9.0% -10.6% -12.5% -2.6% -5.4% -8.6% Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks Source: Company's Data; Diário Oficial; Team 7#23Digital Competiti 23 Product Price: All Aligned for the Customer... The product price, especially for specialized online players, is the same, as the customer can compare them in an instant... Prices are commoditized in the online channel, without differentiation... Standard Price Comparison; [BRL] ...but pet players have been making moves to captivate customers... Companies Signature Models But in the end, it's all pretty similar. What does really matter? BRL 90.99 BRL 95.28 BRL 89.90 N/A A Gross Margin Petz Cobasi Petlove Petz + Zee.Dog A PIPICAT BRL 55.90 BRL 55.50 BRL 55.90 BRL 72.90 5% Discount Increase 10% Discount Increase 15% Discount Increase -2.7% -3.2% -5.7% -6.7% -9.0% -10.6% -3.7% -2.6% -7.9% -5.4% -12.5% -8.6% Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks Source: Company's Data; Diário Oficial; Team 7#2424 24 Digital Competition Delivery Time & Shipping Price: Last Mile Matters The extensive influence area summed to the great position in digital landscape generates to the company the best positioning... As commented before, megastores have a well-developed omnichannel, but how is it compared to other peers? Locations with Petz and Cobasi physically present... Average Shipping Price; [BRL] BRL 45 Average Delivery Time; [Business Days] 9 What did considered in this analysis? Same Products We chose the same products for each one of the 21 analyzed locations... BRL 40 BRL 35 BRL 30 BRL 25 BRL 20 BRL 15 8 7 6 4 Different Locations For our analysis we considered 21 different CEPS from the most diverse regions... Stores and Scenarios We considered 5 types of stores in the most diverse scenarios... What was the takeaway? 312 Megastore - The Winner In locations with Megastores, we see the best competitive position.... Are there Rivals? Some players can be a threat for Petz and Cobasi, such as Petlove and MELI... BRL 10 BRL 5 BRL ☐☐ Petz Cobasi Petlove Magalu MELI 2 ☐ Petz Cobasi Petlove Magalu MELI Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks Source: Team 7#25Digita 25 Delivery Time & Shipping Price: Last Mile Matters TL Product Price Store Location Product Variety Source: Team 7 KO The true champion of the race... Product Price Best in Physical Best in Digital Delivery Time Shipping Price Petz Cobasi Petlove Magalu MELI Petz Cobasi Petlove Magalu MELI Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks#2626 26 Foot Traffic: Our Goldilocks What do we see that the market does not? What is the primary retail indicator? Some can say SSS. Others may say Sales/m², but we believe in the Average Traffic... Results from Foot Traffic; [Average Traffic - Scale 100] 100 Petz Mom & Pop Channels Part of our authoral code using R to find traffic for each petshop in the region... if (!requireNamespace ("devtools")) install.packages("devtools") #devtools::install_github ("dkahle/gomap", ref = "tidyup", force=TRUE) #install.packages ("ggmap") library(ggmap) Cobasi 80 08 ggmap::register_google (key = "AIzaSyAVUZbrxuqeJnvvwfq02orpHu8AiROTRES") Average Traffic 60 40 p<ggmap (get_googlemap (center = c(-46.658356,-23.556356), zoom= 14, scale = 2, maptype=roadmap', color = 'bw')) 20 20 Доло TA 22.32- 0 CENTRO - Foot Traffic Heat Map (Bauru - 1.5 km); [Average Traffic] E DE LOURDES BRA 22.31 AO Expresso de Prata Rodoviaria VILA CAMARGO PARQUE VISTA ALEGRE SANTA LUZIA 16 VILA SANTA LUZIA Boulevard uru Shopping Bauru CARA FLORES JARDIM GUADALAJARA VILA CARDIA ALTO HIGIENOPOLIS VILA MONLEVADE JARDIM CRUZEIRO DO SUL GIENOPOLIS VILA CORALINA Re JARDIM BOM SAMARITANO NC VILA CA JARDIN DONA LI CON 1 3 5 7 9 11 13 13 15 15 17 19 21 23 JARDIM BRASIL 22.33 VILA MESE Time of Day 20 ALTINOPOLIS. VILA UNIVERSITARIA JARDIM ESTORIN JARDIN ESTORI 22.34- VILA NOVA SANTA CLARA JARDIM ESTORIL 40 SCO STA A ARIANA VILA ZILLO I In our analysis, we saw that megastore models have similar traffic, I while mom & pop models are far below average... VILA SERRAO Receita Federal 22.35 Google -49.08 RES. TIVOLI PARQUE DAS JARDIM EUROPA Nucleo de Saúde Jardim Europe -49.06 JARDIM NUCLEO HAB. OL PRES. GEISEL AURI VERDE Paschoalotto tact Center Atacadão Bauru JARDIM SAMBURA VILA NOVA CIDADE UNIVERSITARIA JARDIM AMERICA JARDIM INFANTE DOM HENRIQUE INI JARD REDEN PARI Avg. Traffic 50 PASTOR 25 LOPES 0 JARDIM COLONIAL Petz -49.07 JARDIM NICEIA PARQUE JARDIM EUROPA 200 JARDIM ep 21 -49.05 -49.04 -49.03 Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks Cobasi Mom & Pop Source: Google Cloud; R; Team 7#27Foot Traffic: Our Goldilocks 27 Average Traffic What do we see that the market does not? What is the primary retail indicator? Some can say SSS. Others may say Sales/m², but we believe in the Average Traffic... Average Traffic 100 60 20 We decided to perform our analysis in several competitive scenarios, and megastores always win: Scenario 1: Outside São Paulo State (w/ Petz and Cobasi) Scenario 2: Outside São Paulo State (w/ Petz) 100 -371- Avg. Traffic 100 -16.69- MAKCENTE VASANTE ERGEMA SUL Avg. Traffic 60 80 CAIRO FORT 80 60 40 -372- 0 MEIRELE VICENTE PINZON -373- -374-10E : AMPFICA PICU -3.75-RES PUTING T 0 30 DE LOUNDER Paudy ⚫ Petz MANUEL ⚫ Cobasi ANTE Mom & Pop 0369 12 15 18 21 Time of Day -276-ge -3850 -38.49 -38.48 -39.46 -38.45 Longitude Scenario 3: Inside São Paulo State (w/ Petz and Cobasi) 2354 -23.55- -23.56- APEIA Average Traffic 40 20 CAMPUS ELISEOS OPE Avg. Traffic 100 Ca SANTA IFIGENI 50 BUAQUE RE No do Finebol IN REPUBLICA ARDIM 2357-STAND instlula Cos's ELO VISTA São Paulo BIXIGA LIBER Paky Nucl Cute f JARDINS JARDIM PAULISTARAISO ARDIM EUROPA Asses Emr 23.58- 0369 12 15 18 21 -45.00 +48.87 -46.60 Longitude 48.65 40.64 Time of Day ACLIM 25 Average Traffic ⚫ Petz ⚫ Cobasi 20 • Mom & Pop Latitude -15.70 ST BUENO MARIS Amen 30 -16.71- JARDIM AMERICA NOV. STEDRO LUDOVICO CONUA -15.72- 0 SERRINHA NEUTRA FARQUE AMAZONIA -16.73- JARDIM TLANTICO Law Chacnal CO JARDIM SANTO ANTONIO COM LiteREAPE таком PRUNEDES VILA BUL ⚫ Petz • Mom & Pop 0 3 6 9 12 15 18 21 Time of Day ONES -49.20 40 28 49.27 49.26 40.25 Longitude Scenario 4: Inside São Paulo State (w/ Petz) Latitude -2307- MADIM CONCEICAL CONCEICAOZ VICENTE DE TeplemntO CARVALHO CONCEICAOZINH VOCENTE DE Canya Ho PORTO UNTA -23.00- TA DA PRAIA 23.99- VILK LIGA -24.00- VLALUIS ANTONIO JARDIM XAB -24.01- Avg. Traffic 60 JADDIN DEAL 25 VILA MAIA Quaruja MARRA FLED Par 0 AUTORIAL Go 0 3 6 9 12 15 18 21 Time of Day -46.30 48.29 46.29 -45-27 4528 -48.25 Longitude Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks Source: Google Cloud; R; Team 7 Petz • Mom & Pop#28Foot Traffic: Our 28 What do we see that the market does not? What is the primary retail indicator? Some can say SSS. Others may say Sales/m², but we believe in the Average Traffic... We decided to perform our analysis in several competitive scenarios, and megastores always win: Scenario 2: Outside São Paulo State (w/ Petz) Scenario 1: Outside São Paulo State (w/ Petz and Cobasi) Is it possible to expand this model in a sustainable way? Average Traffi 40 20 O V REPUBLICA 25 -23.55- GELO VISTA São Paulo MIXICA -2356- 0 LIBER Hours Te ARDIN 2357-LISTANO ⚫ Petz Average Traffi 40 20 ACLIM • Cobasi JARDINS JARDIM PAULISTARAISO ARDIM EUROPA • Mom & Pop 23.58-Geigh 0369 12 15 18 21 46.69 49.87 -46.60 4085 4064 Longitude Time of Day 29.95 TA DA PRAIA -2399- LADDIN ENC VILACAME SINTO VILK MA VILKULYA -24.00- 25 0 ANTONIO ANTING LADE ⚫ Petz -24.01- • Mom & Pop COUNO 0369 12 15 18 21 Time of Day Grey silf -45.30 w -4829 48.28 -4527 45.25 -48:25 Longitude Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks Source: Google Cloud; R; Team 7#29Promissing Industry A resilient and fragmented sector with a secular growth Assertive Hub-and-Spoke Strategy Best-in-class operations when compared to mom & pop Expansion to Outpace Organic and sustainable expansion Healthy and Solid Ecosystem A one-stop-shop solution for pets#30Physical Expansion 30 Is Consolidation Viable for Megastores? Ok, we understand the the megastores will consolidate the industry, but is there physical space for them? Petz and Cobasi are leading the consolidation by opening stores... Stores per Year; [stores] Petz Cobasi 160 144 ...but the penetration is still far from cannibalization in the country... Population Coverage; [mn of people] 27.8% of total GDP 63 59 46 42 37 34 133 108 105 96 90 80 76 10.4 24.1% of total GDP 8.2 15.6% of total GDP 5.4 3,439 mn GDP/Store 3,425 mn GDP/Store 3,026 mn GDP/Store 15' 16' 17' 18' 19' 20' 11/21 Petz Cobasi Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks Source: Company's Data; Diário Oficial; IBGE; QGIS; Team 7 Petland#31Physical Expansion 31 Is Consolidation Viable for Megastores? Ok, we understand the the megastores will consolidate the industry, but is there physical space for them? Petz and Cobasi are leading the consolidation by opening stores... Stores per Year; [stores] Petz Cobasi 133 160 144 ...but the penetration is still far from cannibalization in the country... Population Coverage; [mn of people] 27.8% of total GDP 10.4 24.1% of total GDP 63 59 46 42 37 34 108 105 96 90 80 76 8.2 15.6% of total GDP 5.4 3,439 mn GDP/Store 3,425 mn GDP/Store 3,026 mn GDP/Store 15' 16' 17' 18' 19' 20' 11/21 Petz Cobasi Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks Source: Company's Data; Diário Oficial; IBGE; QGIS; Team 7 Petland#32Physical Expansion 32 Is Consolidation Viable for Megastores? Ok, we understand the the megastores will consolidate the industry, but is there physical space for them? And we map all possible points in the country, granularly... Granular Geospatial Analysis - How many Megastores fit in Brazil; [cities] ...with high returns per store, above the Cost of Capital... 4-Wall Analysis; [%] Number of Megastores New Cities > 10 > 9 > 8 > 7 25 > 6 35 > 5 42 > 4 58 > 3 80 > 2 > 1 126 226 222232 20 21 35.8% |---- WACC = 10% 29.7% ROIC per Mature Store Petz Cobasi 20.4% 16.5% EBITDA Margin per Mature Store Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks Source: IBGE; QGIS; Team 7#33Physical Expansion 33 Is Consolidation Viable for Megastores? Ok, we understand the the megastores will consolidate the industry, but is there physical space for them? And we map all possible points in the country, granularly... Granular Geospatial Analysis - How many Megastores fit in Brazil; [cities] ...with high returns per store, above the Cost of Capital... 4-Wall Analysis; [%] Number of Megastores New Cities > 10 > 9 > 8 > 7 25 > 6 > 5 42 20 21 222232 35 > 4 58 > 3 80 > 2 > 1 126 226 35.8% --- WACC = 10% 29.7% ROIC per Mature Store Petz Cobasi 20.4% 16.5% EBITDA Margin per Mature Store Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks Source: IBGE; QGIS; Team 7#34Physical Expansion 34 Is Consolidation Viable for Megastores? Ok, we understand the the megastores will consolidate the industry, but is there physical space for them? And we map all possible points in the country, granularly... Granular Geospatial Analysis - How many Megastores fit in Brazil; [cities] ...and the payback showing self-sustainability, with cash-generation... Payback vs. Maturation; [years] Number of Megastores New Cities > 10 > 9 20 21 222232 > 8 > 7 25 > 6 35 > 5 42 > 4 58 > 3 80 > 2 > 1 126 226 The payback being less than the maturation time indicates that stores are able to generate cash before they are 100% ready in terms of revenue, therefore being self-sustainable... Maturation: 4 years Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks Source: IBGE; QGIS; Company's Data; Diário Oficial; Team 7 Cobasi: 3.9 years Petz: 3.1 years#3535 Digital Expansion Physical Expansion = Digital Expansion? As megastores open stores, we see an improvement in their omnichannel indices given the wide range of influence... ...specially because physical presence increases omnichannel indexes... After opening a store, digital sales increase ~500%... Digital Sales Performance Post-Store Opening; [base 100] Omnichannel Relation; [%] +500% in 3 months Number of Stores Omnichannel Index 600 153 143 138 500 133 400 300 200 100 M-3 M-2 M-1 Opening M+1 M+2 M+3 1200 | 79% Q3'20 87% 86% 85% 84% | | Q4'20 Q1'21 Q2'21 Q3'21 Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks Source: Company's Data; Dário Oficial; QGIS; Conversion#36Digital Expansion 36 Physical Expansion = Digital Expansion? As megastores open stores, we see an improvement in their omnichannel indices given the wide range of influence... After opening a store, digital sales increase ~500%... Digital Sales Performance Post-Store Opening; [base 100] ..That happens since megastores have huge influence areas... E-commerce Influence Zone 600 500 400 300 200 100 +500% in 3 months Petz Cobasi ...which summed to a higher digital presence, guarantees success... Share of Traffic; [%] 10% 17% 38% 35% M-3 M-2 M-1 Opening M+1 M+2 M+3 08/20 Petz + Zee. Dog Petlove Cobasi Others 11% 19% 28% 43% 11/20 02/21 05/21 08/21 Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks Source: Company's Data; Dário Oficial; QGIS; Conversion#37Promissing Industry A resilient and fragmented sector with a secular growth Assertive Hub-and-Spoke Strategy Best-in-class operations when compared to mom & pop Expansion to Outpace Organic and sustainable expansion 原 Healthy and Solid Ecosystem A one-stop-shop solution for pets#38Ecosystem in a Nutshell 38 How does the ecosystem play out? Given that the megastores are very similar, we see as an advantage over Cobasi is its well-developed ecosystem... Synergies: How does Petz complement its products? 1 Cross-Selling & Exclusivity in Retail Distribution Network 2 Data Intellingence to Optimize Product Mix Benefits for Petz: 1 Margin Gains & Customer Captivity 2 CAC Reduction Through Brands... Branded Products Bath & Grooming Petz Veterinary Services seres Training & Others CANSEI DE SER GATO Cão Cidadão Adoption Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks Source: Company's Data; Team 7#39Seres: Vet. Services 39 Seres: Pioneer on Veterinary Verticalization Seres is one of the most promising brands in the Petz ecosystem, having clear advantages over other clinics and hospitals... What do we like about Seres' plans? Seres Non-Verticalized TAIBÌ BIBJ + Health/Vet Insurance Service Provider Clinics and Hospitals Expansion Seres plans to expand its hospital and clinics networks adjacent to store expansion, increasing synergies.... Health/Vet Insurance Service Provider Alignment of interests creates opportunities for cost reduction... Creation of Diagnostic Centers As part of the verticalization, Seres should enter the diagnostics segment, which lacks players with scale... Experience in one of the largest verticalized plans in Brazil... + Irlau Machado Filho, CEO of Grupo Notredame Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks Source: Company's Data; Team 7 Verticalized Health Plan Finally, Seres will be able to offer a veterinary health plan in Brazil, with competitiveness in price and quality.#40Seres: Vet. Services 40 Seres: Holding a Geographical Edge We have found that the most important factor in choosing a veterinary hospital is the distance to veterinary clinics... We screened the nearest hospital for each veterinary clinic at São Paulo... Nearest Distance Hospitals - Clinics We found that the average distance from ais 2.15km... Distance Histogram; [km] 225 2.15km Avg. Distance 183 ...and, at that distance, Seres reaches more clinics than other hospitals... Clinics Reached per Hospital; [clinics] Seres Non-Seres 14 75% more clinics per hospital Seres Hospitals Non-Seres Hospitals O Veterinary Clinics 139 89 32 14 10 4 (1km, 2km] [0km, 1km] (3km, 4km] (2km, 3km] (5km, 6km] > 7km (4km, 5km] (6km, 7km] 2 km Radius Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks Source: Company's Data; QGIS; Google Maps; Team 7 7.5#41Zee.Dog: The Icing on the Cake 41 Zee.Dog: Why Do We Think It's a Perfect Fit? Petz made a major move by acquiring Zee. Dog, with a transaction that placed Petz among a good strategy and good people... GATOR Ecosystem AIRLEASH Branding Storytelling = Private Label Success 73% of products sold are recognized as Private Label Customer Fidelization & Margin Development Acqui-Hiring Growth Avenues Disruptive and Innovative Management National: Petz' Stores as Mini-Hubs Felipe Diz Thadeu Diz Zee's International Presence: Payment: BRL 615 mn World 34% 87% 13% Brazil ANIMATES Stocks Cash Earn-out: BRL 100 mn Adjusted by CDI + Conditions to Provide Long-Term Alignment 66% MAXI ZOO NORDSTROM KIWOKO ABSOLUTE Pets. pets at home chewy Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks Source: Company's Data; QGIS; Team 7#42Zee.Dog: The Icing on the Cake 42 Zee.Dog: Why Do We Think It's a Perfect Fit? Petz made a major move by acquiring Zee. Dog, with a transaction that placed Petz among a good strategy and good people... GATOR Ecosystem AIRLEASH Branding Storytelling = Private Label Success 73% of products sold are recognized as Private Label Customer Fidelization & Margin Development Acqui-Hiring Growth Avenues Disruptive and Innovative Management National: Petz' Stores as Mini-Hubs Felipe Diz Thadeu Diz Zee's International Presence: Payment: BRL 615 mn World 34% 87% 13% Brazil ANIMATES ■Stocks Cash Earn-out: BRL 100 mn Adjusted by CDI + Conditions to Provide Long-Term Alignment 66% MAXI ZOO NORDSTROM KIWOKO ABSOLUTE Pets. pets at home chewy Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks Source: Company's Data; QGIS; Team 7#43Zee.Dog: The Icing on the Cake 43 Zee.Dog: Why Do We Think It's a Perfect Fit? Petz made a major move by acquiring Zee. Dog, with a transaction that placed Petz among a good strategy and good people... Ecosystem AIRLEASH Acqui-Hiring Growth Avenues Disruptive and Innovative Management National: GATOR Branding Storytelling = Private Label Success 73% of products sold are recognized as Private Label Customer Fidelization & Margin Development Petz' Stores as Mini-Hubs Felipe Diz Thadeu Diz Zee's International Presence: Payment: BRL 615 mn World 34% 87% 13% ■Brazil ANIMATES MAXI ZOO ■Stocks Cash NORDSTROM Earn-out: BRL 100 mn Adjusted by CDI + Conditions to Provide Long-Term Alignment 66% ABSOLUTE Pets. KIWOKO pets at home chewy Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks Source: Company's Data; QGIS; Team 7#44Zee.Dog: The Icing on the Cake 44 Private Label: Setting Petz Apart Petz' Private Label has a great cost-benefit value proposition, proved by our proprietary analysis... With the acquisition of Zee. Dog, we see an increase in Petz's private label... Private Label Penetration; [%] 16% Statistical Price Analysis Private Label Example: Snacks Price Points Price Range; [BRL/kg] 14% 12% 10% 8% 6% 4% 2% Zee.Dog Acquisition 0% 17' 18' 19' 20' 21E 22E 23E 24E 25E Fetz BRL 43 Keldug OH (LaLà! Pet CANNIX BRL 345 | Petz is cheaper than 40% 0.5 | 68% of products 0 20% -0.5 -1 -1.5 www 00000 0% -20% -40% -60% -2 -80% OZ-Score % PL Price Variation Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks Source: Company's Data; Team 7#45Zee.Dog: The Icin 45 4% 2% Private Label: Setting Petz Apart Petz' Private Label has a great cost-benefit value proposition, proved by our proprietary analysis... With the acquisition of Zee. Dog, we see an increase in Petz's private label... Private Label Penetration; [%] Statistical Price Analysis So, what does all this represent to Petz? 0% 17' 18' 19' 20' 21E 22E 23E 24E 25E -1.5 ستان -40% -60% -2 -80% Z-Score % PL Price Variation Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks Source: Company's Data; Team 7#46One-Stop-Shop Solution 46 How to explain that with numbers? We see that by having a well-developed ecosystem, Petz is able to generate more cross-sell and increase the frequency of visits... – Average Expenditure per Channel; [BRL/y]_ — 6.6x Products Grooming and Others Healthcare Annual Frequency 10.8x 15x 23.4x ↑ ↑ 38 47% Bigger ↓ 41% Bigger 42 31 26 24 126 105 106 Retail Grooming Healthcare 116 Omnichannel + Grooming + Healthcare + Others Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks Source: Company's Data#47ESG How aligned is Petz with the theme? zeedog 1450#48ESG Analysis: Materiality 48 How did we conduct our ESG Analysis? In order to personalize and adapt the ESG analysis to the Pet Industry, we approached it as international players do... We developed a materiality matrix to identify critically important issues. In this regard, we see that Petz is able to generate as much ESG value as for business... Materiality Matrix; [index] ESG Transparency Pets Welfare Products and Services Quality Management Quality Alignment Labour Practices Tutor's Wellbeing Quality Information When we compare with international players, we see that Petz has a lot of potential to evolve. PetCo & Pets at Home Sustainability Report petco pets at home Group pic THE HEALTH WELLNESS CO Importance to Stakeholders Carbon Emission Ethical and Business Conduct Colaborates Wellbeing Sourcing Responsibility Transportation and Packing Impacts Importance to Business Delivering our purpose So we decided to break down our ESG analysis into three main points: PIP P Planet Pets People Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks Source: Companies' Data; Team 7#49Environmental: Planet 49 Planet: The Most Valuable Asset Petz achieves perfection in terms of planet and people by having a well-developed omnichannel and an aligned team... Omnichannel The increase in Petz omnichannel indices, in addition to the increase in digital indices, generates a decrease in carbon emissions... Shorter Distances & Lower Emission Petz's CO2 Estimated Emission Dillution; [km, kg & base 100] Larger Distances I Median Distance (km) CO2 Emission (kg) Freight Expenses (base 100) 58 100 & Bigger Emission 8 | Traditional Shipping 17' 76 25 52 18' 5 3.5 0.7 Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks Source: Company's Data; BNDES; Team 7 19'#50Social: Pets & People 50 Pets: Bringing the Best for its Main Customer Petz aligns best practices with cross-sell ability and makes an ESG that is sustainable over the long term... Adote Petz: Aligning ESG with Customer Captivity To this day, 56k pets were adopted through the program... # of Adoptions; [#] NGOS send animals for Petz 56,052 46,200 39,931 41,958 H 盘 All dogs are vaccinated, medicated, castrated and taken care of at Petz 2H'18 2H'19 2H'20 YTD And Petz has other social projects that can make a difference in society... .00 arredondar Looking at the testimonials of some employees, we see that Petz manages to take good care of them, generating a good relationship... % of People Who'd Recommend It; [%] 66% of former Petz employees would recommend to work there... ...with a great pontuation in diversitiy & inclusion index... Diversity Index; [0-5] MOL EDITORA Tutors are selected and tend to remain loyal to the Petz brand adotepetz 4.4 of 5 Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks Source: Company's Data; Glassdoor; Team 7#5151 Governance: People People: Big Co + Big Team = Success Formula We believe the Pet Industry is a business made by and for people, and Petz is the best at it... Petz has managed to put together an experienced, diverse and qualified team... With a purebred alignment with company's interests... Shareholders' Composition; [%] NEW Sérgio Zimerman CEO Aline Penna CFO Claudio R. Ely Chairman Irlau M. Filho BoD Diz Brothers Zee.Dog Petz Petz Petz seres B Sérgio Zimerman 62.7% 31.6% Zee.Dog Shareholders Free Float Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks Source: Company's Data 5.7%#5252 Governance: People People: Big Co + Big Team = Success Formula We believe the Pet Industry is a business made by and for people, and Petz is the best at it... Petz has managed to put together an experienced, diverse and qualified team... With a purebred alignment with company's interests... Executive Committee Compensation; [%] NEW ■Fixed Variable Stock-Based 5% 3% 2% 24% 25% Sérgio Zimerman CEO Aline Penna CFO Claudio R. Ely Chairman Irlau M. Filho BoD Diz Brothers 32% Zee.Dog Petz Petz Petz seres B 72% 72% 66% 18' 19' 20' Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks Source: Company's Data#53E Financials & Valuation How to translate our thesis into numbers? zeedog 1450#54Petz Projections 54 Revenue Build-Up: Top-Line Growth Revenue development will occur according to the expansion plan and the sector's growth... For the calculation of gross revenue, we estimate some assumptions... Main Revenue Assumptions ...and SSS is one of the most important assumptions... SSS vs. Pet Industry Growth; [%] 29% Correl. 89% = 24% Opening of 30-40 Stores per Year 19% 14% 9% A.... 4% 4-Y Store Maturation Curve 17' 19' 21E 23E 25E 27E 29E $ SSS Correlated with Industry Growth ...added to the increase in the number of stores... Stores per Year; [stores] Stores ■Hospitals 429 399 366 454 474 330 290 250 210 174 S 133 Constant Seres Penetration to 20' Levels 10 12 17 22 27 32 36 39 41 42 42 20' 21E 22E 23E 24E 25E 26E 27E 28E 29E 30E Source: Team 7 Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks#55Petz Projections 55 Revenue Build-Up: Top-Line Growth Revenue development will occur according to the expansion plan and the sector's growth... Revenue & Market Share Evolution; [BRL] & [%] CAGR (17'-20') = 33.6% CAGR (21E-25E) = 32.5% CAGR (26E-30E) = 14.3% Revenue Market Share 19.7% 19.8% 19.0% 18.1% 17.0% 16,110 15.5% 14,603 13.5% 12,768 11,051 11.5% 9,428 9.4% 7,826 7.7% 6,151 6.1% 4,706 4.8% 4.4% 3,478 3.9% 2,538 1,707 716 913 1,164 Source: Team 7 17' 18' 19' 20' 21E 22E 23E 24E 25E 26E 27E 28E 29E 30E Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks#56Zee.Dog Projections Source: Team 7 228 361 56 Zee.Dog: Adding Value for Petz Zee.Dog will generate BRL 4 for the Petz share and will help the company by generating valuable synergies... We see Zee.Dog growing and increasing its revenue share... Zee.Dog Revenue & Penetration; [BRL mn & %] 2123 11.9% 11.6% 11.7% -11.5% 11.6% 11.0% 10.8% 10.0% 9.4% 8.2% 1693 1904 1488 Based on the company's plans for the brand... Main Zee.Dog Assumptions 004 Strong Projected Growth A Synergies with Petz's Operations 743 971 1235 21E 22E 23E 24E 25E 26E 27E 28E 29E 30E Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks Sensitivity Analysis - WACC; [BRL] Cost of Capital (WACC) Perpetuity Growth (g) 3.97 9.5% 10.0% 10.5% 11.0% 11.5% 12.0% 3.0% 4.84 4.44 4.08 3.78 3.51 3.27 3.5% 5.14 4.68 4.29 3.95 3.66 3.40 4.0% 5.49 4.97 4.53 4.15 3.82 3.54 4.5% 5.91 5.31 4.80 4.38 4.01 3.70 5.0% 6.43 5.71 5.13 4.64 4.23 3.88 5.5% 7.06 6.20 5.52 4.96 4.49 4.09 6.0% 7.88 6.82 5.99 5.33 4.79 4.34#57Petz Projections 57 Margins: Gross Margin Development The increase in Private Label penetration in line with the increase in bargaining power with suppliers will decrease COGS... We see that COGS and SG&A will decrease in long-term... ...this is because these costs and expenditures will be driven by.... Main COGS & SG&A Assumptions COGS & SG&A; [%] COGS SG&A 52.5% 37.5% Short-Term Long-Term 52.0% 37.0% 51.5% 51.0% 50.5% 50.0% 49.5% Increase of Private Label Penetration 36.5% Bargaining Power with Suppliers 36.0% 35.5% Increase of Raw Material Cost 35.0% 34.5% Digital Competition Growth 20' 21E 22E 23E 24E 25E 26E 27E Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks Source: Team 7#58Petz Projections 58 Margins: EBITDA Increasing According to Maturation High operational leverage will increase margins and efficiency... Even in the first year, the company has higher returns per store... EBITDA Margin by Maturity Levels; [%] ...and the company's EBITDA Margin should follow the maturation... EBITDA Margin and Store Maturation; [%] 65% 7.6% Year 1 85% 13.9% 95% 100% 20.4% 16.9% Year 2 Year 3 Year 4 Mature Non-Mature -Adj. EBITDA Margin 44% 43% 42% 39% 31% 26% 21% 17% 15% 11% 15.1% 15.0% 14.7% 14.8% -14.9% 14.1% 13.0% 12.0% 11.7% 11.6% 56% 57% 58% 61% 69% 74% 79% 83% 85% 89% 21E 22E 23E 24E 25E 26E 27E 28E 29E 30E Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks Source: Team 7#59Petz Projections Source: Team 7 107 73 168 87 141 109 128 127 59 Store Expansion Store Renovation CAPEX: High but Sustainable Megastores have very high capex but Petz is able to generate cash on that... CAPEX will increase in the next following years.... Expansion & Renovation CAPEX; [BRL mn] 118 143 100 158 130 Payment only in 26E adjusted to CPI... ...however, the company should sustent it with great cash generation... CFO CFI Evolution; [BRL mn] Zee.Dog Acquisition Payment Driven by stores maturation... 992 96 171 81 182 63 191 47 199 21E 22E 23E 24E 25E 26E 27E 28E 29E 30E Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks 830 670 525 397 121 120 16 -69 -75 21E 22E 23E 24E 25E 26E 27E 28E 29E 30E#6060 60 DCF: FCFF DCF: BRL 25.4 target price with a 39% upside Petz proved to be a great company, with accurate projections, but how has this been reflected in the share price? As a result, we have a FCFF divided into two main phases... ...being able to generate value for shareholders, even with WACC = 10%... WACC Breakdown; [%] FCFF; [BRL mn] Expansion Phase Densification Phase Risk Free 1.64% 889 ERP 4.31% CRP 2.91% Zee.Dog's 736 Inflation Dif. 2.85% Acquisition 586 Ke 11.7% Kd 6.9% 451 WACC 10.4% 50 Stores Opening | 202 175 45 -68 -115 -54 21E 22E 23E 24E 25E 26E 27E 28E 29E 30E Using our company assumptions, we calculate the fair return in ten years using the DCF method To perpetuity, we assume, in general: == g (perpetuity) = 5.5%, Incremental ROIC = 25%, and Taxes = 34% Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks Source: Team 7#61DCF: FCFF 61 DCF: BRL 25.4 target price with a 39% upside Petz proved to be a great company, with accurate projections, but how has this been reflected in the share price? As a result, we have a FCFF divided into two main phases... ...being able to generate value for shareholders, even with WACC = 10%... WACC Breakdown; [%] FCFF; [BRL mn] Expansion Phase Densification Phase Risk Free 1.64% ERP 4.31% 889 CRP 2.91% Zee.Dog's 736 Inflation Dif. 2.85% Acquisition 586 Ke 11.7% Kd 6.9% 451 WACC 10.4% 50 Stores Opening | 202 175 45 -68 -115 -54 21E 22E 23E 24E 25E 26E 27E 28E 29E 30E Using our company assumptions, we calculate the fair return in ten years using the DCF method To perpetuity, we assume, in general: g (perpetuity) = 5.5%, Incremental ROIC = 25%, and Taxes = 34% Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks Source: Team 7#62DCF: FCFF 62 DCF: BRL 25.4 target price with a 39% upside Petz proved to be a great company, with accurate projections, but how has this been reflected in the share price? The most part of the company's value is in the future... Target Price Breakdown; [BRL] ...and even in the worst macro scenarios, Petz is inexpensive... Sensitivity Analysis - WACC; [BRL] BRL 3.2 Source: Team 7 BRL 18.2 -BRL 0.3 BRL 4.0 BRL 25.4 Cost of Capital (WACC) 39% Upside BRL 18.2 Perpetuity Growth (g) 4.4% 106% 79% 57% 4.8% 119% 88% 64% 45% 5.1% 135% 100% 73% 5.5% 156% 114% 83% 5.9% 182% 132% 95% 68% 51% 59% 37% 8.4% 8.9% 9.4% 9.9% 10.4% 10.9% 11.4% 11.9% 12.4% 4.0% 95% 70% 51% 34% 20% 9% -1% -10% -17% 39% 24% 12% 1% -8% -16% 29% 15% 4% -6% -14% 34% 19% 7% -3% -12% 24% 11% 0% -10% 29% 15% 3% 39% 46% -7% 6.3% 218% 154% 111% 79% 54% 35% 19% 6% -4% 6.6% 269% 185% 130% 92% 63% 42% 24% 10% -1% 7.0% 347% 226% 155% 108% 75% 50% 31% 15% 2% BUY (Returns > 10%) = 74% HOLD (-10% < Returns < 10%) = 19% SELL (Returns < -10%) = 7% 21E-30E Perpetuity Net Debt Zee.Dog Target Price Current Price Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks#63Multiples 63 Multiples: Time to Buy! We see that Petz shares are historically very cheap, and when compared to peers, we see that the growth justifies its value... Market P/E is closer to the historic minimum than ever... ...and when compared, the growth justifies our high multiple... EPS Growth (CAGR) 5-Y vs. P/E NTM; [% & x] FWD P/E Ratio 1-Y 20 10 -10 90x 85x 80x 75x 70x EPS Growth (CAGR) 5-Y 104% 78% 52% ARZZ3 PETZ3 26% RADL3 ESPA3 0% AMER3 SBFG3 LREN3 65x PCAR3 -20 -26% 60x -26x Ox 0/20 12/20 02/21 04/21 06/21 08/21 10/21 26x P/E NTM 52x 78x 104x Source: Refinitiv; Team 7 Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks#64... 64 IRR IRR: Indicate Healthy Returns 5Y P/E IRR and its sensitivity to Gross Revenue CAGR reinforces our BUY recommendation... 5-Y P/E IRR indicates returns above Cost of Equity (Ke)... Net Income Evolution; [BRL mn] ...and our sensitivity analysis reforces our thesis with 70% BUY... IRR Sensitivity Analysis; [%] 435 307 215 162 9690 21E 22E 23E 24E 25E IRR 23.9% Exit P/E 28.7x Net Revenue CAGR (20'-25E) 13% 16% 2% -1% 1% 2% -2% 1% 3% 5% 7% 5% 7% 9% P/E FWD Exit 2025E 24% 21x 23x 25x 27x 29x 31x 4% -13% -11% -9% -8% -6% -4% -3% 7% -9% -7% -5% -4% -2% 0% 1% 10% -6% -3% 33x 35x 37x -1% 0% 3% 4% 4% 6% 7% 9% 8% 10% 12% 13% 11% 13% 14% 16% 18% 19% 6% 9% 11% 13% 15% 17% 19% 21% 22% 22% 10% 13% 15% 17% 19% 21% 23% 25% 27% 25% 14% 17% 19% 22% 24% 26% 28% 30% 32% 28% 18% 21% 24% 26% 28% 30% 33% 34% 36% 31% 23% 25% 28% 31% 34% 27% 30% 32% 35% A 5-Y through P/E accounts for a 600bps spread over Cost of Equity Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks Source: Team 7 37% 31% 34% 37% 40% 40% 35% 38% 41% 44% 43% 40% 43% 46% 49% 46% 44% 47% 51% 53% 33% 35% 37% 39% 41% 37% 40% 42% 44% 46% 42% 44% 47% 49% 51% 47% 49% 52% 54% 56% 51% 54% 56% 59% 61% 56% 59% 61% 64% 66%#65Bull, Base & Bear 65 55 Bull, Base & Bear: Stressing Scenarios Our main DCF assumptions lead us to three main scenarios to Petz, reinforcing our investment thesis... Bear Case Stores Opened (22E-25E) = 107 Avg. Mature SSS (22E-25E) = 7.1% Gross Margin (20'-25E) = -100bps BRL 15,32 Target Price Base Case Stores Opened (22E-25E) = 165 Avg. Mature SSS (22E-25E) = 8.4% Gross Margin (20'-25E) = 180bps -16% Downside ✓ BRL 25,29 Target Price 39% Upside Bull Case Stores Opened (22E-25E) = 182 Avg. Mature SSS (22E-25E) = 9.2% Gross Margin (20'-25E) = 220bps احد M BRL 33.33 67% Upside Target Price We have a wide range of prices, but we are still believing in a buy recommendation... Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks Source: Team 7 I I#66Risk Matrix 66 Risk Matrix: What are the main risks to our valuation? We highlight three main risks-type to our projections: (B) Business and Operational, (M) Market, and (E) Macroeconomic... Probability Source: Team 7 M2 B2 M1 All risks are relevant, but we highlight five of them... Business & Operational Risks. [B1] (-): Inability to expand maintaining high returns. [B2] (-): Unsuccessful integration of Zee.Dog [B3] (-): Failure in Private Label integration [B4] (-): Image risk due to relevant penetration in Services [B5] (-) Execution risks Market Risks B5 Impact [M1] (-): Lack of M&A opportunities B3 B1 [M2] (-): Tougher competitive landscape [M3] (-): Lack of bargaining power Macroeconomic Risks B4 E1 M3 [E1] (-): Macro crisis and loss of purchasing power Overview | Promissing Industry | Assertive Hub-and-Spoke Strategy | Expansion to Outpace | Healthy and Solid Ecosystem | ESG | Valuation & Risks#67Would you be a Petz shareholder? 1 A growing, resilient and fragmented industry... 2...in which Petz has the best business model... 3 ...with an organic and sustainable expansion plan... 4 ...summed to the best pets solution in the country. We are now opening the floor for Q&A... Yes!#68Presentation Index 1. Petz Overview 2. Recommendation 3. Promissing Industry A. Resilient Sector B. Humanization Trend C. Room for Consolidation 4. Hub-and-Spoke Model A. Physical Preferences Product Price i. ii. Location iii. Assortment B. Digital Preferences i. Product Price Shipping Analysis ii. C. The Best Model D. Foot Traffic Analysis 5. Expansion to Outpace A. Expansion Viability B. Expansion Analysis C. 4-Wall Analysis D. Physical = Digital 6. Solid Ecosystem A. Ecosystem Pyramid B. Seres Presentation C. Seres Geospatial Analysis D. Zee.Dog E. Private Label Analysis F. Ecosystem Advantages 7. ESG A. Materiality Matrix B. Planet C. Petz D. People 8. Financials and Valuation A. Revenue Build-Up B. Zee.Dog C. Margins D. CAPEX E. DCF F. Multiples G. IRR H. Bull, Base and Bear I. Risk Matrix#69Highlights 1. 2. Income Statement 3. Balance Sheet 4. Revenue Build-Up and SSS 5. P&L Projection 6. Working Capital 7. CAPEX: PP&E and Intangible 8. Financial Revenue and Debt 9. Bottom-Line 10. Cash Flow Statement 11. WACC 12. FCEF 13. Zee.Dog Valuation 14. IRR 15. Multiples Analysis 16. Monte Carlo Analysis 17. Basket Price Analysis 18. Shipping Analysis 19. Private Label Analysis Appendix Index 20. Geospatial Analysis 39. ESG 21. Expanson & Maturation Projections 40. Field Research 22. Foot Traffic 23. What-If Analysis 24. 4-Wall Analysis - 25. Price War – Discount Simulation 26. Financials Comparison 27. DuPont Analysis: Petz and Cobasi 28. Market Share: Petz and Cobasi 29. Cobasi 30. Petlove 31. Petland 32. Local Competition 33. Management 34. Value Proposition 35. Optionalities 36. International Approach 37. Consensus Comparison 38. E-commerce Analysis 41. Historical Stock Price 42. Reverse FCFF 43. CDSG & Cão Cidadão 44. Tornado Analysis 45. Return Projections#70Appendix 1 70% 1. Highlights |1. Margins Gross Margin (excl. Zee.Dog) Gross Margin (incl. Zee.Dog) EBITDA Margin EBITDA Margin (IAS-17) EBIT Margin Net Margin COGS/Net Rev SG&A/Net Rev Opex/Net Rev Profitability ROA Net Income Shareholder's Equity ROE ROE-Ke Spread EBIT NOPAT Net Debt Invested Capital (PL + Net Debt) Invested Capital (WK + Fixed Assets) ROIC Financeiro ROIC (Financeiro)-WACC Spread ROIC Operacional ROIC (Operacional)-WACC Spread Cash Flow Ratios CFO/Net Revenue CFO/Capex CFO/Earnings CFO/EBITDA CFO-CFI Market Ratios P/E P/E PEG EV/EBITDA EV/EBITDA (8702) EPS Asset Management Inventory Turnover Days Sales of Inventory Receivables Turnover Days of Receivables Payables Turnover Days of Payables Operational Cycle Cash Cycle Operational Ratios Number of Stores SSS for Mature Stores DuPont Analysis Leverage (Assets/Equity) Assets' Turnover Net Margin Source: Team 7 17' 18' 19' 20' 21E 22E 23E 24E 25E 26E 27E 28E 29E 30E 44.3% 45.8% 48.3% 48.3% 48.2% 48.2% 48.6% 49.3% 49.8% 50.3% 50.3% 50.3% 50.3% 50.3% 48.51% 48.59% 48.9% 49.6% 50.0% 50.5% 50.5% 50.5% 50.5% 50.5% 8.0% 9.9% 19.6% 17.9% 17.7% 17.8% 18.1% 18.8% 19.3% 19.8% 19.8% 19.8% 19.8% 19.8% 11.7% 11.2% 11.7% 11.7% 12.2% 13.3% 14.1% 14.7% 14.8% 14.9% 15.1% 15.0% 4.2% 6.9% 7.5% 7.5% 7.5% 7.9% 8.6% 9.9% 11.0% 11.7% 11.8% 12.0% 12.1% 12.1% 1.9% 4.0% 2.4% 4.1% 4.5% 5.6% 5.5% 6.0% 6.6% 7.0% 7.0% 7.1% 7.1% 7.1% 55.7% 54.2% 51.7% 51.7% 51.8% 51.8% 51.4% 50.7% 50.2% 49.7% 49.7% 49.7% 49.7% 49.7% 36.3% 35.9% 36.6% 37.1% 36.5% 36.6% 36.4% 36.0% 35.7% 35.5% 35.4% 35.3% 35.2% 35.2% 92.0% 90.1% 88.3% 88.8% 88.3% 88.3% 87.8% 86.7% 85.9% 85.3% 85.2% 85.1% 84.9% 85.0% 3% 5% 2% 3.1% 11,425 30,897 157,815 7% 181,770 17% 23,576 176,278 13% 58,387 514,759 11% 25,103 53,171 73,545 108,028 53,268 96,464 229,208 52.588 4.7% 95,635 1,376,549 6.9% -4% 162,059 106,959 (606,511) 6.9% 7.7% 9.1% 10.4% 11.2% 11.6% 12.1% 12.6% 12.9% 163,597 1,499,246 10.9% -1% 232,828 153,667 (461,487) 218,914 314,025 435,002 554,588 653,361 761,977 880,238. 960,707 1,663,432 1,898,950 2,175,244 13.2% 3% 343,236 226,536 (349,335) 16.5% 6% 517,142 341,314 (296,143) 770,038 1,037,760 1,314,096 1,602,807 20.0% 10% 726,381 479,411 (267,937) 1,907,307 2,507,997 22.1% 12% 932,229 745,586 1,013,308 1,289,644 1,578,355 1,882,855 615,271 (187,274) 2,320,723 2,296,271 2,769,341 23.6% 13% 1,107,034 730,642 2,997,934 3,173,982 3,270,053 25.4% 27.7% 29.4% (168,907) 2,600,434 15% 1,294,026 854,057 (129,003) 2,868,932 17% 1,498,498 989,009. (51,792) 3,122,190 18% 1,643,713 1,084,850 48,328 3,318,380 2,575,982 2,844,480 3,097,738 3,293,928 13.9% 14.8% 17.2% 21.3% 25.1% 26.5% 28.1% 29.8% 31.7% 33% 3% 4% 8% 12% 16% 18% 19% 21% 23% 24% 14% 15% 18% 22% 25% 27% 28% 30% 32% 33% 4% 4% 8% 13% 17% 18% 19% 21% 23% 24% 6% 6% 7% 8% 9% 10% 10% 10% 10% 11% (0.73x) (0.74x) (1.10x) (1.63x) (2.21x) (1.97x) (3.46x) (4.14x) (4.99x) (5.88x) 1.4x 1.2x 1.3x 1.3x 1.3x 1.4x 1.4x 1.4x 0.5x 0.5x 0.6x 0.6x 0.6x 0.6x 0.7x 0.7x 1.4x 0.7x 1.5x 0.7x -74,747 -119,171 -45,874 66,661 197,788 233,116 490,742 632,996 791,784 952,613 75.0 43.9 32.8 23 16 13 76.2 44.6 33.3 N.A 1.2x 0.9x 0.7x 0.6x 0.6x2 70.4 52.4 34.2 14.6 10.8 8.6 71.4 53.2 34.7 0.24 0.42 0.56 0.80 1.10 1.41 (4.8x) (4.6x) (4.6x) (4.5x) (4.5x) (4.4x) -76 -79 -80 -81 -82 -84 (4.3x) -85 (4.3x) (4.3x) (4.2x) -85 -86 -87 11.1x 11.2x 11.2x 11.1x 10.9x 10.7x 10.5× 10.5× 10.4x 10.3x 33 33 32 33 33 34 35 35 35. 36 (4.5x) (4.4x) (4.3x) (4.2x) (4.2x) (4.1x) (4.0x) (4.0x) (4.0x) (3.9x) -80 -83 -84 -86 -87 -90 -91 -91 -92 -94 -43 -46 -47 -48 -48 -50 -50 -50 -51 -5° 37 37 37 38 39 40 41 41 42 43 63 80 105 133 175 225 267 305 340 372 405 435 460 480 6.1% 7.7% 26.5% 8.0% 8.2% 8.1% 8.6% 8.7% 6.0% 5.4% 5.6% 6.1% 6.1% 3.3x 7.0x 3.7x 1.5x 1.6x 1.7x 1.8x 1.9x 2.0x 2.0x 2.1x 2.2x 2.3x 1.3x 0.8x 0.8x 1.0x 1.2x 1.4x 1.5x 1.6x 1.6x 1.7x 1.7x 1.8x 1.8x 4% 2% 4% 4% 6% 6% 6% 7% 7% 7% 7% 7% 7%#71Appendix 2 71 || 2. Income Statement Income Statement Gross Revenue growth YOY Deductions % Gross Revenue Net Revenue growth YOY COGS % Net Revenue growth YOY Gross Profit % Net Revenue growth YOY SG&A % Net Revenue Sales expenses % Net Revenue growth YOY G&A % Net Revenue growth YOY Other Expenses % Net Revenue growth YOY PIS/Cofins Credit over Depreciation - Rights-of-Use (CPC 06 (R2)/IFRS 16) % Net Revenue [Unit] 17' [BRL Th.] 716,005 [%] N.A 18' 913,419 28% 19' 1,164,234 27% 20' 1,706,729 47% 21E 22E 2,538,493 3,477,790 4,705,615 49% 37% 35% 23E 24E 6,151,462 31% [BRL Th.] -118,636 [%] -17% [BRL Th.] 597,369 [%] N.A [BRL Th.] -332,534 -145,512 -16% 767,907 29% -416,039 [%] -56% -54% -178,158 -15% 986,076 28% -509,748 -52% [%] N.A 25% 23% [BRL Th.] [%] 264,835 44% 351,868 476,328 45.8% 48.31% [%] N.A 33% [BRL Th.] [BRL Th.] [%] -217,132 -275,547 -36% -36% -144,637 -192,133 -24% -25% 35% -361,230 -37% -194,609 -20% -269,973 -16% 1,436,756 46% -743,249 -51.7% 46% 693,507 48.27% 46% -532,757 -37% -312,941 -22% -391,392 -15.4% 2,147,101 49% -1,112,222 -51.8% 50% 1,034,879 48.2% 49% -783,519 -36.49% -467,662 -22% [%] N.A 33% 1% 61% 49% 37% [BRL Th.] -61,794 -73,598 -82,052 -116,128 -167,101 -228,933 [%] -10% -10% -8% -8% -7.8% -7.8% [%] N.A 19% 11% 42% 44% 37% 35% -22% 35% 31% -309,757 -404,932 -7.8% -7.8% 31% 25E 26E 27E 28E 29E 30E 7,826,443 9,428,006 11,051,279 12,768,042 14,603,442 16,110,446 27% 20% 17% 16% 14% 10% 15.5% 4.3% 19.8% -536,215 -725,525 -948,450 -1,206,703 -1,453,636 -1,703,917 -1,968,612 -2,251,600 -2,483,954 -15.4% -15.4% -15.4% -15.4% -15.4% -15.4% -15.4% -15.4% -15.4% 2,941,575 3,980,090 5,203,013 6,619,740 7,974,370 9,347,362 10,799,429 12,351,842 13,626,492 37% 35% 31% 27% 20% 17% 16% 14% 10% -1,522,834 -2,047,339 -2,639,015 -3,325,238 -3,966,723 -4,649,696 -5,372,004 -6,144,227 -6,778,281 -51.8% -51.4% -50.7% -50.2% -49.7% -49.7% -49.7% -49.7% -49.7% 37% 34% 29% 26% 19% 17% 16% 14% 10% 1,418,740 1,932,751 2,563,997 3,294,502 4,007,647 4,697,666 5,427,425 6,207,615 6,848,211 48.2% 48.6% 49.3% 49.8% 50.3% 50.3% 50.3% 50.3% 50.3% 37% 36% 33% 28% 22% 17% 16% 14% 10% -1,075,506 -1,447,110 -1,873,846 -2,361,805 -2,832,964 -3,310,593 -3,813,275 -4,347,587 -4,798,465 -36.56% -36.36% -36.01% -35.68% -35.53% -35% -35% -35% -35% -640,707 -866,907 -1,133,272 -1,441,851 -1,736,904 -2,035,957 -2,352,233 -2,690,365 -2,967,997 -22% -22% -22% -22% -22% -22% 27% 20% 17% -22% 16% -22% 14% 10% -515,191 -620,617 -727,473 -840,482 -961,301 -1,060,503 -7.8% -8% -8% -8% -8% -8% 27% 20% 17% 16% 14% 10% [BRL Th.] -10,701 -9,815 -11,197 -13,321 -27,548 -37,742 -51,066 -66,757 -84,934 -102,315 -119,931 -138,561 -158,480 -174,834 [%] -2% -1% -1% -1% -1% -1% -1% -1% -1% -1% -1% -1% -1% -1% [%] N.A -8% 14% 19% 107% 37% 35% 31% 27% 20% 17% 16% 14% 10% [BRL Th.] 0 0 4,482 5,569 8,322 11,402 15,427 20,167 25,659 30,909 36,231 41,860 47,877 52,818 [%] 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% growth YOY [%] N.A NA N.A 24% 49% 37% 35% 31% 27% 20% 17% 16% 14% 10% Adjusted EBITDA % Net Revenue growth YOY EX-IFRS 16 EBITDA % Net Revenue growth YOY Rental Expenses EBIT % Net Revenue % Net Revenue growth YOY Financial Result % Net Revenue growth YOY Financial Revenue Financial Expenses [BRL Th.] 47,703 76,322 192,952 256,686 251,360 343,234 485,642 690,152 932,697 1,174,682 1,387,073 1,614,151 1,860,029 2,049,746 [%] 8% 10% 20% 17.9% 17.7% 17.8% 18.1% 18.6% [%] N.A 60% 153% 33% -2% 37% 41% 42% [BRL Th.] 47,703 76,322 115,097 160,750 121,830 163,707 250,835 401,101 [%] 8% 10% 12% 11.2% 11.2% 11.7% [%] 40% -24% [BRL Th.] -77,855 -95,936 -129,530 [%] -8% -6.7% -6.03% [BRL Th.] 25,103 53,171 73,545 108,028 162,059 34% -179,527 -6.10% 232,828 12.2% 53% 13.3% 60% 19.3% 35% 587,210 14.1% 46% -234,807 -289,051 -345,487 -5.90% -5.56% -5.22% 343,236 517,142 726,381 19.8% 26% 770,644 14.7% 31% -404,038 -5.07% 932,229 [%] 4% 7% 7% 7.5% 7.5% 7.9% 8.6% 9.9% 11.0% 11.7% [%] N.A 112% 38% 47% 50% 44% 47% 51% 40% 28% 19.8% 19.8% 18% 16% 923,609 1,090,292 1,274,710 14.8% 14.9% 20% -463,464 -4.96% 1,107,034 11.8% 19% 19.8% 15% 18% -523,858 -647,949 -4.85% -4.76% 1,294,026 1,498,498 1,643,713 15.1% 17% -585,318 -4.74% 19.8% 10% 1,401,797 15.0% 10% 12.0% 17% 12.1% 16% 12.1% 10% [BRL Th.] -6,976 -6,345 -49,776 -54,153 -32,309 15,045 -11,549 -41,347 -67,287 -91,943 -117,092 -139,516 -164,804 -188,097 [%] -1% -1% -5% -4% -2% 1% 0% -1% -1% -1% -1% -1% -1% -1% [%] N.A -9% 684% 9% -40% -147% -177% 258% 63% 37% 27% 19% 18% 14% [BRL Th.] 3,806 9,151 8,714 14,218 22,670 61,709 52,275 49,189 57,672 70,325 80,163 91,578 102,708 112,956 [BRL Th.] -10,782 -15,496 -58,490 -68,371 -54,979 -46,664 -63,823 EBT [BRL Th.] 18,127 46,827 36,337 69,949 129,750 247,874 331,687 -90,536 -124,959 -162,268 475,795 659,094 840,285 -197,255 -231,094 -267,512 -301,053 989,941 1,154,510 1,333,694 1,455,616 % Net Revenue [%] 3% 6% 4% 5% 6% 8% 8% 9% 10% 11% 11% 11% 11% 11% growth YOY [%] N.A 158% -22% 93% 85% 91% 34% 43% 39% 27% 18% 17% 16% 9% Income Tax and Social Contribution [BRL Th.] -6,702 -15,930 -12,762 -11,562 -34,115 -84,277 -112,774 -161,770 Tax Rate [%] -37% -34% -35% -17% -34% -34% -34% -34% Net Profit [BRL Th.] 11,425 30,897 23,576 58,387 95,635 163,597 218,914 314,025 -224,092 -285,697 -34% -34% 435,002 554,588 -336,580 -34% -392,534 -453,456 -34% 653,361 761,977 880,238 -494,910 -34% -34% 960,707 % Net Revenue growth YOY [%] 2% 4% 2% 4% 4.5% 5.6% 5.5% 6.0% 6.6% 7.0% 7.0% 7.1% 7.1% 7.1% [%] N.A 170% -24% 148% 64% 71% 34% 43% 39% 27% 18% 17% 16% 9% Source: Team 7#72Appendix 3 72 3. Balance Sheet | 3. Balence Sheet Current assets Cash and Cash Equivalents Financial Investments [Unit] 17' 18' 19' [BRL Th.] 224,190 351,704 440,917 20' 886,275 [BRL Th.] 61,089 160,829 169,277 443,757 21E 1,487,682 895,575 [BRL Th.] 0 0 0 43,761 32,248 Accounts Receivable [BRL Th.] 66,875 76,163 96,076 160,675 225,658 300,986 Inventory [BRL Th.] 82,818 97,489 132,657 185,701 276,239 380,709 32,248 32,248 532,379 677,340 511,835 659,754 831,310 22E 23E 24E 25E 26E 27E 28E 29E 30E 1,610,947 1,892,833 2,337,652 2,892,762 3,377,262 3,903,755 4,442,790 4,987,946 5,385,452 839,044 883,541 1,055,311 1,293,903 1,479,425 1,694,687 1,904,569 2,097,823 2,206,393 32,248 32,248 407,248 32,248 815,948 991,681 Taxes and Contributions to be Recovered [BRL Th.] 2,651 8,901 35,375 41,722 39,986 39,986 39,986 39,986 39,986 39,986 32,248 32,248 32,248 32,248 956,434 1,105,012 1,263,856 1,394,280 1,162,424 1,343,001 1,536,057 1,694,570 39,986 39,986 39,986 39,986 Other Assets [BRL Th.] 10,757 8,322 7,532 10,659 17,975 17,975 17,975 17,975 17,975 17,975 17,975 17,975 Non-Current Assets [BRL Th.] 178,178 245,309 801,731 1,006,613 568,628 765,998 945,182 1,119,679 1,292,539 1,580,841 1,735,204 1,871,951 17,975 1,985,169 2,068,019 17,975 Other Assets [BRL Th.] 955 1,070 768 2,884 4,932 4,932 4,932 4,932 4,932 4,932 4,932 4,932 4,932 4,932 Taxes and Contributions to be Recovered [BRL Th.] 0 426 1,692 1,701 1,847 1,847 1,847 1,847 1,847 1,847 1,847 1,847 1,847 1,847 Deferred Income Tax and Social Contribution [BRL Th.] 22,209 12,606 14,770 23,703 24,574 24,574 24,574 24,574 24,574 24,574 24,574 24,574 24,574 24,574 Immobilized [BRL Th.] 146,700 215,555 280,774 350,363 457,795 625,657 Intangible [BRL Th.] 8,314 15,652 41,099 56,902 79,480 108,988 766,661 894,236 194,089 1,011,740 1,241,311 1,337,133 1,418,145 1,480,930 1,527,642 Current Liabilities [BRL Th.] 150,762 212,605 380,950 654,287 533,898 687,589 Suppliers [BRL Th.] 80,234 98,915 130,812 195,675 293,587 403,031 147,168 906,150 1,177,466 543,268 702,104 Loans, Financing and Debentures [BRL Th.] 22,293 56,697 111,102 273,942 144,532 188,779 267,103 Labor and Social Security Obligations [BRL Th.] 22,010 27,101 36,120 53,716 55,670 55,670 55,670 55,670 379,584 512,983 55,670 249,446 308,177 366,718 422,452 472,885 509,024 1,495,743 1,802,700 2,105,396 2,427,693 2,774,785 3,054,727 886,981 1,060,846 1,246,727 1,444,131 1,655,991 1,831,588 646,075 762,890 887,783 1,023,016 1,127,360 55,670 55,670 55,670 55,670 55,670 Tax Obligations [BRL Th.] 15,931 11,831 25,385 36,556 26,419 26,419 26,419 26,419 26,419 26,419 26,419 26,419 26,419 26,419 Dividends payable [BRL Th.] 602 7,941 5,599 13,867 4,521 4,521 4,521 4,521 4,521 4,521 4,521 4,521 4,521 4,521 Bills to pay [BRL Th.] 7,573 8,138 2,877 5,993 6,184 6,184 6,184 6,184 6,184 6,184 6,184 6,184 6,184 6,184 Loyalty Program [BRL Th.] 2,119 1,982 2,252 3,015 2,985 2,985 2,985 2,985 2,985 2,985 2,985 2,985 2,985 2,985 Non-Current Liabilities [BRL Th.] 93,791 202,638 685,420 723,842 145,863 190,110 Loans, Financing and Debentures - NC [BRL Th.] 92,064 200,596 287,383 222,403 144,532 Provision for Civil, Labor and Tax Risk [BRL Th.] 1,727 2,042 2,212 Shareholders' equity [BRL Th.] 157,815 181,770 176,278 Share capital [BRL Th.] 50,515 50,515 50,515 1,902 514,759 387,250 Capital Reserve [BRL Th.] 79,818 79,818 79,818 54,639 1,331 1,376,549 1,177,250 54,639 268,434 380,915 188,779 267,103 379,584 1,331 1,331 1,331 1,499,246 1,663,432 1,898,950 Reserve for Granted Option [BRL Th.] 721 1,118 1,471 1,754 1,818 Special Goodwill Reserve Profit Reserve [BRL Th.] 24,825 24,825 24,825 24,825 24,825 24,825 1,177,250 1,177,250 1,177,250 1,177,250 1,177,250 1,177,250 54,639 54,639 54,639 1,818 1,818 1,818 24,825 24,825 514,314 647,406 764,221 889,114 512,983 646,075 762,890 887,783 1,331 1,331 1,331 1,331 1,331 1,331 2,175,244 2,507,997 2,769,341 2,997,934 3,173,982 3,270,053 1,177,250 1,177,250 1,177,250 1,024,347 1,128,691 1,023,016 1,127,360 54,639 54,639 54,639 54,639 54,639 1,818 1,818 1,818 1,818 1,818 54,639 1,818 24,825 24,825 24,825 24,825 24,825 24,825 [BRL Th.] 1,936 25,494 19,649 46,291 118,017 240,714 404,900 640,418 916,712 1,249,465 1,510,809 1,739,402 1,915,450 2,011,521 Source: Team 7#7373 4. Revenue Build-Up (A) Appendix 4 [Unit] 17' [BRL Th.] 716,005 [%] [BRL Th.] 653,409 18' 913,419 28% 833,291 28% 19' 1,164,234 27% 1,077,509 29% 20' 1,706,729 47% 1,625,236 51% 21E 2,538,493 49% 2,441,588 50% 22E 3,477,790 37% 3,327,980 36% 23E 4,705,615 35% 4,481,544 35% 24E 6,151,462 31% 5,849,864 31% 25E 7,826,443 27% 7,432,379 27% 26E 9,428,006 20% 8,966,542 21% 27E 11,051,279 17% 10,525,039 17% 28E 12,768,042 16% 12,176,113 16% 29E 14,603,442 14% 13,943,849 15% 30E 16,110,446 10% 15,382,786 10% [BRL Th.] 630,161 796,362 987,966 1,229,602 1,678,067 2,211,282 2,882,022 3,644,775 4,490,863 5,258,969 5,997,173 6,745,769 7,516,900 8,292,607 [BRL Th./#] 10,003 9,955 9,409 9,245 9.589 9,828 10.794 11.950 13,208 14,137 14,808 15,508 16,341 17,276 [#] 63 80 105 133 [#] 17 17 25 28 32 [#] 17 17 25 28. 32 [#] 0 0 0 1220 175 225 267 305 340 372 405 435 460 480 50 42 38 35 32 33 30 25 50 42 38 35 32 29 26 0 0 0 0 0 0 0 330 20 23 20 0 [m2] 77,481 94,726 119,477 142,074 167,437 209,109 244,113 275,784 304,954 329,757 350,661 368,091 382,431 [m²/#] 1,230 1,184 1,138. 1,068 957 929 914 904. 897 831 [m²/#] 1,014 990 807 833 833 833 833 833 623 [%] 100% 100% 100% 100% 100% 93% Revenue Build Up Gross Revenue growth YOY Products growth YOY B&M (Products) Revenue per Store Number of Stores Net Opening of Stores Opened Closed Store's Area Average Area per Store. Average Area per New Store: New Store Size Diluiton Store Maturation Curve Store's Area per Year Sales per Squared Meter Year 1 Sales per Squared Meter % of Mature Store Cohort Adjusted Year 2 2 Sales per Squared Meter % of Mature Store Cohort Adjusted Year 3 Sales per Squared Meter % of Mature Store Cohort Adjusted Year 4 - Mature Sales per Squared Meter % of Mature Store Cohort Adjusted Mature Same Store Sales (SSS) [m²] [BRL Th./m²] Total Same Store Sales (SSS) Digital (Products) Digital Penetration (as a % of Total Gross Revenue) Omnichannel Penetration (as a % of Total Gross Revenue) Digital/B&M Ratio Services and Others % Gross Revenue growth YOY Seres Number of Hospitals BoP New hospitals Number of Hospitals EoP Revenue per Hospital growth YOY Other Services growth YOY % Gross Revenue Source: Team 7 རྞྞསྐ Rbཤྲྰི ཚོ~gtB=ཚོtཛྫིཥ®ནྣབྷོལཙྪོཊྛོ L e īདྷ%8ཎྜལཨཊྛེནཊྛཾཛིན 382,431 20 14,339 7 65% 33% 17,430 15 85% 75% 20,904 18 95% 90% 329,757 21 100% 100% 6.1% 8% ཧྲྰི R$ Ī --Btཎཱཾnaཀཽདྡྷི®8དྡྷི༔ཎྜཾ ཚོ ན 5,430,344 6,426,949 44% 85% 86% 18% 659,593 9% 11% 399,479 41 1 42 9,626 5% 260,114 15% 2% དྷནྡྷནྡྷནྡྷནྡྲིནམུཏྟིཀ་པརིདྷགཽཀཽན དྷ eནྡྷོ དྡྷེ॰ ཧྲྰི॰BtônLtབྷོ®ནྣཧྰུྃཡ ིིཊྛོ ཕྱོ ན དྡྷིནཟླརྫདྡྷིནཝེསྒྲོཡ-ཨཏྠིནྡྲཀཽ གྷརྨ ཟླ ཝོདྷོĪ ཧྰུྃ པྤཎྜདྡྷིརཔྤདྡྷི⪜ནིཊྛེ▹ཙྩེཎྜཾ, དྷོ ཙ, དྷནྟཔྤནྣིནཝཏྟཱིཏཀམབྷོནདྡྷིཛ 76,238 93,482 118,191 140,768 167,437 209,109 244,113 8 9 8 9 10 11 12 [m2] 18,963 17,245 24,708 22,577 26,670 41,672 35,004 [BRL Th./m²] 3 4 4 4 4 4 5 [%] 65% 65% 65% 65% 65% 65% 65% [%] 33% 33% 33% 33% 33% 33% 33% [m2] 12,934 18,963 17,245 24,708 22,577 26,670 41,672 [BRL Th./m²] 8 8 8 8 9 10 [%] 85% 85% 85% 85% 85% 85% 85% [%] 75% 75% 75% 75% 75% 75% 75% [m²] 7,374 12,934 18,963 17,245 24,708 22,577 26,670 [BRL Th/m²] 10 10 10 10 11 12 13 [%] 95% 95% 95% 95% 95% 95% 95% [%] 90% 90% 90% 90% 90% 90% 90% [m2] 36,966 44,341 57,275 76,238 93,482 118,191 140,768 [BRL Th./m²] 11 11 11 10.99 11.87 13 14 [%] 100% 100% 100% 100% 100% 100% 100% [%] 100% 100% 100% 100% 100% 100% 100% [%] 13% 6% 8% 27% 8% 8.2% 8.1% [%] 12% 4% 4% 13% 13% 12% [BRL Th.] 23,248 36,929 89,543 395,634 763,521 1,116,698 [%] 3% 4% 8% 23% 30% 32% 1,599,522 34% [%] 1% 29% 71% 80% 85% 85% 85% [%] 4% 5% 9% 32% 46% 51% 56% 46% 43% [BRL Th.] 62,596 80,128 86,725 81,493 96,905 149,810 [%] 9% 9% 7% 5% 6% 7% 224,072 8% [%] NA 28% 8% -6% 19% 55% 50% [BRL Th.] 17,532 18,975 17,831 25,3821 50,188 94,492 [#] 7 10 12 17 [#] 3 2 5 5 [#] 10 12 17 22 [BRL Th./#] 2,098 2,307 3,461 4,846 [%] 10% 50% 40% [BRL Th.] 62,596 62,596 67,750 63,662 71,523 99,622 129,580 [%] 12% 39% 30% [%] 9% 7% 6% 4% 3% 3% 3% ཊྛོ॰ བྷོདྷབྷོ=པྤོསྶནམྨོསྶཊྛིཡཛྫིམྦོ བྷོ ཝཱ བྷིནིཊྛཔྤདྷནྡྷདྷདྷཏྟིཔཡཔམྤིདྷཏྟིཝ 304,954 15 29,170 5 65% 33% 31,671 12 85% 75% 35,004 15 95% 90% 209,109 16 100% 100% 8.7% 13% 2,941,515 3,707,573 38% 85% 66% 33% 394,065 9% 31% 223,001 27 5 32 7,559 20% 171,063 16% 2%#74Appendix 4 74 4. Revenue Build-Up (B): SSS & Industry Growth We understand the importance of estimating the growth of the pet segment in Brazil, given the history of annual double-digit growth and pulverization. Thus, we decided to break the sector into price and quantity, where the price is the average spend per pet in the country and quantity is the growth in the number of pets in Brazil (considering only dogs and cats). In the first point, we decided to calculate the average spend per pet from two valuable proxies. First, we consider using comparables from developed and underdeveloped countries. The second point is to compare this average spending data with each country's GDP per capita, given that average spending per pet is strongly correlated with purchasing power. In this case, we found a 90% correlation between the base data used. Thus, we used linear regression to estimate the average spending per pet for the next ten years summed to a premium per humanization, using the GDP and population growth projections. CHN Countries BRA GDP per Capita (000's) Average Expenditure Regression Statistics 36 304 Multiple R 90% 56 193 MEX 44 213 R Square 81% FRA 205 978 Adjusted R Square 78% JAP 213 1109 Standard Error 52 DEU 242 961 UK 214 1443 Observations 8 USA 337 1255 Nominal GDP Population BRA 21E 38 363 8,094.6 213.3 BRA 22E 39 365 8,272.7 214.8 BRA 23E 39 368 8,520.9 216.8 BRA 24E 40 371 8,759.5 217.6 BRA 25E 41 374 9,004.8 219.1 BRA 26E 42 378 9,256.9 220.3 BRA 27E 43 381 9,516.1 221.5 BRA 28E 44 385 9,782.5 222.7 BRA 29E BRA 30E 45 46 389 10,056.4 223.8 392 10,338.0 224.8 After that, we tried to understand what correlates with Petz's SSS. We did a test analysis with different correlation scenarios (GDP, Stores Outside São Paulo, and CPI). In all cases, the natural growth of the pet industry was the one that achieved the highest correlation, reaching up to 85% with CPI-adjusted values. From this, we again did a statistical study to project SSS growth and then readjusted it to nominal growth, given that our model is nominal. Source: Team 7 Pet Industry Pet Retail Growth SSS (inc. CPI) Mature SSS 25% Pet Retail Growth SSS (inc. CPI) 17' 16.9 7.0% 9.7% 13% 29% Pet Retail Growth Mature SSS 18' 20.8 7.7% 2.2% 6.1% 19' 23.5 8.3% 3.3% 7.7% 20% 24% 20' 27.8 13.2% 21.1% 26.5% 21E 33.1 9.5% 5.9% 15.2% 15% 19% 22E 37.0 7.3% 3.9% 8.2% 23E 41.0 7.3% 4.7% 8.1% 24E 45.5 7.4% 5.1% 8.6% 10% 14% 25E 50.5 7.4% 5.2% 8.7% 26E 55.6 6.6% 2.6% 6.0% 5% 9% 27E 61.1 6.4% 2.0% 5.4% 28E 67.2 6.5% 2.3% 5.6% 29E 74.0 6.6% 2.7% 6.1% 0% 4% 30E 81.5 6.6% 2.7% 6.1% 17' 19' 21E 23E 25E 27E 29E 17' 19' 21E 23E 25E 27E 29E#75Appendix 4 75 | 4. Revenue Build Up (C): Our SSS projections *0 SSS Mature Stores Based on data from 2017 to 2020, we can see the existence of an 84.5% correlation between actual industry growth and SSS for mature stores. Therefore, we use industry growth estimates to estimate Petz's SSS, given its competitive advantages. We premissed revenue per store area, folllowing SSS for mature stores projections; 30% 25% 20% 15% 10% 5% SSS Correlation 0% 6% 7% 8% 9% 10% 11% 12% Real Industry Growth 13% 14% Source: Team 7 Revenue per m² projections Revenue per sqm Mature SSS [%] 21.8 8.7% 20.5 19.3 8.0% 18.3 17.4 16.4 15.1 13.9 12.9 6.1% 11.9 11.0 20' 21E 22E 23E 24E 25E 26E 27E 28E 29E 30E#76Appendix 5 76 | 5. P&L Projection: COGS and SG&A COGS COGS % Net Revenue growth YOY Stardard Products (% Net Revenue) Private Label Margin Private Label Penetration Private Label Margin Increase SG&A SG&A % Net Revenue growth YOY Sales Expenses % Net Revenue growth YOY G&A % Net revenue growth YOY Other Expenses % Net revenue growth YOY PIS/Cofins Credit over Depreciation - Rights-of-Use (CPC 06 (R2)/IFRS 16) % Net revenue growth YOY Rental Expenses % Net Revenue Total Store Area Rent/m² Source: Team 7 [Unit] 17' 18' 19' 20' 21E 22E 23E 24E 25E 26E 27E 28E 29E 30E [BRL Th.] -332,534 -416,039 -509,748 -743,249 -1,112,222 -1,522,834 -2,047,339 -2,639,015 -3,325,238 -3,966,723 -4,649,696 -5,372,004 -6,144,227 -6,778,281 [%] -55.7% -54.2% -51.7% -51.73% -51.80% -51.77% -51.44% -50.72% -50.2% -49.7% -49.7% -49.7% -49.7% -49.7% [%] N.A 45.82% 48.31% 48.27% -1.5% -52.0% -52.2% -52.4% -52.4% -51.9% -51.4% -50.9% -50.9% -50.9% -50.9% -50.9% [%] -44.2% -44.4% -44.5% -44.5% -44.1% -43.7% -43.3% -43.3% -43.3% -43.3% -43.3% [%] 0.1% 0.3% 1.1% 3.3% 6% 9% 12% 15% 15% 15.0% 15.0% 15.0% 15.0% 15.0% [%] 15% 15% 15% 15% 15% 15% 15% 15% 15% 15% 15% 15% 15% 15% 17' 18' 19' 20' [BRL Th.] -361,231 -532,757 [%] 0% 0% -37% -37% [%] N.A N.A N.A 47% 21E -783,519 -36.49% 47% 22E 23E 24E 26E -36.56% [BRL Th.] -144,637 -192,133 -194,609 -312,941 -467,662 [%] -24% -25% -20% -22% -22% 639% -640,707 -22% -1,075,506 -1,447,110 -1,873,846 -36.36% -36.01% 856% 891% -866,907 -1,133,272 -22% -22% -22% -22% [%] N.A 33% 1% 61% 49% 37% 35% 31% 27% 20% 17% 25E 27E 28E 30E -2,361,805 -2,832,964 -3,310,593 -3,813,275 -4,347,587 -4,798,465 -35.68% -35.53% -35.42% -35.31% -35.20% -35.21% 1120% 262% 208% 164% 132% 103% -1,441,851 -1,736,904 -2,035,957 -2,352,233 -2,690,365 -2,967,997 -22% -22% -22% 10% 29E -22% 16% 14% [BRL Th.] -73,598 -82,052 -116,128 -167,101 -228,933 -309,757 -404,932 -515,191 -620,617 -727,473 -840,482 -961,301 -1,060,503 [%] N.A -9.6% -8.3% -8.1% -8% -8% -8% -8% -8% -8% -8% -8% -8% -8% [%] N.A N.A 11% 42% 44% 37% 35% 31% 27% 20% 17% 16% 14% 10% [BRL Th.] -10,701 -9,815 -11,197 -13,321 -27,548 -37,742 -51,066 -66,757 -84,934 -102,315 -119,931 -138,561 -158,4801 -174,834 [%] -2% -1% -1% -1% -1% -1% -1% -1% -1% -1% -1% -1% -1% -1% [%] N.A -8% 14% 19% 107% 137% 135% 131% 127% 120% 117% 116% 114% 110% [BRL Th.] ૦ 0 4,482 5,569 8,322 11,402 15,427 20,167 25,659 30,909 36,231 41,860 47,877 52,818 [%] 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% [%] N.A N.A N.A 24% 49% 137% 135% 131% [BRL Th.] -77,855 -95,936 [%] -8% -7% -129,530 -6% [m²] 105,837 129,479 154,102 [BRL Th./m²] -0.74 -0.74 -0.84 -179,527 -6% 188,273 -0.95 -234,807 -6% 226,611 -1.04 -289,051 -6% 259,949 127% -345,487 -5% 290,369 120% 117% 116% 114% 110% -1.11 -1.19 -404,038 -5% 317,356 -1.27 -463,464 -523,858 -585,318 -5% 340,209 -1.36 -5% 359,376 -1.46 -5% 375,261 -1.56 -647,949 -5% 388,229 -1.67#77Appendix 6 Source: Team 7 六 77 6. Working Capital Working Capital [Unit] 17' 18' 19' 20' 21E 22E 23E 24E 25E 26E 27E 28E 29E 30E Days in the Period 360 360 360 360 360 360 360 360 360 360 360 [days] 360 Net Revenue [BRL Th.] 597,369 767,907 986,076 1,436,756 COGS Change in WC % Net revenue WC (Operational) % Net revenue Receivables Days of Receivables % Net revenue Inventory Days of Inventory % Net revenue Suppliers Days of Suppliers % Net revenue [BRL Th.] -332,534 -416,039 -509,748 [BRL Th.] 5,278 23,184 -743,249 52,780 1% 2% 4% [%] 0% [BRL Th.] 69,459 74,737 97,921 150,701 [%] 12% 10% 10% 10% [BRL Th.] 66,875 76,163 96,076 160,675 2,147,101 -1,112,222 57,610 3% 208,311 10% 225,658 2,941,575 -1,522,834 70,352 2% 278,663 9% 300,986 [days] 36 35 40 38 37 3,980,090 -2,047,339 97,152 2% 375,815 9% 407,248 37 -2,639,015 114,214 2% 490,029 9% 532,379 37 5,203,013 6,619,740 7,974,370 -3,325,238 -3,966,723 131,640 125,113 2% 2% 621,669 746,782 9% 9% 677,340 815,948 37 37 40 [%] 11% 10% 10% 11% 11% 10% 10% 10% 10% 10% [BRL Th.] 82,818 97,489 132,657 185,701 276,239 380,709 511,835 659,754 831,310 991,681 [days] 90 84 94 90 89 90 90 90 90 90 [%] 14% 13% 13% 13% 13% 13% 13% 13% 13% 12% 12% [BRL Th.] 80,234 98,915 130,812 195,675 293,587 403,031 543,268 702,104 886,981 1,060,846 1,246,727 1,444,131 360 9,347,362 10,799,429 12,351,842 13,626,492 -4,649,696 -5,372,004 -6,144,227 -6,778,281 125,349 131,751 140,041 113,340 1% 1% 1% 1% 872,131 1,003,882 1,143,922 1,257,263 9% 9% 9% 9% 956,434 1,105,012 1,263,856 1,394,280 37 37 37 37 10% 10% 10% 10% 1,162,424 1,343,001 1,536,057 1,694,570 90 90 90 90 12% 12% 12% 1,655,991 1,831,588 360 [days] 87 86 92 95 95 95 96 96 96 96 97 97 97 97 [%] 13% 13% 13% 14% 14% 14% 14% 13% 13% 13% 13% 13% 13% 13% Cash Conversion Cycle [days] 43 34 36 35 32 32 31 31 31 31 30 30 30 30#7878 | 7. CAPEX: PP&E and Intangibles *0 Appendix 7 PP&E [Unit] 17' 18' 19' 20' 21E 22E 23E 24E 25E 26E 27E 28E 29E 30E Gross PP&E (BOP) Capex Gross PP&E (EOP) [BRL Th.] 146,700 215,555 325,193 456,139 636,648 [BRL Th.] 68,855 109,638 130,946 180,509 254,785 [BRL Th.] 146,700 215,555 325,193 456,139 636,648 891,433 891,433 249,560 1,140,993 1,140,993 254,303 1,395,296 1,395,296 260,672 1,655,968 1,655,968 387,884 2,043,852 2,043,852 267,010 2,310,862 2,310,862 263,053 2,573,915 2,573,915 253,874 2,827,789 2,827,789 245,245 3,073,034 Depreciation [BRL Th.] -44,419 -61,357 -73,077 -86,923 -108,556 Accumulated Depreciation [BRL Th.] -44,419 -105,776 -178,853 -265,776 -374,332 -126,728 -501,059 -16.4% -15.7% -13.4% -11.4% -10.7% -10.0% Net PP&E [BRL Th.] 146,700 215,555 280,774 350,363 457,795 625,657 766,661 894,236 -143,169 -644,228 -9.4% 1,011,740 -158,312 -802,541 -8.6% 1,241,311 -171,188 -973,729 -7.9% 1,337,133 -182,040 -1,155,769 -7.5% 1,418,145 -191,089 -1,346,858 -7.1% 1,480,930 -198,533 -1,545,391 -6.7% 1,527,642 Capex [BRL Th.] 68,855 109,638 130,946 107,432 167,862 141,004 127,575 117,503 99,912 95,821 Opened [#] 17 17 25 28 32 50 42 38 35 32 Capex per Store Opened [BRL Th./#] 0 4,050 4,386 4,677 3,357 3,357 3,357 3,357 3,357 3,122 29 3,304 81,013 26 62,785 23 46,712 20 3,116 2,730 2,336 Area of New Stores Capex per m² Store Expansion Capex Zee.Dog Capex Store renovation Number of Stores with 1Y or More [m²/#] 17,245 17,245 24,752 22,597 26,670 41,672 35,004 31,671 29,170 24,803 23,788 20,111 15,586 11,596 [BRL Th./m²] [BRL Th.] 4.0 68,855 4.4 109,638 5.8 130,946 4.0 107,432 4.0 167,862 4.0 141,004 4.0 127,575 4.0 117,503 4.01 99,912 4.0 95,821 4.01 81,013 4.0 62,785 4.0 46,712 [BRL Th.] 129,660 [BRL Th.] [#] 63 105 133 167 175 225 267 305 340 372 405 435 460 Area of Stores with 1Y or More Renovation Capex per m² with 1Y or More Maintenance Capex [m²] [BRL Th./m²] [BRL Th.] New Sales/Capex Intangibles Gross Intangibles (BOP) Capex Gross Intangibles (EOP) Amortization % of intangibles Accumulated amortization % of Gross Revenue Total Digital Sales/Capex Ratio Net Intangibles Source: Team 7 [#] 93,482 0.5 118,191 0.5 44,419 61,357 140,768 0.5 73,077 167,437 0.5 86,923 209,109 0.5 108.556 244,113 0.5 126,728 275,784 0.5 143,169 304,954 0.5 158,312 329,757 0.5 171,188 350,661 0.5 182,040 368,091 0.5 191,089 382,431 0.5 198,533 2.41 6.52 6.60 2.48 2.09 2.69 3.00 3.25 1.98 2.76 2.85 3.04 3.16 [Unit] 17' 18' 19' 20' 21E 22E 23E 24E 25E 26E 27E 28E 29E 30E [BRL Th.] [BRL Th.] [BRL Th.] 21,869 53,743 79,524 117,869 170,403 241,484 334,405 452,627 595,042 761,977 954,845 1,175,437 31,874 25,781 38,345 52,534 71,081 92,921 118,222 142,415 166,935 192,868 220,592 243,356 21,869 53,743 79,524 117,869 170,403 241,484 334,405 452,627 595,042 761,977 954,845 1,175,437 1,418,793 [BRL Th.] -6,418 -9,978 -15,767 -23,026 -32,900 -46,000 -62,865 -83,684 -108,394 -137,134 -170,159 -207,218 [%] 17% 15% 16% 16% 16% 16% [BRL Th.] -6,227 -12,644 -22,622 -38,389 -61,415 -94,315 -140,315 16% -203,181 16% -286,865 16% -395,258 16% -532,392 16% -702,552 16% -909,769 [%] [#] 0.0% 2.7% 1.5% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 9.59 18.30 19.95 21.78 23.35 20.67 20.43 19.86 19.14 17.05 [BRL Th.] 15,642 41,099 56,902 79,480 108,988 147,168 194,089 249,446 308,177 366,718 422,452 472,885 509,024#7979 | 8. Financial Revenues, Debt & Payout Appendix 8 Financial Revenues Cash (BOP) Financial Revenues [Unit] 17' 18' 19' 20' 21E 22E 23E 24E 25E 26E 27E 28E 29E 30E [BRL Th.] 61,089 169,277 487,518 487,518 927,823 871,292 915,789 [BRL Th.] 3,806 9,151 8,714 14,218 22,670 61,709 52,275 49,189 1,087,559 1,326,151 57,672 70,325 1,511,673 80,163 1,726,935 91,578 1,936,817 2,130,071 102,708 112,956 Financial Investments Yield. % CDI [BRL Th.] [%] 0 4.7% 6.7% 6.0% 5.4% 5.3% 5.3% 5.3% 5.3% 5.3% 5.3% 0% 0% 105% 60% 90% 90% 90% 90% 90% 90% 90% 90% 90% 17' 18' 19' 20' 21E 22E 23E 24E 25E Debt [Unit] 114,357 257,293 398,485 Gross Debt BOP [BRL Th.] Gross Debt Variation [BRL Th.] 142,936 141,192 97,860 496,345 -207,281 289,064 377,557 Gross Debt EOP % Current 257,293 398,485. [BRL Th.] [%] 114,357 19% 22% 28% 496,345 55% 289,064 50% 88,493 377,557 50% 156,649 534,206 50% 26E 534,206 759,167 1,025,967 224,961 266,800 266,183 759,167 1,025,967 1,292,150 50% 50% 50% 27E 28E 1,292,150 1,525,780 233,630 249,786 1,775,566 1,525,780 50% 50% 29E 30E 1,775,566 2,046,031 270,466 208,689 2,046,031 2,254,720 50% 50% Net Debt Net Debt/EBITDA Gross Debt/ EBITDA Asset/PL Financial Expenses Financial Investments Yield. % CDI Payout Net Income Payout Dividend Paid Reinvestment Rate (CapEx/Net Income) Reinvestment Rate (1-PayOut) Source: Team 7 [BRL Th.] 53,268 96,464 229,208 52,588 -606,511 1.3x 1.2x 0.2x (2.41x) -461,487 (1.34x) [x] 1.1x 3.4x 2.1x 1.9x 1.15x 1.10x -349,335 (0.72x) 1.10x -296,143 (0.43x) -267,937 (0.29x) -187,274 (0.16x) -168,907 (0.12x) -129,003 (0.08x) -51,792 48,328 (0.03x) 0.0x 1.10x 1.1x 1.1x 1.1x 1.1x 1.1x 1.1x [X] 2.4x 3.3x 7.0x 3.7x 1.5x 1.6x 1.7x 1.8x 1.9x 2.0x 2.0x 2.1x 2.2x 2.3x [x] 2.5x -15,496 -58,490 -68,371 -54,979 -46,664 -63,823 -90,536 -124,959 -162,268 -197,255 -231,094 -267,512 -301,053 [BRL Th.] -10,782 [%] -9% [%] -135% -6% -94% -15% -14% 14% 14% 14% 14% -247% -495% 181% 189% 210% 235% 14% 238% 14% 238% 14% 238% 14% 238% 14% 14% 238% 238% [BRL Th.] [%] [BRL Th.] [%] [%] 17' 18' 19' 20' 21E 22E 23E 24E 25E 26E 27E 28E 29E 30E 95,635 163,597 218,914 314,025 435,002 554,588 653,361 761,977 880,238 960,707 25% 25% 25% 25% 36% 40% 60% 70% 80% 90% 23,909 40,899 54,728 78,506 158,708 221,835 392,017 533,384 704,191 864,636 125% 174% 122% 85% 64% 67% 38% 31% 26% 18% 75% 75% 75% 75% 64% 60% 40% 30% 20% 10%#80Appendix 9 六 80 9. Bottom-Line Projections Gross Margin Cost Structure Breakdown COGS/Net Revenue ISG&A/Net Revenue 50% 50% 100% 48% 90% 44% 80% 70% 17' 19' 21E 23E 24E 26E 28E 60% EBITDA Margin 50% 40% 14% 14% 11% 8% 30% 20% 10% 0% 17' 19' 21E 23E 25E 27E 29E 17' 19' 21E 23E 25E 27E 29E Source: Team 7#81Appendix 10 Source: Team 7 六 81 10. Cash Flow Statement |10. Cash Flow Cash BoP (=) Net Income [Unit] 17' 18' 19' 20' 21E 22E 23E 24E [BRL Th.] 443,757 895,575 839,044 883,541 [BRL Th.] 95,635 163,597 218,914 314,025 (+/-) Financial Result add Back [BRL Th.] 32,309 -15,045 11,549 41,347 (+) D&A [BRL Th.] 88,844 109,949 141,456 172,728 25E 1,055,311 435,002 67,287 206,034 653,361 117,092 26E 27E 1,293,903 1,479,425 1,694,687 554,588 91,943 28E 29E 30E 1,904,569 2,097,823 761,977 880,238 960,707 139,516 164,804 188,097 241,996 279,582 319,174 361,248 405,751 (-/+) Change in Other Assets and Liabilities [BRL Th.] -26,584 0 0 0 0 0 0 0 (-/+) Change in WK [BRL Th.] -57,610 -70,352 -97,152 -114,214 -131,640 -125,113 (=) CFO [BRL Th.] 132,594 188,148 274,766 413,885 576,683 763,415 -125,349 924,687 -131,751 1,088,916 1,266,250 -140,041 -113,340 1,441,214 (-) Expansion Capex [BRL Th.] -107,432 -167,862 -141,004 -127,575 -117,503 -229,572 -95,821 -81,013 -62,785 -46,712 (-) Maintenance Capex (-) Intangibles (-) Change in investments (=) CFI [BRL Th.] -73,077 -86,923 -108,556 -126,728 -143,169 -158,312 -171,188 -182,040 -191,089 -198,533 [BRL Th.] -38,345 -52,534 -71,081 -92,921 -118,222 -142,415 -166,935 -192,868 -220,592 -243,356 [BRL Th.]. 11,513 0 0 0 0 0 0 0 0 0 [BRL Th.] -207,341 -307,318 (+/-) Financial Result [BRL Th.] -32,309 15,045 -320,641 -11,549 (+/-) Change in Gross Debt [BRL Th.] -207,281 88,493 156,649 -347,224 -41,347 224,961 -378,895 -67,287 -530,299 -433,945 -455,921 -474,466 -488,601 -91,943 -117,092 -139,516 -164,804 -188,097 266,800 266,183 233,630 249,786 270,466 208,689 (+/-) Change in Capital 64 0 0 0 0 0 0 0 0 0 [BRL Th.] (-) Dividends [BRL Th.] -23,909 -40,899 -54,728. -78,506 -158,708 -221,835 -392,017 (+) Follow-on [BRL Th.] 790,000 0 0 0 0 (=) CFF [BRL Th.] 526,565 62,639 90,371 105,108 (=) FCF FCF Yield Cash EoP [BRL Th.] 451,818 -56,531 44,497 [%] 21% -2% [BRL Th.] 895,575 839,044 1% 883,541 171,769 3% 1,055,311 40,804 238,593 4% 1,293,903 -704,191 0 0 0 -47,595 -275,479 -423,114 -598,529 185,521 215,263 209,881 193,255 2% 2% 2% 2% 1,479,425 1,694,687 1,904,569 2,097,823 -533,384 -864,636 0 -844,044 108,569 1% 2,206,393 CFO-CFI [BRL Th.] -74,747 -119,171 -45,874 66,661 197,788 233,116 490,742 632,996 791,784 952,613#82Appendix 11 Source: Team 7 *0 82 11. Cost of Capital: WACC Kd Index Debt (BRL K) 21E 22E 23E 24E 25E 26E 27E 28E 29E 30E Perpetuity Banco Santander - Borrow Banco Santander - Borrow Banco Votorantim - Borrow Banco Safra Borrow Banco ABC - Borrow Banco do Brasil - Borrow 1,95% a.a. Selic Anual 3,00% a.a. + Selic Anual 30,000 10% 12% 9% 9% 8% 8% 8% 8% 8% 8% 20,000 11% 13% 10% 10% 10% 10% 10% 10% 10% 10% 3,00% a.a. + Selic Anual 21,159 11% 13% 10% 10% 10% 10% 10% 10% 10% 10% 3,30% a.a. Selic Anual 10,000 12% 14% 11% 10% 10% 10% 10% 10% 10% 10% 3,40% a.a. + Selic Anual 30,000 12% 14% 11% 10% 10% 10% 10% 10% 10% 10% 2,50% a.a. Selic Anual 20,000 11% 13% 10% 9% 9% 9% 9% 9% 9% 9% Banco Santander - Borrow 3,49% a.a. Selic Anual 150,000 12% 14% 11% 10% 10% 10% 10% 10% 10% 10% Promissory Note 2,90% a.a. + Selic Anual 60,000 11% 13% 10% 10% 9% 9% 9% 9% 9% 9% Debentures 1,40% a.a. + Selic Anual 200,000 10% 12% 9% 8% 8% 8% 8% 8% 8% 8% Debentures 1,30% a.a. Selic Anual 200,000 10% 12% 9% 8% 8% 8% 8% 8% 8% 8% Cost of Debt 10.4% 12% 9% 9% 9% 9% 9% 9% 9% 9% 9.3% 21E 22E 23E 24E 25E 26E 27E 28E 29E 30E Perpetuity Ke Risk Free 1.6% 1.6% 1.6% 1.6% 1.6% 1.6% 1.6% 1.6% 1.6% 1.6% Unlevered Beta 0.95 0.95 0.95 0.95 0.95 0.95 0.95 0.95 0.95 0.95 Debt Equity 502,720 669,306 534,206 759,167 1,025,967 1,292,150 1,525,780 1,775,566 2,046,031 2,254,720 1,365,332 1,477,182 1,639,267 1,874,143 2,149,886 2,482,106 2,743,088 2,971,406 3,147,267 3,243,245 Tax Rate -34% -34% -34% -34% -34% -34% -34% -34% -34% -34% Levered Beta 1.2 1.2 1.2 1.2 1.2 1.3 1.3 1.3 1.4 1.4 Equity Risk Premium 4.3% 4.3% 4.3% 4.3% 4.3% 4.3% 4.3% 4.3% 4.3% 4.3% Brazil Risk Premium 2.86% 2.91% 2.91% 2.91% 2.91% 2.91% 2.91% 2.91% 2.91% 2.91% Nominal Ke (USA) 9.5% 9.9% 9.5% 9.7% 9.9% 10.0% 10.1% 10.3% 10.4% 10.5% USA CPI 6% 2% 2% 2% 2% 2% 2% 2% 2% 2% Real Ke (USA) 2.9% 7.6% 6.9% 7.1% 7.3% 7.4% 7.5% 7.6% 7.7% 7.8% Brazil CPI 9% 5% 3% 3% 3% 3% 3% 3% 3% 3% Cost of Equity WACC 11.7% 13% 10% 10% 10% 11% 11% 11% 11% 11% 10.9% 21E 22E 23E 24E 25E 26E 27E 28E 29E 30E Perpetuity 6.9% Cost of Debt Post-Tax 8.2% 6.2% 5.9% 5.7% 5.7% 5.7% 5.7% 5.7% 5.7% Debt/(Debt Equity) 27% 31% 25% 29% 32% 34% 36% 37% 39% 41% Cost of Equity 11.7% 12.5% 10.4% 10.3% 10.5% 10.6% 10.7% 10.8% 11.0% 11.1% Equity/(Debt + Equity) 73% 69% 75% 71% 68% 66% 64% 63% 61% 59% WACC 10.4% 11.2% 9.4% 9.0% 8.9% 8.9% 8.9% 8.9% 8.9% 8.9% 9%#83Appendix 12 83 | 12. DCF: FCFF Free Cash Flow to Firm (=) EBIT (-) EBIT Taxes (=) NOPAT 21E 22E 162,059 232,828 119,449 (42,610) (79,162) 153,667 (+) D&A 88,844 (+/-) Change in NWK (57,610) (+/-) Maintenance Capex (73,077) (+/-) Expansion Capex (=) Reinvestment K=) FCFF Period Present Value of Cash Flows 24E 517,142 (175,828) 341,314 109,949 141,456 172,728 (70,352) (97,152) (114,214) (86,923) (108,556) (126,728) (145,777) (220,396) (212,085) (220,496) (276,464) (377,671) (417,793) (461,438) (68,171) (114,055) (49,801) 52,603 0.25 1.25 2.25 3.25 (66,506) (100,787) (39,862) 38,139 23E 343,236 (116,700) 226,536 25E 26E 27E 28E 29E 30E 726,381 932,229 1,107,034 1,294,026 1,498,498 1,643,713 35,390,145 (246,969) (316,958) (376,391) (439,969) (509,489) (558,862) (12,032,649) 479,411 615,271 730,642 854,057 989,009 1,084,850 23,357,495 206,034 241,996 279,582 319,174 361,248 405,751 8,736,067 (131,640) (125,113) (125,349) (131,751) (140,041) (113,340) (143,169) (158,312) (171,188) (182,040) (191,089) (198,533) (235,726) (371,986) (262,757) (273,880) (283,377) (290,068) (510,535) (655,412) (559,294) (587,672) 174,911 201,856 450,931 585,560 4.25 5.25 6.25 7.25 114,868 120,075 242,970 285,789 Perpetuity g 5.5% WACC 10.4% (8,736,067) (5,138,649) Term. ROIC 25% (614,507) (601,941) (13,874,716) 735,750 8.25 325,264 888,660 9.25 355,854 18,218,846 9.25 7,295,532 FCFF 21E-30E 15% Cost of Capital (WACC) 10y Cashflow 1,275,804 Perpertuity 85% Perpetuity 7,295,532 Total 100% 57% 8.4% 8.9% 9.4% 9.9% 10.4% 10.9% 11.4% 11.9% 12.4% Enterprise Value 8,571,336 4.0% 95% 70% 51% 34% 20% 9% -1% -10% -17% Net Debt 134,360 Equity Value Number of shares (K) Petz Target Price 8,436,976 393,991 BRL 21.41 Zee.Dog Target Price BRL 3.97 Target Price BRL 25.39 Stock Price Upside BRL 18.21 39% Perpetuity Growth (g) 4.4% 106% 79% 57% 39% 24% 12% 1% -8% -16% 4.8% 119% 88% 64% 45% 29% 15% 4% -6% -14% 5.1% 135% 100% 73% 51% 34% 19% 7% -3% -12% 5.5% 156% 114% 83% 59% 39% 24% 11% 0% -10% 5.9% 182% 132% 95% 68% 46% 29% 15% 3% -7% 6.3% 218% 154% 111% 79% 54% 35% 19% 6% -4% 6.6% 269% 185% 130% 92% 63% 42% 24% 10% -1% 7.0% 347% 226% 155% 108% 75% 50% 31% 15% 2% Source: Team 7#84Appendix 13 84 | 13. DCF: Zee.Dog Assumptions and Valuation Income Statement (mn) 20' 21E 22E 23E 24E 25E 26E 27E 28E 29E 30E Gross Revenue 125 228 361 522 743 971 1235 1488 1693 1904 2123 Zee.Dog growth YOY 83% 58% 44% 42% 31% 27% 20% 14% 12% 11% Growth Multiplier 1.2x 1.2x 1.2x 1.0x 1.0x 1.0x 0.8x 0.8x 0.8x Petz Growth YOY 49% 37% 35% 31% 27% 20% 17% 16% 14% Gross Revenue Brazil as % of total Gross Revenue Global as % of total (-) Deductions 157 253 370 535 709 902 1,086 1,236 1,390 1,550 69% 70% 71% 72% 73% 73% 73% 73% 73% 73% 71 108 151 208 262 334 402 457 514 573 31% 30% 29% 28% 27% 27% 27% 27% 27% 27% 35 56 80 114 150 190 229 261 293 327 % of Gross Revenue Net Revenue 15% 15% 15% 15% 15% 15% 15% 15% 15% 15% 193 306 441 628 822 1,045 1,259 1,433 1,611 1,796 growth YOY N.A 58% 44% 42% 31% 27% 20% 14% 12% 11% (-) COGS 93 147 212 302 394 502 604 688 773 862 growth YOY N.A 58% 44% 42% 31% 27% 20% 14% 12% 11% % of Net Revenue 48% 48% 48% 48% 48% 48% 48% 48% 48% 48% Gross Profit 100 159 230 327 427 544 655 745 838 934 growth YOY N.A 58% 44% 42% 31% 27% 20% 14% 12% 11% % of Net Revenue (-) SG&A growth YOY % of Net Revenue % of Net Revenue 52% 52% 52% 52% 52% 52% 52% 52% 52% 52% 59 92 130 182 234 298 359 408 459 512 N.A 56% 42% 40% 28% 27% 20% 14% 12% 11% 31% 30% 30% 29% 29% 29% 29% 29% 29% 29% 22% 22% 23% 23% 24% 24% 24% 24% 24% 24% EBIT (Proxy) 39 64 94 137 183 233 281 320 359 401 OCF Zee.DOG 21E 22E 23E 24E 25E 26E 27E 28E 29E 30E Perpetuity Main Assumptions Zee Dog Valuation EBIT (-) Taxes 39 64 94 137 183 233 281 320 359 401 -13 -22 -32 -47 -62 -79 -96 -109 -122 -136 NOPAT 26 42 62 90 121 154 185 211 237 265 (+) D&A. 2 4 5 7 10 12 15 17 19 21 (+/-) Change in WS -2 -3 -3 -4 -5 -5 -5 -4 -4 -4 (-) Capex -9 -14 -21 -30 -39 -49 -60 -68 -76 -85 Tax Rate Capex/Sales 34% +) Cash Flows 520 4% (+) Perpetuity 1,045 WC/Gross Revenue 2% (=) Equity Value 1,565 WACC 12% Shares 394 D&A/Sales 1% Value per Share BRL 3.97 g (perpetuity) 4.4% FCFF Period NPV Source: Team 7 21E-30E Perpertuity 17 28 43 64 87 112 136 156 176 196 2,871 Total 0.25 1.25 2.25 3.25 4.25 5.25 6.25 7.25 8.25 9.25 9.25 17 25 34 45 55 63 69 71 71 72 1,045 33.2% 66.8% 100%#85Appendix 13 85 13. Zee.Dog *** Мой "We went into the stores, we didn't see any brand that actually had the proposal of doing branding, of making a brand that could become top of mind." Zee.Dog Acquisition Presentation And arranged that by creating a unique community that not only serves pets, but their tutors as well... zee.dog THE ZEE DOG BLOG ZEE.DOG MAFMA Source: Company's Data; Team 7 France 2 Q CAES GATOS 11:07 < CATEGORIAS Ces ALIMENTOS Seca Satin Ses ALIMENTOS NATURAIS All C PETISCOS Cane Frango Vegano e outros FARMACIA Ang Probidicos e aven TAPETES HIGIENICOS Preto Beco G What about Zee.Now? Gatos R National Expansion Express Delivery DS ~20% 21% 19% of private label products 46% Drugstore Food Hygiene Accessories 16%#86Appendix 14 86 | 14: 5-Y IRR Price to Earnings. Sensitivity Net Revenue Sensitivity GR Net Income 20' 23E 21E 22E 26E 1.436.756 2.147.101 2.941.575 3.980.090 5.203.013 6.619.740 7.974.370 24E 25E P/E FWD Exit 2025E Payout Ratio Payout Forward P/E CAGR 25% Sensitivity CAGR Shares Outstanding 25% 393.991 393.991 393.991 393.991 393.991 393.991 393.991 Share Price 18,21 Market Cap 7.174.580 42,0 16.622.002 Cash Flow to Equity -7.174.580 42.695 57.276 79.525 16.622.002 2.147.101 2.689.368 3.368.588 4.219.350 5.284.979 6.619.740 8.291.606 101.055 170.782 229.105 318.102 434.134 575.728 25% 25% 25% 25% 36% 40% 25.264 42.695 57.276 79.525 158.391 230.291 29x Net Revenue CAGR (20'-25E) 13% -2% 16% 2% 5% 24% 21x 23x 4% -13% -11% 7% -9% -7% -5% 10% -6% -3% -1% 1% 2% 1% 3% 5% 7% 25x 27x 29x 31x -9% -8% -6% -4% -4% -2% 0% 4% 33x 35x 37x -3% -1% 0% 1% 3% 4% 6% 7% 9% 8% 10% 12% 13% 7% 9% 11% 13% 14% 16% 18% 9% IRR 23,9% Ke 2025E 10,5% Spread TIR-Ke 13,4% 13% 15% 17% 19% 21% 23% 25% 27% 19% 6% 22% 10% 25% 14% 17% 19% 22% 24% 26% 28% 30% 32% 28% 18% 21% 24% 26% 28% 30% 33% 34% 36% 31% 23% 25% 28% 31% 33% 35% 37% 39% 41% 34% 27% 30% 32% 35% 37% 40% 42% 44% 46% 37% 31% 34% 37% 40% 42% 44% 47% 49% 51% 40% 35% 38% 41% 44% 47% 49% 52% 54% 56% 43% 40% 43% 46% 49% 51% 54% 56% 59% 61% 46% 44% 47% 51% 53% 56% 59% 61% 64% 66% 11% 13% 15% 17% 19% 21% 22% Fair P/E FWD 2025E 28,7x Source: Team 7#87Appendix 15 87 15: Multiples Analysis *0 -10 -20 When we look at Petz's FWD 1-Y P/E, we see that the stock is very undervalued, being -20 below the fair average. In this regard, we believe that it is an ideal time to buy Petz's stock... 20 10 0/20 12/20 12/20 02/21 04/21 06/21 08/21 10/21 Source: Refinitiv; Team 7 Ticker 5-Y EPS Growth (CAGR) FWD P/E Ratio ARZZ3 51.6% 24.4x 90x ESPA3 20.0% 14.6x RADL3 24.0% 35.5x 85x SBFG3 15.6% 27.4x 80x LREN3 1.4% 28.2x PCAR3 -18.6% 12.0x 75x PETZ3 49.0% 82.8x AMER3 20.9% 86.0x 70x 65x 60x Looking now at our fair 1-Y FWD P/E, we see that the company is able to have high growth that will justify its CAGR in the coming years. In our analysis, we decided to compare the company to other retailers listed on the Brazilian stock exchange that have an expansion plan throughout Brazil as a common factor.#88Appendix 16 88 | 16: Monte Carlo Analysis [Unit] 21E 22E 23E 24E 25E 26E 27E 28E 29E 30E Gross Revenue Average [%] 34% 34% 34% Std. Dev. [%] 9% 9% 9% 31% 5% 33% 33% 5% 5% 31% 3% 281% 29% 27% Current: BRL 18.2 Target: BRL 25.4 2% 2% 0% 300 Deductions Average [%] -16% -16% Std. Dev. [%] 0% 0% -16% -16% 0% 0% -16% 0% -16% -16% -16% 0% 0% 0% -16% -16% 0% 0% 250 COGS Average [%] -53% -53% Std. Dev. [%] 2% 1% -53% -54% 1% 1% -54% 1% -54% 1% -55% -55% -54% 1% 1% 0% -54% 0% 200 SG&A Average [%] -33% -31% -29% -29% -29% -29% Std. Dev. [%] 3% 3% 1% 1% 1% 1% -29% -30% -30% 0% 0% 0% 0% -30% 150 D&A Average [%] -7% -7% -8% -8% -8% -7% -7% -6% -8% -5% 100 Std. Dev. [%] 3% 3% 4% 4% 4% 5% 6% 5% 5% 5% Recommendation Simulations Results BUY 10,259 68% HOLD 1,595 11% SELL 3146 21% Source: Team 7 Mean Price BRL 30.2 50 BRL 16.4 BRL 20#89Appendix 17 89 17: Basket Price Analysis The question of product price is the main decision factor for the customer. Thus, to understand the product prices of the leading players in the physical environment (62 facilities were analyzed, including megastores, food retailers, franchises, and mom & pop channels). Thus, we created a comparative table with the prices of more than 13 cities distributed in 9 Brazilian states to avoid bias in our analysis. The products were separated into four divisions (Dry Food, Wet Food, Hygienic, and Medicines), being subdivided into six main products (totaling 137 analyses per product). Finally, the table below shows the average results found per product and the standard deviation. Product Ração Golden Fórmula Mini Bits Para Cães Adultos Pequeno Porte Sabor Carne e Arroz 1 kg Dry Food Ração Royal Canin Mini Indoor - Cães Adultos Туре Petz 19.9 Cobasi Petland Food Retail Mom & Pop Channel Average St. Dev 19.9 25.5 18.9 23.4 21.5 2.8 Dry Food 52.4 52.4 62.4 47.2 64.6 55.8 7.4 Alimento Ração Úmida Pedigree Sachê Carne Ao Molho para Cães Adultos de Raças Pequenas 100g Wet Food 2.7 3.0 4.3 3.4 2.7 3.2 0.7 Alimento Ração Úmida Whiskas Sachê Carne Ao Molho para Gatos Adultos 85g Wet Food 3.0 3.0 4.3 3.1 2.9 3.3 0.6 Tapete Higiênico Super Secão C/30 Unidades Hygienic 75.9 85.9 87.9 78.9 86.1 82.9 5.2 Tapete Higiênico Chalesco Antipulgas Zoetis Simparic 10mg para Cães 2,6 a 5kg Total Hygienic 87.9 92.5 93.9 83.9 91.3 89.9 4.0 Anti-Infamatório Agener União Ketojet Cetoprofeno 5mg C/10 Comprimidos Medicines 44.9 36.9 46.7 36.9 39.8 41.0 4.5 Medicines 78.5 75.3 81.4 75.5 81.8 78.5 3.1 365.2 368.8 406.3 347.8 392.6 376.2 Normalized Source: Team 7 1,000 1,010 1,113 952 1,075 1,030#9090 Appendix 18 18. Delivery Time & Shipping Price Analysis (A) In the competitive dynamics of online, freight is the major variable to understand which player is best positioned to meet the demands of its customers. In our freight analysis, we included 21 different locations with 4 types of specifications, these being: (1) Presence of Petz and Cobasi; (II) Presence of Petz; (III) Presence of Cobasi; and (IV) No Petz and Cobasi. In this analysis, we analyzed a feed in 5 different stores (Petz, Cobasi, Petlove, Magalu and MELI), analyzing the different types of delivery and respective times, coming to the following conclusions: (1) Last-Mile matters, and where Petz and Cobasi are physically present are the places where both can deliver most cost-effectively and most efficiently; (II) Petlove, although a purely Pet market player, cannot deliver as efficient a service as megastore players due to low capillarity and the need to pass on freight price to the customer; and (III) Horizontal players do not pay as much attention to this market yet, with difficulties in stocking and making efficient deliveries, especially MELI that, although it has extreme capillarity in the country and makes deliveries as fast as Petz and Cobasi, charges a lot for this, which is not well seen by consumers. It is important to point out that there are business days smaller than 1 because we have made averages between the different delivery times, some of which are fractions of a day (i.e. 3 or 4 hours). Delivery Time (Business Days) Delivery Time (Business Days) 19 2 8 96 5 4 3 2 о Shipping Analysis; [Business Days x BRL] BRL O Cobasi Petlove Petz (1) Petz and Cobasi BRL 10 BRL 20 Shipping Price (III) Only Cobasi Petz Petlove Cobasi BRL O BRL 10 BRL 20 Magalu Shipping Price MELI Magalu BRL 30 BRL 40 MELI BRL 30 BRL 40 Delivery Time (Business Days) Delivery Time (Business Days) 20 +2 852 6 16 m Cobasi BRL O Petz Petlove (II) Only Petz MELI Magalu BRL 10 BRL 20 BRL 30 BRL 40 BRL 50 Shipping Price Cobasi (IV) Neither one Petz Petlove MELI Magalu 0 BRL O BRL 10 BRL 20 BRL 30 Shipping Price BRL 40 BRL 50 BRL 60 BRL 70 Source: Team 7#9191 六 Appendix 18 18. Delivery Time & Shipping Price Analysis (B) 10:02 Jufficio Sarawa We also tested all the companies' products to see if it was valid... OBA! SEU PEDIDO FOI ENTREGUE Zee.Dog Ras Cesar M 299 NOW VER DETALHES Source: Team 7 zee NOW Petz Clarn 21:12 Acompanhar Pedido realizodo 01/12/2001 Pago 01/12/2021 Em separoçe 01/13/2001 Faturedo 1/12/2021 Em transto 01/12/2001 Entreave 01/12/2001 70206123 Resuma › > Cobas Cobasi Seu pedido foi entregue Número do pedido: v23845344cbs-01 Confira ababo os detalhes do seu pedido#92Appendix 19 92 | 19: Private Label Analysis Within the Petz ecosystem, the private label product line is a promising business area for the company, whose value proposition is to offer products with the best cost-benefit ratio in strategic categories. In this sense, the company can reduce the cost of the product by removing one of the intermediaries in the value chain, the supplier brands, buying their private label products directly from the manufacturer, with quality and customization for the Petz brand being a reference among pet lovers. With such an operation, Petz can reduce its COGS for this line and offer more competitive prices. Such dynamics are perceptible in the analysis to the right, in which we compare the competition between more than 1900 variations of 1182 unique products in 21 different categories. To do so, we used web- scraping tools on the Petz e-commerce site to scan the products, collecting price, quantity (weight, units, volume, etc.), brand, description, and other specific information. After this, we performed the segmentation by categories, following the markings of the site itself and the data treatment, eliminating statistical outliers, repeated products, and intruders in the class. Having performed these steps, we compared the average price of Petz with the general average. We concluded that Petz's private label products are priced lower than average, with a median z-score (distance from the mean normalized by standard deviation) of -0.47, i.e., they are cheaper than 68% of the products. Looking closely on snacks and toys category, we can see that on similar products, Petz charges lower prices than competition. Same Product Price Comparison Category Blankets Feed Holders Leashes Collars Shampoo Breastplate Snacks Petz -SNACKS- Snack Churrasco 500 g CRIADORES CHURRASCO PETE EMMO Keld g 190 PURINA Doguitos BIFINHO de CARNE 500g: BRL 22.99 / 60g: BRL 3.49 500g: BRL23.99/ 60g: BRL 3.89 500g: 60g: BRL 6.80 Source: Team 7 Total Private Label % PL Price Unit Avg. Price St. Dev Avg. Price Z-Score Variation Dehydrated Cookies 100g kg BRL 26.9 BRL 139.9 BRL 3.2 BRL 22.0 -18% -1.55 BRL 75.9 BRL 36.2 -74% -1.37 BRL 65.1 BRL 32.6 BRL 33.0 -49% -0.98 BRL 12.1 BRL 6.6 BRL 6.0 -50% -0.92 BRL 111.4 BRL 54.6 BRL 61.3 -45% -0.92 BRL 48.4 BRL 17.3 BRL 34.8 -28% -0.78 BRL 108.8 BRL 106.8 BRL 29.9 -72% -0.74 # BRL 92.7 BRL 52.7 BRL 56.8 -39% -0.68 kg BRL 106.7 BRL 80.5 BRL 56.2 -47% -0.63 Guinea Pig feed kg Beds BRL 136.4 BRL 119.1 BRL 69.9 -49% -0.56 # BRL 235.2 BRL 125.9 BRL 176.2 -25% -0.47 Oral Care 100g BRL 17.9 BRL 17.9 BRL 9.8 -45% -0.45 Odor Eliminator L BRL 13.9 BRL 2.7 BRL 12.9 -7% -0.35 Hamster feed kg BRL 92.9 BRL 55.7 BRL 79.3 -15% -0.25 Clay cat litter kg BRL 6.4 BRL 5.3 BRL 5.4 -16% -0.20 Litter mat BRL 85.4 BRL 13.4 BRL 86.7 1% 0.09 Feeder BRL 30.6 BRL 27.3 BRL 37.4 22% 0.25 Disinfectant Toys Litter boxes Litter scoops BRL 54.4 BRL 39.7 BRL 65.9 21% 0.29 # # # BRL 39.3 BRL 26.2 BRL 47.5 21% 0.31 BRL 67.0 BRL 66.4 BRL 89.9 34% 0.35 BRL 10.1 BRL 5.7 BRL 12.9 29% 0.51#93Appendix 20 93 20: Geospatial Analysis (A) In this context, we created several geospatial analyses to understand various aspects of the pet industry in Brazil. We know that the distribution of stores in the retail segment is essential, especially for a company that seeks to consolidate the sector from a plan to open stores in different cities of the country. That said, we perform our analysis in two main geographic poles: (1) Brazil and (II) São Paulo. (i) Brazil: In the question covering the entire national territory, the first point we sought to understand was the standard of stores Petz seeks to open. In this aspect, we applied a municipal filter, considering 5,567 Brazilian cities. From this, we saw the pattern of stores Petz seeks to extend and compare its penetration level in these cities. The result was apparent. Petz has the vast majority of its stores (125) in cities with over 300k inhabitants, i.e., the central poles of the country. Another fact that corroborates this is the pattern of towns by average income. In the analysis in question, Petz has 118 stores in cities with an average per capita income higher than BRL 1,500. However, despite this appearing to be the company's standard, the penetration level in cities across the country comes to 55% and 64%, respectively. Thus, the company is now looking to open its stores in cities between 100k and 300k inhabitants and average per capita income between BRL 1,000 and 1,500. In addition, we were also able to perform the analysis considering the leading players in the country, such as Cobasi and Petland, as well as more regional players, such as Mundo Pet, Poli Pet, and American Pet. Thus, considering an average radius of influence of 3km per store, we were able to find data such as penetration in the country, the population reached, and most importantly, the GDP per store. Petz' Stores Distribution; [%] 45% 55% With Petz Without Petz 91% 93% 36% 64% > 300k 9% 100k - 300k 7% BRL 1,000 BRL 1,500 > BRL 1,500 Companies Pop. Coverage (mn) GDP Coverage (mn) % of total GDP GDP/Store (mn) Petz 10.4 512,392 27.8% 3439 Cobasi 8.2 441,844 24% 3425 Petland 5.4 287,442 15.6% 3026 AmericanPet 2.2 110,394 6% 2905 Poli-Pet 0.1 4,537 0.2% 378 10 Source: QGIS; IBGE; Companies' Data; Team 7#9494 Appendix 20 || 20: Geospatial Analysis (B) Besides the quantitative data, we can see that Petz has a better geographical distribution with Cobasi, when compared to other players. This is due to the expansion pattern of both companies which are very similar. Petz Cobasi Petland American Pet Poli Pet Potential Cities per Megastore; [# of cities] In this way, we could also calculate a more granular store potential than the potential of standard cities. Using the average GDP/store value of Petz and Cobasi, we found the GDP value of influence for the megastore model, reaching the total potential cities in Brazil. (II) São Paulo: That said, we seek to understand the competitive positioning of both companies. In the matter of analysis in the city of São Paulo, we focused more on the two most prominent players, Petz and Cobasi. We applied an average per capita income filter in the São Paulo districts and sought to understand how Petz and Cobasi stores are distributed. The result clearly showed that both Petz and Cobasi are well distributed in the wealthiest regions of the city. > 10 86 > 8 > 7 > 6 > 5 > 4 > 3 Source: QGIS; IBGE; Companies' Data; Team 7 2222228822 > 2 126 > 1#95Appendix 20 95 20: Geospatial Analysis (C) In addition, we also sought to understand the pattern of Petz and Cobasi stores. We understand that despite having a high radius of influence, the megastore model does not have the same capillarity as mom & pop channels. Thus, the companies positioned themselves to ensure the best strategic positioning, opening their stores near avenues, malls, supermarkets, and subways. We tried to understand if there is any gap between Petz and Cobasi in this positioning issue. The companies were very similar in price and quantity of products. Thus, we applied a minimum distance filter using more than 80 shopping centers in the city of São Paulo and the 89 subway stations in the city. The results can be seen below and corroborate the thesis that both companies are well-positioned. Petz Cobasi Malls Subways Geographical Distribution; [m] Avg. Distance Subway [m] 2500 2000 1500 Petland 1000 500 Petz Cobasi Zee.Dog City's GDP ÷ GDP Reached by Megastore = Potential City Petland 0 1000 1200 • Zee.Dog Source: QGIS; IBGE; Companies' Data; Team 7 1400 1600 Avg. Distance Malls [m] 1800 2000#96Appendix 20 96 | 20: Geospatial Analysis (D) Finally, we also conducted a geospatial analysis to prove the potential of the Seres network, considering around 700 clinics and 50 veterinary hospitals. We crossed each location to find: (i) the nearest hospital for each clinic and (ii) the number of clinics on each distance radius from the hospital. Besides having a strategic position in the cross-sell with the product line, Seres also has potential to become the reference hospital of each region, thus addressing an adjacent, but different market. In São Paulo, for instance, we see well positioned hospitals covering a more significant number of clinics considering the distance between a clinic and its closest hospital, one of the factors prioritized by veterinarians in an emergency room, as verified in a field survey. In this aspect, we considered two main scenarios. The first only find Seres' current veterinary hospitals (3 in the city of São Paulo). The second considers an expansion of 20 hospitals adjacent to current stores, a movement that has been happening slower than the opening of hospitals. We see that Petz' current stores have optimal positioning for getting a geographic edge. The two graphics below shows the accumulated number of clinics into Seres and Non-Seres hospital's radius adjusted by the number of hospitals, increasing possibility to attract more customers in the long term What factors matters when choosing a veterinary hospital? Standard Scenario Expansion Scenario Fr 30 60 45 65050 15 Proximity to Vet. Clinics Service Price Source: QGIS; IBGE; Companies' Data; Team 7 Results Nearest Distance Clinics - Hospital Seres - Non-Seres Seres Non-Seres 30 20 10 0 500 1500 2500 3500 4500 500 1500 2500 3500 4500#97Appendix 21 六 97 63 21. Projection: How do we see Petz' expansion? Number of Stores We see Petz growing in these regions... 175 340 480 SP: Saturated but still with growth opportunities... 17' 18' 19' 20' 21E 22E 23E 24E 25E 26E 27E 28E 29E 30E Average Store Area RJ, MG & ES: Large market where Petz may grow quickly 1230 957 - 897 821 17' 18' Source: Team 7 19' 20' 21E 22E 23E 24E 25E 26E 27E 28E 29E 30E Northeast: Growing market with huge white space#98Appendix 21 Into a Time Interval Source: Team 7 98 21. How do we project maturation curve? Maturation per Store 65% 85% 95% 100% First Year Second Year Third Year Fourth Year 100% 90% 75% 33% Year X Year X + 1 Year X + 2 Year X + 3 17' 18' 19' 20' 21E 22E 23E 24E 25E 26E 27E 28E 29E 30E 2030 stores 2029 stores 2028 stores 2027 stores 2026 stores 2025 stores 2024 stores 2023 stores 2022 stores 2021 stores 2020 stores 2019 stores 2018 stores 2017 stores ■Previous years#99Appendix 22 99 || 22: Foot Traffic Analysis To understand the competitive dynamics of the industry in the best possible way, we created the Foot Traffic analysis to understand two main points: (I) If the megastore model is indeed the big winner in this industry; (II) If there is any crucial difference in customer acquisition between Petz and Cobasi; and (III) How is the traffic of a new store. Our analysis was performed using a proprietary algorithm developed by Team 7, using Google Cloud and R. In this analysis, we start from specific features used by large geolocation companies such as Waze and Uber. This way, the study selects all pet shops in a given radius and thus identifies the average traffic of each of the stores and compares them. That said, we decided to perform our analysis in several competitive scenarios, taking into account the company's expansion plan. How did we do our analysis? Foot Traffic Analysis Compare and Filter with R Extract Data from Google Cloud #install.packages ("remotes") #install.packages("tidyverse") #remotes::install github ("JosiahParty/populartimes") Sys.setenv("GOOGLE_KEY" = "AIzaSyAVUZbrxuqeunvvwfq0zorpHu8A1ROTRES") library (populartimes) library (tidyverse) # Site para as coordenadas http://boxfandex.com/#0.000000 0.000000 0.000000 0.000000 SW <- c(-23.548329,-46.738988) ne <- c(-23.521404,-46.709620) # Site para type https://developers.google.com/maps/documentation/places/web-service/supported_types manch_bars <- search_pop_times (sw, ne, radius = 1500, type = "pet_store") manch_bars <- manch_bare > filter (popular_times != "list ()") manch_teste <- manch_bars > unnest (popular_times) + Elora todas as pontes em grático para dar um Sanity Check manch_bars > filter (name == "Petz") %>unnest (popular_times) > ggplot (aes (hour, popularity)) + geom point (colour = "#FCD702") manch bars filter (name == "Cobasi Osasco") > unnest (popular_times) > ggplot (aes (hour, popularity)) + geom point (colour = "#003E62") manch bars > filter (name != "Petz") %> filter (name = "Cobasi Pet Center") > unnest (popular times] > ggplot (aes (hour, popularity)) + g # Regressão usando os pontos anteriores ggplot (manch_bars *>* unnest (popular times), aes (hour, popularity)) + geom smooth (data = manch bars > filter (name != "Petz") %> filter (name != "Cobasi Pet Center") >unnest (popular times), aes (colour = "# geom smooth (data = manch bars > filter (name == "Petz") > unnest (popular times), aes (colour = "#FCD702"), ymax =100, method="gam", fo geom smooth (data = manch bars > filter (name = "Cobasi Pet Center") %> unnest (popular times), aea (colour = "003E62"), ymax = 100, metho geom_smooth (data - manch_bars > filter (name -- "Petland") > unnest (popular_times), acs (colour "#D9D9D9"), ymax 100, method "gam", scale_color_identity (name "Avg. Traffic", breaks = c("#FCD702", "#003562", "#003562", "D9D9D9"), labels = c("Petz", "Cobasi", "Petshops Locais", "Petland"), guide = "legend") +theme (panel.grid.major element_blank (), panel.grid.minor = element_blank (), panel.background element blank (), axis.line element line (colour = "black")) Source: R; Google Cloud; Team 7#100Appendix 23 100 23. "What if?" Analysis (A) Accretion/Dilution Analysis Earnings Per Share Petz Net Earnings Cobasi Net Earnings Pro Forma Net Earnings Petz Shares O/S Cobasi Share O/S Pro Forma Shares O/S Petz EPS Cobasi EPS Pro Forma EPS Accretion/Dilution % change We understand that in a highly pulverized sector, the possibility of a merger between the two most prominent players is exceptionally high, given that both today represent only 13.4% of the market share (in this case, CADE won't be barrier). Thus, we decided to simulate a merger between Petz and Cobasi as a brainstorming exercise. Together the brands would have 292 stores, with exceptional bargaining power with suppliers and a high capillarity in the state of São Paulo, which would help facilitate the national expansion plan, with an opening of 60-80 stores per year. In addition, we see many synergies in this merger, a cost-cutting of Cobasi's veterinary services, implementation of private label at Cobasi, as well as cuts with SG&A. Therefore, we made some assumptions to project the merger. First, we considered that both brands should be maintained independently, given the relevance of both in the national scenario. The second point was to assume a 100% stock merger, given that this is the most likely scenario to occur, with the Cobasi's management staying in the NewCo. Finally, we thought that Cobasi should grow at the same pace as Petz in this expansion across the country. 75 50 25 0 Source: Company's Data; Diário Oficial; Team 7 21E 22E 23E 24E 25E 26E 27E 28E 29E 30E 95,635 163,597 218,914 314,025 435,002 554,588 653,361 761,977 880,238 960,707 88,854 115,623 154,850 187,460 259,664 342,403 419,134 491,245 629,247 712,248 225,673 348,570 471,193 628,660 863,576 1,108,382 1,328,742 1,557,740 1,853,536 2,049,875 393,991 434,991 434,991 434,991 434,991 434,991 434,991 434,991 434,991 434,991 30,274 30,274 30,274 30,274 30,274 30,274 30,274 30,274 30,274 30,274 424,265 465,265 465,265 465,265 465,265 465,265 465,265 465,265 465,265 465,265 0.2 0.4 0.5 0.7 1.0 1.3 1.5 1.8 2.0 2.2 2.9 3.8 0.5 0.7 87 5.1 6.2 8.6 11.3 13.8 16.2 20.8 23.5 1.0 1.4 1.9 2.4 2.9 3.3 4.0 4.4 0.3 0.4 0.5 0.6 0.9 1.1 1.4 1.6 2.0 2.2 119.1% 99.2% 101.2% 87.2% 85.6% 86.9% 90.1% 91.1% 96.9% 99.5% Google Trends Brands Recognition Petz -Cobasi 100 11/16 09/17 07/18 05/19 03/20 01/21 New Co. Stores Distribution#101Appendix 23 101 | 23. "What if?" Analysis (B) Transaction's Assumptions 40-60 Valuation Fair Stock Price Cobasi Premium Equity Value Acquired (Cobasi) Stocks (40%) 208.5 EBITDA 21E 20% EV/EBITDA 21E 7,575,919 Enterprise Value Petz 121,830 70x 8,571,336 Net Debt 20' + M&A 83.4 Cash (60%) Equity Value 125.1 Price per Share (BRL/ share) Cobasi 186,978 33x 6,171,660 1,342,640 141,606 9,913,976 6,030,054 25.2 208.5 Adjustments NewCo. 132,583 438,338 16,349,358 1,484,246 17,833,604 42 Issued Stocks by Petz (mn) 29,864 Stock Exchange Ratio (Petz/Cobasi) 1.6x Projected Market Share Transaction's Assumptions 50-50 Fair Stock Price Cobasi 208.5 35.0% 35.1% 33.7% Premium 20% Market Concensus 32.1% Equity Value Acquired (Cobasi) 7,575,919 30.1% Stocks (50%) 104.3 27.5% Cash (50%) 104.3 24.0% Issued Stocks by Petz (mn) 24,886 20.4% Stock Exchange Ratio (Petz/Cobasi) 1.6x 16.7% Transaction's Assumptions 100-0 13.4% Fair Stock Price Cobasi 208.5 Premium 20% Equity Value Acquired (Cobasi) Stocks (100%) 7,575,919 208.5 Cash (0%) Issued Stocks by Petz (mn) Stock Exchange Ratio (Petz/Cobasi) Source: Company's Data; Diário Oficial; Team 7 0.0 49,773 1.6x 21E 22E 23E 24E 25E 26E 27E 28E 29E 30E#102Appendix 23 102 23. "What if?" Analysis (C) Scenario 3: Transaction's Assumptions 100-0 Scenario 1: Transaction's Assumptions 40-60 Premium per Share Petz EBIT Cobasi EBIT Synergies Pro Forma EBIT Net Interest Expense Pro Forma EBT Income Tax Expenses Pro Forma Net Income 20% 25% 30% 162,059 162,059 162,059 162,059 151,084 151,084 151,084 151,084 72,030 72,030 72,030 72,030 385,173 385,173 385,173 385,173 -58,383 -61,302 -64,221 -67,141 326,790 323,871 320,952 318,032 -111,109 -110,116 -109,124 -108,131 215,681 213,755 211,828 209,901 35% Premium per Share Scenario 2: Transaction's Assumptions 50-50 30% Petz EBIT Cobasi EBIT Synergies Pro Forma EBIT Net Interest Expense Pro Forma EBT Income Tax Expenses Pro Forma Net Income 20% 25% 35% 162,059 162,059 162,059 162,059 151,084 151,084 151,084 151,084 72,030 72,030 72,030 72,030 385,173 385,173 385,173 385,173 -58,383 -61,302 -64,221 -67,141 326,790 323,871 320,952 318,032 -111,109 -110,116 -109,124 -108,131 215,681 213,755 211,828 209,901 Premium per Share Petz EBIT Cobasi EBIT Synergies Pro Forma EBIT Net Interest Expense Pro Forma EBT Income Tax Expenses Pro Forma Net Income 20% 25% 30% 35% 162,059 162,059 162,059 162,059 151,084 151,084 151,084 151,084 72,030 72,030 72,030 72,030 385,173 385,173 385,173 385,173 -58,383 -61,302 -64,221 -67,141 326,790 323,871 320,952 318,032 -111,109 -110,116 -109,124 -108,131 215,681 213,755 211,828 209,901 Petz Net Income 95,635 95,635 95,635 95,635 Petz Net Income 95,635 95,635 95,635 95,635 Petz Net Income 95,635 95,635 95,635 95,635 Petz Shares O/S Cobasi Share O/S Pro Forma Shares O/S 393,991 434,991 434,991 434,991 29,864 29,864 29,864 29,864 423,855 423,855 423,855 423,855 Petz Shares O/S Petz Shares O/S Cobasi Share O/S Pro Forma Shares O/S 393,991 393,991 393,991 393,991 24,886 24,886 24,886 24,886 418,877 418,877 418,877 418,877 Cobasi Diluted Share O/S Pro Forma Shares O/S 393,991 393,991 393,991 393,991 36,328 37,842 39,356 40,869 430,319 431,833 433,347 434,861 Petz EPS 0.2 0.2 0.2 0.2 Petz EPS 0.2 0.2 0.2 0.2 Petz EPS 0.2 0.2 0.2 0.2 Pro Forma EPS 0.5 0.5 0.5 0.5 Pro Forma EPS 0.5 0.5 0.5 0.5 Pro Forma EPS 0.5 0.5 0.5 0.5 A/D - $ A/D-% 0.3 0.3 0.3 0.3 A/D - $ 109.6% 129.4% 127.3% 125.2% Accretive Accretive Accretive Accretive A/D-% Source: Company's Data; Diário Oficial; Team 7 0.3 0.3 0.3 0.3 A/D - $ 112.1% 110.2% 108.3% 106.4% Accretive Accretive Accretive Accretive A/D-% 0.3 0.3 0.2 0.2 106.5% 103.9% 101.4% 98.9% Accretive Accretive Accretive Accretive#103103 *** || 24. 4-Wall Analysis We did a 4-Wall analysis to understand how Petz stores perform, using the estimated maturation time in our model. From this, we saw that Petz stores manage to have a positive EBITDA throughout their opening time, reaching an average ROIC of 36% at the end of the four-year maturity period. Furthermore, we see a positive IRR for the investment per store, reaching 15% at the end of the period, with a payback of 3.1 years. We use COGS and SG&A data per mature store as assumptions and adjust this for an Opex maturity starting at 80% and reaching 100% at the end of the four years. In addition, we also assume that sales via omnichannel will have a lower penetration in the first few years of opening, going from 40% in the first year to 100% in the last year.About NOPAT, we used the average CAPEX per store (BRL 4,049 mn) and added pre-operating costs and net working capital, as shown in the model below. Using the same assumptions, we did for Petz, we could also simulate a 4-wall analysis using Cobasi's data in 2019. In the thick of it, we have as leading indicators: Main Assumptions Petz Store Model Gross Revenue per Store Omnichannel Revenue ex-Omnichannel Costs per Store Gross Margin Gross Profit Store Expenses % of Gross Revenue ex-Omnichannel Store Contribution Margin Additional SG&A % of Gross Revenue ex-Omnichannel D&A Income Tax NOPAT Capex Pre-Operational Year 1 Year 2 Year 3 Year 4 Maturation Curve - Sales ex- 65% 85% 95% 100% 14,818,690 Omnichannel 1,998,928 Gross Revenue per Store 12,819,763 Omnichannel 6,835,195 Revenue ex-Omnichannel 9,632,149 12,595,887 14,077,756 14,818,690 799,571 1,399,250 1,799,035 1,998,928 8,832,578 11,196,637 12,278,721 12,819,763 46.7% 5,984,568 3,369,785 26.3% Maturation Curve - Omnichannel Digital Penetration 40% 8.3% 70% 11.1% 90% 12.8% 100% 13.5% Costs per Store 5,468,156 6,151,675 6,835,195 6,835,195 2,614,783 133,447 1.0% 433,300 34% 1,637,682 Gross Margin Gross Profit Store Expenses % of Gross Revenue ex-Omnichannel 38.1% 45.1% 44.3% 46.7% 3,364,422 5,044,962 5,443,526 5,984,568 2,695,828 3,032,806 3,369,785 3,369,785 30.5% 27.1% 27.4% 26.3% Maturation Curve - Opex 4,049,000 Store Contribution Margin 620,253 Net Working Capital Invested Capital 277,778 % of Gross Revenue ex-Omnichannel Additional SG&A 4,947,031 D&A Income Tax ROIC Mature Store 36% Main Indicators Cobasi 4-Wall Appendix 24 Payback 3.9 ROIC ROIC + SG&A 4-Wall EBITDA -3.2% 14.0% 14.8% 22.0% 4.5% 21.6% 22.4% 29.7% Year 0 -4,947,031 Year 1 668,594 Year 2 2,012,156 Year 3 2,073,741 Year 4 2,614,783 -4,947,031 -4,278,437 -2,266,281 -192,540 2,422,243 NOPAT Capex Pre-Operational Net Working Capital Invested Capital 80% 90% 100% 100% 668,594 2,012,156 2,073,741 2,614,783 7.6% 18.0% 16.9% 20.4% 133,447 133,447 133,447 133,447 433,300 433,300 433,300 433,300 34% 34% 34% 34% 353,197 1,239,948 1,280,594 1,637,682 4,049,000 4,049,000 4,049,000 4,049,000 620,253 620,253 620,253 620,253 277,778 277,778 277,778 277,778 4,947,031 4,947,031 4,947,031 4,947,031 ROIC 7.1% 25.1% 25.9% 33.1% Margin 1.7% 13.4% 12.7% 16.5% IRR 15% ROIC + SG&A 9.8% 27.8% 28.6% 35.8% 4-Wall EBITDA Margin 7.6% 18.0% 16.9% 20.4% Payback 3.1 Source: Company's Data; Diário Oficial; Team 7#104Appendix 25 104 | 25. Price War - Discount Simulation Average Discount 0% Average Discount 10% Average Discount 0% Average Discount 10% Average Discount 0% Average Discount 10% Petz Petz Cobasi Cobasi Petlove Petlove Sales Mix Products Sales Mix 92.6% Products Private Label 7.4% Private Label 92.6% 7.4% Sales Mix Products 100% Sales Mix Products 100% Sales Mix Products 100.0% Sales Mix Products 100.0% Total Units Sold X Total Units Sold X Total Units Sold X Total Units Sold X Total Units Sold X Total Units Sold X Average Sales Price BRL 100 Average Sales Price BRL 90 Average Sales Price BRL 100 Average Sales Price BRL 90 Average Sales Price (Products) BRL 100 Average Sales Price (Products) BR 100 Average Sales Price BRL 87 (Private Label) Average Sales Price (Private Label) BRL 87 Products Revenue 100.0x Products Revenue 90.0x Products Revenue 100.0x Products Revenue 90.0x Total Revenue 100.0x Total Revenue 90.0x Total Revenue 100.0x Total Revenue 90.0x Products Revenue 92.8x Products Revenue 83.5x Private Label Revenue 6.3x Private Label Revenue 6.3x % COGS 59.9% % COGS 66.6% % COGS 71.0% % COGS 78.9% Total Revenue 99.1x Total Revenue 89.8x COGS 59.9x COGS 59.9x COGS 71.0x COGS 71.0x % COGS (Products) 53.3% % COGS (Products) 59.2% Total COGS 59.9x Total COGS 59.9x Total COGS 71.0x Total COGS 71.0x % COGS (Private Label) 43.3% % COGS (Private Label) 43.3% Gross Profit 40x Gross Profit 30x Gross Profit 29x Gross Profit 19x COGS (Products) 49.5x COGS (Products) 49.5x Gross Margin 40.1% Gross Margin 33.4% Gross Margin 29.0% Gross Margin 21.1% COGS (Private Label) 2.7x COGS (Private Label) 2.7x Total COGS 52x Total COGS 52x Change in Gross Margin -6.7% Gross Profit (Products) 43x Gross Profit (Products) 34x Gross Margin 46.7% Gross Margin 40.8% Private Label Sensitivy Gross Profit (Private Label) 3.6x Gross Profit (Private Label) 3.6x Gross Margin 56.7% Gross Margin 56.7% Gross Profit Gross Margin 47x 47.3% Gross Profit 38x Gross Margin 41.9% Change in Gross Margin -5.4% Gross Margin A 10% 8% 6% 4% 2% 0% 3% 6% 8% 11% 13% 16% 18% 21% 23% Private Label Penetration Change in Gross Margin -7.9% In this way, the team was able to see the actual value of an increased private-label penetration, which is the main factor that guarantees a lower variation in gross margin for the company. We replicated the following model numerous times, creating a sensitivity analysis that shows the variation in gross margin according to the increase in Petz's private label penetration. -5% Discount 10% Discount 15% Discount Source: Company's Data; Diário Oficial; Team 7#105Appendix 26 105 *0 26. Gross Margin & EBITDA Comparison Petz is the industry leader, but how are its numbers compared to its competitors? Gross Margin; [%] Petlove Cobasi Petz EBITDA Margin (IAS-17); [%] Cobasi Petz 16% 50% 48.3% 48.3% 15.1% 14.9% 45.8% 45% 14% 44.3% 43.1% 41.1% 40% 41.0% 39.9% 12% 37.6% 35% 34.9% 35.1% 30% 10% 31.5% 8% 8.0% 29.0% 9.9% 13.2% 11.7% 11.2% 25% 6% 16' 17' 18' 19' 20' 17' 18' 19' 20' Source: Company's Data; Diário Oficial; Team 7#106Appendix 27 106 六 27. DuPont Analisys: Petz vs. Cobasi 7% 17' 3.3x Return on Equity; [%] Petz Cobasi 18% 17% 15% Leverage; [x] 4.2x 20% 15% 18' 19' 2.5x 2.5x 1.3x 1.4x 1.3x 14% We see that Petz has a higher ROE from 2017 because it has leveraged more for national expansion. Today we see that the company will have a higher ROE according to the increase in net margin, because it is already well capitalized.... 20' Assets Turnover; [x] Net Margin; [%] 1.5x 1.3x 1.3x 1.3x 1.3x 10.1% 1.2x 8.9% 8.7% 1.1x 5.2% 4.0% 3.8% 1.9% 17' 18' 19' 20' 17' 18' 19' 20' 17' 18' 19' 20' Source: Company's Data; Team 7#107Appendix 28 六 107 | 28. Petz and Cobasi: Market Share Physical Market Share Petz -Cobasi 6.1% 5% 4.9% 4.8% 5.4% 4.4% 4.8% 3.3% 3.1% 3.9% 2.9% 2.4% Pet Industry Evolution 50.5 45.5 41 37 33.1 27.8 23.5 20.8 18.6 16.9 15' 16' 17' 18' 19' 20' 16' 17' 18' 19' 20' 21E 22E 23E 24E 25E#108108 29. Cobasi: A Purebred Competitor ||29. *** Appendix 29 Balance Sheet 17' 18' 19' Income Statement 17' 18' 19' Physical Market Share; [%] Total Assets 583 700 800 |(=) Net Revenue 786 873 1,053 Current Assets 247 315 356 (-) COGS 441 515 632 Petz Cobasi Cash & Equivalents 94 136 144 (=) Gross Profit 345 358 421 6.1% (-) SG&A 240 247 304 Receivables 71 78 97 (=) EBIT 105 111 117 4.9% 5% Advances 1 4.8% 3 1 (+) D&A 14 19 22 Inventory 75 90 112 |(=) EBITDA 119 130 139 3.1% 3.3% 5.4% Prepaid Expenses 1 1 Others 5 7 NO (=) Financial Result 1 -6 7 4.4% 4.8% 3.9% (+) Financial Revenue 16 10 26 Non-Current Assets 336 385 444 (-) Financial Expenses 15 16 19 2.9% 2.4% Investments 222 240 243 (=) EBT 106 105 124 PP&E 81 111 166 (-) Taxes 27 27 33 (=) Net Income 79 78 _91 Intangible Others 1 1 2 15' 16' 17' 18' 19' 20' 32 33 33 Total Liabilities 136 185 204 Current Liabilities 136 185 202 Suppliers 102 149 159 Short-Term Debt 6 0 Labor Obligations 6 7 Tax Liabilities 18 Others 11 Non-Current Liabilities 0 0 NOJ = N 2 21 11 Long-Term Debt 0 Long-Term Leasing 0 0 1 Others 0 0 1 Equity 447 515 596 9 Cobasi is Petz's biggest competitor with revenues of BRL 1.5 bn by 2020. The company has a similar business model to Petz and from the customer's point of view they are both very similar. In this aspect, we see Cobasi as the next consolidator in the sector next to Petz, although it has had a later development. The company also seeks a consolidation outside the state of São Paulo, focusing on mega stores of similar size and CAPEX as Petz. We see that Cobasi will be able to create a similar ecosystem to Petz, as it already has an outsourced veterinary clinic service (SPet) and has recently acquired Pet Anjo, a platform that offers the intermediation of services such as dog walker, babysitting, lodging and daycare. However, we see an advantage of Petz over Cobasi its best acquisitions and being the first-mover in this respect. Cobasi SPET Source: Diário Oficial; Team 7#109109 | 30. Petlove: The Brazilian Chewy *** Appendix 30 Balance Sheet Total Assets 17' 18' 19' 20' Income Statement 17' 18' 19' 20' 44 55 107 410 |(=) Net Revenue (-) COGS 79 Current Assets 41 51 70 334 (=) Gross Profit 47 Cash & Equivalents 17 15 20 209 (-) SG&A 51 Receivables Inventory Others Non-Current Assets 3 Investments PP&E Intangible Others Total Liabilities Current Liabilities Suppliers Advance to Clients Short-Term Debt Labor Obligations Tax Liabilities ≈ = -momo ou3230-2 12 19 23 57 |(=) EBIT 11 17 26 42 (+) D&A 1 0 1 26 |(=) EBITDA 4 0 3 4 0 0 0 50 68 37 52 27 32503286 37 76 |(=) Financial Result 19 0 (+) Financial Revenue 1 8 (-) Financial Expenses 27 (=) EBT 22% - 225T045-69 178 256 428 petl❤ve 115 162 293 63 94 135 62 95 140 1 -1 -5 Vetsmart 1 1 2 -3 -8 -9 -8 Vetus 1 4 10 12 -7 -10 -13 Hp (-) Taxes dog hero 0 0 2 13 41 (=) Net Income -9 -7 -10 -15 79 111 90 58 4 5 0 10 15 7 1 3 13 2 0 3 Others 1 1 7 10 Non-Current Liabilities 13 16 21 21 Long-Term Debt 13 16 18 13 Long-Term Leasing 0 0 0 3 Others 0 0 3 5 Equity -6 -13 28 299 In the Petlove issue, we see an approach with Chewy (the largest pet e-commerce company in the US). Petlove currently has the second largest market share in the industry in the digital segment, losing ground to Petz, the industry leader. In this aspect, Petlove has sought to position itself better in the digital/e-commerce issue, increasing the number of mini-hubs in the country and trying to generate more digital engagement. Digital Market Share; [%] Petz Petlove 54% 46% 46% 44% 37% 33% 27% 13% 7% 9% 4% -1% 15' 16' 17' 18' 19' 20' Source: Diário Oficial; Team 7#110Appendix 31 110 | 31. Petland: A Franchise Model *0 Highlights Average Sales/m² = BRL 1.2 k Average Net Margin = 18.4% Competitive Positioning For Petland we could see that the company has much lower traffic than when compared to Petz and Cobasi, losing even to the average performed for mom & pop, as shown in our Foot Traffic performed in Vila Leopodina, SP... Growth/Distribution Petland Revenue; [BRL mn] 292 181.7 94.3 112.6 40.4 19.6 Average Revenue Breakdown Foot Traffic Vila Leopodina (1.5 km) 16' 17' 18' 19' 20' 21E Cobasi Petz Petland Mom & Pop Food Non-Food Services Stores Distribution 80 21% 34% Source: Company's Data; Team 7 45% 20 40 60 0 2 4 6 8 10 12 14 16 18 20 22#111111 32. Unraveling Local Competition Capitalization We see that capitalization is essential for pet companies to expand. In this aspect we see Petz's high cash flow as a differential point. We see almost BRL 3 bn in the IPO and another BRL 779 in its most recent follow on, while its competitors Cobasi and Petlove raised respectively BRL 300 bn and BRL 750 mn. Smaller companies like PetCamp are raising around BRL 100 mn. Omnichannel We see that Petz (and also Cobasi) have a more developed omnichannel because of their better expansion and having a strong position in digital. In this aspect, we see that the more regional megastores are one step behind the national ones. Ecosystem Finally, we see that Petz has the advantage over all players in the industry with its robust and well- developed ecosystem, which leaves the company one step ahead of the rest. Brazil Journal Negócios Daytrade Negócios Economia BR Partners investe na PetCamp, 'a Petz do interior' 25 de Novembro de 2021 Brazil Journal Negócios Daytrade Negócios Economia Família Jereissati compra 20% da Petland 1 de Dezembro de 2021 Appendix 32 Source: Team 7#112Appendix 33 112 | 33. Management (A) *0 Name Position Claudio Roberto Ely Independent Member Aline Ferreira Pena CFO and IRO Eduardo Terra Independent Member Sergio Zimerman CEO and Board Member Gregory Louis Reider Board Member Luciano Rocha Sessim Board Member Valéria Pires Corrêa Officer Source: Company's data Background Mr. Claudio is a sênior consultant at Warburg Pincus. Prior to that, Mr. Ely was CEO at Drogasil S.A., where he led the company's IPO process in 2007 and participated in the merger of Drogasil with Raia S.A., which resulted in Raiadrogasil S.A., Brazil's largest pharmacy. Mrs. Aline has almost 20 years of experience, having been, prior to joining the Company, Executive Director of Strategy at Arezzo&Co, where she worked for around 5 years. Mrs. Aline also has 14 years of experience in the Financial Market including PE, M&A and Equity research. Mr. Terra has been serving as deliberative advisor to Savegnago Supermercados since 2014 and to Lopes Supermercado since 2016. He also serves at the strategy and innovation committee of Center Norte since 2017 and at the advisory board of Extrafarma / Grupo Ultra since 2018. Mr. Zimerman is CEO and founder. As founder and CEO, he has led the initial expansion, which in ten years reached the mark of 27. Now Petz has 115 stores and Mr. Zimerman intends to transform Petz into the largest and best chain of pet shops in Latin America. Mr. Gregory holds bachelor's degrees in Economics and International Relations from the Yale College. Mr. Gregory Louis Reider is senior consultant at Warburg Pincus. Prior to that, he was Principal at Warburg Pincus from 2012 to 2020. Mr. Sessim, prior to joining Petz, served as an officer at Walmart. He joined Petz in 2015 as the executive officer of trade, marketing, and foreign trade, where he implemented several strategic plans increasing store productivity and commercial margins in 1000 bps in the past five years. Ms. Corrêa holds a bachelor's degree in veterinary medicine, a master's degree in veterinary clinic surgery and a Ph.D. in experimental physiopathology from the University de São Paulo. She joined us in 2004 and she now serves as technical director of Seres. Sergio Zimerman Luciano Rocha Sessim Valéria Pires Corrêa Claudio Aline Ferreira Pena Roberto Ely Eduardo Terra Gregory Luis Reider On the question regarding Petz's management, we see an excellent and well-aligned team, as commented in our ESG analysis. However, some people are seen as key to the future of the company, such as Claudio Roberto Ely (former CEO of Raia Drogasil) and Irlau Machado Filho (CEO of Notre Dame Intermédica). They bring to the company expertise in the national expansion and verticalization of companies in the healthcare segment. At this point of critical people, we see as the most important point for Petz its strategy committee, which encompasses the main names for the future of the company's national and international expansion, as shown in the table.#113Appendix 33 113 33. Management (B) Management Compensation 32.40% Variable Compensation In addition to Sergio Zimerman's high percentage position in the company, the founders of the recently acquired Zee. Dog also have lock- up of the shares and an earn-out from the transaction in 2026. Nome Sergio Zimerman On 131.968.204 Total (%) 30,33% TRUXT Investimentos 23.208.108 5,33% Outros 279.881.602 64,34% Total 435.057.914 100,00% 65.80% Fixed Compensation Source: Company's data#114Appendix 34 114 34. Value Proposition 六 Value Proposition Megastores Pure Online Mom & Pop Food Retailers Assortment X X Location Convenience Price (Physical) Price (Digital) Online Platform Omnichannel Ecosystem Source: Company's Data; Team 7 ✗ ✗ ☑ X ✗ X Х Ο#115Appendix 35 115 35. Optionalities: Zee.Kitchen (A) SIMNI ASSIM zeedog Kitchen NATURAL Kitchen Zee made a ponctual acquisition to enter a new vertical and is already making big efforts to enter a market composed primarly by food, but where natural food is still unpenetrated... Source: Companies' Data ...and an international peer brings us confidence that it could turn into a huge operation... Freshpet is an American company focused exclusively on the production and sale of Freshpet natural foods, with more than 20,000 points of sale and 1 million customers. $ 320 mn Revenue in 2020 $6 bn Market Cap#116Appendix 35 六 116 Source: Company's Data; Team 7 35. Optionalities: Temple (B) Zee innovated by bringing a store concept where the focus is not the product, but the customer.... In the US, megastore models are no longer a retail trend, and "temple" models are gaining more prominence for the customer's experience with the store. MA zeedon Why do we like this? Omnichannel strategy requires a frictionless experience, in order to align the seller to the company's industry. In this context, Zee.Dog stores and labs become experience stores, where customer can test presencially and, eventually, purchase online...#117Appendix 35 Average Expenditure [BRL] Source: Company's Data; Team 7 *0 117 35. Optionalities: Verticalized Health Plan (C) In Brazil, only 91k animals have health insurance and we see this sub-segment with a high potential as the humanization of pets in the country increases. From this point of view, Petlove together with Porto Seguro has already positioned itself to achieve a comfortable position in this market, reaching 1.5% market share today. Based on our estimates, the market can reach BRL 3.8 bn in just 5 years. 20' 21E 22E 23E 24E 25E Pets in Brazil Health Plan Penetration [mn of pets] [%] 88 91 101 112 123 135 0.1% 0.3% 0.5% 0.8% 1.1% 1.5% Pets w/ Health Plan [mn of pets] 0.1 0.3 0.5 0.9 1.4 2.0 Average Spending per Health Plan [BRL] 1,500 1,635 1,717 1,768 1,821 1,876 Brazilian Health Plan Market [BRL mn] 137 446 867 1,584 2,464 3,799 Health Plan Penetration [%] 0.1% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0% 500 46 91 182 273 364 455 546 637 728 819 910 700 64 127 255 382 510 637 764 892 1,019 1,147 1,274 900 82 164 328 491 655 819 983 1,147 1,310 1,474 1,638 1,100 100 200 400 601 801 1,001 1,201 1,300 118 237 473 710 946 1,183 1,500 137 273 546 819 1,092 1,365 1,700 155 309 619 928 1,238 1,900 173 346 692 1,037 1,383 2,100 191 382 764 1,147 1,529 1,401 1,602 1,802 2,002 1,420 1,656 1,893 2,129 2,366 1,638 1,911 2,184 2,457 2,730 1,547 1,856 2,166 2,475 2,785 3,094 1,729 2,075 2,421 2,766 3,112 3,458 1,911 2,293 2,675 3,058 3,440 3,822 Gross Margin in Diagnostics VCA Animal Hospitals +50% +15% Gross Margin in Pet Hospital 2,300 209 419 837 1,256 1,674 2,093 2,512 2,930 3,349 3,767 4,186 2,500 228 455 910 1,365 1,820 2,275 2,730 3,185 3,640 4,095 4,550#118Appendix 36 118 36. International Approach (A) To better understand how the Brazilian market will perform, we tried to look at the two countries with the best development of the megastore model, the US, and the UK. Thus, we made a comparison between the markets and the dominance of the leading players in this environment: USA: In the United States, we see one of the largest pet markets in the world. However, the story was not always like this. In the early 1980s, the US pet market was dominated by local players and food retailers, which were the big news at the time. This led to the emergence of two large megastore chains, PetSmart and PetCo, fighting for market dominance by aggressively opening stores across the country (PetSmart currently has 1,278 stores across the country, while PetCo has approximately 1,200). That said, both companies have achieved a relevant history of market share, reaching 40.3% for PetSmart and 19.5% for PetCo. However, the scenario for both companies was once better. With the arrival of the COVID-19 crisis, there was an acceleration of purely online and omnichannel services, which caused the two industry leaders a considerable lost share to the new entrant Chewy (a company that PetSmart had already acquired last year). In this aspect, we draw a parallel with the North American market, given that the consolidation that started to occur 40 years ago is happening in Brazil, with some slight differences. We believe that a purely digital player such as Chewy and Amazon have ascended due to a window of opportunity created by the combination of: (1) underdeveloped Ominichannel by dominant players and (II) well- developed logistics network in the US (III) high e-commerce penetration in the country. These factors are not observed both individually and in combination in the Brazilian scenario, supporting our thesis that Petz with its more Asset heavy model appears well positioned in the online sales channel. UK: In UK's market, we see a remarkable parallel to be drawn, mainly with the market, which is very similar to what we believe the Brazilian market will be after consolidation, with a residual share of mom & pop channels and food retailers in the future due to the high capillarity of these channels. Furthermore, we see a profound similarity between Pets at Home and Petz, which can be used as a comparison player for future projections. Thus, the team decided to do authorial field research using our contacts in one of the Pets at Home stores in Worthing, West Sussex. As a result, we could perceive three points that bring Petz and Pets at Home closer together: (1) Pets at Home has a much more extensive range of private label products (44% of the company's total revenue) than Petz; (II) Both companies have grooming, adoptions and veterinary services in their portfolio as a way to generate cross-sell and increase customer loyalty; (III) Both companies have a very similar business model with big stores and omnichannel approach, the most significant difference is in the moment of consolidation of both companies (Pets at Home has opened more small superstore stores, which have 350 sqm). Top 2 Market Share Evolution (Brazil) 13% 11% 8% 8% 6% 6% 16' 17' 18' 19' Top 2 Market Share (2020) 49% 40% 31% 20 20' 21E 11% Source: Team 7#119Appendix 36 六 119 Source: Team 7 36. International Approach (B) Putting your pet first We see Pets at Home as one of the peers most like Petz... pets at home Number of Stores; [stores] 500 400 300 39% of Private Label 200 15% of Omnichannel Index 100 33% of Sales Services 05' 07' 09' 11' 13' 15' 17' 19' 23% of UK's Market Share#120Appendix 37 Source: Reuters 六 120 | 37. Consensus Comparison HISTORICAL (ACTUALS) FY Dec-20 FORECAST (MEAN) FY Dec-21 FY Dec-22 FY Dec-23 REVENUE COST OF GOODS SOLD GROSS INCOME GROSS PROFIT MARGIN SELLING & MARKETING EXPENSE SG&A EXPENSE GENERAL & ADMIN EXPENSE 1436.756 2073.858 2867.672 3818.500 743.249 1091.333 1577.333 2053.667 693.506 1001.667 1440.667 1912.500 48.260% 40.500% 40.250% 40.900% 426.690 575.000 906.000 1218.000 547.915 745.500 992.000 1253.000 133.746 161.000 254.000 338.000 OPERATING EXPENSE 1311.610 1707.000 2170.000 2716.000 EBITDA 185.459 284.952 423.672 624.750 DEPRECIATION 131.241 177.000 220.000 233.000 DEPRECIATION & AMORTIZATION 141.219 122.000 170.667 209.000 EBIT 124.102 158.568 253.152 385.518 INTEREST EXPENSE 63.543 71.000 105.000 129.000 PRE-TAX PROFIT 69.949 114.360 186.646 315.750 TAX PROVISION 11.562 34.000 TAX RATE 29.200% 53.250 26.150% 95.000 28.000% NET INCOME 58.387 86.032 136.996 221.250 NUMBER OF SHARES OUTSTANDING 374.612 EARNINGS PER SHARE 0.150 0.218 0.335 0.530 EBITDA REPORTED 266.365 376.000 579.000 789.000 PRE-TAX PROFIT REPORTED 69.949 107.500 185.000 317.500 NET INCOME REPORTED 58.387 81.667 143.333 236.333 EARNINGS PER SHARE REPORTED 0.150 0.190 0.340 0.560 DIVIDEND PER SHARE 0.030 0.060 0.085 0.127#121Appendix 38 121 *0 Organic Traffic (M) 38. E-commerce: Web Site (A) Petz is the industry leader, but how are its numbers compared to its competitors? 20 18 16 14 12 10 Petlove Traffic Positioning; [M & K] Petz 6 Cobasi 4 2 200 300 400 500 600 Organic Keywords (K) Source: SEMRush Keyword Positioning; [words] 600,000 51 to 100 21 to 50 11 to 20 4 to 10 Top 3 500,000 400,000 300,000 200,000 100,000 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21#122Appendix 38 Source: SEMRush *0 Organic Traffic (M) 122 38. E-commerce: Web Site (B) Petz is the industry leader, but how are its numbers compared to its competitors? Traffic Positioning; [M & K] Digital Traffic Comparison; [traffic] 20 18 Petz Organic Traffic Paid Traffic % of Paid 20,000 16 14 12 18,000 16,000 14,000 12,000 10 Petlove 10,000 8,000 6 6,000 Cobasi 4 4,000 2 2,000 200 300 400 500 600 0 Organic Keywords (K) Petz Cobasi Petlove#123Appendix 38 123 38. E-commerce: App (A) Monthly Active App Users on the Last 2-Y 4.0 M 3.5 M Petz Cobasi Petlove UX Engagement Avg. Visits per Month I Time Spent per Visit 4.6 3.0 M 15-M Delay 2.5 M 2.0 M 2.3 1.5 M 1.7 1.6 1.0 M 0.8 0.7 0.5 M 0.0 M 10/19 01/20 04/20 07/20 10/20 01/21 04/21 07/21 10/21 Petz PetLove Cobasi Source: SimilarWeb#124Appendix 38 六 124 38. E-commerce: App (B) Monthly Active App Users on the Last 2-Y Petz Cobasi Petlove Estimated CAC per Year 4.0 M 0.97 3.5 M 3.0 M 15-M Delay 2.5 M 2.0 M 1.5 M I I 0.78 0.58 1.0 M 0.5 M 0.0 M 10/19 01/20 04/20 07/20 10/20 01/21 04/21 07/21 10/21 18' 19' 20' Source: SimilarWeb; Team 7#125Appendix 39 125 39. ESG: Carbon Footprint (A) PetCo Emissions (tCO2e) Scope 1 Scope 2 144,530 134,090 129,100 18,254 18' 18,758 19' Pets at Home Emissions (tCO2e) 17,066 Scope 1 Scope 2 15,133 8,431 8,445 18' 19' Source: Companies' Data; Team 7 | Scope 1: Direct Carbon Emission 15% 17,282 20' 85% 74% Logistics Operation Omnichannel Reduces CO2 Emissions Scope 2: Indirect Carbon Emission 4 Electricity Consumption Energetic Matrix + Renewable Projetcs Conscious Energy Use + Better Efficiency#126Appendix 39 六 126 | 39. ESG (B): Materiality Matrix We made a materiality matrix to understand how aspects involving Planet, Petz and People affected both shareholders and the business. What was taken in consideration? Business: 1. How does this impact the operation? 2. Business Stakeholders 3. How would a change in it affect the outside view? How is it correlated to the final purpose of the firm? Transporation and Packing Impacts 50 20 Carbon emission 40 40 Stakeholders: 1. How does this impact the future expectations? Collaborates Wellbeing 80 50 2. How would a change in it affect profitability? Labour Practices 70 70 Product and Services Quality 85 85 Pet's Welfare 100 Tutor's Wellbeing 85 Access to quality information 90 Ethics and Business Conduct 65 Sourcing Responsibility 70 Management Quality and Alignment 80 ESG Transparency 40 8 8 8 ४ जै ४ 90 75 70 60 30 80 60 Source: Team 7#127127 | 40. Field Research (A) Appendix 40 Seeking to understand consumer preferences, we conducted a field research with 336 respondents from 15 Brazilian states. Respondents were asked about the average monthly cost per pet, and a median spending range was found to be BRL 200- BRL 300 per month. In addition, we asked respondents to choose two out of five priority purchase factors for physical and online. In general, price and speed mattered most to the consumer in both cases. However, when we segment the results by spending ranges, it is possible to observe a reduction in the importance of price and an increase in the importance of speed and assortment. Thus, we can observe that, with the growth of the premium products market, logistics will be essential to win over this consumer, giving a potential advantage to larger scale players. Online Forms $ Customers' Priorities (Physical) Price Proximity Variety Customer Service 55 Services' Availability 35 Source: Team 7 113 13 148 180 $ +300 Answer Customers' Priorities (Online) Price Deliver Time Free shipping Assortment Customer Service 16 61 121 1241 15 115 15 States Average Spending per pet 178 > BRL 500 15% BRL 400-500 9% BRL 300-400 11% BRL 200-300 22% BRL 150-200 18% BRL 100-150 16% BRL 100 < 9%#128Appendix 40 128 40. Field Research (B) Physical Customers' Priority per Spending (Physical) Physical Customers' Priority per Spending (Online) Customer Service -Product Price Services Avaiability- -Proximity Assortment Customer Service Product Price Free Freight Delivery Time Assortment 50% 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 0% BRL 100 < BRL 100 - BRL 150 - BRL 200 BRL 300 - BRL 400 - > BRL 500 BRL 100 < BRL 100 - 150 200 300 400 500 150 BRL 150 - 200 BRL 200 BRL 300 - BRL 400 - > BRL 500 300 400 500 Source: Team 7#129Appendix 40 129 | 40. Field Research (C) In addition, we used field research to test consumer loyalty to each brand. We asked the respondent's store of preference and then whether the consumer always chooses the mentioned establishment. We saw that the customers who prefer Petz are the most loyal, 16.4% said they always buy at the store, against 12.8% for Cobasi and 5.9% for Petlove. Furthermore, we saw that when Petz is not the first option, it is the second in most cases, both for Cobasi and Petlove. We believe that this result shows that there is difficulty in keeping the customer, but that among the big players, Petz is superior in this aspect. What is your second choice when you don't buy on your preference store? Second Option How often do you choose your store of preference? 53% Always ■Usually Often 53% 41% 34% 31% Source: Team 7 Preference Store Petz Cobasi Petlove 16% Petz N.A 23% 14% Cobasi 43% N.A 11% 13% Petlove 35% 29% N.A Petz Cobasi 6% Petlove 53%#130130 *0* Appendix 41 41. PETZ3: Historical Stock Price 30 3Q20 Zee.Dog Acquisition 1Q21 CSDG 2Q21 3Q21 25 20 15 10 ST 5 SELIC and Inflation Projections are Raised 0 09/20 10/20 11/20 12/20 01/21 02/21 03/21 04/21 05/21 06/21 07/21 08/21 09/21 10/21 11/21 Source: Company's Data; Refinitiv#131Appendix 42 六 131 42. Our Valuation vs. Market Price R$ 16 B R$ 14 B R$ 12 B Revenue Growth Comparison Implied Valuation Our Projections Implied Valuation Assumptions: Requires 15% IRR until 2030. 10.4% WACC on Perpetuity 6.5x Sales/Capital on reinvestments 30% Terminal ROIC -400 bps of EBIT dillution Market Estimates Our Estimates R$ 10 B R$ 8 B R$ 6 B R$ 4 B R$ 2 B R$ 0 B 17' 18' 19' 20' 21E 22E 23E 24E 25E 26E 27E 28E 29E 30E Source: Team 7 11% Market Share (25E) 15.5% Market Share (25E) 14% Share of Growth (25E) 25% Share of Growth (25E)#132Appendix 43 132 43. CSDG & Cão Cidadão: New Aspects of Business CSDG is able to generate engagement with exclusive cat products... while Cão Cidadão offers new services, mainly in conjunction with Adopt Petz... Content Criation Exclusive Products Engagement Rate; [%] 3% + Engagement Know-How Qualified Audience Cão Cidadão I I 0.4% 0.3% 0.2% 0.2% CDSG Chewy PetLove Cobasi Petz Source: Company's Data; Instagram; Team 7 Cha Cidadie The acquisition of Cão Cidadão also brings to Petz Content Creation and Qualified Audience. In addition, it brings a new service: training for pets... Alexandre Rossi, CEO of Cão Cidadão#133Appendix 44 133 44. Tornado Analysis Tornado Analysis Total Store Opening -BRL 2.7 Digital Penetration Mature SSS Private Label Penetration CAPEX per sqm Gross Margin (excl. Private Label) Source: Team 7 -BRL 1.5 BRL 25.4 -BRL 1.1 BRL 1.1 -BRL 0.8 BRL 1.2 BRL 1.6 -BRL 0.4 BRL 0.3 -BRL 0.2 BRL 0.2 Valuation is more sensitive to Private Label penetration -5% 5% BRL 3.4#134Appendix 45 134 | 45. Return Projections ROA, ROE and Operational ROIC ROIC Tree of our Projections • ROA ROE •Operational ROIC 10% 33.2% 9% 29.7% 2020 8% Margin Pressure 7% 14.4% 13.0% NOPAT Margin Top-Line Growth 6% 2030 5% 4% 3% 2% 7.0% 5.9% 3.6% 3% 1% 0% 2.0x 2.5x 3.0x 3.5x 4.0x 2017 2019 2021 2023 2025 2027 2029 Invested Capital Turnover Source: Team 7