Affected by Peru’s external factors
GMexico showed lower than estimated advances during 1Q22, affected by lower production in Peru, which pressured profitability. This was partially offset by higher metal prices
Despite the complex environment, cooper prices expectations remain high, supporting a positive perspective, alongside an interesting valuation (FV/EBITDA 4.6x), confirming our favorable opinion for the company
Moderated growth due to production impact. GMexico reported lower than expected results, with an annual increase of 9.6% to $3.764 billion and an EBITDA of 3.1% y/y to $2.205 billion, with the respective margin contraction from 3.7pp to 58.6%. In the mining division (AMC), revenues benefited by higher metal prices, highlighting cooper’s (+17.6% y/y and +3.7% q/q) which were partially offset by Peru’s production suspension (-23.0% y/y) due to the protesters take over in Cuajone water reservoir, and the reduction in ore grades which led to falls in production (-9.9% y/y) and volume sales (-12.0% y/y). It’s worth noting that it is now working at full capacity. Despite the above, a lower net cash cost (-8.6% y/y) helped mitigate profitability pressures, standing at 60.1% (-4.5pp y/y). On the other hand, GMXT reported lower volumes, but continued with a positive trend recovery supported by better prices and margins; while, in Infrastructure, the EBITDA rose to 6.8% y/y due to higher revenues in El Retiro wind farm and the Highway segment. Given its financial strength (DN/EBITDA of 0.3x), the company declared a dividend of MXN 1.50 per share, payable on June 2nd (annualized yield of 6.2%). Perspectives become more favorable. Excluding Peru’s 1Q22 production impact, the higher cooper prices expectations props up higher growth. However, risks related to lower global environment dynamism and any news about Peru’s situation must be monitored. We continue highlighting the strong fundamentals and the company’s interesting valuation with a FV/EBITDA multiple of 4.6x vs the 5.2x sector’s average.
