Equity Research

Quarterly Report February 24, 2020 TLEVISA www..com Content grew while profitability improved @analisis_fundam

▪ ´s report beat expectations, as Content revenues grew y/y aided Consumer and Telecoms by stable advertising sales, while Cable segment maintained solid dynamics Valentín Mendoza Senior Strategist, Equity ▪ Particularly, the 110bp profitability improvement, due to operating [email protected] efficiencies, stood out. Thus, results should be welcomed by the market. Jorge Izquierdo We will release our PT2020 shortly Analyst [email protected] Operating efficiencies boosted margin expansion. In spite of a challenging economic environment and a significant drop in government advertising Under review Current Price $42.84 expenditures, Televisa´s figures came above expectations. Revenues growth PT 2020 accelerated (+4.7% y/y) to $28,003 million, while EBITDA increased 7.7% to Dividend 2020e Dividend Yield (%) $10,660 million with a 110bp margin expansion to 38.1%. The latter was Upside Potential ADR current price US$11.34 explained by operating efficiencies which contributed to a 7.0% y/y reduction PT2020 ADR in operating expenses. Meanwhile, Content segment sales growth (+2.4% y/y) # Shares per ADR 5 Max – Mín LTM ($) 49.64 – 28.98 was a nice surprise, after advertising revenues stabilized (+0.3% y/y), though Market Cap (US$m) 6,557.0 its impressive 170bp margin improvement was another plus on the report. Cable Shares Outstanding (m) 2,882.4 Float 80% segment continued posting double-digit growth rates (15.7%), supported by a Daily Turnover US$m 98.4 6.8% RGU increase and a 4.5% advance in ARPU, yet profitability decreased Valuation metrics TTM FV/EBITDA 6.2x by 80bp. It is worth mentioning that both offset a 1.5% drop in Sky and a 15.3% P/E 26.1x decrease in Other Business. Finally, net profit was 43x higher than a year ago, bolstered by the solid operating growth (+37.4%), a lower comprehensive Relative performance to Mexbol LTM financial cost (39.6% y/y) –due to FX gains-, and a lower effective tax rate. 10% Attention on news regarding Univision. After the report, the FV/EBITDA 0% LTM multiple dropped to 6.2x since previous level of 6.4x. We will keep paying -10% close attention to any commentaries related to the possible sale of Univision in -20% the earning’s conference call, which will take place tomorrow. Our PT2020 will -30% -40% be released shortly. Feb-19 Jun-19 Oct-19 Feb-20

MEXBOL TLEVICPO

Financial Statements Valuation and Financial metrics

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

Revenue 101,282 101,492 103,281 104,597 EV/EBITDA 6.2x 6.2x 6.3x 6.3x Operating Income 20,253 17,209 18,371 18,965 P/E 20.6x 26.1x 35.2x 33.7x

EBITDA 38,524 39,313 38,962 39,373 P/BV 1.4x 1.4x 1.5x 1.5x

EBITDA Margin 38.0% 38.7% 37.7% 37.6% Net Income 6,009 4,722 3,483 3,636 ROE 5.9% 4.5% 3.4% 3.8%

Net Margin 5.9% 4.7% 3.4% 3.5% ROA 2.0% 1.6% 1.2% 1.2% EBITDA/ Interest 4.0x 3.8x 3.7x 3.7x Total Assets 297,842 290,422 295,337 291,798 Net Debt/EBITDA 2.6x 2.7x 2.8x 2.9x

Cash 32,068 27,452 25,682 20,331 Debt/Equity 1.3x 1.3x 1.4x 1.4x Total Liabilities 48,953 42,368 54,873 56,211 Debt 131,135 133,568 133,888 133,953 This document is provided for the reader’s convenience only. The translation from the original Spanish version was Common Equity 104,781 105,500 97,604 92,664 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 “Crece Contenidos y mejora la rentabilidad” was released on February 20, 2020. 1 Document for distribution among public

TLEVISA – Results 4Q19 Revenue & EBITDA Margin MXN, million MXN, million Diff% vs Concept 4Q18 4Q19 Var % 4Q19e Estim. Revenue 26,735 28,003 4.7% 27,232 2.8% 29,000 41% Operating Income 3,664 5,033 37.4% 4,496 11.9% 40.0% 28,000 Ebitda 9,901 10,660 7.7% 9,963 7.0% 39.0% 40% Net Income 56 2,506 >500% 1,122 123.4% 27,000 39% Margins 26,000 37.9% 38.1% Operating Margin 13.7% 18.0% 4.3pp 16.5% 1.5pp 25,000 37.0% 38% Ebitda Margin 37.0% 38.1% 1.1pp 36.6% 1.5pp 24,000 Net Margin 0.2% 8.9% 8.7pp 4.1% 4.8pp 37% EPS $0.02 $0.87 >500% $0.39 122.3% 23,000 36% 22,000

21,000 35% Income Statement (Million pesos) 4Q18 1Q19 2Q19 3Q19 4Q19 Year 2018 2019 2019 Change Change Revenue EBITDA Margin Quarter 4 3 4 % YoY % QoQ

Net Revenue 26,735 25,786 28,003 4.7% 8.6% Costs of goods sold 15,490 14,947 16,699 7.8% 11.7% Gross profit 11,245 10,840 11,304 0.5% 4.3% General expenses 6,492 5,855 6,037 -7.0% 3.1% Net Income & ROE Operating Income 3,664 4,596 5,033 37.4% 9.5% MXN, million Operating Margin 13.7% 17.8% 18.0% 4.3pp 0.2pp Depreciation 5,147 5,321 5,392 4.8% 1.3% EBITDA 9,901 10,306 10,660 7.7% 3.4% 3,000 8.0% EBITDA Margin 37.0% 40.0% 38.1% 1.0pp (1.9pp) 6.7% 6.5% 7.0% Interest Income (Expense) net (2,314) (2,870) (1,398) -39.6% -51.3% 2,500 5.2% Interest expense 2,670 2,861 2,557 -4.2% -10.6% 6.0% 2,000 Interest income 405 565 318 -21.4% -43.7% 5.0% Other income (expense) 254 355 (560) N.A. N.A. 1,500 2.8% 4.0% 2.6% Foreign exchange gain (loss) (303) (929) 1,401 N.A. N.A. 3.0% Unconsolidated subsidiaries (378) 160 91 N.A. -42.8% 1,000 2.0% Income before taxes 972 1,885 3,726 283.5% 97.6% 500 Income taxes 592 727 804 35.8% 10.6% 1.0% Discontinued operations N.A. N.A. 0 0.0% Consolidated Net Income 380 1,159 2,923 >500% 152.2% 4Q18 1Q19 2Q19 3Q19 4Q19 Non-controlling interest 323 403 417 28.8% 3.2% Net Income 56 755 2,506 >500% 231.8% Net Income ROE Net Margin 0.2% 2.9% 8.9% 8.7pp 6.0pp EPS 0.020 0.262 0.869 >500% 231.8%

Balance Sheet (Million pesos) Total Current Assets 72,139 81,581 68,027 -5.7% -16.6% Net Debt & Net Debt to EBITDA ratio Cash & Short Term Investments 32,068 38,711 27,452 -14.4% -29.1% MXN, million Long Term Assets 225,703 227,058 222,395 -1.5% -2.1% Property, Plant & Equipment (Net) 87,343 83,368 83,329 -4.6% 0.0% Intangible Assets (Net) 28,950 28,806 29,215 0.9% 1.4% 2.8x 2.9x 2.8x 115,000 2.7x 3.0x Total Assets 297,842 308,640 290,422 -2.5% -5.9% 2.6x Current Liabilities 48,953 57,448 42,368 -13.5% -26.2% 110,000 Short Term Debt 4,197 15,254 5,018 19.6% -67.1% 2.5x Accounts Payable 41,700 39,705 33,877 -18.8% -14.7% 105,000 Long Term Liabilities 144,108 148,295 142,554 -1.1% -3.9% 2.0x Long Term Debt 126,938 132,726 128,550 1.3% -3.1% 100,000 Total Liabilities 193,061 205,743 184,922 -4.2% -10.1% 1.5x Stockholders’ Equity 104,781 102,897 105,500 0.7% 2.5% 95,000 Non-controlling interest 15,070 14,524 14,874 -1.3% 2.4% Total Equity 89,711 88,373 90,626 1.0% 2.5% 90,000 1.0x Liabilities & Equity 297,842 308,640 290,422 -2.5% -5.9% 4Q18 1Q19 2Q19 3Q19 4Q19 Net Debt 99,067 109,269 106,116 7.1% -2.9% Net Debt Net Debt to EBITDA

Cash Flow CF from Operating Activities 10,671.6 10,158.2 7,444.5 CF from Investing Activities (16,976) (3,716.2) (5,349.0) CF from Financing Activities (4,178.8) (5,687.2) (13,280) FX effect on cash 124.6 37.9 (64.4) Change in Cash Balance (10,359) 792.8 (11,259)

Source: Banorte, MSE.

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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, Jorge Antonio Izquierdo Lobato and Eridani Ruibal Ortega, 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 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 Ixe 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 Tlevisa CPO 22/01/2019 Hold $57.00 Tlevisa CPO 26/04/2018 Buy $81.00 Tlevisa CPO 20/02/2018 Hold $88.00 Tlevisa CPO 26/10/2017 Hold $97.00

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

Research and Strategy Gabriel Casillas Olvera Chief Economist, Head of Research and IRO [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 Alejandro Padilla Santana [email protected] (55) 1103 - 4043 Financial Market 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 Jorge Antonio Izquierdo Lobato Analyst [email protected] (55) 1670 - 1746 Eridani Ruibal Ortega Analyst [email protected] (55) 1103 - 4000 x 2755

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 Economic, Studies [email protected] (55) 1670 - 2220

Wholesale Banking Armando Rodal Espinosa Head of Wholesale Banking [email protected] (81) 8319 - 6895

Alejandro Eric Faesi Puente Head of Global Markets and Institutional Sales [email protected] (55) 5268 - 1640

Alejandro Aguilar Ceballos Head of Asset Management [email protected] (55) 5268 - 9996

Arturo Monroy Ballesteros Head of Investment Banking and Structured Finance [email protected] (55) 5004 - 1002 Head of Transactional Banking, Leasing and Gerardo Zamora Nanez [email protected] (81) 8318 - 5071 Factoring 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

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