BUY COCA COLA EMBONOR. Positive 2Q16 Results : Maintaining BUY

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1 COMPANY REPORT - CHILEAN EQUITIES August 2nd, 2016 BUY Target Price CLP 1,625 Current Price CLP 1,380 COCA COLA EMBONOR Positive 2Q16 Results : Maintaining BUY recommendation DATA Bloomberg Reuters Credit risk rating RATIOS EMBONOB CI EMBONOR.B- SN AA- 52 weeks high/low (CLP) 1, Current price (CLP) 1,380 Upside potential 18% # stocks (Mn) 266 Market Cap (USD Mn) 936 Free float (%) 49.0% E 2017E EV/EBITDA 7.5x 7.4x 6.7x EV/Sales 1.3x 1.4x 1.3x P/E 18.6x 13.3x 13.0x P/BV 1.6x 1.9x 1.8x Div. yield 4.2% 4.1% 3.8% Embonor reported strong 2Q16 results in line with our operating forecasts although above our net income estimates. Top line increase and lower raw material costs (especially in Bolivia) boosted consolidated EBITDA +21.4% YoY, in line with our estimates. Net income increased 226.5% YoY, mainly driven by positive operating performance and better non-operating figures. In revenue terms, figures increased 7.1% YoY mainly driven by a 3.7% volume expansion and 3.3% increase in average prices. In Chile, revenues decreased 0.5% YoY considering a 2.6% volumes decline while prices increased 2.2%. Bolivia continues to boost results. Revenues increased 17.7% YoY mainly explained by a solid 9.6% volume expansion. In operating terms the company reported a strong 63.8% EBITDA expansion in Bolivia, mainly considering strong top line growth and lower raw material costs. In Chile, EBIT- DA decreased 14.7% mainly explained by weak volumes in the quarter (as the whole industry). In non-operating terms, the company reported slightly better results (moving from CLP -3,669 Mn in 2Q15 to CLP Mn in 2Q16). Considering the aforementioned, a lower effective tax rate and the strong operating expansion, net income increased 226.5% YoY. In summary, we consider Embonor results as positive due to strong consolidated EBITDA and net income expansion. For 2016, we expect positive figures to maintain and we expect Embonor to report the best results among Chilean Beverages sector. We maintain Embonor as one of our top pick stocks in the consumption sector in Chile with a BUY recommendation and a target price of CLP 1,625/share. Jorge Opaso

2 1 2Q16 Operating Data Revenues (CLP M) 2Q16 2Q15 %YoY 6M2016 6M2015 %YoY Chile 61,043 61, % 147, , % Bolivia 51,474 43, % 114,933 94, % Total 112, , % 262, , % EBITDA (CLP M) 2Q16 2Q15 %YoY 6M2016 6M2015 %YoY Chile 6,518 7, % 21,711 21, % Bolivia 10,654 6, % 25,931 17, % Total 17,172 14, % 47,642 38, % Volume (MUC) 2Q16 2Q15 %YoY 6M2016 6M2015 %YoY Chile % % Bolivia % % Total % % Avg Price 2Q16 2Q15 %YoY 6M2016 6M2015 %YoY Chile 2,366 2, % 2,358 2, % Bolivia 1,666 1, % 1,710 1, % Total 1, , % 2, , % Source: Embonor and Bice Inversiones. CLP M 2Q16 BICE % vs Est. 2Q15 %YoY 6M2016 6M2015 %YoY Revenues 112, , % 105, % 262, , % EBITDA 17,173 17, % 14, % 47,642 38, % EBITDA Mg. 15.3% 15.2% 13.5% 18.1% 16.2% Earnings 3,594 2, % 1, % 23,401 13, % Net Margin 3.2% 2.6% 1.0% 8.9% 5.5% EPS % % % Source: Embonor and Bice 2

3 EMBONOR BEVERAGES SHARE PRICE RELATIVE TO IPSA Coca Cola Embonor SA is a Chilean-based company engaged in production, packaging, and distribution of The Coca Cola Company products in Chile (North and a fraction of Central-South) and Bolivia. The Company s total market share account for ~36% of the Coca Cola system in Chile and 97% in Bolivia. Embonor maintains minoritary stakes in Envases CMF (packaging) and Vital (water and Juices), Jugos del Valle and Envases Central. LTM EBITDA OWNERSHIP - Both Series (%) IPSA EMBONOR-B Bolivia 52% Chile 48% Free Float 49% Vicuña Family 51% Jul/15 Sep/15 Nov/15 Jan/16 Mar/16 May/16 DATA INCOME STATEMENT E 2017E 2018E Bloomberg EMBONOB CI Reuters EMBONOR.B-SN Credit Rating AA- 52 weeks Hi/Lo (CLP) 1, Current Price (CLP) 1,390 Upside Potential 18% Shares outstanding (M) 266 Market Cap (USD M) 929 Float (%) 49.0% ADVT 6M (USD M) 0.3 Valuation Method DCF (WACC 10.3%) PE LTM vs 3Y AVG Revenues 508, , , ,167 Chg% 13.2% 8.7% 8.8% 7.9% EBITDA 87, , , ,345 Chg% 20.5% 20.1% 8.6% 10.0% EBITDA Margin 17.2% 19.0% 19.0% 19.3% Net interest -8,793-12,140-12,142-13,636 Associates 1,182 1,517 1,563 1,610 Net Income 28,068 48,279 49,388 54,430 Chg% 25.5% 72.0% 2.3% 10.2% Net Margin 5.5% 8.7% 8.2% 8.4% BALANCE SHEET E 2017E 2018E Current assets 173, , , ,976 Total assets 667, , , ,322 Financial debt 208, , , ,386 Total liabilities 331, , , ,766 Equity 336, , , ,541 Liabilities + equity 667, , , , DEBT RATIOS E 2017E 2018E 18.0 EBITDA/Fin. Expenses 9.4x 8.1x 8.8x 8.6x Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15 Feb-16 Apr-16 Jun-16 LTM P/E 3Y Avrg +1 Std Dev - 1 Std Dev NFD/EBITDA 1.5x 1.3x 1.1x 0.9x Debt/Equity 0.6x 0.6x 0.6x 0.5x ROE 8.4% 14.2% 13.5% 13.8% FCF E 2017E 2018E + EBIT 60,983 76,473 83,000 91,930 + Dep and Amort 26,405 28,469 30,972 33,414 - Taxes -15,456-12,138-16,684-19,125 - CAPEX -51,078-44,382-45,059-48,613 Jorge Opaso Working Capital -26,187-9,270-2,832-3,199 TOTAL -5,333 39,152 49,397 54,408 Figures in CLP Mn. 3

4 SALES TEAM Felipe Figueroa E. Equity Sales and Trading Jacinto Laso P. Equity Sales and Trading Andrés De la Cerda G. Fixed Income and Currency RESEARCH TEAM Agustín Álvarez M. Head of Research Jorge Opaso W. Head of Equity Research Aldo Morales E. Equity Research Analyst Sebastián Carvallo I. Equity Research Analyst Sebastián Senzacqua B. Chief Economist Juan Pablo Castillo C. Strategy Francisca Bustamante C. Strategy Contact Follow Download Visit App BICE Inversiones biceinversiones.cl 4

5 This report has been prepared solely for the purpose of providing information to customers of BICE Inversiones Corredores de Bolsa S.A. This report is not a solicitation or an offer to buy or sell stocks, bonds or other instruments mentioned in it. This information and where it is based has been obtained from public information sources on our best knowledge and that according to our belief seems reliable. However, this does not guarantee that they are accurate or complete. The forecasts and estimates presented in this report have been prepared with the best information and tools available, but this does not guarantee that they will be fulfilled. All opinions and expressions contained in this report may be modified at any time without notice. BICE Inversiones Corredores de Bolsa S.A. and any company or person related to it and its controlling shareholders may at any time have short and long term investments in any of the instruments mentioned in this report or related with companies or markets mentioned and can buy or sell those same instruments. BICE Inversiones Corredores de Bolsa S.A. could eventually recommend purchases and / or sales of shares for trading positions. Such actions could be incorporated into other recommended portfolios. The projections and estimates presented in this report should not be the sole basis for the adoption of an appropriate investment decision and each investor must make its own assessment based on their personal situation, investment strategy, risk tolerance, tax situation, etc. The result of any financial transaction carried out with the support of this report is the sole responsibility of the person who performs it. Foreign securities and issuers that can be referenced in this report, and are not currently registered in the Securities Registry by the Chilean Superintendence of Securities and Insurance, are not applicable laws and regulations governing domestic stock market, therefore is the sole responsibility of investors to get their own information regarding such securities and foreign issuers before making any investment decision. The frequency of the publication of the reports, if any, is at the discretion of BICE Inversiones Corredores de Bolsa S.A. It is not allowed to quote or reproduce in whole or in part this report without the express permission of BICE Inversiones Corredores de Bolsa S.A. At the date of publication of this report, none of the members of the Research Department holds, directly or indirectly, investments in the issuer or issuers analyzed in it. At the date of publication of this report, none of the members of the Research Department holds, directly or indirectly, links to the issuer analyzed in it. The members of the Research Department expressly declare that no part of their compensation was, is or will be directly or indirectly related to specific recommendations or views expressed in this report. BICE Inversiones Corredores de Bolsa S.A. and members of the Research Department expressly declare that there is no commercial relationship with the issuer analyzed in this report. BICE Inversiones Corredores de Bolsa S.A. and / or any company or person associated with it, may at any time have a position in any of the financial instruments mentioned in these reports and may buy or sell those same instruments, in which case they should be guided by the Manual for share transactions and other securities by staff and BICECORP SA and its subsidiaries and is available in At the date of publication of this report, the analyst Jorge Opaso holds, directly or indirectly, investments in the issuer or issuers analyzed in it. At the date of publication of this report, the analyst Mr. holds, directly or indirectly, with related links to the issuer analyzed in it. BICE Inversiones S.A. Corredores de Bolsa states that currently maintains a business relationship with the issuer analyzed in this report. Mr. analyst states that currently maintains a business relationship with the issuer analyzed in this report. 5