InRetail Perú Corp. USD Solid fundamentals, limited upside. EQUITY RESEARCH Update January 6th, What changed in our model?

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1 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 EQUITY RESEARCH Update January 6th, Alberto Arispe Marco Contreras Head of Research Senior Analyst (511) (511) Retail Industry InRetail Perú Corp. Fair Value USD HOLD InRetail Perú Corp. (BVL: INRETC1) Solid fundamentals, limited upside Equity's Fair Value (USD MM) Share's Fair Value (USD) Previous Fair Value (Aug-14) Recommendation Market Capitalization (USD) Share's Market Price (USD) Shares Outstanding (MM) Upside ADTV - LTM (USD MM) Range 52 weeks YTD Change Dividend Yield - LTM Trading 1, Kallpa Securities SAB updates the valuation model of InRetail Perú Corp (InRetail) with a hold recommendation. Our new year-end target price of USD per INRETC1 share (higher than our previous target price of Hold USD 17.50) is 5.3% above the USD market price, as of January 5th,. 1, % % 0.0% BVL We updated our model in order to include 3Q2014 financial results, lower borrowing costs (due to recent bond issuances) and the new corporate tax rate scheme. We use a Discounted Cash Flow to the Firm methodology and a 10.20% discount rate. Moreover, we assume a 3.5% perpetual growth rate, in line with the potential growth of the company's profits. What changed in our model? ADTV: Average Daily Traded Volume LTM: Last Twelve Months Exchange Rate USD/PEN: 3.00 Financial Ratios P / E P / BV EV / EBITDA Debt / EBITDA EBITDA / Financial Exp. EPS (PEN) ROE ROA % 0.9% 2014e % 2.1% e % 3.1% Source: SMV, InRetail, Kallpa SAB We reduced our sales' growth estimates for and 2016 from 16.4% and 14.9% to 15.0% and 13.4%, respectively. This, due to lower expectations regarding the Peruvian economy. We increased EBITDA margin for and 2016 from 9.6% and 10.0% to 9.8% and 10.1%, respectively, due to; i) higher operating efficiencies in the pharmacies segment, ii) dilution of fixed costs in the shopping malls segment; and, iii) acquisition of Real Plaza Centro Cívico for PEN 190 MM (this mall recorded sales of PEN 45 MM in the last twelve months with a 60% EBITDA margin. We reduced our discount rate from 10.61% to 10.20%. We have reduced the company's cost of debt from 8.5% to 7.0%, given the recent debt issuances of InRetail Shopping Malls (ISM - subsidiary that owns the shopping mall business) and InRetail Consumer (IC - subsidiary that owns the supermarkets and pharmacies businesses). It's worth mentioning that the 7-year note of ISM for USD 350 MM had a 6.50% coupon rate and that the 7-year note of IC for USD 300 MM had a 5.25% coupon rate. Chart Nº 1: INRETC1 vs. INCA USD INRETC1 INCA Pts We included the new corporate tax scheme, recently approved by the Peruvian Congress. Corporate tax rate will fall from 30% to 28% in, to 27% by 2017 and to 26% by Despite the fact that we have increased our target price, we reiterate our hold recommendation, as we believe that market price still doesn't represent a buying opportunity. Nevertheless, we think the company has solid fundamentals, which are its leadership position in all its three business segments and the low formal retail penetration in Peru Source: Bloomberg

2 Company's Financial Summary INCOME STATEMENT (PEN MM) Net Sales Cost of Sales Gross Income Sales Expenses Administrative Expenses Other Revenues, Net Operating Income Financial Income Financial Expenses FX Gain (Loss) Income Before Taxes Income Tax Net Income Minority Interest Attributable to InRetail Shares Outstanding (MM) Earnings per Share - EPS (PEN) Depreciation & Amortization EBITDA e e BALANCE SHEET (PEN MM) e e 5,324 6,106 7,023 Cash and Cash Equivalents ,805-4,309-4,940 Accounts Receivable ,519 1,797 2,083 Inventory ,010-1,177-1,337 Other Short Term Assets Current Assets 1,507 1,697 1, Fixed Assets, Net 2,107 2,377 2, Investment Properties 1,696 2,287 2, Intangible Assets, Net 1,160 1,180 1, Other Long Term Assets Non Current Assets 4,988 5,868 6, Total Assets 6,494 7,565 8, Short Term Debt Accounts Payable 1,522 1,543 1, Other Short Term Liabilities Current Liabilities 1,688 1,837 2, Long Term Debt 1,604 2,336 2, Other Long Term Liabilities Non Current Liabilities 1,855 2,631 2, Equity Attributable to InRetail 2,952 3,097 3,339 Minority Interest Liabilities + Equity 6,494 7,565 8,080 MARGINS AND GROWTH RATES (%) Gross Margin Operating Margin EBITDA Margin Net Margin Sales' Growth Operating Income's Growth EBITDA's Growth Net Income's Growth e e CASH FLOW (PEN MM) e e 28.5% 29.4% 29.7% Net Income % 8.0% 7.8% Depreciation & Amortization % 9.5% 9.8% Changes in Working Capital % 2.4% 3.5% Other Adjustments % 14.7% 15.0% Operating Cash Flow % 19.3% 12.2% Investment Cash Flow -1,068-1, % 21.8% 19.6% Financing Cash Flow % 159.9% 67.0% Free Cash Flow FINANCIAL RATIOS e e CHART N 2: SHAREHOLDERS Current Assets / Current Liabilities Average Days of Inventory Debt / Equity Debt / EBITDA % Intercorp and subsidiaries EBITDA / Financial Expenses Payout ratio Dividends per Share (PEN) % 0.0% 0.0% % NG Pharma Corp. Others ROE 1.9% 4.8% 7.5% 71.8% ROA 0.9% 2.1% 3.1% ROIC 6.2% 6.6% 6.6% VALUATION P / Sales P / E EV / EBIT EV / EBITDA P / BV e e CHART N 3: EBITDA E BY BUSINESS UNIT % 35.1% Supermarkets Pharmacies MANAGEMENT Shopping Malls Juan Carlos Vallejo CEO Augusto Rey Gonzalo Rosell CFO Corporate Finance Manager & IRO 32.5% Source: InRetail, SMV, Kallpa SAB 2

3 Kallpa SAB's estimates INCOME STATEMENT (PEN MM) 2014e - P 2014e - N e - P e - N Net Sales Cost of Sales Gross Income Gross Margin Sales Expenses Administrative Expenses Other Revenues, Net Operating Income Operating Margin Financial Income Financial Expenses FX Gain (Loss) Income Before Taxes Income Tax Net Income Net Margin Minority Interest Attributable to InRetail Shares Outstanding (MM) Earnings per Share - EPS (PEN) Depreciation & Amortization EBITDA EBITDA Margin P: Previous estimates N: New estimates Source: InRetail, Kallpa SAB 6, , , , , , , , , , , , % 29.4% 29.5% 29.7% -1, , , , % 8.0% 7.6% - 7.8% % 2.4% 3.3% 3.5% e - P 2016e - N 8, , , , , , % 29.8% -1, , % 8.2% % 4.0% % 9.5% 9.6% 9.8% 10.0% 10.1% 3

4 Multiple Analysis Company Country Market Cap. (USD MM) P/E 12M P/E EV/EBITDA 12M EV/EBITDA P/BV ROE ROA Div. Yield InRetail Perú Corp. Walmart Mexico SACI Falabella Cia Brasileira de Distribuicao Cencosud SA Walmart Chile Almacenes Éxito Organizacion Soriana Grupo Comercial Chedraui Corp Favorita Average Peru 1, % 2.3% 0.0% Mexico 34, % 12.5% 3.3% Chile 15, % 4.4% 1.6% Brazil 9, % 3.5% 1.1% Chile 6, % 2.4% 1.1% Chile 5, n.d n.d % 6.6% 4.4% Colombia 5, % 4.6% 1.9% Mexico 4, n.d. 6.8% 3.8% 1.0% Mexico 2, % 3.8% 0.6% Ecuador 1, n.d. n.d. n.d % 11.9% 2.6% 8, % 5.6% 1.8% Chart Nº 4: P/E vs. EV/EBITDA EV/EBITDA 16 Falabella 14 Market Cap. Chart Nº 5: ROE vs. ROA ROA 5.0% Exito 4.5% Falabella Market Cap Cencosud Soriana InRetail 4.0% 3.5% Soriana Chedraui 8 Chedraui Exito 3.0% Cencosud CBD 6 2.5% 4 CBD P/E 2.0% InRetail 1.5% 4% 6% 8% 10% 12% 14% 16% ROE Sensitivity Analysis Table N 1: FV's sensitivity to WACC and perpetuity growth rate (g) WACC \ g 2.00% 2.50% 3.00% 3.50% 4.00% 4.50% 5.00% 9.20% % % % % Source: Kallpa SAB 4

5 Appendix Disclaimer Analyst certification The analyst that prepared this report hereby certifies that: i) the opinions and views expressed in this valuation report, in regard with the issuer and with the company s overview, reflected his/her personal opinion and ii) No part of his/her salary compensation was, is or will be related directly or indirectly to the recommendations expressed in this report. The economic compensation of the analyst that prepared this report is based in several factors, including but not limited to Kallpa Securities SAB s profitability and the profits generated by its different areas, including investment banking. In addition, the analyst does not receive any kind of economic compensation from the companies he/she covers. This valuation report was prepared by Kallpa Securities SAB s employees that maintain the position of Analyst. Persons involved in the elaboration of this report are authorized to maintain shares. Share prices in this report are based on market prices as of closing of the day prior to the publication of this report, unless it is strictly stated. General statement This document is for informative purposes only. Under no circumstances it should be used / be considered as an offer of sale or an application of purchase of shares or any other securities mentioned in this document. The information herein has been obtained from sources which are believed to be reliable, but Kallpa Securities 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 any notice. Kallpa Securities SAB does not guarantee analysis updates before any change in the circumstances of the market. The products referred in this document may not be available for purchase in some countries. Kallpa Securities SAB has reasonably designed policies to prevent or to control the exchange of non-public information used by areas such Research and Investment, Capital Markets, among others. Definition of qualification ranges Kallpa Securities SAB has 5 qualification ranges: Buy +, Buy, Hold, Sell and Sell -. The analyst will assign the coverage one of these ranges. Sell - < - 30% > + 30% Buy + Sell - -30% to -15% +15% to +30% Buy Hold -15% to 0% 0% to +15% Hold The range assigned to each company covered by the analyst in these reports is based on the analysis/monitoring Kallpa Securities SAB has been developing for the company. In some cases, the analyst can express his/her short-term points of view to traders, vendors and some Kallpa Securities SAB s clients but this point of view may differ in time by market volatility and other factors. The fair value calculated 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 Alberto Arispe CEO (511) CORPORATE FINANCE Ricardo Carrión Manager (51 1) EQUITY RESEARCH Marco Contreras Sebastián Cruz Luis Vicente Stacy Arciniega Senior Analyst Analyst Analyst Assistant (51 1) (51 1) (51 1) (51 1) TRADING Eduardo Fernandini Jorge Rodríguez Eduardo Schiantarelli Head Trader Trader Trader (51 1) (51 1) (51 1) SALES - MAIN OFFICE SALES - MIRAFLORES OFFICE Hernando Pastor Daniel Berger Gilberto Mora Walter León Representative Representative Representative Representative (51 1) (51 1) (51 1) (51 1) hpastor@kallpasab.com dberger@kallpasab.com gmora@kallpasab.com wleon@kallpasab.com SALES - AREQUIPA OFFICE SALES - TRUJILLO OFFICE Jesús Molina Ricky García Marlon Díaz Representative Representative Representative (51 54) (51 54) (51 44) jmolina@kallpasab.com rgarcía@kallpasab.com mdiaz@kallpasab.com ASSET MANAGEMENT Rafael Sánchez-Aizcorbe Commercial Manager (51 1) rsanchez@kallpasab.com OPERATIONS IT Mariano Bazán Ramiro Misari Head of Operations Head of IT (51 1) (51 1) mbazan@kallpasab.com rmisari@kallpasab.com INTERNAL CONTROL ACCOUNTING Elizabeth Cueva Mireya Montero Controller Chief Accountant (51 1) (51 1) ecueva@kallpasab.com mmontero@kallpasab.com 6