Covering the Mexican Economy, Actinver Research

Actinver

Covering the Mexican Economy

Actinver Research

Actinver is a mexican leading financial group, that generates well being for individuals and companies through advisory services that provides investment management to maintain and grow their wealth.

Macroeconomics

<ul>
<li>Having recently launched our Food &amp; Bev coverage (link to report here), we reiterate our Outperform ratings in beverage companies AC (PT down to P$205 from P$210), KOF (P$197 PT), FEMSA (PT up to P$230 from P$222), and Becle (PT down to P$33 from P$36).</li>
<li>We see Coke bottlers as better positioned amid a competitive environment and a picky consumer, while we forecast improving trends in FEMSA and Becle.</li>
<li>We are more cautious on Bimbo (Market Perform) and Gruma (Market Perform), given harsh competition in their main markets and a more limited price/volume growth potential, in our view.</li>
</ul>


Having recently launched our Food &amp; Bev coverage (link to report here), we reiterate our Outperform ratings in beverage companies AC (PT down to P$205 from P$210), KOF (P$197 PT), FEMSA (PT up to P$230 from P$222), and Becle (PT down to P$33 from P$36).
We see Coke bottlers as better positioned amid a competitive environment and a picky consumer, while we forecast improving trends in FEMSA and Becle.
We are more cautious on Bimbo (Market Perform) and Gruma (Market Perform), given harsh competition in their main markets and a more limited price/volume growth potential, in our view.


Actinver Research - Consumer post 3Q24: Sales deceleration while trying to protect margins

Equity Bottom-Up

<ul><li>Revenues of US$1.62 billion decreased 4.2% YoY, slightly (0.5%) below our estimates, driven by a price adjustment in Mexico and a 1% contraction in consolidated sales volume, impacted by the continued underperformance in the U.S. foodservice channel.</li><li>Sales in the U.S. and Mexico declined 2.4% and 1.3% YoY, respectively, the former below our estimates.</li><li> Margins were on average 70 bps above our estimates.</li></ul>

Revenues of US$1.62 billion decreased 4.2% YoY, slightly (0.5%) below our estimates, driven by a price adjustment in Mexico and a 1% contraction in consolidated sales volume, impacted by the continued underperformance in the U.S. foodservice channel.Sales in the U.S. and Mexico declined 2.4% and 1.3% YoY, respectively, the former below our estimates. Margins were on average 70 bps above our estimates.

Actinver Research - Gruma: 3Q24 Mostly better than expected (Quick View)

<ul>
<li>After years of solid consumption, we expect more normalized trends going forward, as consumers have a higher price sensitivity across the whole food &amp; bev spectrum.</li>
<li>It’s not a price increase race anymore, and shrinkflation has its limits.</li>
<li>Therefore, we expect SKU rationalization and increased focus on cost efficiencies (especially amid higher labor costs), among the different strategies that companies follow to hold (or try to improve) margins amid a deceleration in consumption.</li>
</ul>


After years of solid consumption, we expect more normalized trends going forward, as consumers have a higher price sensitivity across the whole food &amp; bev spectrum.
It’s not a price increase race anymore, and shrinkflation has its limits.
Therefore, we expect SKU rationalization and increased focus on cost efficiencies (especially amid higher labor costs), among the different strategies that companies follow to hold (or try to improve) margins amid a deceleration in consumption.


Actinver Research - Food & Bev: Open the bottles (Coverage Initiation)

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

TSE Tokyo Price Index TOPIX / Technical Analysis

<ul>
<li>We continue to believe a 1-4-month pullback/consolidation is ongoing. Important supports have been violated, including $110 on MSCI ACWI (ACWI-US) and $41 on MSCI EM (EEM-US).</li>
<li>We're shifting our outlook to neutral on $ACWI after being bullish since early-November 2023. Major price breakdowns combined with deteriorating market dynamics have increased the odds of a topping pattern.</li>
<li>Also downgrading Japan to market weight. 7/25/24 we said "Japan's TOPIX breaking below 2800-2815 is near-term bearish, suggests it could pull back to its long-term uptrend, or worse."</li>
</ul>


We continue to believe a 1-4-month pullback/consolidation is ongoing. Important supports have been violated, including $110 on MSCI ACWI (ACWI-US) and $41 on MSCI EM (EEM-US).
We're shifting our outlook to neutral on $ACWI after being bullish since early-November 2023. Major price breakdowns combined with deteriorating market dynamics have increased the odds of a topping pattern.
Also downgrading Japan to market weight. 7/25/24 we said "Japan's TOPIX breaking below 2800-2815 is near-term bearish, suggests it could pull back to its long-term uptrend, or worse."


Downgrading Japan; Stay Defensive; Downgrading Outlook on Global Equities $ACWI to Neutral

<ul>
<li>The MSCI ACWI index (ACWI-US) continues to test major support at $90.50-$91.50, though no decisive break yet; as long as this support area holds, we remain constructive on global equities.</li>
<li>MSCI EM (EEM-US) continues to test $37 support, while MSCI ACWI ex-US (ACWX-US) and EAFE (EFA-US) are testing supports at $45 and $65-$66, respectively</li>
<li>Remain overweight and add exposure to Japan; the TOPIX remains in a 1.5-year RS uptrend (vs. MSCI ACWI), and continues to hold above 5-month support at 2200-2215</li>
</ul>


The MSCI ACWI index (ACWI-US) continues to test major support at $90.50-$91.50, though no decisive break yet; as long as this support area holds, we remain constructive on global equities.
MSCI EM (EEM-US) continues to test $37 support, while MSCI ACWI ex-US (ACWX-US) and EAFE (EFA-US) are testing supports at $45 and $65-$66, respectively
Remain overweight and add exposure to Japan; the TOPIX remains in a 1.5-year RS uptrend (vs. MSCI ACWI), and continues to hold above 5-month support at 2200-2215


Remain Overweight and Add Exposure to Japan; Buys in Insurance, Services, Tech, Staples, Utilities

Mexico

Gruma, S.A.B. de C.V. is engaged primarily in the production, marketing, distribution, and sale of tortillas, corn flour, and wheat flour. The Company has operations in the United States, Mexico, Central America, Europe, Asia, and Oceania.

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Gruma SAB de CV (GRUMAB MM)

Actinver Research - Consumer post 3Q24: Sales deceleration while trying to protect margins

Having recently launched our Food & Bev coverage (link to report here), we reiterate our Outperform ratings in beverage companies AC (PT down to...

Actinver

Actinver Research - Gruma: 3Q24 Mostly better than expected (Quick View)

Revenues of US$1.62 billion decreased 4.2% YoY, slightly (0.5%) below our estimates, driven by a price adjustment in Mexico and a 1% contraction...

Actinver

Actinver Research - Food & Bev: Open the bottles (Coverage Initiation)

After years of solid consumption, we expect more normalized trends going forward, as consumers have a higher price sensitivity across the whole...

Actinver

Downgrading Japan; Stay Defensive; Downgrading Outlook on Global Equities $ACWI to Neutral

Downgrading Japan TOPIX, Nikkei; Stay Defensive; Downgrading Outlook on Global Equities $ACWI $EEM to Neutral; Many Risk-Off Signals increase odds...

Vermilion Research

Remain Overweight and Add Exposure to Japan; Buys in Insurance, Services, Tech, Staples, Utilities

Remain Overweight and Add Exposure to #Japan; $TOPIX continues to hold above 5-month support at 2200-2215. Next down supports being tested at 4000...

Vermilion Research

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