#1CAPITAL GOODS & BUILDING MATERIALS Alejandro Azar Wabi [email protected] +52 (55) 5480 5800 Ext. 4116 Laisha Zaack Carrillo [email protected] +52 (55) 5480 5700 Ext. 4116 GBM LAMOSA/CERAMIC: The road to growth is paved with tiles. LAMOSA Rating: Outperformer 2022e Price Target: P$130 CERAMIC Rating: Outperformer 2022e Price Target: P$75 We are initiating coverage on the ceramic tiles industry in Mexico and the leading players in the market-LAMOSA and CERAMIC. In this comprehensive report, we delve into the fundamentals that make this industry a secular growth story that has managed to outperform not only Mexico's GDP but also its construction GDP. In our view, there is clear evidence as to why this has happened, and more importantly, why this trend should continue over the next decade. . • • Housing deficits. At least -25% of households in Mexico continue to live in inadequate conditions, which include poor materials, overcrowding, and lack of infrastructure, among others. Mexico's Demographics. With ~66% of the population below 40 years of age-and growing- and with the rapid enlargement of urban areas, demand for housing and, thus, building materials such as ceramic tiles is set to rise. Noticeable shift towards hard flooring. With ~57% of households having dirt or concrete floors, there is still a huge opportunity for hard flooring materials, where ceramic tiles offer the perfect combination of versatility, low cost, and high durability versus other options. LAMOSA: 2022e price target of P$130/share (-85% upside potential) and a Market Outperformer rating. Value creation at its finest. LAMOSA's management has proven its quality through a disciplined organic and inorganic strategy that has yielded not only returns above the cost of capital but also even higher returns as new assets are integrated into its portfolio. At the same time, it has given back cash to shareholders via a steadily rising dividend payment, while it has repurchased -7% of its outstanding shares since 2019. Growth opportunities. Although LAMOSA is the second-largest ceramic tile producer in the world, it has only ~2% of the global market. In a fragmented industry, the company's profitability, FCF, and scale allow it to smoothly integrate small assets that complement its portfolio. This, on top of its organic growth story across its main markets. Attractive valuation. Despite the stock's low liquidity, a 4.2x EV/EBITDA and ~14% OFCF yield (2022e) seems like a once-in-a-lifetime opportunity to invest in a company with LAMOSA's operational track record and value creation. As such, we are placing LAMOSA as one of GBM's Top Picks. CERAMIC: 2022e price target of P$75/share (~40% upside potential) and a Market Outperformer rating. Vertically integrated business. CERAMIC has built an integrated operation across Mexico and the US, and it is the largest single distributor of ceramic tiles in Mexico, which means it has full control of its strategy, from production to commercialization. More importantly, it has educated its clientele on the quality of its products and positioned its brand "Interceramic" as top of mind. This has allowed it to attain a robust market share (+50%) in the premium ceramic tiles niche segment. Growth opportunities. With favorable industry fundamentals and a tight capacity across North America, we think CERAMIC will expand its capacity (-20%) in the next three years. Additionally, its strong FCF and balance sheet would back any plans to look for an M&A, where a brand already positioned with independent distributors would make perfect sense, as it would complement its retail distribution strategy. Attractive valuation. A 5.6x EV/EBITDA and -11% OFCF yield (2022e) seems attractive enough for a company with CERAMIC's distinctive value proposition around its retail distribution, not only in Mexico but also in the US, where the company has vast growth prospects. LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. |1#2TABLE OF CONTENTS What are Ceramic Tiles? Comparison of Floor Coverings Snapshot of the Global Ceramic Tiles Market Mexico's Fundamentals: Shift Towards Hard Flooring Mexico's Fundamentals: Housing Deficit Mexico's Fundamentals: Demographics and Population Growth Mexico's Fundamentals: Unpenetrated Mortgage Market Mexico's Fundamentals: Remittances as Driver of Home Improvements Ceramic Tiles Should Not Be Seen Entirely as a Construction Play Demand for Ceramic Tiles in Mexico Historical Market Shares (Volumes Sold) The US Market: An Opportunity for Mexico Main Risks Across the Industry GBM 4 5 6 8 9 10 11 12 13 14 15 16 18 MEXICO'S MOST RELEVANT CERAMIC TILE PLAYERS 20 20 LAMOSA Snapshot Timeline Scale Versus Its Mexican Peers A Disciplined M&A Strategy Unlocking Value in South America Putting a Foot in Europe Adhesives Business Recent Developments: Agreement to Acquire Fanosa Shareholders, Management, and Board of Directors Investment Thesis GBM Estimates Valuation Valuation Exercises 37 38 39 LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 2 21 222222223320 24 25 26 28 29 31#3October 12, 2021 TABLE OF CONTENTS CERAMIC Snapshot Timeline Strategic Joint Ventures Franchise Stores Shareholders, Management and Board of Directors Investment Thesis GBM Estimates Valuation Valuation Exercises VITROMEX Snapshot The Road Towards a Stable and Profitable Operation Strategy Valuation DALTILE Snapshot OTHER COMPETITORS Other Competitors APPENDIX International Peer Comparison International Peer Valuations M&A Transactions STOCK PRICE PERFORMANCE VS. ANALYST ESTIMATES 40 41 42 933 43 44 23 46 47 51 52 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 66 GBM LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 3#4October 12, 2021 WHAT ARE CERAMIC TILES? Ceramic Tiles. A versatile, durable, and strong floor and wall covering that can be used in all living spaces and comes in a wide range of designs, colors, sizes, patterns, styles, and shapes for all types of preferences (modern, contemporary, traditional, etc.). Advantages: ↑ ↑ A-O Wide range of costs Durability Adaptability Low maintenance Hypoallergenic Easy to clean ADHESIVES: AN ESSENTIAL COMPONENT FOR CERAMIC TILES A mixture of cement, aggregates, and chemicals that is used for attaching ceramic tiles to floors or walls. When mixed with the right amount of water, a dough is formed that is then used for the installation of ceramic tiles. GBM LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 4#5October 12, 2021 COMPARISON OF FLOOR COVERINGS Source: GBM Research Ceramic Floor and Wall Tile Carpet and Area Rugs Hardwood Description Average price per square meter Duration GBM Floor tiles are thicker and harder, with textures to avoid the risk of slipping, whereas wall tiles are typically thinner, smoother, and more delicate as well as slicker. From US$5 to -US$380 From 75 to 100 years when mantained properly Carpets are tacked to the floor and commonly cover from wall to wall, whereas area rugs are a partial floor covering. Flooring usually made of very hard species such as oak, maple, and cherry trees. -US$32 Up to 10 years From US$43 to -US$108 Up to 100 years or more Vinyl Sheet and Vinyl Floor Tile Both are thin and made of PVC plastic, but vinyl sheets come in rolls, while vinyl tiles are cut into smaller square pieces that are glued down to the floor. From US$5 to US$16 From 10 to 15 years Luxury Vinyl Tile (LVT) Made of PVC plastic, it looks like real wood and stone. It comes in different shapes, sizes, and effects. It is more expensive and prestigious than regular vinyl sheets. From US$22 to US$75 For as much as 25 years LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 5#6October 12, 2021 SNAPSHOT OF THE GLOBAL CERAMIC TILES MARKET Favorable global trends around the industry • A fragmented industry with big growth opportunities, especially in the Americas, where there is a large deficit. GLOBAL CERAMIC TILES INDUSTRY GBM • Global trend to replace soft coatings like carpets and wood floors with hard-like ceramics, vinyl, and laminates. Company Country • Urbanization should continue to spur demand for ceramic tiles in the world for the years to come. Installed Capacity (Million m²) 2020 Tile Sales (USD Million) • 22.9% of the total world production is exported, while 77.1% is for domestic consumption. 1. Mohawk* US 251 3,456* The continents that consume more than they produce are America, with a deficit of 19.8% of its production, and Africa, which consumes 32% more than it manufactures. 2. Lamosa →Mexico 225 881 GLOBAL CERAMIC TILES PRODUCTION AND CONSUMPTION (BILLION M²) North America: Production: 0.3 Consumption: 0.5 Central & South America: Production: 1.2 Consumption: 1.3 Source: Ceramic World Review, Company data and GBM Research Europe: Production: 1.9 Consumption: 1.5 3. SCG Ceramics Thailand 210 -700 4. Grupo Cedasa Brazil 149 N/A 5. RAK Ceramics UAE 140 438 6. Ceramica Carmelo Fior Brazil 108 84 174 7. Pamesa Spain 82 584 Asia-Pacific: 8. Dynasty Ceramics Thailand 82 259 Production: 8.5 Consumption: 8.0 9. Kajaria Ceramics F India 81 370 10. STN Group 遍 Spain 76 388 21. Interceramic Mexico 48 362 Africa: Production: 0.8 Consumption: 1.0 22. Vitromex Mexico 47 163 *Sales are not comparable, as they include the revenue from other ceramics like sanitary ware and natural stone products. LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 6#7October 12, 2021 GBM SNAPSHOT OF THE MEXICAN CERAMIC TILES MARKET MARKET SHARE IN 2020 (VOLUMES SOLD) Ceramic Tiles. After the acquisition of Porcelanite in 2007, LAMOSA positioned itself as the leader in the Mexican ceramic tiles market, more than doubling in size when compared to the second-largest player. According to our analysis, market shares have not moved drastically in the past five years, as all players have continued to grow with the market. MARKET CHARACTERISTICS An industry driven by housing remodeling and the need to address housing deficit. Although the ceramic tiles industry is considered cyclical due to its correlation with the construction sector, the fact that housing remodeling or home improvement accounts for ~80% of the demand makes it more resilient than the economy itself. This resilience, in turn, is linked to the growth of Mexico's GDP per capita over the years and the vast opportunity for improving household conditions, given the current housing deficit. LAMOSA VITROMEX® Others & Imports Ceramic Tiles 40.0% 16.5% 15.7% 14.0% 13.8% INTERCERAMIC daltile Ceramic Tiles (end-use) -80% -20% -2% Remodeling New construction Need a house Housing Deficit in Mexico (% of households) -25% ~57% In poor housing conditions With dirt or concrete floor Adhesives. Through organic and inorganic investments, LAMOSA's has accumulated a market share almost three times the size of its closest competitor. One of its strategic initiatives has been to work closely with installers, who are the ones that make the purchasing decision. CERAMIC and other players have made investments in this segment and are increasingly becoming more competitive; however, it is hard to compete with LAMOSA's scale across all of Mexico and its brand positioning. More detail on LAMOSA's scale on slide 29. LAMOSA is 2x larger than its closests competitors. The characteristics and necessities of the population in Mexico make the ceramic tiles market more inclined to the best and mid-value segments, as opposed to the US market, which tends to seek more premium products, such as porcelain. Despite there is a certain porcelain capacity in Mexico, most of the porcelain is imported from Europe and Asia. Market by Product Type INTERCERAMIC Adhesives Bexel Source: GBM Research cemix +2x LAMOSA Low-Priced High-Priced + Best Value 36% Mid-Value 37% Large Formats Porcelain 17% 10% -250 million sq. mt. LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. [7#8October 12, 2021 GBM MEXICO'S FUNDAMENTALS: SHIFT TOWARDS HARD FLOORING A noticeable shift towards hard flooring. Tile, wood, and other materials were present in only 26.3% of households back in 1980, in contrast with 43% in 2020. As the image below shows, there is a clear trend to change from dirt to concrete and then to hard floor covering. In our view, this is the reason why the ceramic tiles industry is outperforming the GDP growth of both Mexico and the construction sector over the past decades. (More detail on slide 13). Housing deficit. According to the National Housing Commission (CONAVI), at least 25% of households in Mexico live in inadequate housing conditions, while -2% need a house. On top of that, Mexico's growing young population will continue to demand more housing and ceramic tiles, for that matter- the latter should be top-of-mind for consumers when thinking about hard flooring options, given their characteristics, explained in greater detail on slide 5. Floor Materials in Mexican Households -Percentage of households 80.0% 75.5% 73.7% 69.2% 62.7% 57.0% It is all about home improvement. This is no secret; a household is never finished doing home improvements and most (if not all) people aspire to live in a place where they feel pleased or fulfilled. Due to technological improvements that lowered the cost of producing ceramic tiles and their physical appearance (tiles that look like wood or stone), they are a great option for consumers when thinking about floor or wall enhancements. Traditional or mom & pop stores (i.e., not large home centers) hold a relevant share of renovation material sales in Mexico because people tend to renovate their homes on their own. This is feasible because of the support granted through government social programs, such as INFONAVIT'S MEJORAVIT, where people borrow money specifically to make home improvements, which is positive for a sector that continues to grow as fundamentals remain favorable. According to our estimates, the value of the Mexican home improvement market is expected to maintain its growth pace toward 2024 (2019-2024 CAGR of 2.3%), while a sample of floor and wall covering sales indicates that they together represent almost a third (28%) of the total home improvement sales. More importantly, they have slightly outperformed the industry, which we attribute to the increased penetration of better floor covering materials. Home Improvement Breakdown 60.0% 40.0% 20.0% 43.0% 37.3% 30.8% 26.3% 24.5% 0.0% 1980 1990 2000 2010 2020 Dirt, cement and not specified Tile, wood or others Source: Mexico's National Statistics Agency (INEGI) Others 2015-2020 CAGR 72.0% Floor covering 23.5% 4.5% Home improvement 4.5% Wall covering ~5% ~5.5% Floor covering Wall covering Source: GBM Research LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 8#9October 12, 2021 GBM MEXICO'S FUNDAMENTALS: HOUSING DEFICIT Housing deficit, one of the biggest challenges in Mexico. According to CONAVI's population and housing census, in 2008, almost 33.5% of Mexican households lived in inadequate conditions, spanning poor materials (floor, walls, and roof), overcrowding (2.5 people per room in a house), and many others. A decade later (2020), and despite an improvement, we continue to see ~24.5% of households living in inadequate conditions. Moreover, overcrowding is still present in -9.4% of households in Mexico, which also underscores the opportunity for new housing demand. All of this, in addition to the young and growing Mexican population, which may require housing at some point, highlights the strong favorable fundamentals around the ceramic tiles market in the coming decades. An interesting piece of information is that this housing opportunity or deficit is also present in Latin America (more on slides 26 and 27), where LAMOSA has one of the strongest footprints, from Mexico to Brazil. Inadequate Housing Poor or Regular Materials Unhealthy Accommodation Floor (dirt) Walls and Roof (waste material, cardboard or metal sheet, wood, among others) Overcrowding No toilet (2.5 people/room) Percentage of Households Living in Inadequate Conditions Baja California Sonora 42.0% 475,702 27.0% 236,917 ' Chihuahua 37.1% 420,864 Nuevo Coahuila Tamaulipas Leon 12.1% 6.5% 14.5% 153,691 108,344 106,989 Baja California Sur San Luis Potosi 24.1% 57,316 Sinaloa 10.1% 86,208 Durango 21.5% 22.00% 168,614 104,792 Zacatecas Queretaro 12.10% Hidalgo 17.5% 79,918 19.6% 166,679 Yucatan 18.2% 120,394 Nayarit 77,635 21.4% 76,545 Puebla Tlaxcala Campeche 25.6% 11.6% 44.1% 433,537 39,403 114,786 Aguascalientes Jalisco 4.9% 18,998 9.7% 225,370 Michoacan % of households with deficit 27.6% 353,668 Veracruz Tabasco 59.4% 47.5% 1,131,271 399,121 5-18 Guanajuato 14.6% 228,642 Colima 21.4% 48,192 Guerrero 51.5% Oaxaca 18-30 484,725 53.2% Chiapas 68.2% 30-43 43-56 8.2% 222,396 Mexico City State of Mexico Morelos 14.3% 639,104 595,464 911,327 Quintana Roo 17.40% 21.0% 117,548 97,724 56-68 Source: CONAVI The housing deficit has eased, but there is still ample room for improvement. In light of the leeway in both Mexico's economic growth and GDP per capita, we believe the level of inadequate housing may continue to trend down (24.5% in 2020 vs. 33.5% in 2008). In our view, we can pinpoint the following key variables as some of the reasons that could be driving this progress. • . Remittances outperformance. Remittance flows to Mexico have surpassed the national GDP growth and inflation in the past twenty years, hence increasing the purchasing power of recipients. Remittances in Mexico represent an important source of income for many families. More details on slide 12. A young and growing labor force, coupled with a healthy unemployment rate for the past ten years. Greater access to credit. Historically, Mexico has been one of the main laggards in credit penetration among its Latin American peers. And even though the country has improved, there is still room for growth. More detail on slide 11. LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 9#10October 12, 2021 GBM MEXICO'S FUNDAMENTALS: DEMOGRAPHICS AND POPULATION GROWTH A country's population demographics play a fundamental role in the future of its floor covering industry. And in Mexico, the vast majority of the population corresponds to young adults, which should favor the housing sector, as more units would be needed to meet the increased demand. Furthermore, the prospects of the construction segment in Mexico are quite favorable in light of the housing conditions that prevail in the country, as the current family dynamics are giving rise to pent-up demand. For instance, according to the National Statistics Agency (INEGI), -87% of households in Mexico consist of a family plus other relatives or even non-relatives living in the same dwelling. Household Dynamics in Mexico 87% Family Household At least one member is related to the head of the household 13% Non-Family Household Population growth coupled with government efforts to tackle current housing deficits may continue to drive demand for new homes and floor covering materials. The combination of reduced housing deficits, a demand that is boosted by current family dynamics along with the young and growing population, will keep the industry's favorable fundamentals intact in the years to come. Those fundamentals have made the floor covering and ceramic tiles market grow above our country's GDP over the past two decades, and we see no reason why this could change in the short to medium term. Mexican Population Growth -Million of Inhabitants 160 CAGR: 1.7% 140.9 140 135.3 128.9 121.9 120 114.1 106 98.9 There is no relation among members 100 91.7 80 60 40 20 0 1995 2000 2005 2010 2015 2020 2025e 2030e Source: INEGI 71% are nuclear households, consisting of the father, mother, and children, or only the mother or father, with children. A couple with no children living in the same household also constitutes a nuclear household. Mexico's Favorable Demographics 100+ 0.0% 0.0% 95-99 0.0% 0.0% 90-94 0.1% 0.1% 85-89 0.3% 0.2% 80-84 0.5% 0.4% 75-79 0.7% 0.6% 70-74 28% are extended households and consist of a nuclear household plus other relatives (aunts, cousins, etc.). 1.0% 0.9% 65-69 1.5% 1.3% 60-64 1.9% 1.7% 55-59 2.4% 2.1% 50-54 2.9% 2.5% 45-49 3.3% 2.9% 40-44 3.5% 3.1% 35-39 3.7% 3.4% 30-34 3.9% 3.7% 88.8% 25-29 4.2% 4.2% of population 1% is a composite household, consisting of a nuclear or extended household and at least one person unrelated to the head of household. 20-24 4.2% 4.3% 15-19 4.3% 4.4% 10-14 4.2% 4.4% 5-9 4.2% 4.4% 0-4 4.2% 4.3% 6.0% 4.0% 2.0% 0.0% 2.0% 4.0% 6.0% LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 10#11October 12, 2021 GBM MEXICO'S FUNDAMENTALS: UNDER-PENETRATED MORTGAGE MARKET Under-penetrated credit market. In our view, the under-penetrated status of Mexico's credit activity offers a huge opportunity for the ceramic tiles industry to keep growing, as an increased credit penetration (mortgage loans) should boost not only the demand for new housing but also remodeling. Despite the Mexican mortgage market has been steadily improving in the past decades, it is still below other LatAm economies. One could argue that higher costs and a wide unbanked population have been the issue in Mexico; however, as new players seeking to reach untapped markets enter the industry (Fintechs, etc.) and competition increases, we could see a higher credit penetration going forward. Chile provides a great example of a higher penetration (driven by increased competition), as its total loan portfolio (only banks) reaches -80% of GDP, way above Mexico's -23%. However, when adding up the entire financial system, i.e., including government agencies and other financial entities, Chile's total loans penetration rises to as much as -125%. We are not saying Mexico will move towards that level but rather arguing that with new players entering the market, the banked population should increase going forward, further boosting home development and remodeling. Total Loan and Mortgage Penetration in Mexico -Total loans and mortgages as % of GDP 23.0% 20.7% Penetration of Mortgage Loans in LatAm Countries -Mortgages as % of GDP 2.7% 2.1% 2010 3.7% 11.9% Loans for Home Remodeling in Mexico -Figures in MXN Billion 29.5 '10-'21e CAGR: 7.5% 18.9 21.9 13.3 الله 1.7 2.1 3.4% 5.5% 6.1% 17.1% 4.3% 7.4% 7.3% 2015 15.9% 12.1% 15.5% 4.3% 3.4% 2.7% 2.2% 1.8% 2020 2010 2015 2020 27.1% Mortgages as % of GDP Mexico Colombia Peru Chile 2000 2005 2010 2015 2020 2021e 2005 2000 Total Loans as % of GDP Mexico's under-penetrated status in terms of credit activity should be regarded as huge opportunity for further growth in housing demand and remodelings. Mexico is still behind some of its LatAm peers in terms of credit penetration and the entry of new players into the Mexican market would reduce this gap. Loans for home remodeling in the country have outpaced the growth of both the national GDP and the system's total loan book over the last decade. That said, in light of the country's housing deficit and growing population, lending activity is poised to keep expanding going forward. Source: World Bank, CNBV, SNIIV LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 11#12October 12, 2021 MEXICO'S FUNDAMENTALS: REMITTANCES AS DRIVER OF HOME IMPROVEMENTS As previously mentioned, remodeling accounts for 80% of ceramic tile volumes, while 57% of dwellings in Mexico have concrete or dirt floors. Hence, in a country with a high poverty index and where remittances are a relevant source of income for many Mexican families, the latter represents a key variable of the average household disposable income. More importantly, remittances are independent of Mexico's economic performance and are a USD-denominated income further boosted by the depreciation of the Mexican Peso in times of crisis. As such, the large economic benefit per capita of remittances should be regarded as a key driver of growth for ceramic tiles demand. GBM Remittances have outpaced GDP growth and inflation in the past twenty years. Remittances have increased by almost 11.2x in MXN and by around 4.5x in USD since the year 2000, which shows a trend. Notably, Mexico is the third-largest recipient of remittances in the world and the number one in Latin America. The escalation appears even more dramatic when looking at how remittances per capita have outpaced GDP per capita growth and inflation. This means that in the last two decades, Mexican recipients of remittances have a greater disposable income and purchasing power. Per capita 2000-2020 CAGR: Remittances (MXN): 12.1% GDP (current MXN): 5.6% Remittances vs. Inflation and GDP Growth -Index. All figures have 2000 as the base year. 1600 Remittances by the numbers US$41 billion of remittances entered Mexico in 2020 (-4% of GDP). ~8.5% of Mexicans received remittances from relatives or friends abroad during the year of the survey*. According to the 2015 ENIF survey*, ~5% of remittance recipients use the proceeds to buy, repair, remodel, or expand their house, among other purposes. Industries in the United States that generate the most remittances. The economic activities that generate the largest flows of remittances are construction and agriculture (43.5% of total), which are considered essential to the economy under a COVID-19 lockdown scenario. More importantly, the construction industry remains in a healthy state and could still get a boost from a federal infrastructure plan. US economic activity of Mexico's remittances 1400 1200 1000 800 600 400 200 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 INPC *2015 National Survey of Financial Inclusion Source: INEGI and Mexico's Central Bank Remittances (MXN) GDP (MXN) 2020 11.2x 2.2x joi Construction 19.0% Agriculture 17.7% Drivers 7.0% Gardening 7.1% Factories 6.4% 3.6x Source: Center for Latin American Migration Studies (CEMLA) Restaurants 6.4% Operation of Machinery 4.3% Professional Own Business Other 3.2% 3.1% 19.0% LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 12#13October 12, 2021 CERAMIC TILES SHOULD NOT BE SEEN ENTIRELY AS A CONSTRUCTION PLAY. Over the past ten years, the sales of ceramic tiles in Mexico have outperformed the GDP growth of both the country and the construction sector, because of the following dynamics: • -80% of the demand for ceramic tiles is attributed to home remodeling. • Under-penetrated market, with -60% of Mexican dwellings having a concrete or dirt floor (~63% in 2010). High barriers of entry (distribution and branding) that give strong pricing power, enabling the industry to increase prices (at least) in line with inflation. The following chart shows how the three largest companies in Mexico (LAMOSA, CERAMIC and VITROMEX) have replicated the industry's outperformance. Mexico Ceramic Tile Sales vs. National and Construction GDP Growth -YOY Growth 210 200 190 180 170 160 150 140 130 120 110 100 90 80 80 70 10 2009 LAMOSA INTERCERAMIC VITROMEX National GDP Construction GDP - GBM 2019 2020 LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 13 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: GBM Research with companies' data#14October 12, 2021 GBM DEMAND FOR CERAMIC TILES IN MEXICO Despite economic cycles and a decline in construction over the last twenty years, the demand for ceramic tiles has maintained a steady growth pace, thanks to the favorable fundamentals of the industry in Mexico, including large housing deficits (with 57% of households still having dirt or concrete floors), an improving GDP per capita, and promising demographics (a young and growing population). All these factors may cause the sector to keep its uptrend in the long run as the population grows. When compared to other building materials, the demand for ceramic tiles has risen at a CAGR of 3.7% over the last two decades, more than twice the growth of cement consumption. This fact demonstrates the under-penetration of ceramic tiles and their growth opportunity in the building materials industry. Ceramic Tile Consumption -Figures in million square meters 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 69% 63% Percentage of 57% households with dirt or CEMENT CEMENT CEMENT cement floor YOY Change 3.7% CAGR 235 5 243 236 238 242 218 197 191 188 178 175 178 168 169 164 156 153 145 133 120 116 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 +3.4% +10% +9.6% +5.1% +2% +7.6% +4.5% +1.6% -8% +3.3% +5% +7.4% -1.5% +5.1% +10% +8.1% +3.1% -2.7% +0.8% +1.7% Source: The Tile Council of North America (TCNA) with GBM Research data LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 14#15October 12, 2021 GBM HISTORICAL MARKET SHARES (VOLUMES SOLD) After the acquisition of Porcelanite in 2007, LAMOSA positioned itself as the leader in the Mexican ceramic tiles market, more than doubling in size when compared to the second-largest player. Despite the industry still has room for further consolidation, with several family-owned Mexican ceramic tile producers holding less than 3% of the market, it appears that the largest competitors are preferring the organic growth route, with all companies (except for Vitromex) having added capacity since 2010, while no acquisitions have happened in Mexico over that same period. In contrast, many acquisitions have taken place abroad, with LAMOSA and Mohawk (Daltile's holding), the largest ceramic tile producers in the world, being particularly active. Ceramic Tiles Sold (Market Shares) LAMOSA 11% PORCELANITE® diseña tus sueños INTERCERAMIC VITROMEX Adaltile Source: GBM Research Castel azulejos baños sabinas Others & Imports N/A N/A N/A - - - - - 13% 2001 22% 36% N/A LAMOSA 2007 In 2007, LAMOSA bought Porcelanite 15% 21% 48% 18% N/A 16% 2.8% N/A 2020 16.5% 15.7% 14% 11.0% 40% LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 15#16October 12, 2021 GBM THE US MARKET: AN OPPORTUNITY FOR MEXICO • • • The ceramic tiles market in the United States is yet to fully recover from the housing bubble, as the consumption of ceramics has remained flat for the past 16 years. The market began to improve after the crisis until the COVID-19 pandemic emerged. However, with home office mandates increasingly becoming an option for some American families in the context of a healthy housing market, with low levels of inventory and easy access to mortgages, we believe demand for ceramic tiles is poised to keep rising. The domestic production deficit for ceramics in the United States may open an opportunity to increase Mexican imports and expand the supply in the world's largest ceramic importer. Given that imports account for 70% of the US consumption, Mexico's privileged geographic position may allow it to keep gaining market-Mexico accounted for -17% of US imports in 2020. Mexico competitive advantages: - Geographic position Tariffs (Mexico's 0% vs. Other countries' 8.5%) Total Ceramic Tile Consumption 308 303 CAGR 293 Source: TCNA 249 195 2004-2020: -0.6% 2008-2020: +2.5% 173 186 193 204 230 231 289 284 273 269 264 20.2% 254 Others 32.0% 2015 2016 2017 2018 2019 2020 US Total Consumption 16.5% QO 15.2% 16.1% 70% 30% Imports Domestic Manufacturing LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 16#17October 12, 2021 GBM THE US MARKET: AN OPPORTUNITY FOR MEXICO Fierce competition in the US floor covering market. Historically, carpets have been the go-to choice for flooring in the country, but as new options emerge as a result of new technologies, they are rapidly losing share to other products. Meanwhile, innovation has made ceramic tiles or luxury vinyl tile (LVT) more appealing to consumer preferences and are gaining market share. In the case of LVT, it presents extraordinary dynamics, which in our view are attributed to the following reasons: . Shift towards the vinyl sheet. Clients are prefering LVT over vinyl sheet or floor tile because of the enhanced characteristics of the former. • Versatility. LVT offers a wide variety of colors, designs, and patterns. It can look like real wood or stone, although it is just PVC. • • Installation cost. Since labor in the U.S. comes at a high cost, and ceramic tiles take several hours more to install than LVT, the latter beats the former on that front. Ease of installation. This characteristic fits perfectly the Americans' preference to carry out home improvements on their own and take labor costs off a home remodeling budget. It is easy to see why Americans have chosen LVT over other products in the past. However, ceramic tiles still have a compelling story and value proposition. To their defense, it is the only floor covering (besides LVT) that has enjoyed constant growth in the past decade. In our view, this is attributed to its durability, design, and luxury, gaining preference across a large portion of Americans. In turn, with -70% of the country's demand coming from imports on account of the supply/demand dynamics, Mexican producers are in a very favorable position to capitalize on the growth of ceramic tiles in the United States. A very good example of this is Daltile Mexico, which is a subsidiary of the largest ceramic tiles player in the world, Mohawk Industries, and exports -50% of its Mexican production to the U.S. market. Value of Floor Covering Market Sales Ceramic Tiles Market Comparison United States Mexico End Use Remodeling 60% 80% Construction 40% 20% Product Type Porcelain 65% 10% 35% 90% Ceramic Product Source Imports 65% 15% Domestic Manufacturing 35% 85% Distribution Channel Independent Distributors 25% 65% 35% 15% 40% 20% Home Center Commercial 2011 53.2% 11.5% 12.3% 10.8% 12.2% 2019 41.0% 13.0% 14.1% 17.4% 4.8% 9.8% Carpet and area rugs Hardwood Ceramic floor and wall tile Luxury vinyl tile Vinyl sheet and floor tile Others Source: Leading Indicator of Remodeling Activity (LIRA) Notable differences between the American and Mexican ceramic tiles markets. In our view, some key characteristics make each market so unique in many ways. One could say it is all about preferences or culture, or maybe it is the weather or the purchasing power of households. Let us take LVT as an example. Vinyl is not quite common in Mexico because it is not as durable (it gets damaged easily) as other hard flooring choices like ceramic tiles or wood. However, it is a popular choice in the U.S. because of the do-it-yourself culture, lower installation costs, and ease of replacement. Colder weather conditions could be the feature that makes carpets a choice for Americans while not for Mexicans. In the case of ceramic tiles, they are a highly popular choice in Mexico given their durability, wide range of costs, low installation and labor costs, and design. However, high installation costs in the United States make ceramic tiles more of a (still pretty large) premium niche market for Americans. In our opinion, this is why the product mix is more tilted towards the higher-priced porcelain when compared to Mexico. LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 17#18October 12, 2021 MAIN RISKS ACROSS THE INDUSTRY GBM PRODUCT SUBSTITUTION AND NEW TECHNOLOGIES As new technologies arise, better looking and more economical products are grabbing consumers' attention, and the floor covering market offers a wide range of options, not only in a variety of designs but also in terms of costs. Despite ceramic tiles have both a broad cost and design spectrum, some alternatives have gained popularity because of their modern, expensive-looking designs while still being cheaper than ceramic tiles. This is the case for LVT, a product made of PVC that gives the appearance of real wood or stone. It can have any design printed on and it is usually preferred over laminate flooring, carpets, stone, or hardwood because it is more affordable and looks just as real as the others. Given their versatility, products like LVT could pose a risk to ceramics, in our view. Nonetheless, LVT has not penetrated most of the markets where ceramic tiles have a strong presence, such as Latin America or Europe. Besides, it is not as durable as other hard floorings: while ceramics can last more than 100 years, LVT has an average lifespan of less than 25 years and this depends to a great extent on its usage-LVT is not ideal for commercial spaces with heavy foot traffic since it can get easily damaged. If a product is not suitable for heavy-duty use, it may require a higher investment in the long run, which could be a drawback for some consumers. We think this feature is why LVT has not yet penetrated the Mexican market as much as the US. ENVIRONMENTAL The recent environmental trend continues to gain momentum, and energy-intensive industries, such as ceramic tiles, will not escape more stringent regulations which could pose a potential threat to industry players in the event that they can't abide by them. Despite common beliefs that the building materials sector as a whole is highly polluting, it is not as quite the case for ceramic tile companies. Given their properties like durability and recyclability, ceramics are a more sustainable option made from natural materials, in addition to being a substitute for other natural or non-renewable materials. As companies face the forementioned stringent regulations, they are continuously investing in research and development in order to innovate in their processes and be up to date with technologies for more eco-friendly processes as well as implementing the Best Available Techniques (BATS). For example, LAMOSA employs a technology which reduces the thickness of ceramic products whilst retaining stability and durability intact as well as complying with the current normativity. Additionally, a vast majority of the inputs employed for the production of ceramic tiles are entirely reused, creating almost none to zero waste. Furthermore, ceramic companies use natural gas as fuel instead of others that are more polluting, such as coal or petroleum products. Natural gas is relatively clean, as burning it results in fewer emissions of nearly all types of air pollutants and CO2. Thus, it is true that the fabrication process of ceramics could represent a potential harm to the environment, but as long as ceramics players continue to invest in research and development towards more sustainable processes and apply BATS, we believe the companies will continue to hedge from upcoming and more rigorous regulation. LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 18#19October 12, 2021 MAIN RISKS ACROSS THE INDUSTRY GBM ENERGY AS KEY COMPONENT OF COSTS The profitability of this industry is highly sensitive to energy costs, especially fluctuations in the prices of natural gas, which is the main fuel used for ceramic tiles production. According to our estimates, total energy costs represent between 15 and 20% of the consolidated cost of goods sold, depending on the sales mix and the geographic location of plants, among others. Although historically natural gas prices have trended down on account of vast supply in North America, its price has been very volatile on account of natural disasters or extreme weather conditions. Nevertheless, since all this affects industry players across the board, they raise prices to compensate for those incremental costs—if permanent. To provide some sensitivity, if natural gas prices go up by 10%, ceramic tile margins would contract between 50 and 100 bps., depending on the operation. What do we mean? Every business has its peculiarities. For example, Vitromex is 100% ceramic tiles, so it is more exposed to energy, whereas LAMOSA and CERAMIC have other less energy-intensive business-like adhesives. Besides, since most of CERAMIC's footprint is close to the U.S. border (Chihuahua), energy weighs less on its COGS, given the lower transport costs. LAMOSA and CERAMIC EBITDA Mg. vs. Natural Gas Growth 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 LAMOSA EBITDA Mg. (Left Axis) Nov-15 CERAMIC EBITDA Mg. (Left Axis) Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 May-18 Jul-18 Sep-18 Nov-18 Jan-19 Mar-19 May-19 Jul-19 Sep-19 Nov-19 Jan-20 Mar-20 May-20 Jul-20 Sep-20 Nov-20 Jan-21 Mar-21 May-21 Natura Gas YOY % (Right Axis) 120.0% 100.0% 80.0% 60.0% 40.0% 20.0% 0.0% -20.0% -40.0% -60.0% LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 19#20E GBM MEXICO'S MOST RELEVANT CERAMIC TILE PLAYERS LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 20#21TOP PICK GBM LAMOSA LEADER IN MEXICO AND #2 WORLDWIDE Top player in Mexico • Ceramic tile sales in Mexico reached P$9.2 billion (2020) (-48% of total sales). • Adhesives sales in Mexico were P$4.5 billion (2020) (-23% of total sales). EBITDA amounted to P$4.2 billion incl. IFRS 16 (2020). • Estimated market share in Mexico: -40% • Total installed capacity: 225 million m² • Installed capacity in Mexico: 130 million m² • Majority shareholders: Elosúa and Valdés Families (~53%) LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 21#22October 12, 2021 GBM LAMOSA: SNAPSHOT LAMOSA is a producer and seller of ceramic tiles for the construction market in the Americas and Europe. It is a company with 130-years of history with ~225 million square meters of installed capacity, standing as the second-largest ceramic tile producer worldwide and the largest in Mexico. It is also the largest producer and seller of adhesives in the Mexican market. In September, LAMOSA acquired Grupo Roca's ceramic tiles business, a company with operations in Brazil, Spain, and the United States, allowing LAMOSA to expand its footprint into Europe and strengthen its position in the Americas. LAMOSA BEFORE THE ACQUISITION OF GRUPO ROCA 2020 Sales Breakdown By Segment By Currency LAMOSA AFTER THE ACQUISITION OF GRUPO ROCA 2020 Sales Breakdown 24.0% 27.0% 2.0% 20.0% 8.5% 4.5% 1.8% OOOO 76.0% 71.0% 80.0% 27.2% 58.0% Ceramic Tiles Adhesives CERAMIC BRANDS firenze MEXICO LAMOSA PISOS & MUROS MXN **COP/PEN/ARS/CLP LatAm** USD & Others Ceramic Tiles Adhesives MXN LatAm** USD EUR Others ***COP/PEN/ARS/CLP/BRL ADHESIVES Niasa® PORCELANITE* Entre tú y tu obra diseña tus sueños. CREST PERDURA PEGA PISOS ⚫ JUNTEADORES.ESTUCOS SOUTH AMERICA CERAMICA SSCOP CORDILLERA SAN LORENZO Source: Company data CREST MEXICO CERAMIC BRANDS firenze LAMOSA PEGE & MODE PORCELANITE® diseña tus sueños ADHESIVES NiasaⓇ Entre tú y tu obra CREST PERDURA PEGA PISOS JUNTEADORES ESTUCOS SOUTH AMERICA UNITED STATES EUROPE* CERAMICA PISCOP CORDILLERA SAN LORENZO Incepa HUSCT Roca gala *Some brands have long-term exclusivity agreements CREST LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 22#23October 12, 2021 LAMOSA: TIMELINE 1890 1929 1933 BOLSA MEXICANA DE VALORES 1951 Founded as Compañía Manufacturera de Ladrillos Monterrey. Incorporated as Ladrillera Monterrey, S.A. by Bernardo Elosúa and Viviano Valdés The Ceramic Tiles division is created. The company launches its IPO on the Mexican Stock Exchange. Crest GBM 1984 The company starts its Real Estate division in Monterrey. 1974 Acquisition of the Kerámika industrial plant in Tlaxcala. The company begins to consolidate the industry. 1963 O Begins production of sanitary ware and bathroom furniture through its Sanitarios Lamosa subsidiary. CENTES 20 1957 Creates the Crest brand, becoming one of the first manufacturers of cement-based adhesives in Mexico. LAMOSA 1995 Ladrillera Monterrey, S.A. changes its corporate name to Grupo Lamosa, SA. de C.V. 1998 O Pursuing its growth strategy, the company acquires Adhesivos Jalisco. Niasa® Entre tú y tu obra 2001 The company continues to expand its Adhesives business with the acquisition of Industrias Niasa. PORCELANITE diseña tus sueños 2007 -O- The acquisition of Porcelanite for US$810 million drives LAMOSA to become the largest ceramic producer in Mexico. The company sells its Commercial Real Estate division. 2021 Acquires Grupo Roca's ceramic tile business with operations in Spain, Brazil, and the US-for US$260 million. With this transaction, LAMOSA becomes the second-largest ceramic tile producer in the world, further strengthening its positions in the Americas and expanding its footprint into Europe. Roca euro cerámica 2020 Acquisition of Eurocerámica in Colombia for US$33 million. LAMOSA becomes the second-largest player in that country and builds up its presence in South America. SAN LORENZO CORDILLERA SISCOP CERAMICA 2016 Geographic expansion to South America with the US$230 million acquisition of Cerámica San Lorenzo, a ceramic tile manufacturer with operations in Peru, Colombia, Chile, and Argentina through eight production plants. LAMOSA consolidates its positioning in the continent with this transaction. corona 2015 LAMOSA sells its Sanitary ware division to Colombian company Corona for US$40 million to focus exclusively on ceramic tiles and adhesives. LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 23#24October 12, 2021 GBM LAMOSA: SCALE VERSUS ITS MEXICAN PEERS Sometimes size does matter. One of LAMOSA's main competitive advantages in Mexico is its scale, which provides flexibility across its production plants and, as has been the case in 2021, the opportunity to capture rapid increases in demand from changes in consumer behavior. Moreover, by having plants closer to distributors, it has pricing power from lower transportation costs. The illustration below clearly shows how LAMOSA's four plants in Tlaxcala allow the company to better serve the center and southeast regions of Mexico when compared to all its competitors. Being a heavy product to mobilize, ceramic tiles and adhesives could be seen as freight-intensive products, while transporting them over long distances can prove inefficient. The product that travels more is the premium one, and the company's pricing power allows to compensate for the logistics costs. Thus, it is fair to say that the manufacturer that is closer to its distributors has a certain advantage in terms of pricing. LAMOSA's Ceramic Tiles Footprint Ceramic Tiles Footprint of LAMOSA's Main Competitors in Mexico Source: Company data (2) LAMOSA Cost/Pricing Advantage (4) Installed Capacity (Million m²) LAMOSA 0(2) (2) Installed Capacity (Million m²) VITROMEX® MI ESPACIO, MI MUNDO -47 INTERCERAMIC -46 Adaltile -45 -130 Castel ~8.5 Others -50 LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 24#25October 12, 2021 LAMOSA: A DISCIPLINED M&A STRATEGY LAMOSA'S CERAMIC TILES M&A GBM Porcelanite - Mexico. In 2007, LAMOSA (#4 in Mexico) bought Porcelanite (#1 in Mexico), a player 5x its size, in a very aggressive but calculated move by management that resulted in a transformational milestone for the company. LAMOSA's footprint gave the company a significant edge in economies of scale, allowing it to get better supplier contracts than its peers. With such a large scale, the company reorganized its production across plants, focusing each one on a certain design or format, which resulted in longer production runs and, in turn, greater efficiencies and productivity. Ceramica San Lorenzo (CSL) South America. In 2016, - LAMOSA bought CSL to expand into Colombia, Peru, Chile, and Argentina. This move consolidated the company's position in the Americas. Five years later, management has doubled CSL's margins on account of economies of scale, rationalization of capacity, and improved logistics (exports) across the region. At the time of the acquisition, LAMOSA already exported to South America and by getting those assets, it redirected its capacity in Mexico to domestic demand and other markets while increasing CSL's utilization capacity at the same time. - Eurocerámica Colombia. In 2020, LAMOSA acquired Eurocerámica to strengthen its position in Colombia. This acquisition was seamlessly integrated with CSL's assets and turned LAMOSA into Colombia's second-largest ceramic tiles producer, only behind Corona. Grupo Roca - America/Europe. In 2021, LAMOSA announced the acquisition of Grupo Roca's ceramic tiles business, with plants in Brazil and Spain, and a strong business in the United States. Synergies should arise from economies of scale and improved logistics, as well as the integration of best practices and technologies. Hard currency revenues. With the addition of these assets, LAMOSA will now sell -13% of its total revenues in USD and EUR. 20 plants 130M m² 130M m² 20 plants 130M m² 187M m² 2 plants 23M m² 3 plants 23M m² 20 plants 130M m² 2 plants 23M m² 3 plants 23M m² 2 plants 2 plants 11M m² 11M m² 225M m² 1 plant 35M m² 3 plant LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 25#26October 12, 2021 LAMOSA: UNLOCKING VALUE IN SOUTH AMERICA The aftermath of the 2020 health crisis remains an issue for most Latin American countries. In the case of LAMOSA's key markets in the region-Brazil, Colombia, and Peru-, they are not expected to bounce back to pre-pandemic levels until 2023 given the challenging macroeconomic conditions of each country. However, despite a harsh path to recovery, the construction sector, and consequently, the ceramics industry, seemed to remain resilient in the face of the crisis as a result of the surge of stay-at- home trends (office, school, etc). People are spending most of their time at home, and a higher need to renovate and refresh spaces emerged during and after the pandemic lockdowns. Construction sector: how is each market doing? Total Housing Deficits Brazil The construction sector represented 7.1% of its GDP in 2019 and it is forecasted to expand at a CAGR of -4.1% in the 2021-2025 period, driven by the government's housing and infrastructure programs, low interest rates, higher credit activity, and labor market recovery. Those conditions should encourage demand for new homes and an appetite for remodeling, thereby boosting demand for building materials in the country. Colombia The Colombian Chamber of Construction (Camacol) expects home building to grow by 8.4% this year, on the back of an increase in social housing projects. Also, Camacol anticipates the construction of four million housing units by the end of the decade (1.7x the current stock), which, in our view, is an aggressive move to ameliorate the current housing situation. Peru The construction industry is forecasted to expand by 2.8% between 2022 and 2025, supported by better macroeconomic conditions and a rise in public investment. Furthermore, the government recently enacted an unprecedented law that promotes social housing, which facilitates government action at the federal and local levels to create better, affordable, and sustainable housing. These actions should boost not only the residential sector but also the demand for ceramic tiles, because of the need to improve housing materials in the country. Source: Reuters, Mordor Intelligence, Fitch Solutions, DANE, INEI, IADB 19% 46% 16% 27% GBM 25% LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 26#27October 12, 2021 GBM LAMOSA: UNLOCKING VALUE IN SOUTH AMERICA As Latin America becomes increasingly developed, we expect houses and building apartments to post a strong momentum in the following years. Additionally, factors such as the upsurge in population growth, the large share of young people (youth aged 15 to 24 account for -20% of LatAm's population), and the rapid expansion of urban areas will lead to a heated demand for housing services, infrastructure, and building materials. Despite the economic improvement in the past decades and the high urbanization rates (in 2018, 14% of people lived in one of the six cities with ten million inhabitants or more), the region still presents not only insufficient but also inadequate housing units-quantitative and qualitative (i.e., lack of basic services) deficits, respectively. These conditions create substantial room for improvement in terms of housing and public services, suitable infrastructure, and quality materials. Moreover, according to the World Bank, two-thirds of families in Latin America need a better home, not a new one. Going forward, we expect governments to maintain stimuli aimed at reducing the housing deficits, meeting housing needs that arise from the formation of new households, and responding to the growing urbanization process. All this will imply additional market opportunities for new constructions and home remodeling needs. Urbanization cohabiting with slums Today, -79% of the population in Latin America and the Caribbean lives in urban areas, making it the second most urbanized region on the planet. Despite this, a significant share of the population continues to live in slum areas, and although it has decreased over the years, it remains a relevant issue for most Latin American countries. Total urban population in LatAm living in slums A shrinking deficit The Inter-American Development Bank estimates that one in three families live in inadequate housing conditions or a dwelling built with precarious materials or lacking basic services. Nowadays, there are no updated reports of how deficits are at a regional level. However, based on two different studies, the percentage of homes built with poor materials in 2010 was ~14%, while in 2015, it stood at -10%. In our view, this shows that housing inadequacy is diminishing steadily, and it seems like the trend is to keep reducing this deficit as governments are pushing for social programs that serve that purpose. 1990 34% 2005 26% 2018 21% Furthermore, according to the United Nations, 89% of the population in Latin America and the Caribbean will live in urban areas by 2050. This trend of increased urbanization could imply a rise in demand for quality materials or higher needs for home remodeling in the years to come. Source: IADB, CEPAL, UN Habitat Infrastructure 19.8% 17.9% -14-15% Materials 14.1% 9.1% -4-5% Overcrowding 9.4% 3.3% -1-2% Deficit 2010 2015 2020 LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 27#28October 12, 2021 GBM LAMOSA: PUTTING A FOOT IN EUROPE With the acquisition of Grupo Roca's ceramic tiles business, LAMOSA will expand its footprint for the first time into Europe (Spain), which will only represent -5% of total sales. Despite this is a small figure, we should see it as the company's first attempt in venturing into Europe, but in a cautious way. The European ceramic industry is not only a cultural heritage and an identity for the region, but it is also positioned as a world leader in the production of value-added, exceptionally designed, top-quality ceramic products, especially regions like Spain and Italy. What comes next for LAMOSA in Europe? With the company maintaining a very healthy net leverage despite the recent acquisitions (-1x 2021e), and with an objective to increase the scale of its European ceramic tiles operation, we could see LAMOSA's management acquiring a renowned Italian or Spanish brand in the near future, or a european company that exports to the United States to keep increasing its revenue in hard currency and moving forward with its integration in the Americas. Production Value of Europe's Ceramic Industry Snapshot of Europe It has an annual production value of ~€30 billion. It represents -25% of the global production. Export-oriented industry: 30% of its production is sold outside the EU. It generates 338,000+ jobs in the industry. Others Sanitary ware 19% 6% €30 billion Table and ornamental ware 7% Wall and floor tiles 31% 17% 20% Bricks and roof tiles Refractories Major producing countries Largest export markets Green initiatives open new opportunities. ●米 Source: Cerameunie, EC Europe, Ceramtec The region provides exceptional opportunities for housing needs and renovation. While the former is boosted by the strong migration wave from African and Asian countries where emergency and affordable housing is needed, the latter is driven by both the European Union's advocacy towards a greener economy and the fact that half of the residential stock was built before 1970. Several ambitious initiatives have been put in place to rehabilitate dwellings, such as the European Green Deal, which includes an objective for refurbished, energy-efficient buildings, or the Renovation Wave, which is entirely devoted to renovating public and private buildings, as they account for 40% of Europe's energy consumption and 35% of the region's greenhouse emissions. The initiative also tackles the need not only for sustainable but also affordable and quality dwellings since nearly 34 million citizens (7% of the population) cannot afford to heat their homes properly. The plan offers a huge market opportunity, as -75% of buildings in the EU are not energy efficient; however, between 85 and 95% of today's buildings will still be used by 2050. These dynamics represent an untapped market opportunity, where home remodeling and the development of affordable and sustainable housing will become the drivers of growth and expansion for the industry. LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 28#29October 12, 2021 LAMOSA: ADHESIVES BUSINESS GBM LAMOSA's Adhesives business is engaged in the manufacturing and commercialization of adhesives for the installation of ceramic and natural coatings on floors and walls. It is the undisputed leader in Mexico and, a couple of years ago, in 2019, it started operations in Chile after analyzing opportunities to grow in South America, a region where it can make synergies with its strong ceramic tile footprint. With a strategy based on training or being close to ceramic tile installers, who ultimately decide which adhesive to buy, LAMOSA has positioned its brands, especially Crest, at the top of the market. More importantly, given its strong portfolio of brands and its positioning among ceramic tile installers, one could even claim that the company's adhesive products are used to install ceramic tiles of their competitors. Leading Position in Mexico Lamosa is 2x larger than its closests competitors. Brand Portfolio LAMOSA's scale and logistics distribution (close to its clients) has allowed it to attain strong competitive advantages and, in turn, a large market share. More importantly, it has three well-positioned brands across the country: Crest, Niasa, and Perdura. In the case of CEMIX (not CEMEX, the global cement producer), one could argue that it also has operations all over the country; however, its strategy has been to regionalize production but at a smaller scale, hence its low market share. Adhesives Footprint in Mexico by Competitor INTERCERAMIC Adhesives Bexel cemix +2x LAMOSA Niasa® Entre tú y tu obra CREST (2) PERDURA PEGA PISOS JUNTEADORES ESTUCOS Profitable product and a complement to ceramic tiles. Besides going hand in hand with ceramic tiles- the adhesive serves as the paste to install tiles-, the Adhesives business has better profitability, which ultimately boosts not only LAMOSA's consolidated margins but also its FCF generation. More importantly, as LAMOSA continues to penetrate the adhesives market in South America, the higher profitability of this business should act as a tailwind for the company's margins. The margins of LAMOSA's Adhesives business have outperformed Ceramic Tiles over the past ten years. Ceramic Tiles Business EBITDA Mg. 10-year average -19% Source: GBM Research Adhesives Business Adhesives LAMOSA EBITDA Mg. INTERCERAMIC 10-year average cemix -25% Bexel LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 29#30October 12, 2021 RECENT DEVELOPMENTS: AGREEMENT TO ACQUIRE FANOSA GBM Last week, LAMOSA announced a deal to acquire FANOSA, Mexico's leading manufacturer of Expanded Polystyrene (EPS) products, for US$115 million. Despite FANOSA represents only -6% of LAMOSA's revenues (incl. Grupo Roca's Ceramic Tile business), this seems like an atypical transaction, as FANOSA's products do not complement ceramic tiles or adhesives. Hence, despite LAMOSA has succeeded in integrating past acquisitions, we believe this one will imply a certain degree of execution risk. No material synergies might be reaped from the FANOSA acquisition, and considering the transaction is yet to be approved by antitrust authorities, we won't include it in our estimates for the time being. The approval could take from three to six months, according to LAMOSA. What could LAMOSA be looking for in FANOSA? Perhaps, greater diversification of its revenue, looking to develop a third business, mainly focused on insulation and lightening products for construction, and to grab a larger slice of construction revenues-recall that remodeling needs account for 80% of the demand for ceramic tiles and adhesives. The latter could grant LAMOSA an opportunity to be closer to new projects and offer its ceramic tiles portfolio ahead of its competitors. Who is FANOSA? With over fifty years in the market, FANOSA is Mexico's leading manufacturer of EPS products, which are used primarily as insulation and lightening materials in the construction and packaging industries. Its revenues derive from four different segments-construction, agriculture, packaging, and coolers- across Mexico and the sunbelt area of the United States. FANOSA has its own distribution or logistics network, allowing it to serve the market efficiently. FANOSA's Footprint FANOSA's operation and distribution are very similar to LAMOSA's Adhesives business, and the company considers this could help better understand the know-how of FANOSA's operations. What is EPS? Expanded polystyrene is a white plastic foam insulating material consisting of small spherical balls of polystyrene that can expand around forty times its original size and be molded into many forms to suit a given application. Source: Company data FANOSA Distribution Center Plants Exports Representation Center Corporate Headquarters LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 30#31October 12, 2021 LAMOSA: SHAREHOLDERS, MANAGEMENT AND BOARD OF DIRECTORS Senior Management LAMOSA Name Position 1-1 Description GBM Federico Toussaint Chairman & CEO Jorge Antonio Touché CFO Sergio Narváez Germán Alvarado Paredes Ceramic Tiles Division, Director Adhesives Division, Director Human Resources Director Mr. Toussaint has served as CEO since 1992 and as Chairman since 1998. He began his career at Grupo Cydsa and has been highly involved with the industry since. He holds a bachelor's degree in Engineering from ITESM and an MBA from IPADE. Mr. Touché was appointed CFO in October 2018 after serving as Finance Director of the Ceramic Tiles division. He has more than 25 years of experience in business administration and finance. Mr. Touché holds a bachelor's degree in Engineering from ITESM and an MBA from the University of Texas. Mr. Narváez has served as Director of the Ceramic Tiles division since 2000. He has more than 30 years of experience in the industry. He holds a bachelor's degree in Engineering and an MBA from ITESM. Mr. Aldape has performed as Director of the Adhesives division since 1993. He previously served as General Manager of Crest and Minerals & Mining Chemist Finance Manager. He holds a bachelor's degree in Engineering from ITESM and two master's degrees, one from ITESM and one from IPADE. Germán Alvarado Paredes has served as Director of Human Resources since April 2021. Before joining LAMOSA, he worked for 17 years at CEMEX, where his latest position was Global Organization and Compensation Director. He earned a Bachelor of Science in Chemical Engineering from ITESM and holds two MBAs, one from The University of Texas and the other from ITESM. 53% Elosúa and Valdés Families 47% Free Float Jorge Manuel Aldape Board of Directors Proprietary Members Federico Toussaint Elosúa Bernardo Elosúa Robles Guillermo Barragán Elosúa José Manuel Valverde Valdés Javier Saavedra Valverde Valdés Antonio Elosúa González Seniority (years) Independent Members Seniority (years) Chairman of the Board 28 Chairman of Pinturas Berel CEO of Hidrobart Independent consultant 28 28 Eugenio Clariond Rangel Executive President of Grupo Cuprum Eduardo Elizondo Barragán Chairman and CEO of Criotec, among others Armando Garza Sada 1 29 21 Eduardo Padilla Silva Chairman of the Board of ALFA, ALPEK, and NEMAK CEO of FEMSA 24 17 Professional painter for 35 years 21 Maximino Michel González President and CEO of 3H Capital Servicios Corporativos 12 Co-Chairman of Grupo U-Calli 3 Eduardo Garza T Fernández President of Grupo Frisa Industrias 9 Source: Company data LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 31#32October 12, 2021 LAMOSA: INVESTMENT THESIS A quality management team that has leveraged its strengths and focused on what they know best (ceramic tiles) to achieve competitive advantages. Economies of scale and lower freight costs achieved through its position in the industry... #2 #1 Ceramic Tiles Market Share #2 N/A N/A N/A Adhesives Market Share #1 World Mexico Argentina Chile Peru Colombia Brazil Spain US Mexico -2% -40% -25% ~1% -2% -5% ...have allowed LAMOSA to boast EBITDA margins of over 500 bps. versus its Mexican peers and remain as one of the most profitable players. Additional Advantages vs. Peers: • Economies of scale 1. Better supplier contracts 2. Plants' operational flexibility (longer production runs) Cutting-edge technology •⚫ Lower freight costs () GBM 5-Year Average EBITDA Margin 27.5% 21.2% 17.3% 16.5% 16.1% 16.0% 15.2% 15.1% 13.7% 9.0% 8.2% Dynasty LAMOSA Mohawk *Vitromex 2021 Ceramics Kajaria Ceramics RAK Ceramics Source: GBM Research Monalisa Group Co Saudi Ceramic CERAMIC Portobello Vitromex* Panaria Group LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 32#33October 12, 2021 LAMOSA: INVESTMENT THESIS VALUE CREATION AT ITS FINEST GBM Management has successfully integrated acquisitions into the company's operations, keeping its organic and inorganic profitable growth story intact. More importantly and deeply discussed on the next slide, the company has not only delivered returns above the cost of capital but also grown returns as new assets are integrated into its portfolio. At the same time, LAMOSA has given back cash to shareholders via a steadily rising dividend payment, and has repurchased -7% of the company's shares since 2019. From our point of view, if you combine these three factors (inorganic growth, higher or stable returns, and dividends) with LAMOSA's favorable industry fundamentals, you get an attractive proposition for long-term value investors who don't mind the stock's low liquidity. EBITDA AND EBITDA Margins -Figures in MXN Billion 29% 25% 22% 24% 23% 27% 26% 24% 22% 22% 22% 21% 22% 23% 22% 21% 19% 21% 20% 19% 20% 19% Roca 19% 有 7.3 7.1 7.0 euro 6.6 6.2 PORCELANITE diseña tus sueños SAN LORENZO cerámica ^ 4.2 3.4 3.1 3.3 3.5 2.3 2.0 2.1 1.8 1.6 1.5 1.7 1.8 2.0 0.8 1.0 1.0 1.0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 EBITDA 2015 EBITDA Mg. 2016 2017 2018 2019 2020 2021e 2022e 2023e 2024e 2025e Dividends per Share and Dividend Yield -Figures in MXN per Share 3.6% 1.7% 1.6% 1.5% 1.1% 3.1% 1.8% 2.0% 1.9% 2.1% 1.5% 2.5% 1.8% 1.3% 1.4% 1.6% 1.7% 1.9% 1.33 1.21 1.10 1.00 0.70 0.77 0.83 0.91 0.60 0.40 0.20 0.27 0.29 0.08 0.09 0.12 0.15 0.20 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Dividend (MXN per Share) 2017 Dividend Yield 2018 2019 2020 2021e 2022e 2023e 2024e 2025e Source: GBM Research LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 33#34October 12, 2021 LAMOSA: INVESTMENT THESIS VALUE CREATION AT ITS FINEST GBM Excellent operators and good capital allocators. Over the last two decades, LAMOSA's management has proven its quality through a disciplined organic and inorganic strategy that has yielded not only returns above the cost of capital but also even higher returns as new assets are integrated into its portfolio. Divestments and focus on core assets. From 2007 to 2015, LAMOSA sold its real estate and sanitary ware businesses (non-core assets) to focus and allocate all its resources to Ceramic Tiles and Adhesives, their bread and butter. Organic investments. Besides plant expansions and debottlenecking, LAMOSA invests heavily in having all its facilities running with the newest industry technology to keep efficiencies at maximum levels. What's more, the company invests in product design so that every five years it has entirely rotated its product offering. Acquisitions. We think LAMOSA's M&As have had four main characteristics: 1) all targets acquired have traded at an EV/EBITDA multiple of 7-8.5x pre-synergies (more details on slide 65), proving disciplined at the negotiating table, as the company's transactions are also below the average paid by competitors; 2) target assets should smoothly integrate with the current portfolio; 3) there must be a clear roadmap on synergies, and 4) the brands to be acquired must increase the value of LAMOSA's portfolio. Return on Invested Capital (ROIC) -ROIC = (PP&E + Current Assets excl. Cash + Goodwill - Current Liabilities) / NOPAT The ceramic tiles and sanitary ware businesses enjoy above-average returns given the housing bubble in the US. 16.5% 16.2% 13.0% 14.5% 12.8% 10.8% Acquires Porcelanite and becomes the largest ceramic tiles player in Mexico. Divest its sanitary ware business. LAMOSA capitalizes on its footprint as the remodeling boost across the Americas returns. Acquires Grupo Roca's Ceramic Tiles business. 37.4% 37.2% The burst of the housing bubble in the U.S. hurts returns. LAMOSA sells most of its real estate business. 18.4% Acquires Ceramica San Lorenzo, expanding to South America. 21.9% Remodeling boost normalizes. 17.6% 15.5% Acquires Euroceramica 14.4% 14.5% in Colombia. 13.6% 13.2% 12.5% 12.1% 10.2% 10.9% 8.0% 32.8% 30.6% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021e 2022e 2023e 2024e Source: GBM Research LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 34#35October 12, 2021 LAMOSA: INVESTMENT THESIS STRONG FCF AND HEALTHY BALANCE SHEET TO ALLOW FOR FURTHER GROWTH OPPORTUNITIES GBM A strong free cash flow and healthy balance sheet should allow LAMOSA to keep pursuing organic investments while it continues to consolidate the industry via inorganic opportunities. Speaking of M&A, the global industry is highly fragmented and LAMOSA is the second-largest player, with a global market share of ~2%. Against that backdrop, given that the company has reached a significant scale, both in footprint and free cash flow generation, it is in a good position to smoothly integrate small to medium-sized assets to its footprint without compromising its financial position-as it happened in 2020 and 2021. Therefore, the management's ability to maintain a disciplined approach towards M&A and cherry-pick quality assets and brands is still a critical part of the company's growth story going forward. Averaging -40% OFCF conversion rates over the last 10 years OFCF* and Conversion Rate -Figures in MXN Billion 96% 91% 66% 60% 36% 35% 63% 59% 50% 48% 51% 53% 40% 32% 34% 3.9 3.5 3.5 3.6 3.5 3.7 18% 1.7 1.5 1.1 1.2 1.2 1.1 1.2 0.6 0.7 0.6 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021e 2022e 2023e 2024e 2025e OFCF* OFCF Conversion Ratio al Net Debt and Net Leverage Ratio -Figures in MXN Billion Healthy balance sheet despite recent acquisitions SAN LORENZO 3.9x ↑ euro Roca cerámica 3.6x 3.0x 2.5x 2.4x 2.3x 2.3x 2.2x 2.0x 1.5x 1.1x 1.0x 0.7x 0.5x 9.3 7.9 7.9 7.1 7.2 0.1x -0.3x 7.0 4.6 5.5 6.3 3.5 4.8 4.5 4.4 3.6 1.0 (1.8) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021e 2022e 2023e 2024e 2025e Net Debt Net Debt to EBITDA *OFCF: Free cash flow before strategic CAPEX, mostly derived from acquisitions a) OFCF Conversion Ratio: Operating Free Cash Flow/EBITDA Source: GBM Research LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 35#363.0 Jan-05 May-05 Sep-05 Source: GBM Research Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 • • October 12, 2021 ATTRACTIVE VALUATION LAMOSA: INVESTMENT THESIS • Trading at a -40% discount to its peers' 2022e EV/EBITDA and our 7.5x target multiple. • Trading at -35% discount to its historical EV/EBITDA. EV/EBITDA Multiples Trading at a 50% discount to the lower range (8x EV/EBITDA) of our sample of M&As. For further details, please refer to slide 65. 2021e and 2022e OFCF yields of 13.8 and 14%, respectively. Saudi Ceramic 2021e 11.5× SCG Ceramics 10.5× 2022e 11.3x 10.0x Monalisa Group 12.1x 9.3x Portobello 11.6x N/A Dynasty Ceramics 9.5x 9.0x RAK Ceramics 7.8x 7.2x Mohawk Tarkett Nichiha Corp. CERAMIC LAMOSA Average 7.2x 6.6x 7.1x 7.2x 5.8x 4.6x 8.6x 5.6x 5.2x 5.6x 4.2x 7.4x Historical EV/EBITDA Despite the stock's low to zero liquidity on the market, the discount at which LAMOSA is trading to its peer and industry valuations seems overstated, particularly if we consider the company boasts an impeccable operating track record and value creation both organically and inorganically, while it also pays a stable and rising dividend and maintains an operation with returns above the cost of capital. 11.0- 10.0 9.0 8.0 7.0- 6.0 5.0 4.0 ما له سه www Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 EV/EBITDA Average Jan-12- May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 Sep-17 Jan-18 May-18 Sep-18 Jan-19 May-19 Sep-19 Jan-20 May-20 Sep-20 Jan-21 May-21 Sep-21 LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 36 GBM#37October 12, 2021 LAMOSA: GBM ESTIMATES Stock Information GBM Financial Estimates GBM Last Price P$70.9 Stock Returns MXN Million 2020 2021e 2022e 2023e 2024e 2025e No. Shares ('000s) 358,079 1 M 2.8% Revenues 19,473 25,959 28,547 29,163 29,826 29,652 Mkt Cap (MXN Million) $25,388 3M 41.8% % YOY 8.5% 33.3% 10.0% 2.2% 2.3% -0.6% 6M ADVT (MXN Million) $4.8 6M 61.1% Op. Profit 3,549 6,186 6,326 5,921 5,551 5,128 Net Debt (MXN Million) $4,307 1 Yrs 153.2% Op. Mg. 18.2% 23.8% 22.2% 20.3% 18.6% 17.3% Net Debt Incl. IFRS 16 $4,595 3 Yrs 77.3% EBITDA 4,227 7,071 7,313 6,951 6,603 6,223 Float 47.0% 5 Yrs 85.6% % YOY 20.0% 67.3% 3.4% -4.9% -5.0% -5.8% Max 52w P$72.0 EBITDA Mg. 21.7% 27.2% 25.6% 23.8% 22.1% 21.0% Min 52w P$23.3 Net Profit 1,640 3,859 3,966 3,701 3,519 3,331 % YOY 14.8% 135.3% 2.8% -6.7% -4.9% -5.3% Valuation Ratios Net Mg. 8.4% 14.9% 13.9% 12.7% 11.8% 11.2% 2020 2021e 2022e 2023e 2024e 2025e EV/EBITDA 4.1x 4.6x 4.2x 4.2x 4.0x 3.8x Free Cash Flow P/E 7.9x 6.6x 6.4x 6.9x 7.2x 7.6x -MXN Million 2020 2021e 2022e 2023e 2024e 2025e P/S 0.7x 1.0x 0.9x 0.9x 0.9x 0.9x (+) EBITDA 4,227 7,071 7,313 6,951 6,603 6,223 P/BV 1.2x 1.9x 1.6x 1.4x 1.2x 1.1x (-) Working Capital -1,219 646 457 252 156 25 Net Debt/EBITDA 1.1x 1.0x 0.7x 0.5x 0.1x -0.3x (-) Cash Interest 372 473 558 509 401 250 ROE 14.7% 28.7% 25.1% 20.2% 17.1% 14.6% (-) Cash Taxes 769 1,712 1,925 1,684 1,507 1,229 ROIC 21.9% 37.4% 37.1% 32.5% 30.3% 28.7% (-) CAPEX (Maintenance) 441 738 864 950 1,025 1,065 Op. FCF yield 30.0% 13.8% 13.8% 14.0% 13.8% 14.4% (=) Op. FCF 3,864 3,503 3,510 3,556 3,514 3,654 FCF yield 26.8% -8.0% 9.9% 10.2% 11.6% 12.8% (-) CAPEX (Growth) 407 5,546 984 976 560 415 Dividend yield 2.3% 1.2% 1.4% 1.6% 1.7% 1.9% (=) FCF 3,457 -2,043 2,526 2,580 2,954 3,238 Dividend 294 316 358 394 434 477 Net Debt incl. IFRS 16 4,610 7,187 5,481 3,506 987 -1,775 LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 37#38October 12, 2021 LAMOSA: VALUATION GBM WE ARE INITIATING COVERAGE ON LAMOSA WITH A MARKET OUTPERFORMER RATING AND A 2022 PRICE TARGET OF P$130, REPRESENTING AN 85% RETURN. Our price target is based on a DCF valuation, where the perpetuity cash flow of P$7 billion is based on the perpetuity exercise we present on the next slide, which considers LAMOSA's ceramic tiles capacity utilization rates under different EBITDA margin scenarios. Our DCF approach is discounted at a 10.1% WACC, including a liquidity premium of 1.5% and a perpetual growth rate of 3.5%. DISCOUNTED CASH FLOW APPROACH Figures in MXN Million 2021e 2022e 2023e 2024e 2025e EBITDA 7,071 7,313 6,951 6,603 6,223 2026e 6,359 Perpetual CF 7,000 VALUATION ASSUMPTIONS Working Capital -646 -457 -252 -156 -25 -54 Revenues '20-'25 CAGR 8.8% Taxes -1,856 -1,898 -1,776 -1,665 -1,538 -1,572 -1,770 EBITDA '20-'25 CAGR 8.0% CAPEX -6,284 -1,848 -1,927 -1,585 -1,480 -1,265 -1,100 Tax Rate 30.0% FCF to the Firm 3,110 2,996 3,197 3,180 3,468 4,130 Avg. CAPEX (% of Revenues) 5.0% Growth WACC 10.1% g 3.5% WACC DCF Net Present Value of Cash Flows (-) Net Debt '22e $52,955 5,481 (-) Underfunded Pension Plan 680 (=) Theoretical Market Cap # of Shares (in Million) $46,794 358 2022e Theoretical Price $131 Upside 84% 2,723 2,639 2,384 2,362 42,847 % of Debt 30.0% Cost of Debt 6.4% % of Equity 70.0% Beta 0.8 Risk-free Rate 5.0% Market Risk Premium 6.2% Cost of Equity* 11.7% WACC 10.1% *Includes liquidity premium LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 38#39October 12, 2021 LAMOSA: VALUATION EXERCISES GBM PERPETUITY EBITDA Our perpetual EBITDA estimate of P$7 billion seems conservative given the structure of the market, where all players are practically sold out. Hence, for those who think LAMOSA's staggering market share could shrink, it might, perhaps; however, in a growing industry, it would have a smaller share of a bigger pie. In conclusion, we feel comfortable with our DCF valuation since our perpetuity EBITDA considers only LAMOSA's current ceramic tiles capacity utilization rates, even when the company has continued to expand as the market gets bigger. Perpetual EBITDA (MXN Billion) Ceramic Tiles Capacity Utilization Rates RELATIVE VALUATION LAMOSA also seems attractive from a relative valuation standpoint. Even when accounting for zero EBITDA growth vs. 2020 figures, investors get a 10% upside potential from current prices. Meanwhile, when considering the 2021e EBITDA or our perpetual exercise, returns range between 60 and 120%. For more details on industry EV/EBITDA valuations, please refer to slide 64 and 65. LAMOSA 2022e Price Target Ceramic Tiles EBITDA Mg. LAMOSA 5Y Avg. Long-Term GBMe 75% 80% 85% 90% 95% 18.0% 5.1 5.3 5.6 5.8 6.1 19.0% 5.3 5.6 5.8 6.1 6.3 20.0% 5.5 Long-Term GBMe 21.0% 5.7 Record High (2021) 27.0% 6.9 579 5.8 6.0 6.3 6.6 6.0 6.3 6.6 6.9 7.3 7.7 8.1 8.4 Target EV/EBITDA EBITDA (P$ Billion) Year 2020* Year 2021e Perpetual EBITDA 5.0 6.0 6.8 7.0 8.0 7.0x 77 97 112 116 136 7.5x 84 105 122 126 147 8.0x 91 114 131 136 158 8.5x 98 122 141 146 169 9.0x 105 130 150 155 181 *Includes Grupo Roca ceramic tiles acquisition WHAT THE MARKET IS DISCOUNTING AT CURRENT PRICES (P$70/SHARE) To us, the market is being very aggressive by discounting a negative growth rate ("g") for LAMOSA at the current prices. Moreover, an implicit zero g (that would still yield significant upside potential) seems overly pessimistic for an industry that has outperformed the GDP growth of both the country and the construction sector on account of its favorable fundamentals. Price at Different Growth Rates Source: GBM Research Upside 75.4% Upside 27.5% 121 Today's Price 0.0% 88 70 -3.0% -2.0% -1.0% 0.0% 1.0% 2.0% 3.0% LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 39#40CERAMIC GBM MEXICO'S #2 AND THE ONE FOCUSED ON THE PREMIUM MARKET • No. 2 player in Mexico . Ceramic tile sales in Mexico reached P$5.5 billion (2020) (-48% of total sales). Adhesives sales in Mexico were P$1.2 billion (2020) (-23% of total sales). EBITDA amounted to P$1.8 billion incl. IFRS 16 (2020). • Estimated market share in Mexico: -17% • Total installed capacity: 48 million m² • Installed capacity in Mexico: 45.6 million m² . Majority shareholders: Almeida Family (38.7%) Kohler (5.1%) LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 40#41• October 12, 2021 CERAMIC: SNAPSHOT GBM Established in 1978 in Chihuahua by the Almeida family, owners of -38% of the company. CERAMIC is engaged in the production and commercialization of glazed ceramic tiles and complementary products, such as adhesives, nozzles for ceramic tile installation, and sanitary furniture. It has operations in Mexico, the United States, Central America, and China-the latter under a JV and consolidated under the equity method. • One of the largest ceramic tile manufacturers in North America and the world, with ~50 million m² of installed capacity. • Ceramics are produced at three industrial complexes-two in Chihuahua and Guanajuato, Mexico, respectively, and one in Garland, Texas. • Interceramic operates through 307 stores in Mexico (~60% company-owned) and twelve company-owned stores and wholesale centers in the south and center regions of the US. Breakdown by Product (2020) Breakdown by Region/Currency (2020) Strategic Partners 17.3% 10.8% 71.9% Ceramic Tiles Bathroom Furniture & Others Adhesives INTERCERAMIC Brands Interceramic CRAFTED FOR LIFE Main brand distributed in Mexico, the United States, and Central America Source: Company Data 27.9% 1.1% 71.0% ■Mexico/MXN United States/USD Others CERAMIC distributes Kohler products, such as faucets, bathtubs, sinks, toilets, etc., in North America. KOHLER. JV with Guangdong Kito Ceramics Co., LTD. in China for product distribution KITO Commercialization of adhesives for the Mexican market CUSTOM BUILDING PRODUCTS icc Interceramic Chinese Brand Retail trade and dedicated exhibition spots at stores oriented to the Mexican market. CERAMIC has a special space for exhibitions in -50% of The Home Depot THE HOME DEPOT LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 41#42October 12, 2021 CERAMIC: TIMELINE 1978 1980 BOLSA MEXICANA DE VALORES 1987 daltile® 1989 44018 GBM CUSTOM BUILDING PRODUCTS 1993 Founded as Internacional de Cerámica in Chihuahua, Mexico, by the Almeida family Expansion of the business to the US. through a network of independent distributors The company launches its IPO on the Mexican Stock Exchange. Through a JV with Armstrong World Industries (today, part of Daltile International), it opened its second production plant in Mexico. JV with Daltile explained on slide 43. Through a JV with Custom Building Products, it started the production of adhesives in Mexico on a large scale. JV with Custom explained on slide 43. X NYSE 2004 The company delists from the NYSE. 2002 Starts the production of porcelain tiles. KOHLER 2000 Kohler and CERAMIC sign an agreement so that the former could sell its products (faucets, bathtubs, plumbing equipment, etc.) across the latter's franchise network. Kohler acquires 7.2 million shares of CERAMIC, which today represent -5.1% of the company. 1994-1995 Establishment of a network of independent and subsidiary franchises NYSE 1994 The company launches its IPO in the US. Development of its ceramic tiles plant in Garland, Texas 2008 Opens the first stores in Central America (Panama and Guatemala). 2009 To ensure quality of imported products from China, CERAMIC opened a representative office in Foshan, China. KITO 2010 JV with Guangdong Kito Ceramics Co., LTD. for the creation of ICC Guangdong Xinfengjing Ceramics, Co. LTD,. to commercialize products of CERAMIC and Kito in China. Inauguration of the first showroom in China INTERCERAMIC 2020 CERAMIC has managed to reach more than P$10.8 billion in sales with a network of 307 franchises in Mexico and 12 Interceramic Tile and Stone Galleries in the US. LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 42#43October 12, 2021 GBM CERAMIC: STRATEGIC JOINT VENTURES Over its 43 years of existence, CERAMIC has found a strategic vehicle in joint ventures (JVs) to pursue new growth opportunities, complement its product offering, and enhance its industry knowledge. The company has established a JV with Custom Building Products, Inc. ("Custom") in the Adhesives business and another one with Daltile in the Ceramic Tiles business-CERAMIC consolidates both JVs due to its controlling ownership. Additionally, CERAMIC entered into a JV in China with Guangdong Kito Ceramics Co., Ltd. ("Kito Ceramics") to create a company called ICC Guangdong Xinfengjing Ceramics, Co., Ltd., under which both CERAMIC and Kito Ceramics distribute their products under the ICC brand with local distributors in the Asian country. The latter is consolidated under the equity method. Recubrimientos Interceramic, S.A. de C.V. ("RISA") &daltile 49.99% INTERCERAMIC 50.01% Consolidated Businesses Who is Daltile? Daltile is a U.S./Mexico ceramic player with over 55 years of experience in the industry. Daltile is a subsidiary of Mohawk Industries, the largest manufacturer, distributor, and marketer of ceramic tiles and natural stone in the world. The Daltile agreement. In 1990, Armstrong acquired 49.99% of Recubrimientos Interceramic, S.A. de C.V. ("RISA"). Following the acquisition, the RISA plant was built, and it currently has seven million square meters of capacity, representing -15% of CERAMIC's total installed capacity. In 1995, Daltile bought American Olean, the ceramic business that belonged to Armstrong, maintaining the same percentage of ownership as in RISA and formalizing the agreement between CERAMIC and Daltile. Under the agreement, Daltile owns 50% of the plant's production capacity. JV agreement with legal conflicts. With the plant operating in the red since 2012, Daltile and CERAMIC have enmeshed in a legal dispute over the plant. Meanwhile, if CERAMIC manages to keep the asset and turn it around, it would become an upside risk to its operating figures. The company's management believes that with minor investments, a turnaround should be feasible. Adhesivos y Boquillas Interceramic, S. de R.L. de C.V. ("ABISA") CUSTOM BUILDING PRODUCTS 49% INTERCERAMIC 51% Who is Custom Building Products, Inc? It is North America's industry leader in flooring preparation products and tile and stone installation systems for residential and commercial projects. The Custom agreement. In 1993, Custom acquired 49% of Adhesivos y Boquillas Interceramic, S. de R.L. de C.V. ("ABISA"), where CERAMIC agreed to offer administrative and technical services to produce adhesives on a large scale. Custom granted ABISA exclusive rights to distribute Custom products in Mexico and not to compete with the company's products. A very successful partnership. The JV with Custom has allowed CERAMIC to participate in a growing and profitable category, such as adhesives, while expanding its product offering. This well-run business has increased its sales at a CAGR of -7% since 2012 and it has paid dividends to both parties under a payout ratio of -75% of its net income during the past eight years. More importantly, considering that LAMOSA holds the majority of the adhesives market in Mexico, CERAMIC has leeway to grab market share and keep growing this business with the help of an industry leader in North America. ICC Guangdong Xinfengjing Ceramics, Co., Ltd. KITO 50% INTERCERAMIC 50% Consolidated under equity method Source: Company data The Kito Ceramics agreement. In 2010, Kito Ceramics and CERAMIC signed an agreement whereby each would hold a 50% stake in ICC Guangdong Xinfengjing Ceramics, Co., Ltd., a company incorporated in China to commercialize the products of both CERAMIC and Kito Ceramics, as well as third-party products. The operations of this company are based on granting licenses to distributors and local businesses under the ICC brand. ICC currently has over 100 stores from distributors in China. LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 43#44October 12, 2021 GBM CERAMIC: FRANCHISE STORES A powerful distribution network. In our view, CERAMIC's franchise network of stores is its greatest advantage, as it allows the company to adjust rapidly its pricing strategy and product offering across the country, educate its clients on the quality of its products, and offer the same customer experience throughout Mexico. This hidden value has already been perceived by the Kohler Company, one of the biggest sanitary ware and plumbing manufacturers in the world, who became a shareholder of CERAMIC in 2000 and, through a commercial agreement, Kohler products are sold across CERAMIC's network of franchise stores. Expansion of franchise stores. Since 2003, the company has opened 107 new stores in Mexico (~2.5% CAGR at YE2020) at strategic points across the country. Hence, it is today the largest retail outlet (by number of stores) or single distributor selling ceramic tile products in Mexico. Digitalization. CERAMIC has also been making efforts to digitalize its business by making use of screens on the facades and interior of the stores coupled with digital technology or an app (Interceramic 360) to display environments and products to its clients. In our view, digitalization has allowed the industry to offer a differentiated service or help its customers make better purchasing decisions. eCommerce. One could argue that ceramic tiles are fashion or style products that the final customers need to see physically and, most of the time, look at them in a specific setting, as every home has particular characteristics. All of this makes eCommerce more difficult to deploy in this industry. However, CERAMIC has managed to offer its clients an eCommerce experience, especially for those who need to buy a product they already approved at some store. While other competitors have made the same experience available for their distributors, they do not own the end customer data, as is the case of CERAMIC. Country MEXICO US & CANADA Interceramic Stores Footprint Stores % Total Sales THE HOME DEPOT 307 stores 175 own frachises 132 independent franchises -71% 65% (Stores) 35% (Corporate sales and The Home Depot] CERAMIC has a special space for exhibitions in -50% of The Home Depot Mexico. 12 Interceramic Tile & Stone (ITS) Gallery stores 50+ Distributors -28% -78% (ITS) ~17% (Distributors) ~4% (Others) 3 stores -1% GUATEMALA 100+ distributors CHINA Consolidated under equity method More of this JV on slide 43. Costs (Rents and SG&A) Pros & Cons of Interceramic Stores Pros Cons Higher control over: • Pricing strategy . Marketing strategy • Quality and service • Customer experience Same image and service across the country Brand recognition Final sales price By eliminating independent distributors CERAMIC reaches a higher profitability by square meter • CERAMIC's SG&A as a percentage of sales has been higher than their competitors by an average of -5% over the last decade. Inventories (Working capital) CERAMIC's inventory days turnover is almost double their competitors. Given the limited information of the stores, it is difficult for us to understand the net cost or benefit of having them-rents and SG&A expenses vs. higher pricing from vertical integration (eliminating distributors). However, according to the company's management, the difference between owned stores and independent franchise stores in EBITDA margin is -5%. As a result, CERAMIC has the greatest gain per square meter sold versus the competition. Why are CERAMIC's margins below those of LAMOSA's ceramic tiles business? First of all, they are not comparable, as CERAMIC's margins include -20% in sales of other products that carry a lower margin, such as sanitary ware. However, we could argue that despite CERAMIC benefits from running its own stores and having a better product mix than LAMOSA, the latter's better margins would be the reflection of its scale and lower freight costs. Source: Company Data LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 44#45October 12, 2021 CERAMIC: FRANCHISE STORES Mexico and Central America GBM United States and Canada The company has sales in Canada, which are managed through an independent distributor from Toronto, who in turn makes the distribution across the rest of the country. Regional Footprint Interceramic Tile & Stone Stores ⚫ Independent Distributors • Interceramic Franchises (Mexico) * Stores in Central America LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 45#46October 12, 2021 CERAMIC: SHAREHOLDERS, MANAGEMENT AND BOARD OF DIRECTORS INTERCERAMIC Ⓡ Board of Directors Proprietary Members GBM Years in CERAMIC Victor Almeida García Chairman of the Board 41 KOHLER Christian Harp Calderoni Alfredo Harp Helú President of Santo Domingo Films 11 Chairman of Grupo Martí 8 Norma Almeida García Board Member of Inmobiliaria Chihuahuense 36 38.1% Almeida Family 5% 56.9% Kohler Co. Free float Sylvia Almeida García Diana Almeida García CEO of Coratec 25 Consulting Director of Coratec 27 Patricia Almeida García Public Relations Director of Coratec 16 Senior Management Sissi Harp Calderoni Chaiman of the Alfredo Harp Helú Foundation 6 Name Position Description Years in CERAMIC David Kohler* President and CEO of Kohler Co. 19 *Proprietary and Independent member Jesús Olivas Corral CEO León Lugo Aranda CFO Mr. Olivas has served as CEO since November 2020. He began his career in CERAMIC in 1985 as Information Systems Analyst. He holds a bachelor's degree in Financial Administration from ITESM. Mr. Lugo was appointed CFO in April 2010. He began his career with the company in 1994 as a Financial Analyst. He holds a bachelor's degree in Accounting from the University of Chihuahua and two master's degrees in finance and management from ITESM. Related Members Years in CERAMIC 35 Victor Almeida Jones President of Intereramic Inc. 10 Santiago Harp Grañen N/A 3 Augusto Champion Chapa Chairman of Abitat 28 26 Independent Members Years in CERAMIC Carlos Levy Covarrubias President of Nummos Asesores Financieros 14 Victor Almeida Jones President of USA Operations Mr. Almeida has served as President of Interceramic Inc. since July 2017. He holds a bachelor's degree in Finance from the Southern Methodist University. Jose Luis Barraza González Chairman of Grupo Impulso 13 10 Sergio Mares Delgado CEO of Grupo Futurama 18 LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 46#47October 12, 2021 CERAMIC: INVESTMENT THESIS VERTICALLY INTEGRATED BUSINESS, FROM RAW MATERIALS TO RETAIL STORES GBM CERAMIC has built an integrated operation across Mexico and the United States, and it is the largest single distributor of ceramic tiles in Mexico, which means it has full control of its strategy, from production to commercialization. More importantly, it has educated its clientele on the quality of its products and offers the same customer experience throughout Mexico. Besides, the company has positioned its brand "Interceramic" as top of mind, being recognized across all Mexican states and some regions in the U.S., Canada and China. This edge has allowed CERAMIC to attain a robust market share (+50%) in the premium ceramic tiles niche segment. Vertical Integration Source: GBM Research Raw Material Mines Production Plants Interceramic Retail Stores ter cera mic Simplemente lo mejor Regional Footprint Interceramic Tile & Stone Stores ⚫ Independent Distributors • Interceramic Franchises (Mexico) *Stores in Central America LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 47#48October 12, 2021 CERAMIC: INVESTMENT THESIS AN ORGANIC GROWTH STORY WITH ROOM FOR FURTHER EXPANSION GBM Over the past decades, CERAMIC has been a story of organic growth and profitability. With favorable industry fundamentals and a tight production capacity across North America, we don't see a reason why this growth story should not continue. In our estimates, we are projecting the company will grow its capacity by -20% in the coming years through an investment of ~US$50 million. Production Capacity and Expansions -Figures in million sq. mt. 11.6 22 10.4 1980 EBITDA excl. IFRS 16 and EBITDA Mg. -Figures in MXN Billion 19.5 41.5 5.5 47 Expected expansion in the medium term 10 57 1995 2010 2020 2025e Capacity Expansions Production Capacity 13.2% 13.0% 11.8% 12.0% 10.4% 13.2% 11.9% 11.3% 10.4% 9.7% 7.5% 6.5% 16.6% 14.8% 14.3% 14.5% 14.4% 14.6% 14.3% 13.5% 13.9% 12.7% 12.7% 2.1 1.9 2.0 1.8 1.7 1.5 1.4 1.5 1.2 1.3 1.3 0.8 0.6 0.7 0.5 0.5 0.6 0.7 0.8 0.8 0.5 0.4 0.4 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021e 2022e 2023e 2024e 2025e EBITDA excl. IFRS 16 -O- EBITDA Mg. Source: GBM Research LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 48#492013 2014 2015 2016 2017 October 12, 2021 CERAMIC: INVESTMENT THESIS OFCF* and Conversion Rate -Figures in MXN Billion 60% 76% 41% 22% A SOLID FCF AND A HEALTHY BALANCE SHEET COULD ALLOW FOR M&A OPPORTUNITIES IN THE SHORT RUN CERAMIC's strong FCF generation and healthy balance sheet could allow the company to pursue M&A opportunities in the short run. When thinking about inorganic growth, and considering that CERAMIC already serves a premium niche through a retail store chain that is poised to keep growing, we reckon the company could buy a brand renowned among independent distributors in Mexico and the US to complement its product offering. That said, with its Interceramic retail stores and another brand positioned among independent distributors, the company would reach the whole market and unlock additional growth potential. Averaging -35% OFCF conversion rates over the last 10 years 1.2 5% 0.8 0.9 0.9 1.0 0.7 0.7 0.5 0.5 0.6 0.4 0.2 0.1 2013 2014 2015 2016 2017 2018 OFCF* 2019 2020 2021e 2022e 2023e 2024e 2025e -O-OFCF Conversion Ratio al Net Debt O-Net Debt to EBITDA incl. IFRS 16 -0- Net Debt to EBITDA excl. IFRS 16 *OFCF: Free cash flow before strategic CAPEX, mostly derived from acquisitions a) OFCF Conversion Ratio: Operating Free Cash Flow/EBITDA Source: GBM Research 47% 44% 35% 35% 40% 38% 32% 28% Net Debt incl. IFRS 16 and Net Leverage Ratio - Figures in MXN Billion - Healthy balance sheet and sound dividend payment considering the company's growth profile Dividends per Share and Dividend Yield -Figures in MXN per Share 2.4x 2.5x 2.2x 1.9x CERAMIC has bought back -13% of its shares outstanding since 2016. 1.8% 1.5% 1.7% 2.0% 1.8% 1.9% 2.1% 3.1% 2.6% 2.6% 3.0% 3.5% 1.7x 1.8x 1.3x 1.1x 1.6x 1.6x 1.5x 2.0x 1.85 1.2x 1.0x 1.60 1.4x 1.2x 1.1x 1.0x 0.7x 8 1.40 1.40 1.40 4.0 3.1 3.2 3.4 3.5 3.4 0.4x 0.95 1.02 1.02 3.1 2.9 0.74 2.3 0.62 2.0 0.50 0.50 1.3 1.4 1.3 2013 2014 2015 2016 2017 2018 Dividend (MXN per Share) 219 2019 Dividend Yield LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 49 GBM#5012.0 11.0 10.0 9.0 8.0- 7.0 6.0 5.0 4.0 Jan-05 May-05 Source: GBM Research Sep-05 Jan-06- May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 • • October 12, 2021 ATTRACTIVE VALUATION EV/EBITDA Multiples CERAMIC: INVESTMENT THESIS • Trading at a -25% discount to its peers' 2022e EV/EBITDA and our 7.5x target multiple. • Trading at -25% discount to its historical EV/EBITDA. Trading at a 30% discount to the lower range (8x EV/EBITDA) of our sample of M&As. For further details, please refer to slide 65. 2021e and 2022e OFCF yields of 9.1 and 11.1%, respectively. Saudi Ceramic 2021e 11.5× 2022e 11.3x SCG Ceramics 10.5× 10.0x Monalisa Group 12.1x 9.3x Portobello 11.6x N/A Dynasty Ceramics 9.5x 9.0x RAK Ceramics 7.8x 7.2x Mohawk Tarkett Nichiha Corp. CERAMIC LAMOSA Average 7.2x 7.1x 7.2x 5.8x 4.6x 8.6x 6.6x 5.6x 5.2x 5.6x 4.2x 7.4x Historical EV/EBITDA Despite the stock's low to zero liquidity on the market and the company's complex corporate structure, the discount at which CERAMIC is trading to its peer and industry valuations seems overstated, particularly if we consider the company's distinctive value proposition around its retail distribution, not only in Mexico but also in the United States, where it has enormous growth potential. 14.0 13.0 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13- EV/EBITDA May-13 Sep-13 Jan-14 Average May-14 Sep-14- Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 Sep-17 Jan-18 May-18 Sep-18- Jan-19 May-19 Sep-19 Jan-20- May-20 Sep-20 Jan-21 May-21 LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 50 Sep-21 GBM#51October 12, 2021 CERAMIC: GBM ESTIMATES GBM Stock Information Last Price GBM Financial Estimates P$54.0 Stock Returns - MXN Million 2020 2021e 2022e 2023e 2024e 2025e No. Shares ('000s) 141,755 1M 20.0% Revenues 10,798 12,005 12,557 13,418 14,061 13,992 YOY % 3.3% 11.2% 4.6% 6.9% 4.8% -0.5% Mkt Cap (MXN Million) $7,655 3M 20.0% Maj. Revenues 10,390 11,472 11,991 12,807 13,408 13,359 6M ADVT (MXN Million) $1.0 6M 25.6% Op. Profit 875 1,113 1,220 1,278 1,353 1,305 Net Debt (MXN Million) $2,358 1 Yr 45.9% Op. Mg. 8.1% 9.3% 9.7% 9.5% 9.6% 9.3% Net Debt incl. IFRS 16 $3,742 3 Yrs -5.8% EBITDA 1,783 1,990 2,137 2,258 2,380 2,327 Float 24.0% 5 Yrs 31.7% YOY % 11.2% 11.6% 7.4% 5.7% 5.4% -2.2% Max 52w P$44.0 EBITDA Mg. 16.5% 16.6% 17.0% 16.8% 16.9% 16.6% Min 52w P$37.7 Maj. EBITDA 1,695 1,864 2,001 2,111 2,221 2,170 YOY % 11.8% 10.0% 7.4% 5.5% 5.2% -2.3% Valuation Ratios EBITDA Mg. 16.3% 16.2% 16.7% 16.5% 16.6% 16.2% 2020 2021e 2022e 2023e 2024e 2025e Net Profit 145 443 537 544 591 577 EV/EBITDA 5.2x 5.8x 5.6x 5.3x 4.8x 4.6x YOY % -61.2% 204.8% 21.2% 1.3% 8.7% -2.4% P/E 37.5x 17.3x 14.3x 14.1x 12.9x 13.3x Net Mg. 1.3% 3.7% 4.3% 4.1% 4.2% 4.1% P/S 0.5x 0.7x 0.6x 0.6x 0.6x 0.6x P/BV 1.6x 2.1x 1.9x 1.8x 1.6x 1.5x Free Cash Flow -MXN Million 2020 2021e 2022e 2023e 2024e 2025e Net Debt/EBITDA 2.0x 1.7x 1.7x 1.6x 1.3x 1.1x (+) EBITDA 1,783 1,990 2,137 2,258 2,380 2,327 ROE 4.3% 12.1% 13.5% 12.5% 12.6% 11.5% (-) Working Capital -112 205 173 344 221 72 ROIC 7.7% 11.3% 11.3% 11.2% 12.0% 11.8% (-) Cash Interest 201 198 200 234 246 220 Op. FCF Yield 15.3% 9.1% 11.1% 9.5% 11.5% 12.8% (-) Cash Taxes 260 269 262 267 291 284 FCF Yield 15.1% 8.7% 1.3% 5.1% 10.6% 11.9% (-) CAPEX (Maintenance) 602 623 649 685 745 771 Dividend Yield 0.0% 2.6% 2.6% 2.6% 3.0% 3.5% (=) Op. FCF 832 695 853 727 879 981 (-) CAPEX (Growth) 6 30 753 335 70 70 (=) FCF 827 665 100 392 808 911 Maj. Dividend 0 199 198 199 228 266 Net Debt incl. IFRS 16 3,357 3,097 3,474 3,447 2,924 2,341 Maj. Net Debt incl. IFRS 16 3,357 3,097 3,474 3,447 2,924 2,341 LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 51#52• October 12, 2021 CERAMIC: VALUATION GBM WE ARE INITIATING COVERAGE ON CERAMIC WITH A MARKET OUTPERFORMER RATING AND A 2022 PRICE TARGET OF P$75, REPRESENTING A -40% RETURN. Our price target is based on a DCF valuation, where the perpetuity cash flow of P$2.5 billion is based on the perpetuity exercise below, which considers the company's ceramic tiles capacity utilization rates (including an expected expansion) and the revenues of its other business segments under different EBITDA margin scenarios. Our DCF approach is discounted at a 10% WACC, including a liquidity premium of 1.7% and a perpetual growth rate of 3.5%. DISCOUNTED CASH FLOW APPROACH -Figures in MXN Million 2021e 2022e 2023e 2024e 2025e 2026e EBITDA 1,990 2,137 2,258 2,380 2,327 2,382 Perpetual CF 2,500 VALUATION ASSUMPTIONS Working Capital -205 -173 -344 -221 -72 -27 Revenues '20-'25 CAGR 5.3% Taxes -334 -366 -383 -406 -392 -402 -506 EBITDA '20-'25 CAGR 5.5% CAPEX -653 -1,403 -1,020 -815 -840 -857 -815 Tax Rate 30.0% FCF to the Firm 196 510 939 1,023 1,095 1,179 Avg. CAPEX (% of Revenues) 4.5% WACC 10.0% Growth g 3.5% DCF 464 775 768 748 12,346 WACC % of Debt Net Present Value of Cash Flows $15,101 (-) Net Debt '22e 3,474 (-) Minority Interest 833 (-) Underfunded Pension Plan 330 (+) ICC 50% Ownership 100 (=) Theoretical Market Cap $10,563 # of Shares (in Million) 2022e Theoretical Price Upside 142 $75 38% 30.0% Cost of Debt 6.3% % of Equity 70.0% Beta 0.9 Risk-Free Rate 5.0% Market Risk Premium 5.8% Cost of Equity* 11.6% WACC 10.0% *Includes liquidity premium PERPETUITY EBITDA Our perpetual EBITDA of P$2.5 billion considers the following: • 2025e ceramic prices increasing in line with inflation The company's incremental EBITDA from an expected -20% capacity expansion • Long-term EBITDA margins of 16.5% including IFRS 16 CERAMIC'S Consolidated EBITDA Mg. Perpetual EBITDA (MXN Billion) Ceramic Tiles Capacity Utilization Rates CERAMIC 5Y Avg. 75% 80% 85% 90% 95% 14.5% 1.8 1.9 2.0 2.1 2.2 15.5% 2.0 2.0 2.1 2.2 2.3 Long-Term GBMe 16.5% 2.1 2.2 2.3 2.4 2.5 17.5% 2.2 2.3 2.4 2.5 2.6 Record High (2016) 18.5% 2.3 2.4 2.6 2.7 2.8 LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 52#53VITROMEX GBM MEXICO'S #3 Third top player in Mexico Ceramic tiles sales in Mexico reached P$3.2 billion (2020) (-93% of Vitromex's total sales). • Vitromex's sales were P$3.5 billion (2020) (-20% of GISSA's total sales). • 2020 and TTM EBITDA amounted to P$155 million and P$400 million, respectively, incl. IFRS 16. • Estimated market share in Mexico: -15% Installed capacity in Mexico: 47 million m² · Majority shareholders: GISSA (100%) LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 53#54October 12, 2021 GBM VITROMEX: SNAPSHOT • . Vitromex is Grupo Industrial Saltillo's (GISSA) Construction business unit. Engaged in the design, production, and commercialization of a wide variety of floors and ceramic & porcelain coatings. One of the largest ceramic floor and tile manufacturers in the world, with 47 million square meters of installed capacity across four productive units. Products are commercialized through a network of independent distributors and home centers mainly throughout Mexico, the United States, and Latin America. Grupo Industrial Saltillo GISSA is a Mexican conglomerate founded in 1928 that participates in the auto parts, construction, and home goods industries. 100% Ceramic Tiles 回 Brands 2020 Revenues 7.1% Domestic 92.9% Exports VITROMEX® MI ESPACIO, MI MUNDO Best-value brand for a wider market segment. Its diversification is present in both formats and designs that reflect personality in different spaces and ceramic bodies. Source: Company Data ARKO INNOVATION DESIGN A sophisticated and lavish brand for a high-end market. The brand aims to deliver premium products and a value-added differentiator. DRAXTON เ GIS VITROMEX CINSA Global supplier of auto parts Manufacturer of ceramic tiles 20% GISSA's Revenue Breakdown 10% 70% Produces and markets kitchenware and tableware GISSA's EBITDA Breakdown 6% 13% Draxton Vitromex Cinsa LTM figures until June 2021 82% LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 54#55October 12, 2021 VITROMEX: THE ROAD TOWARDS A STABLE AND PROFITABLE OPERATION GBM A failed attempt and execution to redesign the Vitromex brand coupled with a strategy addressed to larger and premium formats, missing the focus on its best value proposition across Mexico, ended up affecting the business as a whole and drove it to report operating losses. Consequently, GISSA's board of directors decided to change the company's management, which in turn outlined a strategy to reincorporate technical talent, rationalize operations, and go back to basics. This operational turnaround has proven successful, taking profitability to historical levels in 2021 (~12% EBITDA Mg.). As a result, GISSA's management thinks there is room for further improvement and believes the margin could stabilize at a 14-18% range in the future. To us, the company's challenge remains to demonstrate the operation can run smoothly and profitably in the long term. If they succeed, Vitromex's strong cash-generating profile would allow for additional organic growth and gain more relevance within GISSA. Process: 2018 2019 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Reincorporation of Technical and Managerial Talent Phase I Recover Key Customer Trust Product Portfolio Rationalization Capacity Rationalization Product Renewal and Launch of Vitroker S&OP Implementation - Customer Service Inventory Rationalization Operational Discipline and Rightsizing Source: Company data Focus on Best Value Products Showroom Update 50% Product Portfolio Reduction Design and Development Phase II Cost Reduction Focus Modular Showrooms 2020 2021 22 Q2 Q3 Q4 Q1 LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 55#56October 12, 2021 GBM VITROMEX: STRATEGY According to our discussion with Vitromex's management, their strategy remains focused on three clear objectives-we added a fourth one, although it is not currently on Vitromex's radar. Consolidate a profitability plan to achieve high double-digit margins. With the turnover plan that we discussed on the previous slide, Vitromex seeks to reach stable EBITDA margins ranging between 14 and 18%-similar to the industry average. Since this is something that we have not seen before, in our valuation of GISSA we are leaving it as an upside risk, with our estimate of perpetuity EBITDA margin close to 9%, which is still above what we have witnessed over the past decade. ⚫ Focus on cost reduction, quality service levels, and best value products to preserve the market share in Mexico. • Constant pursuit of organic growth opportunities on two clear fronts: • 1. Mexico. Expand its capacity in the central part of the country by setting up a new 8-12 million square feet production plant (15 to 25% capacity increase). The US$50-70 million investment required could be easily covered with GISSA's strong FCF generation and healthy balance sheet. 2. United States. Continue to diversify its business through targeted segments and increase its participation in glazed porcelain products. In conclusion, small but clear steps. M&A. In our view, this would apply both ways: either GISSA sells Vitromex to focus 100% on its Auto Parts division (Draxton) and unlocks value by disintegrating its conglomerate structure-becoming a pure auto parts player-or GISSA buys another ceramic tile company looking to expand its scale in the Americas or perhaps Europe-in both cases aiming to enhance its export position of high premium brands across Mexico and the US. Of course, we see this as a possibility only after consolidating its profitability strategy and seizing growth opportunities in Mexico, which might take at least two years. EBITDA incl. IFRS 16 and EBITDA Mg. -Figures in MXN Billion 1.00 9.6% 0.80 8.2% 5.5% 0.60 Vitromex management believes the new structure of the company should show EBITDA margins between 14 and 18%, which are significantly above our expectation of ~9.5%. This demonstrate the vast upside risk in our current valuation of GISSA. 17% 14% 12% 4.2% 9.8% 9.5% 9.5% 0.39 0.39 0.38 0.37 0.40 0.28 -3.6% 0.21 -4.7% 0.20 0.15 (0.12) (0.20) 2015 2016 2017 (0.16) 2018 2019 2020 2021e EBITDA EBITDA Mg. -0- EBITDA Mg. (GISSA's Targets) Source: Company data 2022e 2023e LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 56#57October 12, 2021 VITROMEX: VALUATION GBM VITROMEX VALUATION AND IMPLICIT VALUE OF GISSA'S DRAXTON Implicit valuations for GISSA's Auto Parts business (Draxton) seem attractive, even when valuing Vitromex at a discount to industry M&A transactions. The following exercises show an estimated EBITDA of Vitromex at different capacity utilization rates and EBITDA margins. Then, we use these figures to get its equity value from a relative valuation (EV/EBITDA target), based on the range of valuations at which our sample of M&A transactions (on slide 65) took place. Lastly, we derive the equity value of Vitromex and Cinsa (GISSA's Houseware division at ~8x EV/EBITDA) from GISSA's current enterprise value to arrive at an implicit valuation for Draxton. From this exercise we conclude that Draxton seems very attractive when trading at a 2-3.7x EV/EBITDA, considering it is a growing auto parts business shielded against the electric vehicle revolution. This approach backs our opinion that the market is severely punishing Vitromex's operations. Vitromex EBITDA (USD Million) Vitromex Capacity Utilization Rates Vitromex Equity Value (USD Million) Vitromex Capacity Utilization Rates Draxton Implicit EV/EBITDA (2021e) Vitromex Capacity Utilization Rates EBITDA Mg. 75% 85% GBMe 9.0% 11.0% 14.0% GISSA's target range 16.0% 18.0% 58222 15 16 18 20 23 26 29 223 26 29 33 12233 95% 18 29 37 CLEAR UPSIDE RISKS TO OUR PRICE TARGET FOR GISSA Vitromex EV/EBITDA Target 75% 85% 95% 6.5x 95 107 120 7.0x 124 141 158 7.5x 170 192 215 8.0x 207 235 262 8.5x 247 280 313 Vitromex EV/EBITDA Target 75% 85% 95% 6.5x 3.7x 3.6x 3.5x 7.0x 3.4x 3.3x 3.2x 7.5x 3.1x 2.9x 2.7x 8.0x 2.8x 2.6x 2.4x 8.5x 2.5x 2.2x 2.0x The exercise above clearly shows that, at current GISSA prices (P$29/share), there is significant upside potential due to a misunderstanding of the value of Vitromex, with a -16% market share in Mexico. More importantly, our 2021 price target for GISSA (P$42/share) considers that Vitromex achieves an EBITDA margin of 9% in perpetuity. Hence, if the company attains a better margin than that, our valuation would need to be updated to reflect the greater FCF generation from those new levels of profitability. GBM 2021 GISSA Price Target per Share P$42 P$43 P$44.5 P$46 P$47.5 Upside risk to current valuation from the strategy to improve Vitromex's profitability Vitromex Perpetual 9% 10% 12% 14% 16% EBITDA Mg. LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 57#58DALTILE MEXICO'S #4 • Fourth top player in Mexico. GBM Ceramic tiles sales in Mexico reached P$3.5 billion (2019) (-5% of Mohawk Industries' total sales). • Estimated market share in Mexico: ~14%. Installed capacity in Mexico: ~45 million m2. • Majority shareholders: Mohawk Industries (100%) LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 58#59October 12, 2021 DALTILE: SNAPSHOT GBM Daltile . • daltileⓇ Daltile is a ceramic producer with over 55 years of experience in the ceramic tile manufacturing business. In 2002, the company was acquired by Mohawk Industries, the most important player in the floor covering industry worldwide. Together, they produce almost 700 million m² of covering products annually. Daltile sales represent -5% of Mohawk Industries' revenues. It has a production capacity of ~45 million m² per year in Mexico and, despite it holds a large share of the domestic market, it also serves the United States via exports. Mohawk Industries MOHAWK INDUSTRIES, INC. Mohawk Industries is the largest flooring and ceramic producer in the world and has built leading market positions in North America, Europe, Russia, Brazil, Australia, and New Zealand. It commercializes its products in more than 170 countries around the world. 2020 Sales by Geography • In MXN terms, Daltile has a market share of -13%, according to our estimates. Daltile sales as a % of its peers 55% 35% 90% 16% 26% 58% United States Europe Other LAMOSA INTERCERAMIC VITROMEX daltile Brands AMERICAN OLEAN PROVEN IN TILE" Optima Daltile aims to be distributed by companies like The Home Depot. American Olean is exclusively distributed by Lowe's. Optima is a best value flooring and wall brand. Source: Company data 2020 Sales by Segment 26% 38% O 36% Mohawk Ceramic Brands Flooring North America Global Ceramic Flooring Rest of the World E EMILGROUP MARAZZI daltile® ceramica POLCOLORIT AMERICAN OLEAN PROVEN IN TILE" eliane RAGNO ARTFULLY REIMAGINED GROUP LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 59#60GBM OTHER COMPETITORS LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 60#61October 12, 2021 OTHER COMPETITORS Santa Julia (~10 million m² of capacity) ย CERAMICA SANTA JULIA PISOS Y RECUBRIMIENTOS Grupo Santa Julia has its origin in the Mexican Sewer Pipe Company established in 1894 in the Santa Julia neighborhood of Mexico City. In 1972, it changed its corporate name to the current Cerámica Santa Julia, S.A. de C.V., and moved to Huejotzingo, Puebla, which allowed it to grow significantly its production capacity and expand its lines. In 1999, the modernization of the company continued, employing state-of-the-art technology in the ceramic industry for floor and wall covering. In 2003, a new company was incorporated into the Santa Julia Group for the manufacturing of ceramic adhesives, nozzle, and sanitary ware, thereby completing the ceramic offering and fulfilling the requirements of the market. Castel (~8.5 million m² of capacity) Castel azulejos baños-cabinas Castel is a Mexican-Spanish company specialized in the commercialization of construction products such as ceramic tiles, porcelain, toilets, laminated and stone products, among others. Castel owns several distribution centers in Spain, the United States, Mexico, China, Guatemala, El Salvador, Costa Rica, Venezuela, Nicaragua, and Honduras and has a presence in over 30 countries through commercial representatives. The company has consolidated its position in the international market with annual sales worth over twelve million square meters of porcelain tiles. In Mexico, Castel owns five distribution centers in Mexico City, Monterrey, Guadalajara, Cancun, and Tijuana, with over 1,000+ points of sale, ensuring the prompt availability of all its products to meet the customers' needs. The plant in Salamanca, Guanajuato, has an annual production capacity of 8.5 million m². Cesantoni (~6 million m² of capacity) #cesantoni RAMICA Cesantoni is a Mexican ceramic tile manufacturer founded in 1980, which focuses on quality and design. With three productive plants, the company distributes its products across Mexico and Guatemala, whereas with Cesantoni Inc., it distributes them across the U.S. south. Venettia (~2 million m² of capacity) Venettia CERAMIC TILE Venettia is a flooring and tile manufacturer in Monterrey and the United States, with over 80 years of experience in the market. The company sells floors and tiles, cornices, wall facades, quartzite walls, stave, wood floors, and ceramic coverings, among other products. GBM LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 61#62APPENDIX GBM LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 62#63October 12, 2021 APPENDIX: INTERNATIONAL PEER COMPARISON Peers Country MOHAWK INDUSTRIES, INC. Description Installed Capacity (Million m²) Sales (USD Million) 2020 Tile Sales Breakdown Global flooring manufacturer and distributor of carpets, rugs, ceramic tiles, laminates, wood, stone, LVT, and sheet vinyl 251 3,456* Plants GBM Brands 36% ceramic worldwide 38% flooring North America 26% flooring RoW 23 spread across the US, Mexico, Brazil, Italy, Spain, Poland, Bulgaria, and Russia Olean, Daltile, Durkan, Eliane, Feltex, Godfrey Hirst, IVC, Karastan, Marazzi, Mohawk, Pergo, Quick-Step, Unilin LAMOSA Producer and seller of ceramic tiles and adhesives for the construction market 225 881 80% ceramic tiles 20% adhesives SCG CERAMICS RAK CERAMICS cerâmica CARMELO FIOR PAMESA ceramica DYNASTY Manufacturer and seller of ceramic floor tiles and wall tiles, as well as industrial estate developments 210 -700 100% ceramic tiles Global lifestyle solution brand specializing in ceramic and porcelain walls, floor and countertop tiles, and sanitary ware Producer of floor and wall tiles Dedicated to the design and manufacture of ceramic tiles and products 140 438 67% ceramic tiles 20% sanitary ware 13% tableware Mexico (20), 1 Guatemala (1), Colombia (2), Peru (3), Chile (1), Argentina (2), Spain (1), and Brazil (3) Thailand (21), Vietman (7), Indonesia (3), the Philippines (1) UAE (14), India (3), Bangladesh (1), Iran (1), China (1) Firenze, Porcelanite, Lamosa, Scop, Cordillera, San Lorenzo, Incepa, USCT, Roca, Gala, Niasa, Crest COTTO, Sosuco, Campana, Prime, Mariwasa, Kia, Trend, Impresso RAK Ceramics, Elegance 84 174 100% ceramic tiles Brazil (4) 62 82 584 N.A. Spain (6) Producer of ceramic floor and wall tiles used for both indoor and outdoor construction and decoration 82 259 94% ceramic tiles 6% others Thailand (3) Cecafi, Fioranno, Idealle, Pisoforte, Arielle, Vinilforte Pamesa Ceramica, TAU Ceramica, Geotiles, Prissmacer, Ecoceramic, Navarti Dynasty, Tiletop, Jaguar, Value, Mustang, Chicken, Birdie, Ducky, Swan, M, COSMO, ROVER, MONTE 93% ceramic tiles Kajaria Stn CERAMICA Tile company engaged in the manufacturing and trading of ceramics, polished and glazed vitrified tiles 81 370 6% bathware India (10) Kajaria 1% plywood Group of companies dedicated to the manufacture and commercialization of ceramic products 76 388 N.A. Spain (2) STN, Alaplana, Keratile, Tesany, Vitacer > INTERCERAMIC A company engaged in the production and commercialization of glazed ceramic floor and wall tiles and complementary products 48 362 72% ceramic tiles 11% adhesives 17% others Mexico (6), the US (1) Interceramic, ICC, Kohler VITROMEX MI ESPACIO, MI MUNDO Construction business unit of Grupo Industrial Saltillo (GISSA). Dedicated to the design, production, and commercialization of a wide variety of floors, ceramic and porcelain tiles 47 163 100% ceramic tiles Mexico (4) Vitromex, Arko *Includes revenues from sanitary ware and natural stone products. LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 63#64October 12, 2021 APPENDIX: INTERNATIONAL PEER VALUATIONS Ceramic Tile Peers GBM Market Cap (USD Million) Average EV/EBITDA Price/Earnings 1 year Return P/BV Dividend Yield 2021e 2022e 2021e 2022e % YTD Return % Net Debt to EBITDA Mg. EBITDA Mohawk Industries, Inc. 13,243 0.0% 1.5x 7.2x 6.6x 12.8x 11.8x 103.9% 36.1% 0.8x 14.9% Monalisa Group CO, Ltd 1,796 1.2% 3.3x 12.1x 9.3x 15.4x 11.8x -27.2% -11.1% 0.0x 15.8% Tarkett SA 1,542 0.0% 1.6x 7.1x 5.6x 25.4x 14.9x 105.2% 38.2% 2.2x 8.8% Saudi Ceramic Co 1,354 0.0% 3.1x 11.5× 11.3x 15.8x 13.7x 97.0% 78.7% 1.6x 13.2% Grupo Lamosa SAB de CV 1,248 2.3% 2.1x 4.6x 4.2x 6.7x 6.4x 208.4% 89.7% 0.7x 19.9% Nichiha Corp 1,129 2.0% 1.2x 7.2x 5.2x 14.9x 12.1x 19.1% 3.6% -1.4x 14.4% Dynasty Ceramics 814 5.3% 4.0x 9.5x 9.0x 15.2x 14.5x 25.1% 38.2% 0.3x 26.6% RAK Ceramics 779 13.4% 1.3x 7.8x 7.2x 7.8x 7.4x 116.6% 100.7% 2.3x 16.6% Interceramic 529 2.6% 2.2x 5.8x 5.6x 17.3x 14.3x 50.7% 32.8% 1.8x 14.8% SCG Ceramics PCL 477 0.0% 1.7x 10.5× 10.0x 23.8x 21.8x 134.0% 60.7% -0.6x 8.7% Average 2.7% 2.2x 8.3x 7.4x 15.5x 12.9x 83.3% 46.8% 0.8x 15.4% Adhesives Peers Sika Henkel AG & Co. RPM International, Inc. H.B Fuller Co. Market Cap Average EV/EBITDA Price/Earnings 1 year Return P/BV (USD Million) Dividend Yield 2021e 2022e 2021e 2022e % YTD Return % Net Debt to EBITDA Mg. EBITDA 45,864 0.8% 11.6x 25.1x 21.4x 42.6x 36.5x 26.8% 25.2% 1.7x 17.5% 37,982 2.4% N.A. 9.7x 8.8x 17.0x 15.6x -9.4% -13.9% 3.0x 16.9% 10,349 2.0% 5.8x 13.1x 14.0x 19.1x 20.9x -7.9% -11.0% 2.0x 13.2% 3,339 1.1% 2.1x 10.6x 9.2x 18.3x 15.2x 30.1% 23.5% 3.7x 12.8% 2,597 0.6% 6.2x 11.2x 8.4x 14.7x 11.1x 6.3% 23.2% 1.0x 12.8% 1.4% 6.4x 13.9x 12.4x 22.3x 19.9x 9.2% 9.4% 2.3x 14.6% Keshun Waterpoof Technologies Average Retail Home Distributors Peers (CERAMIC Franchise Stores Peers) Market Cap Average EV/EBITDA Price/Earnings 1 year Return P/BV (USD Million) Dividend Yield 2021e 2022e 2021e 2022e % YTD Return % Net Debt to EBITDA Mg. EBITDA Home Depot Inc 350,105 2.0% N.A. 18.4x 15.8x 27.6x 22.8x 22.4% 27.0% 1.5x 16.6% Lowe's Cos Inc 140,952 1.7% N.A. 14.3x 12.5x 23.3x 17.9x 29.4% 28.2% 1.7x 10.9% Fortune Brands Home & Security 13,304 1.4% 4.4x 11.5x 10.3x 16.7x 15.3x 18.2% 13.5% 1.9x 15.2% Dunelm Group PLC 4,136 2.9% 10.6x 13.2x 11.3x 24.2x 21.2x 1.6% 22.5% 0.7x 15.6% D&O Home Collection Co Ltd 880 0.4% 1.3x 8.9x 7.6x 8.1x 6.7x -47.1% -27.6% 3.2x 14.5% Average 1.7% 5.4x 13.3x 11.5x 20.0x 16.8x 4.9% 12.7% 1.8x 14.6% LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 64#65October 12, 2021 APPENDIX: M&A TRANSACTIONS GBM The ceramic tiles industry should continue to consolidate over the next decades. During the last twenty years, the largest ceramic tiles players in the world (Mohawk and LAMOSA) have been very active in consolidating a globally fragmented industry, with both companies accounting for only 3-4% of the global production capacity. Since industry conditions have improved and most industry players hold a healthy balance sheet, we expect to keep seeing M&A transactions over the next 12 to 18 months. Nobody knows best what is cooking in the pot than the chef itself. It is interesting to see that most acquisitions completed over the last two decades have taken place at an EV/EBITDA multiple pre-synergies in the range of 8-9x-except for Daltile International, where Mohawk might have seen incremental synergies from the scale and strategic footprint that Daltile's Mexico/US operations offered. In our view, the valuations that the largest industry players have paid reflect just an approximate value of global ceramic tile assets. And, more importantly, they are valuations that market players (target companies) are willing to accept for an asset that doesn't have the global scale that companies like Mohawk or LAMOSA possess and or the characteristics that stand them apart from the rest. Sample of Ceramic Tiles M&A Transactions 2003 2007 2013 2016 2017 2018 2019 2020 2021 Acquiring Company w MOHAWK LAMOSA W MOHAWK LAMOSA Duratex MOHAWK Duratex LAMOSA LAMOSA INDUSTRIES, INC. INDUSTRIES, INC. INDUSTRIES, INC. Target Name daltile PORCELANITE diseña tus sueños MARAZZI GROUP SAN LORENZO Ceusa eliane CECRISA euro Roca cerámica Amount US$1.8 billion US$807 million US$1.5 billion US$230 million US$75 million US$250 million. US$258 million US$33 million US$260 million EV/EBITDA 10.3x 8.3x 8.1x 7.7x 8.9x -9x 8.8x -8x ~6.5x Size of Target 30% of Mohawk 110% of LAMOSA 20% of Mohawk 23% of LAMOSA 3% of Duratex 2% of Mohawk 13% of Duratex 2.5% of LAMOSA 22% of LAMOSA Plants of Target US/Mexico Mexico US/Europe Colombia/Peru/ Argentina Brazil Brazil Brazil Colombia Brazil/Europe LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 65#66100.0 90.0 80.0 70.0 60.0 50.0 40.0 30.0 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 12/10/2021 | P$75 Market Outperformer Price October 12, 2021 INTERCERAMIC Apr-21 May-21 Price Target Jun-21 H STOCK PRICE PERFORMANCE VS. ANALYST ESTIMATES Jul-21 Aug-21 Sep-21 Oct-21 20.0 Oct-20 120.0 100.0 80.0 60.0 40.0 Nov-20 Dec-20 Jan-21 140.0 IMPORTANT DISCLOSURES & FORWARD-LOOKING STATEMENTS Grupo Bursatil Mexicano, S.A. de C.V., Casa de Bolsa, and its affiliates, may carry out 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. This report is addressed for GBM's clients or any other suitable third party. The information and analyses contained herein are not intended as tax, legal, or investment advice and may not be suitable for your specific circumstances. However, each investor shall make their 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. 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. Furthermore, the analyst or analysts, each, certify that, neither directly nor indirectly, currently hold or have held positions in the particular sectors and companies that each of them cover. The contents hereof are based on public information; however, those sources have not been corroborated by GBM and, therefore, no guarantee is offered in terms of their accuracy or reliability. GBM, its parent company, affiliates, units, directors, officers, or employees thereof shall not be deemed liable to their clients or any other third party, nor take any responsibility whatsoever for any direct or indirect loss that may result from the use of the contents herein. This report has been prepared by GBM and is subject to change without notice. GBM and its employees shall have no obligation to update or amend any information contained herein. 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. The current document is not released with the purpose of ensuring a future business relationship with the issue (issuer); therefore, this document constitutes no promise or guarantee. For further information on any particular company, please refer to the latest published research report. Forward-looking statements: This presentation contains statements that are forward-looking. Such forward-looking statements express the opinion or expectations of the person who produced this material; are based on current expectations and projections about future events and trends that may affect any of the companies' business, and are not guarantees of future performance. Investors are cautioned that any such forward- looking statements are and will be, as the case may be, subject to many risks, uncertainties and factors, including those relating to the operations and business of such company. These, and various other factors, may adversely affect the estimates and assumptions on which these forward-looking statements are based. Forward-looking statements speak only as of the date on which they are made. GBM does not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. LAMOSA/CERAMIC: THE ROAD TO GROWTH IS PAVED WITH TILES. | 66 Feb-21 Mar-21 12/10/2021 | P$130 Market Outperformer Price Apr-21 May-21 Price Target LAMOSA Jun-21 Jul-21 Aug-21 Sep-21 Oct-21 GBM