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May 5, 2020 Quarterly Report ALSEA www..com Weak, but the toughest challenges are ahead @analisis_fundam

▪ Alsea’s results were weak, resembling the very first impact of the Consumer and Telecoms COVID-19 pandemic, mainly in , though social distancing measures also affected other regions Valentín Mendoza Senior Strategist, Equity ▪ Nevertheless, the greatest impact shall be seen in 2Q20 with most of [email protected] its units closed due to quarantine, which will translate into SSS Jorge Izquierdo dropping 60%-90%. Thus, we prefer to remain on the sidelines Analyst [email protected] Double digit drops. Alsea reported declining results, amid the first impacts of COVID-19. Revenues dropped 11.6% y/y to $12.105 billion, on the back of a Under Review 2.1% decline in SSS -following social distancing measures-, the temporary Current Price $19.46 PT 2020 closure of most of its European units since the second half of March, and FX Dividend 2020 Dividend Yield (%) headwinds in . Meanwhile, a severe drop in commodities’ Upside Potential prices offset FX pressures on imported goods, driving gross margin up Max – Min LTM ($) 54.83 – 13.0 Market Cap (US$m) 1,688.3 20bps.EBITDA fell 9.2% y/y to $2,495 million with respective margin Shares Outstanding (m) 835.6 improving 50bps to 20.6%. It is worth highlighting these figures reflect Float 48.52% Daily Turnover ($ m) 97.8 benefits from IFRS16, thus when excluding them, EBITDA would have Valuation metrics TTM slumped 20.5% with a 110bps profitability contraction on a deteriorated FV/EBITDA 5.7x P/E 30.2x operating leverage. Alsea reported a net loss of $280 million, amid aforementioned operating weakness, coupled with an adverse FX effect on Zena’s options. Relative performance to Mexbol LTM The worst is yet to come. The company faces an extremely challenging 40% environment, with most of its units temporary closed because of the 20% quarantine, which is why we will be trimming our estimates. Thus, we believe 0% -20% stock’s performance will be highly correlated to the pace in which countries -40% concludes their lockdown. Regardless current’s cash position and available -60%Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 credit lines dispel concerns on company’s liquidity, for now, we see that the -80% worst is yet to come. Thus, we recommend to remain on the sidelines MEXBOL ALSEA*

Financial Statements Valuation and financial metrics M XN, million 2018 2019 2020E 2021E 2018 2019 2020E 2021E

Rev enues 46,157 58,155 62,436 68,707 FV/EBITDA 9.2x 6.4x 5.7x 5.0x Operating Income 3,294 4,571 5,633 7,116 P/E 34.5x 35.7x 22.1x 13.5x EBITDA 6,408 12,618 14,012 15,679 P/Book 2.8x 3.4x 2.6x 2.2x

EBITDA Margin 13.9% 21.7% 22.4% 22.8% Net Income 953 927 1,498 2,453 ROE 7.9% 7.4% 11.2% 14.6%

Net Margin 2.1% 1.6% 2.4% 3.6% ROA 1.8% 1.2% 1.9% 3.0%

EBITDA/ Interest ex penses 3.9x 4.9x 5.2x 6.1x Total Assets 53,750 76,412 79,416 82,014 Net Debt/EBITDA 3.7x 3.6x 3.2x 2.7x

Cash 1,988 2,625 2,490 2,790 Debt/Equity 1.9x 4.2x 3.1x 2.4x Total Liabilities 40,101 64,870 64,169 63,734 This document is provided for the reader’s convenience Debt 25,901 48,222 46,736 44,761 only. The translation from the original Spanish version was made by Banorte’s staff. Discrepancies may Common Equity 13,649 11,543 15,247 18,280 possibly arise between the original document in Spanish Source: Banorte with data from M SE 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 “Débil, pero aún faltan los mayores retos“ was released on April 29, 2020. Document for distribution among public 1

ALSEA – Results 1Q20 Revenue & EBITDA Margin MXN, million MXN, million Diff% vs Concept 1Q19 1Q20 Var % 1Q20e Estim. Revenue 13,691 12,105 -11.6% 12,290 -1.5% 23.9% Operating Income 829 468 -43.6% 382 22.4% 18,000 25% Ebitda 2,748 2,495 -9.2% 2,295 8.7% 16,000 24% 14,000 Net Income 106 -280 N.A. 69 N.A. 23% Margins 12,000 21.7% 22% Operating Margin 6.1% 3.9% -2.2pp 3.1% 0.8pp 10,000 21.0% Ebitda Margin 20.1% 20.6% 0.5pp 18.7% 1.9pp 8,000 20.1% 20.6% 21% 6,000 Net Margin 0.8% -2.3% -3.1pp 0.6% -2.9pp 20% EPS $0.13 -$0.33 N.A. $0.08 N.A. 4,000 19% Source: Banorte 2,000 0 18%

Income Statement (Million pesos) 1Q19 2Q19 3Q19 4Q19 1Q20 Year 2019 2019 2020 Change Change Revenue EBITDA Margin Quarter 1 4 1 % YoY % QoQ

Net Revenue 13,691 15,393 12,105 -11.6% -21.4% Costs of goods sold 4,105 4,480 3,611 -12.0% -19.4% Gross profit 9,586 10,913 8,494 -11.4% -22.2% General expenses 8,752 9,538 8,113 -7.3% -14.9% Net Income & ROE Operating Income 829 1,264 468 -43.6% -63.0% MXN, million Operating Margin 6.1% 8.2% 3.9% (2.2pp) (4.4pp) Depreciation 1,919 2,075 2,027 5.7% -2.3% EBITDA 2,748 3,339 2,495 -9.2% -25.3% 500 12.0% EBITDA Margin 20.1% 21.7% 20.6% 0.5pp (1.1pp) 9.7% 400 9.1% Interest Income (Expense) net (622) (502) (854) 37.2% 70.0% 10.0% 300 8.3% Interest expense 499 619 761 52.6% 22.9% 7.3% 200 8.0% Interest income 8 56 46 455.0% -17.5% 6.1% 100 Other income (expense) (167) 72 (139) -16.3% N.A. 6.0% Foreign exchange gain (loss) 35 (11) N.A. N.A. 0 Unconsolidated subsidiaries 0 (1) N.A. N.A. (100) 4.0% (200) Income before taxes 207 762 (388) N.A. N.A. 2.0% Income taxes 73 257 3 -96.4% -99.0% (300) Discontinued operations N.A. N.A. (400) 0.0% Consolidated Net Income 134 506 (390) N.A. N.A. 1Q19 2Q19 3Q19 4Q19 1Q20 Non-controlling interest 28 49 (110) N.A. N.A. Net Income ROE Net Income 106 456 (280) N.A. N.A. Net Margin 0.8% 3.0% -2.3% (3.1pp) (5.3pp) EPS 0.127 0.544 (0.334) N.A. N.A.

Balance Sheet (Million pesos) Total Current Assets 5,907 6,533 8,665 46.7% 32.6% Net Debt & Net debt to EBITDA ratio Cash & Short Term Investments 1,723 2,625 3,844 123.1% 46.4% MXN, million Long Term Assets 71,646 69,879 76,207 6.4% 9.1% Property, Plant & Equipment (Net) 18,568 17,538 18,310 -1.4% 4.4% 6.7x Intangible Assets (Net) 25,934 27,375 28,973 11.7% 5.8% 54,000 7.0x 5.4x Total Assets 77,553 76,412 84,872 9.4% 11.1% 52,000 6.0x Current Liabilities 21,400 20,993 23,318 9.0% 11.1% 4.5x 4.3x 5.0x Short Term Debt 10,442 9,062 10,563 1.2% 16.6% 50,000 3.6x Accounts Payable 5,577 5,813 5,989 7.4% 3.0% 4.0x 48,000 Long Term Liabilities 44,907 43,877 50,827 13.2% 15.8% 3.0x 46,000 Long Term Debt 42,729 39,160 45,859 7.3% 17.1% 2.0x Total Liabilities 66,306 64,870 74,144 11.8% 14.3% 44,000 1.0x Common Stock 11,246 11,543 10,728 -4.6% -7.1% Non-controlling interest 1,885 1,962 1,942 3.0% -1.0% 42,000 0.0x Total Equity 9,361 9,581 8,786 -6.1% -8.3% 1Q19 2Q19 3Q19 4Q19 1Q20 Liabilities & Equity 77,553 76,412 84,872 9.4% 11.1% Net Debt Net Debt to EBITDA Net Debt 51,448 45,597 52,578 2.2% 15.3%

Cash Flow CF from Operating Activities 1,601.1 5,954.1 2,008.4 CF from Investing Activities (1,912.9) (1,967.2) (563.2) CF from Financing Activities 53.6 (2,769.9) 246.6 FX effect on cash (6.8) (215.3) (472.9) Change in Cash Balance (264.9) 1,001.7 1,218.8

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 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 Rating PT ALSEA 23/10/2019 Buy $60.00 ALSEA 25/07/2019 Buy $47.00 ALSEA 25/01/2019 Hold $60.00 ALSEA 18/10/2017 Buy $77.00

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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