Equity Research

January 15th, 2019 Monthly Andean Strategy Update Lack of strong catalysts other than valuation

In December, the Andean region posted a negative return (-2.6% in USD CAPITAL RESEARCH terms), underperforming the LatAm market (-1.3% in USD terms) and closing 2018 with a weak performance (-16.5% in USD terms). Peru surprised with a positive return (+1.2%), while Chile and Colombia disappointed (-3.3% and -4.4%, respectively). Daniel Velandia, CFA +(571) 3394400 ext. 1505 We maintain our Neutral position on Chile despite attractive valuations: [email protected] • Consumer and business confidence has weakened due to slower expected GDP growth for 2019 (3.3%) compared to 2018 (4.0%). Global factors also Carolina Ratto negatively affected confidence indicators. +(562) 2446 1768 • Domestic demand could be at higher risk considering recent confidence [email protected] figures; we remain optimistic on investment. • We expect more activity from local and foreign investors in 2019, but we Tomás Sanhueza expect it to be below our average traded volume. +(562) 2446 1751 • Valuations remain discounted (15.4x P/E 12-months Fwd); however, [email protected] earnings growth and a more uncertain global scenario will continue to drive lower valuations. Sebastián Gallego, CFA • We maintain our strategy that is focused on sound fundamentals and +(571) 3394400 ext. 1594 earnings growth. Our Top Picks are SQM, ItauCorpbanca, ILC and Enel [email protected] Chile. Additional noise from oil prices continues to be the main threat to our Daniel Córdova Overweight position in Colombia: +(511) 416 3333 Ext. 33052 [email protected] • We continue to foresee a gradual recovery of the economy in the upcoming quarters, primarily driven by higher investment. For 2019, we forecast that real gross investment will increase 4.5% (compared to 1.9% in 2018). • The government approved a new payment to the banking sector related to Ruta del Sol 2; this is a positive catalyst for local banks. • The biggest threat to our Overweight position in Colombia comes from the international front. That said, we highlight that the local market is currently trading at a +20% discount in terms of both EBITDA and earnings relative to the historical average (since 2015). • Our equity strategy continues to be mainly focused on banks and Nutresa; Davivienda and Bancolombia are our Top Picks among local banks. We maintain our Underweight position on Peru; mining projects are driving private investment, but public investment should decrease under new sub-national authorities:

• Quellaveco and Mina Justa have started to boost private expenditure and will be the main drivers of growth in 2019. Ferreycorp and Graña y Montero have already been awarded contracts. • The economy is still below its potential, so the Central Bank (BCRP) maintained its expansionary policy for now. We expect that the BCRP will hike its policy rate by 75 bps during 2019, reaching 3.50% by year-end. • Risks seem manageable. The government expects a weak El Niño phenomenon in the upcoming months. In the political arena, Fuerza Popular lost its majority in Congress, so we expect less political confrontation. IMPORTANT NOTICE (US FINRA RULE 2242) This document is intended for INSTITUTIONAL INVESTORS and is not subject to all of the independence and • Companies under coverage continue trading at strong a discount against disclosure standards applicable to debt research reports prepared for retail investors. Credicorp Capital may do or seek to do business with companies historical averages; but it decreases when excluding mining companies. covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. • As Top Picks, Buenaventura (on the efficiency program and projects) and Investors should consider this report as only a single factor in making their InRetail (on added value from its acquisition of Quicorp), remains. investment decision. Refer to important disclosures on page 30 to 33, Analyst Certification on Page 30. Additional disclosures on page 33. 1 Actualizar Contents

Monthly Andean Strategy Update

Chile: Market is subdued to weak earnings growth and resilient global risks 5 Top Picks 8 Colombia: Further noise coming from global markets continues to be the main threat to our overweight position across the 9 Top Picks 12 Peru: Mining projects start to stimulate the economy 13 Top Picks 16

Valuation Summary 18

Appendix: Monthly Summary 22

Top Winners / Losers of the Month 23 Traded Volume 26 Peru - Pension Funds: Monthly Flows 29 Economic Forecasts 30

2 Actualizar LTM Andean Equities Performance (in USD)

IPSA COLCAP SP BVL General Index MSCI Latam 120

110

100

90

80

70 Jan-18 Mar-18 May-18 Jul-18 Sep-18 Nov-18 Jan-19

Source: Credicorp Capital, & Bloomberg

Andean Equities Fwd P/E (12 month rolling) vs 5Y historical average

P/E FWD vs Historical 5Y Average

20.0x 30.0% 18.0x 15.4x 20.0% 16.0x 14.6x 13.7x 10.0% 14.0x 12.0x 0.0% 10.0x -10.0% -16% 8.0x -19% -20.0% 6.0x -30.0% 4.0x 2.0x -40% -40.0% .0x -50.0% Chile Peru Colombia

Andean Equities Fwd EV/EBITDA (12 month rolling) vs 5Y historical average

EV/EBITDA FWD vs Historical 5Y Average

9.0x 30.0% 7.7x 8.0x 7.1x 6.8x 20.0% 7.0x 10.0% 6.0x 5.0x 0.0% 4.0x -10.0% -14% 3.0x -17% -20.0% 2.0x 1.0x -32% -30.0% .0x -40.0% Chile Peru Colombia Source: Credicorp Capital, & Bloomberg

3 Strategy Summary within Andean Context Long view Short view (12-to-18 months) (1-to -3 months) Chile Allocation: Neutral (+) Solid GDP growth (4.0% 2018E), normalized inflation and compelling outlook for Although valuations are appealing, we think that the investments global risks continue to weight on the local market. (+) Safe haven on the regional landscape with steady corporate earnings growth Local and foreign investors have been more active (+) Attractive bottom-up stories with discounted valuations recently, but are still below the average traded (+) New payment to the banking sector related to RDS2 and we expect a GDP volume to consider it a recovery. We believe that a growth of 3.3%, the highest since 2014 return of flows and more appealing earnings growth (-) Negative impact of global risks are key to see an outperformance of the local (-) No clear catalyst with lacking earning growth market. (-)Strategy: Exposure to risks coming from Argentina and Brazil We continue to favor a stock picking strategy of companies with solid fundamentals, earnings momentum and clear catalysts. Top picks: SQM, ItauCorpbanca, ILC, Enel Chile Colombia Allocation: overweight (+) Attractive valuations The most important issues in the short term are: oil (+) GDP growth acceleration prices, exchange rate performance, corporate (+) Better results within the banking sector governance issues/news, 4Q18 results. (-) Recent decline of oil prices (-) Doubts over the fiscal consolidation (-) Global volatility

Strategy:

We continue to believe that the Colombian market offers an attractive entry point due to i) better macro outlook, where we expect a GDP growth of 3.3%, iii) real gross investment should advance 4.5% in 2019 relative to 1.9% in 2018E, and iv) attractive valuations.

Top picks: Davivienda, Nutresa, and Bancolombia Peru Allocation: Underweight (+) Investment in large mining projects is stimulating the economy. is discounted against fundamentals. (+) Early indicators signal a recovery in 4Q18 economic activity. Ferreycorp recently was awarded a contract with (+) Monetary policy to remain expansionary throughout 1H19. Quellaveco. Improving financial indicators at (-) Sub-national public investment is likely to contract as new authorities begin their Interbank make IFS an attractive stock at current terms. levels. InRetail displays strong momentum. Finally, (-) Metal prices volatility on trade war remains a concern. is trading at a discount against peers (-) Valuations excluding mining companies present lower discounts compared to such as Southern Copper and could benefit from historical averages. progress in trade negotiations. Strategy: Mining and mining related names offer the largest upside, though commodity price risks are high. Private consumption has a good 1Q19 outlook, supporting InRetail, Alicorp and IFS. We remain cautious on construction and infrastructure, due to lack of clear drivers.

Top Picks: InRetail and Buenaventura.

4 Chile Market is subdued due to weak earnings growth and global risks

Global turmoil and During 2018, the local market posted negative returns (~-8.3% in CLP and ~-18.6% lack of earnings in USD), in line with the performance of the region ex Brazil. Global risks have momentum drove affected the markets under our coverage with a resilient risk-off sentiment in 2018 that 2018 market led to investors’ looking for safer investment vehicles or markets with appealing stories of performance. macro and political turnaround, such as Brazil, or compelling earnings growth, such as the US market. Chile started 2018 with extreme optimism driven by the presidential election, which sustained economic growth and investment but gradually started to disappoint on the side of consumption, unemployment and earnings growth. On the cyclical front, the banking sector showed resilience on the back of efficiency and a focus on high-growth segments; however, the retail sector disappointed with weak SSS quarter over quarter, in line with a weak consumption environment, lower sales to tourists and negative earnings momentum due to investment in the omnichannel strategy. Therefore, during 2018, there was a thriving macro environment with solid GDP growth, healthy levels of inflation and a promising outlook for investment that was decoupled from the results of the companies. This, along with global turmoil, took its toll on the Chilean market in 2018.

There is a more Declining confidence is generating risks to domestic demand. After almost ten challenging outlook months in the optimistic zone, consumer and business confidence have been in for demand going pessimistic territory since Aug-18 and Nov-18, respectively. In Nov-18, the IPEC and forward. IMCE measures stood at 44.9 and 49.0 points, just five points above the 2014-2017 average for both indexes. The national economic situation expectations measure decreased significantly due to adjustments to expected GDP growth. There has been a widespread decline in business confidence with the commerce, industrial and mining sectors experiencing significant contractions from Feb-18 levels. Lower confidence and higher uncertainty about the future will have a sizeable impact on consumer and business decisions going forward; thus, the current mild pessimism entails a downside risk to domestic demand dynamics in 2019. In our view, the current lower confidence is explained by foreign and external factors. Global GDP growth has been revised downwards in recent months amid higher trade tensions between China and the USA, political disputes in the Eurozone, disappointing high-frequency data coming from China and a lower dynamism in relevant EM economies. President Piñera’s agenda, the cause of the appearance of animal spirits in late 2017, has been halted by opposition in Congress. According to media reports, the tax and pension debates are expected to continue until at least 2Q19.

Private consumption We expect that the economy will grow 3.3% next year. We are less optimistic than the will slowdown its BCCh in terms of economic growth next year and anticipate a 3.3% expansion in 2019. growth in 2019 (3.3% GDP growth will face a challenging base of comparison in 1H19 (GDP grew close to 5% vs 4.0% in 2018). y/y in 1H18), and high-frequency indicators from Nov-18 point towards disappointing numbers in 4Q18; thus, we cannot rule out a scenario in which 2019 starts with subdued economic dynamism. We continue to expect that investment will grow above GDP next year, but we also believe that higher confidence is a necessary condition for avoiding delayed initiatives. Private consumption fundamentals have also deteriorated recently. All this, in addition to the challenging base of comparison that durable goods consumption will face next year (it has increased by 10% on average since 1Q17) and its high correlation with consumer confidence, leads us to anticipate a 3.3% expansion in private consumption next year (vs 4.0% in 2018).

5 Breaking down the performance of the IPSA in 2018. When looking at the performance attribution during 2018, nearly 85% of the total drop was explained by five large cap names that represent 38% of the weight of the index: SQM-B, Falabella, Cencosud, Copec, LATAM and Enel Americas. In our view, this reflects the strong outflows we have seen from foreign investors that has been driven by strong risk-off sentiment on emerging markets. On the positive front, three banks were the top positive contributors to the index: Santander, Itaucorp and BCI. Finally, shares with positive performances were CMPC and Concha y Toro. The former was mostly driven by a positive outlook for pulp prices for the full year, which boosted earnings significantly. In the case of Concha y Toro, the new strategic plan presented at the beginning of 2018 which changed the focus of the company towards profitability was well received by the market, boosting share price by almost ~16%.

What are we expecting going forward? We continue to believe that the market will be subdued due to global risks such as the trade war between the USA and China and slower macro growth. In addition, we do not expect the cyclical sector to pick up significantly in 2019, with a bias towards domestic demand that remains negative. Therefore, we are looking for turnaround stories, resilient earnings growth and/or attractive valuations. Names such as (i) Enel Chile and EECL in the utilities sector, (ii) LATAM Airlines with a potential improvement in margins due to lower fuel costs, (iii) Sonda with the new ambitious strategic plan and positive earnings momentum, (iv) Forus with a new approach and performance on the online sales strategy and (v) Parque Arauco are companies that have underperformed in the last twelve months and have interesting stories to look out for in 2019.

Our Chilean equity sample is trading at 15.4x PE 12m Fwd and 7.7x FV/EBITDA 12m Fwd. These valuations imply a discount from the market’s five-year average that is above one standard deviation for both P/E and EV/EBITDA Fwd, which seems really compelling. However, as we have mentioned in previous reports, global risks have generated strong outflows from the region, which, coupled with weak earnings growth going forward, leave us with a more cautious view compared to other EM markets that have clearer earnings momentum and drivers.

P/E Forward (12 month rolling) FV/EBITDA Forward (12 month rolling)

26 13

24 12

22 11

20 10

18 9

16 8

14 15.4x 7 7.7x 12 6 Jan-13 Jan-15 Jan-17 Jan-19 Jan-13 Jan-15 Jan-17 Jan-19

Source: Company Reports, Credicorp Capital, & Bloomberg

6 Chile Strategy

Our top picks We continue to have a cautious approach for the Chilean market, betting on specific are: SQM-B, Itau names with sound fundamentals and earnings growth. During 2018, we liked CMPC, Corpbanca, ILC Santander and SMU, which were driven by those factors and paid off during the year. For and Enel Chile. 2019, we are changing our Top Picks, removing SMU, which we believe has already paid off, and adding Enel Chile and ILC, which have become interesting stories for 2019. Top Picks Chile

SQM (BUY; T.P.: CLP 38,600 / USD 61.7 (ADR)). Shares have been pressured by several recent pieces of news. As the transaction between Nutrien and Tianqi has already occurred, we believe the shares will start performing based more on fundamentals going forward; however, we believe this is a risky bet, considering the significant uncertainty at the international level. On the other hand, the transaction price of USD 65mn (~50% higher than the current price) should act as a short-term trigger for the shares. Finally, we foresee positive earnings momentum going forward. Looking at fundamentals, lithium demand growing by double digits in the coming years and production capacity increases in Chile support a promising future for SQM. We believe the agreement with Corfo is positive for the company as it unclogged the bottleneck for capacity increases in Chile. Additionally, the potential increase in capacity has a larger impact on results than the negative effect of a higher royalty tax, additional capex and other annual payments. Finally, we believe that shares are trading at attractive valuations and that current prices imply a bearish scenario in terms of LT lithium prices.

Itau Corpbanca (BUY; T.P. (CLP 7.65). We continue to favor Itau Corpbanca among Chilean banks. Monthly results in Nov-18 continued to show positive momentum and a meaningful recovery compared to 2017. Accordingly, we highlight that net income was ~CLP 16 bn in Nov-18, compared to a net loss of CLP 390 mn in Nov-17. The monthly result was positively influenced by lower provision expenses (~CLP 15.2 bn vs ~CLP 50.7 bn), in line with our view for 4Q18. On the other hand, the potential fine recently imposed by the local regulator (CLP 5.9 bn) should be recorded in 4Q18; therefore, 2019 financials should not be affected. Finally, we maintain a positive view for this year, and we reiterate our expectation of 20.0% y/y growth for earnings in 2019. This should be primarily driven by (i) a recovery in loan growth, particularly coming from the consumer segment, ii) higher spreads compared to prior years, particularly in Colombia, iii) an annual decline in OPEX as integration costs have faded and iv) a lower cost of credit relative to prior years as key corporate cases have been resolved.

7 ILC (BUY; T.P.: CLP 12,900). Considering the multiples of peers with the same business mix as ILC, we estimate that the company should trade at a P/E multiple of around ~14x. Based on that, the current valuation suggests that shares are trading at over a 30% discount. In addition, we believe the execution of the call option in the bank and the potential delivery on profitability in Red Salud are short-term triggers for the shares. Regarding the bank, management announced its decision to execute the call option that will allow the company to increase its stake in Banco Internacional from 50.5% up to 67% at an acquisition multiple of 1.65x P/BV, which will be accretive if management is able to achieve a ROAE of 18%, as was announced during the last investor day (October 2018). We continue to be positive on fundamentals as we are expecting double-digit growth in earnings and a divided yield which should continue to be one of the highest ones in the Chilean market (in the 4.0%-4.5% range). Finally, the government recently sent Congress a pension reform bill; the proposals are in line with our expectations, and we believe they will not be disruptive for the industry. Therefore, we do not see them as a game changer for the pension funds. We believe regulatory risk has significantly decreased, so we believe downside risk is limited.

Enel Chile (BUY; T.P. CLP 77). We are including Enel Chile in our Top Picks. Enel Chile is the largest energy generator and distribution company in Chile and is the most important player in renewable energy in the country, which is an industry that has been evolving and will reach a penetration of 70% by 2050. Enel Chile only has 8% of capacity in coal generation, mitigating the risks due to the decarbonization program, and has a significant pipeline of projects in renewable energy, in which the company will invest USD 1.4bn over the next three years (principally in solar and wind). The company’s capacity matrix gives it a competitive advantage that will help it to continue to maintain its long-term contract level. Enel Chile has a significant pool of PPA contracts and has been one of the few players to win new contracts in the last two auctions, bringing stability to cash generation for the upcoming years. The company is currently trading at 6.4x 2019 EV/EBITDA, far below the sector average for the last three years (8.9x) and pays a ~5% dividend yield with a low net debt to EBITDA of ~2x. Moreover, with the EGP consolidation in 2Q18 and good hydro generation the 4Q18, results for the next quarter should come with good momentum. Finally, we acknowledge that we continue to monitor the evolution of the new Dx segment law in Congress, which could be a negative trigger in the medium term, but we do not expect big changes in the first half of 2019 since conversations are in the early stages.

Chile - Top Picks

Chilean Picks Last Target Total Mkt. P/E FV/EBITDA P/BV Div Yield Price Price Upside Return (USD mn) 2018E 2019E 2018E 2019E LTM 2018E Sectors SQM-B 28,592 38,600 35.0% 37.3% 11,040 24.1 21.9 11.7 10.4 5.3 2.3% Materials Itau Corpbanca 6.5 7.7 16.8% 17.5% 4,974 16.8 14.0 nm nm 1.0 0.7% Banks ILC 11,971.0 12,900.0 7.8% 11.7% 1,774 10.9 9.8 nm nm 1.8 3.9% Conglomerates Enel Chile 70 77 10.0% 14.7% 7,274 14.2 17.4 7.3 6.6 1.5 4.7% Utilities Chilean Picks a 17.4% 20.3% 25,063 16.5 15.7 9.5 8.5 2.4 2.9% IPSA 5,353 6,150 15% 18% 175,855 19.5 17.1 8.7 8.4 1.7 3.2% a Simple average, excluding Market Capitalization

Sources: Bloomberg, Company Reports and Credicorp Capital a Simple average, excluding Market Capitalization b Prices in local currencies

8 Colombia

The Colombian equity market underperformed compared to the MSCI Latam during December. The COLCAP Index declined 4.0%, compared to a 0.7% decrease in the MSCI Latam (both in USD terms). We believe that the negative performance of the market was explained by: i) an 8.4% decline in Brent oil prices, ii) the uncertainty related to the tax bill (finally approved on December 28th) and iii) corporate governance issues. We acknowledge that key risks remain as the recent volatility in oil prices has raised concerns about fiscal accounts. That said, we maintain a constructive view on the local market supported by i) compelling valuations and ii) a better macro outlook in 2019 relative to prior years (GDP growth at 3.3% vs 2.7% in 2018E). Under this scenario, we maintain our medium-term strategy of having an Overweight position in Colombian equities relative to other countries within the Andean region.

Our top-down strategy relies on a better outlook on the macro front, while we see compelling valuations from a bottom-up perspective. The local economy increased 2.7% y/y in 3Q18, similar to 2Q18 (2.8%) but above 1Q18 (2.2%). Hence, GDP increased 2.5% through 9M18, up from 1.8% in 2017; this was primarily explained by improving A better macro domestic demand. Going forward, we continue to expect a further acceleration of outlook is key for economic activity in the upcoming quarters with investment, both private and public, taking our thesis. the lead (GDP growth estimate at 3.3% for 2019 vs 2.7% for 2018E). First, we anticipate that royalties, primarily coming from the O&G and mining sectors, should be COP 19.2 tn for the 2019-2020 period. This is equivalent to a 62.7% increase compared to the period between 2017 and 2018. Second, we see a positive effect on corporates coming from the recently approved tax reform. Recall that the statutory tax rate will decline to 33% in 2019, down from 37% in 2018, and will gradually decrease to 30% by 2022 (100 bps each year). Third, we have recently observed early signs of improvement in the construction sector driven by i) available housing units that reached a high point in Nov-17 and have decreased ~1% m/m ever since and ii) cement dispatches for the merchandising segment that reached a low point in June-18 and have increased at 2.9% compounded monthly growth since then.

In terms of valuation, the Colombian equity market currently trades at 12-month forward P/E and EV/EBITDA of 14.5x and 6.9x, respectively (compared to averages since 2015 of 20.7x and 9.1x, respectively). Accordingly, the local market is currently trading beyond one standard deviation relative to historical averages and at a 20% discount both in terms of EBITDA and earnings.

A new tax reform was finally approved. According to Congress and MoF estimates, the reform will increase fiscal revenues by COP 8tn in 2019 (~0.8%-0.9% of GDP). Recall that the government was initially seeking additional resources worth 1.4% of GDP, so expenditure cuts of ~0.5% of GDP will be necessary to comply with the fiscal deficit target (2.4% of GDP). We highlight that the approval of the reform should be positive news, particularly from a short-term perspective. First, uncertainty related to the final outcome has faded, and investors should have a clearer picture for 2019. More importantly, the VAT proposal was finally eliminated, and, therefore, we do not expect a short-term negative effect on private consumption. That said, we acknowledge that significant doubts about fiscal accounts remain (from a medium- to long-term perspective) as the positive effect on revenues from the new bill will mostly fade after 2020.

9 Colombia Strategy

Our equity strategy in the local market remains unchanged as we continue to favor Our strategy in banks, specifically Bancolombia and Davivienda; in addition, our play in private Colombia consumption is Nutresa. We want to stay away from companies that face any type remains in place of corporate governance issues. Despite a challenging 2018, during which the COLCAP Index fell 12.4% in local currency, we highlight that our strategy primarily focused on banks that yielded positive returns. In fact, Bancolombia and Davivienda were among the three companies in positive territory last year; the former increased 5.0%, while the latter increased 3.3% in 2018. On the negative side, we acknowledge that we continue to wait for a stronger performance from Nutresa and that our call on Aval in Sep-18 was not successful.

The government approved a new payment to the banking sector related to the Ruta del Sol 2 case; this should act as a positive catalyst for the banking sector. The Minister of Transport, Ángela María Orozco, announced that the National Infrastructure Agency approved a second payment to the financial system of COP 627 bn (USD 200.3 mn) related to the Ruta del Sol 2 (RDS 2) case. According to the official statement, the payment is in compliance with the Tribunal of Cundinamarca, which recently ruled against the shareholders of the RDS 2 consortium. In addition, the decision was endorsed by a committee that included the current Vice-president, the Minister of Transport, the Attorney General for Public Servants (Procuradoria) and representatives from ANI and the General Controllership, among others. It is worth noting that the payment was also based on the road concession progress that is currently slightly above 50% and the existing resources that are in a trust (please refer to our note for additional details).

Going forward, we see reasons to maintain our strategy. Given our macro outlook, we see favorable trends for local banks, particularly Bancolombia and Davivienda. First, we expect loan growth in the banking industry to accelerate from current levels that are close to 5.0% to a range between 7.0% to 9.0% in 2019; we expect Davivienda to outperform the sector. Our constructive view on banks continues to rely on an improvement of asset quality indicators. As we have previously discussed, there are key factors that support our view: i) banks should be able to fully provision the case of Electricaribe by 4Q18 (USD 620 mn total exposure for the system), ii) the 90-day NPL ratio in Colombia has shown signs of stabilization; in fact, the figure in Oct-18 was 3.6%, 10 bps lower than the figure in Aug-18, and iii) NPL growth in Colombia declined to 21.4% y/y in Oct-18, compared to a figure above 54.0% during the same period in 2017. Under this scenario, we expect profitability, measured in terms of ROAE, to increase at least 100 bps compared to 2018E. This, along with valuations below 1.5x 2019E P/BV, create an attractive opportunity.

Regarding Nutresa, shares have remained flat over the last two months, which we believe is unjustified. In addition, we believe that the significant price drop seen in 2018 was mostly related to the proposal of an increase in the VAT base and its impact on consumption, which is now off the table. Under this scenario, we maintain a positive view on this name.

Beyond these names, we are closely monitoring the cement & construction sector. We are seeing a slow recovery in the Colombian cement & construction market. Considering the slow improvement in the residential sector in Colombia and the demand generated by civil works (4G and district projects) in 2019, we anticipate a volume growth of 3.0%-5.0% for this year (see report). Under this scenario, we believe that Cemargos (HOLD; T.P: 10,300) will benefit the most from this improvement, even

10 though the most important catalyst in this case is the ~40% price plunge the company experienced last year. In fact, Cemargos has historically traded at a 15.0x EV/EBITDA multiple, and it is currently trading at 10.2x; the company will have a 30% return according to our valuation.

Finally, we have a mixed view on the energy/utilities sector. We maintain a Neutral view on Ecopetrol, but the recent rebound in oil prices could be a positive catalyst for Ecopetrol. On the other hand, Tx seems to have had a strong start to 2019, at least from a fundamentals perspective. ISA recently launched its corporate strategy for the period through 2030, announced its entrance into the US transmission market by 2023 and stated an interest in inorganic growth opportunities in Mexico and Argentina. In addition, the company announced its entrance into the Colombian and Peruvian road concession market through an alliance with El Condor. Despite this, we highlight possible overhang risks from the upcoming divestment of EPM’s stake of ~10.2%. We remain cautious on Gx as a moderate El Niño phenomenon is expected to last until May-19. This is likely to put downside pressure on EBITDA margins for Gx companies (such as Celsia). In addition, the auction to expand generation capacity was put off until Mar-19, leaving the issues created by Hidroituango unresolved. Finally, we believe that companies in the utilities sector do not look particularly attractive in terms of valuation.

Given all the aforementioned, we are maintaining Davivienda, Nutresa and Bancolombia as our Top Picks.

P/E Forward (12 month rolling) FV/EBITDA Forward (12 month rolling)

28 10 26 24 9 22 20 8 18 16 14 7 14.6x 6.8x 12 10 6 Dec-14 Dec-16 Dec-18 Dec-15 Dec-16 Dec-17 Dec-18 Source: Company Reports, Credicorp Capital, & Bloomberg

11 Top Picks Colombia

Davivienda (BUY; T.P. COP 41,500). We continue to prefer Davivienda among Colombian banks. This is mainly due to i) a pickup in loan growth with an annual estimate of 10.2% y/y for 2019, compared to 7.3% y/y and 8.3% y/y for 2017 and 2018, respectively, ii) a 24-bps y/y decline in cost of credit for 2019E, iii) the fact that the relative valuation looks attractive compared to local and Andean peers and iv) higher profitability, measured in terms of ROAE, in 2019E relative to Bancolombia (14.7% vs 11.9%). Finally, we prefer Davivienda and Bancolombia to Grupo Aval in the short term due to persisting noise on Ruta del Sol 2.

Nutresa (BUY; T.P. COP 31,900). Shares have remained flat during the last two months, which we believe it is unjustified. In addition, we believe that the significant price drop seen in 2018 was mostly related to the proposal of an increase in the VAT base and its impact on consumption, which is now off the table. Therefore, we believe that the fundamentals for our case for Nutresa as our Top Pick for 2019 remain intact. We continue to bet on the company’s leading position in Colombia as well as a recovery on the international front. The pricing strategy and marketing and innovation initiatives have translated into resilient market share (~60% in Colombia), strongly leveraging on the company’s penetration of the traditional channel (>60% in most categories). More importantly, the company has managed to sustain margins in a tough competitive and raw materials scenario, which gives operating leverage in a potential recovery of volumes to achieve margin expansions. In fact, EBITDA margin has remained within the guidance range of 12% to 14% despite heavy competition and raw material pressures.

Bancolombia (BUY; T.P. COP 36,900). We are maintaining Bancolombia in our Top Picks. Despite lower profitability, measured in terms of ROAE, relative to local peers (11.9% for 2019E), we believe that the bank should benefit from a better macro outlook in 2019. We expect GDP growth in Colombia to be above 3.0% in 2019, for the first time since 2014. Our valuation model considers a 20-bps y/y decline in cost of credit given our expectation of lower provision expenses, primarily coming from Electricaribe. On a relative basis, we believe that investors will continue to have a short-term preference for Bancolombia over Grupo Aval given recent news related to Ruta del Sol 2. Finally, shares are currently trading at 1.3x 2019E P/BV, compared to an average from Andean peers of 1.7x.

Colombia - Top Picks

Colombian Picks Last Target Total Mkt. P/E FV/EBITDA P/BV Div Yield Price Price Upside Return (USD mn) 2018E 2019E 2018E 2019E LTM 2018E Sector Davivienda 34,280 41,500 21% 23% 4,933 11.2 8.9 nm nm 1.5 2.3% Banks Nutresa 23,600 31,900 35% 37% 3,460 17.0 15.3 8.6 7.7 1.3 2.3% Food & Beverages Bancolombia 34,000 36,900 9% 12% 10,339 13.1 11.0 nm nm 1.4 3.0% Banks Colombian Picks a 21% 23% 4,933 11.2 8.9 8.6 7.7 1.5 2.3%

Sources: Bloomberg, Company Reports and Credicorp Capital a Simple average, excluding Market Capitalization

12 Peru Mining projects start to stimulate the economy

During December and the first days of January, mining projects have started to drive demand. In particular, the Quellaveco mining project of Anglo American (USD 5.0bn in capex) has signed machinery and support contracts with Ferreycorp for USD 500mn Quellaveco and Mina over the next five years, as well as construction contracts with a consortium composed of Justa have started to GyM (a Graña y Montero engineering and construction subsidiary) and OSSA for USD stimulate the 43mn. These contracts are in addition to the previous contracts of Graña y Montero and economy. Ferreycorp with ’s Mina Justa.

However, the economy is still below its potential, so the Central Bank (BCRP) maintained its expansionary policy. Even though indicators point towards more dynamism in the economy, GDP is still below its potential. Meanwhile, in December, CPI increased 0.18% m/m, in line with the consensus of analysts, and closed the year at 2.2% y/y, within the BCRP’s target range (1% - 3%). We forecast an annual inflation of 2.5% for 2019. The BCRP held its monetary policy rate unchanged at 2.75%, in line with market expectations and our predicition.

We expect that the BCRP will hike its policy rate by 75 bps during 2019, reaching 3.50% by year-end. This level would still imply an expansionary stance. Our base scenario assumes that the first rate hike will occur in Jun-19 or at the beginning of 2H19; We expect the BCRP this will depend on several factors: (i) the impact of the latest inflation data on to start hiking its expectations, (ii) the pass-through from the PEN depreciation (-4% in 2018 after two policy rate in 2Q19. straight years of appreciation) and (iii) the pace at which the negative output gap will narrow amid the expected significant decrease in sub-national public investment in 1H19 (the Central Bank still projects a negative gap in 2019).

Thus far, risks seem manageable. Senamhi (the government’s meteorology agency) activated the alert for a weak El Niño phenomenon in the coming months. An extraordinary El Niño phenomenon in 2017 was responsible for causalities and disasters in the northern area of Peru that led to a GDP deceleration during that year.

In the political arena, tensions have escalated in early January as Pedro Chavarry, the Attorney General, controversially removed key prosecutors for the Odebrecht investigations. The decision was later overturned, and Chavarry resigned. This was loudly requested by most groups across the political spectrum, the executive branch and civil society institutions. Following seniority protocol at the AG’s Office, Supreme Prosecutor Zoraida Avalos has been named interim Attorney General. Overall, political forces welcomed her appointment since she is the least controversial figure in the Board of Supreme Prosecutors. This has helped to alleviate tensions between Congress and the executive branch, but intense political debate about how the reorganization of the AG’s Office should proceed will continue in the upcoming days.

Fuerza Popular (Keiko Fujimori’s party) lost more congressmen and the majority in Congress. A ruling by the Constitutional Court allowed new caucuses to form. As a result, 26 members of Congress (out of a total of 130) regained the right to preside over the Political committees of Parliament, five of which recently belonged to Fuerza Popular. confrontation should Furthermore, the party lost five more members, including President of Congress Daniel decrease in the Salaverry. Consequently, Fuerza Popular no longer holds a majority in Congress and coming months. cannot censor ministers or approve legislation by itself. Thus, we expect a calmer political environment in the next couple of years.

13 Peru Strategy

The (BVL) maintained a positive performance in December, increasing 1.2% in USD terms (0.9% in PEN). Results within sectors were again mixed, with significant gains and losses in specific stocks defining the direction of the local market. Buenaventura (+14.7%), Ferreycorp (+8.5%), Unacem (+8.3%) and Nexa Peru (+7.1%) were the winners of the month, each one for specific reasons. On the other hand, their impact on the overall market was offset by losses in Trevali (-11.3%), Atacocha B (-9.3%) and Volcan B (-5.3%), among others.

We maintain our Underweight recommendation for Peru, despite some improving activity indicators. Domestic demand showed signs of healthy growth in November and Despite a gradual December. However, catalysts for external demand are not clear as uncertainty persists improvement of due to the USA-China trade negotiations and the possibility of global economic economic indicators, deceleration. Even though political noise has diminished, it remains to be seen whether a significant catalysts reconfiguration of power in Congress turns out to be supportive to growth. from the external front are absent; we Mining and mining-related companies still offer the largest upsides, though, in the maintain our short term, price volatility could remain high due to global trade concerns. Underweight Sentiment has improved because of progress in trade negotiations as economic recommendation. incentives seem more aligned on both sides (USA and China). Most mining companies in our sample remain discounted, such as Cerro Verde, while Ferreycorp stands to benefit further from the strength of mining investment. Private consumption has a favorable outlook in 1Q19, which should support stocks such as InRetail, Alicorp and IFS. The construction and infrastructure sector is recovering slowly, but there are no short-term triggers in sight. The only exception is Unacem, whose reorganization might still bring more value than current prices reveal.

Still trading at a significant discount against its historical average. At 13.7x 12M forward P/E, companies under our coverage are trading at a ~18% discount against the two-year historical average (corrected for the significant losses in Buenaventura). Likewise, the 12M forward FV/EBITDA of 7.1x represents a ~15% discount against the five-year historical average. However, the discount softens when controlling for mining companies. These companies make up 35% of our sample; Buenaventura alone accounts for ~20%. If excluded, P/E and FV/EBITDA trades at ~11% and ~5% discounts, respectively. Thus, greater value remains concentrated in the risky mining sector.

P/E Forward (12 month rolling) * FV/EBITDA Forward (12 month rolling) * 22 11

20 10

The discount in 12M 18 9 forward multiples softens in our ex- 16 8 mining 14 7

13.7x 7.1x 12 6 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Source: Company Reports, Credicorp Capital, & Bloomberg *Mean in the chart considers the last 2 years.

14 Top Picks Peru

Both of our Top Picks in Peru have company-specific catalysts that will unlock value throughout 2019. Although we believe the recovery of consumption has not started yet, we continue to recommend InRetail due to the potential synergies from the Quicorp acquisition. In mining, the sector with the largest upside, we choose Buenaventura because its efficiency program is unlocking value on top of better metal prices.

InRetail (BUY; T.P.: USD 32.50). We maintain InRetail as a Top Pick due to its strong We see an positioning in Pharma, possible synergies after the acquisition of Quicorp and its opportunity in leadership in the food industry. InRetail has been able to outperform its peers with the new InRetail as synergies commercial strategy “Everyday low price”, while also exploring the discount format with Quicorp could through the Mass brand and now the cash & carry format too. Even though Mass is not unlock more value significant in terms of sales and EBITDA, it prevents the company from being kept out of than meets the eye. that segment if it starts to pick up. The acquisition of Quicorp has definitely changed the scenario for InRetail. It was made at a fair multiple (EV/EBITDA 12x vs pharma global peers’ figure of 13x) considering the opportunities arising from the deal: (i) higher negotiating power with global suppliers, possibly allowing the company to reduce the price gap with traditional drugstores and thereby penetrate the informal channel, (ii) possible synergies coming from reducing headcounts, closing 160 stores and consolidating logistics and distribution, (iii) vertical integration as Quimica Suiza owns two national laboratories that distribute ~40% of the medicines in the country and (iv) international expansion into Ecuador, Bolivia and Colombia. So far, the company has positively surprised us in terms of synergies. There are still Buenaventura (BUY; T.P. USD 17.30). Earnings are expected to improve from 2H18 catalysts for onwards on the back of the de-bottlenecking program’s results. Going forward, the Buenaventura; company expects to add a total of USD 120-150mn of EBITDA by 2020, driven by however, it is a risky profitability rather than production. In direct operations, the main reasons for our bet. recommendation are Tambomayo’s improved efficiency and metal recovery rates, Orcopampa’s and Uchucchacua’s efficiencies and El Brocal’s improved efficiency due to the Esperanza tunnel and increased copper production at Marcapunta. Furthermore, regarding associates, we believe that Cerro Verde will continue to add value and that Yanacocha will take a turn for the better due to the Quecher Main gold project (200k oz Au per year from 2020 onwards) in the medium term and the copper sulfides project in the long term. Finally, although we like the stock, there is still risk related to metal prices; if expectations about the trade negotiations between the USA and China sour again, all mining companies will be affected.

Peru - Top Picks

Peruvian Picks Last Target Total Mkt. P/E FV/EBITDA P/BV Div Yield Price Price Upside Return (USD mn) 2018E 2019E 2018E 2019E LTM 2018E Sectors Buenaventura 15.96 17.30 8% 8.5% 3,222 14.8 11.2 8.9 7.8 1.0 0.1% Mining InRetail 32.00 32.50 2% 1.6% 3,290 41.5 22.9 13.2 12.1 2.7 0.0% Retail Peruvian Picks a 8% 5.0% 6,512 28.1 17.1 11.0 9.9 1.9 0.0% S&P/BVL 19,617 23,400 19% 22% 33,326 17.5 14.0 8.0 6.4 1.6 2.6% a Simple average, excluding Market Capitalization, IFS share price in USD Source: Company Reports, Bloomberg and Credicorp Capital

15 Valuation Summary

January 2019

16 Chile

ADTV P/E FV/EBITDA P/BV Div. Yd. ROAE ROAA Company Sector Px Last Px Target Rating Mkt. Cap Local ADR 2018E 2019E 2018E 2019E LTM 2019E 2018E 2019E 2018E 2019E AESGener Utilities 200 180 HOLD 2,488 2.3 4.5 9.0 6.9 7.1 0.9 7.4% 21.4% 10.4% 7.0% 3.6% Aguas-A Utilities 392 385 HOLD 3,449 2.5 17.3 17.5 10.5 10.3 3.5 6.0% 20.9% 20.0% 7.6% 7.3% Andina-B Food & Beverages 2,581 2,880 HOLD 3,407 3.5 0.6 20.4 18.8 9.1 8.7 2.9 3.8% 14.8% 15.4% 5.6% 6.0% AntarChile Conglomerates 9,849 13,900 BUY 6,663 1.3 10.0 10.5 5.8 5.8 1.0 3.6% 9.7% 8.8% 2.8% 2.5% Banco de Chile Banks 101.2 98.0 UPERF 15,155 6.4 3.1 16.8 16.0 nm nm 3.2 3.1% 18.8% 18.7% 1.8% 1.7% Banco Santander Banks 52.3 56.0 HOLD 14,618 8.6 11.2 16.1 14.8 nm nm 3.3 4.3% 19.5% 20.0% 1.6% 1.6% Besalco Construction 633 745 BUY 541 0.7 36.5 22.6 12.6 9.2 1.9 2.4% 5.3% 8.2% 1.5% 2.2% CCU Food & Beverages 8,832 9,530 HOLD 4,837 4.0 4.9 10.8 19.7 6.1 9.6 3.1 2.4% 25.0% 12.6% 14.2% 7.2% Cencosud Retail 1,384.0 1,900.0 HOLD 5,874 8.6 17.1 14.9 9.9 9.9 1.0 4.4% 5.7% 6.4% 2.3% 2.6% CMPC Pulp & Paper 2,271 3,100 BUY 8,414 6.4 13.4 12.8 6.1 6.1 1.0 1.2% 7.5% 7.5% 4.1% 4.1% Colbun Utilities 145.3 153.0 HOLD 3,777 1.9 15.8 17.2 7.3 7.6 1.1 5.5% 6.4% 5.8% 3.5% 3.2% Concha y Toro Food & Beverages 1,393 1,520 HOLD 1,543 1.5 21.1 16.0 14.6 11.5 1.9 2.4% 8.8% 11.0% 4.6% 5.9% Copec Pulp & Paper 8,998.7 11,200.0 HOLD 17,339 9.4 14.1 14.4 7.9 7.8 1.6 2.2% 11.4% 10.4% 5.3% 4.8% Embonor-B Food & Beverages 1,700 1,980 BUY 1,150 0.9 17.9 16.9 8.1 8.0 2.6 4.0% 13.4% 13.6% 6.7% 6.8% Enel Americas Utilities 133.2 140.0 BUY 11,343 12.0 10.5 19.9 15.4 6.3 5.6 1.9 5.4% 9.3% 11.9% 2.4% 2.8% Enel Chile Utilities 70.0 77.0 BUY 7,274 6.0 2.5 14.2 17.4 7.3 6.6 1.5 4.7% 10.7% 8.3% 5.3% 3.8% Engie Chile Utilities 1,325.6 1,480.0 BUY 2,070 1.9 19.3 7.9 8.1 5.4 1.0 1.5% 5.3% 11.9% 3.1% 7.2% Entel Telecom & IT 5,923.2 6,550.0 HOLD 2,652 2.7 nm 34.8 7.2 6.8 1.4 0.7% 0.0% 4.1% 0.0% 1.4% Forus Retail 2,020.9 2,310.0 BUY 774 0.6 19.8 19.8 10.8 10.4 2.4 2.1% 12.6% 11.8% 11.0% 10.5% Habitat Financials 900.0 1,260.0 BUY 1,334 0.1 10.6 9.2 7.1 6.2 2.5 8.1% 23.8% 25.8% 18.7% 20.4% ILC Conglomerates 11,971.0 12,900.0 BUY 1,774 1.4 10.9 9.8 nm nm 1.8 3.9% nm nm nm nm Itau Corpbanca Banks 6.5 7.7 BUY 4,974 3.9 0.3 16.8 14.0 nm nm 1.0 0.7% 6.1% 7.0% 0.7% 0.8% Latam Airlines Transport 7,997.7 7,330.0 HOLD 7,189 7.3 5.9 53.0 24.8 7.7 7.2 1.7 0.7% 3.2% 6.6% 0.7% 1.5% Masisa Materials 38.5 43.0 HOLD 447 0.3 20.2 44.8 9.4 11.0 0.4 0.0% 2.2% 1.0% 1.5% 0.8% Parque Arauco Real Estate 1,721.1 1,970.0 HOLD 2,290 2.2 13.5 15.8 17.3 16.7 4.4 3.3% 13.6% 10.8% 5.3% 4.2% Quiñenco Conglomerates 1,860.0 2,134.9 HOLD 4,584 1.2 18.4 17.9 nm nm 1.0 3.6% nm nm nm nm Ripley Retail 580.0 663.4 HOLD 1,665 2.3 16.0 15.3 19.1 17.5 1.2 4.6% 7.4% 7.6% 2.5% 2.5% Security Conglomerates 288.6 330.0 HOLD 1,580 1.1 12.0 10.0 nm nm 1.5 4.0% 12.2% 13.7% 0.9% 0.9% SK Industrial 1,089.0 1,264.7 BUY 1,735 0.2 18.6 15.3 9.5 7.8 1.3 3.6% 6.9% 8.2% 2.5% 3.0% SM-ChileB Conglomerates 323.8 332.0 HOLD 5,756 1.5 41.2 37.7 nm nm 2.7 0.9% 6.9% 7.0% 1.3% 1.3% SMU Retail 186.0 247.5 BUY 1,592 1.7 28.1 21.5 8.9 8.2 2.2 0.0% 5.9% 6.8% 2.1% 2.8% SM SAAM Transport 61.8 74.3 BUY 892 0.4 16.3 14.5 7.8 7.3 1.2 3.9% 5.7% 6.4% 3.0% 3.5% Sonda Telecom & IT 1,132.9 1,060.0 BUY 1,463 1.8 55.3 28.7 13.1 11.5 2.0 3.6% 3.8% 7.2% 2.1% 3.9% SQM-B Materials 28,592.0 38,600.0 BUY 11,040 27.0 52.2 24.1 21.9 11.7 10.4 5.3 2.3% 20.2% 21.0% 10.1% 10.1% Chile Sample 5,353 6,150 175,855 153.3 19.5 17.1 8.7 8.4 1.7 3.2% 10.5% 10.4% 2.2% 2.2%

Source: Company Reports, Credicorp Capital, & Bloomberg. For LATAM, EV/EBITDAR

17 Colombia

ADTV P/E FV/EBITDA P/BV Div. Yd. ROAE ROAA Company Sector Px Last Px Target Rating Mkt. Cap Local ADR 2018E 2019E 2018E 2019E LTM 2019E 2018E 2019E 2018E 2019E Avianca Transport 1,795 2,160 UPERF 570 0.4 0.8 nm nm 5.2 4.9 0.5 0.4% -5.2% -2.3% -1.0% -0.4% Bancolombia Banks 34,000 36,900 BUY 10,339 6.8 16.4 13.1 11.0 nm nm 1.4 3.0% 10.6% 11.9% 1.2% 1.3% BVC Financials 11,880 13,300 BUY 229 0.2 13.8 13.1 8.4 7.6 1.5 5.8% 11.0% 11.5% 8.4% 8.9% Canacol Oil & Gas 10,040 10,680 HOLD 568 0.1 0.8 nm 5.5 5.0 2.8 2.5 0.0% -3.2% 35.2% -1.1% 12.1% Celsia Utilities 3,960 5,000 HOLD 1,350 0.5 17.0 22.8 6.9 7.5 1.1 4.3% 7.0% 4.6% 2.5% 1.8% Cemargos Cement & Construction 7,100 10,300 HOLD 2,976 2.3 58.6 52.7 10.8 10.2 1.3 3.2% 2.1% 2.4% 0.9% 1.0% CLH Cement & Construction 3,835 6,900 UPERF 680 0.7 8.9 8.1 6.1 6.1 0.4 0.0% 4.9% 5.1% 2.3% 2.6% Corficolombiana Conglomerates 16,460 UR UR 1,243 0.8 11.1 7.9 nm nm 1.1 3.1% 10.3% 11.8% 1.9% 2.4% Davivienda Banks 34,280 41,500 BUY 4,933 1.6 11.2 8.9 nm nm 1.5 2.3% 12.6% 14.7% 1.3% 1.5% Ecopetrol Oil & Gas 2,900 3,580 HOLD 37,993 14.1 27.7 8.5 8.5 4.6 4.4 2.4 3.1% 26.9% 23.9% 11.2% 10.8% GEB Conglomerates 1,795 2,200 HOLD 5,251 1.1 15.1 14.4 nm nm 1.5 6.4% 9.7% 9.9% 4.7% 4.7% ETB Telecom & IT 254 310 UPERF 287 0.1 nm nm 2.4 2.6 0.5 0.0% -8.0% -23.6% -3.6% -9.7% Éxito Retail 13,100 17,290 HOLD 1,868 2.0 39.7 22.0 9.1 8.9 0.9 1.8% 4.1% 5.9% 0.5% 0.7% Grupo Argos Conglomerates 17,080 21,500 HOLD 4,440 2.0 26.3 25.5 9.3 9.3 0.9 2.0% 3.5% 3.6% 1.2% 1.2% Grupo Aval Banks 1,080 UR UR 7,691 2.1 1.7 9.8 8.7 nm nm 1.5 4.4% 15.0% 16.0% 1.7% 1.9% Grupo Sura Conglomerates 32,280 39,100 HOLD 5,871 4.3 14.9 11.7 nm nm 0.8 1.6% 5.2% 6.3% 1.8% 2.2% ISA Utilities 14,380 14,700 HOLD 5,075 1.7 13.8 12.1 9.0 8.7 1.5 3.8% 10.8% 12.2% 2.7% 3.1% Nutresa Food & Beverages 23,600 31,900 BUY 3,460 1.0 17.0 15.3 8.6 7.7 1.3 2.3% 4.9% 5.3% 3.0% 3.1% Colombia Sample 1,388 1,720 94,825 41.8 17.0 14.9 7.5 7.2 0.9 3.3% 12.5% 12.5% 2.5% 2.6%

Source: Company Reports, Credicorp Capital, & Bloomberg

18 Peru

ADTV P/E FV/EBITDA P/BV Div. Yd. ROAE ROAA Company Sector Px Last Px Target Rating Mkt. Cap Local ADR 2018E 2019E 2018E 2019E LTM 2019E 2018E 2019E 2018E 2019E Aceros Arequipa Materials 0.69 0.85 BUY 298 0.1 5.1 5.2 4.0 3.7 0.5 4.6% 10.2% 9.4% 5.8% 4.9% Alicorp Food & Beverages 10.12 13.00 HOLD 2,580 1.0 16.4 15.3 10.7 9.5 3.0 2.4% 17.3% 16.7% 6.5% 6.0% Buenaventura Mining 15.96 17.30 BUY 3,222 19.3 14.8 11.2 8.9 7.8 1.0 0.1% 7.4% 8.9% 5.0% 6.2% Cement & Construction 6.61 8.10 HOLD 844 0.5 0.1 23.9 19.3 10.1 9.0 1.8 3.6% 7.7% 9.4% 4.2% 5.1% Cerro Verde Mining 20.50 28.30 BUY 7,176 0.2 12.3 11.2 5.3 4.8 1.3 2.8% 10.9% 11.0% 7.5% 7.8% Enel Generacion Peru Utilities 1.93 2.60 BUY 1,639 0.0 9.3 10.0 5.6 5.7 1.8 7.9% 20.2% 17.9% 13.9% 12.7% Enel Distribucion Peru Utilities 5.27 6.85 HOLD 1,006 0.1 9.3 8.8 6.3 6.0 1.7 4.3% 18.1% 17.1% 8.2% 8.1% Engie Peru Utilities 5.84 7.80 HOLD 1,050 0.1 10.4 9.6 6.7 6.5 1.0 3.2% 9.4% 9.6% 4.5% 5.0% Ferreycorp Materials 2.54 3.00 BUY 741 0.6 8.7 8.4 5.7 5.4 1.2 5.3% 13.2% 12.8% 5.7% 5.6% Graña y Montero Cement & Construction 2.05 2.50 HOLD 405 0.1 0.4 23.5 13.5 5.3 6.3 0.6 0.7% 2.7% 4.5% 0.7% 1.2% IFS Conglomerates 42.16 49.00 BUY 4,769 1.3 13.4 11.2 nm nm 2.5 3.2% 18.4% 18.9% 1.9% 2.1% InRetail Retail 32.00 32.50 BUY 3,290 0.9 41.5 22.9 13.2 12.1 2.7 0.0% 6.7% 10.6% 2.3% 3.3% Utilities 10.90 13.75 HOLD 1,587 0.1 12.6 12.5 9.3 9.1 2.0 6.2% 16.2% 15.6% 7.5% 7.1% Minsur Mining 1.41 1.95 BUY 1,216 0.1 30.5 24.0 6.2 6.6 1.0 0.0% 3.2% 3.9% 1.7% 2.0% Unacem Cement & Construction 2.60 2.75 UPERF 1,280 0.2 14.6 11.5 7.0 6.8 1.1 2.0% 7.2% 8.6% 3.0% 3.9% Volcan Mining 0.70 1.00 HOLD 2,221 0.5 26.6 26.1 9.1 9.2 3.3 0.8% 13.0% 12.0% 3.7% 3.7% Peru Sample 19,617 23,400 33,326 25.1 17.5 14.0 8.0 6.4 1.6 2.6% 10.8% 11.4% 4.1% 5.4%

Source: Company Reports, Credicorp Capital, & Bloomberg

19 Appendix: Monthly Summary

January 2019

20 Chile - Top Winners / Losers Of The Month

WINNERS:

EISA: Strong industry outlook driven by the mining pipeline.

Andina- B: Recovery after a strong drop, in addition to a more positive outlook for Brazil.

Sonda: Positive reaction after the recently announced investment plan with ambitious growth and margin guidance.

AES Gener: Outperformance is explained by earnings momentum and a high pay out ratio. Besalco: Strong industry outlook driven by the mining pipeline..

Top Winners Return Top Winners YTD Return Top Winners LTM Return

EISA 9,3% Concha y Toro 16,3% Concha y Toro 18,8% Andina-B 5,6% Corpbanca 15,8% Corpbanca 16,1% Sonda 5,1% Santander 7,3% BCI 7,6% AESGener 5,1% BCI 6,8% Santander 7,2% Besalco 5,1% CMPC 5,5% CMPC 6,2%

Top Losers Return Top Losers YTD Return Top Losers LTM Return

SQM-B -8,3% Vapores -40,6% Vapores -40,6% Copec -8,2% Forus -31,4% Forus -31,4% Vapores -6,2% Cencosud -30,8% Cencosud -30,1% AntarChile -5,3% SQM-B -25,3% SQM-B -25,3% CMPC -5,0% Enel Generacion -25,0% Enel Generacion -24,2%

LOSERS:

SQM: Shares were negatively affected by a conference call held by Orocobre, in which it discussed the outlook of the lithium. global market Copec: The underperformance is due to profit taking from investors.

Vapores: High uncertainty related the tariff dispute between the United States and China.

AntarChile: The underperformance is due to profit taking from investors.

CMPC: The underperformance is due to profit taking from investors.

21 Colombia - Top Winners / Losers Of The Month

WINNERS:

Conconcreto: recovery, but posting a 62.8% drop for the year.

Grupo Argos: rally after the sale of a large package in the name.

ISA: upside driven by 2030 corporate strategy and the alliance with El Condor to enter to Colombia’s road concession market .

Nutresa: Strong performance is explained by lower risks related to the tax reform and its impact in consumption.

BVC: recovery from the sudden plunge registered on Nov-19. Sophos continued to drive organic growth.

Top Winners Return Top Winners YTD Return Top Winners LTM Return

Conconcreto 19,1% Ecopetrol 19,7% Ecopetrol 19,7% Grupo Argos 8,4% Bancolombia 4,9% Bancolombia 4,9% ISA 8,0% Dav iv ienda 3,3% Dav iv ienda 3,3% BVC 2,9%

Top Losers Return Top Losers YTD Return Top Losers LTM Return

Av ianca -20,0% CLH -66,4% CLH -66,4% Ecopetrol -14,8% Conconcreto -62,8% Conconcreto -62,8% Corficol -12,3% ETB -45,1% ETB -45,1% ETB -11,6% Av ianca -43,7% Av ianca -43,7% CLH -10,4% Cemargos -42,6% Cemargos -42,6%

LOSERS:

Avianca: Ocean Air Bankruptcy, which used Avianca Brazil as a trademark, was related to AVH’s performance.

Ecopetrol: the stock followed the 11.1% and 11.4% fall in Brent and WTI price, where the latter was constantly below USD50/ barrel.

Corficol: price drop related to a fist instance penalty ruling

ETB: Cundinamarca Tribunal ratified its objection to the District divestment on ETB. CLH: negative momentum related to media noise..

22 Peru - Top Winners / Losers Of The Month

WINNERS:

BVN: 5.1% gold rally and company’s solid fundamentals

Ferreycorp: Favored by USD 500mn contract with Quellaveco

Unacem: Parent companies SIA and IASA will be absorbed by Unacem

Nexa Peru: Low liquidity allows big changes (it only traded 13 days during the month)

Luz del Sur: Recovery of value after a partly accepted claim on tariffs made by the company

Top Winners Return Top Winners YTD Return Top Winners LTM Return

BVN 14,7% In Retail 34,8% In Retail 35,7% Ferrey corp 8,5% Siderperu 14,6% BVN 15,5% U. Andina Cem. 8,3% BVN 14,0% Backus 12,3% Milpo 7,1% Backus 11,6% Siderperu 12,2% Luz del Sur 4,3% IFS 9,1% IFS 10,8%

Top Losers Return Top Losers YTD Return Top Losers LTM Return

Trev ali -11,3% Trev ali -75,3% Trev ali -71,7% Atacocha B -9,3% Relapasa -59,4% Relapasa -60,5% Relapasa -7,4% Atacocha B -52,6% Atacocha B -54,6% Backus -6,6% Volcan B -46,2% Volcan B -48,9% Volcan B -5,3% Panoro Minerals -45,3% Panoro Minerals -40,7%

Losers:

Trevali: Falling zinc prices (-5.1%) took the stock down

Atacocha B: Was affected by lower zinc prices (-5.1%)

Relapasa: Correcting after a price spike with high volume in late November

Backus: Usual volatility in an illiquid stock

Volcan B: Lower zinc prices (-5.1%) impacted the stock price

23 Chile - Traded Volume

In December, traded volume was USD 2,913mn, 27.9% lower than in December 2017, considering the same amount of trading days. Daily average traded volume was USD 153mn, USD 59.4mn lower than the USD 213mn seen during same month last year and 15.4% higher than the USD 133mn seen in November 2018. As for relevant non-recurring flows, we highlight the auctions of the ~24% stake of SQM (~62.6mn A-shares) for USD 4bn, Ripley (USD 48.83mn) and BCI (USD 16.74mn), block trades in AntarChile (USD 14mn) and Invermar (USD 16.03mn) and FTSE rebalancing. For 2018, accumulated traded volume reached USD 43,067mn, 18.3% higher than the USD 36,406mn seen in same period of 2017 and 32.9% above the accumulated five-year average for the period.

Avg. Traded Volume & IGPA Evolution

300 Avg. Traded Volume IGPA 35,000

250 30,000

25,000 200

USDm 20,000 150 15,000 100 10,000

50 5,000

- - Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18

Source: Bolsa de Comercio de Santiago & Credicorp Capital

Moving Avg LTM & Yearly Avg

250 Mvng Avg LTM 2014 Avg. 2015 Avg. 2016 Avg. 2017 Avg. 2018 Avg.

200 +19%

+45% 150 -37%

Moving Average MovingLTM +16% 100

50 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18

Source: Bolsa de Comercio de Santiago & Credicorp Capital

24 Colombia - Traded Volume

In December, ADTV was COP 99,396 mn and USD 30.96 mn, equivalent to decreases of -38.8% y/y and -42.9% y/y, respectively. This also represented decreases of -17.7% m/m in terms of COP and - 18.0% m/m in terms of USD. Total traded volume was COP 1,888,526 mn, decreasing by -35.4% y/y and by -21.8% m/m. In dollars, this figure was USD 588.23 mn, equivalent to contractions of -39.8% y/y and -22.1% m/m.

Average Traded Volume Avg. Traded Volume COLCAP 180 2,000 160 1,800 140 1,600 1,400 120 1,200 USDmn 100 1,000 80 800 60 600 40 400 20 200 - - Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18

Source: BVC & Credicorp Capital

Moving Average LTM

110 Mvng. Avg. LTM 2013 Avg. 2014 Avg. 2015 Avg.

2016 Avg. 2017 Avg. 2018 Avg. -14% 90 -8%

70

-40%

50 -5% -1%

Moving Average Average Average LTM LTM MovingMoving

30 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18

Source: BVC & Credicorp Capital

25 Peru - Traded Volume

Traded volume in December was USD 320.37mn (-9.71% y/y) with a USD 43mn specific trade in Inversiones Centenario. The average daily traded volume (ADTV) decreased to USD 15.3mn, an 18.31% drop from the USD 18.7mn registered in December 2017 due to fewer large specific trades. Likewise, ADTV decreased 14.02% on a m/m basis (USD 17.7mn in November 2018). At year end, the accumulated traded volume was 6.16% lower than the five-year average. In December, pension funds and other local institutional investors were net buyers with USD 40.65mn and USD 33.83mn, respectively. Additionally, local retail investors were also net buyers with USD 63.09mn. Foreign retail and institutional investors were net sellers with USD 0.75mn and USD 136.81mn, respectively. Local retail, pension funds and institutional investors were involved in 53.86% of total trading.

Avg. Traded Volume & SP/BVL Evolution

120 Avg. Traded Volume SP/BVL General Index 25,000

100 20,000

80

15,000 USDm 60 10,000 40

5,000 20

- - Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Source: BVL & Credicorp Capital

Moving Avg LTM & Yearly Avg

Mvng Avg LTM 2012 Avg. 2013 Avg. 2014 Avg.

35 2015 Avg. 2016 Avg. 2017 Avg. 2018 Avg. 30 -35% 127% 25 -53% 20

-6% -50%

Moving AverageAverageAverageAverageAverageAverageAverage MovingMovingMovingMovingMovingMovingMovingLTM LTM LTM LTM LTM LTM LTM Moving Average MovingLTM 15 40% 10

5

- Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18

Source: BVL & Credicorp Capital

26 Chile - Pension Funds: November Flows

In December, pension funds were net buyers of local equities (USD 66.64mn) for the eight consecutive month. The net investment was highly influenced by i) Ripley (USD 41.9mn), which was also the second main investment for the mutual funds (+USD 4.1mn), and ii) SQM-B due to the attractive valuations and the fact that the pension funds continue with an underweight position on SQM-B’s shares compared to the IPSA Index (-2.9%). The exposure to the asset class reached 10.78%, decreasing 5bps m/m. Exposure through direct investments (8.61%) increased 5bps, while investment funds increased by 2bps reaching an exposure of 1.84%. Additionally, we highlight that the major investment of the pension fund during the year was Falabella (USD 559mn), due to the capital increase (USD 581mn) on October- 2018, excluding this effect the major investment was SQM-B (USD 542mn). On the other side, the major divestment was EnelGX (USD 829mn), due to the tender offer in which Enel Chile increased its stake in the company.

December marks the fifteenth consecutive month of investment in Embonor-B, the tenth in Falabella, SM-Chile B and Copec and the sixth in SMU and Concha y Toro. On the other hand, it was the fifth in Parque Arauco and the fourth in LTM, Sonda, Cencosud and EnelAM.

On sector allocation, Pension Funds are overweight in Retail, and Telecom, while maintaining an important underweight in Banks and Natural Resources Local Stocks Movements

900 845 800 700 600 461 500 400 282 273 291 268 300 175 157 200 67 100 29 0 -100 USD mn -200 -71 -300 -400 -281 -500 -441 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Monthly Top Investments / Divestments

Top Net Investments Top Net Investments Total Total December LTM RIPLEY 41.9 FALABELLA 559 SQM-B 33.5 SQM-B 542 ANDINA-B 27.3 ENELCHILE 447 QUINENCO 21.8 MALLPLAZA 257 COPEC 17.5 BSANTANDER 157 Top Net Divestments Top Net Divestments Total Total December LTM ENELAM -54.2 ENELGXCH -829 CENCOSUD -24.9 ENELAM -116 LTM -22.2 BANMEDICA -90 ENTEL -11.0 ECL -43 PARAUCO -5.7 AGUAS-A -32

Net Investments December 66.6 Net Investments LTM 1,726

Source: SAFP & Credicorp Capital

27 Peru - Pension Funds: July’s Flows

Peruvian Pension Funds’ (AFPs) exposure to local equities increased to 11.1% in July 2018, when the S&P/BVL General Index rose 3.08% in PEN (+3.76% in USD).

In July, the net gap between the upper limit on equity investments vs actual funds invested was USD 875.9mn, USD 21.80mn lower than in June. At an aggregate level, exposure to local equities increased, while that of international equities decreased.

We observed net investments in local equities of USD 58.5mn. The main investments during July 2018 included Cementos Pacasmayo (USD 15.8mn), Credicorp (USD 15.3mn) and Nexa (USD 9.9mn). On the other hand, the only divestment for the month was Luz del Sur (USD 0.2mn).

Local Stock Movements

361 224

132 82 88 72 64 98 58 55 58 39 47 23 28 19 12 12 USDm 6 1

0 -1 -20 -14 -15-17 -22 -27 -32

-301 -170

Jul-16

Jul-17

Jul-18

Apr-16

Oct-16

Apr-17

Oct-17

Apr-18

Jan-16

Jun-16

Jan-17

Jun-17

Jan-18

Jun-18

Feb-16

Mar-16

Feb-17

Mar-17

Feb-18

Mar-18

Nov-16

Dec-16

Nov-17

Dec-17

Aug-16

Sep-16

Aug-17

Sep-17

May-16

May-17 May-18 Source: SBS, Credicorp Capital. Monthly Top Investments / Divestments

Top Net Fund 1 Fund 2 Fund 3 Total Investments CPACASC1 0.0 7.3 8.5 15.8 BAP 0.6 10.1 4.7 15.3 NEXA 1.3 3.0 5.6 9.9 SCOTIAC1 0.3 4.1 1.7 6.2 ALICORC1 0.1 1.3 3.9 5.2

Top Net Fund 1 Fund 2 Fund 3 Total Divestments LUSURC1 0.0 0.1 -0.3 -0.2 ATACOAC1 0.0 0.0 0.0 0.0 GRAM ADR 0.0 0.0 0.0 0.0 GRAMONC1 0.0 0.0 0.0 0.0 FOSSALC1 0.0 0.0 0.0 0.0

Net Investment 2.8 30.9 24.8 58.5 July

Source: SBS, Credicorp Capital.

28 Economic Forecasts

CHILE National Accounts (YoY) 2015 2016 2017 2018F 2019F Current GDP (USDmm) 244,417 250,266 277,184 299,440 311,003 GDP (%) 2.3 1.3 1.5 4.0 3.3 Domestic Demand (% v ar.) 2.5 1.3 3.1 4.6 3.7 Total Consumption (% v ar.) 2.6 2.9 2.7 3.8 3.4 Inv estment / GDP 23.8 22.9 21.6 22.0 22.4 CPI 4.4 2.7 2.3 2.6 3.0 Reference rate (end of y ear) 3.50 3.50 2.50 2.75 3.50 Ex change rate (end of y ear) 709 667 615 696 650 Ex change rate (av g.) 655 677 649 640 655 Fiscal Balance (% GDP) -2.2 -2.7 -2.8 -1.8 -1.7 Foreign Reserves (USDmm) 38,643 40,494 39,500 39,000 40,000 Source: INE, BCCh, Dipres & Credicorp Capital Estimates

PERU National Accounts (YoY) 2015 2016 2017 2018F 2019F Current GDP (USDmm) 191,600 194,817 214,452 226,649 229,677 GDP (%) 3.3 4.0 2.5 3.8 3.7 Domestic Demand (% v ar.) 2.9 1.1 1.4 4.2 3.8 Total Consumption (% v ar.) 4.9 2.7 2.2 3.2 3.5 Inv estment / GDP 24.5 22.8 21.7 22.3 22.2 CPI 4.4 3.2 1.4 2.2 2.5 Ov ernight interest rate (end of y ear) 3.75 4.25 3.25 2.75 3.50 Ex change rate (end of y ear) 3.41 3.36 3.24 3.37 3.35-3.40 Ex change rate (av g.) 3.19 3.38 3.26 3.29 3.35-3.40 Fiscal Balance (% GDP) -2.1 -2.6 -3.1 -2.5 -2.3 Foreign Reserves (USDmm) 61,485 61,686 63,621 61,100 61,900 Source: INEI, BCR & Credicorp Capital Estimates

COLOMBIA National Accounts (YoY) 2015 2016 2017 2018F 2019F Current GDP (USDmm) 192,710 283,133 314,477 333,432 344,803 GDP (%) 3.0 2.0 1.8 2.7 3.3 Domestic Demand (% v ar.) 2.4 1.2 1.9 3.0 3.6 Total Consumption (% v ar.) 3.4 1.4 2.2 3.3 3.4 Inv estment / GDP 23.8 23.4 23.1 22.9 23.2 CPI 6.8 5.8 4.1 3.2 3.6 Ov ernight interest rate (end of y ear) 5.75 7.50 4.75 4.25 5.00 Ex change rate (end of y ear) 3,175 3,002 2,984 3,200 3,000 Ex change rate (av g.) 2,760 3,051 2,951 2,940 3,050 Fiscal Balance (% GDP) -3.0 -4.0 -3.6 -3.1 -2.6 Foreign Reserves (USDmm) 46,741 46,683 47,637 48,319 48,343

Source: DANE, BanRep, Bloomberg & Credicorp Capital Estimates

29 Important Disclosures

This research report was prepared by Credicorp Capital Peru S.A and/or Credicorp Capital Colombia Sociedad Comisionista de Bolsa and/or Credicorp Capital S.A. Corredores de Bolsa, companies authorized to engage in securities activities in Peru, Colombia and Chile, respectively and indirect subsidiaries of Credicorp Capital Ltd. (jointly referred to as “Credicorp Capital”). None of the companies jointly referred to as Credicorp Capital are registered as broker-dealers in the United States and, therefore, they are not subject to U.S. rules regarding the preparation of research reports and the independence of research analysts. This research report is provided for distribution only to “major U.S. institutional investors” in reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”). Any U.S. recipient of this research report wishing to effect any transaction to buy or sell securities or related financial instruments based on the information provided in this research report can do so only through Credicorp Capital Securities Inc., a registered broker-dealer in the United States. Under no circumstances may a U.S. recipient of this research report effect any transaction to buy or sell securities or related financial instruments directly through Credicorp Capital. CCSI or any of its representatives are not involved in any way in the preparation, development, or supervision of the research report and does not have any influence whatsoever over the research content. Any analyst whose name appears on this research report is not registered or qualified as a research analyst with the Financial Industry Regulatory Authority (“FINRA”) and is not a registered representative of Credicorp Capital Securities Inc. and, therefore, is not subject to applicable restrictions under FINRA Rules on communications with a subject company, public appearances and trading securities held by a research analyst account.

A. Analyst Disclosures The functional job title of the person(s) responsible for the recommendations contained in this report is Equity Research Analyst unless otherwise stated on the cover.

Regulation AC - Analyst Certification: Each Equity Research Analyst listed on the front-page of this report is principally responsible for the preparation and content of all or any identified portion of this research report and hereby certifies that with respect to each issuer or security or any identified portion of the report with respect to an issuer or security that the Equity Research Analyst covers in this research report, all of the views expressed in this research report accurately reflect their personal views about those issuer(s) or securities. Each Equity Research Analyst also certifies that no part of their compensation was, is, or will be, directly or indirectly, related to the specific recommendation(s) or view(s) expressed by that Equity Research Analyst in this research report. Each Equity Research Analyst certifies that he or she is acting independently and impartially from the referenced company/shareholders, directors and is not affected by any current or potential conflict of interest that may arise from any of the companies’ activities. Analyst Compensation: The research analyst(s) primarily responsible for the preparation of the content of this research report attest(s) that no part of his or her compensation was, is or will be, directly or indirectly, related to the specific recommendations that he or she expressed in the research report. The equity research analysts responsible for the preparation of this report receive compensation based upon various factors, including the quality and accuracy of research, client feedback, competitive factors, and overall firm revenues. Registration of non-US Analysts: Unless otherwise noted, the non-US analysts listed on the front of this report are employees of one of the companies jointly referred as Credicorp Capital, which are non-US affiliates of Credicorp Capital Securities Inc., a SEC registered and FINRA member broker-dealer. Equity Research Analysts employed by the companies jointly referred as Credicorp Capital, are not registered/ qualified as research analysts under FINRA/NYSE rules, are not registered representatives of Credicorp Capital Securities Inc. and may not be subject to NASD Rule 2711 and NYSE Rule 472 restrictions on communications with covered companies, public appearances, and trading securities held by a research analyst account. Please refer to www.credicorpcapital.com for further information relating to research and conflict of interest management.

30 B. Ownership and Material Conflicts of Interest

Other significant financial interests

Type of instruments Equal or less than USD 50,000 Equal or less than USD 100,000 Equal or less than USD 500,000 Equal or less than USD 1,000,000 More than USD 1,000,000 Other equity securities Minsur AesGener, Banco de Chile, CBI, Cencosud, CMPC, Colbun, Corpbanca, ECL, EISA, Falabella, Lan, Santander, Bancolombia, Ecopetrol, ETB, Grupo Aval, Grupo Debt securities Grupo Security Ripley Davivienda Sura, Alicorp, Cementos Pacasmayo, Enel Dx Peru, Enel Gx Peru, Engie Energía Peru, Ferreycorp, IFS, InRetail, Luz del Sur, Minsur, Unacem and Volcan Avianca, Celsia, Cemargos, Derivatives on equity/debt CLH, Éxito, Grupo Argos and securities Grupo Aval. Credicorp Capital Securities Inc. or its affiliates ´beneficially own´ securities issued by the companies referenced in this report according to the following table:

Type of instruments Equal or less than USD 10,000 Equity securities Ferreycorp and InRetail Debt securities Derivatives on equity/debt - securities

C. Compensation and Investment Banking Activities

Credicorp Capital Securities Inc. or its affiliates have managed or co-managed a public offering of securities, in the past 12 months, for the following company(ies): Davivienda, Alicorp, Engie Energia Peru and Luz del Sur. Credicorp Capital Securities Inc. or its affiliates currently have or had, within the past 12 months, the following company(ies) as investment banking client(s): Davivienda, EEB, Aceros Arequipa, AIH, Alicorp, Buenaventura, Cementos Pacasmayo, Engie Energia Peru, Ferreycorp, Graña y Montero, IFS, InRetail, Luz del Sur, Milpo and Volcan. Credicorp Capital Securities Inc. or its affiliates also have received compensation, within the past 12 months, for investment banking services from the following company(ies): Davivienda, EEB, Aceros Arequipa, AIH, Alicorp, Buenaventura, Cementos Pacasmayo, Engie Energia Peru, Ferreycorp, Graña y Montero, IFS, InRetail, Luz del Sur, Milpo and Volcan. Credicorp Capital Securities Inc. or its affiliates also expect to receive or intend to seek compensation, in the next 3 months, for investment banking services from the following company(ies): Davivienda, EEB, Aceros Arequipa, AIH, Alicorp, Buenaventura, Cementos Pacasmayo, Engie Energia Peru, Ferreycorp, Graña y Montero, IFS, InRetail, Luz del Sur, Milpo and Volcan.

D. Other Compensation and Non-Investment Banking Activities

Credicorp Capital Securities Inc. or its affiliates currently provide or have provided, within the past 12 months, non-investment-banking securities-related services to the following company(ies): Banco de Chile, BCI, Copec, ItauCorpbanca, EISA, Falabella, Hatitat, Ripely, Salfacaforp, Santander, Security, SMU, Avianca, Banco de Bogotá, Bancolombia, BVC, Canacol, Cemargos, CLH, Corficolombiana, Davivienda, EEB, ETB, Exito, Grupo Argos, Grupo Sura, ISA, Nutresa and Promigas. Credicorp Capital Securities Inc. or its affiliates also have received compensation, within the past 12 months, for non-investment-banking securities-related services from the following company(ies): Banco de Chile, BCI, Copec, ItauCorpbanca, EISA, Falabella, Hatitat, Ripely, Salfacaforp, Santander, Security, SMU, Avianca, Banco de Bogotá, Bancolombia, BVC, Canacol, Cemargos, CLH, Corficolombiana, Davivienda, EEB, ETB, Exito, Grupo Argos, Grupo Sura, ISA, Nutresa and Promigas.

31 Credicorp Capital Securities Inc. or its affiliates currently provides or have provided, within the past 12 months, non-securities-related services to the following company(ies): Banco de Chile, BCI, Corpbanca, Falabella, Forus, Habitat, Lan, SK, Sonda, Banco de Bogota, Bancolombia, Davivienda, Terpel, Aceros Arequpia, AIH,Alicorp, Cementos Pacasmayo, Cerro Verde, Enel Dx Peru, Enel Gx Peru, Engie Energia Peru, Ferryecorp, Graña y Monetero, InRetail, Luz del Sur, Milpo and Unacem. Credicorp Capital Securities Inc. or its affiliates also have received compensation, within the past 12 months, for non-securities services from the following company(ies): Banco de Chile, BCI, Corpbanca, Falabella, Forus, Habitat, Lan, SK, Sonda, Banco de Bogota, Bancolombia, Davivienda, Terpel, Aceros Arequpia, AIH,Alicorp, Cementos Pacasmayo, Cerro Verde, Enel Dx Peru, Enel Gx Peru, Engie Energia Peru, Ferryecorp, Graña y Monetero, InRetail, Luz del Sur, Milpo and Unacem.

E. Market Making

Credicorp Capital Securities Inc. or its affiliates act as market maker in the following company(ies): Almendra, Besalco, Invercap, Masisa, quiñenco, Grupo Security, DK, SMSAAM, BVC, EEB, ETB, Alicorp, Cementos Pacasmayo, Enegie Energia Peru and Ferrycorp.

F. Rating System Stock ratings are based on the analyst’s expectation of the stock’s total return during the twelve to eighteen months following assignment of the rating. This view is based on the target price, set as described below, and on the analyst’s opinion, general market conditions and economic developments. Buy: Expected returns of 5 percentage points or more in excess over the expected return of the local index, over the next 12-18 months. Hold: Expected returns of +/- 5% in excess/below the expected return of the local index over the next 12-18 months. Underperform: Expected to underperform the local index by 5 percentage points or more over the next 12-18 months. Under Review: Company coverage is under review. The IPSA, COLCAP and IGBVL indexes are the selective equity indexes calculated by the Bolsa de Comercio de Santiago, the Bolsa de Valores de Colombia, and the Bolsa de Valores de Lima, respectively. In making a recommendation, the analyst compares the target price with the actual share price, and compares the resulting expected return for the IPSA, the COLCAP, and/or the SPBVL indexes, as estimated by Credicorp Capital S.A. Corredores de Bolsa, Credicorp Capital Colombia Sociedad Comisionista de Bolsa, and/or CredicorpCapital Peru S.A, and then makes a recommendation derived from the difference in upside potential between the shares and the respective index. G. Distribution of Ratings

Buy Hold Underperform Restricted / UR

Companies covered with this rating 39% 46% 7% 7%

Compensation for investment banking 36% 33% 40% 0% services in the past 12 months*

*Percentage of investment banking clients in each rating category. H. Price Target Unless otherwise stated in the text of this report, target prices in this report are based on either a discounted cash flow valuation or comparison of valuation ratios with companies seen by the analyst as comparable or a combination of the two methods. The result of this fundamental valuation is adjusted to reflect the analyst’s views on the likely course of investor sentiment. Whichever valuation method is used there is a significant risk that the target price will not be achieved within the expected timeframe. Risk factors include unforeseen changes in competitive pressures or in the level of demand for the company’s products. Such demand variations may result from changes in technology, in the overall level of economic activity or, in some cases, in fashion. Valuations may also be affected by changes in taxation, in exchange rates and, in certain industries, in regulations. Investment in overseas markets and instruments such as ADRs can result in increased risk from factors such as exchange rates, exchange controls, taxation, and political and social conditions. This discussion of valuation methods and risk factors is not comprehensive – further information is available upon request.

32 II.ADDITIONAL DISCLOSURES

This product is not for retail clients or private individuals.

The information contained in this publication was obtained from various publicly available sources believed to be reliable, but has not been independently verified by the companies jointly referred as Credicorp Capital, therefore they do not warrant the completeness or accuracy of such information and does not accept any liability with respect to the accuracy or completeness of such information, except to the extent required by applicable law. This publication is a brief summary and does not purport to contain all available information on the subjects covered. Further information may be available on request. This report may not be reproduced for further publication unless the source is quoted. This publication is for information purposes only and shall not be construed as an offer or solicitation for the subscription or purchase or sale of any securities, or as an invitation, inducement or intermediation for the sale, subscription or purchase of any securities, or for engaging in any other transaction. This publication is not for private individuals.

Any opinions, projections, forecasts or estimates in this report are those of the author only, who has acted with a high degree of expertise. They reflect only the current views of the author at the date of this report and are subject to change without notice. The companies jointly referred to as Credicorp Capital have no obligation to update, modify or amend this publication or to otherwise notify a reader or recipient of this publication in the event that any matter, opinion, projection, forecast or estimate contained herein, changes or subsequently becomes inaccurate, or if research on the subject company is withdrawn. The analysis, opinions, projections, forecasts and estimates expressed in this report were in no way affected or influenced by the issuer. The author of this publication benefits financially from the overall success of Credicorp Capital. The investments referred to in this publication may not be suitable for all recipients. Recipients are urged to base their investment decisions upon their own appropriate investigations that they deem necessary. Any loss or other consequence arising from the use of the material contained in this publication shall be the sole and exclusive responsibility of the investor and Credicorp Capital accepts no liability for any such loss or consequence. In the event of any doubt about any investment, recipients should contact their own investment, legal and/or tax advisers to seek advice regarding the appropriateness of investing. Some of the investments mentioned in this publication may not be readily liquid investments. Consequently it may be difficult to sell or realize such investments. The past is not necessarily a guide to future performance of an investment. The value of investments and the income derived from them may fall as well as rise and investors may not get back the amount invested. Some investments discussed in this publication may have a high level of volatility. High volatility investments may experience sudden and large falls in their value which may cause losses. International investing includes risks related to political and economic uncertainties of foreign countries, as well as currency risk.

To the extent permitted by applicable law, no liability whatsoever is accepted for any direct or consequential loss, damages, costs or prejudices whatsoever arising from the use of this publication or its contents.

This report may not be independent of Credicorp Capital’s proprietary interests. Credicorp Capital trades the securities covered in this report for its own account and on a discretionary basis on behalf of certain clients. Such trading interests may be contrary to the recommendation(s) offered in this report

Credicorp Capital (and its affiliates) has implemented written procedures designed to identify and manage potential conflicts of interest that arise in connection with its research business, which are available upon request. The Credicorp Capital research analysts and other staff involved in issuing and disseminating research reports operate independently of Credicorp Capital’s Investment Banking business. Information barriers and procedures are in place between the research analysts and staff involved in securities trading for the account of Credicorp Capital or clients to ensure that price sensitive information is handled according to applicable laws and regulations.

33 Credicorp Capital Securities Inc., is a wholly owned subsidiary of Credicorp Capital Ltd.

Nothing herein excludes or restricts any duty or liability to a customer that Credicorp Capital Securities Inc. have under applicable law. Investment products provided by or through Credicorp Capital Securities Inc. are not insured by the Federal Deposit Insurance Corporation and are not deposits or other obligations of any insured depository institution, may lose value and are not guaranteed by the entity that published the research as disclosed on the front page and are not guaranteed by Credicorp Capital Securities Inc.

Investing in non-U.S. Securities may entail certain risks. The securities referred to in this report and non-U.S. issuers may not be registered under the U.S. Securities Act of 1933, as amended, and the issuer of such securities may not be subject to U.S. reporting and/or other requirements. Rule 144A securities may be offered or sold only to persons in the U.S. who are Qualified Institutional Buyers within the meaning of Rule 144A under the Securities Act. The information available about non-U.S. companies may be limited, and non-U.S. companies are generally not subject to the same uniform auditing and reporting standards as U.S. companies. Securities of some non-U.S. companies may not be as liquid as securities of comparable U.S. companies. Securities discussed herein may be rated below investment grade and should therefore only be considered for inclusion in accounts qualified for speculative investment.

Analysts employed by one of the companies jointly referred to as Credicorp Capital, all of which are non-U.S. broker-dealers, are not required to take the FINRA analyst exam. The information contained in this report is intended solely for certain "major U.S. institutional investors" and may not be used or relied upon by any other person for any purpose. Such information is provided for informational purposes only and does not constitute a solicitation to buy or an offer to sell any securities under the Securities Act of 1933, as amended, or under any other U.S. federal or state securities laws, rules or regulations. The investment opportunities discussed in this report may be unsuitable for certain investors depending on their specific investment objectives, risk tolerance and financial position.

In jurisdictions where Credicorp Capital Securities Inc. is not registered or licensed to trade in securities, or other financial products, transactions may be executed only in accordance with applicable law and legislation, which may vary from jurisdiction to jurisdiction and which may require that a transaction be made in accordance with applicable exemptions from registration or licensing requirements.

The information in this publication is based on sources believed to be reliable, but Credicorp Capital Securities Inc. does not make any representation with respect to its completeness or accuracy. All opinions expressed herein reflect the author's judgment at the original time of publication, without regard to the date on which you may receive such information, and are subject to change without notice.

Credicorp Capital Securities Inc. or its affiliates may have issued other reports that are inconsistent with, and reach different conclusions from, the information presented in this report. These publications reflect the different assumptions, views and analytical methods of the analysts who prepared them. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is provided in relation to future performance.

Credicorp Capital Securities Inc. and any company affiliated with it may, with respect to any securities discussed herein: (a) take a long or short position and buy or sell such securities; (b) act as investment and/or commercial bankers for issuers of such securities; (c) act as market makers for such securities; (d) serve on the board of any issuer of such securities; and (e) act as paid consultant or advisor to any issuer. The information contained herein may include forward-looking statements within the meaning of U.S. federal securities laws that are subject to risks and uncertainties. Factors that could cause a company's actual results and financial condition to differ from expectations include, without limitation: political uncertainty, changes in general economic conditions that adversely affect the level of demand for the company's products or services, changes in foreign exchange markets, changes in international and domestic financial markets and in the competitive environment, and other factors relating to the foregoing. All forward-looking statements contained in this report are qualified in their entirety by this cautionary statement.

Other countries: Laws and regulations of other countries may also restrict the distribution of this report. Persons in possession of this document should inform themselves about possible legal restrictions and observe them accordingly.

34 CONTACT LIST

ANDEAN RESEARCH TEAM SALES & TRADING

Daniel Velandia, CFA Felipe García Head of Research & Chief Economist Head of Sales & Trading [email protected] [email protected] # (571) 339 4400 Ext 1505 # (571) 339 4400 Ext. 1132

EQUITY RESEARCH EQUITY SALES & TRADING

Carolina Ratto Mallie CHILE PERU COLOMBIA Head of Equity Research - Retail [email protected] René Ossa Rodrigo Zavala Juan A. Jiménez # (562) 2446 1768 International Equity Sales Head of Equity - Peru Head of International Equity Sales [email protected] [email protected] [email protected] CHILE PERU COLOMBIA # (562) 2651 9324 # (511) 313 2918 Ext 36044 # (571) 339 4400 Ext 1701

Tomás Sanhueza Daniel Córdova Sebastián Gallego, CFA Ursula Mitterhofer Renzo Castillo Santiago Castro Head of Equity Research - Consumer & Head of Equity Research Peru Head of Equity Research - Banks Sales & Trading Equities Sales International Sales & Trading Transport. [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] # (511) 416 3333 Ext 33052 # (571) 339 4400 Ext 1594 # (562) 2450 1613 # (511) 416 3333 Ext 36167 # (571) 339 4400 Ext 1344 # (562) 2446 1751 Steffania Mosquera Cristóbal Grez Maria Fernanda Luna Credicorp Capital Securities INC Andrés Cereceda Luis Vicente Senior Analyst: Cement & Construction, Associate Sales Equities Sales Associate: Pulp & Paper, Materials, Senior Analyst: Mining & Utilities Non Bank financials [email protected] [email protected] Rafael Solis Healthcare, Pension Funds [email protected] [email protected] # (562) 2450 1629 # (511) 416 3333 Ext 36182 Institutional Equity Sales [email protected] # (511) 416 3333 Ext 37854 # (571) 339 4400 Ext 1025 [email protected] # (562) 2446 1798 Pablo Aguilar # (786) 999 1619 Angela Gonzalez Equities Sales Joel Lederman Raúl F. Jacob Senior Analyst: Transport, TMT & I.T. [email protected] David Crummy Associate: Utilities Analyst: Cement & Construction [email protected] # (511) 416 3333 Ext 36153 Equity Sales Trader [email protected] [email protected] # (571) 339 4400 Ext 1365 [email protected] # (562) 2651 9332 # (511) 416 3333 Ext 36065 Credicorp Capital UK Ltd. # (786) 999 1618 Daniel Mora Felipe Navarro Analyst Marilyn Macdonald Analyst: Construction, Industrial & Ports [email protected] International Equity Sales [email protected] # (571) 339 4400 Ext 1609 [email protected] # (562) 2450 1688 # (4477) 7151 5855

Carlos Vial Analyst FIXED INCOME SALES & TRADING [email protected] # (562) 2450 1694 Andrés Nariño Alfredo Bejar Director Sales Offshore Head of International FI Ana María Bauzá [email protected] [email protected] Research Coordinator # (571) 339-4400 Ext. 1459 # (511) 205 9190 Ext 36148 [email protected] # (562) 2450 1609 CHILE PERU COLOMBIA

FIXED INCOME & ECONOMICS RESEARCH Guido Riquelme Evangeline Arapoglou Carlos Sanchez Head of Sales Head of international FI Sales Head of Fixed Income CHILE PERU COLOMBIA [email protected] [email protected] [email protected] # (562) 2446 1712 # (511) 416 3333 Ext 36099 # (571) 323 9154 Josefina Valdivia Diego Cavero Camilo A. Durán Head of Fixed Income Fixed Income Associate Macro Analyst Juan Francisco Mas Andrés Valderrama Gustavo Trujillo [email protected] [email protected] [email protected] Fixed Income Sales Fixed Income Sales Head of Sales # (562) 2651 9308 # (511) 416 3333 Ext 37946 # (5511) 339 4400 Ext. 1383 [email protected] [email protected] [email protected] # (562) 2446 1720 # (511) 416 3333 Ext 40352 # (571) 323 9252 Ignacio Sabelle Juan Pablo Brosset Fixed Income Analyst Fixed Income Analyst Rafael Gaete Natalia Jurado Andrés Agudelo [email protected] [email protected] Local Fixed Income Sales Fixed Income Sales Fixed Income Sales # (562) 2651 9368 # (511) 416 3333 Ext 36018 [email protected] [email protected] [email protected] # (562) 2651 9336 # (511) 416 3333 Ext 36027 # (571) 339 4400 Ext 1180 Felipe Guzmán Senior Economist Diego Hidalgo Guillermo Arana Emilio Luna [email protected] Local Fixed Income Sales Fixed Income Sales Fixed Income Sales # (562) 2651 9385 [email protected] [email protected] [email protected] # (562) 2450 1693 # (511) 313 2902 Ext. 36144 # (571) 339 4400

Lizeth Espiritu Patricio Luza Sales Renta Fija Fixed Income Sales [email protected] [email protected] # (562) 2450 1619 # (511) 416 3333 Ext. 36168

Carla Tejada Fixed Income Analyst [email protected] # (511) 416 3333

Credicorp Capital Securities INC

Jhonathan Rico Michael Tafur Fixed Income Trader Fixed Income [email protected] [email protected] # 1 (786) 9991614 # 1 (786) 9991607

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