Equity Research Me xico

February 17, 2020

EQUITY STRATEGY www..com Quálitas and Vesta are candidates to join Mexbol @analisis_fundam

▪ On Friday, March 6th, the MSE and S&P Dow Jones Indices will announce changes to the sample that will integrate the S&P BMV Marissa Garza th Director of Equity Strategy IPC as of Monday, March 23 [email protected]

▪ Quálitas (Q) is set to enter the index instead of , as it does not Valentín Mendoza comply with the market cap criteria. On the contrary, Q would meet Senior Strategist, Equity [email protected] all the selection requirements ▪ According to our estimates, after implementing the combined José Espitia Senior Strategist, Equity ranking criterion, Vesta would position itself better than GCC, hence [email protected] it would have to be replaced in the benchmark

Leavers & Quálitas and Vesta could replace Alpek and GCC. Upon performing an Joiners Stock Weighting exercise with data as of January 31st (reference date), we estimate that Leave ALPEK A 0.21% Leave GCC * 0.58% ALPEK would not meet the required minimum VWAP float-adjusted market Join Q * 0.62%e cap (≥$ 8 billion) in order to remain in the Mexbol sample, although it would Join VESTA * 0.66%e be dependent on the float determined by S&P whether it leaves the index or This document is provided for the reader’s convenience only. The translation from the original Spanish version was not. (limit to stay ≥18.39% vs 17.99%e). Instead, Q would join the index as it made by Banorte’s staff. Discrepancies may possibly arise between the original document in Spanish and its English complies with all the selection criteria. Additionally, it is important to mention translation. For this reason, the original research paper in that while BOLSA, GCARSO and GCC would not meet the liquidity Spanish is the only official document. The Spanish version was released before the English translation. The original requirement, after implementing the combined ranking criterion, seeking to document entitled “Entorno Bursátil: Quálitas y Vesta candidatas a integrarse al IPC” was released on February maintain 35 stocks in the sample, VESTA would be better positioned in 17, 2020. Document for distribution among public respect to GCC, thus it would have to be replaced (see tables attached). In that sense, we anticipate that the stocks that would maintain the highest weighting within the benchmark, with no relevant changes, would be AMX (14.2%e), FEMSA (12.0%e), WALMEX (10.8%e), GFNORTE (10.4%e) and

GMEXICO (6.2%e). Finally, it is worth mentioning that the computations made in this exercise could vary given that S&P carries out float reckons based on the stock movements, without letting them know publicly.

Mexbol – Performance LTM Mexbol – Current constituents weightings Volume in millions of shares % 800 51,000 700 AMX L

49,000 600 FEMSA UBD 14.2% WALMEX * 47,000 500 29.4% GFNORTE O 400 45,000 12.0% GMEXICO B

300 CPO 43,000 2.7% 10.8% 200 TLEVISA CPO 41,000 GAP B 100 3.0% 10.5% 6.2% ELEKTRA * 39,000 0 3.3% ASUR B F-19 A-19 J-19 A-19 O-19 D-19 F-20 3.8% 4.0%

Source: Bloomberg, BMV Source: Banorte

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Current constituents’ analysis based on the criteria to remain in the sample

VWAP Float- Investable Annualized Median Weighting in VWAP Shares Floating Adjusted Market Trading Days ≥ Ticker Weighting Traded Value Ratio≥ Median Daily Traded Mexbol L3M Outstanding Shares* Capitalization*≥ 95% Factor≥10% 15% Value* ≥ $30 million $8 billion 3M 6M 3M 6M AMX L 14.17% $ 15.21 44,872 52% 23,333 $ 354,906 100% 33% 37% 481 492 FEMSA UBD 12.01% $ 177.32 2,161 86% 1,859 $ 329,573 100% 30% 35% 387 478 WALMEX * 10.84% $ 55.56 17,461 29% 5,064 $ 281,322 100% 65% 67% 730 770 GFNORTE O 10.51% $ 108.79 2,883 85% 2,451 $ 266,643 100% 49% 57% 535 601 GMEXICO B 6.16% $ 53.31 7,785 41% 3,192 $ 170,142 100% 45% 47% 291 291 CEMEX CPO 3.98% $ 7.31 14,851 100% 14,851 $ 108,511 100% 43% 51% 194 226 TLEVISA CPO 3.84% $ 43.77 2,882 88% 2,537 $ 111,022 100% 16% 21% 74 83 GAP B 3.35% $ 222.91 477 79% 377 $ 83,971 100% 55% 52% 174 158 ELEKTRA * 2.99% $ 1,389.32 233 25% 58 $ 81,060 100% 15% 18% 46 55 ASUR B 2.74% $ 349.74 277 73% 202 $ 70,734 100% 34% 37% 98 99 KOF UBL 2.31% $ 113.42 525 100% 525 $ 59,571 100% 29% 33% 64 77 KIMBER A 2.05% $ 38.85 1,604 88% 1,412 $ 54,859 100% 59% 67% 136 150 OMA B 1.90% $ 138.99 344 100% 344 $ 47,814 100% 38% 49% 72 81 BIMBO A 1.80% $ 34.67 4,646 32% 1,487 $ 51,536 100% 28% 36% 55 69 AC * 1.78% $ 104.54 1,764 25% 441 $ 46,109 100% 47% 60% 90 106 GFINBUR O 1.86% $ 23.73 6,623 33% 2,185 $ 51,851 100% 20% 23% 39 47 * 1.65% $ 44.32 2,100 48% 1,008 $ 44,670 100% 48% 75% 86 119 IENOVA * 1.70% $ 85.41 1,534 34% 522 $ 44,547 100% 63% 72% 113 115 B 1.66% $ 199.33 416 54% 224 $ 44,745 100% 50% 63% 88 102 PINFRA * 1.65% $ 195.35 380 58% 220 $ 43,069 100% 46% 51% 73 76 ALFA A 1.33% $ 15.76 5,031 57% 2,868 $ 45,189 100% 43% 47% 76 85 GCARSO A1 1.12% $ 70.05 2,280 20% 456 $ 31,948 100% 16% 18% 19 21 PE&OLES 0.87% $ 210.50 397 31% 123 $ 25,937 100% 46% 60% 48 63 * 0.80% $ 50.59 830 61% 506 $ 25,609 100% 65% 71% 69 70 BBAJIO O 0.80% $ 31.38 1,190 60% 714 $ 22,406 100% 46% 49% 34 42 GENTERA * 0.81% $ 19.80 1,625 63% 1,023 $ 20,268 100% 44% 44% 37 32 MEGA CPO 0.80% $ 75.20 861 35% 301 $ 22,652 100% 70% 66% 60 60 BOLSA A 0.73% $ 42.48 593 75% 445 $ 18,894 100% 37% 43% 27 29 LIVEPOL C 0.69% $ 98.40 197 100% 197 $ 19,430 100% 43% 47% 35 37 CUERVO * 0.66% $ 33.96 3,654 14% 512 $ 17,371 100% 47% 67% 34 40 BSMX B 0.60% $ 25.78 3,323 17% 565 $ 14,562 100% 64% 104% 39 55 LAB B 0.59% $ 19.23 1,048 71% 744 $ 14,310 100% 58% 59% 34 33 GCC * 0.58% $ 101.75 337 48% 162 $ 16,479 100% 46% 40% 32 26 R A 0.46% $ 106.24 328 33% 108 $ 11,497 100% 123% 137% 57 58 ALPEK A 0.21% $ 20.56 2,116 18% 381 $ 7,832 100% 103% 90% 31 29 Source: MSE, Bloomberg, Banorte * in millions

Potential joiners’ analysis based on the selection universe and liquidity criteria

VWAP Float- Investable Annualized Median VWAP Shares Floating Adjusted Market Trading Ticker Weighting Traded Value Ratio≥ Median Daily Traded L3M Outstanding Shares* Capitalization*≥ Days ≥ 95% Factor≥10% 25% Value* ≥ $50 million $10 billion 3M 6M 3M 6M VOLAR A $ 21.19 924 98% 905 $ 19,185 100% 15% 18% 12 13 VESTA * $ 33.36 606 86% 522 $ 17,399 100% 33% 42% 24 27 SITES B1 $ 13.72 3,300 36% 1,188 $ 16,297 100% 11% 15% 6 9 GMXT * $ 26.34 4,101 15% 615 $ 16,198 100% 14% 11% 9 5 Q * $ 81.18 435 40% 174 $ 14,126 100% 80% 103% 46 56 BACHOCO B $ 80.03 600 27% 162 $ 12,966 100% 37% 32% 20 16 LACOMER UBC $ 24.27 459 99% 455 $ 11,034 100% 18% 20% 8 9 Source: MSE, Bloomberg, Banorte * in millions

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Combined ranking criteria analysis to determine at least 35 constituents for Mexbol

VWAP Float- VWAP Float- Investable Annualized Median VWAP Shares Floating Adjusted Market Trading adjusted Market Ticker Weighting Traded Value Ratio≥ Median Daily Traded Value* ≥ L3M Outstanding Shares* Capitalization*≥ Days ≥ 95% Capitalization Factor≥10% 25% $50 million $10 billion 3M 6M 3M 6M Ranking (1) GCARSO A1 $ 70.05 2,280 20% 456 $ 31,948 100% 16% 18% 19 21 1 VOLAR A $ 21.19 924 98% 905 $ 19,185 100% 15% 18% 12 13 2 BOLSA A $ 42.48 593 75% 445 $ 18,894 100% 37% 43% 27 29 3 VESTA * $ 33.36 606 86% 522 $ 17,399 100% 33% 42% 24 27 4 GCC * $ 101.75 337 48% 162 $ 16,479 100% 46% 40% 32 26 5 SITES B1 $ 13.72 3,300 36% 1,188 $ 16,297 100% 11% 15% 6 9 6 GMXT * $ 26.34 4,101 15% 615 $ 16,198 100% 14% 11% 9 5 7 BACHOCO B $ 80.03 600 27% 162 $ 12,966 100% 37% 32% 20 16 8 LACOMER UBC$ 24.27 459 99% 455 $ 11,034 100% 18% 20% 8 9 9

VWAP Float- Investable Annualized Median Six-month Median VWAP Shares Floating Adjusted Market Trading Ticker Weighting Traded Value Ratio≥ Median Daily Traded Value* ≥ Daily Traded Value L3M Outstanding Shares* Capitalization*≥ Days ≥ 95% Factor≥10% 25% $50 million Ranking (2) $10 billion 3M 6M 3M 6M BOLSA A $ 42.48 593 75% 445 $ 18,894 100% 37% 43% 27 29 1 VESTA * $ 33.36 606 86% 522 $ 17,399 100% 33% 42% 24 27 2 GCC * $ 101.75 337 48% 162 $ 16,479 100% 46% 40% 32 26 3 GCARSO A1 $ 70.05 2,280 20% 456 $ 31,948 100% 16% 18% 19 21 4 BACHOCO B $ 80.03 600 27% 162 $ 12,966 100% 37% 32% 20 16 5 VOLAR A $ 21.19 924 98% 905 $ 19,185 100% 15% 18% 12 13 6 SITES B1 $ 13.72 3,300 36% 1,188 $ 16,297 100% 11% 15% 6 9 7 LACOMER UBC$ 24.27 459 99% 455 $ 11,034 100% 18% 20% 8 9 8 GMXT * $ 26.34 4,101 15% 615 $ 16,198 100% 14% 11% 9 5 9

VWAP Float- Investable Annualized Median VWAP Shares Floating Adjusted Market Trading Combined Ticker Weighting Traded Value Ratio≥ Median Daily Traded Value* ≥ L3M Outstanding Shares* Capitalization*≥ Days ≥ 95% Ranking (1+2) Factor≥10% 25% $50 million $10 billion 3M 6M 3M 6M BOLSA A $ 42.48 593 75% 445 $ 18,894 100% 37% 43% 27 29 4 GCARSO A1 $ 70.05 2,280 20% 456 $ 31,948 100% 16% 18% 19 21 5 VESTA * $ 33.36 606 86% 522 $ 17,399 100% 33% 42% 24 27 6 GCC * $ 101.75 337 48% 162 $ 16,479 100% 46% 40% 32 26 8 VOLAR A $ 21.19 924 98% 905 $ 19,185 100% 15% 18% 12 13 8 SITES B1 $ 13.72 3,300 36% 1,188 $ 16,297 100% 11% 15% 6 9 13 BACHOCO B $ 80.03 600 27% 162 $ 12,966 100% 37% 32% 20 16 13 GMXT * $ 26.34 4,101 15% 615 $ 16,198 100% 14% 11% 9 5 16 LACOMER UBC$ 24.27 459 99% 455 $ 11,034 100% 18% 20% 8 9 17

Source: MSE, Bloomberg, Banorte * in millions

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Estimated index constituents’ weightings after resampling and rebalancing

Weighting Weighting Change in Ticker Change in Mexbol in Mexbol Weighting (current) (estimate) (estimate)

AMX L 14.2% 14.1% -0.1% FEMSA UBD 12.0% 12.0% 0.0% WALMEX * 10.8% 10.8% 0.0% GFNORTE O 10.5% 10.5% 0.0% GMEXICO B 6.2% 6.1% 0.0% CEMEX CPO 4.0% 3.9% -0.1% TLEVISA CPO 3.8% 3.8% 0.0% GAP B 3.3% 3.4% 0.0% ELEKTRA * 3.0% 3.0% 0.0% ASUR B 2.7% 2.7% 0.0% KOF UBL 2.3% 2.3% 0.0% KIMBER A 2.1% 2.1% 0.0% OMA B 1.9% 1.9% 0.0% GFINBUR O 1.9% 1.9% 0.0% BIMBO A 1.8% 1.8% 0.0% AC * 1.8% 1.8% 0.0% IENOVA * 1.7% 1.7% 0.0% GRUMA B 1.7% 1.7% 0.0% ORBIA * 1.7% 1.7% 0.0% PINFRA * 1.7% 1.7% 0.0% ALFA A 1.3% 1.3% 0.0% GCARSO A1 1.1% 1.1% 0.0% PE&OLES 0.9% 0.9% 0.0% MEGA CPO 0.8% 0.8% 0.0% ALSEA * 0.8% 0.8% 0.0% BBAJIO O 0.8% 0.8% 0.0% GENTERA * 0.8% 0.8% 0.0% BOLSA A 0.7% 0.7% 0.0% LIVEPOL C 0.7% 0.7% 0.0% VESTA * Join 0.7% 0.7% CUERVO * 0.7% 0.6% 0.0% Q * Join 0.6% 0.6% LAB B 0.6% 0.6% 0.0% BSMX B 0.6% 0.6% 0.0% R A 0.5% 0.5% 0.0% GCC * 0.58% -0.6% ALPEK A Leave 0.21% -0.2% Source: MSE, Bloomberg, Banorte

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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.

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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.

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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.

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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.

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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 (55) 1103 - 4000 x Lourdes Calvo Fernández Analyst (Edition) [email protected] 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 (55) 1103 - 4000 x Luis Leopoldo López Salinas Economist, Global [email protected] 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 (55) 1103 - 4000 x Eridani Ruibal Ortega Analyst [email protected] 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 Senior Analyst, Economic Studies [email protected] (55) 1670 - 2220 Domínguez

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 Head of Investment Banking and Structured Arturo Monroy Ballesteros [email protected] (55) 5004 - 1002 Finance 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

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