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.
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
EGADE Business School
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
EGADE Business School
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
MXN$0.20 billion at “3 months LIBOR” + 2.00% with maturity in 2019
MXN$0.06 billion at “3 months LIBOR” + 1.90% with maturity in 2019
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
EGADE Business School
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$28.70. Given that the company has been paying dividends in the last years it is expected an additional return
from dividends which will represent a total return of 9.03%.
Burkenroad Reports
EGADE Business School
Financial Statements
Income Statement
Lamosa S.A.B. de C.V.
Thousands MXN
2015 2016 2017 2018 2019e 2020e 2021e 2022e 2023e
Net Revenues 10,636,180$ 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
EGADE Business School
Balance Sheet
Lamosa S.A.B. de C.V.
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
EGADE Business School
Cash Flow
Lamosa S.A.B. de C.V.
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
EGADE Business School
Ratios
Lamosa S.A.B. de C.V.
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
EGADE Business School
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.
Research Director
Burkenroad Reports, Mexico
EGADE Business School
Tecnológico de Monterrey
Tel +52 (81) 86256000 ext. 6050
Burkenroad Reports
EGADE Business School