, 2019 Burkenroad Reports GRUPO LAMOSA, S.A.B. DE C.V ... · Grupo Lamosa (LAMOSA) operates through two business units, wall and floor tile and adhesives. It was founded in 1890 and

Actual Price: MXN$28.70 IPC: 38,574.18 IPC Small Cap: 342.16 S&P: 2,847.60

• We are issuing a MARKET PERFORM rating of Grupo Lamosa stock with a target price of

MXN $30.66 at December 2019, which offers a 6.82% upside from the current stock price. It

represents a total return of 9.03% if additional return from dividends is considered. Our

estimates are considering the expected macroeconomic outlook and industry performance.

• For the last 10 years Lamosa’s revenues grew at a CAGR of 9.2%, closing 2018 with MXN$17,727

million in revenue, a decrease of 1.4% against 2017 and EBITDA of MXN$3,278 million,

representing a decrease of 3.6% and a margin of 18.5%.

• Grupo Lamosa is a Mexican company that operates through two business units, wall and floor tile and

adhesives. It has international operations, exporting to the United States of America and to Central

and South America. It was founded in 1890 and headquartered in Monterrey Nuevo León, Mexico.

• It is the leader in the wall and floor tile industry in Mexico, as well as in the adhesive segment.

Worldwide it is ranked third in the tile segment. In 2018, the tile segment represented 77% of total

sales, the remaining 23% of revenues comes from the adhesive unit. In 2016, the company expanded

its operations to South America acquiring “Cerámica San Lorenzo”, a leader company in that region.

This acquisition allowed Lamosa to increase its ceramic tiles production capacity by 40% through

plants and distribution centers in Argentina, Chile, Colombia and Peru.

• In 2018, foreign sales represented 32% of total revenue as a result of exporting to the United States of

America and to Central and South America.

• Since 2013, the company has paid dividends once a year. The last dividend was paid on April 29th

with a dividend yield of 2.2%, the highest in the last 10 years.

Company profile

Location: Headquarters are located in San Pedro Garcia, N.L., Mexico

Sector: Construction

Subsector: Construction materials

Economic activity: Manufacture and sale of ceramic coatings and adhesives.

Webpage: www.lamosa.com

Analysts: Advisors:

Alberto Sánchez Lan María Concepción del Alto Hernández PhD

José Luis Villareal Garza Marcela Maldonado González MAF

August 15th, 2019 GRUPO LAMOSA, S.A.B. DE C.V.

LAMOSA* / BMV

Continuing coverage: Maintaining its value despite a challenging environment.

Investment recommendation: MARKET PERFORM.

Burkenroad Reports

EGADE Business School

Burkenroad Reports are produced by a select group of students at EGADE Business School, Monterrey. This

report is based on information available to the public and does not purport to be a complete statement of all data

relevant to the securities mentioned and its accuracy cannot be guaranteed. Furthermore, this report is not an offer

to buy or sell the securities mentioned.

Valuation 2017A 2018A 2019E

EPS* $4.38 $3.54 $2.87

P/E 9.93x 10.17x 10.69x

EBITDA/Share* 8.88 8.56 8.34

P/EBITDA 4.90x 4.20x 3.68x

EV/EBITDA 7.16x 6.60x 5.94x

*EPS and EBITDA from last 12 months, expressed in MXN

Stock information

52 weeks range $28.70 -41.49 Outstanding shares (millions) 382.76

12 months return -26.66% Market capitalization (MMXN) $10,717.28

Dividend yield 2.21% Enterprise Value (MMXN) $18,993.12

Average daily volume (1000) 19.46 Beta 0.49

Source: Bloomberg.

http://www.lamosa.com/

BUSINESS DESCRIPTION

Grupo Lamosa (LAMOSA) operates through two business units, wall and floor tile and

adhesives. It was founded in 1890 and headquartered in Monterrey, Mexico. It is leader in

the wall and floor tile industry in Mexico as well as in the adhesive segment, and it also

exports to the United States of America and to Central and South America. It has 29

production facilities located throughout Latin America, 15 are dedicated to wall and floor tile

production and 14 to adhesives production. Out of the 29 facilities, 22 are located in Mexico,

1 in Guatemala, 2 in Argentina, 3 in Peru and 1 in Colombia. As of December 31st, 2018, the

company has a total of 6,705 employees, 57% of which are unionized workers.

In the last year, Lamosa’s stock price has underperformed the Small Cap IPC (Small Cap

Index in Mexico’s Stock Exchange), it has had a 10.3% decrease vs a 1.4% decrease of the

Small Cap Index (figure 1). This decrease is mainly explained by the political and economic

instability in Mexico, this added to higher interest rates that has affected the construction

sector. Nonetheless, in the last ten years, Lamosa´s stock price has raised from $7.54 MXN

per share to $44.10 (figure 2).

Since 2013, the company has paid dividends once a year. The last dividend was paid on April

29th, with a dividend yield of 2.2%, the highest in the last 10 years.

History of the company

Lamosa was founded in Monterrey, Mexico in 1890 by a group of American investors. The

original name was “Compañia Manufacturera de Ladrillos de Monterrey” and it was

dedicated exclusively to brick production.

In 1929, the company was acquired by Mr. Bernardo Elosúa Farías and Mr. Viviano Valdés

and the name was changed to “Ladrillera Monterrey, S.A.”. In 1933, wall and floor tiles and

resistant clay block production were added to the company’s operations and in 1951 Lamosa

started trading its shares on the Mexican Stock Exchange (BMV).

The company added more products to its portfolio when in 1957 started to produce and

commercialize cement-based adhesives for the installation of ceramic floors and tiles, this

was the origin of the commercial brand “Crest”. Continuing with the product diversification,

in 1963 Lamosa acquired “Sanitarios Azteca”, a company dedicated to toilet production.

In 1995, the name of the company was changed to “Grupo Lamosa, S.A. de C.V.”

In 2003 and 2005, Lamosa opened two shopping malls in Monterrey, “Galerías Valle

Oriente” and “Plaza Cumbres”. In 2007, in order to comply with the strategic plan of the

company, both shopping malls were sold and “Porcelanite” was acquired.

In 2015, the company sold its toilet production division in order to focus on its Ceramic Tile

and Adhesives businesses in Mexico and abroad. In 2016, Grupo Lamosa acquired “Cerámica

San Lorenzo” strengthening its presence in South America. The acquisition allowed them to

increase its ceramic tiles production capacity by 40% through plants and distribution centers

in Argentina, Chile, Colombia and Peru.

In 2018, wall and floor tiles represented 77% of Lamosa’s total sales while the rest were sales

from the adhesive segments. The company sold 68% of its revenue in Mexico, the remaining

32% were sold in North and South America (figure 3). Even though wall and floor tile is the

biggest segment regarding sales and EBITDA (figure 4), adhesives has the highest EBITDA

Margin with 24% while tile segment was 16%.

Lamosa has the biggest market share (based on revenues) in Mexico in the adhesives

industry, and after the acquisition of Porcelanite in 2007 it became the largest tile company

in Mexico and the third worldwide.

80%

90%

100%

110%

5/7

/18

6/7

/18

7/7

/18

8/7

/18

9/7

/18

10/7

/18

11/7

/18

12/7

/18

1/7

/19

2/7

/19

3/7

/19

4/7

/19

Lamosa vs IPC Small Cap

Base 100: May 7th, 2018

Lamosa IPC Small Cap

Source: Company Report

77%

23%

Sales by segment

Tiles Adhesives

$2,301

$974

EBITDA per segment (Million MXN)

Tiles Adhesives

Source: Lamosa's Report

Figure 1

$- $5

$10 $15 $20 $25 $30 $35 $40 $45

Stock Price (Mxn)

Figure 2

Source: Bloomberg

Source: Bloomberg

68%

32%

Sales breakdown

Mexico International

Figure 3

Figure 4

Burkenroad Reports


For the last seven consecutive years Lamosa has paid dividends. Even though the average

dividend yield for this period has been 1.3%, the yield for the last five years has increased

from 0.9% in 2015 to 2.2% in 2019. The dividend amount paid in Mexican pesos has always

been superior to that of the previous year (figure 5).

Business Units

Wall and Floor Tile

In the wall and floor tile business unit, the company operates through “Porcelanite Lamosa,

S.A. de C.V.” which is located in Mexico and through “Cerámica San Lorenzo” subsidiaries

located in Argentina, Colombia, Peru and Chile.

The main distribution channels of this business unit are independent and specialized

wholesale distributors, home centers, hardware stores and floor coverings specialized stores.

This business unit, has the largest distribution network in Mexico with more than 240

distributors and more than 1,000 abroad, making it possible to reach more than 2,000 points

of sale in Mexico, the United States, Central America, South America and some Caribbean

countries.

The main competitors in the global market are Marazzi (Italy), Porcelanosa (Spain) and Portobello (Brazil) and some companies from

China that offer products at lower prices. In Mexico is estimated that 85% of the market is supplied by local companies such as

Interceramic, Vitromex and Daltile; the remaining 15% is supplied by companies from India and Spain.

The installed capacity of Lamosa’s ceramic tile production facilities is approximately 180 million m² per year and the percentage of

capacity utilization is over 90%.

Adhesives

The adhesive business unit is integrated by “Crest Norteamerica, S.A. de C.V.”, “Adhesivos de Jalisco, S.A. de C.V.”, “Industrias

Niasa, S.A. de C.V.”, “Soluciones Tecnicas para la Construccion del Centro, S.A. de C.V.” and “Tecnoconcreto, S.A.”. This segment

is mainly dedicated to the manufacture and commercialization of ceramic adhesives and nozzles for the installation of ceramic and

natural coatings in floors and walls, as well as specialized products such as stuccoes, waterproofing sealants, additives and specialized

mortars for the construction industry.

The main distribution channels of this business unit are independent and specialized wholesale distributors, home centers, hardware

stores and construction material distributors. The adhesive unit has a wide network of independent distributors and sub-distributors

that cover more than 5,000 points of sale.

Lamosa’s trademark “Crest” is the leader in the Mexican market and some of its main competitors are Interceramic, Daltile, Laticrete,

Cemix and Bexel.

Real Estate

Real Estate is the smallest unit and operates exclusively in Mexico through its subsidiary “Grupo Inmobiliario Viber, S.A. de C.V.”.

It started operations in the 80’s with the purpose of developing land that was previously used for production activities. It still has

territorial reserves in Monterrey, Mexico, but in order to comply with the strategic plan of the company, real estate revenue is close

to zero.

Figure 5

Source: Bloomberg

Yield

Growth

Rate

2013 0.90%

2014 1.00% 35%

2015 0.90% 7%

2016 1.10% 38%

2017 1.60% 50%

2018 1.70% 17%

2019 2.20% 10%

Dividends

SWOT Analysis

CORPORATE GOVERNANCE

Grupo Lamosa has an adequate adherence to the Code of Best Corporate Practices. It has a solid Board of Directors consisting of

twelve high quality members, five of them are independent and representing 42% of the Board.

Board of Directors Key Executives Federico Toussaint Elosúa

Bernardo Elosúa Robles

Guillermo Barragán Elosúa

Javier Saavedra Valdés

José Manuel Valverde Valdés

Antonio Elosúa González

Eduardo Elizondo Barragán*

Armando Garza Sada*

Carlos Zambrano Plant*

Eduardo Padilla Silva*

Eduardo Garza T Fernández*

Máximino José Michel González*

*Independent

Federico Toussaint Elosúa – Chairman & CEO

Jorge Antonio Touché Zambrano - CFO

Julio Rafael Vargas Quintanilla - HR Director

Jorge Manuel Aldape Luengas – Adhesives Director

Sergio Narváez Garza – Tiles and Flooring Director

Two main concerns regarding the corporate governance are that the Chairman and CEO is the same person and that there are no

women in the Board.

As of December 2018, Lamosa has a total of 382.8 million outstanding shares with 9% of floating stock. The major shareholder is

Federico Toussaint Elosúa who holds 53.4% of total outstanding shares (204.5 million shares). Institutional investors hold 14.3% of

total shares, among them, Blackrock has the biggest stake with 5.16% followed by Operadora de Fondos GBM and Norges Bank

Investment Management with 4.6% and 2.5% respectively.

FINANCIAL ANALYSIS

In 2018, the company reported MXN$17,727 million in revenues (figure 6); this

represented a decrease of 1.4% against 2017. This is explained mainly because of the

decrease in sales derived from the wall and floor tile business unit that had a 3.6%

reduction in revenues, due in part to higher interest rates and political and economic

uncertainty in Mexico. The adhesive segment had an increase of 7.6% against 2017, this

was related to new customers and to being able to participate in a bigger extent in the

product specification. For the last 10 years, revenues grew at a CAGR of 9.2%, this has

been originated mainly by the acquisition of Cerámica San Lorenzo in 2016. The CAGR

for the 8 years prior to this acquisition (2007-2015) was 5.9%, while the industry

increased at 1.0% rate.

Strengths Weaknesses

1. Market share leader in Mexico with solid

brand recognition.

2. Strategic locations to export to North and

South America.

3. Socioeconomic segments diversification.

4. Financial performance superior to its peers.

1. Dependency of the Mexican market.

2. High level of debt and upcoming debt

maturities in USD.

3. Total dependency on the construction

industry.

4. Exposure to exchange rate fluctuations.

Opportunities Threats

1. Recovery of the residential construction

segment in Mexico and USA.

2. USA tariffs on ceramic tiles from Asia.

3. Increase in government spending on

construction in Mexico.

4. Housing deficit in México.

1. Volatility in gas prices.

2. Possibility of a recession.

3. Declining of the construction cycle.

4. Low cost products from Asian

manufacturers.

5. Political risk and instabilities in countries

with production facilities.

6. Uncertainty with new Mexican government

$8.0 $8.8 $8.8 $9.6 $8.6 $9.0 $10.6

$13.6

$18.0 $17.7

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Revenue (billions MXN)

2009-18 CAGR = 9.2%

Source: Capital IQ

Figure 6

Burkenroad Reports


From 2009 to 2018, EBITDA grew at a CAGR of 8.8% (figure 7), a higher rate compared to

its peers.

In 2018, the EBITDA was MXN$3,278 million (figure 7) which represented 18.5% of

revenues and compared to 2017 it represented a decrease of 3.6%. Despite this decrease,

Lamosa’s EBITDA Margin is still above the industry average of 13.0% and Interceramic’s

12.7%, Lamosa’s main competitor. In 2018, MXN$56 million of non-recurring expenses

were reported from Cerámica San Lorenzo in order to comply with the plan to increase

productivity.

In 2018, expenses represented 24% of sales (figure 8), this percentage has been slightly

increasing in the last 10 years, back in 2009 expenses represented 21% of sales. This increase

is in part explained by the restructuring plan of Cerámica San Lorenzo due to which Lamosa

spent MXN$390 million in 2017 and MXN$56 million in 2018. Expenses have had a CAGR

for the last ten years of 11% and an average of 23.3% of revenues. The increase in expenses

in 2013 was due to non-recurrent sales and marketing expenses in order to strengthen its

brands in Mexico and other regions.

The net income for 2018 was MXN$1,355 million and it represented a decrease of 19.2%

when compared to 2017. This decrease is mainly due to a lower operating profit and also to

the fact that even though financial expenses went from $673 million in 2017 to MXN$576

million in 2018, the company incurred in a foreign exchange loss of MXN$72 million against

a foreign exchange gain of MXN$217 million in 2017, these two factors combined had a

negative impact of MXN$192 million on the net income.

Cash Flow

Regarding the working capital, in the last 10 years Lamosa has reduced accounts receivables

by 50 days (from 128 to 76 days receivable), inventory days and days payable outstanding

have increased by 1 and 14 days respectively (figure 9). Lamosa has maintained a sustainable

level of working capital throughout the years which has contributed to a positive generation

of cash flow.

In 2018, cash flow from operating activities was MXN$1,694 million, representing a

decreased of 28% against MXN$2,339 million in 2017, the main cause was the reduction in

net income, and in 2018 the company paid MXN$463 million more taxes than the year

before. Prior to the acquisition of Cerámica San Lorenzo the average cash flow from

operations from 2009 to 2015 was MXN$1,646 million, after the acquisition the cash flow

from operations has increased to an average of MXN$1,988 million for the last 3 years (figure

10).

Capital expenditures have been focused mainly on technology and production increase. In

2015, the company invested in capacity expansion for 3 production facilities of the wall and

floor tile segment in Mexico, and also invested in process automation. In 2016, investments

were directed to the construction of a new wall and floor tile facility in Guanajuato and also

for the construction of 3 new adhesives facilities in Mexico. In 2017 and 2018 investments

were mainly issued for operative needs and for information technology (figure 11). Due to

investments described above, in 2018 capex represented 4% of total sales.

As of December 31st, 2018, Lamosa’s net debt was MXN$7,864 million (figure 12), this

represented 2.4x EBITDA, it is a small increased against 2.3x in 2017, but it has been

continuously reducing from 3.3x since 2016 when the company acquired Cerámica San

Lorenzo. This ratio is similar to its main competitors, Interceramic (2.4x), Portobello (2.2x)

and Somany Ceramic (2.5x). In 2018, the interest coverage ratio improved to 5.2x, slightly

higher than 4.9x in 2017.

At the moment, Lamosa does not have any bonds issued in the market, the entire debt is from

banks. As of March 2019, it has a total debt of MXN$8.2 billion, 21% of which is in Mexican

pesos and 79% in foreign currency. 11% of Lamosa’s debt is due in 2019, 16% in 2020, and

73% in 2021. At this moment, Lamosa has a credit rating of AA- (Fitch). The debt structure

is as follows:

$2.0

$2.5

$1.8 $2.0

$1.2 $1.2

$2.0 $1.9

$2.3

$1.7

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Cash from operating activities (billions MXN)

-

50

100

150

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Working Capital (days sales/cost)

Accts. Rec. Inventories Accts Pay.

21% 20% 22% 23% 28%23% 24% 23% 23% 24%

66% 63% 62% 60% 59% 60% 59% 59% 61% 60%

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Operating Expenses & COGS / Revenues

Opearting Exp. COGS

Figure 7

Figure 8

Figure 9

Source: Capital IQ

Figure 10

Source: Capital IQ

$28 $106 $87 $184 $423

$185

$926

$1,621

$420

$715

20

09

20

10

201

1

20

12

20

13

20

14

20

15

20

16

20

17

20

18

Capex (millions MXN)

Figure 11

Source: Capital IQ

$1.5 $1.8 $1.7

$2.0 $1.7 $1.9

$2.2

$2.8 $3.4 $3.3

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

EBITDA (billions MXN)

Issued in USD

MXN$6.12 billion at “3 months LIBOR” + 2.15% with maturity in 2021



Issued in MXN

MXN$1.75 billion at “28 days TIIE” + 2.00% with maturity in 2021

MXN$0.10 billion at “28 days TIIE” + 1.75% with maturity in 2021

Even though, Cerámica San Lorenzo was acquired issuing debt, Lamosa’s equity has been

increasing throughout the years. In 2007, equity represented 27% of total assets, in 2016,

year of the acquisition of Cerámica San Lorenzo, equity represented 32% of total assets and

in 2018 this number increased to 41%.

Profitability

For the last ten years, Lamosa has had an average ROE of 8.8%, in 2018 it was 15.1% (figure

13). The highest ROE of the last ten years was 21.1% in 2017 and the lowest was 9.8% in

2009. Lamosa has been well above the global average of the industry, and it has also

outperformed Interceramic (1.52%) which is one of its main competitors (similar markets

and regions).

First Quarter 2019

The company reported total net sales of MXN$4,458 million, which represented an increase of 4.72% against 1Q18. Despite the

uncertainty in Mexico, the increase in sales was mainly driven by sales in the domestic market, as sales abroad had a negative variation

of 5.6% with respect to last year’s same period. Both, coatings and adhesives had a positive impact on total sales with a growth of

3.61% and 8.55% respectively.

Operating income was MXN$728 million which represented a negative variation of 3.45%. Even though increases above the inflation

of raw materials and inputs had a negative impact in the company margins, EBITDA margin was not significantly affected when

compared to previous year, in 1Q19 EBITDA was MXN$915 million representing a sales margin of 20.52% and an increase of 0.55%

against MXN$910 million recorded in the first quarter of 2018.

Net income for 1Q19 was MXN$393 million, this represented a decrease of MXN$420 million against 1Q18 (-51.66%). The main

factor was a negative impact on the comprehensive financing result, going from an income of MXN$374 million in 1Q18 to a cost of

MXN$68 million in 1Q19, this variation is mainly due to a lower exchange rate gain (MXN$77 million in 1Q19 versus MXN$498

million in 1Q18) and an increase in the baseline debt rates (TIIE 28 days and LIBOR 3 months).

INDUSTRY ANALYSIS

Revenues of Lamosa are directly related to the industrial and housing sectors and 68% of

their sales come from Mexico, it is extremely related to Mexican economic indicators.

The Mexican Gross Domestic Product (GDP) in 2018 registered a 2.0% growth against

prior year. The construction component of the GDP is integrated by edification (residential,

commercial, offices, etc.), infrastructure construction (bridges, highways, etc.) and

specialized construction works (prefabricated structures, foundations, land preparation).

Construction segment represents 7.0% of Mexico’s GDP and it grew 0.6% in 2018. The

edification component of the construction segment represents 4.8% of total GDP and

increased 1.4% in 2018 (figure 14).

Perspectives of the Construction Industry

For the last six years, the construction sector in México has grown in average 0.9% per year but this year the performance has

worsened, derived from the new government policy, showing a decrease of public resources allocated to the development of new

infrastructure projects. Private companies represent 77% of total investments made in infrastructure and in the construction sector but

because of the uncertainty regarding an adequate political and business climate, the private sector could be encouraged to delay their

investments. Adding up to this situation, the complex international panorama, the rectification of the TMEC agreement, US trade war

with China, and a possible deceleration of the US economy, suggest that the next years the construction industry in Mexico could be

facing some threats. Because of these reasons, the rate of growth estimated for 2019 in this industry is going to be moderate. The

2009 2012 2015 2018

ROE 9.8% 18.4% 11.3% 15.1%

Net Profit Margin 3.9% 9.1% 6.6% 7.6%

Asset Turnover 0.49 0.63 0.69 0.77

Equity Multiplier 5.1 3.2 2.5 2.6

$8.9

$7.0

$6.3

$4.8

$4.5

$4.4

$3.6

$9.3

$7.9

$7.9

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Net Debt (billions MXN)

6.0

2.4 1.7 2.4

1.8

4.0

8.4

5.2

200

9

201

1

201

3

201

5

201

7

Net Debt/EBITDA

Interest Coverage

Figure 13

Figure 12

Source: Capital IQ

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

GDP growth

Mexico GDP Construction GDP

Edification GDP

Figure 14

Source: INEGI

Burkenroad Reports


forecast of the Center for Economic Studies of the Construction Sector (CEESCO) for 2019 reflects a growth between 2.0% and 2.5%

with a downward trend.

According to the Mexican Chamber of the Construction Industry, employment in the

construction segment is projected to grow in the following years, 6.2 million in 2019, 6.3

million in 2020 and 6.5 million in 2020, this will represent a 2.4% CAGR.

Housing in Mexico

Regarding the housing market, 2018 was a year in which different factors affected the

construction and real estate sector. Because of risks associated with the new Mexican

government policies and performance of inflation, the Central Bank of Mexico

(BANXICO) decided to increase twice the interest rates (figure 15).

Additionally, according to the Federal Mortgage Institute (SHF), house prices had a

nominal average increase across the country of 9%. This derived from the increase in the

costs of inputs, mainly in the price of cement, concrete and metal rod.

According to Euromonitor, Holcim Mexico increased the prices of cement by 7% in mid-2018, after a 10% increase at the beginning

of the year. Likewise, Cemex announced a 5% increase for the ready mix and aggregates, including sand and limestone. These

increases as well as other inputs represented an increase in the cost of construction materials of around 27% year-over-year. It is

expected that costs will continue to increase for the housing sector in the short term in Mexico.

Even with these factors, the construction and real estate industry maintained certain level of dynamism in 2018, mainly due to the

change in the subsidized mortgage financing policy by increasing the maximum credit limits. During the first semester of 2018, the

government granted loans for MXN$70 billion, an increase of 3.9% in real terms against its equivalent to the same semester in last

year.

According to data from the National Institute of Statistics and Geography (INEGI), the most recent National Housing Survey (2017)

showed that the number of houses in the country reached 34.1 million units, averaging a household size of 3.6 people per house. Based

on estimates from the National Population Council (CONAPO), by the year 2025 the population in Mexico is expected to be 133

million, representing an increase of 2.6 million houses, these will represent a 2017-25 compounded annual growth rate of 1.0%.

Mortgage Sector in México

According to data from the National Housing Commission (CONAVI) 1,227,371 loans were

placed in 2018, which represented an investment of more than MXN$363,364 million. In this

regard, Mexican Housing state institution (INFONAVIT), the largest mortgage lender in

Mexico, placed 538,517 loans, this represents 7.3% more than planned.

Even though the number of mortgages has decreased since 2013 at an annual rate of 4.9%,

the amount in Mexican pesos has increased by 4.7% annually. The number of loans issued

for house improvements has had an annually decreased of 9.5% since 2013 but the amount

in Mexican pesos has maintained the same level (figures 16 and 17).

Mortgage rates are at a competitive level despite increases in reference rates. According to

data from the Central Bank Of Mexico (BANXICO), the average interest rate went from

10.79% in January 2018 to 10.55% in October 2018, a decrease of 24 bp, due to greater

competition among the main players in order to increase market share.

For this year, estimates of SHF expect that the demand for mortgages will contract by 7.1%

in absolute terms, mainly because of a possible rise in inflation and the expectation that

BANXICO will not decrease interest rates.

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

2009 2010 2011 2012 2013 20142015 2016 2017 2018

Banxico Interest Rate & Inflation

Inflation Banxico Interest Rate

-

100

200

300

400

$-

$5

$10

$15

2013 2014 2015 2016 2017 2018

Thousa

nd

Bil

lio

n M

xn

Remodeling Loans

Mxn # Remodeling Loans

-

50

100

150

$-

$50

$100

$150

2013 2014 2015 2016 2017 2018

Tho

usa

nd

Bil

lio

n M

xn

Mortgages

Mxn # Mortgages

Figure 15

Source: INEGI

Source: CNBV

Figure 16

Source: CNBV

Figure 17

Consumer Credit and Jobs in the Construction Sector

According to BANXICO, consumer credit continued with a downward trend, especially due

to factors such as uncertainty in the local economic performance. According to the Mexican

Banking and Securities Committee (CNBV), in February of 2019 the growth in consumer

financing remained low compared to others, it had a real growth of 2.4%. This indicator could

be anticipating the deceleration environment in the country.

Argentina, Chile, Peru and Colombia

This countries in South America represent an important market for Lamosa operations, given

that represent 30% of total revenue.

Chile, Peru and Colombia have similar economic indicators between each other. Out of the

three countries, Peru is the one with more economic strength with an average GDP growth in

the last 10 years of 4.8% and average inflation of 3.1%. Most of its economic strength comes

from tourism and exporting raw materials specially minerals (Figure 18)

Chile and Colombia have had similar economic performance in the last years with an average

GDP growth of 3.1% and 3.5% respectively and a 3.3% and 4.1% in inflation rate. Chile’s

lending interest rate (bank rate that usually meets the short- and medium-term financing

needs of the private sector) is one of the lowest of the region with a rate of 4.2% in 2018 and

Colombia’s is one of the highest with 12.1% (Mexico has an average 8.1%).

Argentina is experiencing important economic difficulties with a devaluation of the

Argentine peso by 50%, inflation of 47% in 2018 and high interest rates levels of 45%. This

macro-economic instability will slow growth and according to the latest construction activity

data published by the National Institute of Statistics and Censuses of Argentina (INDEC),

the trend is towards a sharp slowdown (figure 19).

VALUATION

Model Description

For the valuation process of the Lamosa stock price, the methodologies used were Discounted

Cash Flow, Dividend Discount Model and Relative Valuation. The results from the different

methodologies are shown in figure 20.

Relative valuation was discarded mainly because industry peers’ EV/EBITDA multiples

range from 4.8x to 20.5x with a median of 7.3x. Furthermore, many peers have low liquidity,

making it difficult to obtain a meaningful EV/EBITDA multiple valuation.

Even though dividend discount model valuation resulted in a price per share close to the current stock price, it was discarded due to

the fact that this methodology does not capture the current and future financial situation of the company nor economic trends, and

only bases it results on dividends paid in the past.

The model that best represents Lamosa’s intrinsic value is Discounted Cash Flow and it was supported on the following assumptions.

Assumptions

Revenues: In 2018 the company had a negative growth in the tile segment of -3.6%. Based on this information and in the current

economic situation of the countries in which Lamosa has presence, using econometrics tools, it was estimated a decrease in sales for

2019 of -3.0% for Mexico and an increase of 2.0% for the rest of the regions; expecting a slow recovery from 2020 to 2023 at a CAGR

of 1.4%.

Even though the average growth YOY in the adhesives business unit for the last ten years has been 8.7% and last year’s growth was

7.6%, an increase of 2.0% and 3.0% was estimated for Mexico and the rest of the countries respectively for 2019. The CAGR for the

years 2020 until 2023 is 3.5%.

MXN/Share

Relative Valuation $ 43.54

Dividend Discount Model $ 29.72

Discounted Cash Flow $ 30.66

-10%

0%

10%

20%

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

GDP Growth

Argentina Chile

Colombia Peru

Source: World Bank

Figure 19

Source: World Bank

0%

20%

40%

60%

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Inflation Rate

Argentina Chile

Colombia Peru

Figure 18

Figure 20

Consolidated revenues are expected to decrease -0.7% in 2019 and will gradually recover until reaching a 2.5% growth in 2023,

resulting in a CAGR 2019-2023 of 1.6%.

Gross Margin: The average of the last ten years is 38.7%, however the last 3 years the margin has fallen from 40.8% in 2016 to 39.6%

in 2018. For 2019 our estimates consider the increases in inputs and also the impossibility of increasing prices due to a weak Mexican

economy. Based on this, the gross margin is expected to shrink to 39.0% and 38.6% in 2020. A recovery in revenues is expected in

2021, therefore the gross margin is expected to move up to 38.9% and in 2023 the margin could get to 39.5%, reaching similar levels

than in 2018.

Operating Expenses: For the last 5 years, the ratio between operating expenses and revenues has been 23.5% on average. Since the

acquisition of Cerámica San Lorenzo, this ratio slightly decreased to 23.3%. For the following years it is expected to stabilize, mainly

because of the execution of synergies generated from this acquisition.

EBITDA: The average margin in the last ten years has been 20.5% and it has decreased from 20.9% in 2016 to 18.5% in 2018. Due

to lower revenue scenario and a gross margin reduction in 2019, EBITDA margin could decrease to a level of 18.1%. For the following

years a recovery is expected and it will reach similar levels to that of 2017.

Working Capital: Considering the transaction of Cerámica San Lorenzo, the working capital was estimated based on the improvements

in accounts receivables, level of inventories and days payables outstanding; reflecting a higher cash from operations and free cash

flows.

Capital Expenditure: Based on economic assumptions previously stated, no future acquisitions are expected in the next years, so Capex

estimated was calculated only for maintenance purposes. Excluding acquisition investments, the average capex to revenue ratio for

the last 10 years has been 3.0%. Maintaining this percentage for the next 5 years will result in an average of MXN$530 million per

year.

Terminal value and Exit Multiple: An exit EV/EBITDA multiple of 5.6x is obtained by assuming a 2.25% perpetuity growth rate.

This multiple is consistent with Lamosa’s current EV/EBITDA multiple.

WACC

The method used to calculate the Cost of Equity was the Capital Asset Pricing Model,

obtaining a value of 16.27%. Due to the fact that 80% of EBITDA is generated in Mexico,

the risk-free rate used was the 10-year Mexican Bond rate of 7.68% (figure 21).

Market risk premium (MRP) was obtained by calculating the average from the differences

between the returns of IPC (Mexican Stock Exchange representative index) and the 10-year

Mexican bond since 2001, which resulted in 6.18%

In the case of the beta, it is not representative given its low liquidity stock. In order to get an

adequate beta, the median unlevered raw beta from nine Lamosa’s competitors was obtained

and then based on the company´s D/E ratio it was re levered obtaining a beta of 1.07.

As a result of its low trading volume, a liquidity premium of 2.0% was applied. Lamosa’s

compounded cost of debt is 10.19% before taxes and 7.14% after applying tax rate. The

resulting Weighted Average Cost of Capital used was 12.38% (figure 21).

Sensitivity Analysis

WACC 12.38%

Cost of Equity 16.27%

We 57%

Cost of Debt 7.14%

Wd 43%

Cost of Equity 16.27%

Risk Free Rate 7.68%

Beta 1.07

MRP 6.18%

Liquidity Premium 2.00%

Figure 21

5.8 1.75% 2.00% 2.25% 2.50% 2.75%

11.4% 6.1 6.3 6.4 6.5 6.7

11.9% 5.8 6.0 6.1 6.2 6.3

12.4% 5.6 5.7 5.8 5.9 6.0

12.9% 5.3 5.4 5.5 5.6 5.7

13.4% 5.1 5.2 5.3 5.4 5.5

EV/EBI TDA (2018)

Perpetuity Growth

WA

CC

30.66$ 1.75% 2.00% 2.25% 2.50% 2.75%

11.4% 33.65$ 34.73$ 35.86$ 37.06$ 38.32$

11.9% 31.16$ 32.12$ 33.13$ 34.19$ 35.31$

12.4% 28.90$ 29.76$ 30.66$ 31.61$ 32.61$

12.9% 26.84$ 27.62$ 28.43$ 29.28$ 30.17$

13.4% 24.96$ 25.66$ 26.40$ 27.16$ 27.97$

SHARE PRI CE

WA

CC

Perpetuity Growth

Figure 22

INVESTMENT THESIS

Market Positioning: In terms of market share Grupo Lamosa is the third biggest company worldwide and the market leader in Mexico.

Diversification: During the last five years sales have had a CAGR of 18.6% mainly through the acquisition of Cerámica San Lorenzo.

Export sales are expected to continue growing through increasing its participation in South American countries.

Profitability: Since 2014, Lamosa’s net income has had a 32.3% CAGR increase mainly impacted by the acquisition of Cerámica San

Lorenzo and in terms of net margin it went from 4.9% in 2014 to 7.6% in 2018. For 2019 a decrease in net income of 18.6% and a net

margin of 6.2% are expected, but with an upward tendency for the next years. In terms of ROA, 2018 reported a 5.9%, 100 bp above

average of the last 5 year. Even though Lamosa’s operating cash flow for the past years has been stable, it might experience a decrease

in 2019 but it will have upward trend for the years to come.

Leverage and Liquidity: Grupo Lamosa has maintained an average Net Debt/EBITDA multiple of 2.4x for the last 5 years with an

expected downward trend for the next five years until it reaches 1.5x, turning into less liabilities in the event of a slowdown of the

economy.

Operational Efficiency: Grupo Lamosa average gross margin and EBITDA margin have been stable with a 40% and 19% respectively.

This are one of the highest in the industry.

INVESTMENT RISKS

Macroeconomic and political factors: 68% of Lamosa’s revenue are generated in Mexico, this could be a risk given the macroeconomic

outlook. The outlook for the next years is not clear mainly because of an important level of uncertainty regarding the current Mexican

government and its economic and social policies. Construction activity for the 1Q19 decreased by 3.2% versus 1Q18. In May 2019,

employment generation decreased 88% against the prior month, the construction sector was the second to last sector in the job

generation category. Plans to restore PEMEX finances have raise doubts among investors and ratings on Mexico’s bonds could be

lowered.

Low Liquidity: The market may not reflect its intrinsic value due to the fact that Lamosa’s shares have low trading volume.

Input Price Increase: Both gas and energy are essential for the operation of the company and represent the most significant cost of the

company.

Market Risks. Most of the company's debt is in US dollars, the fluctuation in the exchange rate could make it difficult to fulfill its

obligations. Rates in Mexico are expected to decrease but it is still uncertain if the Central Bank of Mexico will do so.

INVESTMENT SUMMARY

According to the fundamental analysis and considering the uncertainty of the industry and macroeconomic outlook, we are issuing a

MARKET PERFORM recommendation, with a target price of MXN$30.66 and it represents a 6.82% upside based on its current

stock price of MXN$28.70. Given that the company has been paying dividends in the last years it is expected an additional return

from dividends which will represent a total return of 9.03%.

Burkenroad Reports


Financial Statements

Income Statement

Lamosa S.A.B. de C.V.

Thousands MXN

2015 2016 2017 2018 2019e 2020e 2021e 2022e 2023e

Net Revenues 10,636,180$ 13,619,256$ 17,970,966$ 17,727,029$ 17,604,363$ 17,679,707$ 17,936,206$ 18,335,842$ 18,790,258$

Tile 7,584,720$ 10,164,769$ 14,200,843$ 13,687,942$ 13,482,623$ 13,473,452$ 13,601,620$ 13,825,646$ 14,054,551$

Adhesives 3,020,929$ 3,454,351$ 3,753,467$ 4,038,942$ 4,121,740$ 4,206,255$ 4,334,585$ 4,510,197$ 4,735,707$

Real Estate 30,531$ 136$ 16,656$ 145$ -$ -$ -$ -$ -$

COGS 6,310,074$ 8,066,831$ 11,008,643$ 10,701,241$ 10,734,291$ 10,860,739$ 10,964,004$ 11,153,473$ 11,374,121$

Gross Profit 4,326,106$ 5,552,425$ 6,962,323$ 7,025,788$ 6,870,072$ 6,818,968$ 6,972,202$ 7,182,369$ 7,416,137$

Gross Margin 40.7% 40.8% 38.7% 39.6% 39.0% 38.6% 38.9% 39.2% 39.5%

SG&A Expenses 2,566,781$ 3,192,117$ 4,073,865$ 4,243,313$ 4,141,979$ 4,159,706$ 4,220,055$ 4,314,083$ 4,420,998$

Other Op. Expense (Income) 28,967$ 31,402$ 84,528-$ 50,983-$ 66,717-$ 58,925-$ 63,877-$ 63,206-$ 65,846-$

Operating Income (EBI T) 1,788,292$ 2,391,710$ 2,803,930$ 2,731,492$ 2,661,376$ 2,600,337$ 2,688,269$ 2,805,081$ 2,929,293$

EBIT Margin 16.8% 17.6% 15.6% 15.4% 15.1% 14.7% 15.0% 15.3% 15.6%

Depreciation 340,282$ 420,652$ 562,030$ 514,791$ 499,611$ 514,313$ 529,228$ 544,475$ 560,100$

Amort. of Intangibles. 25,668$ 29,916$ 33,170$ 31,553$ 31,129$ 31,129$ 31,129$ 31,129$ 31,129$

EBITDA 2,154,242$ 2,842,278$ 3,399,130$ 3,277,836$ 3,192,116$ 3,145,778$ 3,248,625$ 3,380,684$ 3,520,522$

EBITDA Margin 20.3% 20.9% 18.9% 18.5% 18.1% 17.8% 18.1% 18.4% 18.7%

Net Interest Expenses 239,152-$ 343,370-$ 672,528-$ 607,237-$ 765,016-$ 698,032-$ 636,913-$ 581,146-$ 530,262-$

Currency Exchange Gains (Loss) 399,418-$ 771,973-$ 217,457$ 72,056-$ -$ -$ -$ -$ -$

Other Expenses -$ -$ -$ 31,188$ -$ -$ -$ -$ -$

I ncome Before Taxes 1,149,722$ 1,276,367$ 2,348,859$ 2,083,387$ 1,896,360$ 1,902,305$ 2,051,356$ 2,223,935$ 2,399,031$

IBT Margin 10.8% 9.4% 13.1% 11.8% 10.8% 10.8% 11.4% 12.1% 12.8%

Income Tax Expense 383,993$ 642,946$ 671,560$ 728,017$ 798,413$ 780,101$ 806,481$ 841,524$ 878,788$

Earnings from Cont. Op. 765,729$ 633,421$ 1,677,299$ 1,355,370$ 1,097,948$ 1,122,204$ 1,244,875$ 1,382,411$ 1,520,243$

Earnings (loss) of Disc. Op. 64,376-$ -$ -$ -$ -$ -$ -$ -$ -$

Net Income to Company 701,353$ 633,421$ 1,677,299$ 1,355,370$ 1,097,946$ 1,122,204$ 1,244,875$ 1,382,411$ 1,520,243$

Minority Int. in Earnings -$ -$ -$ -$ -$ -$ -$ -$ -$

Net I ncome 701,353$ 633,421$ 1,677,299$ 1,355,370$ 1,097,946$ 1,122,204$ 1,244,875$ 1,382,411$ 1,520,243$

Net Margin 6.6% 4.7% 9.3% 7.6% 6.2% 6.3% 6.9% 7.5% 8.1%

Burkenroad Reports


Balance Sheet


Thousands MXN

2015 2016 2017 2018 2019e 2020e 2021e 2022e 2023e

ASSETS

CURRENT

Cash & Equivalents 1,371,456$ 538,866$ 713,523$ 360,130$ 651,128$ 798,376$ 1,073,262$ 1,481,503$ 2,037,642$

Net Accounts receivables 2,600,669$ 3,384,709$ 3,497,319$ 3,761,841$ 3,580,892$ 3,596,218$ 3,648,392$ 3,729,682$ 3,822,115$

Net Inventories 1,476,496$ 2,679,417$ 2,468,688$ 2,480,041$ 2,447,432$ 2,476,263$ 2,499,807$ 2,543,007$ 2,593,315$

Other Current Assets 376,729$ 211,480$ 140,935$ 91,532$ 88,400$ 89,048$ 90,158$ 91,984$ 94,077$

TOTAL CURRENT ASSETS 5,825,350$ 6,814,472$ 6,820,465$ 6,693,544$ 6,767,853$ 6,959,905$ 7,311,620$ 7,846,176$ 8,547,148$

NON CURRENT

Gross Property, Plant & Equipment 12,417,232$ 16,960,260$ 17,180,284$ 17,320,434$ 17,843,253$ 18,368,309$ 18,900,983$ 19,445,526$ 20,003,564$

Accumulated Depreciation 7,657,813-$ 7,867,122-$ 8,278,513-$ 8,454,606-$ 8,954,217-$ 9,468,530-$ 9,997,757-$ 10,542,232-$ 11,102,332-$

Goodwill 382,636$ 879,445$ 803,384$ 705,090$ 705,090$ 705,090$ 705,090$ 705,090$ 705,090$

Other Intangibles 4,036,617$ 5,198,268$ 5,119,793$ 5,000,006$ 5,000,006$ 5,000,006$ 5,000,006$ 5,000,006$ 5,000,006$

Amortization Other Intangibles 31,129-$ 62,258-$ 93,387-$ 124,516-$ 155,645-$

Deffered Taxes 573,043$ 705,207$ 1,150,823$ 1,209,230$ 1,164,741$ 1,180,018$ 1,205,113$ 1,240,205$ 1,284,528$

Other Non Current Assets 198,501$ 215,201$ 303,114$ 310,428$ 310,922$ 311,151$ 311,225$ 311,226$ 311,182$

TOTAL CURRENT ASSETS 9,950,216$ 16,091,259$ 16,278,885$ 16,090,582$ 16,038,666$ 16,033,787$ 16,031,273$ 16,035,305$ 16,046,393$

TOTAL ASSETS 15,775,566$ 22,905,731$ 23,099,350$ 22,784,126$ 22,806,519$ 22,993,692$ 23,342,893$ 23,881,481$ 24,593,541$

LIABI LI TIES

SHORT TERM

Net Accounts Payable 1,104,941$ 1,843,972$ 1,942,369$ 1,815,938$ 1,857,754$ 1,879,638$ 1,897,510$ 1,930,301$ 1,968,488$

Curr. Port. of LT Debt 448,987$ 247,723$ 461,595$ 875,472$ -$ -$ -$ -$ -$

Curr. Port. of Cap. Leases 36,474$ 51,566$ 52,328$ 51,528$ -$ -$ -$ -$ -$

Short-term Borrowings -$ 179,262$ -$ 12,558$ -$ -$ -$ -$ -$

Other Short Term Liabilities 1,522,559$ 1,916,709$ 1,957,044$ 1,699,819$ 1,699,819$ 1,699,819$ 1,699,819$ 1,699,819$ 1,699,819$

TOTAL SHORT TERM LI ABI LITI ES 3,112,961$ 4,239,232$ 4,413,336$ 4,455,315$ 3,557,573$ 3,579,457$ 3,597,329$ 3,630,120$ 3,668,307$

LONG TERM

Long-Term Debt 4,352,983$ 9,318,689$ 8,024,381$ 7,270,592$ 7,504,013$ 6,846,972$ 6,247,460$ 5,700,441$ 5,201,319$

Capital Leases 100,193$ 80,979$ 48,091$ 13,954$ -$ -$ -$ -$ -$

Def. Tax Liability, Non-Curr. -$ 344,258$ 337,289$ 315,041$ 293,572$ 276,314$ 261,089$ 247,657$ 235,657$

Other LongTerm Liabilities 1,738,367$ 1,696,882$ 1,618,478$ 1,396,878$ 1,315,794$ 1,240,195$ 1,171,032$ 1,109,889$ 1,055,087$

TOTAL LONG TERM LI ABI LITI ES 6,191,543$ 11,440,808$ 10,028,239$ 8,996,465$ 9,113,379$ 8,363,481$ 7,679,582$ 7,057,987$ 6,492,062$

TOTAL LI ABI LITI ES 9,304,504$ 15,680,040$ 14,441,575$ 13,451,780$ 12,670,952$ 11,942,938$ 11,276,911$ 10,688,107$ 10,160,369$

EQUITY

Common Stock 203,028$ 203,053$ 203,053$ 203,053$ 203,053$ 203,053$ 203,053$ 203,053$ 203,053$

Aditional Paid in Capital 139,386$ 139,386$ 139,386$ 139,386$ 139,386$ 139,386$ 139,386$ 139,386$ 139,386$

Retained Earnings 6,373,332$ 6,855,140$ 8,302,784$ 9,390,212$ 10,193,433$ 11,108,620$ 12,123,848$ 13,251,240$ 14,491,038$

Comprehensive Inc. and Other 244,684-$ 28,112$ 12,552$ 400,305-$ 400,305-$ 400,305-$ 400,305-$ 400,305-$ 400,305-$

TOTAL EQUI TY 6,471,062$ 7,225,691$ 8,657,775$ 9,332,346$ 10,135,567$ 11,050,754$ 12,065,982$ 13,193,374$ 14,433,172$

EQUITY + LI ABI LITI ES 15,775,566$ 22,905,731$ 23,099,350$ 22,784,126$ 22,806,519$ 22,993,692$ 23,342,893$ 23,881,481$ 24,593,541$

Burkenroad Reports


Cash Flow


Thousands MXN

2015 2016 2017 2018 2019e 2020e 2021e 2022e 2023e

Opearating Activities

Income (loss) before taxes 1,149,694$ 1,276,367$ 2,348,859$ 2,083,377$ 1,896,360$ 1,902,305$ 2,051,356$ 2,223,935$ 2,399,031$

Items related to investment activities

Depreciation and amortization 365,950$ 450,568$ 595,200$ 546,344$ 530,740$ 545,442$ 560,357$ 575,604$ 591,229$

Other reserves 143,803$ -$ -$ -$ -$ -$ -$ -$ -$

PP&E retire 36,000$ 36,000$ 24,065$ 35,733$ -$ -$ -$ -$ -$

Others -$ 191,811$ 195,667$ 141,521$ -$ -$ -$ -$ -$

Items related to financing activities

Interest income 17,148-$ 11,745-$ 16,819-$ 18,529-$ -$ -$ -$ -$ -$

Interest expenses 247,203$ 355,115$ 689,347$ 625,766$ 765,016$ 698,032$ 636,913$ 581,146$ 530,262$

Gain due to monetary position -$ -$ -$ 31,188-$ -$ -$ -$ -$ -$

Foreign exchange (Gain) loss 399,418$ 771,973$ 217,457-$ 72,056$ -$ -$ -$ -$ -$

Sum 2,324,920$ 3,070,089$ 3,618,862$ 3,455,080$ 3,192,116$ 3,145,778$ 3,248,625$ 3,380,684$ 3,520,522$

Decrease (increase) in accounts receivables 71,754-$ 169,024-$ 329,139-$ 93,403-$ 180,949$ 15,326-$ 52,174-$ 81,290-$ 92,432-$

Decrease (increase) in inventory 87,271-$ 45,897$ 7,692$ 141,466-$ 32,609$ 28,830-$ 23,544-$ 43,199-$ 50,308-$

(Decrease) Increase in accounts payables 165,869$ 243,335$ 126,959$ 47,675-$ 41,816$ 21,884$ 17,872$ 32,791$ 38,187$

Other liabilities 106,829-$ 54,988$ 123,798$ 194,831$ 78,447-$ 76,476-$ 70,346-$ 62,970-$ 56,851-$

Income tax (paid) 225,518-$ 1,313,647-$ 1,208,906-$ 1,672,854-$ 775,393-$ 812,636-$ 846,801-$ 890,048-$ 935,111-$

Cash flow from operating activities 1,999,417$ 1,931,638$ 2,339,266$ 1,694,513$ 2,593,650$ 2,234,395$ 2,273,631$ 2,335,968$ 2,424,006$

Property, Plant and Equipment 926,045-$ 1,620,714-$ 420,238-$ 715,317-$ 522,819-$ 525,056-$ 532,674-$ 544,542-$ 558,038-$

Interest income 17,148$ 11,745$ 16,650$ 18,515$ -$ -$ -$ -$ -$

Acquisition of intangible assets 48,882-$ 15,994-$ 19,244-$ 41,527-$ -$ -$ -$ -$ -$

(Acquisition) Disposition of business net of cash received or delivered 544,735$ 4,763,501-$ -$ -$ -$ -$ -$ -$ -$

Net cash flow from financing activities 413,044-$ 6,388,464-$ 422,832-$ 738,329-$ 522,819-$ 525,056-$ 532,674-$ 544,542-$ 558,038-$

Cash flow to be used in financing activities 1,586,373$ 4,456,826-$ 1,916,434$ 956,184$ 2,070,831$ 1,709,338$ 1,740,957$ 1,791,425$ 1,865,968$

Actividades de Financiamiento

Debt Acquisition -$ 5,034,650$ 1,274,639$ 2,336,216$ -$ -$ -$ -$ -$

Capital payments to debt 237,221-$ 836,570-$ 2,236,200-$ 2,741,605-$ 720,091-$ 657,041-$ 599,511-$ 547,019-$ 499,123-$

Net Interest Expenses 205,759-$ 312,396-$ 647,153-$ 543,091-$ 765,016-$ 698,032-$ 636,913-$ 581,146-$ 530,262-$

Movements in treasury shares -$ -$ -$ -$ -$ -$ -$ -$ -$

Payment of dividends 102,791-$ 143,826-$ 217,846-$ 254,112-$ 294,725-$ 207,017-$ 229,647-$ 255,019-$ 280,445-$

Expenses paid for obtaining loans -$ 135,044-$ -$ -$ -$ -$ -$ -$ -$

Cash flow from financing activities 545,771-$ 3,606,814$ 1,826,560-$ 1,202,592-$ 1,779,831-$ 1,562,090-$ 1,466,071-$ 1,383,183-$ 1,309,829-$

Cash and Cash Equivalents

Net increase (decrease) in cash and cash equivalents 1,040,602$ 850,012-$ 89,874$ 246,408-$ 291,000$ 147,248$ 274,885$ 408,242$ 556,139$

Changes in the value of cash 40,585$ 17,422$ 84,783$ 106,995-$ -$ -$ -$ -$ -$

Cash and sash equivalents at the beginning of period 290,277$ 1,371,464$ 538,874$ 713,531$ 360,128$ 651,128$ 798,376$ 1,073,262$ 1,481,503$

Cash and cash equivalents end of period 1,371,464$ 538,874$ 713,531$ 360,128$ 651,128$ 798,376$ 1,073,262$ 1,481,503$ 2,037,642$

Burkenroad Reports


Ratios


2014 2015 2016 2017 2018 2019e 2020e 2021e 2022e 2023e

Productivity Ratio

Receivable Turnover 3.08 3.84 4.55 5.22 4.88 4.80 4.93 4.95 4.97 4.98

Inventory Turnover 3.90 4.44 3.88 4.28 4.32 4.36 4.41 4.41 4.42 4.43

Accounts Payable 5.52 6.17 5.47 5.81 5.69 5.84 5.81 5.81 5.83 5.83

Working Capital 2.71 3.35 3.79 4.36 4.20 4.10 4.23 4.25 4.27 4.28

Fixed Asset Turnover 1.89 2.31 1.97 2.00 2.00 1.98 1.99 2.01 2.06 2.11

Total Asset Turnover 0.60 0.69 0.70 0.78 0.77 0.77 0.77 0.77 0.78 0.78

Days Sales Outstanding 118 88 89 70 76 73 73 73 73 73

Days Inventory Outstanding 91 84 120 81 83 82 82 82 82 82

Days Payable Outstanding 63 63 82 64 61 62 62 62 62 62

Liquidity Ratio

Current Ratio 2.46 1.87 1.61 1.55 1.50 1.90 1.94 2.03 2.16 2.33

Quick Ratio 1.86 1.40 0.98 0.99 0.95 1.21 1.25 1.34 1.46 1.62

Cash Ratio 0.13 0.44 0.13 0.16 0.08 0.18 0.22 0.30 0.41 0.56

Net Working Capital 3,338,604$ 2,712,389$ 2,575,240$ 2,407,129$ 2,238,229$ 3,210,280$ 3,380,448$ 3,714,290$ 4,216,056$ 4,878,841$

Long Term Solvency

Total Liabilities/Total Assets 0.60 0.59 0.68 0.63 0.59 0.56 0.52 0.48 0.45 0.41

LT Debt/Equity 0.74 0.67 1.29 0.93 0.78 0.74 0.62 0.52 0.43 0.36

Profitability

Return on Assets 2.9% 4.4% 2.8% 7.3% 5.9% 4.8% 4.9% 5.3% 5.8% 6.2%

Retunr on Equity 7.4% 10.8% 8.8% 19.4% 14.5% 10.8% 10.2% 10.3% 10.5% 10.5%

Gross Margin 40.0% 40.7% 40.8% 38.7% 39.6% 39.0% 38.6% 38.9% 39.2% 39.5%

Operation Margin 17.5% 16.8% 17.6% 15.6% 15.4% 15.1% 14.7% 15.0% 15.3% 15.6%

EBITDA Margin 21.1% 20.3% 20.9% 18.9% 18.5% 18.1% 17.8% 18.1% 18.4% 18.7%

Burkenroad Reports


The Latin America Burkenroad Reports from ITESM are financial analysis of companies listed in the Mexican

Stock Exchange, and capital budgeting of medium and small companies. They are elaborated by students of both

the Master in Finance program at EGADE Business School, and the Bachelor in Finance; under the supervition

of recognized professors.

The Instituto Tecnológico y de Estudios Superiores de Monterrey (ITESM), Instituto de Estudios Superiores de

Administración de Venezuela (IESA), and Universidad de los Andes from Colombia, along with Tulane

University, started the Latin America Burkenroad Program with the support of Multilateral Investment Fund of

the Interamerican Development Bank in 2001. Actually it has been expanded to other countries, sucha are the

Universidad Catolica de Perú, EAFIT in Ecuador, ICESI in Colombia, and the Universidad del Norte, as well

as Argentina by the Universidad de Belgrano.

This program enriches human capital by providing training in financial analysis and valuation techniques, and

also intends to facilitate access of companies to financing sources by providing financial information to investors

and financial institutions.

The reports prepared by this program, evaluate financial conditions and investment opportunities in Latin

American companies. Financial reports of listed companies are distributed to national and foreign investors

through websites, publications and media recognited such as Reuters and FactSet, where EGADE Business

School is a contributor.

Business plans, evaluation of investment projects or financial diagnoses of private companies are only distributed

to beneficiary companies for future private presentations to financial institutions or potential investors.

For more information about the Burkenroad Latin America Program please visit the following websites:

https://egade.csf.itesm.mx/burkenroad/

www.latinburkenroad.org

María Concepción del Alto Hdez. Ph.D.

[email protected]

Research Director

Burkenroad Reports, Mexico


Tecnológico de Monterrey

Tel +52 (81) 86256000 ext. 6050

Burkenroad Reports


https://egade.csf.itesm.mx/burkenroad/

http://www.latinburkenroad.org/

, 2019 Burkenroad Reports GRUPO LAMOSA, S.A.B. DE C.V ... · Grupo Lamosa (LAMOSA) operates through two business units, wall and floor tile and adhesives. It was founded in 1890 and

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