Equity Research M exico

Company Note September 30, 2020 ALFA www..com A strategy aiming to unlock value @analisis_fundam

▪ Alfa has started a strategy aimed at unlocking greater value for shareholders, through the independence of its businesses and the strengthening of its financial structure Marissa Garza Director, Equity Strategy ▪ After the eventual spin-off of , the value at which Alfa's shares [email protected]

are currently trading without Nemak is ~ MXN 10.58, representing a 28.4% discount against the Net Value (NAV) BUY ▪ In that sense, through a Sum-of-the-Parts valuation model (which Current Price Alfa+Nemak MXN 13.69 Alfa Price (ex Nemak) MXN 10.58 excludes Nemak), we determined a PT2020 for Alfa shares of MXN Theoretical Price NAV MXN 14.79 14.00 vs ~MXN 10.58 as of today. Our rating is BUY Dcnt / Premium vs NAV -28.4% PT 2020 MXN 14.00 Upside Potential 32.3% Aiming for the independence of all its businesses. After announcing the Max – Min LTM ($) 17.83- 6.12 strategic decision to spin-off its shareholding in Nemak, and following the Market Cap (US$m) 2,977.2 Shares Outstanding (m) 5,058.3 approval of its shareholders' assembly, Alfa has taken the first step on its strategy Float 54.5% aimed at (1) unlocking greater value to its shareholders; (2) giving independence Daily Turnover US$m 114.1 Valuation metrics LTM to each of its businesses and exploiting their respective potential value; and (3) FV/EBITDA 6.3x maximizing the value of Alfa's shares by reducing its discount. P/E 17.1x With this in mind and hoping that Nemak's spin-off will be concluded before next Relative performance to Mexbol October 17th, the company expects to finalize the sale of Axtel's Infrastructure LTM segment or even Axtel itself by the end of 2020 or the beginning of 2021. Such resources would be allocated for strengthening its financial structure through debt reduction at holding level. After that, although in longer term, it would seek to spin-off its business, , in such a way that Alfa would only hold the food business, Sigma; thus leaving all its subsidiaries listed, independently. By updating Alfa's NAV model and assuming the potential spin- off of Nemak, Alfa's current price would be MXN 10.58. That said, through a Sum-of-the-Parts valuation model (excluding Nemak already), we determined a Sep.-19 Dec.-19 Mar.-20 Jun.-20 Sep.-20 PT2020 for Alfa shares of MXN 14.00, which would represent a 32.4% potential return (vs. the current MXN 10.58). Therefore, our rating is BUY.

Financial Statements Valuation and Financial metrics

2018 2019 2020E 2021E 2018 2019 2020E 2021E

Revenue 366,432 337,750 312,718 265,311 FV/EBITDA 4.1x 4.8x 5.7x 6.3x Operating Income 35,705 23,593 19,083 20,193 P/E 5.4x 12.1x 7.0x 6.1x EBITDA 55,178 44,280 37,145 32,284 P/BV 1.0x 1.0x 1.3x 1.1x

EBITDA Margin 15.06% 13.11% 11.88% 12.17% 13,143 5,807 10,080 11,485 ROE 11.3% 4.0% 21.2% 21.6% Net Margin 3.59% 1.72% 3.22% 4.33% ROA 3.6% 1.7% 3.3% 3.6%

EBITDA/ interest 6.1x 5.4x 4.2x 4.3x

Total 369,828 339,709 304,276 320,769 Net Debt/EBITDA 2.4x 2.7x 3.4x 3.7x Cash 26,411 25,195 26,454 36,904 Debt/Equity 1.6x 1.5x 2.2x 2.1x Total Liabilities 271,604 244,783 235,290 246,094 This document is provided for the reader’s convenience only. The translation from the original Spanish version was Debt 157,049 144,088 152,194 156,600 made by Banorte’s staff. Discrepancies may possibly arise Common Equity 98,224 94,926 68,987 74,675 between the original document in Spanish and its English Source: Banorte translation. For this reason, the original research paper in Spanish is the only official document. The Spanish version was released before the English translation. The original document entitled Una estrategia que busca detonar mayor valor” was released on September 29, 2020. 1 Document for distribution among public

ALFA – Financial statements & EBITDA Margin MXN, Millions MXN, million

Year 2018 2019 2020E 2021E CAGR 15.1% 400,000 16.0% Net Revenue 366,432 337,750 312,718 265,311 -11.4% 13.1% 350,000 12.1% 14.0% Costs of goods sold 311,771 294,707 272,865 231,500 -9.4% 11.9% 12.2% Gross profit 54,662 43,043 39,853 33,811 -14.8% 300,000 12.0% General expenses 18,956 19,449 20,769 13,618 -10.4% 250,000 10.0% Operating Income 35,705 23,593 19,083 20,193 -17.3% 200,000 8.0% 9.7% 7.0% 6.1% 7.6% -7.9% Operating Margin 150,000 6.0% Depreciation 18,956 19,449 18,062 12,090 -13.9% 100,000 4.0% EBITDA 55,178 44,280 37,145 32,284 -16.4% 50,000 2.0% EBITDA Margin 15.1% 13.1% 11.9% 12.2% -6.9% Interest Income (Expense) net (9,354) (7,524) (7,293) (8,399) -3.5% 0 0.0% Interest expense 10,017 9,687 9,834 7,913 -7.6% 2017 2018 2019 2020E 2021E Interest income 971 1,439 994 371 -27.4% Revenue EBITDA Margin Foreign exchange gain (loss) (308) 724 1,547 (857) 40.7% Unconsolidated subsidiaries 121 (271) (81) Income before taxes 26,967 14,622 8,696 13,508 -20.6% Income taxes 9,127 5,586 106 4,052 -23.7% Consolidated Net Income 13,143 5,807 10,080 11,485 -4.4% Non-controlling interest 4,818 2,958 (1,572) (2,029) -175.0% Net Income & ROE Net Income 8,325 2,849 11,652 13,514 17.5% MXN, million Net Margin 2.3% 0.8% 3.7% 5.1% 30.9% EPS 1.621 0.555 2.269 2.632 17.5%

16,000 21.2% 21.6% 25.0% Balance Sheet (Million pesos) 14,000 Total Current Assets 127,384 113,628 117,335 132,563 1.3% 20.0% 12,000 Cash & Short Term Investments 26,411 25,195 26,454 36,904 11.8% 10,000 11.3% 15.0% Long Term Assets 242,444 226,080 186,941 188,206 -8.1% 8,000 Property, Plant & Equipment (Net) 153,389 134,695 96,740 97,743 -13.9% 10.0% 6,000 4.0% Intangible Assets (Net) 89,055 91,385 90,201 90,463 0.5% 4,000 5.0% Total Assets 369,828 339,709 304,276 320,769 -4.6% 2,000 Current Liabilities 112,721 87,946 81,715 87,055 -8.3% -3.9% 0.0% 0 Short Term Debt 21,319 7,461 17,536 16,738 -7.7% -5.0% (2,000) 2017 2018 2019 2020E 2021E Accounts Payable 91,401 80,485 64,179 70,317 -8.4% Long Term Liabilities 158,883 156,837 153,575 159,039 0.0% (4,000) -10.0% Long Term Debt 135,729 136,627 134,659 139,861 1.0% Net Income ROE Total Liabilities 271,604 244,783 235,290 246,094 -3.2% Common 98,224 94,926 68,987 74,675 -8.7% Non-controlling interest 24,834 23,164 14,131 12,102 -21.3% Total Equity 73,390 71,762 54,856 62,573 -5.2% Liabilities & Equity 369,828 339,709 304,276 320,769 -4.6% Net Debt 130,638 118,893 125,740 119,696 -2.9% Net Debt & Net Debt to EBITDA ratio MXN, million

3.7x 135,000 4.0x 3.3x 3.4x 3.5x 130,000 2.7x 2.4x 3.0x 125,000 2.5x 2.0x 120,000 1.5x 1.0x 115,000 0.5x 110,000 0.0x 2017 2018 2019 2020E 2021E

Net Debt Net Debt to EBITDA

Source: Banorte, BMV.

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A new strategy: First Nemak's spin-off. A few weeks ago, Alfa surprised the market by announcing its strategic decision to spin off its 75.2% stake in Nemak -its aluminum auto parts subsidiary-. According to the company, the rationale behind this decision is to give greater independence to its auto parts business, looking at the same time to maximize the value of Alfa's shares, by reducing its conglomerate discount. Having the latter been approved by the company's Shareholders' Meeting, it is expected that Nemak's spin-off will be concluded before next October 17th. Afterwards, Alfa's shareholders will receive a new share from a new entity called 'Nemak Holding', which essentially will be the owner of Alfa's current share participation in Nemak. Once the corresponding authorizations are obtained, it will be listed on the . Thus, Nemak will become an independent company, whose strategy will continue to be focused on maximizing the potential of the business in which it has developed a leading position. Although, in first instance, both Nemak and 'Nemak Holding' will be listed on the Mexican Stock Exchange, in the future they will seek to merge both entities, so that only one will prevail, which should help improving shares’ marketability. ALFA – Current Structure ALFA – Pro forma structure (Post Nemak spin-off)

ALFA ALFA ALFA Shareholders Shareholders Shareholders

Nemak* ALFA ALFA Holding

100% 82% 53% 100% 75% 100% 82% 53% 100% 75% Sigma Alpek Axtel Newpek Nemak Sigma Alpek Axtel Newpek Nemak

Source: Alfa. Source: Alfa. * New publicly traded entity in BMV

ALFA – Current Structure ALFA – Pro forma structure (Post Nemak spin-off)

ALFA ALFA Shareholders Shareholders

Nemak ALFA Nemak Nemak* Shareholders Shareholders Holding 75% 25% 75% 25%

Nemak Nemak

Source: Alfa. Source: Alfa. * New publicly traded entity in BMV

Next: the potential independence of all its businesses. After announcing the decision to spin-off its shareholding in Nemak, the company has implemented a long-term strategy that essentially aims to: (1) unlock value to its shareholders; (2) give independence to each of its businesses and exploit their respective potential value; and (3) maximize the value of Alfa's shares by reducing its

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conglomerate discount and gradually transform itself into a . In this sense, once Nemak's spin-off is concluded, the company expects to complete the sale of Axtel's Infrastructure segment, or even Axtel itself, towards the end of 2020 or the beginning of 2021, hoping to use the resources obtained to strengthen its financial structure through debt reduction at the holding level. After that, although in a longer term, it would seek to spin-off the business, Alpek, in such a way that Alfa would only hold the food business, Sigma; thus leaving all of its subsidiaries listed independently.

ALFA – Unlocking Value 1 2 3 4

Nemak spin-off Axtel divestment Alpek spin-off Sigma Public

ALFA ALFA ALFA ALFA

Sigma Alpek Axtel Nemak Sigma Alpek Axtel Sigma Alpek Sigma

Source: Alfa, Banorte. Recently, following the strategic guideline of focusing on core assets, its energy subsidiary, Newpek, divested all of its assets in Texas, including the wells and leases in the Eagle Ford Shale and Edwards Shale formations. This was done by transferring said assets to Ensign Operating LLC and Reliance Eagleford Upstream Holding LP, in exchange for the full cancellation of their obligations in operating contracts and of their partnership. Although no further details of the transaction were disclosed, it has an implied value of US$88 million for Newpek, resulting from the obligations' cancellation. Consequently, Alfa will recognize in 3Q20 EBITDA an extraordinary US$58 million profit, which would be equivalent to ~3.0% of the company's consolidated EBITDA over the last twelve months and a little less than 1% of company’s net debt as of the end of 2Q20.

Assuming the eventual spin-off of Nemak in the NAV. Once the spin-off process is concluded, Alfa's market price should adjust to reflect the business separation. In that sense, by updating our Alfa's net asset value model, with pro forma figures upon disincorporating Nemak's operations, and taking into account current market prices of each subsidiary, we obtain the theoretical "adjusted" prices for both Alfa and 'Nemak Holding'. The market price of Alfa's shares as of today is MXN 13.69. In that sense, Alfa's price after the spin-off would be MXN 10.58, assuming the price of 'Nemak Holding' is MXN 3.11 (Nemak's equity value/Alfa’s number of shares)-(MXN 3.11+ MXN 10.58= MXN 13.69).

Usually, Alfa's shares have traded at a discount of more than 30% (even ~35% prior to the spin-off announcement day) with respect to the NAV, but as we have mentioned previously, we believe this discount should decrease with this strategic operation and even disappear as the separation from the rest of the businesses takes place. Currently, the discount at which Alfa's shares are trading with respect to the NAV is 28.4%.

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ALFA- Net Asset Value MXN thousands Current Equity Shares Price Mkt Cap Shareholding Value Debt Cash Net Debt Alpek 2,118,163 $ 15.90 33,678,786 82.1% 27,646,915 32,710,200 7,058,676 25,651,524 Axtel 2,874,800 $ 6.98 20,066,104 52.8% 10,590,890 14,885,854 857,742 14,028,112 Sigma 4,750,000 $ 12.00 57,000,000 100.0% 57,000,000 44,659,000 9,730,000 34,929,000 Total 95,237,805 92,255,054 17,646,418 74,608,636

Holding 22,155,946 1,665,582 20,490,364 ALFA ex Nemak 5,055,110 $ 10.58 53,502,353 114,411,000 19,312,000 95,099,000

Alfa theoretical value ex Nemak 74,747,441 Per share $ 14.79 $ 16.72 Discount/Premium -28.4%

Current Equity Shares Price Mkt Cap Shareholding Value Debt Cash Net Debt Nemak 3,078,076 $ 6.78 20,869,355 75.2% 15,702,103 28,605,085 5,883,451 22,721,634 Nemak Holding 5,055,110 $ 3.11 15,702,103 Fuente: Banorte, Alfa, assuming pro forma figures as of 4Q19 in accordance with Alfa's Corporate Restructuring Brochure and therefore figures from the balance sheets of the subsidiaries also as of 4Q19

We determined a PT2020 of MXN 14.00, with BUY rating. After adjusting our estimates by disincorporating Nemak's figures, we updated our SOTP valuation model. It is important to remember that in Alpek's case our PT2020 is MXN 19.00, and for Axtel is MXN 9.00. For Sigma, we assumed a FV/EBITDA multiple of 7.0x, in line with Mexican peers' in 2020e, according to Bloomberg. Additionally, we are considering a 15% conglomerate discount. In our view, said discount should drop as the strategic plan for making all subsidiaries independent moves on. Alfa’s current discount vs. NAV is 28.4%. Based on the above, we obtained a 2020 target price for Alfa's shares of MXN 14.00, which would represent a 6.3x FV/EBITDA 2021e multiple, similar to current valuation Potential return against our target price, when considering current Nemak-free adjusted Alfa price of MXN 10.58, is 32.3%. We find such yield very attractive, therefor, our rating is BUY. Sum-of-the-Parts USD million EBITDA 2020e FV/EBITDA Net Debt MKT CAP Shareholding TOTAL Price ALPEK 505 6.6x 1,510 1,829 82.0% 1,500 $ 6.53 AXTEL 300 5.7x 541 1,172 53.5% 627 $ 2.73 SIGMA 676 7.0x 1,938 2,794 100.0% 2,794 $ 12.16 NEWPEK 32 1.0x - 6 38 100.0% 38 $ 0.17 SOTP Value 4,959 Net Debt ALFA Holding 1,176 -$ 5.12 ALFA Total 3,783 Nu Shares 5,055 Price US$ x Share 0.75 FX 2020e 22.00 THEORETICAL PRICE ALFA $ 16.46 $ 16.46 Conglomerate Discount 15.0% 15% PT 2020e $ 13.99 $ 10.88

Source: Banorte Estimates

ALFA 2020 estimates. We are incorporating into our Alfa estimates Nemak's spin-off, taking into account that this will be done by next October 17th. Therefore, we are only considering ~15 days of Nemak operations into our 4Q20 estimates, and the balance sheet already reflects such transaction at the end of the

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year. In that sense, on a consolidated basis for Alfa, in 2020 we expect of MXN 312.718 billion (US$11.829 billion, 32.2% y/y ) and EBITDA of MXN 37.145 billion (US$1.512 billion, 34.8% y/y) representing 7.4% and 16.1% y/y decreases, respectively. It is important to remember that such declines are not only related to the deconsolidation of Nemak, but obviously also reflect the impacts of the pandemic, particularly in the first half of the year, with a very gradual recovery in each of the businesses towards the second half of this 2020.

At Axtel, our estimates assume revenues of MXN 12.811 billion and EBITDA of MXN 6.424 billion in 2020, representing increases of 0.2% and 43.9% y/y, respectively. These figures would be mainly bolstered by the extraordinary gain of MXN 2.021 billion, related to the sale of 3 data centers, and the resilience of Infrastructure, which would offset the lower dynamism in Alestra. Axtel’s business strategy has focused on divesting non-strategic assets, functionally separating its business units, reducing leverage, as well as restarting the competitive process to attract investors and strategic options for Axtel Networks or the entire company. In this sense, the company has divested itself of the mass market (80% to in 2018 and 20% to Megacable in 2019), sold 142 of its towers and the aforementioned data centers, transferred the 3500 to 3550 MHz frequency band concessions to AMX (recording a net profit of MXN 90 million) and formalized the "Axtel Networks" brand for its Infrastructure unit. The latter is attractive for its profitability, growth potential and valuation, strengthening Axtel's position to continue with its disinvestment plan -Alfa estimates it will be carried out towards the end of 2020 or the beginning of 2021-. Assuming that the sale is made at a FV/EBITDA 2020E multiple of 5.9x and a 15% acquisition premium, Alfa could receive between US$620 million and US$710 million for its 52.8% stake in Axtel, which would be used for reducing debt at holding level. Through a sum-of-the-parts valuation, we established our PT2020 for Axtel at MXN 9.00, representing a 7.7x FV/EBITDA 2021E, above current valuation and last year's average, both at 5.1x, on the back of a positive outlook, an adequate strategy of functionally separating its business units, and strengthening its capital structure, as part of its deleveraging strategy.

Axtel – Divestment of assets and leverage decrease Axtel – Business Units

4.0x 3.6x 3.6x 3.7x ND/EBITDA Sales 3.4x 2Q17 3.2x 4Q17 2.8x 4Q18 80% 2Q20 2T17 4T17 294 4T18 2T20 20% 175 51% 61 49%

Towers Massive Data Centers Infrastructure EBITDA Sales Services

Source: Axtel, Banorte. Source: Axtel, Banorte.

At Alpek our estimates assume MXN 109.000 billion in revenues (US$4.936 billion, -20.6% y/y) and MXN 10.058 billion in EBITDA (US$505 million, - 40.6% y/y) during 2020, representing 8.9% and 38.7% y/y decreases, respectively. During the first half of the year, the weak environment of raw

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material prices caused strong repercussions from inventory costs and raw material carry-overs, although we expect such trend to be reversed in the second half of the year, in view of a more benign price environment. In addition, the resilience of polyester segment's volumes, coupled with stable margins, should support a more favorable second half of the year for the company, in our view. In the meantime, it is important to remember that the long-term growth strategy focuses on three pillars: (1) strengthening existing businesses through a cost reduction plan, as well as investing in infrastructure for producing high-value products such as ethylene-propylene copolymers; (2) fostering a circular by meeting its minimum rPET content goals, investing in the equipment of virgin PET facilities, promoting higher recycling rates and developing biodegradable alternatives for the product portfolio; and (3) strategic and focused growth, constantly analyzing expansion opportunities, including monetization of recent innovations such as the bio-fertilizer, a carbon dioxide recovery and purification plant, and maximizing the value of Corpus Christi Polymers through efficient capital investment. Alpek – PET Margin

600 478 600 500 393 377 500 342 370 400 333 324 304 310 400 255 277 276 263 284 275 280 300 193 248 227 223 240 346 227 242 214 300 238 215 214 164 200 208 204 184 202 196 227 202 200 174 186 165 159 180 145 PET 100 200 133 135 155 140 100 74 72 80 81 104 117 110 82 78 83 77 PTA 0 69 69 62 64 60 0 2011 2012 2013 2014 2015 2016 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 2020e

PET Margin

Source: Alpek, Banorte.

At Sigma, our estimates assume MXN 138.942 billion in revenues (US$6.268 billion, -3.0% Y/Y) and MXN 14.999 billion in EBITDA (US$676 million, -3.9% Y/Y) in 2020, representing 11.6% and 10.7% y/y increases, respectively. Despite the impact of the pandemic and a subdued economic activity on results, company's defensive position and the implemented strategies should help a gradual recovery. Let us remember that Sigma has managed to position itself as a leader in its industry, through a business model focused on the acquisition of solid brands and therefore diversifying its portfolio, as well as through constant product innovation, managing to launch 250 new brands during the first half of the year, which accounted for 11% of its sales. Over the past 20 years, Sigma has gone from being a solid national company into becoming a global player with operations in 18 countries across North America, , and . Likewise, its strategy remains focused on two pillars, expansion and innovation, with the creation of Tastech, Sigma's first worldwide acceleration program for projects in development and through its two research centers where they implement their "Design thinking" system for the constant launching of new products. With this, Sigma intends to continue strengthening its position in the market.

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Sigma – Sales by geography Sigma – EBITDA by geography

Latam 6% 7% US Mexico 20% 36% Europe 35% 46% US Latam Europe 36% 13%

Source: Sigma, Banorte. Source: Sigma, Banorte.

As for Newpek, we anticipate EBITDA 2020 of US$32 million, which compares very favorably with the loss recorded in 2019 of US$90 million, yet it is important to remember that this is attributed to the US$58 million extraordinary gain related to the Texas assets' sale that we have already mentioned. The strategy will continue to concentrate efforts only on the assets in Mexico, though those are irrelevant to company's consolidated figures.

Strategy aimed at strengthening the balance sheet. As of the end of 2Q20, Alfa's ND/EBITDA ratio stood at 3.9x, and according to our estimates it could end at 3.7x in YE20. Despite the above, part of the company's strategy is focused on reducing this level below 2.5x, though it will depend on the achievement of some of the objectives discussed above, such as Axtel's sale, for which we estimate that it could receive ~US$620-710 million. Additionally, the possible sale Alfa’s land in , which has a very strategic geographical position, should help to achieve such objective.

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Certification of Analysts. We, Gabriel Casillas Olvera, Alejandro Padilla Santana, Delia María Paredes Mier, Juan Carlos Alderete Macal, Manuel Jiménez Zaldívar, Marissa Garza Ostos, Tania Abdul Massih Jacobo, Francisco José Flores Serrano, Katia Celina Goya Ostos, Santiago Leal Singer, José Itzamna Espitia Hernández, Valentín III Mendoza Balderas, Víctor Hugo Cortes Castro, Hugo Armando Gómez Solís, Miguel Alejandro Calvo Domínguez, Luis Leopoldo López Salinas, Leslie Thalía Orozco Vélez, Gerardo Daniel Valle Trujillo, Eridani Ruibal Ortega and Juan Barbier Arizmendi, certify that the points of view expressed in this document are a faithful reflection of our personal opinion on the company (s) or firm (s) within this report, along with its affiliates and/or securities issued. Moreover, we also state that we have not received, nor receive, or will receive compensation other than that of Grupo Financiero Banorte S.A.B. of C.V for the provision of our services.

Relevant statements. In accordance with current laws and internal procedures manuals, analysts are allowed to hold long or short positions in shares or securities issued by companies that are listed on the Mexican Stock Exchange and may be the subject of this report; nonetheless, equity analysts have to adhere to certain rules that regulate their participation in the market in order to prevent, among other things, the use of private information for their benefit and to avoid conflicts of interest. Analysts shall refrain from investing and holding transactions with securities or derivative instruments directly or through an intermediary person, with Securities subject to research reports, from 30 calendar days prior to the issuance date of the report in question, and up to 10 calendar days after its distribution date.

Compensation of Analysts.

Analysts’ compensation is based on activities and services that are aimed at benefiting the investment clients of Casa de Bolsa Banorte and its subsidiaries. Such compensation is determined based on the general profitability of the Brokerage House and the Financial Group and on the individual performance of each analyst. However, investors should note that analysts do not receive direct payment or compensation for any specific transaction in investment banking or in other business areas.

Last-twelve-month activities of the business areas. Grupo Financiero Banorte S.A.B. de C.V., through its business areas, provides services that include, among others, those corresponding to investment banking and corporate banking, to a large number of companies in Mexico and abroad. It may have provided, is providing or, in the future, will provide a service such as those mentioned to the companies or firms that are the subject of this report. Casa de Bolsa Banorte or its affiliates receive compensation from such corporations in consideration of the aforementioned services.

Over the course of the last twelve months, Grupo Financiero Banorte S.A.B. C.V., has not obtained compensation for services rendered by the investment bank or by any of its other business areas of the following companies or their subsidiaries, some of which could be analyzed within this report.

Activities of the business areas during the next three months.

Casa de Bolsa Banorte, Grupo Financiero Banorte or its subsidiaries expect to receive or intend to obtain revenue from the services provided by investment banking or any other of its business areas, by issuers or their subsidiaries, some of which could be analyzed in this report.

Securities holdings and other disclosures.

As of the end of last quarter, Grupo Financiero Banorte S.A.B. of C.V. has not held investments, directly or indirectly, in securities or derivative financial instruments, whose underlying securities are the subject of recommendations, representing 1% or more of its investment portfolio of outstanding securities or 1 % of the issuance or underlying of the securities issued.

None of the members of the Board of Grupo Financiero Banorte and Casa de Bolsa Banorte, along general managers and executives of an immediately below level, have any charges in the issuers that may be analyzed in this document.

The Analysts of Grupo Financiero Banorte S.A.B. of C.V. do not maintain direct investments or through an intermediary person, in the securities or derivative instruments object of this analysis report.

Guide for investment recommendations.

Reference

BUY When the share expected performance is greater than the MEXBOL estimated performance. HOLD When the share expected performance is similar to the MEXBOL estimated performance. SELL When the share expected performance is lower than the MEXBOL estimated performance. Even though this document offers a general criterion of investment, we urge readers to seek advice from their own Consultants or Financial Advisors, in order to consider whether any of the values mentioned in this report are in line with their investment goals, risk and financial position.

Determination of Target Prices

For the calculation of estimated target prices for securities, analysts use a combination of methodologies generally accepted among financial analysts, including, but not limited to, multiples analysis, discounted cash flows, sum-of-the-parts or any other method that could be applicable in each specific case according to the current regulation. No guarantee can be given that the target prices calculated for the securities will be achieved by the analysts of Grupo Financiero Banorte S.A.B. C.V, since this depends on a large number of various endogenous and exogenous factors that affect the performance of the issuing company, the environment in which it performs, along with the influence of trends of the stock market, in which it is listed. Moreover, the investor must consider that the price of the securities or instruments can fluctuate against their interest and cause the partial and even total loss of the invested capital.

The information contained hereby has been obtained from sources that we consider to be reliable, but we make no representation as to its accuracy or completeness. The information, estimations and recommendations included in this document are valid as of the issue date, but are subject to modifications and changes without prior notice; Grupo Financiero Banorte S.A.B. of C.V. does not commit to communicate the changes and also to keep the content of this document updated. Grupo Financiero Banorte S.A.B. of C.V. takes no responsibility for any loss arising from the use of this report or its content. This document may not be photocopied, quoted, disclosed, used, or reproduced in whole or in part without prior written authorization from Grupo Financiero Banorte S.A.B. of C.V. History of PT and ratings Stock Date Recommendation PT ALFA September 25, 2020 BUY $14.00 ALFA January 20, 2020 Under Review Under Review ALFA July 18, 2019 BUY $21.80 ALFA April 24, 2019 BUY $26.80

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GRUPO FINANCIERO BANORTE S.A.B. de C.V.

Research and Strategy Gabriel Casillas Olvera IRO and Chief Economist [email protected] (55) 4433 - 4695 Raquel Vázquez Godinez Assistant [email protected] (55) 1670 - 2967 Lourdes Calvo Fernández Analyst (Edition) [email protected] (55) 1103 - 4000 x 2611

Economic Research and Financial Market Strategy Executive Director of Economic Research and Financial Alejandro Padilla Santana [email protected] (55) 1103 - 4043 Markets Strategy Itzel Martínez Rojas Analyst [email protected] (55) 1670 - 2251

Economic Research Juan Carlos Alderete Macal, CFA Director of Economic Research [email protected] (55) 1103 - 4046 Francisco José Flores Serrano Senior Economist, Mexico [email protected] (55) 1670 - 2957 Katia Celina Goya Ostos Senior Economist, Global [email protected] (55) 1670 - 1821 Luis Leopoldo López Salinas Economist, Global [email protected] (55) 1103 - 4000 x 2707

Market Strategy Manuel Jiménez Zaldívar Director of Market Strategy [email protected] (55) 5268 - 1671

Fixed income and FX Strategy Santiago Leal Singer Senior Strategist, Fixed Income and FX [email protected] (55) 1670 - 2144 Leslie Thalía Orozco Vélez Strategist, Fixed Income and FX [email protected] (55) 5268 - 1698

Equity Strategy Marissa Garza Ostos Director of Equity Strategy [email protected] (55) 1670 - 1719 José Itzamna Espitia Hernández Senior Strategist, Equity [email protected] (55) 1670 - 2249 Valentín III Mendoza Balderas Senior Strategist, Equity [email protected] (55) 1670 - 2250 Víctor Hugo Cortes Castro Senior Strategist, Technical [email protected] (55) 1670 - 1800 Eridani Ruibal Ortega Analyst [email protected] (55) 1103 - 4000 x 2755 Juan Barbier Arizmendi, CFA Analyst [email protected] (55) 1670 - 1746

Corporate Debt Tania Abdul Massih Jacobo Director of Corporate Debt [email protected] (55) 5268 - 1672 Hugo Armando Gómez Solís Senior Analyst, Corporate Debt [email protected] (55) 1670 - 2247 Gerardo Daniel Valle Trujillo Analyst, Corporate Debt [email protected] (55) 1670 - 2248

Economic Studies Delia María Paredes Mier Executive Director of Economic Studies [email protected] (55) 5268 - 1694 Miguel Alejandro Calvo Domínguez Senior Analyst, Economic Studies [email protected] (55) 1670 - 2220

Wholesale Banking Armando Rodal Espinosa Head of Wholesale Banking [email protected] (81) 8319 - 6895 Alejandro Aguilar Ceballos Head of Asset Management [email protected] (55) 5268 - 9996 Alejandro Eric Faesi Puente Head of Global Markets and Institutional Sales [email protected] (55) 5268 - 1640 Alejandro Frigolet Vázquez Vela Head of Sólida Banorte [email protected] (55) 5268 - 1656 Arturo Monroy Ballesteros Head of Investment Banking and Structured Finance [email protected] (55) 5004 - 1002 Carlos Alberto Arciniega Navarro Head of Treasury Services [email protected] (81) 1103 - 4091 Gerardo Zamora Nanez Head of Transactional Banking, Leasing and Factoring [email protected] (81) 8318 - 5071 Jorge de la Vega Grajales Head of Government Banking [email protected] (55) 5004 - 5121 Luis Pietrini Sheridan Head of Private Banking [email protected] (55) 5004 - 1453 Lizza Velarde Torres Executive Director of Wholesale Banking [email protected] (55) 4433 - 4676 Osvaldo Brondo Menchaca Head of Specialized Banking Services [email protected] (55) 5004 - 1423 Raúl Alejandro Arauzo Romero Head of Transactional Banking [email protected] (55) 5261 - 4910 René Gerardo Pimentel Ibarrola Head of Corporate Banking [email protected] (55) 5268 - 9004 Ricardo Velázquez Rodríguez Head of International Banking [email protected] (55) 5004 - 5279 Víctor Antonio Roldan Ferrer Head of Commercial Banking [email protected] (55) 5004 - 1454

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