Equity Research M exico

April 16, 2019 PREVIEW 1Q19 www.banorte.com Pressure on margins and the effects of IFRS 16 @analisis_fundam

. 2019 is expected to kick-off with mild growth and lower operating leverage. Hence, for the companies we have under coverage, we Manuel Jiménez estimate a 3.3% yoy revenue growth and 0.3% in EBITDA Director Equity Research Telecommunications / Media . The IFRS 16 accounting rules regarding leasing shall affectt the [email protected] comparability of figures -mainly in retail and transportation sectors-

increasing EBITDA, and the companies’ assets and liabilities Marissa Garza Equity Research – Conglomerates / Financials/ . This quarter, the ten companies with the highest expected growth in Mining / Petrochemicals EBITDA are the following: Volar, Sport, Livepol, Chdraui, Lacomer, [email protected] Gmxt, Alsea, Pinfra, Gap and Oma

A less dynamic year-start. Revenue figures from the companies that we cover José Espitia are expected to begin 2019 with lower dynamism, in view of more moderate Equity Research – Airlines / Airports / Cement / economic growth and an adverse environment for commodity prices. Meanwhile, Infrastructure / REITs [email protected] lower operating leverage, certain pressures on costs and, in some cases, consolidation effects of less profitable businesses, are expected to affect margins. However, a more favorable FX effect would undermine pressures in margins, Valentín Mendoza Equity Research – Auto Parts/ Consumer boosting net profit similarly to revenue. Thus, our estimates assume a 3.3% Discretionary / Real Estate / Retail growth in revenue, 0.3% in EBITDA and 3.4% in net profit. It should be noted [email protected] that as of this quarter, the companies will begin to implement the IFRS 16 accounting standard, over leases, which would affect the comparability of figures, Jorge Izquierdo because now, their value will be recognized in their balance sheets, increasing Analyst assets and liabilities. Additionally, rental expenses will no longer be reported at [email protected] an operating level and are now being replaced by depreciation expenses and declining interest accruals, which may affect the operating income, but would This document is provided for the reader’s convenience only. The translation from the original Spanish version benefit EBITDA. In terms of net income, higher financial expenses, given the was made by Banorte’s staff. Discrepancies may possibly increase in liabilities from leasing and, in some cases, exchange volatility over arise between the original document in Spanish and its English translation. For this reason, the original research leases in other currencies, could affect net results. It should be mentioned that our paper in Spanish is the only official document. The estimates do not reflect this accounting change; therefore the figures may vary Spanish version was released before the English translation. The original document entitled “Presión en considerably. márgenes y efectos de NIIF 16” was released on April 12, 2019.

Top ten companies with the highest estimated EBITDA growth in 1Q19 Revenue and EBITDA quarterly performance Chg % yoy Chg % yoy Stock Sector Revenue Ebitda 40% Volar Transportation 18.8% 54.7% 28.9% Sport Services 18.8% 27.8% 30% Liverpol Retail 9.7% 23.4% Chdraui Retail 37.5% 17.2% 20% 15.3% Lacomer Retail 14.0% 17.1% 11.0% 10.5% Gmxt Transportation 12.7% 15.7% 10% 5.5% 6.2% 7.1% Alsea Retail 23.9% 12.1% 3.6% 3.3% Pinfra Infrastructure 28.4% 11.4% 0.3% Gap Airports 11.8% 10.7% 0% Document for distribution among public

Oma Airports -4.2% 9.4% Revenue EBITDA

Source: Banorte 1Q18 2Q18 3Q18 4Q18 1Q19e

Document for distribution among public

Earnings Calendar

The following chart pinpoints the dates on which some companies have commented the possible release of their earnings releases. It is important to mention that most of the companies report by the third week of the month, marking Tuesday, April 30th as the deadline to do so.

Preview 1Q19 – Earnings Calendar by Company

April 2019 MONDAY TUESDAY WEDNESDAY THURSDAY FRIDAY 1 2 3 4 5

8 9 10 11 12

15 16 17 18 19 Holy Thursday Good Friday

22 23 24 25 26 FIHO ALFA AZTECA* CEMEX AC ALPEK CREAL GAP* KOF ASUR* GCC* HOTEL SORIANA AXTEL GENTERA VOLAR SPORT GMEXICO* MEXCHEM WALMEX GMXT* OMA LIVEPOL PINFRA* NEMAK

29 30 AMX ALSEA FEMSA BIMBO GICSA CHDRAUI IENOVA LACOMER LAB MEGA TLEVISA

Deadline

Source: Banorte, Bloomberg, Thomson Reuters, Infosel * Tentative

Estimates Summary

In the following chart we include the companies that we have under coverage and which are part of the document herein. This quarter we have included FEMSA on which we recently initiated coverage. Based on our estimates for 34 companies, we expect nominal variations of 3.3% in sales and 0.3% in EBITDA. In the chart below, we separate the estimates of 30 companies classified as Retail, Industrial and Services, two from the financial sector and two others from the real estate sector.

Quarterly Estimates for 1Q19

MXN, million pesos Revenue EBITDA Operating Income Net Income 1Q18 1Q19e Var. % 1Q18 1Q19e Var. % 1Q18 1Q19e Var. % 1Q18 1Q19e Var. % Alfa 85,850 87,578 2.0% 11,787 10,826 -8.2% 7,046 6,071 -13.8% 3,554 1,917 -46.1% Alpek 28,746 30,241 5.2% 3,391 3,151 -7.1% 2,695 2,368 -12.1% 1,550 1,179 -23.9% Alsea 11,012 13,644 23.9% 1,426 1,599 12.1% 672 749 11.4% 212 159 -24.8% Amx 253,422 253,037 -0.2% 71,820 70,623 -1.7% 30,408 34,787 14.4% 18,087 18,369 1.6% Asur 3,917 4,327 10.5% 2,670 2,675 0.2% 2,197 2,169 -1.3% 1,455 1,340 -7.9% Axtel 3,753 3,197 -14.8% 1,379 1,084 -21.4% 343 186 -45.9% 960 -141 NA Azteca 3,427 3,117 -9.0% 521 307 -41.2% 264 90 -66.1% 174 -413 NA Cemex* 62,810 63,529 1.1% 9,938 9,695 -2.4% 6,204 5,704 -8.1% 482 1,902 294.4% Chdraui 23,289 32,030 37.5% 1,594 1,867 17.2% 1,174 1,202 2.4% 573 648 13.1% Femsa 115,337 121,096 5.0% 13,006 13,790 6.0% 8,412 8,778 4.4% 1,476 4,337 193.9% Gap 3,408 3,811 11.8% 2,230 2,469 10.7% 1,845 2,035 10.3% 1,114 1,312 17.7% Gcc* 3,533 3,376 -4.4% 859 784 -8.7% 473 429 -9.2% 212 199 -6.2% Gmexico* 49,936 50,426 1.0% 23,574 23,419 -0.7% 18,115 17,754 -2.0% 6,776 6,905 1.9% Gmxt 10,182 11,472 12.7% 4,196 4,857 15.7% 2,491 3,036 21.9% 1,866 1,604 -14.0% Hotel 575 627 9.0% 226 217 -3.9% 171 161 -6.3% 152 70 -53.8% Ienova* 5,390 6,473 20.1% 3,957 4,220 6.6% 2,809 2,910 3.6% 2,387 2,202 -7.7% Kof 49,713 48,278 -2.9% 8,706 9,351 7.4% 5,883 6,154 4.6% 2,414 3,190 32.2% Lab 3,025 3,177 5.0% 684 655 -4.3% 667 626 -6.2% 379 336 -11.2% Lacomer 4,287 4,886 14.0% 369 432 17.1% 207 235 13.5% 172 199 15.7% Livepol 25,262 27,716 9.7% 2,373 2,929 23.4% 1,547 1,984 28.2% 1,003 1,311 30.7% Mega 4,695 5,132 9.3% 2,374 2,499 5.3% 1,613 1,688 4.6% 1,155 1,232 6.7% Mexchem* 32,867 33,410 1.7% 6,173 5,658 -8.3% 4,243 3,640 -14.2% 1,480 1,532 3.5% Nemak 23,163 21,323 -7.9% 3,695 3,100 -16.1% 2,032 1,323 -34.9% 1,287 753 -41.5% Oma 1,932 1,852 -4.2% 1,072 1,173 9.4% 945 1,020 8.0% 608 691 13.6% Pinfra 2,340 3,006 28.4% 1,686 1,878 11.4% 1,582 1,761 11.3% 876 985 12.4% Soriana 35,487 35,112 -1.1% 2,505 2,349 -6.3% 1,751 1,554 -11.2% 817 633 -22.6% Sport 450 535 18.8% 59 76 27.8% 9 21 126.5% -4 -1 NA Tlevisa 22,812 23,291 2.1% 8,579 8,530 -0.6% 3,624 3,312 -8.6% 678 614 -9.5% Volar** 5,850 6,951 18.8% 823 1,273 54.7% -906 -453 NA -1,118 -322 NA Walmex 145,054 151,685 4.6% 14,378 15,193 5.7% 11,334 11,724 3.4% 8,349 8,625 3.3% Subtotal 1,021,524 1,054,332 3.2% 206,050 206,678 0.3% 119,849 123,017 2.6% 59,123 61,368 3.8%

Cemex (US$) 3,381 3,308 -2.2% 535 505 -5.6% 334 297 -11.1% 26 99 281.5% Gcc (US$) 189 176 -6.9% 46 41 -11.0% 25 22 -11.5% 11 10 -8.6% Gmexico (US$) 2,668 2,625 -1.6% 1,259 1,219 -3.2% 968 924 -4.5% 362 359 -0.7% Ienova (US$) 288 337 17.0% 211 220 3.9% 150 152 1.0% 128 115 -10.1% Mexchem (US$) 1,756 1,739 -0.9% 330 295 -10.7% 227 190 -16.4% 79 80 0.9%

* Conversion of dollars to closing exchange rate. The company reports its figure in dollars. ** In Volar the data is EBITDAR

Revenue EBITDA NOI Net Income 1Q18 1Q19e Var. % 1Q18 1Q19e Var. % 1Q18 1Q19e Var. % 1Q18 1Q19e Var. %

GICSA 1,050 1,337 27.4% 934 901 -3.6% 890 885 -0.6% 410 224 -45.4% FIHO 1,009 1,057 4.8% 314 294 -6.4% 368 346 -6.1% 175 95 -45.8% Subtotal 2,058 2,395 16.3% 1,248 1,195 -4.3% 1,258 1,231 -2.2% 585 319 -45.5%

Interest Income Financial Margin Operating Income Net Income 1Q18 1Q19e Var. % 1Q18 1Q19e Var. % 1Q18 1Q19e Var. % 1Q18 1Q19e Var. %

Creal 2,415 2,830 17.2% 1,570 1,770 12.7% 490 501 2.2% 423 464 9.8% Gentera 5,016 5,457 8.8% 4,641 4,964 7.0% 1,050 1,110 5.7% 726 792 9.0% Subtotal 7,430 8,287 11.5% 6,211 6,733 8.4% 1,540 1,611 4.6% 1,149 1,256 9.3%

Total 1,031,012 1,065,014 3.3% 207,298 207,873 0.3% 122,490 125,696 2.6% 60,857 62,943 3.4% Source: Banorte, MSE.

Estimates by sector

In this section we present the stocks we have under coverage grouped by sectors. With this information, we observe that the strongest reports in terms of EBITDA are related to the Transportation, Infrastructure and Retail sectors. On the negative side, weaker reports are expected in the Auto Parts, Industrials and Petrochemicals sectors.

Quarterly Estimates for 1Q19 MXN, million pesos Revenue EBITDA Operating Income Net Income 1Q18 1Q19e Var. % 1Q18 1Q19e Var. % 1Q18 1Q19e Var. % 1Q18 1Q19e Var. %

Airports 9,256 9,989 7.9% 5,973 6,317 5.8% 4,988 5,225 4.8% 3,177 3,343 5.2% Auto Parts 23,163 21,323 -7.9% 3,695 3,100 -16.1% 2,032 1,323 -34.9% 1,287 753 -41.5% Beverages 165,050 169,374 2.6% 21,712 23,141 6.6% 14,295 14,932 4.5% 3,890 7,528 93.5% Cement 66,344 66,905 0.8% 10,797 10,479 -2.9% 6,677 6,133 -8.1% 694 2,101 202.7% Retail 247,417 268,250 8.4% 23,330 25,024 7.3% 17,352 18,073 4.2% 11,505 11,912 3.5% Energy 5,390 6,473 20.1% 3,957 4,220 6.6% 2,809 2,910 3.6% 2,387 2,202 -7.7% Infraestructure 2,340 3,006 28.4% 1,686 1,878 11.4% 1,582 1,761 11.3% 876 985 12.4% Fibras/ Real Estate 2,058 2,395 16.3% 1,248 1,195 -4.3% 1,258 1,231 -2.2% 585 319 -45.5% Financials 7,430 8,287 11.5% #DIV/0! 1,540 1,611 4.6% 1,149 1,256 9.3% Industrials 85,850 87,578 2.0% 11,787 10,826 -8.2% 7,046 6,071 -13.8% 3,554 1,917 -46.1% Mining 49,936 50,426 1.0% 23,574 23,419 -0.7% 18,115 17,754 -2.0% 6,776 6,905 1.9% Petrochemicals 61,612 63,651 3.3% 9,564 8,809 -7.9% 6,937 6,008 -13.4% 3,029 2,711 -10.5% Services 1,025 1,161 13.3% 285 293 2.7% 180 181 0.4% 147 70 -52.8% Transportation 16,032 18,423 14.9% 5,019 6,129 22.1% 1,585 2,583 63.0% 748 1,282 71.5% Telecommunications 288,109 287,773 -0.1% 84,673 83,042 -1.9% 36,252 40,063 10.5% 21,053 19,661 -6.6% Total 1,031,012 1,065,014 3.3% 207,298 207,873 0.3% 122,647 125,859 2.6% 60,857 62,943 3.4% Source: Banorte, MSE. Note: in Transportation we include GMXT and Volar. In the latter the figures are +EBITDAR

Revenue 1Q19e Ebitda 1Q19e

40% 28.4% 40% 20.1% 16.3% 14.9% 22.1% 20% 13.3% 7.9% 8.4% 11.5% 2.6% 3.3% 20% 2.0% 11.4% 0.8% 1.0% 5.8% 6.6% 7.3% 6.6% 0% 2.7% -0.1% 0% -7.9% -20% -0.7% -2.9% -4.3% -1.9% -8.2% -7.9%

-40% -20% -16.1%

Retail Retail

Mining Mining

Energy Energy

Airports Airports

Cement Cement

Services Services

Financials

Industrials Industrials

Auto Parts Auto Parts

Beverages Beverages

Infrastructure Infrastructure

Transportation Transportation

Petrochemicals Petrochemicals

Fibras/ RealFibras/Estate Fibras/Real Estate Telecommunications Telecommunications

Operating Income 1Q19e Net Income 1Q19e

70% 63.0% 230% 202.7%

180%

130% 93.5% 71.5% 20% 11.3% 10.5% 80% 4.5% 4.6% 4.2% 3.6% 0.4% 30% 5.2% 3.5% 12.4% 9.3% 1.9%

-2.2% -2.0% -20% -8.1% -7.7% -10.5% -6.6% -13.8% -13.4%

-30% -70% -41.5% -45.5% -46.1% -52.8%

Retail Retail

Mining Mining

Energy Energy

Airports

Cement Cement

Services Services

Financials Financials

Industrials Industrials

Auto Parts Auto Parts

Beverages Beverages

Infrastructure Infrastructure

Transportation Transportation

Petrochemicals Petrochemicals

Fibras/ RealFibras/Estate RealFibras/Estate Telecommunications Telecommunications

Companies Under Coverage

ALFA A Alfa ALPEK A Alpek ALSEA * Alsea AMX L América Móvil ASUR B Grupo Aeroportuario del Sureste AXTEL CPO Axtel CEMEX CPO Cemex CHDRAUI Grupo Comercial Chedraui CREAL * Crédito Real FEMSA Fomento Económico Mexicano FIHO 12 Fibra Hotel GAP B Grupo Aeroportuario del Pacífico GCC * Grupo Cementos de Chihuahua GENTERA * Compartamos GICSA B Grupo Gicsa GMEXICO B Grupo México GMXT * Grupo México Transportes HOTEL * Grupo Hotelero Santa Fe IENOVA * Infraestructura Energética Nova KOF L Coca Cola Femsa LAB B Genomma Lab Internacional LACOMER UBC La Comer LIVEPOL C1 El Puerto de Liverpool MEGA CPO Megacable Holdings MEXCHEM * Mexichem NEMAK A Nemak OMA B Grupo Aeroportuario del Centro del Norte PINFRA * Promotora y Operadora de Infraestructura SORIANA B Organización Soriana SPORT S Grupo Sports World TLEVISA CPO Grupo Televisa VOLAR A Controladora Vuela Compañía de Aviación WALMEX * Walmart de México y Centroamérica

ALFA A (Buy, PT2019 MXN$29.50) Marissa Garza Ostos

ALFA – Preview 1Q19 Revenue & EBITDA Margin MXN, million MXN, million 19.0% 96,000 20.0% Concept 1Q18 1Q19e Chg % 94,000 14.0% Revenue 85,850 87,578 2.0% 92,000 13.7% 13.5% 15.0% Operating Income 7,046 6,071 -13.8% 90,000 12.4% Ebitda 11,787 10,826 -8.2% 88,000 10.0% Net Income 3,554 1,917 -46.1% 86,000 Margins 84,000 5.0% Operating Margin 8.2% 6.9% -1.3pp EBITDA Margin 13.7% 12.4% -1.3pp 82,000 Net Margin 4.1% 2.2% -1.9pp 80,000 0.0% EPS $0.69 $0.37 -46.1% 1Q18 2Q18 3Q18 4Q18 1Q19e Source: Banorte

Revenue EBITDA Margin

Alfa, a weak quarter. The company is scheduled to report 1Q19 earnings on Tuesday, April 23rd, after the bell. We anticipate a quarter with pressures in profitability in every subsidiary, except Sigma. In this sense, in the consolidated balance, we expect a 2.0% Net Income & ROE year-on-year increase in revenue , but an 8.2% decline in EBITDA, MXN, million 17.9% 5,000 20.0% to stand at MXN$87.5 billion and MXN$10.8 billion, respectively. 16.0% We expect MXN$1.9 billion in net income, down 46.1% year-on- 4,000 11.7% 15.0% year given operating weakness and a less favorable FX effect, as 3,000 10.0% gains reported in 1Q18 were considerably higher than those 2,000 0.9% 5.0% expected for 1Q19. We should remember that during the quarter, 1,000 0.0% the peso appreciated just 2.3% vs. 7.5% the previous year. 0 -2.4% -5.0% In Alpek, contribution from Suape and Citepe Petrochemical 1Q18 2Q18 3Q18 4Q18 1Q19e operations should boost revenue and marginally offset expected Net Income ROE pressures amid a less favorable price context. The recovery observed in the price of Brent crude this quarter vs the significant decline seen by year-end 2018, will not be enough to completely outweigh the effect of lower margins, particularly in the Polyester segment, in view of global-wide normalization thereof (See Alpek’s Net Debt & Net Debt to EBITDA preliminary report). MXN, million 145,000 3.2x 3.3x 3.5x 2.7x 2.6x In Nemak, we anticipate a quarter strongly affected by lower 140,000 3.0x 2.4x 2.5x aluminum prices and a drop in vehicle production in all regions. 135,000 2.0x Consequently, profitability will be affected given a lower operating 130,000 1.5x leverage (See Nemak’s preliminary). 125,000 1.0x 120,000 In Axtel, the quarter should reflect downturns, resulting from the 0.5x 115,000 0.0x sale of the residential fiber-to-the-home business (Massive 1Q18 2Q18 3Q18 4Q18 1Q19e

Business) in December. Excluding this effect, earnings will reflect Net Debt Net Debt to EBITDA pressures in profitability derived from the slowdown in government spending. (See Axtel’s preliminary report).

In Sigma, we expect a positive quarter, given a favorable price environment.

ALPEK A (Buy, PT2019 MXN$35.00) Marissa Garza Ostos

ALPEK – Preview 1Q19 Revenue & EBITDA Margin MXN, million MXN, million

40,000 25.0% Concept 1Q18 1Q19e Chg % 21.1% 35,000 20.0% Revenue 28,746 30,241 5.2% 30,000 14.1% Operating Income 2,695 2,368 -12.1% 25,000 13.7% 11.8% 10.4% 15.0% Ebitda 3,391 3,151 -7.1% 20,000 Net Income 1,550 1,179 -23.9% 15,000 10.0% Margins 10,000 Operating Margin 9.4% 7.8% -1.6pp 5.0% EBITDA Margin 11.8% 10.4% -1.4pp 5,000 Net Margin 5.4% 3.9% -1.5pp 0 0.0% EPS $0.73 $0.56 -23.9% 1Q18 2Q18 3Q18 4Q18 1Q19e Source: Banorte

Revenue EBITDA Margin

ALPEK, a weak quarter, yet already priced-into the stock. Alpek is set to report 1Q19 earnings on Tuesday April 23rd, after the closing bell. We anticipate weak figures, impacted by lower prices of oil and commodities, although we believe this should Net Income & ROE already be discounted in the price of the stock. MXN, million 36.3% 9,000 35.8% 40.0% Margin pressures given a less favorable price context. For this 8,000 30.0% 7,000 17.8% 20.0% quarter, our estimates assume MXN$30.2 billion (US$1.5 6,000 billion,+19.2% yoy) in revenue and MXN$3.1 billion (US$164 5,000 10.0% 4,000 0.0% million, -8.9% yoy) in EBITDA, representing a 5.2% rise and a 3,000 -10.0% 7.1% decline, respectively. Consequently, the consolidated 2,000 -11.9% 1,000 -20.0% -21.3% EBITDA margin should adjust by 140bps to levels of 10.4%. In 0 -30.0% peso-terms, the conversion effect is marginally favorable, 1Q18 2Q18 3Q18 4Q18 1Q19e considering a 1.8% average MXN depreciation yoy and taking into Net Income ROE account that company operations are dollarized. The incorporation of Brazil will mitigate the downturn of the Polyester segment. Although in 1Q19 the price of Brent crude recovered from the considerable drop seen by year-end, this was not Net Debt & Net Debt to EBITDA enough to completely cancel out the effect of lower margins, MXN, million 3.2x particularly in the Polyester segment, in view of global-wide 40,000 3.1x 3.5x normalization thereof. However, we expect the contributions of the 35,000 3.0x 30,000 Suape and Citepe Petrochemical operations in Brazil to help boost 1.9x 2.5x 25,000 1.8x 1.8x 2.0x revenue and marginally offset expected pressures amid a less 20,000 1.5x favorable price environment. In Plastics and Chemicals, we expect 15,000 1.0x margin stability in propylene and slight pressures on demand 10,000 5,000 0.5x following weak prices reported in the beginning of the year. 0 0.0x 1Q18 2Q18 3Q18 4Q18 1Q19e

Ahead of news on the development of M&G México and the Net Debt Net Debt to EBITDA sale conclusion of the co-generation plants. The most relevant highlight this quarter will be news notes related to the restructuring process in M&G México and confirmation that everything is set to close the sale of the co-generation plants by 2Q19.

ALSEA * (Hold, PT2019 MXN$ 60.00) Valentín III Mendoza Balderas

ALSEA – Preview 1Q19 Revenue & EBITDA Margin MXN, million pesos MXN, million 14.7% 16,000 14.0% 13.7% 16.0% Concept 1Q18 1Q19e Chg % 13.0% 14,000 11.7% 14.0% Revenue 11,012 13,644 23.9% 12,000 12.0% Operating Income 672 749 11.4% 10,000 10.0% Ebitda 1,426 1,599 12.1% 8,000 8.0% Net Income 212 159 -24.8% Margins 6,000 6.0% Operating Margin 6.1% 5.5% -0.6pp 4,000 4.0% EBITDA Margin 13.0% 11.7% -1.3pp 2,000 2.0% Net Margin 1.9% 1.2% -0.7pp 0 0.0% EPS $0.25 $0.19 -24.6% 1Q18 2Q18 3Q18 4Q18 1Q19e Source: Banorte

Revenue EBITDA Margin

This first quarter of the year would reflect the effects of the acquisitions in Europe and the implementation of IFRS16. Alsea is scheduled to report 1Q19 earnings on Tuesday, April 30th, after market close. This would be the first quarter to incorporate the effects from the acquisition of Grupo Vips in Spain and Starbucks Net Income & ROE MXN, million operations in France and Benelux. Furthermore, the implementation 350 15.3% 18.0% of IFRS16 may affect the comparability of results vs. our estimates. 14.4% 300 16.0% 14.0% 250 11.3% Grupo Vips and Starbucks Benelux would practically double 12.0% 200 8.1% the company’s revenue in Europe, boosting TS 23.9% yoy. We 7.1% 10.0% 150 8.0% expect the acquisitions in Europe to translate into a 94.2% sales 6.0% 100 increase in said region (MXN$4.8 billion), boosting consolidated 4.0% 50 2.0% revenue 23.9% yoy to MXN$13.6 billion. Moreover, a 5.6% jump 0 0.0% in Mexico to MXN$6.3 billion, explained by a 2% LfL upturn and 1Q18 2Q18 3Q18 4Q18 1Q19e the opening of 131 units in the L12M, should compensate the 1.7% Net Income ROE drop of such indicator in South America. (MXN$2.4 billion).

Lower profitability of acquired businesses would pressure the consolidated EBITDA margin by 130bps. We expect Alsea’s EBITDA to grow 12.1% yoy to total MXN$1.5 billion, below the sales rhythm, which would result in a 130bps decline of the Net Debt & Net Debt to EBITDA MXN, million corresponding margin to 11.7%, as we project new consolidations 3.7x 3.7x in Europe would pressure the indicator of such region by 520bps to 30,000 4.0x 3.5x 25,000 14.8%. Hence, EBITDA would raise 43.8% yoy to MXN$715 3.0x 20,000 million. In addition, we forecast a 5.8% EBITDA surge in Mexico, 2.1x 2.1x 2.1x 2.5x to close at MXN$1.4 billion and a 9.1% drop in Latam to 15,000 2.0x 1.5x 10,000 MXN$304 million. 1.0x 5,000 Higher interest payment would impact net profit. We anticipate 0.5x 0 0.0x Alsea’s net income may reach MXN$159 million in 1Q19 (-24.8% 1Q18 2Q18 3Q18 4Q18 1Q19e yoy), as a 76.5% higher Net Interest Expense, 26.9% from higher Net Debt Net Debt to EBITDA interest payments (+54.4%e), would offset the positive effect of a lower effective tax rate (33%e vs the previous 37.9%).

AMX L (Buy, PT2019 MXN$17.00) Manuel Jiménez Zaldivar

AMX – Preview 1Q19 Revenue & EBITDA Margin MXN, million MXN, million 29.1% 275,000 28.3% 28.7% 30% Concept 1Q18 1Q19e Chg % 27.5% 27.9% 28% Revenue 253,422 253,037 -0.2% 250,000 Operating Income 30,408 34,787 14.4% 26% Ebitda 71,820 70,623 -1.7% 225,000 24% Net Income 18,087 18,369 1.6% Margins 22% Operating Margin 12.0% 13.7% 1.7pp 200,000 20% EBITDA Margin 28.3% 27.9% -0.4pp Net Margin 7.1% 7.3% 0.1pp 175,000 18% EPS $0.27 $0.28 1.6% 1Q18 2Q18 3Q18 4Q18 1Q19e Source: Banorte Revenue EBITDA Margin

Results reflect a negative FX conversion effect and the acquisition in Guatemala. Based on our estimates, América Móvil’s quarterly earnings will be neutral. In 1Q19, the company’s numbers will reflect the acquisitions of Telefónica operations in Net Income & ROE Guatemala for US$333 million. In this country, Telefónica had a MXN, million 26.9% roughly 20% market share, that is to say, a 4.1 million mobile 20,000 25.5% 30.0% 25.0% subscriber base. Moreover, we anticipate the company’s earnings 18.2% 15,000 20.0% will be negatively impacted by the fluctuation of Latin American 15.0% 10,000 currencies against the U.S. dollar. 6.1% 10.0%

5,000 5.0% We expect a marginal variation in revenue. We forecast the 0.0% -1.2% company will close the quarter with 364 Revenue Generating Units 0 -5.0% (RGUs), up an annual 0.5% and equaling 4 million net additions 1Q18 2Q18 3Q18 4Q18 1Q19e resulting mainly from the above-mentioned acquisition. During the Net Income ROE first quarter of the year, we expect AMX to report consolidated revenue totaling MXN$253.0 billion, a -0.2% variation vs 1Q18.

Breaking down this item, we anticipate a 2.1% yoy drop in revenue from services to MXN$210.7 billion due to a negative FX conversion effect and greater competition that would impact ARPU. In addition, we estimate a 11.1% increase in revenue from Net Debt & Net Debt to EBITDA equipment sales to MXN$42.2 billion, due to the migration of MXN, million subscribers towards value-added services and to lower subsidies on 800,000 3.0x 2.4x 2.4x equipment. 2.5x 2.1x 2.0x 2.0x Slight pressure on profitability and higher financial expenses. 600,000 2.0x We forecast an annual 1.7% decline in EBITDA to MXN$70.6 billion, sending the corresponding margin to stand at 27.9% 1.5x

(-40bps yoy). At a Net Interest Expense level, we expect a total of 400,000 1.0x MXN$5.9 billion, far exceeding the year-ago period’s MXN$913 1Q18 2Q18 3Q18 4Q18 1Q19e million, derived from lower FX gains. Finally, we anticipate an Net Debt Net Debt to EBITDA annual 1.6% net profit increase to MXN$18.3 billion, higher financial expenses would be partially offset by a lower tax rate.

ASUR B (Buy, 2019 PT MXN$ 380.10) José Itzamna Espitia Hernández

ASUR – Preview 1Q19 Revenue & EBITDA Margin MXN, million MXN, million

4,400 68.2% 70.0% Concept 1Q18 1Q19e Chg % 4,200 68.0% Revenue 3,917 4,327 10.5% 66.0% Operating Income 2,197 2,169 -1.3% 4,000 62.7% Ebitda 2,670 2,675 0.2% 61.9% 61.8% 64.0% 3,800 60.7% Net Income 1,455 1,340 -7.9% 62.0% Margins 3,600 60.0% Operating Margin 56.1% 50.1% -6.0pp 3,400 Ebitda Margin 68.2% 61.8% -6.3pp 58.0% Net Margin 37.1% 31.0% -6.2pp 3,200 56.0% EPS $4.85 $4.47 -7.9% 1Q18 2Q18 3Q18 4Q18 1Q19e Source: Banorte

Revenue EBITDA Margin

Operations in Puerto Rico and Colombia (Airplan) boost sales, but EBITDA reports slight variation in the consolidated balance. Asur will report a 10.5% increase in sales in 1Q19 (up 12.2% combining aeronautic and non-aeronautic revenue), and a slight +0.2% variation in EBITDA, to close at MXN$4.3 billion Net Income & ROE MXN, million and MXN$2.7 billion, respectively. For the 9 airports operated by 1,600 21.8% 21.9% 21.1% 25.0% the group in Mexico, we expect a surge of 7.8% and 8.1% in 1,400 17.1% 20.0% operating revenue and EBITDA, respectively. 1,200 16.2% 1,000 15.0% 7.9% yoy increase in total passengers in the 16 airports 800 10.0% operated by the group. In 1Q19, total passenger traffic for Asur 600 400 5.0% rose 7.9% vs. 1Q18, including a 12.2% surge in domestic and a 200 2.3% increase in international traffic. The 9 airports operated by the 0 0.0% 1Q18 2Q18 3Q18 4Q18 1Q19e group in Mexico reported a low 2.4% passenger growth (due to an adverse calendar effect from an Easter Week shift, from March in Net Income ROE

2018 to April in 2019), while the Aeropuerto Luis Muñoz Marín in San Juan, Puerto Rico (LMM), posted a sharp 23.8% upturn (solid passenger recovery considering that the island was hit by Hurricane Maria in September of 2017). Passengers in Colombia underwent a solid 15.1% expansion, driven mainly by international (+16.5%) Net Debt & Net debt to EBITDA ratio yoy, followed by domestic traffic (+7.7%). MXN, million 14,000 1.6x 1.3x 1.4x 1.4x Drop in EBITDA margin yoy without accounting changes. We 12,000 1.2x 1.1x 1.2x forecast the operating margin will stand at 50.1%, and the EBITDA 10,000 0.9x 1.0x 8,000 margin will fall 6.3pp, to stand at 61.8%. The group’s margins, 0.8x 6,000 without considering construction costs and revenue, would close as 0.6x 4,000 follows: operating at 53.7% and EBITDA at 66.2% (-7.9pp). This 0.4x 2,000 0.2x results from practically flat margins from operations in Mexico and 0 0.0x Puerto Rico, and lower profitability in Colombia, as well as from 1Q18 2Q18 3Q18 4Q18 1Q19e greater weight from the consolidated balance of Puerto Rico and Net Debt Net Debt to EBITDA Colombia, which have a lower margin vs. Mexico. We expect majority net profit to drop 7.9% yoy.

AXTEL CPO (Buy, PT2019 MXN$3.55) Manuel Jiménez Zaldivar

AXTEL – Preview 1Q19 Revenue & EBITDA Margin MXN, million MXN, million

4,000 40% Concept 1Q18 1Q19e Chg % 38% Revenue 3,753 3,197 -14.8% 36.7% 36.8% Operating Income 343 186 -45.9% 3,500 36% Ebitda 1,379 1,084 -21.4% 34.2% 33.9% Net Income 960 -141 N.A. 34% Margins 3,000 31.8% Operating Margin 9.1% 5.8% -3.3pp 32% EBITDA Margin 36.7% 33.9% -2.8pp Net Margin 25.6% -4.4% -30.0pp 2,500 30% EPS $0.33 -$0.05 N.A. 1Q18 2Q18 3Q18 4Q18 1Q19e Source: Banorte

Revenue EBITDA margin

Slowdown in revenue from government cut in telecommunications spending. It should be mentioned that 1Q18 figures include operations from the residential fiber-to-the-home business which was sold to Grupo Televisa by the end of 4Q18, Net Income & ROE therefore, figures are not compared on an equal basis. With this, MXN, million 30.2% Axtel has concentrated on the corporate segment, its core business. 1,500 40% 30% During this quarter, we anticipate lower government spending in 1,000 20% 0.1% 10% telecommunications as a result of a new administration in office. 500 0% -0.2% -10% 0 -20% Mid-single digit increase in revenue within a comparable base. -30% In 1Q19, Axtel may report revenue totaling MXN$3.1 billion, (500) -40% -42.6% -46.5% -50% which would represent a 14.8% drop yoy. However, by excluding (1,000) -60% massive segment revenue from the comparative base, consolidated 1Q18 2Q18 3Q18 4Q18 1Q19e revenue would surge 5.2% yoy. The corporate segment would be Net Income ROE boosted by the dynamism of the network management and IT solutions business. This segment would produce MXN$2.6 billion in revenue (+6.7% yoy) contributing with 84% of total revenue. As for Government revenue, we estimate a 2% dip due to lower spending from federal and state government entities. Net Debt & Net Debt to EBITDA MXN, million 3.6x However, profitability drops. At an EBITDA level, we estimate 21,000 3.6x 3.5x MXN$1.0 billion, representing a 21.4% decline and a 2.8pp 19,000 3.3x 3.4x contraction in the corresponding margin to 33.9%. We anticipate 17,000 3.1x 3.2x lower operating leverage due to the slowdown of government 3.0x spending. It is worth mentioning that in 1Q18, Axtel reported 15,000 3.0x MXN$122 million in net revenue from the sale of 13,000 2.8x telecommunications towers. Excluding such extraordinary revenue, 11,000 2.6x EBITDA would decrease 13.8% yoy. 1Q18 2Q18 3Q18 4Q18 1Q19e Net Debt Net Debt EBITDA Interests reflect leverage reduction. Although the comparative base is difficult at a Net Interest Expense level due to the MXN$942 million FX gain, in this first period we estimate a 14% reduction in interest expense. In this context, in terms of net profit, we estimate a MXN$141 million loss vs. a MXN$960 million gain.

CEMEX CPO (Buy, 2019 PT MXN$ 12.70) José Itzamna Espitia Hernández

CEMEX – Preview 1Q19 Revenue & EBITDA Margin USD, million MXN, million 18.8% 18.8% 76,000 20.0% Concept 1Q18 1Q19e Chg % 15.8% 17.5% 74,000 15.3% 72,000 Revenue 3,381 3,308 -2.2% 15.0% 70,000 Operating Income 334 297 -11.1% 68,000 Ebitda 535 505 -5.6% 66,000 10.0% Net Income 26 99 281.5% 64,000 Margins 62,000 5.0% Operating Margin 9.9% 9.0% -0.9pp 60,000 EBITDA Margin 15.8% 15.3% -0.6pp 58,000 Net Margin 0.8% 3.0% 2.2pp 56,000 0.0% EPS $0.00 $0.01 284.2% 1Q18 2Q18 3Q18 4Q18 1Q19e Source: Banorte / Historic and estimated figures excluding IFRS 16. Revenue EBITDA Margin

We expect Cemex to report a drop in sales and EBITDA in 1Q19 yoy. We anticipate a decline of 2.2% yoy in sales (in dollars) and 5.6% in EBITDA. Moreover, the company would surge 281.5% in majority net profit vs 1Q18. Net Income & ROE We project volumes to report a slight set back in the MXN, million 8,000 6.3% 7.0% consolidated balance. We foresee an average growth in volume in 5.9% 5.2% 5.5% 6.0% the U.S. (1.6%), Europe (2.5%), Asia, Middle East and Africa 6,000 5.0% 5.0% (0.8%) and Central America, South America and the Caribbean 4,000 4.0% (1.2%). Conversely, we expect an average 3.3% decline in Mexico 2,000 3.0% derived from the market’s lower dynamism. It is worth mentioning 2.0% 0 that volume in the U.S. was partially impacted by an adverse 1.0% climate, while in Europe, weather conditions improved in (2,000) 0.0% 1Q18 2Q18 3Q18 4Q18 1Q19e comparison to 1Q18. Net Income ROE We estimate better prices yoy in local currency and increments in dollars in most regions. Cemex’s efforts to improve its price strategy continue; thus, we estimate price improvement in local currency in all regions where the company is present. Along the same line, we expect growth in dollars in most of the regions where Net Debt & Net Debt to EBITDA Cemex operates. We must remember that the exchange rate plays a MXN, million relevant role. 205,000 4.2x 4.3x 200,000 4.2x 4.1x We forecast lower profitability in EBITDA. We estimate a 0.9pp 195,000 4.1x 4.0x 190,000 and 0.6pp downturn in operating margin and EBITDA to 9.0% and 3.9x 185,000 3.8x 3.8x 3.8x 15.3%, respectively. In addition to weaker sales, we believe energy 180,000 3.7x 3.7x prices will continue to pressure the company’s costs. By region, we 175,000 3.6x expect the following expansion in EBITDA margin yoy: U.S. 170,000 3.5x 165,000 3.4x (+0.2pp) and Europe (+0.2pp); on the other hand, we forecast the 1Q18 2Q18 3Q18 4Q18 1Q19e following declines: Mexico (-1.3pp), Asia, Middle East and Africa Net Debt Net Debt to EBITDA (-1.7pp), and Central America, South America and the Caribbean (- 0.5pp).

Majority net profit would total US$99 million (+281.5% yoy) given lower comprehensive financing cost (-40%) which would more than compensate the company’s loss in operating profit.

CHDRAUI B (Buy, PT2019 $49.00) Valentín III Mendoza Balderas

CHDRAUI – Preview 1Q19 Revenue & EBITDA Margin MXN, million pesos MXN, million

40,000 6.8% 8.0% Concept 1Q18 1Q19e Chg % 35,000 5.8% 7.0% 5.5% 5.6% Revenue 23,289 32,030 37.5% 30,000 5.0% 6.0% Operating Income 1,174 1,202 2.4% 25,000 5.0% Ebitda 1,594 1,867 17.2% 20,000 4.0% Net Income 573 648 13.1% Margins 15,000 3.0% Operating Margin 5.0% 3.8% -1.3pp 10,000 2.0% EBITDA Margin 6.8% 5.8% -1.0pp 5,000 1.0% Net Margin 2.5% 2.0% -0.4pp 0 0.0% EPS $0.59 $0.67 13.1% 1Q18 2Q18 3Q18 4Q18 1Q19e Source: Banorte

Revenue EBITDA Margin

Positive year-start. Grupo Comercial Chedraui is scheduled to report corresponding 1Q19 earnings on Tuesday, April 30th, after the bell. We anticipate a good 2019 start, highlighting the dynamism of SSS in Mexico, exceeding the performance of Walmex. Meanwhile, although the consolidation of Fiesta Mart Net Income & ROE MXN, million would pressure margins, in such operations we should observe a 700 7.7% 7.8% sequential improvement in profitability as a result of the first 600 7.4% 7.6% synergies. 500 7.3% 7.4% 400 We expect consolidated revenue to grow 37.5%. We anticipate 7.0% 7.0% 7.2% 300 that the consolidation of Fiesta Mart will give revenue a strong 7.0% 200 push, in view of a 21.7% sales floor increase (+134.6% in the U.S.), 100 6.8% to which we would have to add a positive 260bps FX conversion 0 6.6% effect over the operations of Bodega Latina. Meanwhile, in Mexico, 1Q18 2Q18 3Q18 4Q18 1Q19e we project that SSS would exceed the performance of Walmex by Net Income ROE growing 5.4% yoy, in El Super format we forecast a 2.5% rally and in Fiesta, a 0.2% contraction. Hence, TS would reach MXN$32.0 billion (+37.5%) resulting from a 10.8% increase in Mexico

(MXN$18.3 billion), 107% in the U.S. (MXN$13.4 billion) and

2.2% in Real Estate. Net Debt & Net Debt to EBITDA MXN, million The consolidation of Fiesta Mart would pressure the EBITDA 10,000 1.6x margin by 100bps. We expect CHEDRAUI’s EBITDA to grow 1.4x 1.3x 1.2x 1.2x 1.4x 8,000 17.2% yoy to MXN$1.8 billion, resulting from a 10.7% rally in 1.2x such indicator in Mexico (MXN$1.2 billion) and a 10.1% increase 6,000 1.0x in that of the U.S. (MXN$422 million), while real estate would 0.8x 4,000 0.5x 0.6x contribute with MXN$167 million. Thus, the consolidated EBITDA 0.4x 2,000 margin would fall 100bps to 5.8%, due to the Fiesta Mart 0.2x consolidation effect. 0 0.0x 1Q18 2Q18 3Q18 4Q18 1Q19e

A lower tax effective rate would boost net profit. We project a Net Debt Net Debt to EBITDA 13.1% net income growth to MXN$648 million, supported by a lower tax rate (30% vs the previous 34%), added to a practically flat Net Interest Expense (-0.4%) – in view of MXN$2 million in FX gains, which favorably compares to last year’s MXN$12 million loss, offsetting a 29% increase in interest payments.

CREAL * (Buy, PT2019 MXN$22.50) Marissa Garza Ostos

CREAL – Preview 1Q19 Interest Income & NIM MXN, million MXN, million 16.6% 2,900 14.5% 18.0% Concept 1Q18 1Q19e Chg % 14.2% 2,800 14.0% 13.1% 16.0% 14.0% Interest Income 2,415 2,830 17.2% 2,700 Financial Margin 1,570 1,770 12.7% 12.0% Operating Income 490 501 2.2% 2,600 10.0% Net Income 423 464 9.8% 2,500 8.0% 6.0% Margins 2,400 ROE 12.3% 13.0% 0.7pp 4.0% 2,300 NIM 14.0% 13.1% 0.9pp 2.0% NPL 2.1% 1.8% -0.3pp 2,200 0.0% Provisions/TL 183.1% 159.0% -23.2pp 1T18 2T18 3T18 4T18 1T19e Source: Banorte

Interest Income NIM

CREAL, maintains growth inertia. Crédito Real is scheduled to release 1Q19 earnings on Wednesday April 24th after the bell. We anticipate a positive quarter, where the strategy will continue to focus on growth in Mexico and in the U.S. Net Income & ROE MXN, million 13.1% SMEs, Payroll and Automobile Mexico will continue to boost 600 13.2% 13.0% the portfolio. This quarter, we anticipate an annual 23.6% increase 500 13.0% 12.7% 12.8% in the total credit portfolio, to stand at roughly MXN$38.7 billion. 400 12.3% 12.6% Such growth is explained mainly by the favorable performance in 300 12.1% 12.4% SMEs with the launching of a new pure leasing product, Payroll 200 12.2% 12.0% favored by greater origination, and Automobiles, driven primarily 100 11.8% by a sound growth in Mexico. 0 11.6% 1Q18 2Q18 3Q18 4Q18 1Q19e

Financial Margin reflects perpetual bond accounting Net Income ROE adjustments. Growth in portfolio and adjustments related to Instacredit commissions with the implementation of NIIF 9 (all origination revenue and expenses must be integrated into the FM) should boost financial revenue, which we anticipate will grow 17.2% yoy to reach MXN$2.8 billion. It should be noted that as of Coverage Ratio & NPL July of 2018, perpetual bond interests are directly registered in MXN, million equity when the coupon is paid. Moreover, we expect a 25.6% 200% 2.1% 2.5% increase in financial expenses due to greater funding costs. Thus, 1.9% 1.9% 1.7% 1.8% 2.0% the Financial Margin should stand at MXN$1.7 billion, up an 150% 1.5% annual 12.7%. As for provisions, these should rise 3.1% yoy to 100% MXN$434 million, with which we anticipate a Net Interest Margin 1.0% 50% of 13.1% vs 14.0% in 1Q18. 0.5%

0% 0.0% Net profit to increase on a par with Margin. This quarter, we 1Q18 2Q18 3Q18 4Q18 1Q19e expect MXN$464 million in net profit, which would represent a Coverage ratio NPL 9.8% yoy increase. Accordingly, we anticipate ROE at 13.0%, flat vs. 4Q18, but should stand at levels of 1.8% considering the NPL ratio (vs. 1.9 in 1Q18).

FEMSA (Hold, PT2019 MXN$192.00) Manuel Jiménez Zaldivar Valentín Mendoza Jorge Izquierdo FEMSA – Preview 1Q19 Revenue & EBITDA Margin MXN, million MXN, million

130,000 18% Concept 1Q18 1Q19e Chg % 125,000 16% Revenue 115,337 121,096 5.0% 14.5% Operating Income 8,412 8.778 4.4% 120,000 12.7% 14% Ebitda 13,006 13,790 6.0% 12.6% 115,000 11.4% Net Income 1,476 4,337 193.9% 11.3% 12% Margins 110,000 Operating Margin 7.3% 7.2% -0.1pp 105,000 10% EBITDA Margin 11.3% 11.4% 0.1pp Net Margin 1.3% 3.6% 2.3pp 100,000 8% EPS $0.08 $0.24 193.9% 1Q18 2Q18 3Q18 4Q18 1Q19e Source: Banorte Revenue EBITDA margin

KOF would offset cost pressures incurred by FEMSA Comercio. We anticipate a neutral report. Higher operating expenses from FEMSA Comercio would be outweighed by the positive deconsolidation effect of the Philippines in KOF. Net Income & ROE MXN, million

FEMSA Comercio: solid growth in revenue. We expect revenue 12,000 17.3% 18.4% 20% from the proximity division to grow 10.4%, driven by a 5.5% 10,000 10.9% 15% increase in same store sales and the opening of 190 new OXXO 8,000 9.9% locations. In the health division, revenue would gain 9% yoy 6,000 6.9% 10% derived from a 5.4% increment in LfL sales and the opening of 62 4,000 5% pharmacies. Furthermore, revenue from the fuel division would 2,000 grow 17% yoy, driven by a 3.9% increase in the average price per 0 0% liter and the opening of 20 new stations. Finally, KOF’s revenue 1Q18 2Q18 3Q18 4Q18 1Q19e would fall 2.9% yoy to MXN$48.2 billion. Net Income ROE

Marginal improvement in profitability. We forecast a 5.3% yoy increase in operating expenses given pressures of the FEMSA Comercio division. These are explained by the change implemented in the employment scheme, cash management and the opening of Net Debt & Net Debt to EBITDA new OXXO format stores, as well as by the pharmacy opening MXN, million effect in South America and the implementation of new vapor recovery systems and the opening of OXXO GAS stations. Hence, 75,000 2.0x 1.5x EBITDA from the proximity division would stand at MXN$3.2 65,000 billion (+2.8%) with a margin at 7.6%. Meanwhile the health 1.1x 1.5x 55,000 1.0x 0.9x 1.4x division would contribute with MXN$508 in EBITDA (-4.3%) and 1.0x a 3.7% margin. Finally, the fuel division would add MXN$190 45,000 0.5x million (+9%) with a 1.5% margin. However, the deconsolidation 35,000 of KOF operations in the Philippines would have a positive effect 25,000 0.0x on profitability by growing 6% yoy to MXN$13.7 billion. 1Q18 2Q18 3Q18 4Q18 1Q19e Net Debt Net Debt EBITDA Profit benefited by an FX effect and the participation in Heineken. We expect FX losses to fall 89% yoy during 1Q19. In addition, a higher contribution from FEMSA’s participation (14.8%in Heineken would boost net earnings to MXN$4.3 billion.

FIHO12 (Hold, 2019 PT MXN$ 11.80) José Itzamna Espitia Hernández

FIHO – Preview 1Q19 Revenue & EBITDA Margin MXN, million MXN, million

1,100 31.1% 29.8% 35.0% Concept 1Q18 1Q19e Chg % 1,080 25.6% 26.0% 27.8% 30.0% Revenue 1,060 1,009 1,057 4.8% 25.0% NOI 368 346 -6.1% 1,040 Ebitda 314 294 -6.4% 1,020 20.0% Net Income 175 95 -45.8% 1,000 15.0% Margins 980 10.0% NOI Margin 36.5% 32.7% -3.8pp 960 Ebitda Margin 31.1% 27.8% -3.3pp 940 5.0% Net Margin 17.4% 9.0% -8.4pp 920 0.0% Distribution payment $0.30 $0.27 -9.2% 1Q18 2Q18 3Q18 4Q18 1Q19e Source: Banorte

Revenue EBITDA Margin

Complicated beginning of the year impacts operating results. In 1Q19, we expect the REIT to report a 4.8% yoy increase in sales, a 6.1% drop in NOI and a 6.4% decline in EBITDA to close at MXN$1.1 billion, MXN$346 million and MXN$294 million, respectively. In addition, net profit would post a considerable NOI & NOI Margin MXN, million 45.8% annual downturn. 400 36.5% 37.0% 350 34.9% 36.0% More hotel rooms under operation and a higher rate would 300 35.0% 34.0% more than offset a decline in occupancy, thus boosting revenue. 250 32.7% 32.2% 33.0% 200 In 1Q19, the REIT would close with 3.1% more rooms vs. 1Q18. 31.0% 32.0% 150 Considering the total number of hotel rooms under operations and 31.0% 100 30.0% under development, FIHO would close this quarter with a similar 50 29.0% number to that of the year-ago period. We estimate the REIT’s 0 28.0% 1Q18 2Q18 3Q18 4Q18 1Q19e stabilized hotel occupancy (74) to stand at 64.0% (-0.4pp). Furthermore, we expect the average rate to stand at P$1,185, NOI NOI Margin whereby the effective rate would be P$758 (+1.3% vs. 1T18).

We foresee a drop in profitability. We expect the NOI’s margin to stand at 32.7% and the EBITDA margin at 27.8%, representing

3.8pp and 3.3pp declines, respectively. The latter is due to a lower AFFO / Distribution payment operating leverage resulting from lower market demand, mainly in MXN, million beach destinations and, specifically for FIHO, in the Fiesta 300 0.350 Americana Condesa Cancún (FACC), as well as in business hotels 0.290 0.295 0.268 due to the current uncertain climate that affects projects and travel 250 0.262 0.300 0.207 0.250 plans. 200 0.200 150 We project a 45.8% net profit decline vs. 1Q18, which would 0.150 100 stand at MXN$95 million due to lower operating earnings and 0.100 50 higher comprehensive financing cost (+140.9% vs. 1Q18), mainly 0.050 0 0.000 resulting from higher paid interests (no longer capitalizing). 1Q18 2Q18 3Q18 4Q18 1Q19e

We forecast cash distribution to stand at MXN$ 0.268 per AFFO Distribution payment

CBFI, which would represent an approximate 2.8% yield based on the current price level.

GAP B (Buy, 2019 PT MXN$ 206.70) José Itzamna Espitia Hernández

GAP – Preview 1Q19 Revenue & EBITDA Margin MXN, million MXN, million 65.4% 3,900 66.0% Concept 1Q18 1Q19e Chg % 64.8% 3,800 65.0% Revenue 3,408 3,811 11.8% 3,700 64.0% Operating Income 1,845 2,035 10.3% 62.3% 63.0% Ebitda 3,600 2,230 2,469 10.7% 61.5% 60.6% 62.0% Net Income 1,114 1,312 17.7% 3,500 Margins 61.0% 3,400 Operating Margin 54.2% 53.4% -0.8pp 60.0% Ebitda Margin 65.4% 64.8% -0.7pp 3,300 59.0% Net Margin 32.7% 34.4% 1.7pp 3,200 58.0% EPS $1.99 $2.34 17.7% 1Q18 2Q18 3Q18 4Q18 1Q19e Source: Banorte

Revenue EBITDA Margin

We expect Gap to continue to post double-digit growth in 1Q19. We estimate the airport group to report 1Q19 earnings, including an 11.8% growth in sales and a 10.7% increase in EBITDA, to close at MXN$3.8 billion and MXN$2.5 billion, respectively. Net Income & ROE Mid single-digit passenger growth during the quarter. We MXN, million 1,600 27.0% 27.0% 30.0% expect the sum of aeronautic and non-aeronautic revenue 24.8% 23.8% 1,400 (including MBJ) to total a 12.7% growth and considering only the 20.3% 25.0% 1,200 20.0% 12 airports that operate in Mexico, such expansion is estimated at 1,000 12.0%. This would result from a 5.2% yoy total passenger traffic 800 15.0% 600 increase, constituted by a 3.9% domestic and 6.7% international 10.0% 400 5.0% traffic surge. Additionally, excluding MBJ (only the 12 airports that 200 operate in Mexico), total passengers climbed 4.4%. It should be 0 0.0% mentioned that there was an adverse calendar effect due to an 1Q18 2Q18 3Q18 4Q18 1Q19e Easter Week shift this year, from March in 2018 to April in 2019. Net Income ROE

We expect a slight increase in the group’s EBITDA margin

(without accounting changes). We anticipate the group will post operating and EBITDA margin contractions of 0.8pp and 0.7pp to stand at 53.4% and 64.8%, respectively. It must be stated that such Net Debt & Net debt to EBITDA ratio margins, without considering accounting changes (not representing MXN, million 0.8x outflow), would come in as follows: 58.0% for operating (-1.3pp) 8,000 0.9x 7,000 0.7x 0.8x and 70.4% for EBITDA (-1.3pp). We expect profitability of the 0.7x 6,000 0.6x 0.7x airports that operate in Mexico to remain stable (+0.2pp in 0.5x 0.6x 5,000 0.5x EBITDA margin), as well as a lower margin for the MBJ Airport (- 4,000 0.4x 3,000 14.0pp). 0.3x 2,000 0.2x We project that as at 1Q19, Gap’s majority net profit would 1,000 0.1x total MXN$1.3 billion (+17.7% vs. 1Q18), due to increments in 0 0.0x 1Q18 2Q18 3Q18 4Q18 1Q19e operating earnings, lower taxes (-7%) and a less negative number Net Debt Net Debt to EBITDA from FX conversion difference, partially offset by comprehensive financing cost (vs. a gain in 1Q18).

GCC * (Buy 2019 PT MXN$ 124.50) José Itzamna Espitia Hernández

GCC – Preview 1Q19 Revenue & EBITDA Margin USD, million USD, million 30.0% 300 29.9% 27.9% 35.0% Concept 1Q18 1Q19e Chg % 24.3% 30.0% 250 23.2% Revenue 189 176 -6.9% 25.0% Operating Income 25 22 -11.5% 200 Ebitda 46 41 -11.0% 20.0% 150 Net Income 11 10 -8.6% 15.0% Margins 100 10.0% Operating Margin 13.4% 12.7% -0.7pp 50 EBITDA Margin 24.3% 23.2% -1.1pp 5.0% Net Margin 6.0% 5.9% -0.1pp 0 0.0% EPS $0.03 $0.03 -8.6% 1Q18 2Q18 3Q18 4Q18 1Q19e Source: Banorte / Historic and estimated figures excluding IFRS 16.

Revenue EBITDA Margin

We forecast setbacks in GCC’s 1Q19 earnings. In 1Q19, we expect GCC to report a 6.9% decrease in sales (in dollars), as well as an 11.0% drop in EBITDA, to come in at US$176 million and US$41 million, respectively. Net Income & ROE We expect a low-single digit volume decline, on average, in the USD, million consolidated balance. In the U.S., adverse weather conditions 50 12.0% affected company volumes. In addition, the comparative base is 40 9.7% 10.0% 30 7.3% 8.0% high, as 1Q18 was GCC’s all-time strongest performing quarter. 6.5% 6.4% 6.1% 20 6.0% Hence, we forecast a mid-single digit drop in product volume. On 10 4.0% the other hand, for operations in Mexico, unlike the rest of the 0 country, we consider the favorable market dynamic in Chihuahua (10) 2.0% had a positive effect on cement and concrete volumes. Thus, we (20) 0.0% 1Q18 2Q18 3Q18 4Q18 1Q19e estimate an average +3.5% increase in volume. Net Income ROE Improved prices yoy in local currency and in U.S. dollars, on average. GCC continues the implement its price strategy, which we expect will be reflected on figures this quarter. We estimate a mid- single digit improvement in product prices, on average, in local currency and a low-single digit improvement in dollars. Net Debt & Net Debt to EBITDA USD, million Operating margin reduction. We forecast GCC will present a 500 1.9x 1.8x 1.8x 0.7pp drop in operating margin, to stand at 12.7%, and a 1.1% 480 1.8x 1.8x EBITDA margin contraction to 23.2%. This would result from 460 1.7x 1.6x lower sales which would have a negative impact on the company’s 440 1.7x 1.6x operating leverage. 420 1.6x 1.6x 1.6x 400 1.5x We foresee an 8.6% yoy downturn in GCC’s majority net 380 1.5x profit, given lower operating profit, partially offset by lower 360 1.4x 1Q18 2Q18 3Q18 4Q18 1Q19e comprehensive financing cost (-12% yoy), as well as by lower taxes (-11%). On the other hand, the company will continue to report Net Debt Net Debt to EBITDA financial strength, with the Net Debt/EBITDA indicator at 1.6x vs. 1.6x in 4Q18.

GENTERA * (Buy, PT2019 MXN$20.00) Marissa Garza Ostos

GENTERA – Preview 1Q19 Interest Income & NIM MXN, million MXN, million

5,700 48.0% 45.5% Concept 1Q18 1Q19e Chg % 5,600 44.6% 46.0% 5,500 Interest Income 5,016 5,457 8.8% 5,400 44.0% Financial Margin 4,641 4,964 7.0% 41.5% 5,300 Operating Income 1,050 1,110 5.7% 40.7% 42.0% 5,200 Net Income 726 792 9.0% 5,100 38.2% 40.0% Margins 5,000 38.0% ROE 15.3% 16.0% 0.7pp 4,900 36.0% NIM 45.5% 38.2% -7.3pp 4,800 NPL 4.1% 2.9% -1.2pp 4,700 34.0% Provisions/TL 174.7% 214.5% 39.8pp 1Q18 2Q18 3Q18 4Q18 1Q19e Source: Banorte

Interest Income NIM

Gentera, a good year-start. The company is set to report 1Q19 earnings on Wednesday April 24th, after the bell. We anticipate a favorable quarter, moving forward with the recovery momentum of previous periods. Net Income & ROE MXN, million Gentera’s portfolio maintains double-digit growth. For this first 840 17.0% 16.4% 820 quarter of the year, we expect positive figures which should reflect 800 16.0% 16.5% 780 favorable dynamics that were implemented as well as the 15.5% 16.0% 760 15.3% company’s aggressive commercial strategy, especially to boost 740 15.0% 15.5% 720 growth in Mexico. In this sense, we expect Gentera’s total portfolio 700 15.0% to expand 12.9% yoy to stand at MXN$35.6 billion. In any case, it 680 14.5% 660 should be mentioned that we anticipate a marginal qoq contraction, 640 14.0% not only resulting from the business’s cyclical nature, but also due 1Q18 2Q18 3Q18 4Q18 1Q19e to an adverse calendar effect due to an Easter-week shift from Net Income ROE

March in 2018 (1Q18) to April in 2019 (2Q19). Financial Margin reflects rate-reduction strategy in order to boost growth. Although growth in portfolio should boost financial revenue, this will be tempered by a lower active rate, related to the Coverage Ratio & NPL company’s strategy to boost growth, whereby we anticipate an MXN, million 4.1% 8.8% yoy increase in such item. This, coupled with higher interest 250% 4.5% expenditures, resulting from a hike in Mexico’s reference rate and 4.0% 200% 2.9% 2.7% 2.9% 3.5% higher liquidity levels, will reflect in a 7.0% Financial Margin 2.6% 3.0% 150% increase to MXN$4.9 billion. Growth of provisions below that of 2.5% 2.0% 100% the portfolio will translate into a Risk Adjusted Financial Margin of 1.5% MXN$4.2 billion, up 7.7% yoy. Consequently, the Net Interest 50% 1.0% 0.5% Margin (NIM) will go from 45.5% in 1Q18 and 40.7% in 4Q18 to 0% 0.0% 38.2% in 1Q19. 1Q18 2Q18 3Q18 4Q18 1Q19e Coverage Ratio NPL Net profit reflects a favorable strategy. The company’s operating performance coupled with cost efficiencies will reflect on a MXN$792 million net profit, posting a 9.0% yoy increase. ROE should stand at 16.0% and the NPL ratio should erode slightly to 2.9% qoq.

GICSA B (Buy, PT2019 MXN$9.00) Valentín III Mendoza Balderas

GICSA – Preview 1Q19 Revenue & EBITDA Margin MXN, million pesos MXN, million

2,500 89.0% 88.1% 100.0% Concept 1Q18 1Q19e Chg % 76.9% Revenue 1,050 1,337 27.4% 2,000 67.4% 80.0% Operating Income 890 885 -0.6% 56.5% 1,500 60.0% Ebitda 934 901 -3.6% Net Income 410 224 -45.4% 1,000 40.0% Margins Operating Margin 84.8% 66.2% -18.6pp 500 20.0% EBITDA Margin 89.0% 67.4% -21.6pp Net Margin 39.1% 16.7% -22.3pp 0 0.0% EPS $0.27 $0.15 -45.4% 1Q18 2Q18 3Q18 4Q18 1Q19e Source: Banorte

Revenue EBITDA Margin

Recent openings should begin to offset the effects from the assets swap. GICSA is set to report 1Q19 earnings on Monday April 29th, after the closing bell. We anticipate a quarter with moderate declines, as recent openings should start to offset part of the effects from the assets swap. However, said effect would also Net Income & ROE MXN, million pressure profitability given the lower occupancy. 5,000 22.3% 25.0% 20.2% 4,000 GLA would grow 8.8% yoy. The recent openings of La Isla 20.0% Mérida, La Explanada Puebla, Paseo Querétaro and Masaryk 169 3,000 2 2,000 15.0% would add 68,316m to the company’s portfolio, therefore totaling 10.0% 2 1,000 3.2% 10.0% 840,477m of GLA (+8.8%). Meanwhile, we expect occupation to 0.9% 0 5.0% reach 91.2% for the stabilized portfolio and 82.8% in assets that are (1,000) under process of stabilization. (2,000) 0.0% 1Q18 2Q18 3Q18 4Q18 1Q19e 9.7% average rent and GLA increase would support a 27.4% net revenue expansion. We expect net revenue to reach MXN$1.3 Net Income ROE billion in 1Q19, up 27.4% from the year-ago period, due to a 9.7% surge in average rent, explained by a 7% lease-spread and the positive effect from the peso’s depreciation against the U.S. dollar (260bps) of the company’s office space portfolio – which is dollarized-, also adding an 8.8% increase in GLA. Net Debt & Net Debt to EBITDA MXN, million 6.5x We anticipate a low one-digit drop in NOI and EBITDA. We 21,800 7.0x 21,600 5.4x 5.3x expect Gicsa’s net operating income (NOI) to fall 0.6% yoy to 5.0x 6.0x 21,400 4.8x 5.0x MXN$885 million, as the first contributions of recently opened 21,200 properties should partially offset the assets swap effect. 21,000 4.0x Furthermore, service companies are expected to subtract some 20,800 3.0x 20,600 2.0x growth from the company’s EBITDA, thus reaching MXN$901 20,400 1.0x million during the first quarter of the year (-3.6% yoy). 20,200 20,000 0.0x Sharp interest expenses growth would pressure net income. We 1Q18 2Q18 3Q18 4Q18 1Q19e anticipate net income to slump 45.4% to MXN$224 million, in Net Debt Net Debt to EBITDA view of MXN$428 million in Net Interest Expense, which would unfavorably compare to a MXN$164 million income in 1Q18.

GMEXICO B (Buy, PT2019 MXN$53.00) Marissa Garza Ostos

GMEXICO – Preview 1Q19 Revenue & EBITDA Margin USD, million USD, million

2,680 49.4% 50.0% Concept 1Q18 1Q19e Chg % 2,660 49.0% Revenue 2,668 2,625 -1.6% 2,640 47.2% 48.0% Operating Income 968 924 -4.5% 2,620 46.4% 47.0% Ebitda 1,259 1,219 -3.2% 2,600 44.6% 45.2% 46.0% Net Income 362 359 -0.7% 2,580 45.0% Margins 2,560 44.0% Operating Margin 36.3% 35.2% -1.1pp 2,540 EBITDA Margin 47.2% 46.4% -0.8pp 2,520 43.0% Net Margin 13.6% 13.7% 0.1pp 2,500 42.0% EPS $0.05 $0.05 -0.7% 1Q18 2Q18 3Q18 4Q18 1Q19e Source: Banorte

Revenue EBITDA Margin

GMEXICO, a neutral quarter. Grupo México will be releasing 1Q19 figures after April 23rd. The adverse comparative base for the price of copper will be undermined by a significant recovery in volumes. Hence, according to our projections model, we anticipate Net Income & ROE a quarter where revenue may drop 1.6% and EBITDA, 3.2% yoy, in USD, million dollars. Lower profitability in Mining operations, in view of lower 500 11.9% 12.5% 12.0% 400 11.3% 11.3% metal prices will be partially offset by higher margins of the 11.5% Transport division (GMXT). Thus, despite efficiencies in costs and 300 11.0% 10.2% expenses that have been implemented, we expect a 0.8pp EBITDA 10.0% 10.5% 200 10.0% margin year-on-year contraction, to close at 46.4%. We expect 9.5% 100 stable figures with US$359 million in net income (-0.7% yoy). 9.0% 0 8.5% The new concentrator in Toquepala will begin to boost volumes. 1Q18 2Q18 3Q18 4Q18 1Q19e This quarter, both the price of copper and that of by-products will Net Income ROE face an adverse annual comparative base. In 1Q19, the average price of copper posted a year-on-year decline above 10%, going from US$3.14 per pound in 1Q18 to US$2.80 in 1Q19. Moreover, the price of silver fell a little over 6% yoy, while that of zinc dropped nearly 21% yoy and molybdenum adjusted almost 30% yoy. All the foregoing will be partially outweighed by growing Net Debt & Net Debt to EBITDA volumes, particularly in the case of copper, we anticipate a 10.0% USD, million yoy increase mainly due to the operational start- up of the new 8,000 1.6x 1.8x 1.4x 1.4x 1.3x 1.3x 1.6x concentrator in Toquepala and higher volumes of by-products. 7,500 1.4x 1.2x 1.0x GMXT posts double-digit growth. The momentum of solid 7,000 0.8x earnings in the Transportation division will continue this quarter, 0.6x supported both by higher volumes and by prices in general. In 6,500 0.4x 0.2x dollar-terms, we expect increments of 10.0% in revenue and 12.8% 6,000 0.0x in EBITDA yoy (See GMXT’s preliminary report). 1Q18 2Q18 3Q18 4Q18 1Q19e Net Debt Net Debt to EBITDA Expected dividend of MXN$0.80 per share, similar to the previous one and which represents a 1.5% return over current prices.

GMXT * (Buy, PT2019 MXN$31.70) Marissa Garza Ostos

GMXT – Preview 1Q19 Revenue & EBITDA Margin MXN, million MXN, million

12,500 44.4% 45.0% Concept 1Q18 1Q19e Chg % 43.9% 12,000 44.0% Revenue 10,182 11,472 12.7% 11,500 Operating Income 2,491 3,036 21.9% 42.3% 43.0% 41.8% Ebitda 4,196 4,857 15.7% 11,000 41.2% 42.0% Net Income 1,866 1,604 -14.0% 10,500 41.0% Margins 10,000 Operating Margin 24.5% 26.5% 2.0pp 9,500 40.0% EBITDA Margin 41.2% 42.3% 1.1pp Net Margin 18.3% 14.0% -4.3pp 9,000 39.0% EPS $0.45 $0.39 -14.0% 1Q18 2Q18 3Q18 4Q18 1Q19e Source: Banorte

Revenue EBITDA Margin

GMXT, a positive year-start. Grupo México Transportes is scheduled to release its 1Q19 figures after April 23rd. We anticipate another positive quarter, moving forward with the momentum of organic growth and higher profitability. Net Income & ROE MXN, million Increase in volume continues mainly driven by the Energy, 1,900 14.0% 14.1% 14.2% 1,850 14.0% Agriculture, Metal and Intermodal segments. According to our 13.7% 1,800 13.8% estimates, this quarter we anticipate a 12.7% yoy increase in 1,750 13.2% 13.6% consolidated revenue, to stand at MXN$11.4 billion. Such growth 1,700 13.4% 1,650 13.0% 13.2% will be fueled by a 5.0% increase in transported volume, measured 1,600 13.0% in tons/kilometers, being the Energy, Agriculture, Metals and 1,550 12.8% 1,500 12.6% Intermodal segments those that present the most improvement. 1,450 12.4% Additionally, we expect considerable improvement, in annual 1Q18 2Q18 3Q18 4Q18 1Q19e terms, on average consolidated prices per ton (+7.3% A/A), Net Income ROE although these will marginally drop on a sequential basis. (-0.6% T/T). Profitability improvement continues, driven by higher revenue and especially by efficiencies obtained in view of ongoing Net Debt & Net Debt to EBITDA investments, the organizational restructuring of FEC (Florida East MXN, million Coast Railway) and the new plan to increase the subsidiary’s 25,000 1.4x 1.5x productivity, at EBITDA level, we anticipate a 15.7% increase yoy 1.4x 24,500 to MXN$4.8 billion. Consequently, the consolidated EBITDA 1.4x 24,000 1.3x 1.3x 1.3x margin should expand 1.1pp to stand at 42.3% 1.3x 1.2x 23,500 1.3x 1.2x Net profit hit by a less favorable FX effect. Despite the solid 23,000 operating performance, a less favorable qoq FX conversion effect 1.2x 22,500 1.1x vs. the year-ago period would produce a 14.0% yoy drop in net 1Q18 2Q18 3Q18 4Q18 1Q19e profit to close at MXN$1.6 billion. Net Debt Net Debt to EBITDA

Expected dividend of P$0.30 per share. We expect the company to issue a dividend of P$0.30, similar to the previous one which represents a 1.1% return over current prices.

HOTEL * (Buy, 2019 PT MXN$ 10.00) José Itzamna Espitia Hernández

HOTEL – Preview 1Q19 Revenue & EBITDA Margin MXN, million MXN, million

700 39.2% 45.0% Concept 1Q18 1Q19e Chg % 34.6% 40.0% 600 31.9% Revenue 30.3% 35.0% 575 627 9.0% 500 28.2% Operating Income 171 161 -6.3% 30.0% Adjusted Ebitda 226 217 -3.9% 400 25.0% Net Income 152 70 -53.8% 300 20.0% Margins 15.0% 200 Operating Margin 29.8% 25.6% -4.2pp 10.0% Adjusted EBITDA Margin 39.2% 34.6% -4.6pp 100 5.0% Net Margin 26.3% 11.2% -15.2pp 0 0.0% EPS $0.31 $0.14 -53.8% 1Q18 2Q18 3Q18 4Q18 1Q19e Source: Banorte

Revenue EBITDA Margin

Weak 1Q19 report. We expect the company to report a 9.0% yoy increase in sales, but a 6.3% and 3.9% decline in operating profit and Adjusted EBITDA, to stand at MXN$627 million, MXN$161 million and MXN$217 million, respectively. We anticipate the company’s majority net profit will drop 53.8%, to MXN$70 Net Income & ROE MXN, million million. 200 7.0% 5.8% 6.0% An increase in the number of rooms yoy supports growth in 150 4.9% 4.2% 5.0% revenue which is partially offset by a lower effective rate. We 3.9% 100 3.0% 4.0% project a 2.4% downturn in occupation of self-owned rooms vs. the 50 3.0% year-ago period, standing at 66.3%. Moreover, we expect the 2.0% 0 average daily rate in 1Q19 to be MXN$1,508 (+1.0% yoy). Thus, 1.0% we estimate the effective daily rate will post a 2.5% setback, to (50) 0.0% 1Q18 2Q18 3Q18 4Q18 1Q19e MXN$627. Net Income ROE Ongoing inorganic growth. HOTEL sales are favored by a higher number of self-owned rooms this quarter, +9.6% more vs. 1Q18.

The company has an interesting growth outlook and has the resources to continue to integrate new assets to its portfolio.

Net Debt & Net Debt to EBITDA We expect the company’s EBITDA margin to post a yoy MXN, million reduction. We forecast a 4.2pp profit margin drop to stand at 3,000 4.1x 4.5x 25.6%. Along the same line, we project Hotel’s Adjusted EBITDA 3.5x 4.0x 2,500 3.4x 3.5x margin will report a 4.6pp reduction, coming in at 34.6%. The latter 3.2x 3.5x 2,000 3.0x would be explained by lower operating leverage due to several 2.5x 1,500 elements that had an adverse effect during the quarter, such as: a 2.0x 1,000 1.5x difficult comparative base, including Easter week in 1Q18, which 1.0x 500 this year falls in April, a slowdown in tourism due to safety 0.5x 0 0.0x concerns, lower demand of urban hotels (current uncertainty) and a 1Q18 2Q18 3Q18 4Q18 1Q19e longer than expected wait time for Reflect hotels to mature. Net Debt Net Debt to EBITDA

We project MXN$70 million in majority net profit, down 53.8% from 1Q18, due to lower operating profit and a comprehensive financing cost, in comparison to a gain in 1Q18, from lower FX profits.

IENOVA * (Buy, PT2019 MXN$92.80) Marissa Garza Ostos

IENOVA – Preview 1Q19 Revenue & EBITDA Margin USD, million USD, million

450 73.4% 80.0% 71.2% 65.2% Concept 1Q18 1Q19e Chg % 400 58.4% 60.1% 70.0% Revenue 288 337 17.0% 350 60.0% Operating Income 150 152 1.0% 300 50.0% 250 Ebitda 211 220 3.9% 40.0% Net Income 128 115 -10.1% 200 30.0% Margins 150 20.0% Operating Margin 52.1% 45.0% -7.1pp 100 EBITDA Margin 73.4% 65.2% -8.2pp 50 10.0% Net Margin 44.3% 34.0% -10.3pp 0 0.0% EPS $0.11 $0.10 -10.1% 1Q18 2Q18 3Q18 4Q18 1Q19e Source: Banorte

Revenue Adjusted EBITDA Margin

Ienova, a neutral quarter. The company is set to release 1Q19 earnings on Monday April 29th, after market close. According to our estimates, Ienova should start the year with modest growth in Adjusted EBITDA. This quarter, the main catalyst will be the solid Net Income & ROE performance of the Thermoelectric plant in Mexicali (whose USD, million 140 10.0% operations were once again integrated as of 2Q18) and the 8.2% 9.1% 8.6% 120 8.1% beginning of operations of the Prima and Rumorosa Solar projects. 7.2% 8.0% 100 We will closely monitor comments related to possible contract 80 6.0% reviews with the CFE and any progress on pending projects such as 60 4.0% the sea-bed pipeline (Texas-Tuxpan) expected to begin operations 40 2.0% in 2Q19. 20 0 0.0% Sustained growth supported by solid base contracts. According 1Q18 2Q18 3Q18 4Q18 1Q19e to our estimates, we anticipate a 17.0% yoy increase in the Net Income ROE company’s consolidated revenue to reach US$337 million and a 3.9% expansion in adjusted EBITDA to stand at US$220 million. The latter results from higher sales volume, mitigated by lower natural gas prices. Net Debt & Net Debt to EBITDA Gas Segment. In this segment, we expect a neutral quarter, where USD, million 3.9x lower natural gas prices and some adjustments in Ecogas will 4,000 3.9x impact growth. Accordingly, we expect US$145 million in 3,500 3.8x EBITDA, practically stable vs. 1Q18. 3,000 3.6x 3.7x 2,500 3.5x 3.5x 3.6x 2,000 3.4x 3.5x Electricity Segment. Higher sales volumes from the 1,500 3.4x Thermoelectric plant in Mexicali, coupled with the incorporation of 1,000 3.3x the Prima and Rumorosa Solar projects will reflect in US$35 500 3.2x 0 3.1x million worth of EBITDA (+137.6% yoy). 1Q18 2Q18 3Q18 4Q18 1Q19e

Net Debt Net Debt to EBITDA Net profit boosted by lower taxes. The favorable operating performance will be partially offset by a less favorable yoy FX effect. Accordingly, the company’s net profit should fall 10.1% to US$115 million.

KOF L (Hold, PT2019 MXN$137.00) Manuel Jimenez Zaldivar Jorge Izquierdo

KOF – Preview 1Q19 Revenue & EBITDA Margin MXN, million MXN, million

54,000 25% Concept 1Q18 1Q19e Chg % 52,000 23% Revenue 49,713 48,278 -2.9% 50,000 Operating Income 5,833 6,154 4.6% 20.4% 48,000 21% Ebitda 8,706 9,351 7.4% 19.2% 19.4% Net Income 2,414 3,190 32.2% 46,000 18.3% 19% 17.5% Margins 44,000 Operating Margin 11.8% 12.7% 0.9pp 17% 42,000 EBITDA Margin 17.5% 19.4% 1.9pp Net Margin 4.9% 6.6% 1.7pp 40,000 15% EPS $1.15 $1.52 32.2% 1Q18 2Q18 3Q18 4Q18 1Q19 Source: Banorte

Revenue EBITDA Margin

Solid beginning of the year for KOF. We anticipate a positive report. The deconsolidation effect from operations in the Philippines would offset a drop in volume in Colombia, due to the new valued added tax imposed on the production chain of sugary Net Income & ROE beverages and beer in said country, as well as to macroeconomic MXN, million 6,000 11.2% 11.5% conditions in Argentina. 12.0% 5,000 7.0% In this context, we assume a 2.9% yoy revenue reduction and a 4,000 2.0% 7.4% year-on-year EBITDA increment. It should be mentioned that 3,000 -3.0% our figures do not incorporate the recently announced changes in 2,000 -8.0% IFRS 16 and data released by the company could vary significantly. 1,000 -13.0% -13.7% -13.7% 0 -14.6% -18.0% In a comparable base, we anticipate solid growth. By re 1Q18 2Q18 3Q18 4Q18 1Q19 expressing 2018 figures excluding the results from the Philippines, Net Income ROE revenue and EBITDA would be growing 9.4% and 14.5%, respectively. Moreover, we expect increments in average prices in line with inflation and year-on-year volume growth in Mexico and Central America (+2.7%) and Brazil (+1.7%). Furthermore, we anticipate an increase of roughly 5% on the average price per unit Net Debt & Net Debt to EBITDA case in Colombia to face an estimated 4.7% volume drop. Finally, MXN, million 1.9x we expect volume in Argentina to fall 14% yoy. 80,000 2.0x 1.8x 70,000 1.9x Improvement in profitability. In a comparable base, we expect 60,000 1.8x 1.6x the margin to post an 86bp expansion to 19.4% in 1Q19. This as a 50,000 1.6x 1.7x 40,000 1.6x 1.5x result of the termination of the operations in the Philippines, 30,000 1.5x efficiencies in hedging main raw materials and a more favorable 20,000 1.4x environment for the price of sugar at an international level. 10,000 1.3x 0 1.2x 1Q18 2Q18 3Q18 4Q18 1Q19 Net profit benefited by lower interest payments. During 4Q18, Net Debt Net Debt to EBITDA the leverage level dropped. Due to the latter, we expect interest payments to fall nearly 15% yoy in 1Q19. In this sense, net profit would increase 32% to stand at MXN$3.1 billion.

LAB B (Hold, 2019 PT MXN$ 15.50) Valentín III Mendoza Balderas

LAB – Preview 1Q19 Revenue & EBITDA Margin MXN, million pesos MXN, million

3,200 22.6% 25.0% Concept 1Q18 1Q19e Chg % 20.6% 20.6% 20.6% 18.5% 3,150 20.0% Revenue 3,025 3,177 5.0% Operating Income 667 626 -6.2% 3,100 15.0% Ebitda 684 655 -4.3% 3,050 Net Income 379 336 -11.2% 10.0% Margins 3,000 Operating Margin 22.1% 19.7% -2.4pp 2,950 5.0% EBITDA Margin 22.6% 20.6% -2.0pp Net Margin 12.5% 10.6% -1.9pp 2,900 0.0% EPS $0.36 $0.32 -11.2% 1Q18 2Q18 3Q18 4Q18 1Q19e Source: Banorte

Revenue EBITDA Margin

Investments in advertising to boost sales should put pressure on margins. Lab is scheduled to report 1Q19 earnings on Monday April 29th after the closing bell. We anticipate that higher advertising expenses would support revenue growth but would, in turn, pressure profitability. Net Income & ROE MXN, million 16.9% Sales would grow 5.0% by year-start. We expect consolidated 400 16.2% 16.2% 16.4% 18.0% revenue to come in at MXN$3.2 billion in 1Q19 (+5.0% yoy). Such 350 13.0% 16.0% 300 14.0% 12.0% performance would be explained by a 3.8% rally in Mexico, in 250 10.0% view of 3.5% and 4.2% increments in OTC and PC, respectively, 200 8.0% 150 anticipating that higher spending in advertising would have 6.0% streamlined the sell-out and made room for sell-in growth. In 100 4.0% 50 2.0% addition, a 12.2% OTC expansion in Latin America would offset a 0 0.0% 1.3% contraction in personal care products in said region. Thus, 1Q18 2Q18 3Q18 4Q18 1Q19e such consolidated indicator would advance 3.9% yoy. Finally, in Net Income ROE the U.S., we consider the double-digit growth dynamic could continue, which coupled with an increase in points of sale and a 260bps favorable FX conversion effect would result in TS escalating 13%, due to a 13.2% gain in OTC and a 12.8% expansion in PC. Net Debt & Net Debt to EBITDA MXN, million Advertising expenses would undermine the EBITDA margin by 1.8x 5,000 1.8x 2.0x 200bps. In line with the strategy implemented as of 4Q18, we 1.6x 1.4x 4,000 1.4x expect higher investments in advertising with the purpose of 1.5x boosting sell-out would increase the expense to sales ratio by 2pp. 3,000 1.0x Hence, these would grow by double-digits year-on-year (10.3%), 2,000 0.5x eroding the EBITDA margin by 200bps to stand at 20.6% and 1,000 translate into a 4.3% yoy EBITDA reduction for LAB to MXN$655 0 0.0x million. 1Q18 2Q18 3Q18 4Q18 1Q19e Higher tax effective rate would impact the company’s net Net Debt Net Debt to EBITDA profit. We expect Lab’s net income to drop 11.2% to MXN$336 million, as a higher tax effective rate (30%E vs a previous 24.1%) would offset a 12.4% lower Net Interest Expense related to lower FX losses in comparison to 1Q18.

LACOMER UBC (Buy, PT2019 MXN$ 25.00) Valentín III Mendoza Balderas

LACOMER – Preview 1Q19 Revenue & EBITDA Margin MXN, million pesos MXN, million

5,200 12.6% 14.0% Concept 1Q18 1Q19e Chg % 5,000 8.8% 12.0% Revenue 4,287 4,886 14.0% 4,800 8.6% 8.1% 10.0% Operating Income 207 235 13.5% 7.3% Ebitda 369 432 17.1% 4,600 8.0% Net Income 172 199 15.7% 4,400 6.0% Margins 4,200 4.0% Operating Margin 4.8% 4.8% 0.0pp EBITDA Margin 8.6% 8.8% 0.2pp 4,000 2.0% Net Margin 4.0% 4.1% 0.1pp 3,800 0.0% EPS $0.16 $0.18 15.7% 1Q18 2Q18 3Q18 4Q18 1Q19e Source: Banorte

Revenue EBITDA Margin

Ongoing profitability improvement La Comer is set to report 1Q19 earnings on Tuesday, April 30th, after the bell. During the quarter, we expect dynamism in revenue to continue, coupled with the most aggressive SSS and sales floor increments within the retail sector in Mexico (5.5% and 12.0%, respectively). Meanwhile, in Net Income & ROE MXN, million terms of profitability, a more favorable sales mix should offset an 450 6.0% 5.0% 5.0% 4.9% increase in expenses resulting from higher electricity prices and 400 4.2% 5.0% pre-operating expenses. 350 4.1% 300 4.0% 250 We continue to expect the best LfL growth within the retail 3.0% 200 sector. We project La Comer’s SSS may report a 5.5% yoy 150 2.0% 100 increase in 1Q19, once again topping Chedraui (5.4%e), Walmex 1.0% 50 (5.1%) and Soriana (+1.3%e). Meanwhile, a 12% yoy sales floor 0 0.0% expansion, following the opening of 5 new locations during the last 1Q18 2Q18 3Q18 4Q18 1Q19e year, may boost total sales +14.0% year-on-year to MXN$4.9 Net Income ROE billion.

Despite pressures from higher electricity costs and pre- operating expenses, the company’s EBITDA margin could expand 20bps. We project that a more favorable sales mix may boost the gross margin by 50bps to 27.6%, thanks to a greater Net Debt & Net Debt to EBITDA MXN, million contribution from Fresko and City Market towards consolidated 1Q18 2Q18 3Q18 4Q18 1Q19e sales. This, in turn, should outweigh certain pressures on expenses 0 0.0x (+17.9%) in view of higher electricity prices and some pre- (500) operating expenditures due to the opening of new units. Thus, (1,000) -0.5x (1,500) EBITDA would grow 17.1% yoy to MXN$432 million, thereby -1.0x (2,000) translating into a 20bps EBITDA margin expansion to 8.8%. -1.4x -1.5x -1.6x (2,500) -1.7x -1.8x -1.5x Net profit could grow 15.7% yoy. We expect La Comer’s net (3,000) income to reach MXN$199 million in 1Q19, increasing 15.7% over (3,500) -2.0x the year-ago period. In addition to operating growth, a 94.7% Net Debt Net Debt to EBITDA higher Net Interest Income, resulting from greater interest income and lower FX losses, should offset a higher tax effective rate (30%e vs a previous 25.9%)..

LIVEPOL C (Hold, PT2019 MXN$ 151.00) Valentín III Mendoza Balderas

LIVEPTL – Preview 1Q19 Revenue & EBITDA Margin MXN, million pesos MXN, million

60,000 25.0% Concept 1Q18 1Q19e Chg % 19.2% 50,000 20.0% Revenue 25,262 27,716 9.7% 14.9% Operating Income 1,547 1,984 28.2% 40,000 12.7% 15.0% Ebitda 2,373 2,929 23.4% 10.6% 30,000 9.4% Net Income 1,003 1,311 30.7% 10.0% Margins 20,000 Operating Margin 6.1% 7.2% 1.0pp 5.0% EBITDA Margin 9.4% 10.6% 1.2pp 10,000 Net Margin 4.0% 4.7% 0.8pp 0 0.0% EPS $0.75 $0.98 30.7% 1Q18 2Q18 3Q18 4Q18 1Q19e Source: Banorte

Revenue EBITDA Margin

Solid growth and improved profitability given an easy comparative base. Liverpool is set to report 1Q19 earnings on Tuesday April 23rd, after the closing bell. We anticipate a quarter with double-digit growth in EBITDA and net profit, facing an easy comparative base as a result of several extraordinary charges Net Income & ROE MXN, million reported in 1Q18, which hit profitability. 7,000 12.1% 12.2%

Revenue would grow 9.7% yoy. We expect Liverpool’s 6,000 12.0% 5,000 consolidated revenue to reach MXN$27.7 billion in 1Q19 (+9.7% 11.8% 11.6% 4,000 11.5% yoy), explained by a 7.8% surge in Liverpool and FdF sales 11.5% 11.5% 11.6% 3,000 (SSS+6.6%e), in addition to a 12.4% increment in Suburbia sales 11.4% 2,000 (SSS +8.4%e) and a 15.5% increase in interest income, given a 1,000 11.2% 6.7% portfolio upturn due to the launching of the Suburbia credit 0 11.0% card. Furthermore, we expect revenue from rent to grow 14.1%, 1Q18 2Q18 3Q18 4Q18 1Q19e thanks to GLA expansions in Perisur and Satélite. Finally, other Net Income ROE revenue and services would add MXN$219 million.

Double-digit EBITDA growth. We project that revenue growth from the financial business should change Liverpool’s sales mix towards a more favorable combination, boosting the gross margin by 90bps to 41.8%. Meanwhile, the absence of extraordinary Net Debt & Net Debt to EBITDA MXN, million charges- like those acknowledged in 1Q19-, coupled with a 0.1pp 30,000 1.4x 1.6x yoy lower NPL rate (5%e), should offset the effect of pre-operating 1.3x 1.2x 1.4x 25,000 expenses from the 13 department stores that were opened in the 1.2x 20,000 0.9x 0.9x LTM. Hence, we estimate expenses will grow practically in line 1.0x with sales (9.9%e), translating into a 23.4% EBITDA increase to 15,000 0.8x 0.6x 10,000 MXN$2.9 billion and a 120bps EBITDA margin expansion to 0.4x 5,000 10.6%. 0.2x 0 0.0x Sharp net income growth. We consider that a 20.3% lower Net 1Q18 2Q18 3Q18 4Q18 1Q19e

Interest Expense- from 8.7% lower interest payments- would Net Debt Net Debt to EBITDA compensate a higher tax rate (27%e vs a previous 19.4%), bolstering the company’s net profit by 30.7% to MXN$1.3 billion.

MEGA CPO (Buy, PT2019 MXN$108.50) Manuel Jiménez Zaldivar

MEGA – Preview 1Q19 Revenue & EBITDA Margin MXN, million MXN, million

5,300 52% Concept 1Q18 1Q19e Chg % 50.6% 5,050 50.2% 48.7% 50% Revenue 4,695 5,132 9.3% 4,800 47.8% Operating Income 1,613 1,688 4.6% 4,550 48% 45.1% Ebitda 2,374 2,499 5.3% 4,300 46% Net Income 1,155 1,232 6.6% 4,050 Margins 44% 3,800 Operating Margin 34.4% 32.9% -1.5pp 42% EBITDA Margin 50.6% 48.7% -1.9pp 3,550 Net Margin 24.6% 24.0% -0.6pp 3,300 40% EPS $1.34 $1.43 6.6% 1Q18 2Q18 3Q18 4Q18 1Q19e Source: Banorte Revenue EBITDA Margin

Recovering from the cyber-attack. We should recall that last November the company fell victim to a cyber-attack that disturbed its collection capacity and generated costs and additional expenses due to the implementation of safety measures in 4Q18. We consider Net Income & ROE that during the first quarter of the year, the aftermath of such attack MXN, million 1,400 17% will be limited. Furthermore, the company continues to run the trial 16.6% 16.4% 16.4% phase of the mobile telephone service under the MVNO system 1,200 16.2% 1,000 16% which it will operate under the “Megafon” brand in seven cities of 800 15.1% the Mexican Republic. 600 15% 400 Mega maintains double-digit growth in terms of RGUs. We 200 estimate a 10.6% increase in Megacable’s Revenue- Generating 0 14% Unit base (RGUs) to 8.18 million, which would represent 221 1Q18 2Q18 3Q18 4Q18 1Q19e thousand net additions. Breaking down RGUs by type of service, Net Income ROE we observe the following variations: +5.4% in video, +10.5% in internet access and +21.3% in telephone service. Moreover, we anticipate a 2.1% drop in ARPU due to the Triple play service bundling package, effect which would be partially offset by the addition of value-added services (X-view). However, revenue per Net Debt & Net Debt to EBITDA single subscriber would grow 2.7% vs 1Q18. MXN, million 1,200 0.2x Solid growth rhythm in the corporate segment and pressure on 1,000 800 margins from the MVNO system. We estimate MXN$5.1 billion 0.1x 0.1x 0.1x 600 0.1x in consolidated revenue, up an annual 9.3%. As for revenue in the 400 corporate segment, we anticipate a 12.3% increase vs. 1Q18, driven 200 0.0x 0.0x 0.0x mainly by Metrocarrier operations. Revenue from the corporate 0 (200) segment would contribute with 17.5% of total revenue. The (400) -0.1x company could produce MXN$2.4 billion in EBITDA (+5.3% yoy), 1Q18 2Q18 3Q18 4Q18 1Q19e which would equal a 48.7% margin (-190bps vs 1Q18). We expect Net Debt Net Debt to EBITDA profitability to drop due to higher IT costs as well as to additional expenses from the “Megafon” trial phase. Finally, in terms of net profit, we forecast a 6.6% surge yoy given the absence of significant financial expenses.

MEXCHEM * (Buy, PT2019 MXN$64.00) Marissa Garza Ostos

MEXCHEM – Preview 1Q19 Revenue & EBITDA Margin USD, million USD, million

2,000 21.5% 21.0% 25.0% Concept 1Q18 1Q19e Chg % 1,950 18.8% 1,900 15.9% 16.9% 20.0% Revenue 1,756 1,739 -0.9% 1,850 Operating Income 227 190 -16.4% 1,800 15.0% Ebitda 330 295 -10.7% 1,750 Net Income 79 80 0.9% 1,700 10.0% Margins 1,650 Operating Margin 12.9% 10.9% -2.0pp 1,600 5.0% EBITDA Margin 18.8% 16.9% -1.9pp 1,550 Net Margin 4.5% 4.6% 0.1pp 1,500 0.0% EPS $0.04 $0.04 0.9% 1Q18 2Q18 3Q18 4Q18 1Q19e Source: Banorte

Revenue EBITDA Margin

Mexchem, a sluggish year-start. The company is set to release 1Q19 earnings on Wednesday April 24th, after the bell. This quarter, the weak performance of Vinyl should continue, impacting operation profitability. Net Income & ROE USD, million 14.7% Netafim will soon become more comparable, yet challenges 180 14.3% 16.0% 12.9% faced by Vinyl continue. It should be mentioned that as of this 160 11.7% 14.0% 140 quarter, Netafim is soon reaching a comparable basis, as 2 months 12.0% 120 8.3% 10.0% 100 of operations were consolidated during 1Q18. Therefore, we expect 8.0% 80 year-on-year reductions of 0.9% in sales to US$1.7 million and 60 6.0% 10.7% in EBITDA to US$295 million. Hence, we project a 1.9pp 40 4.0% 20 2.0% EBITDA margin contraction to 16.9%. Finally, net profit should be 0 0.0% stable yoy, with estimated profit at US$80 million given a less 1Q18 2Q18 3Q18 4Q18 1Q19e adverse FX effect. Net Income ROE

Vinyl, this quarter will continue to be affected by PVC adverse market conditions and challenges in terms of ethane distribution in the U.S. following the shutdown of several plants in Europe and Asia, due to environmental restrictions, and even despite the Net Debt & Net Debt to EBITDA reopening of Vestolit operations since mid-January. These adverse USD, million 3.2x conditions are expected to continue in upcoming months, thus the 4,100 3.5x 2.7x 2.8x most relevant highlight this quarter, in our opinion, will be news 4,000 2.5x 2.6x 3.0x related to measures that would help mitigate the impact of a 3,900 2.5x 3,800 2.0x conflicting environment. 3,700 1.5x 3,600 Fluent, Netafim will begin to reflect organic growth, expecting to 3,500 1.0x observe some benefits related to synergies, coupled with a good 3,400 0.5x 3,300 0.0x performance of operations in Europe and the U.S./Canada, which 1Q18 2Q18 3Q18 4Q18 1Q19e we hope will continue. Net Debt Net Debt to EBITDA

Flúor, will continue to face an environment of less favorable prices yoy, given the significant rally that took place particularly during the first half of the previous year, with more stable figures qoq.

NEMAK A (Sell, PT2019 MXN$13.00) Valentín III Mendoza Balderas

NEMAK – Preview 1Q19 Revenue & EBITDA Margin MXN, million pesos MXN, million 16.7% 15.8% 25,000 16.0% 18.0% Concept 1Q18 1Q19e Chg% 24,000 14.5% 16.0% 13.0% Revenue 23,163 21,323 -7.9% 23,000 14.0% 12.0% Operating Income 2,032 1,323 -34.9% 22,000 Ebitda 3,695 3,100 -16.1% 10.0% 21,000 Net Income 1,287 753 -41.5% 8.0% 20,000 Margins 6.0% Operating Margin 8.8% 6.2% -2.6pp 19,000 4.0% EBITDA Margin 16.0% 14.5% -1.4pp 18,000 2.0% Net Margin 5.6% 3.5% -2.0pp 17,000 0.0% EPS $0.42 $0.24 -41.5% 1Q18 2Q18 3Q18 4Q18 1Q19e Source: Banorte

Revenue EBITDA Margin

A very negative year-start. Nemak is set to report corresponding 1Q19 earnings on Tuesday, April 23rd, after the bell. We anticipate a very sluggish quarter, affected not only by a drop in vehicle production but also by lower aluminum prices and an adverse FX effect in Europe Net Income & ROE MXN, million Sharp drop in volume. We expect the consolidated volume to fall 1,400 12.0% 10.2% 9.7% 9.6% 1,200 7.8% year-on-year to 12.1 million equivalent units, hit by an 8.8% 8.2% 10.0% 1,000 setback in NAFTA, 5% in Europe and 11.7% in the Rest of the 7.1% 8.0% 800 World, which would be attributed to a decline in vehicle production 6.0% 600 of 0.8% in North America, 5.4% in Europe, 12.1% in China and 4.0% 400 2.3% in Latin America, from which it is worth noting that Detroit’s 200 2.0% Big Three would observe a 5% contraction. 0 0.0% 1Q18 2Q18 3Q18 4Q18 1Q19e Lower aluminum prices would exacerbate revenue contraction. Net Income ROE We project sales to drop 10.1% yoy to US$1.1 billion, due to the fact that in addition to lower volume, we expect a 2.4% contraction in the price per unit, in view of a 12.8% decline in the price of aluminum and due to a negative effect from the Euro’s depreciation (7.6%). By region, we anticipate drops of 8.6% in Nafta, 11.9% in Europe and 11.6% in the Rest of the World. Net Debt & Net Debt to EBITDA MXN, million Lower operating leverage would pressure the EBITDA margin 28,500 2.2x by 150bps. According to our projection model, Nemak’s EBITDA 28,000 2.1x 27,500 2.1x 2.1x would fall 18.0% yoy to US$161 million during 1Q19, as a result of 27,000 2.0x a lower operating leverage in all regions where it operates, due to a 26,500 2.0x 2.0x 26,000 2.0x 1.9x decline in volume. Hence, the EBITDA margin would contract 25,500 1.9x 1.9x 25,000 1.8x 150bps to stand at 14.5%. 1.8x 24,500 1.8x A higher tax effective rate would pressure the bottom line even 24,000 1.7x 1Q18 2Q18 3Q18 4Q18 1Q19e further. We consider that Nemak’s net profit could reach US$39 Net Debt Net Debt to EBITDA m, which equals a 43.5% yoy reduction, as a higher tax effective rate (28% vs. a previous 18.3%) would also build on the company’s reported operating weakness.

OMA B (Buy, 2019 PT MXN$ 118.80) José Itzamna Espitia Hernández

OMA – Preview 1Q19 Revenue & Adjusted EBITDA Margin MXN, million MXN, million

2,050 71.4% 72.0% Concept 1Q18 1Q19e Chg % 70.5% 2,000 71.0% Revenue 1,932 1,852 -4.2% 69.9% Operating Income 945 1,020 8.0% 1,950 70.0% Adjusted Ebitda 1,072 1,173 9.4% 1,900 69.0% Net Income 68.1% 608 691 13.6% 67.9% Margins 1,850 68.0% Operating Margin 48.9% 55.1% 6.2pp 1,800 67.0% Adjusted EBITDA Margin 67.9% 68.1% 0.2pp Net Margin 31.5% 37.3% 5.8pp 1,750 66.0% EPS $1.52 $1.76 15.4% 1Q18 2Q18 3Q18 4Q18 1Q19e Source: Banorte

Revenue Adjusted EBITDA Margin

Solid growth in 1Q19. We expect Oma to report 1Q19 earnings with an increase of 9.0% in operating revenue (sum of aeronautic and non-aeronautic revenue), 8.0% in operating profit, 9.4% in Adjusted EBITDA and 13.6% in majority net profit, to settle at MXN$1.7 billion, MXN$1.0 billion, MXN$1.2 billion and Net Income & ROE MXN, million MXN$691 million, respectively. 900 37.0% 40.0% 35.4% 34.2% 800 34.0% 35.0% 30.2% Passenger traffic spikes by one and a half digit in 1Q19. 700 30.0% 600 During the first quarter of the year, the airport group’s total traffic 25.0% 500 20.0% closed with a 4.3% increase vs. 1Q18, constituted by a 5.0% 400 15.0% domestic and 0.8% international traffic surge. It should be 300 200 10.0% mentioned that there was an adverse calendar effect due to an 100 5.0% Easter Week shift this year, from March in 2018 to April in 2019. 0 0.0% 1Q18 2Q18 3Q18 4Q18 1Q19e

The company continues to focus on the diversification of non- Net Income ROE aeronautic revenue through the development of new businesses. We expect revenue per passenger (sum of aeronautic and non- aeronautic/ total traffic) to have a positive 2.3% variation over

1Q18.

Net Debt & Net debt to Adjusted EBITDA ratio We expect the group’s Adjusted EBITDA margin to remain MXN, million practically flat yoy. We forecast a 6.2pp increase in Oma’s 3,500 0.7x 0.8x operating margin, closing at 55.1%. Moreover, we anticipate the 3,000 0.7x 0.5x 0.6x group’s Adjusted EBITDA margin (Adjusted EBITDA/ Sum of 2,500 0.5x 0.5x aeronautic and non-aeronautic revenue) would remain stable and 2,000 0.4x 0.3x 0.4x 1,500 present a marginal +0.2pp variation, to stand at 68.1%, reflecting 0.3x economies of scale, as well as control and efficiencies under costs 1,000 0.2x and company spending. 500 0.1x 0 0.0x 1Q18 2Q18 3Q18 4Q18 1Q19e Oma’s majority net profit would rise 13.6% vs. 1Q18, mainly due to higher operating results and lower comprehensive financing Net Debt Net Debt to Adjusted EBITDA cost (-63% yoy), partially offset by a higher amount of income taxes (+22.0%).

PINFRA * (Buy, 2019 PT MXN$ 215.30) José Itzamna Espitia Hernández

PINFRA – Preview 1Q19 Revenue & EBITDA Margin MXN, million MXN, million

72.1% 3,500 62.5% 80.0% Concept 1Q18 1Q19e Chg % 64.0% 58.5% 3,000 55.5% 70.0% Revenue 2,340 3,006 28.4% 2,500 60.0% Operating Income 1,582 1,761 11.3% 50.0% Ebitda 1,686 1,878 11.4% 2,000 40.0% Net Income 876 985 12.4% 1,500 30.0% Margins 1,000 Operating Margin 67.6% 58.6% -9.0pp 20.0% EBITDA Margin 72.1% 62.5% -9.6pp 500 10.0% Net Margin 37.4% 32.8% -4.7pp 0 0.0% EPS $2.04 $2.29 12.4% 1Q18 2Q18 3Q18 4Q18 1Q19e Source: Banorte

Revenue EBITDA Margin

Pinfra would present double-digit growth in 1Q19 earnings. We expect the company to report a 28.4% increase in sales and 11.4% in EBITDA, to MXN$3.0 billion and MXN$1.9 billion, respectively. Net Income & ROE Higher revenue in Concessions and Construction would more MXN, million 1,800 13.5% 14.0% than offset losses in Plants. Pinfra’s main segment, Concessions- 13.2% 1,600 13.5% 12.8% 12.7% —67.1% of sales in the last 12 months- would post a 7.6% rally 1,400 13.0% 1,200 due to the solid vehicle capacity performance in the company’s 12.5% 1,000 12.0% expressways and the increase in tolls. Furthermore, we foresee a 800 11.4% 11.5% 142.7% increase in Construction (27.3% contribution), and 600 400 11.0% conversely, a 3.5% decline in Plants (5.5% weight). 200 10.5% 0 10.0% The company has some assets under development and there lies the 1Q18 2Q18 3Q18 4Q18 1Q19e heavy pondering of construction revenue. Such assets are the Net Income ROE following: the second stage of the Pirámides-Texcoco toll road, the Monterrey – Nuevo Laredo toll road and the Siglo XXI expressway.

Considerable drop in profitability expected from lower margins forecasted for the company’s three business segments and Net Debt & Net Debt to EBITDA MXN, million greater weight from Construction (the least profitable (14,000) -2.4x segment). We expect operating profit to grow 11.3% and EBITDA, (15,000) -2.5x 11.4%. We anticipate the Concessions segment (the most profitable -2.5x (16,000) business) will post a lower EBITDA margin (-0.8pp), Plants, a -2.6x (17,000) -2.5x 1.5pp drop and Construction profitability to fall 5.9pp. Thus, in the -2.6x (18,000) consolidated balance, we expect margins to post a decline: 9.0pp in -2.6x -2.6x -2.7x (19,000) operating and 9.6pp in EBITDA, to 58.6% and 62.5%, respectively. -2.7x (20,000) -2.7x -2.7x -2.8x 1Q18 2Q18 3Q18 4Q18 1Q19e We project a 12.4% increase in majority net profit vs. 1Q18, standing at MXN$985 million, as increments in operating earnings Deuda Neta Deuda Neta EBITDA would be partially offset by higher taxes (+57% A/A).

SORIANA B (Hold, PT2019 $33.00) Valentín III Mendoza Balderas

SORIANA – Preview 1Q19 Revenue & EBITDA Margin MXN, million pesos MXN, million

42,000 7.9% 9.0% Concept 1Q18 1Q19e Chg % 7.1% 7.2% 6.7% 8.0% 6.1% Revenue 35,487 35,112 -1.1% 40,000 7.0% Operating Income 1,751 1,554 -11.2% 6.0% 38,000 Ebitda 2,505 2,349 -6.3% 5.0% Net Income 817 633 -22.6% 4.0% 36,000 Margins 3.0% Operating Margin 4.9% 4.4% -0.5pp 34,000 2.0% EBITDA Margin 7.1% 6.7% -0.4pp 1.0% Net Margin 2.3% 1.8% -0.5pp 32,000 0.0% EPS $0.45 $0.35 -22.6% 1Q18 2Q18 3Q18 4Q18 1Q19e Source: Banorte

Revenue EBITDA Margin

Still a weak quarter. Soriana will report 1Q19 results on Friday, April 26th, during the MSE trading session. Though we expect a mild recovery in sales performance among Soriana’s formats, weakness in Mega should still impact consolidated results. Moreover aggressive commercial promotions could put some Net Income & ROE MXN, million pressure on gross margin, while higher energy prices and salaries 1,400 7.8% 9.0% would offset efficiencies in other expenses, impacting profitability. 7.1% 8.0% 1,200 6.5% 5.8% 7.0% 1,000 5.4% Stable LfL. We estimate that SSS may have remained stable in 6.0% 1Q19, after finally having normalized the supply of merchandise in 800 5.0% 600 4.0% stores and having launched aggressive promotions to boost traffic. 3.0% 400 Moreover, a 130bps sales floor contraction, following the closing of 2.0% 200 1.0% 9 units in the LTM, may lead total sales fall 1.1% (MXN$35.1 0 0.0% billion). 1Q18 2Q18 3Q18 4Q18 1Q19e We expect the company to have sacrificed 10bps of gross Net Income ROE margin to recover customers. We consider Soriana may have begun aggressive promotion campaigns with the purpose of recovering the preference of lost customers during the 2018 supply shortage issue. Hence, we estimate a 10bp- gross margin contraction, standing at 22.5%. Net Debt & Net Debt to EBITDA MXN, million Despite expense control, higher energy prices and salary 30,000 2.2x 2.2x 2.5x increases would erode EBITDA margin. We anticipate that in 1.8x 1.9x 25,000 1.7x 2.0x spite of a strict cost control, pressures from higher electricity prices 20,000 and salary increases may translate into a 30bps increase in the 1.5x 15,000 proportion of expenses to sales, which added to our expected gross 1.0x 10,000 margin contraction, should translate into a 40bps lower EBITDA 5,000 0.5x margin to stand at 6.7%. As such, operating cash flow would fall 0 0.0x 6.3% yoy to MXN$2.3 billion. 1Q18 2Q18 3Q18 4Q18 1Q19e Losses in Soriban and Sodimac would impact net level Net Debt Net Debt to EBITDA performance We expect the company’s net profit to fall 22.6% to MXN$633 million, hit by a MXN$149 million loss in non- consolidated subsidiaries (vs –MXN$49 million in 1Q18).

SPORT S (Hold, PT 2019 MXN$24.00) Valentín III Mendoza Balderas

SPORT – Preview 1Q19 Revenue & EBITDA Margin MXN, million pesos MXN, million

560 25.0% Concept 1Q18 1Q19e Chg % 20.1% 540 19.3% 14.2% 20.0% Revenue 450 535 18.8% 520 15.8% Operating Income 9 21 126.5% 13.2% 500 15.0% Ebitda 59 76 27.8% 480 Net Income -4 -1 N.A. 10.0% Margins 460 440 Operating Margin 2.0% 3.9% 1.8pp 5.0% EBITDA Margin 13.2% 14.2% 1.0pp 420 Net Margin -0.9% -0.1% 0.8pp 400 0.0% EPS -$0.05 -$0.01 N.A. 1Q18 2Q18 3Q18 4Q18 1Q19e Source: Banorte

Revenue EBITDA Margin

Solid year-start. Sports World expects to report 1Q19 earnings on Friday April 26th, after the bell. We anticipate a solid quarter, one in which revenue would be driven by the opening of new clubs, while a higher operating leverage and cost control should offset pressure on growth, allowing profitability to continue improving. Net Income & ROE MXN, million 5.7% 5.6% The opening of 5 new clubs in the LTM would boost active 25 6.0% 5.1% 4.9% members. Following the net opening of 5 clubs during the year (3 20 4.2% 5.0% 15 in this quarter alone), we expect active members to climb 11.1% to 4.0% 10 90,540, thanks to the contribution of 7,021 members of new 3.0% 5 locations, while for same-clubs, we estimate a 2.5% yoy increase 2.0% 0 with a 10bps higher churn rate yoy (5.2%). (5) 1.0% Double-digit revenue growth. We project SW sales will post an (10) 0.0% 1Q18 2Q18 3Q18 4Q18 1Q19e 11.1% year-on-year expansion, to stand at MXN$535 million in 1Q19. Such figure is explained by an 11.3% surge in revenue from Net Income ROE maintenance and membership fees, while we anticipate other revenue to increase 63.6% yoy. Higher operating leverage and corporate cost control would translate into profitability expansion We consider that an Net Debt & Net Debt to EBITDA increment of only 7% in corporate spending, coupled with a higher MXN, million leverage of operating expenses- growing 18.1% yoy, below the 1.9x 700 1.7x 1.7x 2.0x sales rhythm, would compensate an 18.8% rally in sales costs. 600 1.5x 1.6x Thus, EBITDA could grow 27.8% to MXN$76 million, resulting in 500 1.5x 400 a 100bp corresponding margin improvement to 14.2%. 1.0x 300 Higher interest payments would pressure the company’s net 200 0.5x profit. We project that SPORT will report MXN$1 million in net 100 loss, mainly explained by an expected 50.1% higher Net Interest 0 0.0x Expense yoy resulting from 42.8% higher interest payments. 1Q18 2Q18 3Q18 4Q18 1Q19e Net Debt Net Debt to EBITDA

TLEVISA CPO (Hold, PT2019 MXN$57.00) Manuel Jiménez Zaldivar

TLEVISA – Preview 1Q19 Revenue & EBITDA Margin MXN, million MXN, million

28,000 39.2% 40.0% Concept 1Q18 1Q19e Chg % 27,000 38.3% Revenue 22,812 23,291 2.1% 26,000 37.6% Operating Income 3,624 3,312 -8.6% 25,000 37.0% 38.0% Ebitda 8,579 8,530 -0.6% 24,000 36.6% Net Income 678 614 -9.5% 23,000 Margins 36.0% 22,000 Operating Margin 15.9% 14.2% -1.7pp EBITDA Margin 37.6% 36.6% -1.0pp 21,000 Net Margin 3.0% 2.6% -0.3pp 20,000 34.0% EPS $0.23 $0.21 -9.3% 1Q18 2Q18 3Q18 4Q18 1Q9e Source: Banorte

Revenue EBITDA Margin

Inorganic growth would offset plunge in advertising. In the Content segment, 1Q19 results will reflect the impact of lower government spending and the effect of an economic slowdown over advertiser spending. From our standpoint, this may fuel concerns Net Income & ROE among investors. At a consolidated level, we may observe moderate MXN, million

5,000 7.4% 8% operating variations derived from the acquisition of the residential 7.2% 6.7% fiber-to-the-home Business from Axtel during 4Q18. 4,000 6.6% 7%

3,000 6% Cable would be the only business with sales growth. Televisa could report MXN$23.2 billion in consolidated earnings, up 2.1% 2,000 4.3% 5% vs. 1Q18. For the Content division, we estimate a 3.3% slump in 1,000 4% revenue due to an 8% reduction of advertising sales, which would 0 3% be partially offset by the sale of programing and licenses (+1.3%) 1Q18 2Q18 3Q18 4Q18 1Q9e and the sale of channels (+4.5%). For SKY, we expect a 1.9% drop Net Income ROE in revenue due to a 3.5% downturn in subscribers. In Cable, the consolidation of Axtel’s massive business and the demand of value- added services would push sales 12.4%.

We expect pressure on margins in view of lower operating Net Debt & Net Debt to EBITDA leverage. We estimate MXN$8.5 billion in EBITDA, down 0.6% MXN, million yoy, equaling a margin of -36.6% (-1pp vs 1Q18). We estimate 105,000 3.0x 2.6x margin erosion in all business segments, highlighting that of the 100,000 2.5x 2.4x 2.5x 2.2x 2.5x Content division due to a lower operating leverage. In this segment, 95,000 we expect a 1.7pp decline to 34%. For Sky, we expect a 2.6pp 90,000 2.0x reduction to 42% from the start of Blue Telecomm operations and 85,000 1.5x higher advertising expenses. In cable, we estimate a 60bp margin 80,000 deterioration due to the consolidation of Axtel’s operations. 75,000 1.0x 1Q18 2Q18 3Q18 4Q18 1Q9e

And an annual 9.5% downturn in net profit. Lower operating Net Debt Net Debt to EBITDA leverage, a 5% increase in depreciation and amortization coupled with stable financial expenses would result in a net profit of MXN$614 million.

VOLAR A (Hold, 2019 PT MXN$ 18.00) José Itzamna Espitia Hernández

VOLAR – Preview 1Q19 Revenue & EBITDAR Margin MXN, million MXN, million

9,000 26.7% 26.6% 30.0% Concept 1Q18 1Q19e Chg % 8,000 25.0% 7,000 Revenue 5,850 6,951 18.8% 16.9% 18.3% Operating Income -906 -453 N.A. 6,000 14.1% 20.0% Ebitdar 823 1,273 54.7% 5,000 15.0% Net Income -1,118 -322 N.A. 4,000 Margins 3,000 10.0% Operating Margin -15.5% -6.5% 9.0pp 2,000 5.0% Ebitdar Margin 14.1% 18.3% 4.2pp 1,000 Net Margin -19.1% -4.6% 14.5pp 0 0.0% EPS -$1.11 -$0.32 -N.A. 1Q18 2Q18 3Q18 4Q18 1Q19e Source: Banorte / Historic and estimated figures excluding IFRS 16

Revenue EBITDAR Margin

Sales and EBITDAR would advance in 1Q19. This quarter, we expect Volar to report 18.8% yoy growth in sales and 54.7% in EBITDAR. Furthermore, the company is estimated to report a lower net loss (-MXN$322 million) given lower operating and FX losses. Net Income & ROE Sharp 16.4% yoy growth in total passengers. A greater rise in MXN, million demand vs. capacity was reported, thus increasing passenger 600 1.0% 1.2% 2.0% 400 0.0% load factor. In 1Q19, Volar reported a 16.4% major surge in 200 passenger traffic, comprised of an 18.3% domestic and 9.0% 0 -2.0% (200) -4.0% international traffic upturn. The company expanded its total (400) capacity, measured in terms of available seat miles (ASMs) by (600) -5.1% -6.0% (800) 12.8% and total demand, measured by revenue passenger miles -8.0% (1,000) -8.4% -7.5% (RPMs), rose 14.2%. Hence, passenger load factor stood at 83.2% (1,200) -10.0% 1Q18 2Q18 3Q18 4Q18 1Q19e (+1.0pp vs. 1Q18). We should mention that there was an adverse calendar effect due to an Easter week shift to April, from March, Net Income ROE this year. We foresee a slight drop in the average fare yoy and double-digit growth in other revenue per passenger. We estimate a 5.3% rise in total revenue per available seat mile (TRASM) and a 1.1% climb in revenue per available seat mile (RASM). Finally, we do not project changes in passenger revenue per RPM (yield). Net Debt & Adjusted Net debt to EBITDAR ratio MXN, million Volar’s profitability jumps. We expect the airline to post lower 0 7.4x 8.0x 6.8x 7.1x (500) 6.7x 7.0x operating and EBITDA losses. Furthermore, we estimate a 54.7% 6.0x (1,000) 6.0x EBITDAR increment, to MXN$1.2 billion. Consequently, the (1,500) 5.0x (2,000) company’s EBITDAR margin would expand 4.2pp, to 18.3%, 4.0x (2,500) 3.0x mainly explained by operating efficiencies and lower cost of fuel, (3,000) partially offset by the depreciation of the exchange rate (~60% of (3,500) 2.0x (4,000) 1.0x costs in dlls.). We project operating costs per available seat mile (4,500) 0.0x (CASM) without fuel to drop 4% yoy. 1Q18 2Q18 3Q18 4Q18 1Q19e Net Debt Net Debt to EBITDAR

Adjusted Net Debt = Net Debt + (Aircraft and engine rent expense) * 7

WALMEX * (Buy, PT2019 MXN$58.00) Valentín III Mendoza Balderas

WALMEX – Preview 1Q19 Revenue & EBITDA Margin MXN, million pesos MXN, million

200,000 10.7% 11.0% Concept 1Q18 1Q19e Chg % 10.1% 10.0% 10.5% Revenue 145,054 151,685 4.6% 150,000 9.9% Operating Income 11,334 11,724 3.4% 10.0% Ebitda 14,378 15,193 5.7% 100,000 9.2% 9.5% Net Income 8,349 8,625 3.3% Margins 9.0% Operating Margin 7.8% 7.7% -0.1pp 50,000 8.5% EBITDA Margin 9.9% 10.0% 0.1pp Net Margin 5.8% 5.7% -0.1pp 0 8.0% EPS $0.48 $0.49 3.3% 1Q18 2Q18 3Q18 4Q18 1Q19e Source: Banorte

Revenue EBITDA Margin

Positive year-start. Walmex will report 1Q19 earnings on Thursday, April 25th after the bell. We anticipate a good beginning of the year, one in which the solid performance in Mexico would offset weakness in Central America, translating into a 10bps expansion in EBITDA margin. Net Income & ROE MXN, million Consolidated revenue would grow 4.6% yoy. Walmex pre 14,000 30.6% 35.0% 12,000 30.0% reported a 3.3% consolidated SSS increase, resulting from a 5.1% 23.9% 23.3% 22.3% 22.2% increment in Mexico and a 2.7% decline in Central America. 10,000 25.0% Meanwhile, the sales floor would have risen 1.6% (1.2% in our 8,000 20.0% 6,000 15.0% country and 5.4% in CA) with the opening of 120 new stores in the 4,000 10.0% LTM. Thus, consolidated revenue would reach MXN$151.7 billion 2,000 5.0% (+4.6%). 0 0.0% 1Q18 2Q18 3Q18 4Q18 1Q19e We expect the gross margin to remain stable. We expect that Net Income ROE during the first quarter of the year, improved commercial conditions would have allowed the expansion of Walmex’s price gap vs the competition without pressuring the gross margin. With this in mind, we expect the latter margin to remain stable at 22.9%.

Double-digit EBITDA margin by year-start. According to our Net Debt & Net Debt to EBITDA projections model, the company’s EBITDA could grow 5.7% yoy MXN, million to MXN$15.2 billion, resulting in a 10bps EBITDA margin 1Q18 2Q18 3Q18 4Q18 1Q19e 0 0.0x expansion to 10%, as a 6.1% increase in Mexico’s metric -0.1x (10,000) (MXN$12.7 billion) should offset a 2.1% decline in that of Central -0.2x (20,000) -0.3x America. -0.3x -0.4x (30,000) -0.3x -0.3x -0.4x -0.5x 78.4% Net Interest Expense, given lower FX gains, would curb (40,000) -0.6x -0.7x the company’s net profit growth. We project that net income for (50,000) -0.8x Walmart de Mexico and Central America will reach MXN$8.6 (60,000) -0.8x -0.9x billion in 1Q19, which equals a 3.3% year-on-year growth. It Net Debt Net Debt to EBITDA should be noted that we consider lower FX gains (MXN$12 million vs previous MXN$92 million) would pressure Net Interest Expenses by 78.4% yoy, curbing the company’s net profit growth.

Certification of Analysts. We, Gabriel Casillas Olvera, Delia Maria Paredes Mier, Alejandro Padilla Santana, Manuel Jiménez Zaldívar, Tania Abdul Massih Jacobo, Katia Celina Goya Ostos, Juan Carlos Alderete Macal, Víctor Hugo Cortes Castro, Marissa Garza Ostos, Miguel Alejandro Calvo Domínguez, Hugo Armando Gómez Solís, Gerardo Daniel Valle Trujillo, José Itzamna Espitia Hernández, Valentín III Mendoza Balderas, Santiago Leal Singer, Francisco José Flores Serrano, Francisco Duarte Alcocer, Jorge Antonio Izquierdo Lobato and Leslie Thalía Orozco Vélez, 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 Mexican Stock Exchange 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 Mexico 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.

GRUPO FINANCIERO BANORTE S.A.B. de C.V.

Research and Strategy

Gabriel Casillas Olvera Chief Economist and Head of Research [email protected] (55) 4433 - 4695

Raquel Vázquez Godinez Assistant [email protected] (55) 1670 - 2967

Economic Analysis

Delia María Paredes Mier Executive Director of Economic Analysis [email protected] (55) 5268 - 1694 Katia Celina Goya Ostos Senior, Global Economist [email protected] (55) 1670 - 1821 Juan Carlos Alderete Macal, CFA Senior Economist, Mexico [email protected] (55) 1103 - 4046 Miguel Alejandro Calvo Economist, Regional [email protected] (55) 1670 - 2220 Domínguez Francisco José Flores Serrano Economist, Mexico [email protected] (55) 1670 - 2957 Francisco Duarte Alcocer Analyst, Global Economist [email protected] (55) 1670 - 2707 Lourdes Calvo Fernández Analyst (Edition) [email protected] (55) 1103 - 4000 x 2611

Fixed income and FX Strategy

Alejandro Padilla Santana Head Strategist – Fixed income and FX [email protected] (55) 1103 - 4043 Santiago Leal Singer FX Senior Strategist [email protected] (55) 1670 - 2144 Leslie Thalía Orozco Vélez Fixed Income and FX Strategist [email protected] (55) 1670 - 1698

Equity Strategy

Director Equity Research — Manuel Jiménez Zaldivar [email protected] (55) 5268 - 1671 Telecommunications / Media Victor Hugo Cortes Castro Technical Analysis [email protected] (55) 1670 - 1800 Equity Research – Conglomerates / Financials/ Marissa Garza Ostos [email protected] (55) 1670 - 1719 Mining / Petrochemicals Equity Research – Airlines / Airports / Cement José Itzamna Espitia Hernández [email protected] (55) 1670 - 2249 / Infrastructure / REITs Equity Research – Auto Parts/ Consumer Valentín III Mendoza Balderas [email protected] (55) 1670 - 2250 Discretionary / Real Estate / Retail Jorge Antonio Izquierdo Lobato Analyst [email protected] (55) 1670 - 1746 Itzel Martínez Rojas Analyst [email protected] (55) 1670 - 2251

Corporate Debt

Tania Abdul Massih Jacobo Director Corporate Debt [email protected] (55) 5268 - 1672 Hugo Armando Gómez Solís Senior, Corporate Debt [email protected] (55) 1670 - 2247 Gerardo Daniel Valle Trujillo Analyst, Corporate Debt [email protected] (55) 1670 - 2248

Wholesale Banking

Armando Rodal Espinosa Head of Wholesale Banking [email protected] (55) 1670 - 1889 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 Asset Management [email protected] (55) 5268 - 9004 Ricardo Velázquez Rodríguez Head of International Banking [email protected] (55) 5004 - 5279 Víctor Antonio Roldan Ferrer Head of Corporate Banking [email protected] (55) 5004 - 1454