Quarterly Report BIMBO Market Underperformer 2016 Price Target P$41.9 Price 51.51 12M Price Range 45.02 / 59.86 Shares Outstanding (Mill) 4,703.2 Market Cap (Mill) 242,262 Float 24.0% Net Debt (Mill) 72,562 EV (Mill) 326,385 Dividend Yield 0.4% 2015 2016e 2017e Revenue 219,186 249,729 255,017 EBITDA 21,199 27,985 30,226 Net Profit 5,225 9,449 11,223 Free CF -3,913 10,262 11,492 EPS 1.11 2.01 2.39 P/E 41.4x 25.5x 21.5x EV/EBITDA 13.5x 11.3x 9.5x P/BV 4.2x 3.5x 3.0x Miguel Mayorga mmayorga@gbm.com.mx +52(55) 5480 5800 ext. 5718 Jeronimo Contreras L. jcontreras@gbm.com.mx +52(55) 5480 5800 ext. 4556 Miguel A. Tortolero matortolero@gbm.com.mx +52(55) 5480 5800 ext. 4820 A great year so far, driven by sound performance in Mexico and progress in the US, considerably aided by lower input costs The US once again pulled off a sound performance, while Mexico s defensiveness helped to partly offset pressures on dollarized COGS. As anticipated, the US & Canada s operations are still the main catalyst for profitability improvements, as this division remains considerably aided by lower wheat prices, while managing to lower SG&As. Yet, volumes in the region continue to be pressured. On the other hand, Mexico s operations remained sound, offsetting pressures on dollarized raw materials. Notwithstanding the sound performance over the year, and the expected improvements for the US & Canada, we believe current valuations already imply the good news. We are reiterating our Market Underperformer rating, while maintaining our 2016 price target of P$41.9. Meanwhile, we ll be working on our estimates to update our latest MXN estimates and revise the outlook for each region to publish our price target for 2017 later. 3Q16 Highlights Resilient performance for Mexico once again. Mexico s operations delivered healthy top-line growth (+8.7% YOY). The sound consumer environment allowed volumes to rise in key categories, despite increasing prices. Distribution efficiencies and lower wheat prices also allowed this division to partially offset pressures on dollarized COGS, leading to a slight contraction in EBITDA margin (-80 bps YOY). Double-digit EBITDA margin for the US & Canada. Profitability kept delivering important improvements, mainly boosted by lower wheat prices, as this year s hedges stand well below last year s. However, regarding top line, volumes remain pressured, as top line rose 13.5% YOY practically reflecting the FX translation effect mainly due to the more competitive environment in both countries. First quarter for Panrico. Europe s top line surged 83% YOY given the integration of Panrico at the end of July, while EBITDA margin stood at 1.0% (vs. -3.2% in 3Q15). We expect Panrico to bring interesting synergies to this division, and strengthen the company s presence in the sweet baked goods and buns & rolls categories. Cash burn of P$696 million reflects the disbursement of P$3.8 billion to acquire Panrico. Nonetheless, excluding this payment, FCF would have stood at P$4 billion. Conference Call Information: Friday, October 28 at 11:00am ET (10:00am Mexico City) United States: 1 (844) 839-2191 Mexico: 1 (412) 317-2519 Passcode: Grupo Bimbo
BIMBO s Fact Sheet Financials (P$ Mill) 2015 2016 2017 2018 Operating Data 2015 2016 2017 2018 P&L Revenue Breakdown Revenue 219,186 249,729 255,017 261,440 Mexico 76,295 79,730 83,225 86,860 Var (%) 17.2% 13.9% 2.1% 2.5% North America 116,399 139,174 140,257 141,504 Gross Profit 116,765 132,433 136,227 140,699 LatAm 23,760 28,500 29,082 30,774 Gross Mg. 53.3% 53.0% 53.4% 53.8% Europe 7,561 8,562 8,821 8,829 Operating Profit 10,019 20,222 22,314 24,271 Operating Mg. 4.6% 8.1% 8.7% 9.3% EBITDA Breakdown EBITDA 21,184 27,985 30,226 32,375 Mexico 13,431 13,554 13,815 14,593 Var (%) 31.2% 32.1% 8.0% 7.1% North America 9,590 12,804 14,026 14,999 EBITDA Mg. 9.7% 11.2% 11.9% 12.4% LatAm 536 1,311 1,687 2,031 Interest -4,190-4,135-3,230-1,916 Europe -341 51 476 574 Taxes -4,063-5,343-6,335-7,418 Net Profit 5,172 9,449 11,223 13,398 Valuation Var (%) 47.0% 82.7% 18.8% 19.4% EPS 1.10 2.01 2.39 2.85 Net Mg. 2.4% 3.8% 4.4% 5.1% P/E 46.3x 25.4x 21.4x 17.9x Balance Sheet EV/EBITDA 14.8x 11.1x 10.0x 9.1x Cash 4,014 10,801 21,469 34,228 P/B 3.6x 3.5x 3.0x 2.6x Accounts Receivable 14,238 17,917 18,297 18,757 P/Sales 1.1x 1.0x 0.9x 0.9x Inventory 5,352 6,332 6,413 6,518 Fixed Assets 56,748 62,735 64,372 66,049 Return Total Assets 200,355 205,219 218,286 233,656 ROA 2.7% 4.9% 5.3% 5.9% Accounts Payable 36,392 20,090 20,354 20,731 ROE 9.5% 15.8% 15.1% 15.5% Debt 68,380 67,761 67,761 67,761 ROIC 12.5% 23.9% 24.7% 26.1% Total Liabilities 139,722 182,587 182,851 183,228 FCF Yield 0.9% 2.9% 4.5% 5.3% Equity 57,481 68,601 79,794 92,902 Dividend Yield 0.0% 0.0% 0.0% 0.0% FCF Buyback Yield 0.0% 0.0% 0.0% 0.0% Operating Profit 10,019 20,222 22,314 24,271 +Depreciation 11,164 7,763 7,912 8,104 Leverage -Interests -4,356-4,135-3,230-1,916 Debt/Equity 1.2x 1.0x 0.8x 0.7x -Cash tax -4,060-5,343-6,335-7,418 Net Debt/EBITDA 3.0x 2.0x 1.5x 1.0x -Working Capital -228-2,216-498 -557 Interest Coverage -0.4x 4.9x 6.9x 12.7x -CAPEX -10,391-9,316-9,495-9,724 Free Cash Flow 2,147 6,976 10,668 12,759 Turnover (Days of) Accounts Receivable 26 26 26 26 Inventory 19 19 19 19 Payables 48 48 48 48 Cash Conversion -2-2 -2-2 Liquidity Current Ratio 3.9x 7.1x 7.6x 8.1x Quick Ratio 0.5x 1.4x 2.0x 2.6x
BIMBO s Valuation DCF 2016e 2017e 2018e 2019e 2020e Perpetual FCF EBITDA 28,127,511 30,882,181 32,374,632 34,794,556 38,266,389 39,414,381 Working Capital -1,827,350-429,988-473,658-747,956-646,969 Taxes -5,347,324-6,351,297-7,438,010-8,601,569-9,733,131-10,025,125 OPERATING CASH FLOW 20,810,737 23,444,739 24,462,965 25,445,031 26,773,907 29,389,256 CAPEX -9,315,917-9,494,681-9,724,402-10,148,810-10,504,403-9,372,000 FREE CASH FLOW 11,494,820 13,950,058 14,738,563 15,296,221 16,269,504 20,017,256 WACC 9.20% TOTAL PRESENT VALUE Net Debt 3Q16 286,867,997 72,561,945 Minority Equity 3,381,197 P/BV 3.4x Minority Equity 11,496,070 Equity Value (P$) 202,809,982 Shares Outstanding (000's) 4,703,200 Price Target 2016e P$43.1
Investment Risks In addition to the risks related to macroeconomic aspects, we believe the most relevant risks in the Mexican market are: 1) 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. The company s financial situation and/or its operation are subject to risks from its international activities. Every country or market in which Bimbo operates displays conditions that could affect its global performance, such as interest rate fluctuations, inflation, changes in consumption trends, political and social instability, new legal and tax frameworks, among others. There are risks derived from fluctuations in the market pertaining to the price of some raw materials such as wheat, soy oil, milk, corn, and natural gas, to name a few. 60.0 Stock Price Performance vs Analyst Estimates 55.0 50.0 45.0 18/12/2014 39.0 M arket Performer 28/10/2015 41.9 M arket Underperformer 40.0 35.0 30.0 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16
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