GMexico reported solid progress in 4Q21, supported by higher metal prices, higher profitability, and an interesting dividend with an annualized return of 7.8%
The quarter supports our view that the attractive valuation (FV/EBITDA 4.3x) stills does not reflect the remarkable growth, financial strength, and recurring distributions. We reiterate Buy
Strong growth due to Mining and Transportation. Gmexico’s figures showed in 4Q21 annual increases in sales of 17.4% to US$3.776 billion and in EBITDA of 26.3% y/y to US$2.190 billion, in line with our expectations, with an expansion in the respective margin of 4.1pp to 58.0%. In the Mining division (AMC), the positive performance continued, due to higher copper prices (+33.9% y/y and +1.9% t/t), despite decreases in production (-7.2% y/y) and sales volumes (-11.9% y/y) due to lower ore grades. Despite the increase in the net cash cost of 13.1% y/y, the company is focusing on cost control and in achieving greater operational efficiencies, which led to an expansion in profitability from 5.8pp to 60.2%. In Transportation, GMXT showed an important recovery, supported by the economic reactivation and retrieval in volumes, even exceeding pre-pandemic levels; while, in Infrastructure, EBITDA fell 13.7% y/y, due to the adjustment of quotas in PEMSA, desface of projects in Constructora and lower FX gains. This, alongside financial strength (ND/EBITDA of 0.3x), derived in a dividend of MXN 1.75 per share, payable on March 4th (annualized return of 7.8%). Outlook remains favorable. The results confirm our positive view for GMexico. However, we must be attentive to the updated outlook due to less economic global dynamism, as well as any news related to the situation in Peru. Meanwhile, we reiterate that the company has solid fundamentals and highlight the very attractive valuation, which shows a reduction of 4.7x to 4.3x vs 5.1x peer average.