Equity Research M exico

FEMSA Company Note January 22, 2021

www.banorte.com Valuation does not reflect recovery outlook @analisis_fundam

▪ Economic reopening would support a significant recovery in Consumer and Telecom Proximity, Kof, and Fuel results, where the comparison base will also be low following the impact of the pandemic Valentín Mendoza Senior Strategist, Equity ▪ [email protected] However, current valuation do not appear to incorporate this perspective, with Femsa Comercio (Femco) implicitly trading at 11.1x Juan Barbier, CFA FV/EBITDA (~20% discount vs. historical average) Analyst [email protected] ▪ We established a PT2021 of MXN 190.00, which implies an 11.4x BUY FV/EBITDA 2021E, above the current multiple but in line with the 3Y Current Price $150.29 average. In view of the positive outlook we recommend BUY PT 2021 $190.00 Dividend 2021 $3.26 Dividend Yield (%) 2.2% A good combination to invest: recovery at attractive multiples. After the Upside Potential 28.6% strong impact of the COVID-19 pandemic on Femsa's results –having faced ADR Price US$76.89 PT2021 ADR US$96.00 operating restrictions of up to 50% of its units and a beer shortage in 2Q20– Shares per ADR 10 2021 is shaping up to be a recovery year. As a result, we believe that the Max – Mín LTM ($) 181.9 – 112.5 Market Cap (US$m) 24,816.1 reopening of economic activity (although dependent on the epidemiological Shares Outstanding (m) 3,578.2 indicator), just for base effect, should be reflected in an important recovery in Float 60% Daily Turnover US$m 556.9 Oxxo, Oxxo Gas, and Kof, remembering that Proximity and the bottling Valuation metrics LTM company contribute with close to 85% of the consolidated EBITDA. FV/EBITDA 10.5x P/E 131.8x However, in our view, despite the rally that the issuer has had recently, current MSCI ESG Rating* A valuation does not fully incorporate this positive outlook. Femsa is currently trading at a discount of over 25% from the sum of the parts, while Femco's Relative performance to Mexbol LTM multiple is implicitly at 11.1x, which is 20% lower than the 14.0x historical 10% average. Consequently, we see an interesting entry point, considering that 0% there is room for appreciation in valuation parameters. In this context, we -10% updated our sum-of-the-parts valuation model, establishing our PT2021 at -20%

MXN 190.00 per linked unit. The latter represents a FV/EBITDA 2021E -30% multiple of 11.4x, above the current figure of 10.5x but in line with the 3Y -40% average at 10.9x, justified by the positive outlook. Our rating is BUY. Jan.-20 Apr.-20 Jul.-20 Oct.-20 Jan.-21 MEXBOL FEMSAUBD

Financial Statements Valuation and Financial metrics 2018 2019 2020E 2021E 2018 2019 2020E 2021E Revenue 483,513 506,910 487,389 527,013 FV/EBITDA 11.1x 9.8x 10.8x 9.6x Operating Income 42,184 47,165 40,275 45,624 P/E 22.5x 27.2x 267.3x 31.7x EBITDA 61,927 75,483 70,661 79,314 P/BV 2.1x 2.2x 2.2x 2.2x EBITDA Margin 12.8% 14.9% 14.5% 15.0% Net Income 24,084 19,936 2,027 17,097 ROE 7.2% 6.0% 0.6% 5.3% Net Margin 5.0% 3.9% 0.4% 3.2% ROA 4.2% 3.1% 0.3% 2.4% EBITDA/ interest 6.3x 5.3x 4.1x 4.3x

Total Assets 576,381 637,541 710,972 718,203 Net Debt/EBITDA 1.1x 1.6x 2.0x 1.8x

Cash 62,047 65,562 115,931 119,394 Debt/Equity 0.4x 0.6x 0.8x 0.8x Total Liabilities 240,839 311,790 393,549 388,058 Debt 131,300 187,257 260,305 259,424 This document is provided for the reader’s convenience only. The translation from the original Spanish version was Common Equity 335,542 325,751 317,422 330,146 made by Banorte’s staff. Discrepancies may possibly arise Source: Banorte between the original document in Spanish and its English 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 “Valuación no refleja perspectiva de recuperación” was released on January 18, 2021. 1 Document for distribution among the general public

FEMSA – Financial Statements Revenue & EBITDA Margin MXN, million MXN, million Income Statement 540,000 16% Year 2018 2019 2020e 2021e CAGR 15.0% 520,000 14.9% Net Revenue 483,513 506,910 487,389 527,013 2.9% 500,000 14.5% 15% Costs of goods sold 304,163 315,347 299,581 325,899 2.3% 480,000 Gross profit 179,351 191,562 187,808 201,115 3.9% 14% General expenses 135,444 141,869 145,699 153,627 4.3% 460,000 13.3% Operating Income 42,184 47,165 40,275 45,624 2.6% 440,000 12.8% Operating Margin 8.7% 9.3% 8.3% 8.7% -0.3% 13% Depreciation 19,742 28,319 30,386 33,690 19.5% 420,000 EBITDA 61,927 75,483 70,661 79,314 8.6% 400,000 12% EBITDA Margin 12.8% 14.9% 14.5% 15.0% 2017 2018 2019 2020e 2021e Interest Income (Expense) net (7,363) (13,500) (12,541) (16,135) 29.9% Interest expense 9,848 14,141 17,053 18,311 23.0% Revenue EBITDA Margin Interest income 2,903 3,171 2,332 1,450 -20.7% Other income (expense) (176) (59) 289 280 -217% Foreign exchange gain (loss) (242) (2,470) 1,891 447 -223% Unconsolidated subsidiaries 6,252 5,467 1,930 7,064 4.2% Income before taxes 40,508 33,375 29,473 36,553 -3.4% Net Income & ROE Income taxes 10,537 10,480 13,630 12,183 5.0% MXN, million Discontinued operations 3,201 Consolidated Net Income 33,172 27,286 6,652 24,371 -9.8% Non-controlling interest 9,088 7,349 4,624 7,273 -7.2% 16.9% Net Income 24,084 19,936 2,027 17,097 -10.8% 50,000 18% Net Margin 5.0% 3.9% 0.4% 3.2% 16% EPS 6.731 5.572 0.567 4.778 -10.8% 40,000 14% 12% Balance Sheet 30,000 6.0% 7.2% 10% Total Current Assets 177,607 172,579 221,048 236,695 10.0% 8% Cash & Short Term Investments 62,047 65,562 115,931 119,394 24.4% 20,000 5.3% 6% Long Term Assets 398,774 464,962 489,923 481,509 6.5% 4% Property, Plant & Equipment (Net) 108,602 114,513 102,157 93,597 -4.8% 10,000 0.6% Intangible Assets (Net) 107,183 104,483 104,067 104,067 -1.0% 2% Total Assets 576,381 637,541 710,972 718,203 7.6% 0 0% Current Liabilities 101,464 136,534 135,147 130,500 8.8% 2017 2018 2019 2020e 2021e Short Term Debt 14,079 35,737 26,375 26,339 23.2% Accounts Payable 65,669 76,676 60,089 62,086 -1.9% Net Income ROE Long Term Liabilities 139,375 175,256 258,402 257,558 22.7% Long Term Debt 117,222 151,520 233,930 233,086 25.7% Total Liabilities 240,839 311,790 393,549 388,058 17.2% Common Stock 335,542 325,751 317,422 330,146 -0.5% Non-controlling interest 78,489 73,762 73,646 80,919 1.0% Net Debt & Net Debt to EBITDA ratio Total Equity 257,053 251,988 243,777 249,227 -1.0% MXN, million Liabilities & Equity 576,381 637,541 710,972 718,203 7.6% Net Debt 69,253 121,695 144,374 140,031 26.5%

Cash Flow 2018 2019 2020e 2021e 160,000 2.0x 2.4x CF from Operating Activities 48,378 61,639 24,774 37,976 140,000 1.8x 1.6x 2.0x

CF from Investing Activities (57,663) (14,132) (21,110) (23,926) 120,000 CF from Financing Activities (23,011) (38,433) 30,198 (29,959) 1.6x 100,000 FX difference in cash & equivalents (2,602) (5,559) 16,507 19,371 1.1x Change in Cash Balance (34,897) 3,515 50,369 3,462 80,000 1.2x

60,000 0.7x 0.8x 40,000 0.4x 20,000 0 0.0x 2017 2018 2019 2020e 2021e

Net Debt Net Debt/EBITDA

Source: Banorte, BMV.

2

2021 Estimates

As we have discussed, 2021 is shaping up to be a recovery year for Femsa, especially after the strong impact of the COVID-19 pandemic on its results. Consequently, we believe that the reopening of economic activity (although dependent on the epidemiological indicator), just for base effect, should be reflected in a significant recovery in Oxxo, Oxxo Gas and Kof, recalling that Proximity and the bottling company contribute with about 85% of consolidated EBITDA. In this sense and based on our projection model, we estimate that the consolidated revenue of Fomento Económico Mexicano (Femsa) will grow 8.1% y/y to MXN 527.0 billion in 2021. Such performance would be explained by an 8.5% year-over-year advance in Proximity (37% of total sales), reflecting the reopening of economic activity and an easy comparison base after the confinement. Let us recall that at the height of the health crisis (2Q20), the company only kept 50% of its units operating without any restrictions, while the beer shortage in Mexico ‒when production ceased during the quarantine period‒ strongly impacted Oxxo's traffic, since beer sales represent approximately 15% of Proximity's revenue. As a result, we anticipate that the division's SSS will increase 6.8% y/y (traffic +2.9%; ticket +3.8%), exacerbated by a base effect. At the same time, we expect the opening of new units to resume dynamism, anticipating a more accelerated expansion in South America. Regarding the latter, we will have to wait for the acquisition of OK Market in Chile to be concluded and evaluate the performance of the new Oxxo units opened in Brazil, in association with Raizen, in order to estimate whether the business there could be scalable and determine the feasibility of Femsa seeking to increase its participation later on to acquire control. Having said the above, we anticipate a 6.3% year-over-year growth in the number of stores (1,252 net openings, equivalent to 1.5x those made in 2020). For its part, in Health (13% of total revenues) we expect an acceleration in growth rate (+10.0% y/y vs. 7.1% in 2020), boosted by a favorable FX effect related to the MXN appreciation against the CLP and COP (not so in Ecuador where Socofar and GPF operations are dollarized), and the net addition of 190 new pharmacies. In terms of same-store sales (SSS), we project them to grow 3.4% y/y, recovering modestly after the operation was constrained in South America during the pandemic (-1.8%e in 2020). Meanwhile, in Fuel (8% of consolidated revenue), we anticipate a 14.2% y/y revenue recovery (SSS +13.3%e), reflecting a rebound in sales volumes with activities resumption and energy prices increasing in line with inflation, as the granting and assignment of dispensing permits by the regulator in Mexico would continue to limit a more accelerated expansion ‒25 openings‒. As for KOF (37% of total revenues), as detailed in our note, we anticipate a 5.5% rebound in the indicator, explained by volume recovery and a favorable FX effect in South America.

At the gross level, we expect a 40bps margin erosion, explained by a 0.7pp contraction in KOF's profitability due to increased concentrate cost in Mexico and higher prices of raw materials, such as PET.

3

In terms of EBITDA, we expect a 12.2% y/y increase to MXN 79.3 billion, which would expand consolidated EBITDA margin by 50bps to 15.0%. The above should reflect 100bps improvement in Oxxo's profitability (EBITDA +17.0% y/y to MXN 26.3 billion), explained by operating leverage recovery as SSS growth resumed and sales mix normalized. Meanwhile, in Health we estimate EBITDA to grow 30% to MXN 8.0 billion and profitability to improve 180bps to 11.6%, driven by economies of scale, better absorption of fixed expenses, and the latest synergies generated between GPF and Socofar. At Fuel, it would increase 43.7% to MXN 2.5 billion and the margin would expand 1.3% to 6.1%, reflecting more favorable commercial conditions, better operating leverage as SSS recovered, and lower maintenance expenses (as lower investments in the installation of vapor recovery systems would offset expenses related to the scaling of dispensaries at some gas stations). Finally, in Coca-Cola Femsa we anticipate a 40bps decline in profitability due to the already described pressure at gross level.

At the net level, we anticipate a 7.4x higher profit than in 2020 (reaching MXN 17.1 billion). This growth would be mainly attributed to the easy comparison base that the company will face. In this regard, it is worth noting that last year the company made an extraordinary MXN 8.8 billion payment to SAT (after which the effective tax rate should normalize to 33.3%e from 46.2%e in 2020), it also recognized some asset impairments of Coca-Cola Femsa, closed the operations of Specialty's Café and Bakery, and recorded a negative impact related to its participation in Heineken's results.

Finally, we expect the company to exercise a MXN 25.4 billion Capex (+23.5% y/y), reflecting that it would finally resume units growth after the impact of the pandemic and the prudential measures implemented to preserve liquidity.

Valuation and PT2021 of MXN 190.00

By updating our sum-of-the-parts valuation, now incorporating 2021 estimates, we set our PT2021 at MXN 190.00 per linked unit. For its calculation, we assume a target FV/EBITDA multiple of 14.0x for Proximity, equal to the 3Y average at which Femsa Comercio has implicitly traded. This valuation would be higher than the current 11.1x market valuation, and higher than the 2021 global proximity stores median of 7.2x. For Health, we determined a 10.0x multiple, similar to the global pharmacy median of 10.8x, while in Fuel we set a 12.0x target, slightly below the median of a sample of companies that operate gas stations worldwide at 12.7x. Finally, in Strategic Businesses, we set a target valuation of 7.0x, similar to the median of land transportation companies (6.8x), considering that Solistica represents the largest part of this division, and we are still unclear about the figures for cleaning products and consumables distribution in the US. Finally, for Femsa's 14.8% stake in Heinken, we assume Bloomberg' s consensus PT of €90.10, use its estimated EUR/USD exchange rate of 1.22 in 2021E, and 19.80 for USD/MXN at the end of 2021, as estimated by our fixed income and FX strategy team.

4

On this basis, our PT2021 for FEMSA is MXN 190.00, representing an 11.4x FV/EBITDA 2021E, above the current multiple at 10.5x; but in line with the 3Y average of 10.9x. We believe the current valuation does not reflect the positive outlook for the issuer in 2021, especially considering that Femsa Comercio is implicitly trading at 11.1x FV/EBITDA LTM, which in our view represents an attractive entry point as there is room and catalysts for revaluation. Furthermore, the potential return of 28.6% vs. our PT (including 2.2% dividend return) is relevant, for which we reiterate our BUY rating, considering that Femsa should be part of investment portfolios this year.

Sum-of-the-Parts Valuation (SOTP) MXN million Segment EBITDA 2021E $m FV/EBITDA HoldingEV $m$/share Coca-Cola Femsa 37,943 7.7x 47.2% 137,900 38.54$ Proximity 26,250 14.0x 100.0% 367,496102.70 $ Health 8,046 10.0x 100.0% 80,46022.49$ Strategic Businesses 2,809 7.0x 100.0% 19,664 5.50$ Fuel 2,453 12.0x 100.0% 29,437 8.23$ SOTP 77,501 8.2x 634,957177.45 $ (-) Net Debt (140,031) 39.13-$ (=) Total FEMSA 494,926138.32 $ (+) Heineken 185,744 51.91$ (=) Equity Value FEMSA 680,671 Outstanding linked units 3,578

PT2021 $ 190.23 Current Price $ 150.29 Upside Potential 26.6% Source: Banorte

FEMCO- FV/EBITDA LTM (implicit) FEMSA- FV/EBITDA LTM Times Times 14 20.0x FV/EBITDA U12MLTM Promedio 3A FV/EBITDA COMERCIO Promedioaverage 3Y average 13 18.0x 12 16.0x 10.9x 14.0x 11 14.0x 10 12.0x 11.1x 9 10.0x 8 8.0x 7 4Q164T16 3Q173T17 2Q182T18 1Q191T19 4Q194T19 3Q203T20 Jan-18 Jan-19 Jan-20 Jan-21

Source: Femsa, BMV, Bloomberg, Banorte Source: Bloomberg, Banorte

5

Relative Valuation- Proximity stores

P/U FV/EBITDA Rendimiento Emisora P/VL de U12M 2020E 2021E U12M 2020E 2021E Dividendos

SEVEN & I HOLDINGS CO LTD 1.3x 19.6x 23.3x 13.2x 5.1x 5.6x 4.4x 2.5% GRUPO NUTRESA SA 1.4x 19.4x 18.7x 16.9x 10.0x 10.0x 9.3x 2.7% TESCO PLC 1.9x 23.5x 20.9x 13.3x 8.2x 9.4x 8.2x 4.0% CARREFOUR SA 1.5x 29.3x 13.2x 12.2x 7.5x 6.6x 6.6x 1.4% ALIMENTATION COUCHE-TARD -B 2.7x 12.4x 12.5x 14.4x 7.4x 7.8x 8.8x 1.0% LOBLAW COMPANIES LTD 2.1x 20.2x 14.8x 12.8x 7.8x 7.5x 7.2x 2.1% KONINKLIJKE AHOLD DELHAIZE N 2.0x 13.6x 11.1x 12.7x 6.6x 6.2x 6.6x 3.9% KROGER CO 2.5x 10.6x 10.1x 12.3x 6.8x 6.6x 7.2x 2.2%

Promedio Proximidad 1.9x 18.6x 15.6x 13.5x 7.4x 7.5x 7.3x 2.5% Mediana Proximidad 2.0x 19.5x 14.0x 13.0x 7.5x 7.1x 7.2x 2.3%

FOMENTO ECONOMICO MEXICA-UBD 2.2x131.8x31.7x23.8x 10.5x10.8x9.6x2.0% Premium/DiscountPremio/Descuento vs MedianaMedian 12.5%576.2%126.7%82.5% 40.1%52.3%33.5% Fuente: Banorte, Bloomberg Relative Valuation – Bottling companies

P/U FV/EBITDA Rendimiento Emisora P/VL de U12M 2020E 2021E U12M 2020E 2021E Dividendos

COCA-COLA CONSOLIDATED INC 5.4x 23.6x 15.5x 14.1x 7.7x 0.4% EMBOTELLADORA ANDINA-PREF B 2.3x 11.5x 15.8x 14.9x 6.5x 7.1x 6.7x 4.3% COCA-COLA EUROPEAN PARTNERS 3.1x 20.5x 23.6x 17.2x 14.0x 14.0x 11.3x 4.1% COCA-COLA ICECEK AS 2.2x 13.5x 13.6x 12.2x 7.6x 7.5x 6.5x COCA-COLA HBC AG-DI 3.9x 22.6x 22.8x 19.1x 11.3x 11.5x 10.3x COCA-COLA BOTTLERS JAPAN HOL 0.6x 36.6x 10.0x 8.9x 7.1x 1.6% COCA-COLA AMATIL LTD 7.1x 47.4x 30.0x 24.9x 17.3x 13.6x 12.2x 2.7% COCA-COLA FEMSA SAB DE CV 1.6x 21.2x 19.4x 15.4x 7.9x 7.0x 6.5x 5.2% ARCA CONTINENTAL SAB DE CV 1.4x 10.3x 17.1x 15.8x 7.9x 7.6x 7.1x 1.0% COCA-COLA EMBONOR SA-B 1.4x 15.0x 6.2x 2.6% HOKKAIDO COCA-COLA BOTTLING 0.7x 34.8x 4.1x 1.5% ANADOLU EFES BIRACILIK VE 1.2x 17.6x 19.2x 13.3x 6.3x 6.7x 5.8x 6.5% HAAD THIP PUBLIC CO LTD 2.2x 13.4x 12.5x 11.0x 7.8x 7.5x 6.9x 4.6%

Promedio Embotelladoras 2.6x 20.9x 18.9x 17.7x 8.8x 9.1x 8.0x 3.1% Mediana Embotelladoras 2.2x 19.1x 18.2x 15.4x 7.8x 7.6x 7.0x 2.7%

FOMENTO ECONOMICO MEXICA-UBD 2.2x 131.8x 31.7x 23.8x 10.5x 10.8x 9.6x 2.0% Premio/DescuentoPremium/Discount vsvs MedianaMedian -0.6% 591.8% 74.6% 54.8% 35.0% 42.4% 37.5% Fuente: Banorte, Bloomberg Relative Valuation - Pharmacies P/U FV/EBITDA Rendimiento P/E FV/EBITDA Emisora P/VL Dividendde Stock P/BV U12M 2020E 2021E U12M 2020E 2021E LTM 2020E 2021E LTM 2020E 2021E DividendosYield

CARDINAL HEALTH INC 11.5x 12.6x 9.5x 9.0x 12.5x 7.0x 6.6x 3.5% CVS HEALTH CORP 1.4x 11.5x 10.2x 10.0x 8.9x 9.6x 9.5x 2.7% WALGREENS BOOTS ALLIANCE INC 2.1x 18.5x 10.3x 9.6x 13.8x 12.8x 12.0x 3.8% RAIA DROGASIL SA 10.2x 104.5x 74.2x 51.8x 24.2x 33.6x 26.1x 0.0%

PromedioAverage Farmacias 6.3x 36.7x 26.0x 20.1x 14.8x 15.7x 13.6x 2.5% MedianaMedian Farmacias 6.2x 15.5x 10.3x 9.8x 13.2x 11.2x 10.8x 3.1%

FOMENTO ECONOMICO MEXICA-UBD 2.2x 131.8x 31.7x 23.8x 10.5x 10.8x 9.6x 2.0% Premium/DiscountPremio/Descuento vs MedianaMedian -64.4% 748.3% 209.0% 142.8% -20.3% -4.0% -10.6% Fuente: Banorte, Bloomberg Source: Banorte, Bloomberg

6

Relative Valuation – Service Stations Rendimiento P/UP/E FV/EBITDAFV/EBITDA Dividend EmisoraStock P/BVP/VL de U12MLTM 2020E 2021E U12MLTM 2020E2020E 2021E2021E Yield Dividendos DELEK US HOLDINGS INC 1.1x 15.6x PHILLIPS 66 1.6x 84.7x 24.5x 32.9x 11.4x 4.9% MARATHON PETROLEUM CORP 1.3x 22.9x 14.1x 5.1% ULTRAPAR PARTICIPACOES SA 2.7x 125.8x 29.6x 20.0x 10.7x 9.2x

PromedioAverage Estaciones de Servicio 1.7x 105.3x 29.6x 22.3x 22.2x 12.6x 5.0% MedianaMedian Estaciones de Servicio 1.5x 105.3x 29.6x 22.3x 22.9x 12.7x 5.0%

FOMENTO ECONOMICO MEXICA-UBD 2.2x131.8x31.7x23.8x 10.5x10.8x9.6x2.0% Premio/DescuentoPremium/Discount vs vsMediana Median 48.4%25.3%7.2%6.8% -53.0%-24.4% Fuente: Banorte, Bloomberg

Relative Valuation - Land transportationP/U FV/EBITDA Rendimiento Emisora P/VL de U12M 2020E 2021E U12M 2020E 2021E Dividendos

ARAMEX PJSC 2.5x 17.6x 17.6x 14.2x 7.8x 7.4x 6.8x 3.8% HYUNDAI GLOVIS CO LTD 1.4x 10.5x 12.4x 10.9x 7.0x 7.3x 6.2x 1.9% ID LOGISTICS GROUP 7.0x 94.2x 54.7x 40.8x 9.2x 8.3x 7.4x RADIANT LOGISTICS INC 2.2x 24.8x 17.4x 14.0x 7.9x 9.0x 7.7x SCHNEIDER NATIONAL INC-CL B 1.7x 18.3x 18.9x 14.8x 6.4x 6.1x 5.2x 1.1% TFI INTERNATIONAL INC 2.8x 18.5x 16.3x 14.4x 8.1x 8.3x 7.6x 1.7% TIANJIN PORT CO LTD-A 0.7x 20.3x 7.9x 7.5x 1.6% UNIVERSAL LOGISTICS HOLDINGS 2.7x 15.7x 13.1x 7.3x 5.8x 7.7x 5.6x 1.9% VALUE GROUP LTD 0.8x 4.9x 2.9x 9.5% VRL LOGISTICS LTD 2.8x 19.1x 70.7x 28.9x 9.6x 8.0x 6.5x 1.6% HUB GROUP INC-CL A 1.8x 25.0x 26.3x 18.6x 9.0x 9.3x 7.7x HUNT (JB) TRANSPRT SVCS INC 6.5x 30.6x 32.6x 25.0x 13.7x 13.8x 11.8x 0.7% HEARTLAND EXPRESS INC 2.1x 28.9x 21.5x 17.6x 7.1x 7.0x 6.2x 0.4% DASEKE INC 5.2x 25.7x 6.6x 6.3x 6.2x XPO LOGISTICS INC 4.2x 242.0x 85.3x 31.3x 13.8x 13.5x 10.6x GRUPO TRAXION SAB DE CV 0.9x 15.2x 18.8x 11.3x 5.4x 5.8x 4.7x

Promedio Transporte Terrestre 2.8x 39.0x 31.2x 19.6x 8.0x 8.4x 7.2x 2.4% Mediana Transporte Terrestre 2.3x 19.1x 18.9x 16.2x 7.8x 7.9x 6.8x 1.7%

FOMENTO ECONOMICO MEXICA-UBD 2.2x 131.8x31.7x23.8x 10.5x10.8x9.6x2.0% Premium/DiscountPremio/Descuento vs MedianaMedian -5.9% 588.5%68.0%46.9% 35.4%42.0% Fuente: Banorte, Bloomberg Source: Banorte, Bloomberg

7

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.

MSCI ESG Rating Scale History of PT and ratings CCC B BB BBB A AA AAA Stock Date Rating PT LAGGARD AVERAGE LEADER FEMSA UBD 18/01/2021 Buy $190.00 *MSCI ESG Rating is an indicator that evaluates FEMSA UBD 27/07/2020 Buy $164.00 companies in Environment, Social and Governance FEMSA UBD 29/11/2019 Buy $211.00 (ESG) metrics FEMSA UBD 04/4/2019 Hold $192.00

8

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

9