Equity Research Me xico Company Note September 30, 2020 NEMAK www.banorte.com A less challenging environment ahead @analisis_fundam ▪ After the impact of COVID-19, Nemak’s outlook is poised for Consumer and Telecoms recovery. Meanwhile, the cost and expense reduction strategy implemented should be reflected into better margins Valentín Mendoza Senior Strategist, Equity ▪ Its spin-off from Alfa conglomerate will provide greater independence
[email protected] for strategic decision-making. Likewise, when eventually only one Juan Barbier, CFA series of shares remains listed, marketability should improve Analyst
[email protected] ▪ Through a discounted cash flow valuation model, we raised our PT2020 to MXN 7.60 vs. the MXN 7.00 previously, representing a 4.8x HOLD FV/EBITDA 2021E multiple. We reiterate our HOLD rating Current Price $6.78 PT 2020 $7.60 Dividend The worst is over now. After the strong impact on Nemak's results from the Dividend Yield (%) OEMs plants closure due to the COVID-19 pandemic, IHS Automotive has Upside Potential 12.1% Max – Min LTM ($) 9.54 – 3.25 revised upwards its vehicle production projections for 2H20 and 2021. This is Market Cap (US$m) 924.2 explained by a faster recovery in China and low inventory levels at the Detroit Shares Outstanding (m) 3,076.6 Float 19.24% 3, yet mainly at General Motors, after production ceased in 2Q20. Thus, IHS Daily Turnover ($m) 10.0 now estimates global vehicle production to sequentially recover to -5% y/y in Valuation metrics TTM FV/EBITDA 7.8x 3Q20 (vs. -43% in the previous quarter), while it is expected to recover 13% in P/E N.A.