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Votorantim Celulose e Papel S.A. 09 July 2008

Update Report – 1Q 08 results

Increased focus on pulp to boost margins

ADR BUY Direct access

Fundamental toindicates
research the full report
a 17% upside free
in the of
ADR charge at 6-12 months. We have
over the next
calculated the target price based on fundamental factors, using a weighted average of target prices
http://www.iirgroup.com/researchoracle/viewreport/show/20266
obtained using DCF and comparative valuation methodologies.

Ticker: VCP
Target price: US$30.59 We upgrade the ADR (1 ADR = 1 Brazilian preferred share) from a HOLD to a BUY on fundamental
Current price: US$26.04 grounds, with a 6-12 month target price of US$30.59.

Brazilian HOLD The Brazilian preferred stock is expected to depreciate by approximately 6% over the next 6-12
months, as the 17% fundamental upside is expected to be offset by approximately 23 percentage
Preferred points’ downside attributable purely to the appreciation of the Brazilian real against the US dollar over
the same period. We continue to value the company over a 6-12 month investment horizon, as we
Stock anticipate a significant negative currency impact on the Brazilian preferred stock over the medium
term1.
Ticker: VCPA4.SA
Target price: BRL39.77
We upgrade the Brazilian preferred stock from a SELL to a HOLD, with a 6-12 month target price of
Current price: BRL42.14 BRL39.77.

Supervisor: Meera Patil

Analyst: Abhay Amlekar Investment horizon - short term actionable trading strategies
Editor: James Smithies This report addresses the needs of strategic investors with a long term investment of 6-12 months. If this report is
Global Research Director: provided to you by your broker under the Global Settlement, you may now also access (free of charge) the short term
Satish Betadpur, CFA trading outlook that we publish from time to time for this issuer, looking at the coming 5-30 days for readers with a
shorter trading horizon. These are available online only at www.researchoracle.com.
Next news due:
2Q 08 results, 17 July 2008
Report summary
Votorantim Celulose e Papel S.A.’s (VCP) 10 08 revenues and adjusted net income2 were in line with
our expectations for the quarter. After increasing its focus on pulp, the company’s revenues from
paper fell significantly, offsetting gains in pulp revenues. The global pulp market is experiencing strong
demand from China, which is driving pulp prices higher. Going forward, we expect pulp prices to
increase further, as demand from Europe and Asia is expected to outstrip supply. In addition, we
believe that new pulp capacity, set to come online in FY 2009, will drive growth in sales volumes.
Meanwhile, restructuring activities along with the anticipated depreciation of the Brazilian real are
expected to support growth in margins during FY 2009. At current levels, we believe the stock
represents a solid investment opportunity.

Currency impact for US investors

VCP reports in US dollars, which we assume is its major trading currency. Earnings forecasts are,
therefore, also expressed in US dollars. Although VCP’s has costs as well as revenues in other
currencies, we assume that the net risk is minimized through effective hedging strategies. As a result,
the impact of currency movements on the ADR price is assumed to be neutral. Wherever specific
currency risks are identified, these will be highlighted in the report.

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