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Equity Research Mexico Equity Research Mexico Quarterly Report February 24, 2020 TLEVISA www.banorte.com Content grew while profitability improved @analisis_fundam ▪ Televisa´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. 2 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.
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