Investor Presentaiton
October 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. | 57View entire presentation