Equity Analysis /
Mexico

Alpek: Quarterly Report 3Q22: Well position to face a challenging environment

  • Octal’s acquisition drove comparable EBITDA to record levels, achieving on comparable basis a 84% y/y increase

  • Given its financial strength, Alpek could distribute an extraordinary dividend, representing a 4% yield

  • On track to achieve its 2022 guidance, and recalling the possibility of a potential spin-off from Alfa

Marissa Garza Ostos
Marissa Garza Ostos

Head of Equity Research

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Banorte
21 October 2022
Published byBanorte

Well positioned to face a challenging environment

  • Margin strength and Octal’s acquisition drove comparable EBITDA to a record high. Remarkable financial position opens up the opportunity for extraordinary dividends

  • Well positioned to face environment challenges. Financial strength (ND/EBITDA of 1.2x), and very attractive valuation (FV/EBITDA 3.3x) make us reiterate it in our top-picks

It exceeded expectations, on a comparable basis. Alpek recorded 43.5% y/y revenue growth to MXN 59.75 billion, far exceeding expectations, and supported by extraordinary volumes due to the acquisition of Octal's PET business. Although EBITDA includes a negative effect from inventory adjustment and raw material carry-over effect of ~ MXN 2.367 billion ($118 million) – given the 12% q/q adjustment in Brent and related raw materials prices (paraxylene -18% q/q) – on a comparable basis the increase was ~84% y/y to MXN 8.548 billion, +5.2% above our estimate. The before mentioned, supported by margins that continued to exceed expectations and be resilient in  both businesses: (1) Polyester, underpinned by Octal’s acquisition, and Asia’s integrated reference margins, averaging $400 per ton, still not normalized and barely -2.0% q/q, given transportation costs that have been reduced very slowly; and (2) in Plastics and Chemicals, where strength of EPS margins offset the decrease in Polypropylene ones – see Page 3.  Clearly on track to achieve the 2022 guidance.  Despite an environment that represents significant challenges, the dynamics and strategy implemented have been advantageous for the company, which is clearly on track to achieve its 2022 guidance (EBITDA 2022e of $1.6 billion – $1.475 billion on a comparable basis – +40% vs 2021). Meanwhile, with remarkable financial strength (ND/EBITDA 1.2x), we do not dismiss the possibility that Alpek could distribute an extraordinary dividend before year end, which could represent a return of ~4%. The above, together with a 3.3x FV/EBITDA valuation, which undoubtedly seems very attractive to us in a restrictive scenario that outlines a higher risk premium, makes us reiterate it in our issuer selection for the quarter. We must not forget the potential spin-off from Alfa, which will strengthen its independence.

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