Mexico Equity Research: 1Q25

We are updating our models ahead of 1Q25 Results; calendar headwinds and a slowdown in some industries are expected, along with FX-related effects in some companies —with some companies benefitting due to their exposure—. Adverse weather conditions are also expected to weigh on results. We thus forecast sales growth of 6% (9% on a median basis), with EBITDA growth of 1% (4% on a median basis). We expect only 3 companies within our coverage to post flat or improving margins.

In Consumer, we are keeping our ratings unchanged, with minor adjustments to PTs. Overall, FX remains a key factor, with some of our covered Consumer companies expected to post some impact depending on their sales and cost structures. Within Consumer Discretionary, we continue to prefer Alsea, as we see its formats more resilient and healthily positioned to keep or gain market share. In food & bev, beverage companies AC, KOF, FEMSA and Becle remain our Outperform ratings, with the former two expected to be the best positioned amid a series of headwinds in 1Q25 and throughout the year. In Health & Personal Care, we reiterate our Market Perform rating in Kimberly-Clark de México, while in Supermarkets, we continue to prefer Chedraui amid its solid format and geographical diversification.

The Mexican Air Transport sector is expected to post another positive quarterly result at the top line, while margins could contract, amid higher operating costs. Overall, airport groups are expected to post double-digit EBITDA growth, while land transport EBITDA growth is forecasted to be within the mid-single digits, and the airline sector (VOLAR) to post a low-single-digit contraction. Total air PAX during the quarter gained 5% YoY, a better performance compared to previous quarters and improving compared to FY24 figures. Within our coverage, ASUR’s EBITDA margin is expected to remain flat. In contrast, for GAP we estimate a contraction of 3.6 pp, followed by VOLAR (-1.6 pp), GMXT (-1.1 pp), and OMA(-0.4 pp). As a result, the EBITDA margin in the transport sector is expected to decrease by 1.0 pp in 1Q25.

In the Cement sector, we anticipate a challenging quarter. Bad weather conditions were adverse in most regions, negatively impacting cement demand across the markets. According to our estimates, the sector's total revenues in 1Q25 are expected to decrease 13% YoY, while total EBITDA drops 17% YoY. In that context, CEMEX is expected to post the highest EBITDA contraction with an 18% YoY drop. Lastly, in housing, we expect total revenues in the sector to increase strongly by 70% YoY, explained by VINTE’s positive performance after JAVER’s business consolidation at the end of 4Q24. In addition, total EBITDA is expected to be solid. We forecast VINTE’s total sales to reach P$3.3bn in 1Q25 vs. P$933mn reported in 1Q24.