Investment Recommendation: Share's Fair Value: S/ Overweight. Shareholders' structure. Business Units. Mass Consumption Goods

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1 ALICORP PEN Equity's Fair Value (million) 5, Share's Fair Value 6.72 Market Capitalization (million) 4, Market Price ( ) 5.70 Potencial Appraisal 17.9% Exchange BVL Range 52 weeks 4.95 / 6.80 Shares outstanding (million) Financial Indicators 2011e 2012e 2013e PER Price/Book Value Price/EBITDA Gross Margin Operating Margin Net Margin 8% 6% 5.7% ROE % 14.5% ROA 10.6% 8.1% 7.4% EPS Net Income (S/. million) Shareholders' structure Investment Recommendation: Share's Fair Value: Overweight S/ Kallpa Securities Sociedad Agente de Bolsa (Kallpa SAB) initiates coverage in Alicorp S.A. s (Alicorp) recommending to overweight the company s common shares within the portfolio. Our fair value, obtained using the DCF methodology, is S/ per common share. This fair value is 17.9% higher than its market price of S/ Alicorp is the leading Peruvian company in the production and commercialization of mass consumption goods, and Andean Community s second largest company in this industry. 75% of its income is generated in Peru, while the remaining 25% comes from Argentina, Colombia, Ecuador, Guatemala and Honduras, among other countries. The company s market capitalization is S/. 4,871 million and 2011 s estimated EBITDA is S/ million. Between 2006 and 2010, the company s income increased 100% due to organic growth and several acquisitions that took place in Peru (Molinera Inca, Asa Alimentos) and in foreign countries (Helados Eskimo in Ecuador, The Value Brands and Italo Manera in Argentina, Propersa in Colombia, among others). Alicorp s main shareholders are Grupo Romero with a 46% stake and the Pension Funds administrated by Administradoras de Fondos de Pensiones AFPs (Pension Funds Administrators) with a 33% stake. The remaining 21% is hold by several institutional and retail investors. The company is highly recognized for its corporate government policies and its shares are often compared as a proxy regarding domestic demand s growth. 46% 33% Grupo Romero 8% 13% AFP's Otros Others Business Units Institucionales Alicorp produces and commercializes three kinds of products: i) mass consumption goods, ii) industrial products and iii) nutritional products for animals. This allows the company to have a diversification on its business structure as shown in the following chart. Income by Product 2011 Peru Mass Consumption Goods Andean Region & Central America Mercosur Region Industrial Products Nutritional Products for 30% 7% Consumer goods Industrial products 106 brands in 16 different categories. 14 brands directed to the Food Industry. 2 brands directed to the Fish and Seafood Industry. 63% Animal Nutritional Products i) Mass consumption goods - (63% of its income) It includes several mass consumption goods, most notable: margarines, mayonnaises, cookies, pastas, juices, pet foods, soaps, detergents, shampoos, among others. EQUITY RESEARCH DIVISION Alberto Arispe aarispe@kallpasab.com Phone: ii) Industrial products - (30% of its income) Most notable products are industrial flour, cooking oil, Omega 3, and non-dairy butter. iii) Nutritional products for animals - (7% of its income) It includes prepared food for shrimps and fish.

2 Peruvian Market: Great Competitive Advantages Distribution Structure - Peru 1). Alicorp is the Peruvian leading company in almost all of its products. In mayonnaises (Alacena) it has a 95% market share, in laundry soaps (Bolivar, Marsella and Jumbo) 81%, in detergents (Bolivar, Marsella, Opal) 49%, in margarines (Manty, Sello de Oro) 60%, and in juices (Yaps, Negrita, Kanu) 55%. The company has several competitors, most notable Unilever, Nestle, P&G, Kraft, Cogorno, among others. 2). Exclusive 3). Distributors Storage Centers Sales Offices Alicorp s brands have a high brand awareness and recall among the Peruvian people. There is a close link between the products, brands and Alicorp. Alicorp has an unique distribution structure within the country. Alicorp has 27 exclusive distributors (independent companies), 12 storage centers, 25 sales offices and 9 industrial factories. The distribution structure constitutes barriers to entry for competence and allows developing the sale of new products with no additional costs. In addition, the distributors are constantly trained by the company and awarded on the basis of obtained results. Industrial Factories 4). 5). A skilled Management Team with years of experience in operations, marketing, commercialization, and cost administration, that manages to increase income sustainably and maintains the company s operative margins. A solid financial position, an aggressive acquisitions strategy, and Grupo Romero s support, the biggest Peruvian business group. Main Products - Peruvian Market 2011 Category Mayonnaise Soap Detergent Pasta Cooking Oil Margarine Flour Cookies Powder Juice Pet Food Shampoo Nutritional products for animals Brands Alacena Bolívar, Marsella, Jumbo, Trome Bolívar, Opal, Marsella Don Vittorio, Lavaggi, Nicolini, Alianza Primor, Primor Light, Capri, Cocinero, Cil Sello de Oro, Manty Nicolini, Blanca Nieve, Inca Casino, Tentación, Glacitas, Chomp Yaps, Negrita, Kiribá, Kanú Mimaskot, NutriCan Anua, Plusbelle Nicovita % Market Share Rank 95% 81% 49% 45% 54% 60% 53% 3 56% 38% 2 70% As shown in the table, Alicorp is the leading company in the Peruvian Market. Growth through Mergers, Integrations and Acquisitions Acquisition Merger Alicorp S.A.A. Acquisitions CIPPSA Consorcio de Alimentos Fabril Pacífico La Fabril Molinera del Perú Detergent Factory TVB Consorcio Distribuidor Industrias Pacocha Propersa Consolidation in Peruvian Markets International Expansion 2

3 International Markets: Catalyst for the next years 38% Foreign Income % 13% 11% 10% 6% 3% Argentina Ecuador Colombia Canada Others USA Honduras Haiti In 2011, 25% of Alicorp s income were related to sales originated outside Peru. From this total of foreign sales, 38% came from Argentina, 17% from Ecuador and 13% from Colombia (in these 3 countries Alicorp has own operations). It should be noted that Alicorp exports products to countries in North America and Central America. We believe that most of the company s growth during the next 5 years will come from acquisitions that Alicorp will undertake outside Peru. Management seems to be convinced that company s growth during the next five years will come from acquisitions and we believe that it will intend to do it outside the country, in order to diversify its risk and to look for new market opportunities. We expect that between 2012 and 2016 Alicorp will invest approximately US$ 500 million in acquisitions and that foreign income will represent 40% of total income (25% nowadays). We believe that acquisitions would take place in Argentina (Alicorp already has 3 industrial factories and nationwide distribution), where it is already the second, third and/or fourth company in several of its products and most of its competitors are similar to those in Peru (although we do not discard acquisitions in greater markets like Mexico and Brazil). We assume that 100% of these purchases will be financed with debt. International Presence Country Argentina Category Shampoo Soap Detergent Cookies Pudding & Desserts Pasta Juice Brands Plusbelle Limol, Plusbelle Limzul, Zorro Okebon Eurocake Nutregal Dink-C Ecuador Pet Food Mimaskot 23% Colombia Mayonnaise Pasta Shampoo Juice Shampoo - Kids Cookies Pet Food Alacena Don Vittorio Anua Kanú Anua, Baby Soft Glacitas Mimaskot % Market Share Rank 30% 17% 9% 1 11% 5% 14% 11% 8% 5% 4% #3 #9 #3 #4 #4 #6 #7 #6 10% 8% 9% 10% 8% 9% 7% 9% 9% 7% 9% 9% 83% 83% 83% 83% 8 8 Home and personal care Other categories Food Total Income (US$ million) Product Diversification Total Income (%) % 20% 21% 20% 11% 11% 11% 11% 68% 69% 68% 69% Home and personal care Other Categories Food Food Other Categories Home and personal care , , ,330 Alicorp's Valuation and Estimations Kallpa SAB has valued Alicorp using a model of discounted free cash flows to the firm during In addition, we have applied a 4% constant growth rate to the free cash flows to the firm after These cash flows have been discounted using a weighted average cost capital (WACC) of 9.. Income and EBITDA During , we have assumed an annual average sales growth of 12.5% per year. We estimate in accordance with a guide presented by Management that in the next five years Alicorp will invest US$ 500 million in acquisitions outside Peru, therefore most of its income growth will be originated by the purchase of assets. As for the sales growth in Peru, we assume that sales will grow at GDP s growth rate (we assume that Peru will grow 5% per year in the analysis period and that there won t be additional acquisitions in the industry. Given this, we estimate that the company s total income in 2015 would reach US$ 2,500 million, approximately in line with Management s estimations. We assume that Alicorp s EBITDA margin during will be 13.6% in average, higher than the 13.3% obtained during Greater costs that may denote the increase in the price of commodities, used as raw materials in some of the company s mass consumption goods like soy bean and wheat, will be offset by the increase in productivity and with the proper administration of coverage policies using financial derivatives. It should be noted that 90% of Alicorp s costs correspond to raw materials (variable costs), 5% correspond to overhead expenses and 5% to other expenses. 3

4 98 CAPEX (In S/. million as a % of Total Income) Net Profit We expect that the company s net profit will grow 5. per year in average, much lower than the 1 observed during This is due to a lower growth in income that were 15.7% per year during , versus our estimations of 12.5% per year for This is explained by a lower growth in the Peruvian economy estimated in 5% for the next five years versus 6.7% during , and by a strong increase in financial expenses caused by greater assumed debt during the next five years in order to finance the purchases and acquisitions previously mentioned. Acquisitions: CAPEX and Financing Last 12 M 959 CAPEX CAPEX as a % of Income Debt & Debt/EBITDA (S/. million) As previously mentioned, we expect a US$ 730 million CAPEX in the next four years, of which US$ 500 million will correspond to acquisitions. The CAPEX ex acquisitions/incomes is assumed approximately in 2.5%, similar to what was observed during We assume that the US$ 500 million will be financed with debt, which will increase the Debt/EBITDA ratio from 1.03 (last three years average) to 1.84 in In these levels, the Debt/Equity ratio is still manageable in 70%. Therefore, assuming that the US$ 500 million financing will be carried out uniformly between 2012 and 2015, we estimate that this financing will represent approximately US$ 8 million per year in financial expenses (we estimate that 2011 s financial expenses will reach approximately US$ 14 million). The average ROE between 2012 and 2016 is 14.8%, greater than the 13.6% obtained between 2007 and Discount Rate and Perpetuity Kallpa SAB uses a discount rate (WACC) of 9. in local currency and a long term free cash flows to the firm growth of 4% per year Last 12 M Debt Debt/EBITDA Valuation and Sensitivity Analysis In our opinion, Alicorp s fair value is S/. 5,783.5 million. 99% of its shares are common shares and the remaining 1% are acciones de inversion. Therefore, the fundamental value per common share is S/ Performing a sensitivity analysis, we must highlight that if Peruvian economy growth increases to 7% per year during rather than our 5% assumption, the share s fundamental value will increase to S/ If we decrease the expected growth rate from 5% to 3% during the same period of time, Alicorp s fair value decreases to S/ Given our estimated fair value of S/ per share, Fair Value/EBITDA ratio will be 7.7x, similar to comparable Latin-American companies average that is 9.4x and lesser than US peers average of 10.1x. Comparative Charts Emerging Markets US PEERS Company Nutresa Grupo Bimbo Gruma Hypermarcas M Dias Branco Average Source: Bloomberg Market Cap/EBITDA 2011e 12.2X 9.5X 5.3X 11.0X 8.9X 9.38X Company Procter & Gamble Kraft Colgate-Palmolive General Mills Kellog's HJ Heinz Ralcorp Holdings Flowers Foods Average Market Cap/EBITDA 2011e 10.6X 10.0X 11.2X 9.8X 10.5X 10.7X 8.3X 9.3X 10.05X Source: Bloomberg 4

5 Conclusions 1.) 2.) 3.) 4.) 5.) We recommend to hold Alicorp s common shares since its fundamental value of S/ is 17.9% higher that its market value of S/ Holding Alicorp s shares allows access to the benefits/costs that represent the adoption of Peruvian domestic demand s risk, being Alicorp the leading company in the mass consumption goods industry. 75% of the company s incomes come from the sales of these products in Peru. The company s great potential relies in the management of its acquisition policies, and that these acquisitions generate value for the shareholders. Overpayment risks are always present in these cases. Alicorp s net profit growth will depend on: i) GDP and domestic demand s growth, ii) the success of the acquisitions outside Peru and, iii) the increase on its margins and EBITDA. Alicorp has a skilled Management Team, it has a strong experience on its markets and Grupo Romero s support, one of Peru s most successful business groups in Peru. Alicorp - Financial Statements Profit & Loss Statement (S/. thousand) Net Sales Cost of Sales (excl D&A) Administration Expenses (excl D&A) Sales Expenses EBITDA Margin Depreciation and Amortization EBIT Financial Income, Dividends and others Financial Expenses Profit before Taxes Profit Sharing (Employees) Income Tax Net Profit 4,232,932 4,624,055 5,250,229 5,886,256 6,920,950 7,613,045-2,878,394-3,190,598-3,648,909-4,090,948-4,810,060-5,291, , , , , , , , , , , , , , , , , ,329 1,027, % 14.0% 13.5% 13.5% 13.5% 13.5% 70,845 96, , , , , , , , , , ,443 13,029 9,116 10,931 12,702 14,908 16,619-37,918-61,210-74, , , , , , , , , ,727-63,188-58,121-62,648-67,275-78,114-86, , , , , , , , , , , , ,667 Cash Flow Statement (S/. thousand.) Net Profit Adjustment for differences in tax expenses and taxes paid Depreciation and Amortization Changes in Current Assets Changes in Current Liabilities and in other Liabilities Cash Flows from Operations Capex (1) Net Increase in Debt Dividends Net Increase/decrease in Cash and Cash Equivalents (1) CAPEX includes US$ 500 million, as previously mentioned, for acquisition investments (see Acquisitions: CAPEX and Financing) 320, , , , , ,667-35,771 38,557 41,406 48,076 53,251 70,845 96, , , , ,318-69, , , , , ,818 46,059 46,480 83,059 83, ,987 95, , , , , , , , , , , , ,586 78, , , , , , , , , , , , ,794 90,716 88, ,288 85,530-23,163 Balance Sheet Total Current Assets Total Non - Current Assets Total Assets Total Current Liabilities Total Non - Current Liabilities Total Liabilities Total Equity 1,527,930 1,741,646 2,017,953 2,313,709 2,700,961 2,879,615 1,616,005 1,989,515 2,367,439 2,739,603 3,115,037 3,142,306 3,143,935 3,731,161 4,385,392 5,053,312 5,815,998 6,021, , , , , ,355 1,037, ,260 1,116,787 1,505,475 1,897,014 2,295,404 2,198,898 1,318,896 1,751,147 2,225,230 2,699,695 3,237,759 3,236,348 1,825,040 1,980,013 2,160,162 2,353,617 2,578,239 2,785,573 Definition of Valuation Ranges Kallpa Securities SAB has 5 valuation ranges: Overweight +, Overweight, Neutral, Underweight and Underweight -. The analyst will assign the coverage one of these ranges. Underweight - < - 31% > + 31% Overweight + Underweight -16% to -30% +16% to +30% Overweight Neutral -15% to 0% +15% to 0% Neutral The range assigned to each company covered by the analyst is based on the analysis/monitoring that Kallpa Security SAB has been developing for the company. In some cases, the analyst can express his/her short-term point of view to traders, vendors and some Kallpa Securities SAB s clients nevertheless this point of view may differ in time by market volatility and other factors. The fair value estimated by Kallpa SAB is based in one or more valuation methodologies commonly used by financial analysts, including but not limited to discounted cash flows, In situ valuations or any other applicable methodology. It should be noted that the publication of a fair value does not imply any guarantee that the value will be achieved. 5

6 KALLPA SECURITIES SOCIEDAD AGENTE DE BOLSA Management Position Phone Alberto Arispe General Manager (511) Trading Enrique Hernández Head Trader (511) Eduardo Fernandini Trader (511) Javier Frisancho Trader (511) Hernando Pastor Representative (511) Jose Antonio Avendaño Representative (511) Daniel Berger Representative (511) Corporate Finance Ricardo Carrión Manager (511) Equity Research María Belén Vega Senior Analyst (511) Dalmi Rivera Analyst (511) Ricardo Barrera Assistant (511) Operations Elizabeth Cueva Manager (511) Alex Rodriguez Analyst - Securities (511) arodriguez@kallpasab.com Alan Noa Analyst - Treasury (511) anoa@kallpasab.com This document is for informative purposes only. Under no circumstances it should be used/be considered as an offering of sale or an application of purchase of shares or other securities mentioned in this document. The information herein has been obtained from sources which are believed to be reliable, but KALLPA SAB does not guarantee the trustfulness or accuracy of the content of this report, or the future market values of shares or other securities mentioned in this document. The views and opinions expressed in this document constitute our opinion at the time of this report and are subject to change without notice. KALLPA SAB does not guarantee analysis updates before any change in the circumstances of the market. This document accurately reflects the Investment Analyst s points of view and no part of his/her salary compensation was, is or will be related directly or indirectly to the recommendations and opinions expressed in this document. The products referred in this document may not be available for purchase in some countries. KALLPA SAB may have positions and perform investment banking with securities mentioned in this document. 6