EQUITY RESEARCH | Update

July 24, 2013

Alberto Arispe Head of Research (511) 630 7500 aarispe@kallpasab.com

Marco Contreras Analyst (511) 630 7528 mcontreras@kallpasab.com

Construction Industry

Fair Value

Graa y Montero S.A.A.

PEN 10.93
NEUTRAL

Graa y Montero S.A.A.

Fair Value of Equity (PEN MM) Fair Value per Share (PEN) Previous FV - Feb. 13 (PEN) Recommendation Market Capitalization (PEN MM) Shares Market Price (PEN) Shares Outstanding (MM) Upside ADTV - LTM (PEN MM) 52 Week Range YTD Variation Dividend Yield - LTM Trading

(LSE: GRAMONC1)
7,169.61 10.93 10.60 Neutral 7,805.91 11.90 655.96 -8.2% 2.41 8.03 - 12.79 24.3% 1.3% LSE, NYSE

USD 412 MM in new funds for the company through IPO in NYSE
Kallpa Securities SAB updates Graa y Montero S.A.A. (Graa y Montero) valuation model recommending to maintain its shares within a benchmark portfolio for the Peruvian market. Our PEN 10.93 (higher than our previous PEN 10.60 fair value) is 8.2% below its PEN 11.90 market price, at 12:30 p.m. of July 24th 2013. We update our valuation due to the recent share issuance of the company in the New York Stock Exchange.

What is the new issuance about?

On July 23rd, 97.67 million new shares were issued at the NYSE through an ADS program. Below are the issuance details: Issuance price was USD 21.13 per ADS or PEN 11.75 per common share at a PEN/USD 2.78 exchange rate. 19.53 million ADS were issued on a first tranch. Each ADS represents 5 common shares. USD 412.77 million were the gross proceeds of this first tranch. There is an option to place 2.93 million ADS in a second tranch, which would mean additional US$61.92 million in gross proceeds. Taking this into account would mean our FV to increase to PEN 10.95 per share. The new funds will be used: i) 60% for infrastructure projects; ii) 20% for M&A; iii) 10% to buy land for the Real Estate business; and, iv) 10% for general corporate purposes.

Source: Bloomberg, Kallpa SAB ADTV: Average Daily Traded Volume LTM: Last Twelve Months

Financial Ratios
P/E P / BV EV / EBITDA (CA - Inventory) / CL Debt / EBITDA EBITDA / Fin. Expenses EPS (PEN) ROE ROA Backlog (USD MM)

2012
26.91 3.07 9.51 0.82 1.10 18.76 0.520 22.4% 7.2% 4,573

2013e
23.39 1.98 8.12 1.20 1.03 14.82 0.555 15.9% 5.9% 5,341

2014e
20.16 1.85 7.06 1.17 0.98 15.57 0.590 13.2% 5.4% 5,635

Why did our fair value increased?

Placement price was higher than our previous fair value (PEN 11.75 vs. PEN 10.60). Positive effect of time value of money. We discount our cash flows to today, compared to our last update, when they were discounted to February 2013. It's worth mentioning, that, in a conservative way, we are considering the new shares' issuance as only an increase in the cash of the company as they still do not give guidance on the returns of the investments they will do with the proceeds of the placement. We know this assumption is pessimistic on Graa y Montero, but we prefer to be conservative. Under this scenario, we believe the positive outlook on the company is already internalized in the stock price. For this reason, we reiterate our neutral recommendation.

Source: SMV, Kallpa SAB Note: CA and CL stand for Current Assets and Liabilities, respectively.

Chart N 1: GRAMONC1 vs. INCA

PEN
13.5 12.5 11.5 10.5 9.5 8.5 7.5 6.5 5.5 Jul-12 Feb-13 Jan-13 Aug-12 Sep-12 Nov-12 Dec-12 Mar-13 May-13 Jun-13 Oct-12 Apr-13 Jul-13 GRAMONC1 INCA

Pts.
130 125 120 115 110 105 100 95 90 85 80

Source: Bloomberg

Construction | Graa y Montero S.A.A.

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 companys 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 SABs 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 SABs 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: Overweight +, Overweight, Neutral, Underweight and Underweight - . The analyst will assign the coverage one of these ranges. Underweight Underweight Neutral < - 30% -30% to -15% -15% to 0% > + 30% +15% to +30% 0% to +15% Overweight + Overweight Neutral

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 SABs 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.

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Construction | Graa y Montero S.A.A.

KALLPA SECURITIES SOCIEDAD AGENTE DE BOLSA

MANAGEMENT Alberto Arispe CEO (511) 630 7500 aarispe@kallpasab.com TRADING Enrique Hernndez Manager (51 1) 630 7515 ehernandez@kallpasab.com CAPITAL MARKETS Ricardo Carrin Manager (51 1) 630 7500 rcarrion@kallpasab.com CORPORATE FINANCE Andrs Robles Manager (51 1) 630 7500 arobles@kallpasab.com EQUITY RESEARCH Marco Contreras Analyst (51 1) 630 7528 mcontreras@kallpasab.com OPERATIONS Elizabeth Cueva Manager (51 1) 630 7521 ecueva@kallpasab.com CHACARILLA OFFICE Hernando Pastor Representative (51 1) 626 8700 hpastor@kallpasab.com AREQUIPA OFFICE Jess Molina Representative (51 54) 272 937 jmolina@kallpasab.com TACNA OFFICE Gerson del Pozo Representative (51 52) 241 394 gdelpozo@kallpasab.com Daniel Berger Representative (51 1) 652 6453 dberger@kallpasab.com Alan Noa Head of Operations (51 1) 630 7523 anoa@kallpasab.com Mariano Bazn Analyst - Treasury (51 1) 630 7522 mbazan@kallpasab.com Ramiro Misari Head of IT (51 1) 630 7500 rmisari@kallpasab.com Edder Castro Analyst (51 1) 630 7529 ecastro@kallpasab.com Humberto Len Analyst (51 1) 630 7527 hleon@kallpasab.com Juan Franco Lazo Assistant (51 1) 630 7500 jlazo@kallpasab.com Eduardo Fernandini Head Trader (51 1) 630 7516 efernandini@kallpasab.com Javier Frisancho Trader (51 1) 630 7517 jfrisancho@kallpasab.com Jorge Rodrguez Trader (51 1) 630 7518 jrodriguez@kallpasab.com

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