Equity Analysis /
Mexico

Alfa: Quarterly Report 3Q22: Axtel’s spin-off favored results

  • Axtel figures finally-reflected as discontinued operations. Results were mixed, although with an upside bias

  • Alpek’s figures stood out, though partially offset by Sigma’s, where margins contracted because of cost pressures

  • The discount on the Net Asset Value of Alfa, close to 37%, we believe is extremely interesting to accumulate positions

Marissa Garza Ostos
Marissa Garza Ostos

Head of Equity Research

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Banorte
1 November 2022
Published byBanorte

Axtel’s spin-off favored results

  • Alfa finally registered Axtel's figures as discontinued operations, which supported part of the growth. Meanwhile, in Alpek and Sigma results are mixed, but the bias is positive

  • NAV discount is undoubtedly very attractive at ~37%. The above, together with the company strategic priorities makes us reiterate our BUY recommendation

Axtel figures were finally reflected as discontinued operations. Alfa's results were mixed, although with a clear bias to the upside. Consolidated revenues amounted to MXN 98.289 billion, increasing by 27.9% y/y, while EBITDA advanced 4.3% y/y to MXN 9.211 billion. Axtel spin-off was promising for growth, with decreases of 0.8% y/y in revenues and 13.4% y/y in EBITDA, respectively. Meanwhile, in Alfa, Alpek advances stood out, where despite having registered  a negative effect due to inventory adjustments and carry-forward effect after q/q decreases in Brent and feedstock prices, margins strength and Octal’s acquisition boosted comparable EBITDA to record levels, which was even higher than expected. This was mitigated by Sigma’s profitability pressures, where despite the 9.9% y/y increase in revenues, supported by volumes advances in all regions, EBITDA contracted by 13.2% y/y due to high energy costs and raw materials mainly in Europe.  Alfa is focused on strategic priorities, while the NAV discount seems extremely interesting.  After having practically executed the spin-off of Axtel, it is expected that 'Controladora Axtel' shares will begin trading on the MSE before year end. Meanwhile, Alfa is focused on continuing to strategically strengthen its operations in Alpek and with special emphasis on improving profitability in Sigma, given environment challenges. Balance sheet strengthening continues, with ND/EBITDA now at 2.1x vs 2.3x previously. Given a strategy that seems appropriate to us, we believe that the discount on the Net Asset Value of Alfa, close to 37%, is extremely interesting to accumulate positions.

Alfa’s Theoretical Value - NAV

Operating results by Division