Perdigao and Sadida_food Sector

8/9/2019 Perdigao and Sadida_food Sector

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Flash Note

PERDIGO ANDS ADIA FOOD SECTOR - Brazil

May 19, 2009

Banco Esprito Santo de Investimento, S.A. EquityIberia - Brazil

FINALLY, PERDIGO ANDS ADIA ANNOUNCEMERGER Sadia and Perdigo have announced a merger between the two companies, with theconsequent creation of Brasil Foods (BRF). The new company will be listed on theBovespa Novo Mercado, and only ordinary shares with voting rights will be traded.Each shareholder of Perdigo will receive one share in BRF and, after variouscorporate transactions, the non-controlling shareholders and holders of SDIA4 andSDIA3 will receive 0.132998 shares in the new company for each share already held,

while the current controlling shareholders of Sadia will receive 0.166247 shares inBRF for each share in Sadia held. The current shareholders of Sadia will end up with32.2% of the new company, while Perdigos will end up with 67.7%.SYNERGYS AVINGS For the new company, based on a recurring reduction of 5% in sales expenses and20% in general and administrative expenses (from 2010), we estimate that thesynergy savings created by this merger will amount to a net present value ofapproximately R$ 3.1 billion. At this time we have not considered other possiblesynergy saving opportunities that could arise in terms of costs and revenues, or taxbenefits from the premium that is being created. We estimate that EBITDA margin forthe new company in 2010, without synergy savings, would be 11.2%, and 12.3% withthe synergy savings we have calculated.ISSUE OF SHARES FOR SUBSCRIPTION Together with the "material event" notice announcing the merger of the twocompanies, it was also announced that there would be a public offering of shares at anestimated value of R$ 4 billion. Therefore, if the new company manages to raise thisamount of capital, we believe that at the end of 2009 the Net Debt/EBITDA ratio of thenew company would be approximately 2.4x (4.2x without the issue). The dilution to ourtarget price as a consequence of this issue will heavily depend on the issue price, butat market prices this issue would dilute our target price by 7,7% to R$ 43.20/share inthe new company.PROBLEMS WITH ANTI-TRUST AUTHORITIES?

As a single company, Sadia and Perdigo have a market share of more than 50% invarious products segments. Therefore we will be waiting for the anti-trust authorities tosuggest a number of alterations in the operations of the new company that may needto be made, which could reduce the potential synergy between Sadia and Perdigo.On the other hand, the argument that a merger represented the only solution forpreventing Sadia from facing serious insolvency problems, may also be used.OUR VIEW

Current Price 4,32Target Price 6,20Ups ide Potential 43,5%

Ticker SDIA4# Share 683Trading Volume R$ 33,7% Float 53%% Voting Shares 38%52 Weeks Max./Min. 14,30 / 2,54Market Cap 2.254EV 8.987

BUY

Current Price 33,99Target Price 46,80Ups ide Potential 37,7%

Ticker PRGA3# shares 207

Average volume 29,8% Float 53%% Voting 100%52 Weeks Mx./Mn. 54,98 / 25,50Market Cap 7.049EV 9.917

BUY

Taking our assumptions for a reduction in sales expenses of 5% and in general andadministrative expenses, of 20% from 2010, as a result of this merger, we havealtered our target price for Perdigo to R$ 46.70/share and that for Sadia to R$6.20/share. For Perdigo, we are maintaining our BUY recommendation, but with amedium-to-long term view due to the fact that in the short term we believe that: (i)investors have already priced in part of the potential synergy savings between the twocompanies, (ii) a risk of dilution exists through the possible issue of shares to reduceindebtedness, (iii) there maybe anti-trust related difficulties in holding on to all theoperations due to the high market share that the resulting company will have and (iv)market multiple levels in the short term will be high as a result of the synergy savings

expected over the next few years. For Sadia, we have upgraded our recommendationto BUY, given that its shares will continue to follow the swap ratio proposed. The newcompany would be trading at a EV/EBITDA 09E and 10E multiple of 8.8x and 6.4x,respectively, already taking into account the synergy savings captured from 2010. Inthe short term, we prefer the shares of Marfrig, which are trading at an EV/EBITDA10Emultiple of 5.6x.

Anal ys tLuiz [email protected] +55 11 30747322


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PERDIGO ANDS ADIA May 19, 2009

Banco Esprito Santo de Investimento, S.A. - 2 - EquityIberia - Brazil

THE OPERATION AND SWAP RATIOS TO BE USED The merger operation between the two companies will be done in various steps, asfollows:

i) The creation of a company called HFF, which will receive the ordinary shares of theshareholders of Sadia that hold more than 51% of the ordinary shares. HFF will havethe same number of shares as those received from the shareholders of Sadia.

ii) Indication to Perdigo of the shareholders in Sadia who will be obliged to acquire theConcrdia Financeira.

iii) If steps i) and ii) are completed, Perdigo will alter its name to BRF and incorporatethe shares of HFF at a swap ratio of 0.166247 shares in HFF for each share in BRF;

iv) There will then follow shareholder restructuring of Sadia, HFF and Perdigo/HFFand finally;

v) The remaining shareholders that own Sadia ON and PN shares will then switch intoBRF at a swap ratio of 0.132998 PN and ON shares for each share in BRF.

CHART: STEPS IN THE CREATION OFBRF

1 - Sale of Concrdia Holdi ngFinanceira 2 - Incorpo rati on of HFF's shares

3 - Incorpo rati on of shares ofremaining shareholdres

ControllingShare-

holders

MarketHFF

SADIA

CONCRDIAHOLDING

FINANCEIRA

Market

HFF Market

BRF"New Corp. denom.

of PERDIGO"

SADIA

100,0%

Exch. Rate: 0,166247Sadia Control: R$5,59Perdigo: R$33,65

Ex-SADIA'sControl. Share-

holdersMarket

HFF Market

BRF

SADIA

Exch. Rate: 0,132996Sadia Market: R$4,48Perdigo: R$33,65

Source: Perdigo and Sadia

The shareholding reorganisation cited in step (iv) will alter the bylaws of Perdigo, andtherefore those of BRF, so that its Board of Directors will consist of 11 members,

implementing the structure of Joint-Chairmanship of the Board. Three new boardmembers will be nominated by the shareholders of HFF, and therefore the currentcontrolling shareholders of Sadia, one of them occupying the role of Joint-Chairman,with a mandate up to BRFs AGM, to be held in 2011.

According to the conference call held by the companies to clarify queries about theoperation, 92% of the ordinary shares will be subject to the swap ratio of 0.166247while the other ordinary and preferred shares will be swapped for shares in BRF at aswap ratio of 0.132998.

According to our estimates, these figures result in 306 million shares in BRF (withoutconsidering the R$ 4 billion issue of shares).

Finally, once all these steps have been concluded, BRF will start trading onBM&FBovespa.


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CHART: FUTURE SHAREHOLDING STRUCTURE OFBRF FOODS S.A.

BRF - BRASIL FOODS S.A.

BRF

SADIA

100%

Marketex-Perdigo

Ex- ControllingShareholders

Sadia

Marketex-Sadia

Source: Perdigo e Sadia

WHAT WILL THE NEW COMPANY BE?The new company created from the merger of Perdigo and Sadia will come into beingwith a gross revenue in 2008 of R$ 21.7 billion, and EBITDA of R$ 2.3 billion.

For 2008, the combination of both companies would result in 47% of total grossrevenue deriving from industrialised and processed meat products, with 37% from

poultry. It is important to note that the dairy segment, which represented a significanttranche of revenue for Perdigo, will only represent 4% of the new company's totalgross revenue.

In the Brazilian market, 74% of revenue will be from industrialised meat products andother processed products.

In the international market, the company will continue to be focused on the export ofpoultry in-natura, which will account for approximately 67% of total gross revenue.

CHART: BREAKDOWN OF TOTAL GROSSREVENUE

CHART: BREAKDOWN OF DOMESTICGROSS REVENUE

CHART: BREAKDOWN OF GROSS EXPORTREVENUE

Poultry37%

ProcessedFood47%

Others3%

Dairy4%

Pork and Beef 9%

ProcessedFood74%

Poultry8%

Pork and Beef 4%

Dairy8%

Others6% Processed

Food17%

Dairy1%

Poultry67%

Pork and Beef 14%

Others1%

Source: Perdigo, Sadia and BES Securities Source: Perdigo, Sadia and BES Securities Source: Perdigo, Sadia and BES Securities

Our initial estimates, already including our synergy savings forecasts, indicate netrevenue of R$ 23.9 billion for 2009 (pro-forma as if the merger had taken place at thebeginning of the year) and R$ 25.7 billion for 2010. In EBITDA terms, we are estimatingR$ 2.3 billion for 2009 and R$ 3.1 billion for 2010.


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T ABLE: BRF FINANCIAL RESULT(PERDIGO+ S ADIA) WITH ESTIMATED SYNERGY SAVINGS

Resul ts (R$mm) 2009E 2010E 2011E 2012E

Net Revenues 23.935 25.684 27.923 30.346

COGS -18.046 -19.051 -20.699 -22.501

Gross Profit 5.888 6.633 7.224 7.845

Gross Margin (%) 24,6% 25,8% 25,9% 25,9%

Operational Expenses -4.615 -4.638 -4.898 -5.311

EBITDA 2.304 3.149 3.614 3.976

EBITDA Margin (%) 9,6% 12,3% 12,9% 13,1%

Financial Results -241 -967 -925 -860

Net Profit 1.018 1.119 1.462 1.716

Net Margin (%) 4,3% 4,4% 5,2% 5,7%Source: BES Securities

In multiple terms, and taking possible synergy savings from 2010, BRF would be tradingtoday at an EV/EBITDA multiple of 8.8x for 2009 and 6.4x for 2010.

We point out that the multiples for 2009 are likely to remain high in comparison withother companies in the sector, due to expectations for synergy savings still not yetcaptured in the 2009 results.

T ABLE: CURRENT TRADING MULTIPLES OF THE COMPANIES

EV/EBITDA P/E

Company 2009 2010 2009 2010

Perdigo 8,3 6,9 11,2 14,9

Sadia 8,7 6,7 7,6 8,2

BRF w/ 8,8 6,4 10,5 9,5BRF w/o 8,8 7,0 10,5 12,7

Marfrig 6,9 5,6 7,0 9,4

JBS 6,6 5,7 12,2 11,3

Minerva 7,4 5,8 2,3 4,6Source: BES Securities, *including synergy savings from 2010 with a reduction of 5% in sales expenses and 20% in generaland administrative expenses; w = with synergy savings; w/o = without synergy savings .

SHAREHOLDER BREAKDOWN After all the steps in the merger operation between Sadia and Perdigo have beencarried out, the current shareholders of Perdigo will hold 68% of the new company,while the controlling shareholders of Sadia will have 13% - with the remaining 19%

being in the hands of the minority shareholders of Sadia.

CHART: ESTIMATED SHAREHOLDER BREAKDOWN FOR THE NEW COMPANY

Minority Sadia19%

Controling groupSadia13%

Perdigo68%

Source: BES Securities


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CHART: SHAREHOLDING STRUCTURE OFBRF PRIOR TO THESHARE ISSUE

CHART: SHAREHOLDING STRUCTURE OFBRF AFTER THESHARE ISSUE

Minority Sadia19%

Controling groupSadia13%

Perdigo68%

Minority Sadia

14%

Perdigo49%

New Shareholders28%

Controlling GroupSadia

9%

Source: BES Securities Source: BES Securities

The net short-term debt (short-term debt, less cash and equivalents) of Sadia andPerdigo together would be R$ 3.2 billion and therefore we believe most of the fundsraised would be used to extend the profile of the debt which falls due within 1 year.

PROBLEMS WITH THE ANTI-TRUST AUTHORITY?Both companies have strong brand names in the domestic market and compete for 1stand 2nd ranking position in several segments in the food sector.

Taking the information contained in the presentations given by Perdigo, below weshow the market share of both companies in various segments.

CHART: MARKET SHARE(%) AND SIZE OF THE MARKET IN SOME SEGMENTS

29,5

38,6

52,3

35

0

26,333 31,9 29,8

13

55,8

71,684,2

64,8

13

Processed Meat Frozen Meat Pasta Pizzas Dairy

Sadia Perdigo SDA+PDA

R$ 14bi

R$ 2,5bi R$ 425mi

R$ 387mi

R$ 3,7bi

Source: Perdigo and BES Securities, barbels referred to size of Brazilian market

We believe that the market share of the new company may give rise to questioning onthe part of the anti-trust authorities, but the companies have the backing of someweighty arguments to minimise possible losses. As an example, the lawyers of bothcompanies could use the argument that Sadia could become insolvent if the transactionwere not to go ahead.

We also point out that possible restrictions could be imposed on 50% of the company'srevenue, given that the remaining 50% derives from exports.


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WHY DO WE PREFERM ARFRIG?We prefer Marfrig among Brazil's meat processing companies because of: (i) its lowEV/EBITDA10E multiple, of 5.6x, (ii) the rise in the capacity utilization rate in the beefsegment which is currently taking place, (iii) the company's significant exposure to lowprice proteins (chicken), (iv) the ongoing integration of the operations with MoyPark,generating gains in margin, (v) improvements in working capital levels during 2009, (vi)the fact that the beef cycle in Brazil becomes favourable to the industry from 2010onwards, as well as, (iv) the resilience of the company's operations in Europe to theeffects of the financial crisis on that continent.


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SADIA - SDIA4/SDA BALANCE SHEET 2007 2008 2009E 2010E 2011EPrice R$ 4,32 Corporate Governan N1 N1 Current Assets 4.700 7.908 7.482 7.884 8.418Price US$ 6,38 Tag Along: 80% 0,8 Cas h and Equivalents 2.505 4.593 3.967 4.080 4.284Float: 53% Share: PN PN Receivables 487 790 806 891 968Target Price R$ 6,20 Potencial Up.: 43,5% 0,1 Inventory 1.169 1.851 1.932 2.077 2.258Target Price USD$ 8,90 Potencial Up.: 39,5% 0,2 Others 539 673 777 835 908ECONOMIC ASSUMPTIONS 2008E 2009E 2010E 2010E 2011E Long Term 395 1.269 1.327 1.386 1.445F/X Med (R$/US$) 1,95 1,83 2,22 2,13 2,18 Receivables 0 0 0 0 0

F/X Final (R$/US$) 1,76 2,34 2,10 2,15 2,20 Others 395 1.269 1.327 1.386 1.445SELIC 12,3% 12,1% 10,1% 9,8% 9,7% Fixed Assets 3.087 4.482 4.553 4.765 4.978IPCA 4,4% 5,9% 4,5% 4,5% 4,2% TOTAL ASSETS 8.181 13.659 13.362 14.035 14.841GDP 5,4% 5,1% 1,0% 3,7% 4,0%

Cur rent Liabilities 2.228 8.418 8.022 8.227 8.464OPERATING ASSUMPTIONS 2008E 2009E 2010E 2010E 2011E Short Term Debt 1.012 6.941 6.435 6.542 6.649Selling Price (R$/ton) Payables 594 919 1.011 1.098 1.195Domestic Market 5328 5897 6238 6649 6935 Others 622 558 576 588 620Exports 3837 4586 5027 5122 5364 Long Ter m Liabilit ies 3.008 4.776 4.598 4.807 5.029

Long Term Debt 2.688 4.385 4.207 4.415 4.638Selling Volume (ton) Others 320 391 391 391 391Domestic Market 998 1120 1232 1278 1329 Net Equity 2.945 465 742 1.001 1.348Exports 1148 1205 1169 1215 1264 TOTAL LIABILITIES 8 .181 13 .659 13.362 14.035 14.841

Volume Sales Break down (%) DEBT SITUATION 2007 2008 2009E 2010E 2011EExt Market 53% 52% 49% 49% 49% Total Debt 3.700 11.326 10.642 10.957 11.286

Net Debt 1.195 6.733 6.675 6.877 7.002Off Balance Deb t 0 0 0 0 0% Short Term 27,4% 61,3% 60,5% 59,7% 58,9%% Local Currency 35,1% 28,7% 31,9% 32,2% 32,7%

RESULT 2008E 2009E 2010E 2010E 2011E Net Interes t/EBITD A -5,5% 332,7% 11,8% 31,9% 25,9%Net Revenues 8.623 10.754 12.012 13.006 14.136 Net Deb t./EBITDA 117 ,7% 57 5,4 % 6 00,3% 46 8,5 % 43 0,8 %Cost of Sales 6.312 8.109 9.303 9.839 10.692 Net Debt/Market Cap 17,3% 298,7% 226,2% 233,1% 237,3%Gross Profit 2.311 2.644 2.709 3.167 3.444 Net Debt/Net Worth 40,6% 1448,5% 900,2% 687,1% 519,4%General Expenses 1.566 1.855 2.048 2.202 2.381Other Expenses/Income 75 68 79 86 94 2007 2008 2009E 2010E 2011EEBIT 670 721 583 879 969 # Shares 683 683 683 683 683EBITDA 1.015 1.170 1.112 1.468 1.625 EPS 1,0 -3,6 0,6 0,5 0,7Financial Results 56 -3.893 -132 -469 -420 BVPS 4,3 0,7 1,1 1,5 2,0Non-operating Results 155 1 0 0 0 Dividends R$ 207 98 110 102 138Equity Results -93 0 0 0 0 DPS 0,3 0,1 0,2 0,1 0,2Earnings before Taxes 788 -3.170 452 410 549 Pay Out % 30,0% -4,0% 28,5% 28,3% 28,4%Taxes 100 -703 65 48 64 Div. Yield % 3,0% 4,3% 3,7% 3,5% 4,7%Minority & Statutory Partic. -1 -10 0 0 0Net Income/Loss 689 -2.457 387 362 485 MULTIPLES 2007 2008 2009E 2010E 2011E

Share Price $10,12 $3,30 $4,32 $4,32 $4,32MARGINS 2008E 2009E 2010E 2010E 2011E Market Cap 6.912 2.254 2.951 2.951 2.951Gross Margin 26,8% 24,6% 22,6% 24,4% 24,4% EV 8.107 8.987 9.626 9.828 9.953EBIT Margin 7,8% 6,7% 4,9% 6,8% 6,9% EV/Sales 0,9 0,8 0,8 0,8 0,7EBITDA Margin 11,8% 10,9% 9,3% 11,3% 11,5% EV/EBIT 12,1 12,5 16,5 11,2 10,3Net Margin 8,0% -22,9% 3,2% 2,8% 3,4% EV/EBITDA 8,0 7,7 8,7 6,7 6,1

EV/EBITDA* 8,0 7,7 8,7 6,6 6,0MOMENTUM 2008E 2009E 2010E 2010E 2011E EV/FCFE 172,4 -1,9 33,2 -113,9 1510,6Net Income Growth 25,4% 24,7% 11,7% 8,3% 8,7% P/Sales 0,8 0,2 0,2 0,2 0,2EBIT Growth 149,8% 7,7% -19,1% 50,7% 10,2% P/E 10,0 -0,9 7,6 8,2 6,1EBITDA Growth 89,9% 15,3% -5,0% 32,0% 10,7% P/BV 2,3 4,8 4,0 2,9 2,2Net Profit Growth 83,1% -456,6% -115,7% -6,4% 34,1%

CASH FLOW 2008E 2009E 2010E 2010E 2011EEBIT 670 721 583 879 969

Depreciation 345 449 529 589 656EBITDA 1.015 1.170 1.112 1.468 1.625Taxes 100 -703 65 48 64 MULTIPLES AT TARGET 2007 2008 2009E 2010E 2011EWorking Capital -27 920 16 193 203 Target Price $6,20 $6,20 $6,20Operating Cash Flow 942 953 1.031 1.227 1.358 Target MKT 4.235 4.235 4.235Investments 951 1.815 600 800 869 EV 10.910 11.112 11.237Net Cash Flow -9 -862 431 427 489 EV/Sales 0,9 0,9 0,8Interest Expenses -56 3.893 141 513 482 EV/EBIT 18,7 12,6 11,6Cash Flow(FCFE) 47 -4.755 290 -86 7 EV/EBITDA 9,8 7,6 6,9

EV/EBITDA* 9,9 7,5 6,7RETURN % 2008E 2009E 2010E 2010E 2011E EV/FCFE 37,6 -128,8 1705,5FCF Yield -0,1% -38,2% 14,6% 14,5% 16,6% P/Sales 0,4 0,3 0,3FCFE Yield 0,7% -211,0% 9,8% -2,9% 0,2% P/E 10,9 11,7 8,7Capital Employed R$ 4.140 7.198 7.417 7.878 8.351 P/BV 5,7 4,2 3,1Inves ted Capital R$ 4.148 6.205 6.280 6.636 7.010ROCE (EBIT*(1-t)) 13,8% 8,5% 6,7% 9,5% 9,9%ROIC (EBIT*(1-t)) 13,7% 9,9% 7,9% 11,3% 11,8%

WACC 12,3% 11,7% 11,1% 11,3% 11,4%ROIC/WACC 1,1 0,8 0,7 1,0 1,0ROE 8,4% -18,0% 2,9% 2,6% 3,3%* Contemplate current net debt


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PERDIGO - PRGA3/PDA BALANCE SHEET 2008E 2009E 2009E 2010E 2011EPrice R$ 33,99 Corporate Governanc NM Current Assets 3.843 5 .985 6.031 6.576 7.320Price US$ 33,21 Tag Along: 100% Cash and Equivalents 1.837 1.976 2.073 2.369 2.786Float: 53% Share: ON Receivables 841 1.378 1.332 1.412 1.490Target Price R$ 46,80 Po tencial Up .: 37,7% Inventory 865 1.689 1.625 1.740 1.895Target Pric e USD$ 44,60 Po tencial Up .: 34,3% Others 300 9 42 1.000 1.056 1.149ECONOMIC ASSUMPTIONS 2007 2008 2009E 2010E 2011E Long Term 179 597 549 504 463

F/X Med (R$/US$) 1,95 1,83 2,22 2,13 2,18 ReceivablesF/X Final (R$/US$) 1,76 2,34 2,10 2,15 2,20 Others 179 597 549 504 463SELIC 12,3% 12,1% 10,1% 9,8% 9,7% Fixed Assets 2.521 4.637 4.735 4.770 4.832IPCA 4,4% 5,9% 4,5% 4,5% 4,2% TOTAL ASSETS 6.543 11.220 11.314 11.850 12.614GDP 5,4% 5,1% 1,0% 3,7% 4,0%

Curr ent Liabilities 1.941 3.081 3.018 3.136 3.337OPERATING ASSUMPTIONS 2007 2008 2009E 2010E 2011E Short Term Debt 1.052 1.646 1.525 1.550 1.576Selling Pric e (R$/ton) Payables 576 1.083 1.065 1.164 1.294Domestic Market 3.768 3.574 3.562 3.640 3.799 Others 314 351 428 422 467Exports 3.872 4.490 5.001 5.141 5.385 Long Ter m Liabilit ies 1.376 4.027 3.737 3.816 3.894

Long Term Debt 1.214 3.720 3.415 3.480 3.544Selling Volume (ton) Others 162 308 322 336 350Domestic Market 1.169 2.267 2.388 2.476 2.575 Net Equity 3.226 4.111 4.559 4.899 5.383Exports 826 1.098 1.045 1.088 1.131 TOTAL LIABILITIES 6.543 11.220 11.314 11.850 12.614

Volume Sales Break down (%) DEBT SITUATION 2008E 2009E 2009E 2010E 2011EExt Market 51% 56% 58% 59% 59% Total Debt 2.266 5 .366 4.940 5.030 5 .120

Net Debt 429 3.390 2.868 2.661 2.334Off Balance Debt 0 0 0 0 0% Short Term 46,4% 30,7% 30,9% 30,8% 30,8%% Local Currency 27,4% 21,7% 23,6% 23,2% 22,8%

RESULT 2007 2008 2009E 2010E 2011E Ne t Interes t/EBITDA -1 3,6 % -5 6,8 % 2,7% -22 ,3 % -1 7,0 %Net Revenues 6.633 11.393 11.923 12.678 13.787 Ne t De bt./EBITDA 55 ,4 % 3 05,7% 2 41,6 % 1 90,6% 1 38,3%Cost of Sales 4.760 8.634 8.744 9.212 10.007 Net Debt/Market Cap 4,7% 55,0% 40,7% 37,8% 33,1%Gross Profit 1.873 2.759 3.179 3.466 3.780 Net Debt/Net Worth 13,3% 82,5% 62,9% 54,3% 43,4%General Expenses 1.342 1.994 1.902 2.002 2.034Other Expenses/Income 23 232 592 633 690 2007 2008 2009E 2010E 2011EEBIT 509 533 685 831 1.056 # Shares 207 207 207 207 207EBITDA 774 1.109 1.187 1.396 1.688 EPS 1,5 0 ,5 3,0 2,3 3 ,3Financial Results 105 630 -32 311 287 BVPS 15,6 19,8 22,0 23,6 26,0Non-operating Results 20 19 0 0 0 Dividends R$ 98 76 178 134 193Equity Results 0 0 0 0 0 DPS 0,5 0 ,4 0,9 0,6 0 ,9Earnings before Taxes 384 -117 717 520 769 Pay Out % 30,6% 70,8% 28,5% 28,3% 28,5%Taxes 32 -242 90 47 91 Div. Yield % 1,1% 1,2% 2,5% 1,9% 2,7%Minority & Statutory Partic. 30 17 0 0 1Net Income/Loss 321 108 626 473 677 MULTIPLES 2007 2008 2009E 2010E 2011E

Share Price $44,26 $29,70 $33,99 $33,99 $33,99MARGINS 2007 2008 2009E 2010E 2011E Market Cap 9.179 6.159 7.049 7.049 7.049Gross Margin 28,2% 24,2% 26,7% 27,3% 27,4% EV 9.608 9 .550 9.917 9.711 9 .383EBIT Margin 7,7% 4,7% 5,7% 6,6% 7,7% EV/Sales 1,4 0,8 0,8 0,8 0,7EBITDA Margin 11,7% 9,7% 10,0% 11,0% 12,2% EV/EBIT 18,9 17,9 14,5 11,7 8,9Net Margin 4,8% 0,9% 5,3% 3,7% 4,9% EV/EBITDA 12,4 8,6 8,4 7,0 5,6

EV/EBITDA* 12,4 8,6 8,8 7,5 6,2MOMENTUM 2007 2008 2009E 2010E 2011E EV/FCFE -43,8 -10,3 13,8 9,1 7,8Net Income Growth 27,3% 71,7% 4,7% 6,3% 8,7% P/Sales 1,4 0,5 0,6 0,6 0,5EBIT Growth 142,8% 4,6% 28,5% 21,3% 27,1% P/E 28,6 57,1 11,3 14,9 10,4EBITDA Growth 124,9% 43,3% 7,0% 17,6% 20,9% P/BV 2,8 1,5 1,5 1,4 1,3Net Pro fit Growth 174,4% -66,4% 480,2% -24,5% 43,2%

CASH FLOW 2007 2008 2009E 2010E 2011EEBIT 509 533 685 831 1.056Depreciation 265 576 502 565 632

EBITDA 774 1.109 1.187 1.396 1.688Taxes 32 -242 90 47 91 MULTIPLES AT TARGET 2007 2008 2009E 2010E 2011EWorking Capital 209 503 -120 132 142 Target Price $46,80 $46,80 $46,80Operating Cash Flow 533 848 1.216 1.217 1.455 Target MKT 9.706 9.706 9.706Investments 857 2.403 600 600 694 EV 12.573 12.367 12.040Net Cash Flow -324 -1.555 616 617 761 EV/Sales 1,1 1,0 0,9Interest Expenses -105 -630 -100 -454 -443 EV/EBIT 18,4 14,9 11,4Cash Flow(FCFE) -219 -925 717 1.071 1.205 EV/EBITDA 10,6 8,9 7,1

EV/EBITDA* 11,0 9,4 7,8RETURN % 2007 2008 2009E 2010E 2011E EV/FCFE 17,5 11,5 10,0FCF Yield -3,9% -25,2% 9,6% 9,7% 11,9% P/Sales 0,8 0,8 0,7FCFE Yield -5,2% -35,4% 8,1% 2,6% 5,0% P/E 15,5 20,5 14,3Capital Employed R$ 3.655 7.501 7.427 7.560 7.718 P/BV 2,1 2,0 1,8Invested Capital R$ 3.652 6.621 6.628 6.758 6.922ROCE 11,8% 6,0% 7,8% 9,3% 11,6%ROIC 11,8% 6,8% 8,8% 10,5% 13,0%WACC 11,5% 12,3% 11,8% 11,8% 11,5%

ROIC/WACC 1,0 0,6 0,7 0,9 1,1ROE 4,9% 1,0% 5,5% 4,0% 5,4%* Contemplate current net debt


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DISCLAIMERRatings

Buy 54.7%Neutral 35.8%

Sell 9.4%

Per dig o ON - PRGA3

BN

0

20

40

60

80

100

M a y - 0

7

J u l - 0 7

A u g - 0

7

O c t - 0 7

N o v - 0

7

J a n - 0

8

F e b

- 0 8

M a r - 0 8

M a y - 0

8

J u n - 0

8

A u g - 0

8

S e p - 0

8

N o v - 0

8

D e c - 0

8

F e b

- 0 9

M a r - 0 9

M a y - 0

9

R$

Closing Price Target Price

Date Rating Target Price Closing Price16-Jul-07 BUY 44.60 37.24

17-Sep-07 BUY 51.70 36.60

13-Dec-07 BUY 63.40 46.00

22-Apr-08 BUY 56.30 43.40

04-Jun-08 NEUTRAL 55.30 49.20

20-Oct-08 BUY 55.90 32.50

26-Feb-09 BUY 44.50 29.40

27-Apr-09 BUY 39.80 30.83

19-May-09 BUY 46.80 34.00

Sadia PN - SDIA4B B BN NU U

0

5

10

15

20

M a y - 0 7

J u l - 0 7

A u g - 0 7

O c t - 0 7

N o v - 0 7

J a n - 0 8

F e b - 0 8

M a r - 0 8

M a y - 0 8

J u n - 0 8

A u g - 0 8

S e p - 0 8

N o v - 0 8

D e c - 0 8

F e b - 0 9

M a r - 0 9

M a y - 0 9

R$

Closing Price Target Price

Date Rating Target Price Closing Price17-Sep-07 BUY 12.90 9.33

13-Dec-07 UNDER REVISION - 11.13

14-Jan-08 BUY 13.80 10.49

22-Apr-08 BUY 13.60 11.77

04-Jun-08 NEUTRAL 14.60 13.26

25-Sep-08 UNDER REVISION - 9.30

20-Oct-08 NEUTRAL 12.60 5.30

26-Feb-09 NEUTRAL 5.50 2.91

27-Apr-09 NEUTRAL 4.60 4.07

19-May-09 BUY 6.20 4.30

Marfrig ON - MRFG3

B

05

101520253035

m a i - 0 7

j u l - 0 7

a g o - 0

7

o u t - 0 7

n o v - 0

7

j a n - 0

8

f e v - 0

8

m a r - 0 8

m a i - 0 8

j u n - 0

8

a g o - 0

8

s e t - 0 8

n o v - 0

8

d e z - 0

8

f e v - 0

9

m a r - 0 9

m a i - 0 9

R$

Closing Price Target PriceDate Rating Target Price Closing Price

27-Apr-09 BUY 15.70 10.50


11/12

EquityIberia - Brazil

ANALYST STOCK RATINGBUY: Expect the company to perform better than the primary market index over the next 12 months.NEUTRAL: Expect the company to perform approximately in line with the primary market index over the next 12 months.SELL: Expect the company to underperform the primary market index over the next 12 months.

Esprito Santo Research has issued this report for information purposes only. All the information contained in this report is based upon information available to thepublic and has been obtained from sources believed to be reliable, but Esprito Santo Research does not guarantee its accuracy or completeness. The opinionsexpressed herein are our present opinions only, and are subject to change without prior notice. Esprito Santo Research is not under any obligation to update orkeep current the information and the opinions expressed herein. This report is not, and should not be construed as, an offer or a solicitation to buy or sell anysecurities or related financial instruments. The investment discussed or recommended in this report may be unsuitable for investors depending on their specificinvestment objectives and financial position. Where an investment is denominated in a currency other than the investor's currency, changes in rates of exchangemay have an adverse effect on the value, price of, or income derived from the investment. Past performance is not necessarily a guide to future performance.Income from investments may fluctuate. The price or value of the investments to which this report relates, either directly or indirectly, may fall or rise against theinterest of investors. The securities mentioned in this publication may not be eligible for sale in some states or countries. Esprito Santo Research does not accept

any kind of liability for losses or damages which may arise from the use of this report. This report cannot be reproduced, in whole or in part, in any form or by anymeans, without Esprito Santo. The Esprito Santo Research is a trademark and aggregates the teams of analysis from Banco Esprito Santo, S.A. (Portugal) and itsaffiliates BES Securities do Brasil, S.A - Corretora de Cmbio e Valores Mobilirios, (Brazil) and Esprito Santo Investment, S.A.U., Sociedad de Valores (Spain).Until the date of publication of the present report, none of these institutions held business relations with the company object of this analysis, with the possibilityhowever, of establishing one due to its activities.

Not disregarding provision stated in the disclaimer above, the analyst(s) of investment responsible for this report declare the following:

_ the analysis(es)/recommendation(s) herewith described reflect only and exclusively his(their) individual opinion(s), being developed independently andautonomously, even as far as BES Securities is concerned; _the BES Securities does not hold direct or indirect stake in the capital of the company(companies) object of analysis(es)/recommendation(s) in this report, but theGrupo Banco Esprito Santo in which it takes part, holds direct shareholding stake, and in some cases indirect, in the capital of the companies: Cia. ProvidnciaIndstria e Comrcio, Bradesco, Bradespar and its associated companies CVRD and CPFL Energia; and Brasilcel and its associated company Vivo Participaes;and UOL. Bradesco is a direct shareholder of BES Securities parent company.. With the exception of the companies mentioned before, the BES Securities does nothold direct or indirect stake in the capital of the other companies object of analysis(es/recommendations in this report, as well as it was not involved in the acquisitionalienation and intermediation of securities issue by these companies in the market;

_the analyst(s) does(do) not maintain relationship with any individual working for the company(companies) which securities was(were) target ofanalysis(es)/recommendation(s) in this report;

_ the analyst(s) does(do) not hold, directly or indirectly, securities issued by the company(companies) object of analysis(es)/recommendation(s) in this report, whichcorrespond to 5% (five percent) or more of the individual assets, not even until the date of publication, or is(are) involved in the acquisition, alienation andintermediation of securities issued by the company(companies) in the market;

_ the analyst(s) does(do) not receive, nor does BES Securities, payment for services provided, nor maintain commercial relations with company object ofanalysis(es)/recommendation(s), or with individual or legal entity, fund or universality of rights that act on the behalf of companys interest;

_ the fixed compensation(s) and eventual variable compensation(s) are not related to pricing of securities issued by the company object ofanalysis(es)/recommendation(s) in this report. The variable compensation, eventually received, is conditioned to the fulfilment of qualitative and quantitativepremises established by the BES Securities board, among which, net result of activities.

Confidentiality

This report cannot be reproduced, in whole or in part, in any form or by any means, without BES Securities specific wri tten authorization. This reportcontains infor mation intended solely fo r the designated addressee. Therefore any disclosure, replication, distrib ution or any action taken in reliance on

it, is prohibited and unlawful.


12/12

GLOBAL RESEARCH COORDINATOR Miguel Frasquilho [email protected] +351 21 310 6457

BES SECURITIES DO BRASILGilberto Pereira de SouzaRui Marques

[email protected]@bessecurities.com.br

+55 11 3074 7325+55.11.3074.7103

BRAZIL EQUITY RESEARCH Gilberto Pereira de Souza [email protected] +55 11 3074 7325

Alexandre Kogake Claudio [email protected] +55 11 3074 7327

Juliana Chu [email protected] +55 11 3074 7320

Luiz Carlos Cesta [email protected] +55 11 3074 7322

Mariana Moraes de Barros [email protected] +55 11 3074 7356

MACROECONOMIC RESEARCH Carlos Almeida Andrade [email protected] +351 21 310 6493

Jankiel Ap. Lima dos Santos [email protected] +55 11 3074 7344Flavio Zientara Serrano [email protected] +55 11 30747343

SALES EQUITY BRAZIL Local Rui Marques [email protected] +55 11 3074 7103

Andre Julio [email protected] +55 11 3074 7392

David Matos [email protected] +55 11 3074 7012

Karin Augustinsk [email protected] +55 11 3074 7390

SALES - EQUITY BRAZIL - Iberia

Igor Maresti [email protected] +351 21 319 9735

Joo Gonalves [email protected] +351 21 319 9786

TRADING BRAZIL EQUITY AND BM&F Luiz Eduardo Sposito [email protected] +55 11 3074 7393

Gustavo Vieira de Oliveira [email protected] +55 11 3074 7394

Jorge Alexandre G. de Almeida [email protected] +55 11 3074 7010

Luiz H. Giannini [email protected] +55 11 3074 7391

Marcos Prado [email protected] +55 11 3074 7410

Maurcio Albernaz [email protected] +55 11 3074 7009

Ney Mendona de Aquino [email protected] +55 11 3074 7340

Ricardo Copia [email protected] +55 11 3074 7398

Simone Klein [email protected] +55 11 3074 7011

So Paulo Desk [email protected] +55 11 3074 7400

FIXED INCOME BRAZIL

FIXED INCOME EUROPE

Carlos Pinto [email protected] +351 21 310 95 81

Arnaldo Antunes Sales & Trading [email protected]

+351 21 310 95 83

Marta MartinCorporate Desk [email protected] +34 91 400 53 52

Brbara BraamcampCorporate Desk [email protected] +351 21 310 95 69

BANCO ESPRITO SANTO ESPIRITO SANTO DEINVESTIMENTO ESPIRITO SANTO INVESTMENT ESPRITO SANTO INVESTMENT

Av. da Liberdade, 1951250 - 142 Lisboa

PORTUGAL

Rua Alexandre Herculano, 381269 - 161 Lisboa

PORTUGAL

Calle Serrano, 88 28006 Madrid

SPAIN

Av. Brigadeiro Faria Lima,3729 604538-905 So Paulo

BRAZIL

Ombudsman: 0800-7700668

Documents

Perdigao and Sadida_food Sector