VITRO Conglomerates. Quarterly Report July 29, VITRO Market Outperformer 12M FWD Price Target P$73.0

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1 Quarterly Report VITRO Market Outperformer 12M FWD Price Target P$73.0 Price M Price Range 36.3/ 66.7 Shares Outstanding (Mill) Market Cap (Mill) 1,564 Float 20% Net Debt ( Mill) -424 EV Adj. (Mill) 1,304 Dividend Yield 1.4% Figures in US$ million 2015 TTM 2016e 2017e Revenues EBITDA Net Profit* 1,411 1, FCF EPS P/E EV/EBITDA P/BV Figures in US$ million *Includes the sale of its Food and Beverage Division Lilian Ochoa lochoa@gbm.com.mx +52(81) ext Alejandro Azar aazar@gbm.com.mx +52(81) ext x 6.0x 5.0x 4.0x 3.0x 2.0x 1.0x VITRO s value creation story still has plenty of room to grow We are reiterating our Market Outperformer recommendation while introducing a 12M FWD price target of P$73.0 per share, as our conviction on the name remains strong, with an investment thesis based on the following four pillars: An attractive valuation, trading at 6.0x EV/EBITDA 16 and 1.5x P/BV, A promising outlook, benefited by a resilient automotive segment and a recovery of the construction industry, The company s efforts to improve profitability, including its focus on value-added products and cost efficiencies, and The solid balance sheet, with a net cash position of US$424.0 million, and a potential FCF generation. Moreover, VITRO s agreement to buy certain assets from PPG Industries flat glass business (not yet included in our estimates) might act as a catalyst, as the transaction seems accretive and should improve its capital structure. The Glass Containers Division ended up boosting VITRO s consolidated revenues. Total sales increased 4.5% YOY, mainly due to the following dynamics across divisions: Glass Containers (+34.0% YOY), benefited from higher volumes in both the domestic and export markets, particularly sales of fragrances and molds & machinery. Flat Glass (-3.8% YOY), impacted by the conclusion of certain OEM platforms during 2Q16, in addition to lower volumes from the chemical business; both of thse offset the higher volumes in the domestic construction segment. Efficiencies and the lower prices of natural gas boosted profitability. Operating and EBITDA margin expanded 240 and 70 bps, thanks to increased capacity utilization, the better product mix in the construction segment, VITRO s cost-saving initiatives, and the lower prices of natural gas and electricity. As a result, operating profit and EBITDA rose 20.3 and 7.7% YOY, each. Sound operating performance and strong F/X gains boosted net income 15.6% YOY to US$47.0 million. US$8.0 million FCF generation, despite VITRO s expansion plans. Indeed, FCF benefited mainly from the lower interest expenses, which were enough to offset the higher strategic CAPEX across all segments as well as working capital needs. However, VITRO s US$22.0 million dividend resulted in a decline of 4.1% QOQ in its net cash position to US$424.0 million. 12M FWD EV/EBITDA 12M PRICE PERFORMANCE VS. IPC P /E 07/15 08/15 09/15 10/15 11/15 12/15 01/16 02/16 03/16 04/16 05/16 06/16 07/16 08/ % 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% -10.0% -20.0% 07/15 08/15 09/15 10/15 11/15 12/15 01/16 02/16 03/16 04/16 05/16 06/16 07/16 08/16 VITRO GBM Grupo Bursatil Mexicano, S.A. de C.V., Casa de Bolsa ( GBM ), and its affiliates, may carryout and seek to do business with companies covered in its research reports. Investors should not consider this report as a single factor in making their investment decisions. These materials do not constitute an offer to buy or sell any security or participate in any trading strategy. IPC x 500.0x 0.0x x x x x x 07/15 08/15 09/15 10/15 11/15 12/15 01/16 02/16 03/16 04/16 05/16 06/16 07/16 08/16

2 A road into shareholder value creation still more to come VITRO has been one of those amazing deleveraging stories. After the restructuring process that began in 2009 and ended in 2013, the company s new management focused on increasing its profitability levels, mainly with a leaner labor structure and by pushing for cost reduction across all divisions, in addition to regaining the market share lost in its businesses during the restructuring process. Moreover, during mid-2015, VITRO s management made the decision to sell its Food & Beverage segment within Glass Containers, and used the proceeds to fully pay its debt, pay a 39.9% extraordinary dividend, and announced investments across all its remaining businesses. After those decisions, VITRO still maintained a strong financial position (US$424.0 million in net cash during 2Q16) which, considering the company s strong FCF generation, left the door open for a higher value proposition for investors, including a new dividend policy, and possible M&As within all its remaining businesses. Last week, VITRO announced that it signed a contract to acquire the assets of PPG Industries flat glass business for around US$750.0 million, strengthening its construction segment, in addition to entering a new business high performance glass coatings. The transaction, which should take place at around 5.8x EV/EBITDA 15, puts together more than 200 years of experience in the production of glass, and will allow the company to return to the same level of FCF generation as before it sold its F&B division, with a much lower financial leverage. With this transaction, we believe VITRO continues to enhance shareholder value by expanding its footprint in North America at attractive valuations a market with healthy fundamentals. Highlighting the current state of the US housing market. With months of supply below the 6-month benchmark for a balanced market, the lowest inventory level since 2005, combined with a resilient demand, rising home prices, and a healthy job market, we believe the balance in the housing market should come from a faster housing formation in the short to medium term. USA Housing Starts (SA) Figures in million units Source: US Census Bureau with PCA Estimates Historic Long-term Average TTM 2016e 2017e 2018e 2019e USA Housing Inventories vs. Months of Supply Figures in million units Housing Inventories Months of Supply Source: Bloomberg and National Association of Realtors TTM Lastly, our optimistic outlook for the company bases its fundamentals on the following: Increasing production capacity in its Chemical segment, which should start production during 2H16. Expansions in Monterrey and Mexicali, in order to capitalize on the attractive potential of the Mexican automotive and construction industries. Since 2013, VITRO has won contracts with OEMs worth ~US$230.0 million in annual revenues; US$50.0 million started at YE15, and US$180.0 million should start by YE17. Growing its market share in the automotive replacement market. VITRO is investing in increasing production capacity, in addition to constructing an automated line, focused on bending processes with the latest technologies to meet the needs of current and new OEM customers. New plant in Brazil for its CFT segment, looking to penetrate one of the largest cosmetics markets in the world, and to reduce distribution costs and F/X risk, among other expenses with current Brazilian customers. Incremental revenues from its Molds and Machinery business as, before the transaction, this unit only gave service to VITRO s kilns and machines, in addition to providing molds for internal use within its Glass Containers Division. After the OI transaction, OI became VITRO s first client, and it is VITRO s intention to expand this business by investing in technology for molds in the following years.

3 Investment Thesis A stronger company operationally and financially. Our investment thesis on VITRO remains unchanged, based on an attractive valuation trading at 6.0x EV/EBITDA 16e and 1.5 P/BV, below the average of its peers coupled with an encouraging operating outlook, based on the following: A promising outlook for the Flat Glass Division, benefited by a resilient automotive segment, and a recovery of the construction industry. Moreover, incremental volumes in the OEM business from contract recoveries should continue. The company s efforts to improve profitability, including its focus on value-added products and cost efficiencies, and The company s potential FCF generation, which should provide for its expansion strategy and at the same time, a higher value proposition for investors. All in all, we are reiterating our Market Outperformer recommendation, while introducing our 12M FWD price target of P$73.0 per share. DCF Valuation Figures in US$ millions 3Q-4Q16e 2017e 2018e 2019e 2020e Perpetuity CF EBITDA Taxes CAPEX Change in working capital FCF to the firm DCF (23) ,566 Theoretical Mkt Cap NPV 1,811 WACC 10.7% Net debt -424 Minority PBV 158 Theoretical mkt cap 2,077 # Shares (Million) 484 Price Target $73.0 Current price $61.1 Discount (Premium) 19.5% WACC Equity Weight 83.5% Debt Weight 16.5% Risk Free Rate 6.0% Market Risk Rate 11.0% Beta 0.9 Cost of Equity** 12.0% Weighted Cost of Equity 10.0% Interest rate* 6.0% Tax rate 30.0% Cost of Debt 4.2% Weighted Cost of Debt 0.7% WACC 10.7% *12M Estimate **Cost of Equity includes a size premium.

4 Estimates vs. Official Results GBM's Estimates* Sales 5.0% 4.5% Operating Profit 25.0% 20.3% EBITDA 10.5% 7.7% Net Profit -16.3% 15.6% Operating Margin 19.6% 18.7% EBITDA Margin 24.0% 23.5% Net Margin 14.6% 20.6% Source: *GBM; **VITRO 2Q16 Press Release 2Q16 quarterly dynamics Official Results** We should mention that after the divestment of its Food and Beverage segment, VITRO decided to change the composition of its reportable segments structure. Prior to the divestiture, the Chemical business was grouped within the Glass Containers segment. As of 3Q15, the Chemical business became part of the Flat Glass segment, as it aligns more closely with VITRO s new structure. Thus, financial information for 2014 and 1H15 has been reclassified in order to present comparable segment financial information in accordance with the new structure. The Glass Containers Division ended up boosting VITRO s consolidated revenues. Despite the negative impact from the MXN depreciation, revenues increased 4.5% YOY, mainly due to the following dynamics across divisions: Glass Containers top line increased 34.0% YOY, thanks to domestic volumes (+21.9% YOY), particularly sales of molds and machinery, in addition to higher exports of fragrances in the US; both of which were enough to offset the negative impact of the MXN depreciation. Flat Glass revenues declined 3.8% YOY, affected by the conclusion of certain OEM platforms during the quarter, in addition to a 5.7% volume decline from the chemical business that suffered from a mild winter season in the US and a challenging oil price environment. Both of these were enough to offset the higher volumes within the domestic construction segment. Efficiencies and the lower prices of natural gas boosted profitability. Operating and EBITDA margin expanded 240 and 70 bps to 18.7 and 23.5%, respectively, mainly thanks to the following positives: Higher capacity utilization and cost-saving initiatives, Lower prices of electricity and natural gas, and Higher volumes and a better product mix in the domestic construction market. As a result, operating profit and EBITDA increased 20.3 and 7.7% YOY to US$43.0 million and US$54.0 million. Strong F/X gains behind bottom-line growth. Despite having recorded a US$37.0 million gain from discontinued operations related to the sale of the Food & Beverage segment last year, net income grew 15.6% YOY to US$47.0 million, mainly due to: VITRO s sound operating performance, An F/X gain of US$21.0 million compared to a US$47.0 million loss in 2Q15, and Null interest expenses during the quarter compared to US$27.0 million last year. As a result, EPS moved from -US$0.002 in 2Q15 to US$3.0. Mild FCF generation despite VITRO s expansion plans. The company posted a FCF generation of US$8.0 million (vs. a US$3.0 million cash burn in 2Q15), as VITRO s sound operating performance and lower interest expenses were enough to offset the higher strategic CAPEX related to expansions across all its segments, in addition to the higher working capital needs, associated to higher inventories in anticipation of the maintenance and expansion in Mexicali. However, VITRO reinitiated its dividend policy during the quarter after 8 years, paying US$22.0 million (1.3% dividend yield); hence, its net cash position decreased 4.1% QOQ to US$424.0 million.

5 VITRO s quarterly free cash flow Figures in US$ millions 2Q15 2Q16 YOY% EBITDA % Working Capital N/A Net Interest Paid % Taxes % Operating CF % CAPEX % Free Cash Flow -3 8 N/A Source: GBM with company data The Automotive segment to blame for the lower revenues in the Flat Glass division. Top line decreased 3.8% YOY, to US$165.0 million, as the conclusion of certain OEM platforms during the quarter, in addition to a 5.7% volume decline from the chemical business, which suffered from a mild winter season in the US and a challenging oil price environment, were enough to offset the higher volumes and prices within the domestic construction segment. Regarding profitability, operating and EBITDA margins increased 270 and 240 bps YOY to 19.0 and 24.0%, respectively, benefiting from the lower prices of natural gas and electricity, a better product mix in the domestic construction segment, and VITRO s cost-saving initiatives. Thereby, operating profit and EBITDA increased 12.3 and 7.2% YOY to US$31.0 million and US$40.0 million, respectively. Mexico: Monthly Car & Truck Sales and Production Thousands of Units Sales Production (Right Axis) Exports (Right Axis) Source: AMIA Thousands of Units US: Vehicle Sales (SAAR) and Production (SA) Millions of Units US Vehicle Sales US Vehicle Production Source: Freelunch by Moody's Analytics Strong volume performance from the domestic market boosted the Glass Containers division s revenues. Despite the negative impact from the MXN depreciation, revenues increased 34.0% YOY to US$61.0 million, due to the following: Higher domestic volumes (+21.9% YOY), boosted by demand from molds & machinery, and A mild 1.6% YOY increase in export volumes, benefited mainly from demand for fragrances in the US. Regarding profitability, operating margin increased 140 bps YOY to 21.4%, boosted by higher volumes in both the domestic and export markets, and in our view, a higher contribution from the molds and machinery business, which should deliver higher profitability levels. On the other hand, EBITDA margin retreated 200 bps to 26.3%. We believe this is related to a depreciation and amortization quarterly adjustment, which should normalize going forward. Thereby, operating profit and EBITDA increased 43.8 and 24.3% YOY to US$13.0 million and US$16.0 million, respectively.

6 GBM Estimates Figures in US$ millions Financials (US$ Mill) 2015 TTM 2016e 2017e 2018e Operating Data 2015 TTM 2016e 2017e 2018e P&L Sales Growth YOY Revenue ,073 Flat Glass 3.5% 4.7% -2.1% 9.8% 8.5% Var (%) 5.5% 4.0% 8.8% 7.5% Glass Containers 12.8% 41.4% 24.7% 6.5% 5.7% Gross Profit Gross Mg. 33.0% 35.4% 35.9% 35.6% 35.6% Valuation 2015 TTM 2016e 2017e 2018e Operating Profit EPS Operating Mg. 16.0% 18.8% 19.2% 20.0% 20.7% P/E 1.1x 1.1x 10.0x 10.0x 9.1x EBITDA EV/EBITDA 6.8x 6.0x 6.0x 5.2x 4.4x Var (%) 43.3% 15.0% 11.4% 8.4% P/B 1.5x 1.5x 1.4x 1.2x 1.1x EBITDA Mg. 21.8% 23.7% 24.1% 24.6% 24.8% P/Sales 1.8x 1.7x 1.7x 1.6x 1.5x Interest (67) (24) Taxes (13) (77) (63) (60) (67) Return 2015 TTM 2016e 2017e 2018e Net Profit 1,411 1, ROA 87.7% 92.3% 9.5% 8.9% 9.1% Var (%) NA -88.9% -0.6% 10.2% ROE 133.2% 136.4% 13.9% 12.4% 12.3% Net Mg % 157.2% 17.1% 15.6% 16.0% ROIC 74.2% 134.2% 11.9% 10.7% 10.8% Balance Sheet FCF Yield 0.6% 4.3% 1.2% 1.6% 5.2% Cash Dividend Yield 39.9% 1.4% 1.4% 1.4% 1.4% Accounts Receivable Buyback Yield 0.0% 0.0% 1.7% 1.7% 1.7% Inventory Fixed Assets Leverage 2015 TTM 2016e 2017e 2018e Total Assets 1,608 1,567 1,645 1,761 1,884 Debt/Equity 0.0x 0.0x 0.0x 0.0x 0.0x Accounts Payable Net Debt/EBITDA -2.2x -1.9x -1.8x -1.7x -1.9x Debt Interest Coverage 1.7x 4.4x -55.5x 120.7x 357.3x Total Liabilities Equity 1,168 1,171 1,242 1,367 1,504 Turnover (Days of) 2015 TTM 2016e 2017e 2018e FCF Accounts Receivable Operating Profit Inventory Depreciation Payables Interests (82) (39) (3) 2 1 Cash Conversion Cash tax (27) (25) (37) (49) (56) -Working Capital (18) (15) (42) (34) (29) Liquidity 2015 TTM 2016e 2017e 2018e -CAPEX (55) (71) (120) (140) (101) Current Ratio 3.3x 3.9x 3.7x 3.9x 4.1x Free Cash Flow Quick Ratio 2.6x 3.0x 2.9x 3.0x 3.3x

7 Investment Risks In addition to the risks related to macroeconomic aspects, we believe the most relevant risk in the Mexican market is: during the last couple of years, there has been a significant flow of global funds into the Mexican market in search of new investment opportunities. There is no guarantee that, going forward, these flows will remain at current levels. Some other risks pertaining to VITRO include, but are not limited to: 1) economic factors of the US, Bolivia, Colombia, Costa Rica, Guatemala, Panama, in which the company has operating facilities; 2) market prices of energy inputs such as natural gas and electric power have a direct impact on the cost of goods sold; 3) substitution trends in the glass containers industry may adversely affect its business; 4) High exposure to the auto and construction industry which are cyclical activities. VITRO 80.0 Stock Price Performance vs Analyst Estimates /10/ M arket Outperformer 07/12/ M arket Outperformer 01/03/ M arket Outperformer 29/07/ M arket Outperformer Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Price Price Target Important Disclosures: The analyst or analysts involved in the creation of this document hereby certify that the views expressed in this document accurately reflect their personal opinions and that they have not and will not receive direct or indirect compensation for expressing specific recommendations or views in this report. This report has been prepared by GBM and is subject to change without notice. GBM and employees shall have no obligation to update or amend any information contained herein. This report is for informational purposes only, based upon publicly available information, which we believed is reliable, but its accuracy and completeness cannot be guaranteed. GBM makes no express or implied representations or warranties that such information is accurate or complete and, therefore, GBM and employees shall not in any way be liable for related claims. This report does not constitute an offer to buy or sell any security or participate in any trading strategy. The information and analyses contained herein are not intended as tax, legal, or investment advice and may not be suitable for your specific circumstances. Each investor shall make their own determination of the suitability of an investment of any securities referred to herein and should consult their own tax, legal, investment, or other advisors, to determine such suitability. This report may discuss numerous securities, some of which may not be qualified for sale in certain countries or states therein and may therefore not be offered to investors in such countries or states. This report or any portion hereof may not be reproduced, reprinted, sold or distributed without the written consent of GBM.