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ALPEK 2020 Closing: Record Volumes and Financial Strength @Analisis Fundam

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ALPEK 2020 Closing: Record Volumes and Financial Strength @Analisis Fundam Equity Research México Quarterly Report February 12, 2021 ALPEK www.banorte.com 2020 closing: record volumes and financial strength @analisis_fundam ▪ Alpek concluded 2020 with positive results, in line with our expectations in terms of EBITDA. Record volumes and a favorable raw material Marissa Garza price environment stood out Director of Equity Strategy [email protected] ▪ Excluding non-recurring items, EBITDA remained stable. The Nova Chemicals acquisition and the M&G debt recovery support a positive BUY perspective, with a solid financial structure Current Price $17.98 PT $22.00 Dividend $1.00 ▪ After incorporating the results and adjusting our 2021 outlook, our Dividend (%) 5.5% price target is MXN 22.00, implying a 6.4x 2021e FV/EBITDA (vs. 7.4x Upside Potential 27.8% comparable). We upgrade our recommendation to BUY Max – Min LTM ($) 18.81.-7.58 Market Cap (US$m) 1,865.8 Positive results that should be welcomed by the market. Alpek posted better- Shares outstanding (m) 2,112 Float 17.9% than-expected revenues of MXN 28.7 billion (+5.8% y/y), and MXN 4.1 billion Daily Turnover ($m) 21.1 EBITDA (-39.8% y/y), in line with our expectations. On a comparable basis, Valuation Metrics LTM * excluding non-recurring items such as the sale of the cogeneration plants FV/EBITDA Adj 5.6x P/E 12.2x (4Q19), the business combination gain from the Lotte Chemical acquisition in MSCI ESG Rating* N.A. Wilton, UK, and raw material adjustments, EBITDA would have remained virtually flat at MXN 3.3 billion. Highlights of the quarter include record volumes in both Polyester (+17% y/y) and Plastics & Chemicals (P&Q) (+23% Relative performance to MEXBOL y/y), supported by higher PET and EPS demand due to the pandemic and LTM 30% packaging needs for food, beverages, vaccines, the recovery in the construction 20% 10% and automotive industries, which backed the recovery in Polypropylene (PP) 0% and the acquisition of Nova's styrenics business. As for margins (See Page 3), -10% -20% we note that they remain solid, even though Polyester is starting to normalize, -30% -40% and in P&Q Nova's contribution was not very significant, while in PP a -50% -60% sequential improvement was observed. Meanwhile, the financial structure Feb-20 May-20 Aug-20 Nov-20 Feb-21 remains solid with a 2.0x ND/EBITDA ratio, while US$40 million of M&G MEXBOL ALPEKA debt was recovered. Financial statements Valuation and financial metrics MXN, Million 2019 2020 2021E 2022E 2019 2020 2021E 2022E Revenues 119,685 113,989 112,288 116,424 FV/EBITDA 4.2x 5.6x 5.7x 5.6x Operating Income 12,361 7,493 7,710 8,315 P/E 5.8x 12.2x 11.7x 12.5x Adjusted EBITDA 16,395 11,993 11,693 12,360 P/BV 0.9x 0.9x 0.9x 0.9x EBITDA Margin 13.70% 10.52% 10.41% 10.62% Net Income 6,605 3,123 3,265 3,050 ROE 16.3% 7.7% 7.9% 7.2% Net margin 5.52% 2.74% 2.91% 2.62% ROA 6.4% 2.9% 3.1% 2.7% EBITDA/ Interest expenses 11.9x 6.1x 5.7x 6.3x Total Assets 102,794 106,353 105,845 111,576 Net Debt/EBITDA 1.6x 2.0x 2.0x 2.0x Cash 7,059 10,144 8,659 7,003 Debt/Equity 0.7x 0.7x 0.7x 0.6x Total Liabilities 57,736 60,840 58,400 62,384 This document is provided for the reader’s convenience Debt 32,710 33,729 31,555 31,218 only. The translation from the original Spanish version was made by Banorte’s staff. Discrepancies may possibly arise Common Equity 45,058 45,512 47,445 49,192 between the original document in Spanish and its English Source: Banorte 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 “Cierre 2020: volúmenes récord y 1 solidez financiera” was released on February 11, 2021. Document for distribution among public ALPEK – 4Q20 Results Revenue & EBITDA Margin MXN, Millions MXN, million Diff % vs Concept 4Q19 4Q20 Var % 4Q20e Estim. 29,500 30.0% Revenue 27,133 28,709 5.8% 26,276 9.3% 25.3% Operating Income 5,834 3,124 -46.4% 3,050 2.4% 29,000 25.0% Ebitda 6,863 4,131 -39.8% 4,194 -1.5% 28,500 Net Income 4,047 2,020 -50.1% 2,426 -16.8% 14.4% 20.0% 28,000 13.5% margins 15.0% Operating Margin 21.5% 10.9% -10.6pp 11.6% -0.7pp 27,500 7.7% 6.2% 10.0% Ebitda Margin 25.3% 14.4% -10.9pp 16.0% -1.6pp 27,000 Net Margin 14.9% 7.0% -7.9pp 9.2% -2.2pp 26,500 5.0% EPS $1.91 $0.95 -50.1% $1.15 -16.7% 26,000 0.0% 4Q19 1Q20 2Q20 3Q20 4Q20 Income Statement (Millions) Revenue EBITDA Margin Year 2019 2020 2020 Var% Var% Quarter 4 3 4 y/y q/q Net Revenue 27,133.3 29,310.1 28,709.0 5.8% -2.1% Cost of goods sold 23,882.8 25,315.7 24,928.4 4.4% -1.5% Gross profit 3,250.5 3,994.4 3,780.6 16.3% -5.4% Net Income & ROE General expenses (2,583.2) 1,259.4 656.5 N.A. -47.9% MXN, million Operating Income 5,833.7 2,734.9 3,124.1 -46.4% 14.2% Operating Margin 21.5% 9.3% 10.9% (10.6pp) 1.6pp Depreciation 1,028.8 1,220.9 994.3 -3.4% -18.6% 5,000 16.3% 18.0% EBITDA 6,863.0 3,958.0 4,131.0 -39.8% 4.4% 14.8% 16.0% EBITDA Margin 25.3% 13.5% 14.4% (10.9pp) 0.9pp 4,000 12.7% 11.9% 14.0% Interest income (expense) net (693.9) (355.0) 39.3 N.A. N.A. 3,000 12.0% Interest expense 626.2 501.7 442.0 -29.4% -11.9% 7.7% 10.0% Interest income 52.2 29.7 27.3 -47.8% -8.1% 2,000 8.0% Exchange Income (loss) 66.3 (57.0) (98.7) N.A. 73.2% Unconsolidated subsidiaries (186.2) 174.1 552.9 N.A. 217.5% 1,000 6.0% 4.0% Unconsolidated subsidiaries (301.9) (11.8) (43.3) -85.6% 266.2% 0 Net Income before taxes 4,837.9 2,368.2 3,120.1 -35.5% 31.8% 2.0% Provision for Income taxes 628.2 596.6 692.7 10.3% 16.1% (1,000) 0.0% Discontinued Operations N.A. N.A. 4Q19 1Q20 2Q20 3Q20 4Q20 Consolidated Net Income 4,209.6 1,771.6 2,427.4 -42.3% 37.0% Minorities 162.5 335.6 407.8 151.0% 21.5% Net Income ROE Net Income 4,047.2 1,435.9 2,019.6 -50.1% 40.7% Net Margin 14.9% 4.9% 7.0% (7.9pp) 2.1pp EPS 1.911 0.678 0.954 -50.1% 40.7% Balance Sheet (MXN, million) Net Debt & Net Debt to EBITDA Total Current Assets 43,714.2 47,544.8 45,548.8 4.2% -4.2% MXN, million Cash & Short Term Investments 6,069.4 11,602.2 10,144.5 67.1% -12.6% Long Term Assets 72,189.5 67,223.4 60,803.9 -15.8% -9.5% Property, Plant & Equipment (Net) 47,322.4 41,517.0 38,578.9 -18.5% -7.1% 2.3x 2.4x Intangible Assets (Net) 3,800.1 3,689.0 3,237.8 -14.8% -12.2% 40,000 2.5x 1.9x 2.0x Total Assets 115,903.6 114,768.2 106,352.7 -8.2% -7.3% 35,000 2.0x Current Liabilities 24,336.2 24,546.6 21,351.5 -12.3% -13.0% 30,000 1.6x Short Term Debt 4,450.4 4,244.3 1,226.4 -72.4% -71.1% 25,000 1.5x Accounts Payable 18,633.5 19,315.8 19,543.9 4.9% 1.2% 20,000 Long Term Liabilities 49,834.5 44,135.2 39,488.9 -20.8% -10.5% 15,000 1.0x Long Term Debt 42,913.4 35,977.0 32,502.4 -24.3% -9.7% 10,000 0.5x Total Liabilities 74,170.7 68,681.7 60,840.4 -18.0% -11.4% 5,000 Common Stock 41,732.9 46,086.5 45,512.2 9.1% -1.2% 0 0.0x Minorities 5,087.1 5,654.3 5,126.6 0.8% -9.3% 4Q19 1Q20 2Q20 3Q20 4Q20 Total Equity 36,645.8 40,432.1 40,385.6 10.2% -0.1% Liabilities & Equity 115,903.6 114,768.2 106,352.7 -8.2% -7.3% Net Debt Net Debt to EBITDA Net Debt 41,294.4 28,619.2 23,584.3 -42.9% -17.6% Cash Flow Cash Flow from Operating Activities 12,765.6 11,554.7 14,575.6 Cash Flow from Investing Activities 10,948.2 (1,130.8) (2,088.1) Cash Flow from Financing Activities (17,700.9) (3,886.2) (6,030.3) Increase (decrease) in cash 3,247.6 4,394.0 3,816.0 Source: Banorte, MSE 2 Results by Business Segment Polyester MXN, Million 4Q19 Margin 3Q20 Margin 4Q20 Margin % y/y % q/q Revenue 20,731 100.0% 21,901 100.0% 19,949 100.0% -3.8% -8.9% EBITDA 2,349 11.3% 2,409 11.0% 2,542 12.7% 8.2% 5.5% EBITDA* 2,368 11.4% 2,239 10.2% 1,897 9.5% -19.9% -15.3% * Inventory and non – operating (non – recurring) gains/losses are not included Source: Alpek Plastics and Chemicals MXN, Million 4Q19 Margin 3Q20 Margin 4Q20 Margin % y/y % q/q Revenue 6,006 100.0% 6,552 100.0% 7,687 100.0% 28.0% 17.3% EBITDA 819 13.6% 1,481 22.6% 1,509 19.6% 84.2% 1.9% EBITDA* 888 14.8% 1,230 18.8% 1,365 17.8% 53.7% 11.0% * Inventory and non – operating (non – recurring) gains/losses are not included Source: Alpek Estimates 2021.
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