DLO

DLocal Ltd

$14.05 USD 4.0B market cap 2026-01-17

DLocal Limited DLO BUFFETT / MUNGER / KLARMAN SUMMARY

1 SNAPSHOT

Price$14.05

Market CapUSD 4.0B

EVUSD 3.9B

Net DebtUSD -135M

Shares285M

2 BUSINESS

DLocal operates the dominant cross-border payment infrastructure connecting global enterprise merchants (Amazon, Google, Uber, Microsoft) to emerging markets across 40+ countries in Latin America, Africa, and Asia through a single API integration. Revenue comes from processing fees (fixed % per transaction) and FX conversion spreads on cross-border and local payments.

Revenue: USD 746M Organic Growth: 14.7%

3 MOAT NARROW

Network effects (more merchants → better FX liquidity → better rates), switching costs (single API integration across 40+ countries eliminates need for multiple local integrations), and 60+ regulatory licenses across EM markets. However, moat is NARROWING as large merchants obtain direct local licenses and global competitors (Stripe/Adyen) invest in EM infrastructure.

4 MANAGEMENT

CEO: Pedro Arnt (since 2024)

$200M share buyback program at depressed prices (good). No dividends (appropriate for growth stage). Heavy R&D investment in tech/licenses. Dual-class structure gives founders 81.6% voting control despite 47% economic ownership - governance red flag.

5 ECONOMICS

18.8% Op Margin

~20% ROIC

USD -55M FCF

-0.7x Debt/EBITDA

6 VALUATION

FCF/ShareUSD -0.19

FCF Yield-1.4%

DCF RangeUSD 9.00 - 12.00

Revenue growth: 15% (2025) declining to 5% terminal. EBITDA margin stabilizing at 25%. CapEx 3% of revenue. WACC 12% (EM fintech risk premium). Terminal multiple 12x EBITDA.

7 MUNGER INVERSION -38.3%

Kill Event	Severity	P()	E[Loss]
Major merchant disintermediation (direct local licensing)	-40%	25%	-10.0%
Multi-country EM currency crisis	-50%	15%	-7.5%
Regulatory license requirements spread globally	-25%	30%	-7.5%
Continued margin compression (EBITDA <20%)	-20%	40%	-8.0%
Top merchant loss (>10% revenue)	-35%	15%	-5.3%

Tail Risk: Non-additive scenario: EM currency crisis + merchant disintermediation + margin compression occurring together could result in >70% permanent loss. The 62% revenue concentration in top 10 merchants means a single large loss could be catastrophic.

8 KLARMAN LENS

Downside Case

In the bear case, EBITDA margins compress to 15% (payment processor commodity levels) as competition intensifies and FX spreads normalize. If P/E compresses to 12x on lower earnings, stock could trade at $5-6, representing a 60% decline from current levels.

Why Market Wrong

Market may be underestimating the stickiness of DLocal's enterprise relationships. The "one API" value proposition remains compelling for smaller merchants entering EM markets. 113% NRR shows existing merchants continue expanding. New CEO Pedro Arnt (ex-MercadoLibre CFO) brings credibility and EM expertise.

Why Market Right

The bears correctly identify that DLocal's moat is eroding. The Brazil licensing example shows that at scale, merchants WILL pursue direct integration. Argentina FX bonanza is permanently gone. 62% concentration in top 10 merchants means repricing risk is always one renegotiation away. Negative FCF in 2024 is a real concern for a supposedly asset-light model.

Catalysts

Return to positive FCF and EBITDA margin stabilization above 27% would signal the investment phase is ending. A major new merchant win (top-10 global company) would demonstrate continued moat relevance. Stripe/Adyen acquisition interest would establish floor value.

9 VERDICT WAIT

B+ T3 Adaptable

Strong Buy$7

Buy$8.5

Sell$16.5

DLocal operates a genuine business solving a real problem for enterprise merchants needing EM payment infrastructure. However, at $14.05 the stock is 25-40% overvalued relative to conservative DCF and private market comparables. With negative FCF, declining margins, and an eroding moat, there is no margin of safety. WAIT for $8.50 or below (30% MOS) before initiating a position. Monitor NRR, EBITDA margin, and FCF quarterly.

🧠 ULTRATHINK Deep Philosophical Analysis

DLO - Ultrathink Analysis

Deep philosophical analysis in the Buffett/Munger tradition

The Real Question

What problem are we actually solving by investing in DLocal?

The surface answer is "we're investing in emerging market payment infrastructure." But that misses the point. The real question is: Is the complexity of emerging market payments a durable source of economic profit, or is it a temporary friction that technology and regulatory harmonization will inevitably eliminate?

DLocal's entire thesis rests on the idea that emerging markets are permanently complex - that Brazil, Mexico, Nigeria, Egypt, and 35+ other countries will forever require local knowledge, local licenses, local banking relationships, and local regulatory navigation that global merchants cannot efficiently replicate.

If you believe emerging markets will remain balkanized payment islands indefinitely, DLocal is a toll bridge operator collecting fees on every crossing. If you believe payments will eventually standardize globally (as they have in developed markets), DLocal is building sand castles at low tide.

The honest answer is: I don't know. And that uncertainty demands a substantial margin of safety that current prices don't provide.

Hidden Assumptions

The market is making several implicit assumptions that deserve scrutiny:

Assumption 1: Enterprise Merchants Need DLocal

The market assumes that Amazon, Google, Uber, and Microsoft must use DLocal. But we already have counter-evidence: a major commerce merchant in Brazil was "required to connect directly with acquirers in order to remain compliant." This single sentence in the earnings call reveals the uncomfortable truth - at sufficient scale, merchants will pursue direct integration because regulators may require it.

Assumption 2: Network Effects Are Strong

DLocal claims better FX liquidity from more merchant volume. But FX markets are already liquid for major EM currencies. The "network effect" may be marginal rather than compounding. A true network effect (like Facebook's or Visa's) would show accelerating returns - instead, we see decelerating revenue growth and compressed margins.

Assumption 3: Licenses Are Barriers

60+ regulatory licenses sound impressive. But licenses are binary - you either have one or you don't. Once Stripe or Adyen obtains the same licenses (and they have the resources to do so), this "moat" evaporates. Licenses are a speed bump, not a wall.

Assumption 4: EM Payments Are Growing

This is probably true. But growth is not the same as profit. Payments is a scale business where the largest player often captures all the economics. DLocal is a mid-sized player in a fragmenting market. Being "the best in emerging markets" may mean little if Stripe becomes "good enough in emerging markets."

The Contrarian View

What would have to be true for the bears to be right?

Stripe/Adyen execute in EM. If Stripe achieves 80% of DLocal's functionality in key markets, enterprise merchants will consolidate vendors. DLocal's entire value proposition is avoiding multiple integrations - but so is Stripe's. One global provider beats one EM provider.
Merchants learn to self-serve. The "complexity" DLocal monetizes is learnable. Once Amazon builds EM expertise internally, they won't need a middleman. The Brazil licensing example shows this is already happening.
FX spreads compress permanently. Argentina's peso devaluation showed how much revenue came from FX arbitrage rather than payment processing. As EM currencies stabilize and capital markets develop, FX spreads will normalize toward developed market levels (near zero).
The dual-class structure protects founders, not shareholders. Founders control 81.6% of votes with 47% of economics. If the business deteriorates, minority shareholders have no ability to force change. The insiders can extract value through salaries, related-party transactions, or simply inaction while the stock declines.

The contrarian case is not that DLocal will fail - it's that DLocal will survive but never generate the returns necessary to justify current valuations.

Simplest Thesis

DLocal is a toll bridge operator whose bridge may become optional.

That's it. The business works today because crossing the EM payment chasm is hard. If the chasm narrows or alternative bridges are built, the tolls disappear.

Why This Opportunity Exists

The mispricing (if it exists) stems from three sources:

Narrative hangover. DLocal IPO'd at a $10B+ valuation during the 2021 fintech bubble with a story of "Stripe for emerging markets." That story was always exaggerated. The current ~$4B valuation reflects reality but may overshoot to the downside.
Argentina obscured true economics. From 2021-2023, Argentina FX spreads contributed outsized profits that masked the underlying business quality. Now that Argentina has normalized, we're seeing the "real" DLocal: a good but not exceptional business with 25% EBITDA margins, not the 36%+ margins investors expected.
Growth investor exodus. DLocal's revenue growth decelerated from 55%+ to 15%. Growth investors don't care about business quality - they care about momentum. The stock is orphaned between growth investors (who've left) and value investors (who aren't yet interested at current prices).

The opportunity will emerge when the stock falls to value investor territory ($7-9) where the intrinsic value provides genuine margin of safety even in pessimistic scenarios.

What Would Change My Mind

I would become bullish if:

EBITDA margins stabilize above 28% for two consecutive years. This would prove the investment cycle is ending and the business has structural profitability.
FCF returns to $100M+ annually. Negative FCF in an "asset-light" model is unacceptable. Positive FCF would demonstrate capital discipline.
NRR exceeds 120% for four consecutive quarters. This would show accelerating share-of-wallet gains despite merchant maturation.
A top-5 global merchant publicly commits to multi-year expansion with DLocal. Public endorsement would validate the moat.
Stock price falls to $8 or below. At that price, even mediocre execution yields acceptable returns.

Conversely, I would become permanently bearish if:

NRR falls below 100% (merchants shrinking)
A second top-10 merchant pursues direct licensing
Stripe announces major EM initiative with competitive pricing
Negative FCF continues for three consecutive years

The Soul of This Business

What makes DLocal's competitive position inevitable or fragile?

The fragile truth: DLocal's position is not inevitable - it's contingent.

The company exists because:

Global merchants want a single integration point for EM payments
Local regulations require specialized knowledge and licenses
FX liquidity in EM currencies is fragmented
Local payment methods (PIX in Brazil, UPI in India, M-PESA in Kenya) require custom integrations

Each of these conditions is changeable. Regulations can harmonize. FX markets can deepen. Payment methods can standardize. Competitors can invest.

The soul of this business is convenience - saving enterprise merchants the hassle of 40+ integrations. But convenience is a weak moat. It's nice to have, not must-have. When merchants become large enough that EM is strategic (not experimental), they will insource.

The hopeful truth: Emerging market complexity may actually increase before it decreases. New payment methods proliferate. Regulations tighten. Currencies remain volatile. The world is not converging toward simplicity - it may be diverging toward more fragmentation.

If EM payments become MORE complex, DLocal's value increases. This is the bullish bet.

The question is whether you believe in convergence (bearish) or divergence (bullish). History suggests eventual convergence - but "eventual" could be 20+ years.

The Patient Investor's Path

Do not buy at current prices.

$14.05 prices in a recovery that hasn't happened. You're paying for optionality without getting compensated for risk.

Wait for $8.50 or below. At that price:

P/E compresses to ~14x forward earnings
EV/Revenue falls to 2.5x (private market floor)
Margin of safety emerges for the bear case

If it never reaches $8.50, that's fine. There are other opportunities. DLocal isn't a must-own business - it's a nice-to-own business if the price is right.

If it reaches $7 or below, consider a 2% position. At that level, even permanent margin compression to 15% EBITDA yields acceptable returns over 5 years.

Monitor quarterly:

NRR (must stay >105%)
EBITDA margin (must stabilize >25%)
FCF (must turn positive)
Top 10 concentration (must not increase)

The virtue of waiting is time. Each quarter of data reveals whether the moat is narrowing or stabilizing. There is no urgency. The opportunity will either become compelling or disappear - either outcome beats overpaying today.

"The big money is not in the buying and the selling, but in the waiting." - Charlie Munger

Wait.

Executive Summary

3-Sentence Investment Thesis

DLocal operates the dominant cross-border payment infrastructure connecting global enterprise merchants to emerging markets across Latin America, Africa, and Asia through a single API integration. The company benefits from a genuine network effect moat with 113% NRR and 92% TPV CAGR since 2016, serving tier-zero merchants like Amazon, Google, Microsoft, and Uber who have no practical alternative for multi-country emerging market payment processing. However, declining margins (EBITDA margin from 36.5% in 2022 to 25.3% in 2024), negative FCF in 2024, high customer concentration (62% from top 10), and exposure to volatile EM currencies create significant execution risk that warrants patience for a better entry point.

Key Metrics Dashboard

Metric	Value	Assessment
Price	$14.05	Near 52-week high
Market Cap	$4.0B	Mid-cap fintech
P/E (TTM)	25.1x	Moderate for growth
P/E (Forward)	16.7x	Attractive if growth holds
EV/EBITDA	16.0x	Fair for sector
ROE (2024)	24.6%	Strong, but declining
Revenue Growth (YoY)	14.7%	Decelerating from 55%+
TPV Growth (YoY)	44.7%	Still robust
NRR	113%	Healthy expansion
EBITDA Margin	25.3%	Down from 36.5% (2022)
FCF (2024)	-$55M	Negative - concerning
Net Cash	~$135M	Adequate liquidity

Decision: WAIT

Primary Concern: Margin compression and negative FCF in FY2024 Required Entry: $10-11 (30% margin of safety) Catalyst Needed: Margin stabilization + return to positive FCF

Phase 0: Opportunity Identification (Klarman)

Why Does This Opportunity Exist?

Post-IPO De-rating: Stock down ~65% from IPO high of ~$40. Market punished aggressive growth narrative as margins compressed.
Argentina FX Volatility: Argentina represented significant FX spread revenue (29% of GP in Q1 2023, now 8%). The December 2023 peso devaluation crushed this high-margin business.
Customer Repricing: Largest merchant (likely Amazon or similar) achieved volume tier and renegotiated lower fees in Q1 2024.
Class Action Lawsuit: Named in securities fraud class action (October 2023) alongside former co-CEO. Creates headline risk.
Brazil License Issue: Lost share of wallet with a top commerce merchant when that merchant was required to obtain direct acquirer licenses for regulatory compliance.

Is This a Temporary or Permanent Problem?

Mixed Assessment:

Temporary: Argentina FX normalization, merchant repricing is one-time, lawsuit settlement likely
Potentially Permanent: Margin pressure from competition, merchant disintermediation risk, regulatory fragmentation requiring direct licenses

Phase 1: Risk Analysis (Inversion Thinking)

How Could This Investment Lose 50%+ Permanently?

Disintermediation: Large merchants bypass DLocal by obtaining local licenses directly (already happening in Brazil). If Amazon, Google, and other top-10 merchants (62% of revenue) pursue direct integration, the entire business model collapses.
EM Currency Crisis: A coordinated emerging market currency crisis (Brazil real, Mexican peso, Egyptian pound, Nigerian naira) could vaporize FX revenue and reduce merchant appetite for EM expansion.
Regulatory Balkanization: Each country requiring local licenses undermines the "one API" value proposition. We're already seeing this in Brazil.
Competition from Stripe/Adyen: If Stripe or Adyen aggressively builds EM infrastructure, they could poach enterprise merchants who prefer a single global provider.
Execution Failure: New CEO Pedro Arnt (joined mid-2024) may fail to stabilize margins or alienate enterprise relationships.

Top 10 Risks Quantified

Risk	Probability	Severity	Expected Loss
Major merchant disintermediation	25%	-40%	-10.0%
EM currency crisis (multi-country)	15%	-50%	-7.5%
Regulatory license requirements spread	30%	-25%	-7.5%
Continued margin compression	40%	-20%	-8.0%
Class action settlement/distraction	50%	-10%	-5.0%
Competition (Stripe/Adyen EM push)	20%	-30%	-6.0%
Key person risk (CEO turnover)	15%	-15%	-2.3%
Brazil growth stagnation	35%	-15%	-5.3%
Negative FCF continues 2+ years	30%	-25%	-7.5%
Top merchant loss (>10% revenue)	15%	-35%	-5.3%
Total Expected Downside			-64.4%

Note: Risks are not fully additive; correlation exists between EM currency crisis and margin compression.

Bear Case Summary (3 Sentences)

DLocal's "one API" moat is eroding as large merchants discover they must obtain local licenses anyway for regulatory compliance, making the integration convenience less valuable. Argentina's FX spread bonanza is permanently gone as the currency stabilizes, and similar dynamics will play out in other high-margin EM countries. The company is spending heavily on tech and back-office while revenue growth decelerates, leading to permanent margin compression toward commodity payment processor levels (10-15% EBITDA margin).

Pre-Defined Sell Triggers

Thesis Break: Top 3 merchant announces direct licensing strategy bypassing DLocal
Moat Erosion: NRR falls below 100% for two consecutive quarters
Management Failure: CEO turnover within 18 months OR material accounting restatement
Financial Deterioration: Negative FCF for 3 consecutive years

Phase 2: Financial Analysis

ROE Decomposition (DuPont)

Year	Net Margin	Asset Turnover	Equity Multiplier	ROE
2024	16.1%	0.64x	2.40x	24.6%
2023	22.9%	0.60x	2.38x	32.7%
2022	25.9%	0.52x	2.07x	27.9%
2021	31.9%	0.40x	2.08x	26.5%
2020	27.1%	0.50x	4.45x	60.3%*

*2020 ROE inflated by low equity base pre-IPO

Trend: ROE declining primarily due to margin compression, partially offset by leverage increase.

Owner Earnings Calculation

FY2024 Owner Earnings:
  Net Income:                    $120.4M
  + D&A:                         $17.4M
  - CapEx:                       $22.6M
  - Working Capital Change:      $150M (est. based on OCF)
  = Owner Earnings:              -$35M (approximately)

Assessment: Negative owner earnings in 2024 is a major red flag. The business consumed cash rather than generating it, primarily due to working capital growth outpacing income.

Valuation Trinity

1. Liquidation Value (Floor)

Item	Value
Total Current Assets	$1,073M
Total Liabilities	$682M
Net Current Asset Value	$391M
Shares Outstanding	~285M
NCAV per Share	$1.37

Current price ($14.05) is 10x NCAV - no margin of safety from liquidation perspective

2. DCF Valuation (Conservative)

Assumptions:

Revenue Growth: 15% (2025), 12% (2026), 10% (2027-2029), 5% terminal
EBITDA Margin: 25% stabilizing (current level)
CapEx: 3% of revenue
WACC: 12% (EM fintech risk premium)
Terminal Multiple: 12x EBITDA

Year	Revenue	EBITDA	FCF
2025E	$858M	$214M	$175M
2026E	$961M	$240M	$197M
2027E	$1,057M	$264M	$217M
2028E	$1,163M	$291M	$239M
2029E	$1,279M	$320M	$263M
Terminal		$336M

DCF Value: ~$3.2B = $11.20/share

3. Private Market Value

Recent fintech M&A comps:

Paysafe (2021): 3.5x revenue
Worldline/Ingenico: 2.8x revenue
Bill.com/Divvy: 5x revenue (growth premium)

At 3.5x revenue: $746M x 3.5 = $2.6B = $9.10/share At 4.0x revenue: $746M x 4.0 = $3.0B = $10.50/share

Margin of Safety Analysis

Method	Value	Current Price	MOS
NCAV	$1.37	$14.05	-90% (overvalued)
DCF (Conservative)	$11.20	$14.05	-25% (overvalued)
Private Market (3.5x)	$9.10	$14.05	-54% (overvalued)
Private Market (4.0x)	$10.50	$14.05	-34% (overvalued)

Conclusion: At current prices, there is NO margin of safety. Stock appears 25-50% overvalued on most metrics.

Relative Valuation

Company	EV/Revenue	EV/EBITDA	P/E
DLocal	4.3x	16.0x	25.1x
Adyen	12.5x	35x	55x
PayPal	2.1x	10x	17x
Block (SQ)	1.8x	18x	35x
PagSeguro	1.5x	8x	10x

Assessment: DLocal trades at a premium to most payment peers but discount to Adyen. Premium seems unwarranted given declining margins and negative FCF.

Phase 3: Moat Analysis

Moat Sources

Source	Present?	Strength	Evidence
Network Effect	Yes	Medium	More merchants → better FX liquidity → better rates
Switching Costs	Yes	Medium	Single API integration across 40+ countries
Regulatory Licenses	Yes	Medium	60+ licenses across EM markets
Scale Economies	Partial	Low-Medium	Processing cost leverage exists
Brand	No	Weak	B2B, not consumer-facing

Moat Width Assessment: NARROW

Why Not Wide:

Large merchants can and do obtain local licenses (Brazil example)
Stripe/Adyen could replicate with sufficient investment
FX spreads are commoditizing as markets develop
62% revenue concentration means moat depends on few relationships

Moat Durability Test

Force	Severity (1-5)	Timeline	Mitigation
Merchant direct licensing	4	3-5 years	Orchestration layer pivot
Stripe/Adyen EM expansion	3	5+ years	First-mover depth
Regulatory fragmentation	3	Ongoing	License portfolio
EM currency stability	2	Variable	Geographic diversification
Tech disruption	2	5+ years	Continuous R&D investment

10-Year Moat Trajectory: NARROWING

The "one API" convenience moat is eroding as:

Regulatory environments mature and require local presence
Global competitors invest in EM infrastructure
Merchant sophistication increases

Phase 4: Management & Incentive Analysis

Leadership

Role	Name	Since	Background
CEO	Pedro Arnt	2024	Former MercadoLibre CFO (18 years)
CFO	Mark Ortiz	2024	Former Adtalem CFO
Founder	Sebastián Kanovich	2016	Stepped down as co-CEO 2024

Insider Ownership

Shareholder	Shares	% Outstanding	Voting %
Class B Holders (Founders/Early)	134M	47.0%	81.6%
General Atlantic	57M+ Class A	20%+	~6%
Mastercard (Strategic)	Undisclosed	~3%	~1%

Assessment: Dual-class structure gives founders 81.6% voting control despite 47% economic ownership. This is a governance red flag - minority shareholders have limited influence.

Capital Allocation Track Record

Use	2022-2024	Assessment
Buybacks	$200M program	Good - repurchasing at depressed prices
Dividends	$0	Appropriate for growth stage
M&A	Minimal	Disciplined
Organic CapEx	~$60M	Heavy R&D investment
Debt	Minimal	Conservative

Score: B+ - Buybacks at depressed prices are smart, but no M&A track record to judge.

Compensation Alignment

CEO Pedro Arnt's compensation is not yet fully disclosed (joined mid-2024), but prior regime showed:

Heavy equity-based compensation
Performance metrics tied to TPV and revenue growth (not profitability)

Concern: Incentives favor growth over margin discipline.

Phase 5: Catalyst Analysis

Potential Positive Catalysts

Catalyst	Timeline	Probability	Impact
Margin stabilization (EBITDA >28%)	2-4 quarters	40%	+20%
Return to positive FCF	2-4 quarters	50%	+15%
Major new merchant wins	Ongoing	60%	+10%
Brazil growth re-acceleration	4-6 quarters	30%	+15%
Acquisition by Stripe/PayPal	2+ years	10%	+50%

Potential Negative Catalysts

Catalyst	Timeline	Probability	Impact
Major merchant loss	Any time	20%	-25%
Class action settlement >$50M	12-18 months	30%	-10%
Continued margin decline	Ongoing	40%	-20%
EM currency crisis	Unpredictable	15%	-35%

No-Catalyst Assessment

Without a clear catalyst for margin stabilization, the stock could remain range-bound or drift lower. Require 30%+ margin of safety given catalyst uncertainty.

Phase 6: Decision Synthesis

Valuation Summary

Method	Value/Share	vs Current	MOS
Graham Number	N/A (EPS unclear)	-	-
NCAV	$1.37	-90%	None
DCF (Conservative)	$11.20	-20%	None
Private Market Value	$9.10-$10.50	-25% to -34%	None
Peer Multiple (15x EBITDA)	$10.00	-29%	None

Intrinsic Value Estimate: $10-11 per share Current Price: $14.05 Margin of Safety: NEGATIVE (-27% to -40%)

Buy/Sell Price Levels

Level	Price	Rationale
Strong Buy	$7.00	36% below IV, Graham-level MOS
Buy	$8.50	30% below IV
Accumulate	$10.00	20% below IV
Fair Value	$11.00	DCF midpoint
Take Profits	$13.20	20% above IV
Sell	$16.50	50% above IV

Position Sizing

Recommended: 0% (WAIT for better entry)

If entering at $8.50 (30% MOS):

Tier 2 (Resilient) megatrend score → 2-3% max position
Narrow moat narrowing → 0.7x multiplier
No clear catalyst → 0.7x multiplier
Position Size: 2% × 0.7 × 0.7 = 1.0% of portfolio

Expected Return Scenarios

Scenario	Probability	3-Year Return	Weighted
Bull (margins recover, 20x P/E)	20%	+60%	+12%
Base (margins stable, 18x P/E)	45%	+15%	+6.8%
Bear (margin compression, 12x P/E)	25%	-30%	-7.5%
Disaster (moat collapse)	10%	-60%	-6.0%
Expected Return	100%		+5.3%

Risk-adjusted return is inadequate at current prices. Expected return barely exceeds risk-free rate.

Final Recommendation

┌─────────────────────────────────────────────────────────────────┐
│                     INVESTMENT RECOMMENDATION                    │
├─────────────────────────────────────────────────────────────────┤
│ Company: DLocal Limited            Ticker: DLO                  │
│ Current Price: $14.05              Date: 2026-01-17             │
├─────────────────────────────────────────────────────────────────┤
│ INTRINSIC VALUE ESTIMATE: $10.50 (weighted average)             │
│ MARGIN OF SAFETY: -34% (OVERVALUED)                             │
├─────────────────────────────────────────────────────────────────┤
│ RECOMMENDATION:  [ ] BUY  [ ] HOLD  [ ] SELL  [X] WAIT          │
├─────────────────────────────────────────────────────────────────┤
│ STRONG BUY PRICE:        $7.00  (33%+ MOS)                      │
│ BUY PRICE:               $8.50  (30% MOS)                       │
│ ACCUMULATE PRICE:        $10.00 (20% MOS)                       │
│ FAIR VALUE:              $11.00                                 │
│ CURRENT PRICE:           $14.05 (27% OVERVALUED)                │
├─────────────────────────────────────────────────────────────────┤
│ POSITION SIZE: 0% (Wait for entry)                              │
│ CATALYST: Margin stabilization + return to positive FCF         │
│ PRIMARY RISK: Merchant disintermediation / moat erosion         │
│ SELL TRIGGER: NRR < 100% for 2 consecutive quarters             │
└─────────────────────────────────────────────────────────────────┘

Monitoring Metrics

Metric	Current	Yellow Flag	Red Flag	Action
NRR	113%	<110%	<100%	Reassess thesis
EBITDA Margin	25.3%	<23%	<20%	Reduce IV estimate
FCF	-$55M	Negative 2 years	Negative 3 years	Exit
Top 10 Concentration	62%	>65%	>70%	Increase risk discount
Brazil Revenue %	20%	<18%	<15%	Assess moat erosion

Psychology Check (Munger)

Bias	Check	Status
Incentive-caused bias	Am I being paid to recommend?	No
Social proof	Do respected investors own it?	Mixed (GA yes, Buffett no)
Liking tendency	Do I like the product?	N/A (B2B)
Deprival super-reaction	Am I buying because it dropped?	Possible - 65% off highs
Availability bias	Am I overweighting recent news?	Monitoring
Excessive self-regard	Am I overconfident?	DCF assumptions are moderate

Final Munger Test: If this dropped 50% tomorrow to $7, would I buy more or panic? Answer: At $7, I would initiate a 2% position. At current $14.05, I would panic about overpaying.