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Peru Equity Guide 2020Bet on consumption in the middle of global uncertainty
Bet on consumption in the middle of global uncertainty
Management
Alberto Arispe
CEO
(511) 630 7500
aarispe@kallpasab.com
Corporate Finance Special Operations
Ricardo Carrión Miguel Rodriguez
Manager Manager
(51 1) 630 7500 (51 1) 630 7500
rcarrion@kallpasab.com mrodriguezv@kallpasab.com
Equity Research
Marco Contreras Marco Alemán Jose Inurritegui Anthony Hawkins
Head of Research Senior Analyst Analyst Assistant
(51 1) 630 7528 (51 1) 630 7527 (51 1) 630 7529 (51 1) 630 7500
mcontreras@kallpasab.com maleman@kallpasab.com jinurritegui@kallpasab.com ahawkins@kallpasab.com
Sales & Trading
Eduardo Fernandini Hernando Pastor Mayra Carrión Hilmer Calderón
Head Trader Sales Trader Sales Trader Sales Trader
(51 1) 630 7516 (51 1) 630 7511 (51 1) 630 7510 (51 1) 243 8024
efernandini@kallpasab.com hpastor@kallpasab.com mcarrion@kallpasab.com hcalderon@kallpasab.com
Rosa Torres Belon Walter León Blanca Pajuelo Mishell Morales
Sales Trader Sales Trader - Miraflores FX Sales FX Sales
(51 1) 630 7520 (51 1) 243 8024 (51 1) 630 7515 (51 1) 630 7525
rtorresbelon@kallpasab.com wleon@kallpasab.com tesoreria@kallpasab.com mmorales@kallpasab.com
Backoffice
Ramiro Misari Edilay Broncano Franklin Mujica
Head of Operations & IT Backoffice Analyst IT Analyst
(51 1) 630 7523 (51 1) 630 7500 (51 1) 630 7500
rmisari@kallpasab.com custodia@kallpasab.com asisti@kallpasab.com
Internal Control
Lissete Cuyuche
Controller
(51 1) 630 7500
lcuyuche@kallpasab.com
Accounting and Administration
Luz Quispe Juan Carlos Huisa Gema Torres
Chief Accountant Accounting Assistant Office Manager
(51 1) 630 7523 (51 1) 630 7500 (51 1) 630 7500
contadorgeneral@kallpasab.com contabilidad@kallpasab.com administracion@kallpasab.com
www.kallpasab.com 2Peru Equity Guide 2020
Bet on consumption in the middle of global uncertainty
Index
Presentation ………………………………………………...…………………………………………………………………………………………………………………………………………………………..
I. Peru: Macroeconomic Outlook 2020 ………………………………………………………………………………………………………………………………………………………………………………..
2019: GDP would close with the lowest growth since 2009 …………………………………………………..………………………………………………………………………………………………………………………………………………………………………..
Expectations for 2020 …………………………………………………..………………………………………………………………………………………………………………………………………………………………………..
Investment boosted by the mining sector …………………………………………………..………………………………………………………………………………………………………………………………………………………………………..
Fiscal Situation …………………………………………………..………………………………………………………………………………………………………………………………………………………………………..
Monetary Situation …………………………………………………..………………………………………………………………………………………………………………………………………………………………………..
Inflation …………………………………………………..………………………………………………………………………………………………………………………………………………………………………..
Exchange Rate …………………………………………………..………………………………………………………………………………………………………………………………………………………………………..
II. Metals Prices: Outlook ………………………………………………………………………………………………………………………………………………………………………………..
Gold and Silver …………………………………………………..………………………………………………………………………………………………………………………………………………………………………..
Copper ………………………………………..……………………………………………………………………………………………………………………………………………………………………..
Zinc ………………………………………...…………………………………………………………………………………………………………………………………………………………………..
Tin ………………………………….……………………………………………………………………………………………………………………………………………………………………..
III. Peruvian Equities ………………………………………………………………………………………………………………………………………………………………………………………………………
IV. Strategy: Overweighting Consumption ………………………………………………………………………………………………………………………………………………………………………………..
V. Companies under Coverage ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..
Financials
Credicorp ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..
Intercorp Financial Services ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..
Consumption
Alicorp ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..
InRetail ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..
Infrastructure
v. Cementos Pacasmayo ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..
vi. Ferreycorp ………………………………………………………………………………………………………………………………………………………………………………..………………………………………………………………………………………………………………………
Graña y Montero ………………………………………………………………………………………………………………………………………………………………………………..
Unacem ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..
Energy
ix. Enel Distribución Perú ………………………………………………………………………………………………………………………………………………………………………………..
Enel Generación Perú ……………………………………………………………………………………………………………………………………………………………………………………..
Engie Energía Perú …………………………………….……………………………………………………………………………………………………………………………………………………..
xii. Luz del Sur …………………….…………………………………………………………………………………………………………………………………………………………………………………..
Refinería La Pampilla …………………………………………………………………………………………………………………………………………………………………………………..
Mining
Buenaventura ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..
Cerro Verde ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..
Nexa Resources Perú ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..
Minsur ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..
Southern Copper ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..
Trevali ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..
Volcan ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..
www.kallpasab.com 3
xv.
xix.
Peru Equity Guide 2020
xvi.
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iv.
v.
vi.
vii.
i.
ii.
iii.
iv.
vii.
viii.
x.
xi.
i.
xiii. 39
41
53xx.
xvii.
ii. 17
37
iii.
iv.
xiv.
xviii.
5
10
11
12
14
19
21
27
29
45
47
49
51
23
31
33
35
25
4
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5
6
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13
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43
Bet on consumption in the middle of global uncertainty
Sincerely,
Marco Contreras
Head of Research
Kallpa Securities SAB
www.kallpasab.com 4
The North American market led the growth of the stock market, supported by the three reductions in the reference rate
of the US Federal Reserve (Fed). This, due to the fear of a deeper global economic slowdown, as well as the trade
tensions with China. The trade negotiations continued along 2019, while tariffs increased between both countries.
Finally, in December, the United States decided to suspend a scheduled tariff increase due to a progress within the
first phase of a trade deal that could be signed in January 2020.
For 2020 we are more optimistic. We expect an economic growth of 3.2%, which will be boosted by the recovery of the
primary sectors. Likewise, we estimate that consumption will continue to maintain a solid growth above 3.0%.
Peru Equity Guide 2020
Finally, we always recommend investing in companies with good fundamentals, overweighting companies related to
the consumer sector, which we believe have a high potential for growth in their profits.
2019 was a positive year both for developed countries and emerging economies. After a highly volatile period in 2018,
S&P 500 had a positive performance of 28.9% in 2019, while emerging economies yielded 18.2%.
We would like to present the "Peru Equity Guide 2020" developed by Kallpa SAB's Equity Research Team. In this
document you will be able to find our overview of the Peruvian market and the economy for 2020. Furthermore, we
wish to share our recommendations of the stocks we like the most from the Lima Stock Exchange (BVL) and we also
update the target prices of the 20 companies we have under coverage.
Dear Investor,
Stock markets in emerging countries also had a good year. The MSCI Emerging Markets Index rose 18.2%,
recovering the loss of 15.3% that it had in 2018. A lower risk aversion and a slightly weaker dollar benefited this
market segment.
However, despite the above, the region suffered from a greater perception of risk towards the end of 2019, due to the
various social and political conflicts that broke out in Chile, Ecuador, Bolivia and Argentina.
Peru was no stranger to this situation and the political conflict between the legislative and the executive power ended
with the decision of President Martín Vizcarra to dissolve Congress and call for parliamentary elections on January 26,
2020.
In addition to political uncertainty, the local economy had a strong slowdown, due to the lower growth of the fishing
and mining sectors, which affected the country's exports. In this context, the GDP growth estimates for 2019 were
reviewed downwards from an estimated 4.0% at the beginning of the previous year to the 2.3% we currently expect.
Due to all of the above-mentioned, the Peruvian market did not perform well during the year. The MSCI Peru Index
rose only 1.1% in 2019.
We believe that in this context the Lima Stock Exchange (BVL) can have a positive performance. However, the market
will remain quite alert to external factors, such as the development of trade negotiations between China and the United
States, the Fed's monetary policy, the US presidential elections and the latter's recent conflict with Iran.
Bet on consumption in the middle of global uncertainty
2019: GDP would close with the lowest growth since 2009
Source: BCR, Kallpa SAB Source: Ipsos
Expectations for 2020
Source: BCR, Kallpa SAB
www.kallpasab.com 5Peru Equity Guide 2020
ii.
i.
I. Peru: Macroeconomic Outlook 2020
We expect the year 2019 to close with a GDP growth of 2.3%; its lowest level since 2009 (when it grew 1.0%). This
figure, considerably lower than the previous year (2018 grew 4.0%), responds mainly to lower expected growth of
domestic demand, an adverse political environment and a slowdown in global economic growth. During the first half of
the year the local economy grew by an average of 1.8%, given the smaller progress in public investment and exports,
which we expect will recover in the second half.
Regarding the economic sectors, we highlight that fishing and mining would be the drivers of low growth. This, due to
a lower than expected anchovy catching and problems in the production of the Las Bambas and Cerro Verde mines. In
the midst of lower economic activity, the Central Bank decided to make 2 cuts of 25 basis points in its reference rate,
with the aim of stimulating consumption and investment.
In the political sphere, tensions between the Legislative and the Executive Power were maintained. After having
rejected two confidence votes proposed by the Executive, President Martin Vizcarra decided to dissolve the Congress
of the Republic. In this regard, he also called for extraordinary parliamentary elections, which will take place on
January 26. The new Congress will begin work in March 2020, to complete its mandate together with the president
until July 2021.
By 2020, we expect an acceleration of the economy, which would reach a growth of 3.2%. This would be boosted by a
recovery of the primary sectors, since we estimate a greater anchovy catching and a greater mining production. A
global scenario with lower trade tensions between China and the United States would also be beneficial and favor
commodity prices.
-1%
0%
1%
2%
3%
4%
5%
6%
7%
3Q14 1Q15 3Q15 1Q16 3Q16 1Q17 3Q17 1Q18 3Q18 1Q19 3Q19
Chart N° 1: GDP vs. Domestic Demand
GDP Domestic Demand
9.1%
1.0%
8.5%
6.5%6.0% 5.8%
2.4%
3.3%
4.0%
2.5%
4.0%
2.3%
3.2% 3.2%
0%
2%
4%
6%
8%
10%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019e 2020e 2021e
Chart N° 3: GDP Variation
11%
8%
4%
4%
3%
3%
16%
34%
17%
Chart N° 2: Voting Intention 2020
Acción Popular
Fuerza Popular
Partido Morado
Alianza Para el Progreso
Somos Perú
Frente Amplio
Others
Blank Vote
Don't know
Bet on consumption in the middle of global uncertainty
Investment boosted by the mining industry
Source: BCR, Kallpa SAB Source: BCR, Kallpa SAB
Table N° 1: Portfolio of Main Mining Projects
Project Company
Quellaveco Anglo American
Los Chancas Southern Copper
Michiquillay Southern Copper
Pampa de Pongo Jinzhao Mining
Yanacocha Sulphides Minera Yanacocha
Haquira Antares
Mina Justa Minsur
Toromocho Exp. Chinalco
Others
Total
Source: BCR Source: MINEM
www.kallpasab.com 6
Metal
We believe that private investment can maintain its dynamism in 2019 and 2020. We expect growth of 4.2% and
3.5%, respectively. This progress would be based mainly on the execution of various projects, especially in the mining
sector. The non-mining sector would also see greater dynamism, as business confidence recovers.
During 2018, it began the construction of the Minsur Mina Justa copper project, which has an investment of USD
1,600 MM. Likewise, the expansion of the Toromocho mine from Chinalco (USD 1,300 MM) was also executed.
Additionally, in 2019 the work of the Anglo American Quellaveco project (USD 5,300 MM) began, which has given an
additional boost to the investment and it is the reason why we expect a 29% growth in the mining investment of 2019.
For the following years, the growth would be more moderate. We estimate that work will continue in Quellaveco during
2020, in addition to the last stage of Mina Justa, which should start production towards the end of the year.
By 2021 we expect a recovery in metal prices, which could trigger the construction of new projects that are currently in
the USD 57,772 MM portfolio of the Ministry of Energy and Mines. Among the next projects could be Pampa de Pongo
(USD 2,200 MM), Zafranal (USD 1,157 MM), Corani (USD 585 MM), Coroccohuayco (USD 590 MM), among others.
Cu 2,500
Fe 2,200
Cu
Peru Equity Guide 2020
57,772
38,057
Cu 2,100
Cu 1,860
Cu 1,600
iii.
5,300
Cu 2,800
1,355
CAPEX (USD MM)
Cu
Infrastructure projects: The most important is the Line 2 of the Lima Metro, which has an investment of USD 5,700 MM
and has currently reached 27.8% progress. We also expect in 2020 the construction of the Jorge Chavez Airport
expansion (USD, 1500 MM) to begin, as well as other projects such as the Chancay Port Terminal or the Salaverry
Port.
Mining Investment: The main catalyst for private investment growth for 2019 will be the development of mining
projects. Chart 6 shows the high correlation between mining investment and private investment.
Chart N° 6: Mining vs. Private Investment Growth
30
35
40
45
50
55
60
65
70
2012 2013 2014 2015 2016 2017 2018 2019
Chart N° 5: Business Confidence
6.9%
-2.3%
-4.3%
-5.4%
0.2%
4.2% 4.2%3.5% 3.5%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
2013 2014 2015 2016 2017 2018 2019e 2020e 2021e
Chart N° 4: Private Investment
-60%
-40%
-20%
0%
20%
40%
60%
-12%
-9%
-6%
-3%
0%
3%
6%
9%
12%
1Q15 3Q15 1Q16 3Q16 1Q17 3Q17 1Q18 3Q18 1Q19 3Q19
Private Investment Mining Investment
Bet on consumption in the middle of global uncertainty
Table N° 2: Main Infrastructure Projects
Project
Line 2 of the Lima Metro
Jorge Chávez Airport Expansion
Chancay Port
Rutas Nuevas de Lima
Muelle Norte Modernization
Red Vial 4
Treatment of Residual Water in Titicaca Lake
San Martín Port
Salaverry Port
Red Vial 6 Expansion
Source: AFIN, Universidad del Pacífico Source: BCR, Kallpa SAB
Table N° 3: Distribution of the budget for reconstruction
Sector
Transport
Education
Sewage
Roads
Agriculture
Health
Housing
Capex for damaged infrastructure
Prevention works and others
Total Budget
Source: BCR, Kallpa SAB Source: BCR, Kallpa SAB
Fiscal Situation
www.kallpasab.com 7
2,671 10.4%
2,041 8.0%
1,114 4.3%
It is estimated that 2019 will close with an execution of PEN 2,500 MM, much higher than the previous two years.
Also, the estimate for 2020 is PEN 4,000 MM, maintaining a greater dynamism in the execution of these projects.
Chart N° 8: Public Investment Growth
38.0%
Despite the above-mentioned, we highlight the execution risk that exists in every project. Additionally, those works
whose progress depends on government decisions could see greater delays due to increases in the country's political
noise and the lack of experience of the authorities.
19,759
9,760
1,344
5,896
Peru Equity Guide 2020
23.0%
25,655
1,343
370
380
229
CAPEX (USD MM)
1,500
1,300
260
1,483 5.8%
77.0%
590
5.2%
5.2%
CAPEX (PEN MM) %
Reconstruction works: In 2017 the country was affected by the “El Niño” Phenomenon, where great part of the
national infrastructure was damaged. Given this, the government planned a budget to carry out reconstruction works
for an amount of PEN 25,655 MM, which we expect will be executed in the medium term.
270
iv.
By 2020 we expect the fiscal deficit to remain stable at 1.7% of GDP, in line with the end of 2019, and would go hand
in hand with the expected recovery of economic activity and public investment (+ 5.0% YoY). By 2021 we expect the
fiscal deficit to be reduced to 1.6% of GDP.
We believe that public spending will bring greater indebtedness to the government, which will increase from 26.5%
(public debt / GDP) in 2019 to 27.3% in 2020. The levels of indebtedness would be gradually reduced, as the fiscal
deficit decreases.
5,700
200
We estimate that for the year 2019 the fiscal deficit would close at 1.7% (by November 2019, the accumulated fiscal
deficit of the last twelve months was 1.6% of GDP, after reaching 2.3% of GDP in 2018). The above would be due to
the higher current revenues of the general government (+0.2 pp of GDP vs. 2018), and for the reduction of non-
financial expenditure (-0.1 pp of GDP vs. 2018).
36%
19%
17%
12%
8%
5% 3%
Chart N° 7: Infrastructure Gap
Transport
Energy
Telecom
Health
Water and Sewage
Hidraulic
Education
11.1%
-1.1%
-9.5%
-0.2%
-2.3%
9.9%
-0.5%
5.0%
3.0%
-15%
-10%
-5%
0%
5%
10%
15%
2013 2014 2015 2016 2017 2018 2019e 2020e 2021e
Bet on consumption in the middle of global uncertainty
Source: BCR, Kallpa SAB Source: BCR, Kallpa SAB
Monetary Situation
Inflation
Exchange Rate
Source: BCR, Kallpa SAB Source: BCR, Kallpa SAB
www.kallpasab.com 8
For 2020 we expect the exchange rate to fluctuate around 3.35. A slower stance on the Fed's monetary policy and a
slight increase in commodity prices (mainly copper), would contribute to maintain the exchange rate stable.
Peru Equity Guide 2020
Finally, regarding the exchange rate (PEN / USD), during 2019 it registered a 1.5% drop. The lower strength of the
dollar was due to the reduction in Fed interest rates, although there was a greater risk aversion for the trade war
between the United States and China. This showed strong volatility, reaching a price above 3.40.
During 2019, the Central Bank reduced two times its reference rate, which went from 2.75% at the beginning of the
year to 2.25% at the end of the year, due to the low levels of inflation and economic growth below potential.
Since March 2017, inflation has remained within the target range of the BCR (between 1% and 3%). In 2019 prices
increased by 2.0%. This was the result of a rise in the prices of the service segments (+ 2.0%); and, electricity (+
2.6%).
For 2020, we expect inflation to remain within the target range, close to 2.0%, aligned with the price increase reported
in 2019.
v.
vi.
vii.
For 2020, we foresee that the Central Reserve Bank of Peru (BCR) will reduce its reference rate by 25 additional basis
points, in order to stimulate the economic growth, as inflation expectations remain in the target range. In this scenario,
the rate would close the year at 2.0%.
0.9%
-0.3%
-2.1%
-2.5%
-3.1%
-2.7%
-1.7% -1.7% -1.6%
-4%
-3%
-3%
-2%
-2%
-1%
-1%
0%
1%
1%
2%
2013 2014 2015 2016 2017 2018 2019e 2020e 2021e
Chart N° 9: Fiscal Deficit (% of GDP)
20.0% 20.1%
23.3% 23.8%24.9%
25.9% 26.5%27.3% 27.3%
0%
5%
10%
15%
20%
25%
30%
2013 2014 2015 2016 2017 2018 2019e 2020e 2021e
Chart N° 10: Public Debt (% of GDP)
0%
1%
2%
3%
4%
5%
6%
7%
8%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Chart N° 11: Reference Rate vs. Inflation
Reference Rate CPI YoY Variation
2.0
2.2
2.4
2.6
2.8
3.0
3.2
3.4
3.6
3.8
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Chart N° 12: Exchange Rate PEN/USD
e
Bet on consumption in the middle of global uncertainty
Metals Prices: Outlook
Table N° 4: Average Metal Prices Vector
Source: Kallpa SAB
www.kallpasab.com 9
Throughout 2019 the price of gold registered a growth of 18.7%, while silver did it at 15.8%. Both results were mainly
influenced by the monetary policy of the US Federal Reserve (Fed). Due to the concerns about a possible slowdown in
the global economy, generated by the constant trade conflicts between the United States and China, the Fed decided
to reduce the reference rate three times in 2019, which is equivalent to a reduction of 75 basis points, placing it in the
range of 1.50% -1.75%. Moreover, there were recent tensions between the US and Iran, which were aggravated by
the murder of a high-ranked general from the Middle Eastern country, ordered by the US government. This has caused
threats from Iran, generating global uncertainty about a possible war.
18,000
Copper USD/Lb.
18,000
Gold USD/Oz
Silver USD/Oz
Peru Equity Guide 2020
18.00 18.00
2019
1.00
New
20,000
Old
New
New
Old
New
16.50
1.16
18.00 18.00 18.00
II.
1,394
17.25 17.75 18.00
18,000
2021e
3.10
16.21
1,300
18,000
1.05
3.00
1.10
20,000 20,000
0.95
1.00
0.90
1.15 1.10 1.10 1.10
0.90
Zinc USD/Lb.
Lead USD/Lb.1.00 1.00 1.00 1.00 1.00
0.95
Tin USD/TM18,636 18,000 18,000
Given the previously mentioned factors, an offer without major changes and a demand with upward bias, in view of
greater long positions of investors and greater purchases by Central Banks, expectations for the gold metal are
positive in the short term.
3.252.72
3.00
Old 18,000
LT
1,500 1,450 1,400 1,350 1,300
Our expectations for the prices of metals for a medium and long term, which we use in our valuation models of mining
companies, are presented below.
1.00
1.20
0.91
i.
17.50 18.00
2.85 3.00
1,300
20,000
Vector
New
Old
Gold and Silver: Uncertainty over global economy would boost the demand of safe-haven assets
The year 2019 began with the optimism that the differences between the United States and China were resolved; therefore
there was positive expectations regarding the performance of base metals. Likewise, the inventories of these metals were
located at levels close to the historical lows. In this way, copper and zinc exceeded, at some point, the USD 2.95 / Lb. and
the USD 1.35 / Lb., respectively. However, the uncertainty over the outcome of the trade war ended up negatively affecting
their prices. The market expects that in the first month of 2020 the first phase of a trade deal to be signed. Such agreement
could clarify several doubts and boost the price of base metals. On the other hand, precious metals, such as gold and silver,
were the most benefited from global uncertainty during 2019, exceeding levels of USD 1,500 / Oz. and of USD 18.0 / Oz.,
respectively.
3.10
1,300
Old
Gold is considered a safe-haven asset, therefore its volatility is affected in great part by the perception of risk over the
expectations of different economic indicators, such as inflation and monetary policy, besides the geopolitical risk. In
addition, metal has been used for some time to speculate, through ETFs, therefore long and short positions create
volatility in the price. On the other hand, silver is considered a hybrid metal, as even though it is used as a precious
metal, it is also used as an industrial metal, therefore it is harder to measure if the price per ounce is over or
undervalued.
To analyze silver, it is useful to observe the gold / silver ratio. In the last 20 years, the ratio has been on average at
64.0x. In the last 10 and 5 years it has been located at 67.0x. In July 2019, the ratio reached a historical peak, due to
the higher rise in gold, a consequence of global trade conflicts. Silver remained relatively lagging, which could be an
indicator that the metal could have an attractive upside in the short and medium term. All of the above would support a
gold price of around USD 1,500 per ounce and a silver price of USD 17.50 an ounce in 2020.
1,300
0.95
1,300
3.30 3.20
1,300
1.00 1.00
3.15
3.15
New
Old
2020eMetal 2022e 2023e
Bet on consumption in the middle of global uncertainty
Source: World Gold Council, Kallpa SAB Source: World Gold Council, Kallpa SAB
Copper: We expect a recovery in 2020
Source: Bloomberg, Kallpa SAB Source: Bloomberg, Kallpa SAB
Zinc: Market is getting close to a balance gradually
www.kallpasab.com 10
Chart Nº 15: International Copper Market
Additionally, the growth of the mining supply is also usually affected by disruptive events, which have affected between
5% -6% of the global supply in the last two decades. Protests for social conflicts or renegotiation of labor contracts are
always a risk that can affect the metal price.
Second, and with a close correlation to the above, the growth of China is one of the most important factors to maintain
the copper price at high levels, because it concentrates more than 50% of global demand. While China's demand has
slowed more than expected, world production also had an adjustment in 2019 due to lower grades and disruptions in
the production of some mines. By 2020, we do not expect many changes in this regard and we believe there will still
be a copper supply deficit.
Given this, we expect an average copper price of USD 2.85 by 2020 (+4.6% YoY).
Peru Equity Guide 2020
First, although the persistence of trade tensions between the United States and China and the influence on the
economic growth of the Asian country have limited the recovery of the price of copper, it was recently announced that
a partial agreement between the two countries would be signed in mid-January 2020. Trade tensions, which began in
March 2018, have pushed investors away from the copper market in 2019, but a positive outcome of the negotiations
could align price expectations with market fundamentals and increase demand.
Important mines that removed 1.0 MM of annual MT of zinc were closed between 2013 and 2016, causing a supply
deficit, which until a year ago, was expected to last for a long time. Today, the situation has changed and there is a
possibility that it will be reversed with a greater offer.
Throughout 2019 the price of copper has increased 4.2% (vs. closing 2018), however, with respect to the average
price of 2018 the metal price has fallen 8.1%, again defined by the volatility generated by the uncertainty due to the
trade war between the United States and China, in addition to the conflicts in major producing countries such as Chile
and Peru. While the long-term deficit is now expected to be less than what it was expected years ago, the following
factors could still sustain and boost the price in 2020.
ii.
iii.
2,695 2,531 2,4592,101 2,237 2,241 2,028
2,340
1,667 1,670
1,467 1,4251,748
1,568
356
348 332
323 333335
324
0
1,000
2,000
3,000
4,000
5,000
6,000
2013 2014 2015 2016 2017 2018 2019e
Chart Nº 13: Physical Demand of Gold (MT)
Technology Safe-heaven asset and Central Banks Jewelry
0
500
1,000
1,500
2,000
2,500
3,000
3,500
2003 2005 2007 2009 2011 2013 2015 2017 2019
Chart N° 14: ETFs Gold Holdings (MT)
Others Asia Europe US
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
200
0
200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
201
6
201
7
201
8
201
9
USD/Lb.MT
Chart N° 16: Copper Inventory
LME Inv. Shanghai Inv. Copper Spot
0.00
1.00
2.00
3.00
4.00
5.00
-1,500
-1,000
-500
0
500
1,000
1,500
200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
201
6
201
7
201
8
USD/Lb000' MTDemand - Supply Copper Price
Bet on consumption in the middle of global uncertainty
Source: Bloomberg, Kallpa SAB Source: Bloomberg, Kallpa SAB
Source: Bloomberg, Kallpa SAB
Tin: Prices affected by a supply surplus
Source: Bloomberg, Kallpa SAB
www.kallpasab.com 11
The average price of the metal during 2019 was USD 18,636 / MT (-7.4% vs 2018). The greater supply from Peru and
Malaysia, generated that the inventories at global level increase from 1,500 MT at the beginning of the year to 7,050
MT, affecting the price of the metal. However, towards the end of 2019 the price of tin presented an important
recovery and advance 8.0% from its lowest point in the year, in August (USD 15,760 / MT). For 2020 we estimate that
the price will recover due to a greater demand of the metal, and will be around USD 18,000 / MT.
The demand for zinc has shown steady growth in recent years, however, trade conflicts between the United States
and China, and the uncertainty about the global economy growth, have negatively affected the demand for metal in the
last year. Global demand for zinc is expected to grow at rates below 1.5% over the next two years, due to lower house
construction and a slowdown in China's transport sector.
The growth of the offer in the next two years would come largely from China (+150,000 MT), re-starts of inactive mines
(+100,000 MT), along with the increased production of mines such as Antamina, Penasquito, Gamsberg, among
others (+ 700,000 MT). The greater production would be offset by the low refining capacity that currently exists in the
markets, which generates a "bottleneck" in the short term. Thus, we believe that the price of zinc should be around
USD 1.05 / lb. in 2020 (-9.2% YoY).
Peru Equity Guide 2020
iv.
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
Jan
-17
Fe
b-1
7
Ma
r-17
Ap
r-17
Ma
y-1
7
Jun
-17
Jul-
17
Au
g-1
7
Se
p-1
7
Oct-
17
Nov-1
7
Dec-1
7
Jan
-18
Fe
b-1
8
Ma
r-18
Ap
r-18
Ma
y-1
8
Jun
-18
Jul-
18
Au
g-1
8
Chart Nº 17: Supply of Concentrates (YoY)
0.0
0.4
0.8
1.2
1.6
2.0
2.4
0
400
800
1,200
1,600
2,000
200
0
200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
201
6
201
7
201
8
201
9
USD/Lb.000' MTChart Nº 18 : Zinc inventories
LME Inv. Shanghai Inv. Zinc Spot
0.0
0.5
1.0
1.5
2.0
2.5
-800
-600
-400
-200
0
200
400
600
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
USD/Lb. 000' MT
Chart N° 19: Zinc International Market
Demand - Supply Zinc Spot
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
0
10
20
30
40
50
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
USD/TM000' MTChart N° 20: Spot price and Tin Inventories
LME Inventories Tin Spot
Bet on consumption in the middle of global uncertainty
Peruvian Equities
Source: Bloomberg, Kallpa SAB
www.kallpasab.com 12
Regarding the multiples valuation, the MSCI Peru Index trades at a P/E of 13.6x, 14.6% above its 10-year average of 11.9x.
Likewise, according to Chart N° 21, during the years with higher level of profits (years with high metal prices), the valuations
reached between 14x and 16x the level of net income of the companies. This reflects our high expectations of growth in
profits generated as a result of the greater efficiencies in consumer companies, and the expansion plans of mining
companies (Minsur and Southern Copper, mainly).
On the other hand, the net profit of companies linked to domestic demand would show a growth of 8.1%. The financial sector
(+8.9%) would be benefited from a greater dynamism of loans, especially in the retail segment. In the case of consumer
companies (+20.6%), the strong increase would come from the improvement in margins and deleveraging of InRetail and
Alicorp.
Peru Equity Guide 2020
The infrastructure segment would also recover dynamism (+18.4%), due to better profits in cement companies, given better
margins in Unacem and the solid growth of the concrete business in Cementos Pacasmayo. The energy sector, meanwhile,
would not register significant changes (-3.6%), since the slight increase in the profits of the electricity distribution companies
would be offset by the lower profits of Engie and Relapasa.
III.
We estimate that in 2020 our sample of companies under coverage will see an increase of 19.2% in net income, boosted by
the companies of the mining industry, whose profits would increase by 31.4%. Companies like Cerro Verde and
Buenaventura will lead the progress in the sector. In the case of the first one, the advance would be influenced by a higher
level of production and greater cost efficiency. Regarding Buenaventura, profits would be boosted by better prices of precious
metals and better results from associates (Cerro Verde and Yanacocha).
However, for the profits of the companies to continue advancing, it will be necessary that: i) the positive performance in the
consumption and investment levels is maintained, ii) the portfolio infrastructure projects are executed, iii) greater mining
production, as a result of expansion plans and recovery of ore grades in mining companies; iv) that the price of copper
presents a recovery in 2020 and trades around USD 2.85 / Lb.
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
0
500
1,000
1,500
2,000
2,500
Chart N° 21: P/E Ratio of MSCI Peru Index vs. MSCI Peru
MSCI Peru (Eje Der.) P/E MSCI Peru (Eje Izq.)
Prom.: 11.9x
Bet on consumption in the middle of global uncertainty
Table N° 5: Top picks 2020
Source: Bloomberg, Kallpa SAB
www.kallpasab.com 13
Despite the lower economic growth of 2019, private consumption has remained resilient, reaching a 3.0% growth. Along the
same line, consumer loans, credit cards and mortgages have registered solid growth, reaching double-digit increases,
although total loans in the financial system grow at levels close to 7%. We believe that the consumer sector will maintain its
trend in 2020 and that companies related to this sector could benefit. Likewise, the profits of the companies in this sector will
have remarkable growth in 2020, giving support to our recommendation.
Alicorp: Company whose main business is Consumer Good Peru (CGP). This segment will continue to be the main driver of
margins and profitability in 2020. We expect an EBITDA margin close to 13%. Although we estimate a reduction in margins in
the aquaculture business and an environment of higher commodity prices (soybean oil), we believe that this will be offset by
the efficiencies obtained from the integration of Intradevco, Fino and ADM Sao.
Market Cap.
(USD MM)
P/E
1.0 41.9%
16.9%
10.6%
2.6%
Industry
2.0
2021ePrice
InRetail Perú
P/BV
6.5
11.8
9.9
6,791Mining
Strategy: Overweighting Consumption
We recommend overweighting the companies related to Peruvian domestic demand, especially those in the consumer
sector. We remain cautious in the mining sector, although with greater optimism regarding copper producing companies.
30.4%
0.9%
624
4.2%
2,323
Cerro Verde: The largest copper producer in the country. We believe that the metal has fundamentals to maintain a price
around USD 2.85 / Lb. in 2020. In addition, a lower cash cost would maintain the EBITDA margin at levels close to 49%.
This, added to the low levels of indebtedness, could generate the increase in the payment of dividends.
Peru Equity Guide 2020
2.93,898
2.2%
11.0 10.1
Cerro Verde
6.2Ferreycorp
EV/EBITDA
Machinery
n.a.
13.6 11.3
Retail 19.0
Dvd.
YieldTP 2020 Upside
1.3
6.1
5.2
11.0
7.58.1 2.4
n.a.
6.4
Intercorp Finan. Serv. Financial
IV.
4.7
22.7
2020e 2021e
13.5
24.8%
38.0%
4,808
2020e
Alicorp Consumption
Company
In mining, we remain cautious due to the high volatility in metal prices, lower ore grades and increased costs in some
companies in the sector. However, we are more optimistic about copper, given that we believe there are fundamentals that
could sustain a rise in the metal price in the medium term. The main risk will be the trade conflict between China and the
United States. However, this factor could be mitigated if a first trade deal can be signed at the beginning of the year.
In this scenario, we developed a model portfolio with our 5 top picks for 2020, taking as a starting point two companies in the
consumer sector: Alicorp in consumer goods and InRetail in the retail sector. We complement this selection with IFS, a
company in the financial sector focused on consumer loans; Ferreycorp, a company that will report a good profit generation
and with an attractive appreciation potential; and Cerro Verde, copper producer with high margins and greater production
expectations in 2020.
Ferreycorp: Company that will benefit from the high levels of mining investment estimated for 2020. During this and the next
year, the company will begin delivering machinery to the Quellaveco project (USD 5,300 MM), which will support the sales
figures. Meanwhile, the continued growth of the spare parts and services business unit will continue to be the main driver of
profitability for the company. To this, an attractive cash generation is added, which has improved the payment of dividends.
Intercorp Financial Services: Holding whose main asset is Interbank, fourth bank for total loans but first on credit cards. Its
focus on the consumer sector will allow it to continue growing in double digits in 2020. ROE would be reduced to levels of
17% due to the recent share issuance but should increase in the medium term.
InRetail: Holding with the first player in the market in the Food Retail, Pharmacies and Shopping Centers businesses. Food
Retail will generate high levels of growth with the greater penetration of its discount store format. Meanwhile, the pharmacy
and shopping center segments will bring margin improvements, given the greater synergies to be generated between
Inkafarma and Mifarma; and, the incorporation of the new Real Plaza Puruchuco in the company's cash flows.
9.13
2.15
41.65
38.50
19.40
PEN
PEN
USD
USD
USD 25.30
45.00
52.00
3.05
12.60
USD
USD
USD
PEN
PEN
Bet on consumption in the middle of global uncertainty
V. Companies under coverage
Table N° 6: Companies under coverage
Financials
Consumption
Infrastructure
Graña y Montero
Energy
Mining
Southern Copper
n.a.: does not apply
Source: Kallpa SAB
www.kallpasab.com 14
Buy
Buy
1.70
33.70
0.58
Buy
Buy
41.65 52.00 24.8% 11.00
Hold
Dvd.
Yield
2.6%
4.2%
4.0%
Rating
3.9%
3.2%
2.6%
0.0%
10.6%
5.9%
0.9%
7.66
6.06
14.45
26.85
PricePrevious
TP
We emphasize that of the companies we have under coverage, we have made significant adjustments in our target prices,
especially in cement companies and in polymetallic miners.
For polymetallic miners, the main driver of the lower target prices has been the downward adjustment in our zinc price vector,
which has an even greater impact on the margins of these companies. Additionally, the 26% adjustment in the zinc content of
the Cerro Lindo reserves, which was made in the last update of its mining plan, also influenced Nexa Resources Peru target
price.
0.0%
Hold
Buy
Hold
5.29
0.74
0.58
2.22
4.35
1.03
17.0% 2.88
n.s.
6.99
1.28
2.29
PEN
IFS USD
6.76 1.93
0.31
1.97
Market Cap.
(USD MM)
10.05 4,808
3.68
2.00
8.90
3.30
2.85
3.70
8.50
Hold
Buy
Buy
5.19
2.92
16,712
6.10
241.00 n.a.
PEN
38.50 45.00
12.04 11.15 209.52
2,323
3,898
7.52
9.94
235.50
49.10
13.40
45.00
0.0%
4.6%
4.6%
1.55
168.7%USD
Relapasa
19.40
Hold
Hold
Buy
Hold
Buy
Hold
Minsur
PEN
1,304
0.0%
4.9%
4.9%
15.0%
2.2%
0.6%
5.34 6.6%
30.4%
13.00
7.90
6.95
Hold
Hold
2.95
8.70
14.70
0.18
41.71
14.6%
Luz del Sur
9.25 29.4%
Enel Gx
PEN 7.15
26.1%
Engie Perú
UNACEM
PEN
60.0%
3.45
14.02
8.38 5.94
13.42
0.95
8.59
7.43
7.36
5.68
Enel Dx
11.14
14.83
68.22 65.26
2.14
4.32
0.126
n.s.
5.17 5.67
16.00
5.16
2.14
1.22
0.83
6,791
0.131
9.02 4.62
2.50
2021
7.28
0.18
5.67
1.39
0.53
6.99 0.39
19.91
-12.7%
26.00
USD
PEN
PEN
n.a. n.a.
414
41.9%
64.7% 6.30
9.30
1.83
1,085
13.58
1,343
1,048
1,592
13.44
C. Pacasmayo
4.32 PEN
7.40
3.05
2.80
EV/EBITDA
32,271
18.50 -28.8% 20.29 19.78
149
1,872
29.0% 12.11
0.62
PEN
Nexa Perú
Cerro Verde
Ferreycorp
15.82 13.93
6.38
3.20
n.a.
8.12
1,949
-1.0% 4,027
9.05
8.05
11.33
16.24
1,363
15.0%
785
2.30 Buy
2.15
11.00
2020 2021 2020
13.53 11.76 9.13
19.03
TP P/BV
16.9%
2.15
1.70
2.00
7.42
14.93
21.3%
Credicorp
PEN
USD
0.49
4.04
Peru Equity Guide 2020
10.36
4.74
USD
PEN
7.26
12.60
USD
Upside
Kallpa Securities SAB has twenty (20) companies under coverage that belong to the following industries: financial (2),
consumption (2), infrastructure (4), energy (5) and mining (7). All of them are listed in the Lima Stock Exchange (BVL).
2.90
22.65
38.0%
Industry / Company
16.41
2.39
PEN
624
8.12
InRetail
Buenaventura
Alicorp
6.20
Trevali
6.54
11.01 10.87
P/E
19.46
13.51
14.65
4.3%
36.40
25.30
14.50
313
Volcan
USD
PEN
In the case of cement companies, the values have been adjusted for lower levels of growth and long-term margins, in line
with an estimated long-term growth for the Peruvian economy of 3.0% (previously it was estimated 4.0%).
8.23
Bet on consumption in the middle of global uncertainty
Marco Contreras
Head of Research
(511) 630 7528
mcontreras@kallpasab.com
Credicorp Ltd.
Target Price (USD)
Rating Hold
Market Capitalization (USD MM)
Market Price (USD)
Shares Outstanding (MM)
Upside
ADTV - LTM (USD MM)
Range 52 weeks (USD)
YTD Change
Dividend Yield - LTM
Trading
ADTV: Average Daily Traded Volume
Financial Ratios
Loans/Deposits
NIM
Efficiency
EPS (PEN)
ROE
ROA
P / E
P / BV
Sensitivity Analysis
Source: Bloomberg
www.kallpasab.com
244.30 250.61
Target Price
15
234.02
187.07
Peru Equity Guide 2020
2.35
197.79 - 249.15
16,711.62
189.61
Recommendation
13.10
Source: SMV, Kallpa SAB
1.98 1.85
USD 241.00
High level of competitiveness. With the economic slowdown in the country,
the level of competitiveness has increased, especially in the wholesale
segment. Our profits estimates may be affected if the company decides for
an aggressive pricing strategy.
Valuation
We believe that the company has solid fundamentals, which fall on
attractive rates of growth of loans, and improvements in the level of
operational efficiency. However, we note that these are already internalized
in the market price, which is why we recommend to hold.
42.7%
We value Credicorp with a residual income model over a 10-year horizon.
We use a discount rate (COK) of 10.5% and a perpetual growth rate of
3.0%.
Fundamentals are already internalized
17.2%17.1%
58.29 62.93
2.2%
215.47 218.90
193.51 196.04 198.85 202.02
11.54%
LTM: Last 12 Months
Fundamentals for 2020
241.00
5.5%
Chart N° 22: BAP vs. PERU SELECT
2.15
2019e
1.04
43.0%
79.76
17.1%
5.5%
2.2%
HOLDCredicorp Ltd.
2020e
15.0%
2.50%
-1.5%
Financial Industry
1.04
182.75 184.80
2.3%
2021e
42.5%
4.0%
NYSE, BVL
(BVL: BAP)
10.04%
236.06 241.00 246.64 253.15
238.82
2.00%
180.90
5.5%
229.77
12.04 11.15
1.04
53.59
11.04% 191.24
Source: Kallpa SAB
10.54%
NIM: Net Interest Margin
COK / g
232.12
231.70
9.54%
4.00%3.50%3.00%
222.76 227.13
We estimate that the company will generate greater operational
efficiencies. However, we expect the ROE to remain close to 17.0% in the
short term.
Risks
Peru risk. The main risk of the company is its leverage to the Peruvian
economy. Political risk can also affect the development of new investments
and impact on the growth of bank loans.
Asset quality. A deterioration in the asset quality could cause significant
increases in provisions, affecting Credicorp's future profits and ROE.
We expect loans to maintain the dynamism shown in 2019 and advance
7.0% in 2020, boosted mainly by the retail segment.
The cost of risk would be around 1.5%, while PDL ratio would reach 3.1%.
NIM would remain stable at 5.5%.
Kallpa Securities SAB updates its valuation of Credicorp Ltd. (Credicorp), with a
hold recommendation. Our new 2020 year-end target price of USD 241.00 is 15%
above the USD 209.52 market price, as of the closing of January 7th, 2020.209.52
Source: Bloomberg, Kallpa SAB
480
500
520
540
560
580
190
200
210
220
230
240
250
Jan
-19
Fe
b-1
9
Ma
r-19
Ap
r-19
Ma
y-1
9
Jun
-19
Jul-
19
Au
g-1
9
Se
p-1
9
Oct-
19
Nov-1
9
Dec-1
9
Jan
-20
Pts.USDBAP PERU SELECT
Bet on consumption in the middle of global uncertainty
INCOME STATEMENT (PEN MM) BALANCE SHEET (PEN MM)
Interest Income Funds available
Interest Expenses Investments
Net Interest Income Net Loans
Net Provisions for Loan Losses Fixed Assets, Net
Net Income after Provisions Intangibles, Net
Non-Financial Income Other Assets
Insurance's Technical Result Total Assets
Operating Expenses Deposits and Obligations
Operating Income Due to Banks and Correspondents
Income Tax Reserves for Claims
Net Income Bonds and Subordinated Debt
Minority Interest Other Liabilities
Net Income Attributable to Credicorp Total Liabilities
Shares Outstanding - Average (MM) Equity Attributable to Credicorp
Earnings per Share - EPS (PEN) Minority Interest
Net Equity
Liabilities + Equity
GROWTH (%) CASH FLOW (PEN MM)
Loans' Growth Net Income
Deposits' Growth Non-Cash Expenses
Net Interest Income's growth Changes in Assets and Liabilities
Provisions' Growth Operating Cash Flow
Operating Income's Growth Investment Cash Flow
Net Income's Growth Financing Cash Flow
Free Cash Flow
FINANCIAL RATIOS
Net Interest Margin (NIM)
PDL Ratio
NPL Ratio
Coverage for PDL
Coverage for NPL
Efficiency Ratio
Loans / Deposits
Payout Ratio
Dividends per Share (PEN)
ROE
ROA
VALUATION
P / E
P / BV
MANAGEMENT
Walter Bayly CEO
César Ríos CFO
Milagros Cigueñas IRO
Source: Credicorp, SMV, Kallpa SAB
www.kallpasab.com 16
-7,025
2,316
23,253
114,056
2,144
34,197
7,879
121,404
-1,932 3,003
-3,365
62.93
22,313 22,881
4,649 5,020
977 1,052 201,765
-1,386
Peru Equity Guide 2020
4,749 5,127 21,160
519
229,350
-747
26,538
1,086 1,077
2019e
7.3%
215,284
2,995
4,649
-834
6.3%
22,641
32,613 35,227
-766
2,986
2020e 2021e
30,977
6,505 7,024
215,284 229,350
7,449 4,567 4,710
2020e 2021e 2020e
7.0% 7.0% 4,275
7.3%
2021e2019e
2,615
4.0% 4.0% 4.0%
37.89
1.85
-1,329
2.2%
1.04
2.15 1.98
42.7% 42.5%
2019e
13.10 12.04
186,412
28,872
10,044
-1,169
7.0%
198,373
53.59 58.29
1,031
7.7%
10,747
-2,253
30,251
618 726
5,020
4,366 24,226
201,765
56.5%
146.1% 145.8% 145.8%
113.1% 112.8% 112.8%
9,936
3.1%
2020e 2021e CHART N° 24: CREDICORP LOANS 3Q2019
1.04
17.1% 17.1% 17.2%
65.0%
8.0%
2021e
7.3%
2.2%
2,397
24,624
122,040
4,781
-7,824
32,703
28,254
92
2,223
3.1%
8.8%
2019e
9,144
31,430
129,902 9,812
-1,633
5.5%
4,275
5,070 5,376 21,971
8,418
10,472
29,627 12,509
-3,852
7.0%
905
13,421 14,324
2020e 2021e 2019e
4,800
9.1%
6.7%
-2,054
113,496
175,227
-1,806
6,000 9,387
3,018
17.9%
-3,610
Credicorp: Financial Summary
2019e
8.4%
-1,756 -1,896 8,843
80 80 80
7.3%
28.22 30.28
7,338
2020e
26,020
5.5%
100 108
43.0%
3.1%
8.0% -396
5.5%
CHART N° 23: SHAREHOLDERS
56.5%
11.15
1.04
2.3%
7.0%
21,781
130,583
9,374
-7,421
16%
84%
Romero Family
Institutional Investors
25%
16%
14%
9%
9%
7%
7%
5%5% 2%
Corporate
Medium-size companies
Mortgage
Mibanco
SME
Consumption
Bolivia
Small Businesses
Credit Cards
Others
Bet on consumption in the middle of global uncertainty
Marco Contreras
Head of Research
(511) 630 7528
mcontreras@kallpasab.com
Intercorp Financial Services (BVL: IFS)
Target Price (USD)
Rating
Market Capitalization (USD MM)
Market Price (USD)
Shares Outstanding (MM)
Upside
ADTV - LTM (USD MM)
Range 52 Weeks
YTD Change
Dividend Yield LTM
Trading
Financial Ratios
Loans / Deposits
NIM
Efficiency Ratio
EPS (PEN)
ROE
ROA
P / E
P / BV
Source: Kallpa SAB
Source: Bloomberg
www.kallpasab.com 17
11.54% 44.09 44.68
Peru Equity Guide 2020
Chart N° 25: IFS vs. PERU SELECT
3.00% 3.50% 4.00%
56.05
Fundamentals for 2020
45.34 46.08
2.0%
34.2%
10.04% 53.62 54.76
12.03 11.00
1.97 1.80
2.00% 2.50%
57.54
Sensitivity Analysis
COK / g
48.46 49.39 50.45
9.54% 57.67 59.09 60.73 62.64 64.89
50.97 52.00 53.17 54.52
0.96 0.96
2021e
1.9% 2.0%
5.5%
34.3%
5.5%
17.6%
46.91 47.64
Financial Industry Target Price
5.5%
13.88
BUY
10.05
1.66
12.69
Intercorp Financial Services
Inc.USD 52.00
52.00
Buy
17.1%
4,808.40
41.65
115.45
24.8%
2.13
38.00 - 50.00
BVL
ADTV: Average Daily Traded Volume
LTM: Last 12 Months
0.96
11.04%
NIM: Net Interest Margin
Source: SMV, IFS, Kallpa SAB
Risks
34.5%
11.87
17.2%
59.27
Source: Bloomberg, Kallpa SAB
2019e 2020e
10.54% 50.06
Retail segment will continue to lead growth during 2020
1.8%
46.92
4.2%
We estimate a ROE of 17.1% in 2020, which would be below the 17.6% we
expected for 2019, due to the impact of the issuance of shares conducted
in July 2019. However, we expect an increase in ROE in the medium term,
given the strong growth of loans in Interbank and the better profitability
levels of Interseguro.
Asset quality. A deterioration in the asset quality could lead to increases in
provisions, affecting the company's estimated future earnings.
Valuation
Recommendation
We believe that IFS has solid fundamentals that rely in the strong credit
growth of the retail segment (especially consumption and credit cards) and
the improvements we expect in profitability. Considering the above, our
recommendation is to buy.
The efficiency level would improve slightly and reach a ratio of 34.3% in
2020, better than the 34.5% we estimated for 2019.
Peru risk. The main risk of the company is its leverage to the Peruvian
economy. Political risk can also delay investments and affect consumer
decisions, causing a negative impact on the growth of the loan portfolio.
We value IFS with a residual income model over a 10-year horizon. We
use a discount rate (COK) of 10.5% and a perpetual growth rate of 3.0%.
Kallpa Securities SAB updates its valuation of Intercorp Financial Services Inc.
(IFS), with a buy recommendation. Our new 2020 year-end target price of USD
52.00 is 24.8% above the USD 41.65 market price, as of the closing of January
7th, 2020.
We expect the loans growth to maintain its dynamism and rise 10.0% in
2020, boosted by the growth of the retail segment.
Provisions would record a similar growth to the loan portfolio, while the
IFS’s PDL ratio would remain at 2.7% in 2020.
480
500
520
540
560
580
36
38
40
42
44
46
48
50
Jan
-19
Fe
b-1
9
Ma
r-19
Ap
r-19
Ma
y-1
9
Jun
-19
Jul-
19
Au
g-1
9
Se
p-1
9
Oct-
19
Nov-1
9
Dec-1
9
Jan
-20
Pts.USD
IFS PERU SELECT
Bet on consumption in the middle of global uncertainty
INCOME STATEMENT (PEN MM) BALANCE SHEET (PEN MM)
Interest Income Funds available
Interest Expenses Investments
Net Interest Income Net Loans
Net Provisions for Loan Losses Investment Properties
Net Income after Provisions Fixed Assets, Net
Non-Financial Income Other Assets
Premium Less Claims Total Assets
Operating Expenses Deposits and Obligations
Operating Income Due to Banks and Correspondents
Translation Result Bonds, Notes and Other Obligations
Income Tax Insurance Contract Liabilities
Net Income Other Liabilities
Minority Interest Total Liabilities
Net Income Attributable to IFS Equity Attributable to IFS
Shares Outstanding (MM) Minority Interest
Earnings per share - EPS (PEN) Net Equity
Liabilities + Equity
GROWTH (%) CASH FLOW (PEN MM)
Loans' Growth Net Income
Deposits' Growth Non-Cash Expenses
Net Interest Income's growth Changes in Assets and Liabilities
Provisions' Growth Operating Cash Flow
Operating Income's Growth Investment Cash Flow
Net Income's Growth Financing Cash Flow
Free Cash Flow
FINANCIAL RATIOS CHART N° 26: SHAREHOLDERS
Net Interest Margin (NIM)
PDL Ratio
NPL Ratio
Coverage for PDL
Coverage for NPL
Efficiency Ratio
Loans / Deposits
Payout Ratio
Dividends per Share (PEN)
ROE
ROA
VALUATION CHART N° 27: IFS LOANS BY SEGMENT - 2020
P / E
P / BV
MANAGEMENT
Luis Felipe Castellanos CEO
Michela Casassa CFO
Ernesto Ferrero IRO
Source: IFS, SMV, Kallpa SAB
www.kallpasab.com 18
16.6%
10.05
2021e
4,244
10 11
2,945 3,244
2020e
9.4% -1,807
21,177
36,909
29.6% 10.0% 8.4%
2021e
4,879 5,169
5 - - 8,053 8,538 9,045
-455
9
2,710
1,883
113
3.3% 3.3%
1.97 1.80 1.66
14.4% 10.0% 8.5% 433 411 395
12.0% 10.0%
12.03 11.00
12.69 13.88 8,207 9,008 9,736
72,655
10.8%
-518 -567
1,448
-1,988
1,514
5.5% 5.5% 5.5%
2.7% 2.7%
1,348
9.4%
2,881
8.5% 1,339
-1,405
11,387
883
7.61
824 801
1,069 988
-324 -343
18,880 20,004
2020e
2,700 1,598
3,467 3,867
2021e
40,616
2019e
2,735 2,765
13,355 14,343
-368
1,602
115 50 55 115
1,475 1,613 1,883
3,881
-290
2019e 2020e 2021e
2021e
-2,142
11,931 12,506
1,883
74,586
-2,319 38,523
10.0%
12,286
1,057
95.8%
8,958 9,681
-1,462
4,871
2,628
78,632 84,322
45
792
1,121 1,188
2020e
Intercorp Financial Services: Financial Summary
2019e 2020e
2019e
2.0% 1.9% 2.0%
17.6% 17.1% 17.2%
95.8%
60.4% 50.0% 60.0%
5.80 5.80
152.7% 149.5% 147.5%
124.5% 122.3% 120.8%
34.5%
72,655
1,798
11.6% 9.8%
5,403 5,906
11.87
-1,536 -1,662
2020e
-1,525
9.4%
1,339 1,465 8,162
1,993 2,180
2,109 833
34.3% 34.2%
2019e
23.5%
Peru Equity Guide 2020
42,392 45,983
78,632
95.8%
2021e
3.3%
64,448 69,624
-179
2.7%
84,322
1,465 1,602
44,056
-838
4,602
2019e
3,905
-922 -1,000
1,831
71%
14%
16%
Intercorp Peru y related companies
Pension Funds
Others
46%
34%
17%
2%
Commercial
Consumption
Mortgage
SME
Bet on consumption in the middle of global uncertainty
Marco Contreras
Head of Research
(511) 630 7528
mcontreras@kallpasab.com
Alicorp S.A.A.
Target Price (PEN)
Rating Buy
Market Capitalization (PEN MM)
Market Price (PEN)
Shares Outstanding* (MM)
Upside
ADTV - LTM (PEN MM)
Range 52 weeks
YTD Change
Dividend Yield - LTM
Trading
Financial Ratios
P / E
P / BV
EV / EBITDA
Net Debt / EBITDA
EPS (PEN)
ROE
ROA
Sensitivity Analysis
Chart N° 28: ALICORC1 vs. PERU SELECT
Source: Bloomberg
www.kallpasab.com 19
2021e
BUYAlicorp S.A.A.
Integration and deleveraging will boost margins
Fundamentals for 2020
Source: SMV, Kallpa SAB
5.2% 5.4% 6.2%
13.76
14.17
17.62 19.59
9.13
854.58
7,782.89
12.60
(BVL: ALICORC1)
11.76
3.00% 3.50% 4.00%
13.53
2.37 2.00
-0.8%
2.6%
38.0%
8.50 - 11.55
2020e
Consumer Staples Industry Target Price
Peru Equity Guide 2020
We expect that in 2020 growth will be led by the consumer and aquaculture
businesses. We also believe that deleveraging and a slight improvement in
margins will be the main drivers of profits. Given this, our recommendation
is to buy.
Source: Bloomberg, Kallpa SAB
2.39 2.18 1.97
15.38
We expect a 19.8% growth in sales in 2019, which would be boosted by
the acquisition of Fino and ADM Sao in Bolivia, and Intradevco. For 2020
we expect a 7.1% growth, which would be boosted by the Consumer
Goods Peru and Aquaculture segments.
The market share above 50% in several categories and the broad
distribution network will still be the main competitive advantages for the
company.
We expect an EBITDA margin of 13.1% in 2020. We believe that higher
operating efficiencies will compensate for higher commodity prices such as
soybean oil.
PEN 12.60
2.47
10.04
8.81%
9.31%
12.60
2.00% 2.50%
13.56 14.72
0.594 0.673
13.17
11.10 11.79
7.81%
16.87
LTM: Last 12 months
16.8% 17.6%
15.34
BVL
8.31%
14.81 16.07
8.12
12.32
2.74
* Includes 7.39 MM of investment shares (ALICORI1)
ADTV: Average Daily Traded Volume
0.775
15.6%
2019e
Recommendation
9.81%
10.61
7.52
After the sale of Credicorp shares, the net debt / EBITDA ratio would close
2019 at 2.7x. Assuming there will be no other M&A operation, the ratio
should continue to decline in 2020 to 2.4x.
Risks
Latam risk. Main risk is the exposure of the company to the performance of
the economies of Peru, Bolivia, Chile, Ecuador, Brazil and Argentina.
Commodity risk. Nearly 50% of the cost of sales correspond to commodity
purchases. Volatility in commodity prices can have an impact in Alicorp's
margins.
Climate risk. The aquaculture segment depends on the performance of the
fishing industry in Ecuador and Chile, which is sensitive to weather
changes that can affect its profitability.
M&A risk. Risk that an M&A operation will not reach the return expected by
management.
11.28 12.05 12.98
9.12
8.77
9.60
WACC / g
10.15 10.79 11.53
Source: Kallpa SAB
Valuation
We value Alicorp with a Free Cash Flow to the Firm (FCFF) model in a 10-
year horizon. We use a discount rate (WACC) of 8.8% and a perpetual
growth rate of 3.0%.
Kallpa Securities SAB updates the valuation model of Alicorp S.A.A. (Alicorp),
with a buy recommendation. Our new 2020 year-end target price of PEN 12.60 is
38.0% above the PEN 9.13 market price as of the closing of January 7th, 2020.
480
500
520
540
560
580
8.0
8.5
9.0
9.5
10.0
10.5
11.0
11.5
12.0
Jan
-19
Fe
b-1
9
Ma
r-19
Ap
r-19
Ma
y-1
9
Jun
-19
Jul-
19
Au
g-1
9
Se
p-1
9
Oct-
19
Nov-1
9
Dec-1
9
Jan
-20
Pts.PENALICORC1 PERU SELECT
Bet on consumption in the middle of global uncertainty
Alicorp: Financial Summary
INCOME STATEMENT (PEN MM) BALANCE SHEET ( PEN MM)
Net Sales Cash and Cash Equivalents
Cost of Sales Accounts Receivable
Gross Income Inventory
Sales Expenses Other Short Term Assets
Administrative Expenses Current Assets
Other Expenses Fixed Assets, Net
Operating Income Other Long Term Assets
Financial Income Non Current Assets
Financial Expenses Total Assets
FX Gains (Losses) Short Term Debt
Stake in Associates Accounts Payable
Income Before Taxes Other Short Term Liabilities
Income Tax Current Liabilities
Net Income Long Term Debt
Minority Interest Other Long Term Liabilities
Net Income Attributable to Alicorp Non Current Liabilities
Shares Outstanding - Average (MM) Equity Attributable to Alicorp
Earnings per Share - EPS (PEN) Minority Interest
Depreciation and Amortization Net Equity
EBITDA Liabilities + Equity
MARGINS AND GROWTH (%) CASH FLOW (PEN MM)
Gross Margin Net Income
Operating Margin Depreciation and Amortization
EBITDA Margin Changes in Working Capital
Net Margin Others
Sales Growth Operating Cash Flow
Operating Income Growth Investment Cash Flow
EBITDA Growth Financing Cash Flow
Net Income Growth Free Cash Flow
FINANCIAL RATIOS
Current Assets / Current Liabilities
Average Days of Inventory
Debt / Equity
Net Debt / EBITDA
EBITDA / Financial Expenses
Payout Ratio
Dividends per Share (PEN)
ROE
ROA
ROIC
VALUATION
EV / Sales
P / E
EV / EBIT
EV / EBITDA
P / BV
MANAGEMENT
Alfredo Perez CEO
Juan Moreyra CFO
Gisele Remy IRO
Source: Alicorp, SMV, Kallpa SAB
www.kallpasab.com 20
423 362
2020e 2021e
10,635 11,255 691
1,742
1.04 0.86
1,056 1,104 1,184
3,260
279
-267 10,635
575 662
17 17 17
3,577 3,941
3,738 3,271
3,958
-906 241
10,635
3,594 3,278
442
-8,405
1,865
2020e 2019e
1,592 1,675
2,480 2,661 2,850 1,694 1,792
-714 -747
249 256
4,218 4,139
-0 -0
4,298 3,831 3,653
4 -
-284
2,533 -0
2021e
10,571 10,679
-7 -11 -11 3,179 3,196 3,216
997 1,075 1,186 3,238 3,236 3,238
96 31 27 6,417 6,433 6,454
3,093
560 560 560
822 946 256 256 256
-238 -247 -284 3,060 3,146 3,068
575 662
-
507
855 855 855
2019e 2020e 2021e
1,287 1,390
-41 -69 -61
25.0% 25.0%
13.0%
10,571 10,679
0.673 0.775
290 315 316
2019e 2020e 2021e
10.0% 10.1% 10.5%
13.1% 13.3%
-1,752 -330 -338
11.5%
30.1%
1.38
83.00 82.00 81.00
25.3% 507 575 662
290 315 316
5.1% 5.4% 300 284 267
8.1%
16.8% 17.6%
11.33 10.50 9.52
8.77 8.12 7.52
2.39 2.18 1.97
1.14 1.06 1.00
15.34
19.8% 7.1% 5.8%
3.68 4.90 5.64
2019e 2020e 2021e
1.38 1.32
15.6%
26.8% 7.8% 10.3%
8.0%
1.29
5.2% 5.4% 6.2%
9.5% 9.8% 11.0%
CHART N° 29: SHAREHOLDERS
2019e 2020e 2021e
45.1% 45.0% 45.0%
0.240 0.303
2.74 2.37 2.00
13.53 11.76
6 -
4,225
476
0.594
2,327 2,447
511
749
-805
-350
9,931
2019e
-671
-7,451 -7,974
-
13.4% 15.0%
342 -1,043 -907
-354 -268 -61
1,502
0.349
Peru Equity Guide 2020
CHART N° 30: SALES BY SEGMENT 2019
5.9%
-861
46%
29%
15%
10%
Romero Group
Pension Funds
Mutual Funds
Others
34%
17%17%
22%
10%
Consumer Goods Peru
Consumer Goods International
B2B
Aquaculture
Crushing
Bet on consumption in the middle of global uncertainty
Marco Contreras
Head of Research
(511) 630 7528
mcontreras@kallpasab.com
InRetail Perú Corp.
Target Price (USD)
Rating
Market Capitalization (USD MM)
Market Price (USD)
Shares Outstanding (MM)
Upside
ADTV - LTM (USD MM)
Range 52 weeks
YTD Change
Dividend Yield - LTM
Trading
ADTV: Average Daily Traded Volume
LTM: Last 12 Months
Source: Bloomberg, Kallpa SAB
Financial Ratios
P / E
P / BV
EV / EBITDA
Net Debt / EBITDA
EPS (PEN)
ROE
ROA
Sensitivity Analysis
Chart N° 31: INRETC1 vs. PERU SELECT
Source: Bloomberg
www.kallpasab.com 21
Source: SMV, Kallpa SAB
2.00%
Recommendation
The low penetration of formal retail in Peru and the leadership in the 3
business segments where it operates are the main fundamentals of the
company. Likewise, net income should present a notable improvement in
the medium term due to the better operating margins and the lower
expected indebtedness, which is why we recommend to buy.
Valuation
We value InRetail with a Free Cash Flow to the Firm (FCFF) model in a 10-
year horizon. We use a discount rate (WACC) of 8.2% and a perpetual
growth rate of 3.0%
Peru Equity Guide 2020
2.50% 3.00% 3.50%
4.7%
4.42
36.54 39.44 42.90 47.10
Target Price
(BVL: INRETC1)
101.24
16.9%
2.01
30.40 - 40.30
6.9%
0.9%
BVL
29.16 22.65 19.03
45.00
Margin improvement will come from pharmacies and Puruchuco
10.4% 12.3%
34.79
11.00 9.94
3.15 2.71 2.42
4.00%
4.1%
34.088.70%
5.69 6.78
Buy
Source: Kallpa SAB
2019e 2020e 2021e
2.92 2.66
13.3%
3.3%
12.35
7.20% 49.49 54.24 60.13 67.60 77.41
7.70% 43.44 47.20 51.75
37.57 40.89
2.43
9.20% 30.38 32.42
3,897.68
38.50
8.20% 38.37 54.7945.00 49.3741.40
57.40 64.57
Peru risk. A macroeconomic or adverse political situation could have
negative impacts on the growth of the economy and local consumption,
which would affect the businesses of supermarkets and pharmacies.
WACC / g
Kallpa Securities SAB updates the valuation model of InRetail Perú Corp.
(InRetail), with a buy recommendation. Our 2020 year-end target price of USD
45.00 is 16.9% above the USD 38.50 market price as of the closing of January
7th, 2020.
InRetail Perú Corp.
High competitiveness with other companies in the sector (Falabella,
Cencosud) and with the traditional channel can generate pressure on the
margins of the company.
Fundamentals for 2020
The EBITDA margin would increase from 11.0% in 2019 to 11.3% in 2020,
as a result of the expectation of better margins in the pharmacies business
and a significant increase in the EBITDA of shopping malls, due to the
opening of the Real Plaza Puruchuco at the end of 2019.
Risks
We expect sales growth of 8.4% in 2020, based mainly on the growth of
the Food Retail segment through the Mass and Economax formats.
We expect rapid deleveraging in 2020, as we expect higher levels of
EBITDA and lower investments, compared to 2019. We estimate that the
net debt / EBITDA ratio will reach 3.2x in 2019 and 2.7x in 2020.
USD 45.00BUY
Retail Industry
480
500
520
540
560
580
28
30
32
34
36
38
40
42
Jan
-19
Fe
b-1
9
Ma
r-19
Ap
r-19
Ma
y-1
9
Jun
-19
Jul-
19
Au
g-1
9
Se
p-1
9
Oct-
19
Nov-1
9
Dec-1
9
Jan
-20
Pts.USDINRETC1 PERU SELECT
Bet on consumption in the middle of global uncertainty
INCOME STATEMENT (PEN MM) BALANCE SHEET (PEN MM)
Net Sales Cash and Cash Equivalents
Cost of sales Accounts Receivable
Gross Income Inventory
Sales Expenses Other Short Term Assets
Administrative Expenses Current Assets
Other Income, Net Fixed Assets, Net
Operating Income Investment Properties
Financial Income Intangibles, Net
Financial Expenses Other Long Term Assets
FX Gains (Losses) Non Current Assets
Income Before Taxes Total Assets
Income Tax Short Term Debt
Net Income Accounts Payable
Minority Interest Other Short Term Liabilities
Attributable to InRetail Current Liabilities
Shares Outstanding (MM) Long Term Debt
Earnings per share - EPS (PEN) Other Long Term Liabilities
Depreciation and Amortization Non Current Liabilities
EBITDA Equity Attributable to InRetail
Minority Interest
Liabilities + Equity
MARGINS AND GROWTH (%) CASH FLOW (PEN MM)
Gross Margin Net Income
Operating Margin Depreciation and Amortization
EBITDA Margin Changes in Working Capital
Net Margin Others
Sales Growth Operating Cash Flow
Operating Income Growth Investment Cash Flow
EBITDA Growth Financing Cash Flow
Net Income Growth Free Cash Flow
FINANCIAL RATIOS
Current Assets / Current Liabilities
Average Days of Inventory
Debt / Equity
Net Debt / EBITDA
EBITDA / Financial Expenses
Payout Ratio
Dividends per Share (PEN)
ROE
ROA
ROIC
VALUATION
EV / Sales
P / E
EV / EBIT
EV / EBITDA
P / BV
MANAGEMENT
Juan Carlos Vallejo CEO
Gonzalo Rosell CFO
Vanessa Dañino IRO
Source: InRetail, SMV, Kallpa SAB
www.kallpasab.com 22
2020e
702 -9,174 -9,898 -10,637
2020e 2021e 2019e2019e
780 883
2021e
50 13 14 3,630 3,754 3,891
1,179
4,344 4,704 1,835 1,953 2,098
-2,376 -2,564 -2,756 190 192 194
13,139 14,242 15,341 569 521 472
-464 -445 -434 328 328 328
-1 - - 10,806 11,103 11,392
733
3,966
InRetail: Financial Summary
1,340 1,502 3,670 3,822 3,954
18 12 11 3,177 3,199 3,219
-460 -453 -460 3,296 3,446 3,647
484 616 734 3,555 3,726 3,829
36 40 48 39 39 39
448
907 1,079 14,102 14,549 15,039
-249 -290 -345 372 398 453
4.42 5.69 6.78 815 815 815
259 276 286 5,547 5,314 5,160
1,439
576 686 3,967 4,164 4,321
101 101 101 4,732 4,499 4,345
11.3% 11.7%
7.3%
10.7% -487 -735 -721
115.2%
1,616 1,788 4,475 4,917 5,372
114 154 186
2021e 2019e 2020e 2021e
445 433 423
11.0%
3.7%
2019e
27.4% 19.0% -93
-814 -573 -575
1.11 0.97
30.0%
-49
11.83
7.8%
12.35
9.5%
2019e
3.3% 4.1% 4.7%
13.3%
2020e 2021e
1.25 1.16
8.8%
15,039
-49
30.2%
14,102 14,549
9.94
2.92
2019e 2020e
0.86
3.15 2.71
72.00 68.84
24.8% 12.3%
2020e 2021e CHART N° 32: SHAREHOLDERS
0.83 0.83 0.84
73.00
30.5% 30.7% 448 576 686
9.0% 9.4%
56 -27 -148
11.00
1,259 1,248
25.7% 13.6% 12.1%
4.3% 4.8%
2.66 2.43
8.4% 7.7% 1,208
9.8% 259 276 286
1.123 1.327 2.277
19.03
2.42
3.63 4.12
CHART N° 33: EBITDA 2019e BY SEGMENT
29.16 22.65
15.07 13.26
3.10
10.4%
54.6%
1.35
40.0%
12.3%
Peru Equity Guide 2020
71%
17%
12%
Intercorp and subsidiaries
Pension Funds
Others
28%
48%
23%
Food Retail
InRetail Pharma
InRetail Shopping Malls
Bet on consumption in the middle of global uncertainty
Marco Contreras
Head of Research
(511) 630 7528
mcontreras@kallpasab.com
Cementos Pacasmayo
TP per Share / ADR (PEN / USD)
Rating Buy
Market Capitalization (PEN MM)
Market Price (PEN / USD)
Shares Outstanding* (MM)
Upside
ADTV - LTM (PEN MM)
Range 52 weeks
YTD Change
Dividend Yield - LTM
Trading
* Includes 13.2 MM of investment shares (CPACASI1)
ADTV: Average Daily Traded Volume
LTM: Last 12 Months
Source: Bloomberg, Kallpa SAB
FINANCIAL RATIOS
P / E
P / BV
EV / EBITDA
Net Debt / EBITDA
EPS (PEN)
ROE
ROA
Sensitivity Analysis
Source: Bloomberg
www.kallpasab.com 23
Macroeconomic risk. Macroeconomic and political instability could cause
delays in private investment and therefore impact on cement demand.
Peru Equity Guide 2020
Fundamentals for 2020
11.09
12.9%
7.73 8.26 8.90 9.67
6.59 6.96 7.40
A future of concrete
2,629.90
6.10 / 9.01
9.20%
8.70%
8.20%
9.8% 11.5%
-0.8%
5.9%
6.5%
Source: SMV, Kallpa SAB
5.45 - 6.83
21.3%
0.84
7.91 8.52
7.40 / 11.04
4.9% 5.7%
Cement Industry Target Price
Cementos Pacasmayo S.A.A. PEN 7.40BUY
(BVL: CPACASC1)
10.20%
2019e
2.59 2.35 2.15
0.332 0.388 0.441
BVL, NYSE
8.07 8.63 9.29 10.10
7.27
423.87
2020e 2021e
18.51 15.82 13.93
1.83 1.81 1.79
8.78 8.12 7.66
WACC / g 2.00% 2.50% 3.00% 3.50% 4.00%
5.99 6.30 6.66 7.08 7.57
5.46 5.73 6.03 6.38 6.78
Source: Kallpa SAB
CHART N° 34: CPACASC1 vs. PERU SELECT
9.70%
Valuation
We value Pacasmayo with a Free Cash Flow to the Firm (FCFF) model in
a 10-year horizon. We use a discount rate (WACC) of 9.2% and a
perpetual growth rate of 3.0%.
Recommendation
A greater dynamism in the concrete business would be the main driver of
growth and profit generation of the company. This will also reduce leverage
and maintain an attractive dividend payment, which is why we recommend
to buy.
The EBITDA margin would be 29.7% in 2020, similar to the margin we
expect for 2019. This, given that the greater dilution of fixed costs, which
we estimate due to the increase in the use of cement plants, would be
offset by a greater share of sales of the concrete business, which reports
lower margins.
We believe that the company can still maintain a payout close to 100%, as
long as it does not make large investments or develop projects in the
medium term.
Risks
Kallpa Securities SAB updates its valuation of Cementos Pacasmayo S.A.A.
(Pacasmayo), with a buy recommendation. Our new 2020 year-end target price of
PEN 7.40 is 21.3% above the PEN 6.10 market price as of the closing of January
7th, 2020.
We expect sales to increase by 8.1%, led by the increase in revenues from
the concrete business. We believe that the increase in the execution of
reconstruction works will be the main driver during 2020 and would allow
an increase in cement dispatches close to 6.0%.
Geographic concentration in the north of the country.
Execution risk in reconstruction works in Northern Peru, that depend on the
Government's management capacity
480
500
520
540
560
580
5.0
5.4
5.8
6.2
6.6
Jan
-19
Fe
b-1
9
Ma
r-19
Ap
r-19
Ma
y-1
9
Jun
-19
Jul-
19
Au
g-1
9
Se
p-1
9
Oct-
19
Nov-1
9
Dec-1
9
Jan
-20
Pts.PENCPACASC1 PERU SELECT
Bet on consumption in the middle of global uncertainty
INCOME STATEMENT (PEN MM) BALANCE SHEET (PEN MM)
Net Sales Cash and Cash Equivalents
Cost of Sales Accounts Receivable
Gross Income Inventory
Administrative Expenses Other Short Term Assets
Sales Expenses Current Assets
Other Income, Net Fixed Assets, Net
Operating Income Intangibles, Net
Financial Income Other Long Term Assets
Financial Expenses Non Current Assets
FX Gains (Losses) Total Assets
Income Before Taxes Short Term Debt
Income Tax Accounts Payable
Net Income Other Short Term Liabilities
Minority Interest Current Liabilities
Attributable to Pacasmayo Long Term Debt
Shares Outstanding (MM) Other Long Term Liabilities
Earnings per Share - EPS (PEN) Non Current Liabilities
Depreciation and Amortization Equity Attributable to Pacasmayo
EBITDA Liabilities + Equity
MARGINS AND GROWTH (%) CASH FLOW (PEN MM)
Gross Margin Net Income
Operating Margin Depreciation and Amortization
EBITDA Margin Changes in Working Capital
Net Margin Others
Sales Growth Operating Cash Flow
Operating Income Growth Investment Cash Flow
EBITDA Growth Financing Cash Flow
Net Income Growth Free Cash Flow
FINANCIAL RATIOS
Current Assets / Current Liabilities
Average Days of Inventory
Debt / Equity
Net Debt / EBITDA
EBITDA / Financial Expenses
Payout Ratio
Dividends per Share (PEN)
ROE
ROA
ROIC
VALUATION
EV / Sales
P / E
EV / EBIT
EV / EBITDA
P / BV
MANAGEMENT
Humberto Nadal CEO
Manuel Ferreyros CFO
Claudia Bustamante IRO
Source: Pacasmayo, SMV, Kallpa SAB
www.kallpasab.com 24
2021e
1,389 1,501 1,598
-894 -952 -1,004
495 550
282 318 349
3 2 2
-82 -85
594
2021e
91 99 105
-43 -46 -49
2 - -
-172
-
202 236 268
-60 -70 -79
142 166 189
-
20
142 166 189
428 428 428
Pacasmayo: Financial Summary
2019e 2020e
-185 -196
40 41 56
2019e 2020e
-84
-1 -
- -
2,902 2,903 2,916
20 20
81 86 91
139 146 151
240 252 262
514 548 577
57 59 60
702 746 798
1,092 1,072 1,052
2,106 2,063 2,024
47 47 47
46 47 47
2,200 2,157 2,118
13.1%
10.2% 11.1%
131 131 131
1,203 1,183
1,439 1,449 1,472
2,902 2,903 2,916
1,223
17.0% 13.5%
2019e
-85
2020e 2021e
142 166 189
132 128 125
-73 -31 -27
80 82
100.0%
0.360 0.365
20.3% 21.2%
2019e 2020e 2021e
2019e 2020e 2021e
35.6% 36.6% 37.2%
29.1%
0.332 0.388 0.441
-132 -128 -125
413 447 474
21.8%
29.8% 29.7% 29.6%
9.6%
11.4% 8.0% 6.1%
9.5%
0.388
9.8%
8.78 8.12
10.0% 8.1% 6.4%
16.5%
81
280 346 367
-85 -85
-205 -259 -267
-9 2 14
12.88 11.40 10.40
2.59 2.35 2.15
5.03 5.27 5.67
200.9% 110.0%
CHART N° 35: SHAREHOLDERS
CHART N° 36: CEMENT PRODUCCION 2019E BY PLANT2019e 2020e 2021e
2.61 2.42 2.27
18.51 15.82 13.93
0.77 0.75 0.73
2.92 2.97 3.05
210.00 210.00 210.00
11.5% 12.9%
1.83
4.9% 5.7% 6.5%
7.6% 8.6%
1.81 1.79
Peru Equity Guide 2020
7.66
11.8%
50%
21%
16%
13%
Inversiones ASPI
Pension Funds
ADR Program
Others
48%
40%
13%
Pacasmayo
Piura
Rioja
Bet on consumption in the middle of global uncertainty
Marco Contreras Marco Alemán
Head of Research Senior Analyst
(511) 630 7528 (511) 630 7527
mcontreras@kallpasab.com maleman@kallpasab.com
Ferreycorp S.A.A.
Target Price (PEN)
Rating Buy
Market Capitalization (PEN MM)
Market Price (PEN)
Shares Outstanding (MM)
Upside
ADTV - LTM (PEN MM)
Range 52 weeks
YTD Change
Dividend Yield - LTM
Trading
Financial Ratios
P / E
P / BV
EV / EBITDA
Net Debt / EBITDA
EPS (PEN)
ROE
ROA
Sensitivity Analysis
Source: Bloomberg
www.kallpasab.com 25
We expect a growth in Ferreycorp sales of 13.3% and 6.0% for the years
2019 and 2020, respectively. The greater dynamism would come from the
new machinery delivery line, as a result of the contracts closed in previous
years. This business line would represent around 12-13% of total revenues
in the years 2019 and 2020 (vs. 5.6% in 2018). The business line of spare
parts and services would maintain its growing path.
Target Price
PEN 3.05
Peru Equity Guide 2020
4.07 4.50 5.05
-1.8%
6.38
0.95
0.324 0.332
13.3% 13.0% 12.9%
Ferreycorp S.A.A.
(BVL: FERREYC1) Deals closed, post-sales assured3.05
2,088.78
2.15
971.52
41.9%
1.55
BUY
Capital Goods Industry
1.96 - 2.61
Fundamentals for 2020
3.50% 4.00%
8.09% 3.41 3.71
8.59% 2.98 3.22 3.51 3.86 4.28
10.6%
BVL
ADTV: Average Daily Traded Volume
LTM: Last 12 Months
0.88 0.82
6.23 6.20 6.06
3.11 3.14 2.93
5.3% 5.4% 5.6%
Source: Bloomberg, Kallpa SAB
2019e 2020e 2021e
7.29 6.54
Source: SMV, Kallpa SAB
9.09% 2.61 2.81 3.05
Ferreycorp trades at an EV/EBITDA 2020 of 6.2x, below the 7.1x median of
its peers, and at a P/E 2020 of 6.5x, below the median of 12.5x of similar
companies.
9.59% 2.29 2.46 2.66 2.88 3.15
2.16 2.32 2.50 2.72
Source: Kallpa SAB
3.32 3.66
0.294
WACC / g 2.00% 2.50% 3.00%
We value Ferreycorp with a Free Cash Flow to the Firm (FCFF) model in a
10-year horizon. We use a discount rate (WACC) of 9.1% and a perpetual
growth rate of 3.0%.
Risks
A lower than expected growth of private investment, generated by the
slowdown and lower execution of projects, in addition to a lower dynamism
of the mining industry (~55-60% of its sales), due to problems with the
communities and commodity volatility.
The high level of competitiveness that exists in mining industry, due to the
participation of Komatsu Mitsui, which could take a more aggressive stance
in this new mining investment cycle.
Valuation
10.09%
Recommendation
All in all and considering the attractive dividend yield, we reaffirm our buy
recommendation of FERREYC1.
CHART N° 37: FERREYC1 vs. PERU SELECT
The estimated portfolio of mining projects according to the Ministry of
Energy and Mining (MEM) exceeds USD 57,000 MM for the following
years. 71% of them corresponds to copper projects, a metal that
represents a large part of Peru´s exports, and with solid fundamentals in
the medium and long term.
We estimate that the margins and the generation of cash flows would
remain stable due to the 5.5% growth in 2020 of the spare parts and
services business unit (segment that generates the highest margins), which
would maintain the gross margin between 23% - 24%
Kallpa Securities SAB updates Ferreycorp S.A.A. (Ferreycorp) valuation model
with a buy recommendation. Our new 2020-year-end target price of PEN 3.05 is
41.9% higher than the PEN 2.15 market price as of the closing of January 7th,
2020.
2.02
480
500
520
540
560
580
1.9
2.0
2.1
2.2
2.3
2.4
2.5
Jan
-19
Fe
b-1
9
Ma
r-19
Ap
r-19
Ma
y-1
9
Jun
-19
Jul-
19
Au
g-1
9
Se
p-1
9
Oct-
19
Nov-1
9
Dec-1
9
Jan
-20
Pts.PENFERREYC1 PERU SELECT
Bet on consumption in the middle of global uncertainty
INCOME STATEMENT (PEN MM) BALANCE SHEET (PEN MM)
Net Sales Cash and Cash Equivalents
Cost of Sales Accounts Receivable
Gross Income Inventory
Sales Expenses Other Short Term Assets
Administrative Expenses Current Assets
Other Income, Net Fixed Assets, Net
Operating Income Other Long Term Assets
Financial Income Non Current Assets
Financial Expenses Total Assets
FX Gains (Losses) Short Term Debt
Stake in Associates Accounts Payable
Income Before Taxes Other Short Term Liabilities
Income Tax Current Liabilities
Net Income Long Term Debt
Shares Outstanding - Average (MM) Other Long Term Liabilities
Earnings per Share - EPS (PEN) Non Current Liabilities
Depreciation and Amortization Net Equity
EBITDA Liabilities + Equity
MARGINS AND GROWTH (%) CASH FLOW (PEN MM)
Gross Margin Net Income
Operating Margin Depreciation and Amortization
EBITDA Margin Changes in Working Capital
Net Margin Others
Sales Growth Operating Cash Flow
Operating Income Growth Investment Cash Flow
EBITDA Growth Financing Cash Flow
Net Income Growth Free Cash Flow
FINANCIAL RATIOS
Current Assets / Current Liabilities
Average Days of Inventory
Debt / Equity
Net Debt / EBITDA
EBITDA / Financial Expenses
Payout Ratio
Dividends per Share (PEN)
ROE
ROA
ROIC
VALUATION
EV / Sales
P / E
EV / EBIT
EV / EBITDA
P / BV
MANAGEMENT
Mariela García CEO
Patricia Gastelumendi CFO
Elizabeth Tamayo IRO
Source: Ferreycorp, SMV, Kallpa SAB
www.kallpasab.com 26
2021e
- - 1,066
2021e
532 526
-621
-92 -91 6,203
5,893 6,244 6,433
9 8
690 693
14
709
-161
287 319
1,631
536
6,203
-640 45
-90
1,460
2,371
6,076
83
6,076
1,258
2019e
682 737
2,539
0.95 0.85
7.9% 7.9%
190 190
14
327
46 47
1,138 1,561 1,424
4
-325 3,572 3,825
5,780
616
21
2020e 2021e
642 668
56 66 81
-4,475 -4,784 -4,942
4 1,177
1,492
448 463
-143
2,251
4
976
5,780
987
1,328
985 190
-147
2020e 2021e
-17
1,614
153.00
2,257
365
6.06
144
-308 -321
3.14 2.93
12.9%
6.20
-17
1,751
0.228 0.147 0.164
7.9%
2.3% -104
144 149
511
15
7.50 7.65 7.91
3.11
13.0%
150.00 154.00
11.4% 2.5%
0.69
-586
2,293
2,050
0.294 0.324 0.332
3,910
1,592 1,609 1,625 8
474
23 24 2,208
0.3%
2019e
Ferreycorp: Financial Summary
-187 -193
-168 -303
-29
9.0%
319 327
149 2,195 137
1,694 1,710
1,418 1,839 2,018 2,071
1,300
1,954
8.4%
2019e 2020e 2021e
13.3% 3.0%
CHART N° 38: SALES BY ECONOMIC SECTOR
6.0%
4.9% 5.1% 5.1% 64 63
24.1% 23.4%
2019e 2020e
10.9%
13.3%
1.58 1.96 1.91
10
CHART N° 39: SALES BY BUSINESS UNIT 2020e
0.95
2020e 2021e
8.17 8.02
6.23
6.54
0.82
6.38
98.4% 50.0%
2019e
Peru Equity Guide 2020
50.0%
1.00
-106 -162
23.2% 287
14
0.88
5.4% 5.6%
-314
0.67
8.08
11.0%
0.73
7.29
11.7%
8.3% 137
401
5.3%
-1.0% 1.8%
27.4%
14.1%
11.1%
2019e 2020e
6%
35%
59%
Onyx Latin America Equity FundLP
Pension Funds
Others
49%
12%
10%
8%
7%
13%Spare Parts and Services
CAT Machinery for Other Industries
Allied Equipment
Rental and Used Equipment
Other Lines
CAT Machinery for Mining
Bet on consumption in the middle of global uncertainty
Marco Contreras Marco Alemán
Head of Research Senior Analyst
(511) 630 7528 (511) 630 7527
mcontreras@kallpasab.com maleman@kallpasab.com
Graña y Montero S.A.A.
TP per Share / ADR (PEN / USD)
Rating Hold
Market Capitalization (PEN MM)
Market Price (PEN / USD)
Shares Outstanding (MM)
Upside
ADTV - LTM (S/ MM)
Range 52 weeks
YTD Change
Dividend Yield - LTM
Trading
Financial Ratios
P / E
P / BV
EV / EBITDA
Net Debt / EBITDA
EPS (PEN)
ROE
ROA
Sensitivity Analysis
Source: Bloomberg
www.kallpasab.com 27
We expect sales to register a slight improvement of 1.7% in 2020, and with
it, that the Backlog / sales ratio will oscillate at levels of 2.0x - 2.2x during
the year.
Peru Equity Guide 2020
Graña y Montero S.A.A.
Target Price
PEN 2.80HOLD
Fundamentals for 2020
64.7%
0.79
Risk of execution in E&C projects, both in terms of time and costs incurred
by the company.
(BVL: GRAMONC1)
1.70 / 2.53
814.92
2.49 2.59
Source: Kallpa SAB
Source: SMV, Kallpa SAB
2.40
CHART N° 40: GRAMONC1 vs. PERU SELECT
2.26
2.60
3.34
2.80 / 4.18
May the force be on the margins
2.42 2.50 2.5911.12%
The net debt / EBITDA ratio for 2020 would be 1.1x, below 1.4x in 2019, as
a result of a 17.5% reduction in net debt levels and a 7.2% increase in
EBITDA.
Risks
Fines or civil reparations that the company can face, given the
investigations that have been made to G&M.
Valuation
11.62%
6.6%
10.12%
2.50% 3.00% 3.50% 4.00%
9.62% 3.02 3.15 3.30
2.80
3.173.03
0.0%
0.81
NYSE, BVL
ADTV: Average Daily Traded Volume
LTM: Last 12 months
Source: Bloomberg, Kallpa SAB
2019e
0.51
1.06
2.7%
0.9% 2.4% 2.6%
Construction Industry
2.912.80
8.59
0.58 0.53
We expect a recovery in private investment levels, mainly in the mining
industry, which would be the main driver of sales for the segment of E&C
(Engineering and Construction). We estimate that the Backlog will stay at
levels of USD 2,200 - 2,500 MM.
1.25 - 2.40
1,385.37
2020e 2021e
6.8%
1.37
2.92
2.69
2.33
3.48 3.68
7.57 6.30
3.052.69 2.80
* Exchange Rate USD/PEN: 3.35
We emphasize that the EBITDA margin of the E&C area would be 4.5% in
2020, higher than 3.3% in 2019e. This, given the company's objective of
seeking projects with more efficient schemes. This would lead the
consolidated EBITDA margin to rise to 14.3% in 2020, above the 13.6%
expected for 2019e.
Capex by 2020 would rise to USD 60 MM, of which 70% would correspond
to GMP investment commitments.
0.121 0.252 0.273
We value Graña y Montero with a Free Cash Flow to the Firm (FCFF)
model in a 10-year horizon. We use a discount rate (WACC) of 10.6% and
a perpetual growth rate of 3.0%.
Recommendation
10.62%
WACC / g 2.00%
Kallpa Securities SAB updates Graña y Montero S.A.A. (Graña y Montero or
G&M) valuation model with a hold recommendation. Our new 2020-year-end
target price of PEN 2.80 is 64.7% higher than the PEN 1.70 market price as of the
closing of January 7th, 2020.
Despite the high upside regarding the market price, we highlight the high
risk level due to the situation facing the company regarding the several
investigations that have been carried out. Given this, we recommend to
hold.
3.99 4.32 5.19
0.0%
480
500
520
540
560
580
1.2
1.4
1.6
1.8
2.0
2.2
2.4
2.6
Jan
-19
Fe
b-1
9
Ma
r-19
Ap
r-19
Ma
y-1
9
Jun
-19
Jul-
19
Au
g-1
9
Se
p-1
9
Oct-
19
Nov-1
9
Dec-1
9
Jan
-20
Pts.PENGRAMONC1 PERU SELECT
Bet on consumption in the middle of global uncertainty
Graña y Montero: Financial Summary
INCOME STATEMENT (PEN MM) BALANCE SHEET (PEN MM)
Net Sales Cash and Cash Equivalents
Cost of Sales Accounts Receivable
Gross Income Inventory
Administrative Expenses Other Short Term Assets
Other Income Current Assets
Operating Income Fixed Assets, Net
Financial Income Intangibles, Net
Financial Expenses Other Long Term Assets
FX Gains (Losses) Non Current Assets
Stake in Associates Total Assets
Income Before Taxes Short Term Debt
Income Tax Accounts Payable
Net Income Other Short Term Liabilities
Minority Interest Current Liabilities
Attributable to Graña y Montero Long Term Debt
Shares Outstanding - Average (MM) Other Long Term Liabilities
Earnings per Share - EPS (PEN) Non Current Liabilities
Depreciation and Amortization Equity Attributable to Graña y Montero
EBITDA Minority Interest
Total Liabilities + Equity
MARGINS AND GROWTH (%) CASH FLOW (PEN MM)
Gross Margin Net Income
Operating Margin Depreciation and Amortization
EBITDA Margin Changes in Working Capital
Net Margin Others
Sales Growth Operating Cash Flow
Operating Income Growth Investment Cash Flow
EBITDA Growth Financing Cash Flow
Net Income Growth Free Cash Flow
FINANCIAL RATIOS
Current Assets / Current Liabilities
Collection Period
Debt / Equity
Net Debt / EBITDA
EBITDA / Financial Expenses
Payout Ratio
Dividends per Share (PEN)
ROE
ROA
ROIC
VALUATION
EV / Sales
P / E
EV / EBIT
EV / EBITDA
P / BV
MANAGEMENT
Luis Díaz CEO
Mónica Miloslavich CFO
Paola Pastor Investor Relations
Source: Graña y Montero, SMV, Kallpa SAB
www.kallpasab.com 28Peru Equity Guide 2020
200
420
181
1,613 1,770
6.6% 6.8%
14.7%
991
28
443 467
7,304
-
660
1,622
2,431 2,598 2,728
623 659
15.1% 80 166
627
241 278 291
2019e
618
7,439
622
4.29
2.7%
6.9% 7.2%
0.64 0.77 0.75
0.53 0.51
7.57 6.30
CHART N° 42: BACKLOG BY SECTOR
8.59
5.65 6.48 8.80
3.99
0.58
2021e
3.36
2.4% 2.6%
4.4%
2019e
- - 0.076
2020e
4.32 5.19
0.9%
30.0%
0.51
33
5.8% -339
-243
n.s.
7.2%
7,328 7,439
2019e 2020e 2021e
4.59
1.30 1.31 1.35
97.00
1.06 0.81
0.0%
0.67
2020e
108.6% 8.5% 32
2021e
-256
-225
0.0%
0.57
1.37
193 200
2020e 2021e
0.121 0.252 0.273
582
13.6%
181
1.9% 3.8%
1.7% 3.6% 564
-225
19.7% 7.2% 6.9% -193
181 193
4.0% 103 105
9.5% 463 514
CHART N° 41: SHAREHOLDERS2019e
-3.7%
113
-4
1 190
38 920
-173 -145 -143 2,495 2,464 2,448
-5 -
-3,689 -3,698
278
660
14.8%
306
-47 -55 -60 2,682 2,665 2,631
660
580 644 677 586
278
386
3,824 3,843
401 429 459 463
588
- 3,480 3,484
2020e
4,269 4,342 4,498
-218 277
867 894
2019e
1,940
3,555
-3,820 1,801 1,808 1,836
-
516
3,884
597
42
815 811
2020e 2021e
844
1,908
9.9% 10.2%
127
470 466
486
7,328
354
-209 -214
181 1,143 1,004
30
99.00
2019e
-155
80
60
2021e
1,934
-
326 281
-1
101.00
-104
7,304
166
13.6% 14.3%
-
9.4%
222
-113
22%
19%
10%10%
5%
35%
Pension Funds
Original Family
Pacifico Corp. S.A.
Megeve
Aberdeen
Others
38%
32%
24%
4%2%Oil & Gas
Mining Projects
Transport
Real Estate
Others
Bet on consumption in the middle of global uncertainty
Marco Contreras Marco Alemán
Head of Research Senior Analyst
(511) 630 7528 (511) 630 7527
mcontreras@kallpasab.com maleman@kallpasab.com
UNACEM S.A.A.
Target Price (PEN)
Rating Buy
Market Capitalization (PEN MM)
Market Price (PEN)
Shares Outstanding (MM)
Upside
ADTV - LTM (PEN MM)
Range 52 weeks
YTD Change
Dividend Yield - LTM
Trading
Financial Ratios
P / E
P / BV
EV / EBITDA
Net Debt / EBITDA
EPS (PEN)
ROE
ROA
Source: SMV, Kallpa SAB
Sensitivity Analysis
Source: Bloomberg
www.kallpasab.com 29
Political and social conflicts that affect the performance of the operations of
subsidiaries abroad (Ecuador, Chile, Colombia, etc.). This could reduce the
levels of private investment and public budget in the following periods.
Peru Equity Guide 2020
2.63 2.75 2.89 3.05 3.24
10.81% 2.40 2.50 2.62 2.75 2.91
0.192
Source: Kallpa SAB
8.81% 3.53 3.73 3.98 4.27 4.62
9.31% 3.19 3.36 3.56 3.80 4.08
9.81% 2.89 3.04 3.62
2.50%
0.83 0.78 0.75
6.14 5.94 5.68
3.14
3,636.26
2.00
1,818.13
60.0%
1.51
1.93 - 2.90
Fundamentals for 2020
0.0%
2.6%
BVL
ADTV: Average Daily Traded Volume
0.215
3.00%2.00%
10.31%
Cement Industry Target Price
UNACEM S.A.A. PEN 3.20BUY
(BVL: UNACEMC1) Peru cement to improve. Attractive cash flows3.20
LTM: Last 12 Months
Source: Bloomberg, Kallpa SAB
2019e 2020e 2021e
10.44 9.30 8.38
For 2020, we expect the net debt / EBITDA ratio to be 2.7x (2019 would
close at 3.1x). This is the result of a 10.6% drop in net debt levels and a
3.3% growth in EBITDA. This would generate an increase in the potential
payment of dividends in the future.
8.2%
2.71 2.35
0.239
3.20 3.40
Valuation
We value UNACEM with a Free Cash Flow to the Firm (FCFF) model in a
10-year horizon. We use a discount rate (WACC) of 9.8% and a perpetual
growth rate of 3.0%.
Recommendation
3.50% 4.00%
4.2%
8.6% 9.1%
3.3% 3.8%
WACC / g
CHART N° 43: UNACEMC1 vs. PERU SELECT
We expect an increase of 5.3% in the company’s revenue in 2019, due to
the greater dynamism in cement businesses in the United States; and,
concrete in Peru and Chile. For 2020 we expect an increase of 1.1%, given
that the foregoing would be offset by a contraction in Ecuador's revenues.
We expect the EBITDA margin to be 30.9% in 2020. We highlight the
higher cement margins in the United States (due to better prices in
Arizona), as well as in concrete and electric power units.
Risks
Lower-than-expected private investment growth in Peru, as a result of the
delay of large infrastructure projects in the area of influence of the
company.
A lower capacity to increase prices, due to higher imports in the company's
area of influence. Likewise, we highlight the lower-than-expected
efficiencies, given the increases in costs such as electricity, oil, freight,
insurance, among others.
Given the aforementioned, and the expectation of greater dynamism of the
Peruvian economy as well as the better expected operating margins for the
company, we maintain our buy recommendation.
Kallpa Securities SAB updates Unión Andina de Cementos S.A.A. (UNACEM)
valuation model with a buy recommendation. Our new 2020 year-end target price
of PEN 3.20 is 60.0% higher than the PEN 2.00 market price as of the closing of
January 7th, 2019.
480
500
520
540
560
580
1.9
2.1
2.3
2.5
2.7
2.9
Jan
-19
Fe
b-1
9
Ma
r-19
Ap
r-19
Ma
y-1
9
Jun
-19
Jul-
19
Au
g-1
9
Se
p-1
9
Oct-
19
Nov-1
9
Dec-1
9
Jan
-20
Pts.PENUNACEMC1 PERU SELECT
Bet on consumption in the middle of global uncertainty
UNACEM: Financial Summary
INCOME STATEMENT (PEN MM) BALANCE SHEET (PEN MM)
Net Sales Cash and Cash Equivalents
Cost of Sales Accounts Receivable
Gross Income Inventory
Administrative Expenses Other Short Term Assets
Sales Expenses Current Assets
Other Income, Net Fixed Assets, Net
Operating Income Intangibles, Net
Stake in Associates Other Long Term Assets
Financial Income Non Current Assets
Financial Expenses Total Assets
FX Gains (Losses) Short Term Debt
Income Before Taxes Accounts Payable
Income Tax Other Short Term Liabilities
Net Income Current Liabilities
Minority Interest Long Term Debt
Attributable to UNACEM Other Long Term Liabilities
Shares Outstanding - Average (MM) Non Current Liabilities
Earnings per Share - EPS (PEN) Equity Attributable to UNACEM
Depreciation and Amortization Minority Interest
EBITDA Total Liabilities + Equity
MARGINS AND GROWTH (%) CASH FLOW (PEN MM)
Gross Margin Net Income
Operating Margin Depreciation and Amortization
EBITDA Margin Changes in Working Capital
Net Margin Others
Sales Growth Operating Cash Flow
Operating Income Growth Investment Cash Flow
EBITDA Growth Financing Cash Flow
Net Income Growth Free Cash Flow
FINANCIAL RATIOS
Current Assets / Current Liabilities
Average Days of Inventory
Debt / Equity
Net Debt / EBITDA
EBITDA / Financial Expenses
Payout Ratio
Dividends per Share (PEN)
ROE
ROA
ROIC
VALUATION
EV / Sales
P / E
EV / EBIT
EV / EBITDA
P / BV
MANAGEMENT
Carlos Ugás CEO
Álvaro Morales CFO
Francisco Barúa CIO
Source: UNACEM, SMV, Kallpa SAB
www.kallpasab.com 30
-343 -334
1.03
80.1%
2021e
1,077
0.91
4.3%
2019e
-388
10.9% 129
1.78
26
CHART N° 45: EBITDA BY SUBSIDIARY 2020e
58
Peru Equity Guide 2020
762 762 785
0.75
1.85
12.3%
-27
1,108
-5 -2 -2 3,338 3,177 2,736
348 391 434 872 872 875
CHART N° 44:SHAREHOLDERS
3.5%
2019e 2020e 2021e
434
168 480
1,282 1,338 10,386 10,359
465
-161
0.192 0.215 0.239 4,373 4,679 4,878
1.87
3.3%
9.89 9.57 9.07
6.14 5.94 5.68
0.83 0.78
2020e 2021e
-694
1,241
9.4%
18.9% 19.3%
10,334
166 164
3.8% 4.2%
10.44 9.30 8.38
60.0%
0.047 0.047 0.129
8.2% 8.6% 9.1%
44.3% 24.6%
6.6%
2019e 2020e
5.9% 6.2%
19.7% 465 480 492
30.9% 31.1% 15 -26
98.00 99.00 100.00
0.89 0.76 0.69
3.14 2.71 2.35
4.42 5.40 6.04
1,818 1,818 1,818 4,210 4,049 3,611
5.3% 1.1% 1,113
-675 -650
1.09
492
9.3% 3.4% 5.4%
7.7% 3.3%
30.2%
10.0% 279 231 214 8.3%
2019e 2020e 2021e
27.7% 28.4% 28.7% 348 391
343 389 432 1,635 1,440 1,706
6 8 11 8,895 8,758 8,601
-282 -239 -223 10,386 10,334 10,359
3 - - 716 521
505 572 635
761
-183 -203 157 158 160
19 1 1 7,163 7,016 6,849
776 802 845 1,392 1,401 1,411
2 2 2 340 340 342
-2,973 -3,065 529 546 565
1,182 1,235 798 806 840
-277 -277 -285 27 28 28
-104 -103 -105 1,491 1,576 1,758
1,138
2019e 2020e 2021e 2019e 2020e 2021e
4,111 4,155 4,300 137 196 324
-2,972
43%
24%
20%
12%
Inversiones JRPR S.A.
Inversiones Andino S.A.(Controlado por JRPR)
Pension Funds
Others
62%15%
9%
9%
5%
UNACEM Perú
UNACEM Ecuador
UNICON y CONCREMAX
Celepsa
Others
Bet on consumption in the middle of global uncertainty
Marco Contreras
Head of Research
(511) 630 7528
mcontreras@kallpasab.com
Enel Distribución Perú S.A.A.
Target Price (PEN)
Rating Buy
Market Capitalization (PEN MM)
Last TP (PEN)
Shares Outstanding (MM)
Upside
ADTV - LTM (PEN MM)
Range 52 weeks
YTD Change
Dividend Yield - LTM
Trading
ADTV: Average Daily Traded Volume
LTM: Last Twelve Months
Source: Bloomberg, Kallpa SAB
Financial Ratios
P / E
P / BV
EV / EBITDA
Net Debt / EBITDA
EPS (PEN)
ROE
ROA
Source: SMV, Kallpa SAB
Sensitivity Analysis
Valuation
Source: Kallpa SAB
Recommendation
Source: Bloomberg
www.kallpasab.com 31
12.5610.27
7.59% 6.33 6.59 6.89 7.21 7.57
8.36 8.837.09% 7.23 7.56 7.94
6.76
1.69 1.73
0.639
18.3% 16.8% 15.7%
CHART N° 46: ENDISPC1 vs. PERU SELECT
6.59% 8.32 8.76 9.25 9.80 10.43
5.59% 11.44 12.23 13.14 14.22 15.51
6.09% 9.69
2019e
10.92 11.68
8.8% 8.4% 8.0%
2.00% 2.25% 2.50% 2.75% 3.00%
(BVL: ENDISPC1)
4,565.73
7.15
638.56
0.48
5.18 - 7.35
2020e
WACC / g
2021e
11.18 11.01 10.87
1.93 1.77 1.66
7.15 6.95
0.649
Higher prices and high margins in 2020
Fundamentals for 2020
Risks
The company is exposed to regulatory changes which could affect the
operations of the energy distribution in the medium term
Good economic prospects, margin stability and higher rates would be the
main catalysts during 2020. We believe that the share price does not yet
reflect the fundamentals of the company, so our recommendation is to buy.
-2.7%
0.658
We value the company with a Free Cash Flow to the Firm (FCFF) model in
a 10-year horizon. We use a 6.6% WACC and a perpetual growth rate of
2.5%.
3.2%
BVL
9.25
Electricity Industry
Peru Equity Guide 2020
Enel Distribución Perú S.A.A. PEN 9.25BUY
Target Price
We expect that the company does not have its free customers share too
affected, following the trend of 2019, resulting in greater stability of cash
flows. We believe that revenue growth could be around 3.0% in 2020.
A further oversupply in the electricity market could generate higher
competition levels that would make free clients to contract directly with the
electricity generators for a lower price.
The higher regulated market prices, reflected in the company's results in
2019, would continue to be an important catalyst in the generation of cash
flows by 2020.
The company's investment levels would be around PEN 460 MM, in order
to ensure the quality and maintenance of networks, and reduce energy
losses.
29.4%
1.68
Kallpa Securities SAB updates Enel Distribución Perú S.A.A. (ENDISPC1)
valuation model with a buy recommendation. Our new 2020-year-end target price
of PEN 9.25 is 29.4% higher than the PEN 7.15 market price as of the closing of
January 7th , 2020.
480
500
520
540
560
580
4.5
5.0
5.5
6.0
6.5
7.0
7.5
Jan
-19
Fe
b-1
9
Ma
r-19
Ap
r-19
Ma
y-1
9
Jun
-19
Jul-
19
Au
g-1
9
Se
p-1
9
Oct-
19
Nov-1
9
Dec-1
9
Jan
-20
Pts.PENENDISPC1 PERU SELECT
Bet on consumption in the middle of global uncertainty
Enel Dx: Financial Summary
INCOME STATEMENT (PEN MM) BALANCE SHEET (PEN MM)
Net Sales Cash and Cash Equivalents
Cost of Sales Accounts Receivable
Gross Income Inventory
Commercialization Expenses Other Short Term Assets
Administrative Expenses Current Assets
Other Income (Expenses), Net Fixed Assets, Net
Operating Income Other Long Term Assets
Financial Income Non Current Assets
Financial Expenses Total Assets
FX gain (loss) Short Term Debt
Income Before Taxes Accounts Payable
Income Tax Other Short Term Liabilities
Net Income Current Liabilities
Shares Outstanding (MM) Long Term Debt
Earnings per Share - EPS (PEN) Other Long Term Liabilities
Depreciation and Amortization Non Current Liabilities
EBITDA Equity
Liabilities + Equity
MARGINS AND GROWTH (%) CASH FLOW (PEN MM)
Gross Margin Net Income
Operating Margin Depreciation and Amortization
EBITDA Margin Changes in Working Capital
Net Margin Others
Sales' Growth Operating Cash low
Operating Income's Growth Investment Cash Flow
EBITDA's Growth Financing Cash Flow
Net Income's Growth Free Cash Flow
FINANCIAL RATIOS
Current Assets / Current Liabilities
Collection Period
Debt / Equity
Net Debt / EBITDA
EBITDA / Financial Expenses
Payout Ratio
Dividends per Share (PEN)
ROE
ROA
ROIC
VALUATION
EV / Sales
P / E
EV / EBIT
EV / EBITDA
P / BV
MANAGEMENT
Riccardo Lama CEO
Guillermo Lozada CFO
Pilar Cano Finance and Investor Relations
Source: Enel Dx, SMV, Kallpa SAB
www.kallpasab.com 32
581
408
51 53
2021e
4,773
681 112 116
13 14 4,368 4,637 4,890
0.64
7.15
2019e
-172
12.7%
1.93
11.18
9.15
2019e
-2,253
2019e
2019e
0.43
18.8%
1.94
27.3%
639 639
2021e
658 671
24
3,194 3,294 88
-2,408
1,113
6 6
289
2020e
415 420 975
- - 242 272
272 -2,328
-105
307
2020e 2021e 2019e
101 107
184
14.1%
333
-92 -94 -97 4,783 5,083 5,362
12
-113 6
845 866 886 49
-108
420
27.1%
195
4,783
184
2020e
5,083 5,362
1,473
867 892
-464 -463 1.5% -462
27.1% -23 4 4
27.1% 26.9% 408
195 1,445
2,754
2019e
80
0.23 0.31 0.39
1.69 1.73
9.20 9.18 9.16
22.00
6.95 6.76
CHART N° 48: RENEVUE BY CLIENT 2019e
1.66 1.77
1.89 1.83
12.0% 11.4% 10.9%
2.9%
2021e
0.649 0.658 179 179 179
843 2,363 2,583
1,495
2020e 2021e
81
415
-106 -111
2.9% -200 -219
0.43 0.42
1.6% 1.3% -12
-175 -177 72 73 74
6
0.60
13
23.00 24.00
0.61
1,266
8.8% 8.4% 8.0%
18.3% 16.8% 15.7%
1,294 1,316
CHART N° 47: SHAREHOLDERS
210
2.0%
13.0%
42.8% 60.0%
1.68
21.2% 21.0% 20.7%
649 696 719
84
-117
-250
116
0.639
639
2
5.0%
415 447 472
1,028
24 25 4,256 4,521
590 598 660
210
3.1% 3.1%
12.8%
2020e
27.2%
13.2%
2021e
Peru Equity Guide 2020
47.8%
8.84
2020e
11.01 10.87
8.98
682 706
3,098
55%
12%
18%
15%
Residential
Commercial
Industrial
Others
83%
11%
6%
Enel Perú S.A.C.
Pension Funds
Others
Bet on consumption in the middle of global uncertainty
Marco Contreras
Head of Research
(511) 630 7500
mcontreras@kallpasab.com
Enel Generación Perú S.A.A.
Target Price (PEN)
Rating Buy
Market Capitalization (PEN MM)
Last TP (PEN)
Shares Outstanding (MM)
Upside
ADTV - LTM (PEN MM)
Range 52 weeks
YTD Change
Dividend Yield - LTM
Trading
ADTV: Average Daily Traded Volume
LTM: Last Twelve Months
Source: Bloomberg, Kallpa SAB
Financial Ratios
P / E
P / BV
EV / EBITDA
Net Debt / EBITDA
EPS (PEN)
ROE
ROA
Source: SMV, Kallpa SAB
Sensitivity Analysis
Valuation
Source: Kallpa SAB
Source: Bloomberg
www.kallpasab.com 33
-0.66 -0.74
BVL
14.4%
2.55 2.67 2.81 2.98
6.74%
3.08
8.24% 2.28 2.37 2.47 2.58 2.72
4.26
2.84 3.00
WACC / g 1.00% 1.50% 2.00% 2.50%
2.90 3.31
7.74% 2.44
7.35 7.26 6.99
9.8% 9.6% 10.0%
14.5% 14.1%
0.155 0.164
7.24% 2.63 2.75
3.00%
6.24% 3.10 3.30 3.54 3.85
0.154
3.19 3.42 3.72
2020e 2021e
14.92 14.83 14.02
2.14 2.06
2019e
We have valued the company under the Free Cash Flow to the Firm
(FCFF) methodology, with a 10 year horizon. We used an 7.2% WACC and
a perpetual growth of 2.0%.
Peru Equity Guide 2020
(BVL: ENGEPEC1)
2,838.75
1.99
Recommendation
Fundamentals for 2020
Risks
Low volatility and play for dividends
Great part of the company’s power plants are hydroelectric generation, so
the climatic factor (lack of rainfall) could increase costs and reduce
margins.
A rise in the energy spot price can generate distortion in the margins of the
company, since the company is a net buyer.
The increase in the company's cash level, together with lower investment
levels, would result in higher dividends in the coming years, with a gradual
increase in payout (we expect a 100% payout in the following years).
We estimate that the company maintains an aggressive strategy in the
generation of new contracts for free customers, taking advantage of the
current price situation, which we estimate will remain at similar levels
during 2020.
2.90
Electricity Industry Target Price
PEN 2.90Enel Generación Perú S.A.A.
0.16
1.83 - 2.63
26.1%
BUY
6,529.13
2.30
3.9%
0.0%
-0.56
For the next year we expect the company to maintain its stable
fundamentals, mainly its high levels of cash and low debt. We also believe
that there is potential to increase dividend payments, given the current little
investment in the sector. We believe that, although the shares has shown a
positive performance in 2019, the fundamentals are not yet fully
internalized in the market price, so our recommendation is to buy.
CHART N° 49: ENGEPEC1 vs. PERU SELECT
We expect energy production to grow above 2.5% and the EBITDA margin
to remain around 49% in 2020.
Kallpa Securities SAB updates Enel Generación Perú S.A.A. (ENGEPEC1)'s
valuation model with a buy recommendation. Our new 2020-year-end target price
of PEN 2.90 is 26.1% higher than the PEN 2.30 market price as of the closing of
January 7th, 2020.
480
500
520
540
560
580
1.6
1.8
2.0
2.2
2.4
2.6
Jan
-19
Fe
b-1
9
Ma
r-19
Ap
r-19
Ma
y-1
9
Jun
-19
Jul-
19
Au
g-1
9
Se
p-1
9
Oct-
19
Nov-1
9
Dec-1
9
Jan
-20
Pts.PENENGEPEC1 PERU SELECT
Bet on consumption in the middle of global uncertainty
Enel Generación Perú: Financial Summary
INCOME STATEMENT (USD MM) BALANCE SHEET (USD MM)
Net Sales Cash and Cash Equivalents
Cost of Sales Accounts Receivable
Gross Income Inventory
Administrative Expenses Other Short Term Assets
Other Income (Expenses), Net Current Assets
Operating Income Fixed Assets, Net
Financial Income Intangibles
Financial Expenses Other Long Term Assets
FX gain (loss) Non Current Assets
Income Before Taxes Total Assets
Income Tax Short Term Debt
Net Income Accounts Payable
Minority Interest Other Short Term Liabilities
Net Income Attributable to Enel Gx Current Liabilities
Shares Outstanding (MM) Long Term Debt
Earnings per Share - EPS (PEN) Other Long Term Liabilities
Depreciation and Amortization Non Current Liabilities
EBITDA Equity Attributable to Enel Gx
Minority Interest
Liabilities + Equity
MARGINS AND GROWTH (%) CASH FLOW (PEN MM)
Gross Margin Net Income
Operating Margin Depreciation and Amortization
EBITDA Margin Changes in Working Capital
Net Margin Others
Sales' Growth Operating Cash low
Operating Income's Growth Investment Cash Flow
EBITDA's Growth Financing Cash Flow
Net Income's Growth Free Cash Flow
FINANCIAL RATIOS
Current Assets / Current Liabilities
Collection Period
Debt / Equity
Net Debt / EBITDA
EBITDA / Financial Expenses
Payout Ratio
Dividends per Share (PEN)
ROE
ROA
ROIC
VALUATION
EV / Sales
P / E
EV / EBIT
EV / EBITDA
P / BV
MANAGEMENT
Marco Raco CEO
Guillermo Lozada Pozo CFO
Pilar Cano Finance and Investor Relations
Source: Enel Gx, SMV, Kallpa SAB
www.kallpasab.com 34
-947 -1,042 541 563 586
1,651 1,791 619 671 755
2019e 2021e 2019e 2020e 2021e2020e
1,720
1,325 1,437
-79 -85 3 3 3 -82
5
646
750 85 89 93
7.35 6.99
-0.66
48.34
14.1% 13.9%
2019e 2021e
13.7%
2020e
-0.56 -0.74
2.14 1.99
4,714 4,839
-997
704
645 670 3,285 3,287 3,287
20 5
3,389 3,402
19
6.234 6.234 6.234 -17
-
647 634
20 83 96 109 19
675
7.26
2.06
10.0%
14.5% 14.4%
0.118 0.124
51.6% 80.0%75.0%
0.116
14.1%
615 600
447 476
182 182 182
-187 -199
374 394 412
-198
450
9
440 438
39 7 59
70 70
183 202
3,056 3,168 3,282
0.154 0.164
880 862 888
2,839 2,839
785 785 785
2,839
0.155
193
839 829
96 77 103
872
69
-1 -527.1% 26.5%26.1%
193 202
438 440 466
4,621 4,714 4,839
2019e 2020e 2021e
48.7%
39.1% 37.4%
42.6% 41.9%
2019e 2021e2020e
42.0%
37.6%
48.8%50.2% -7 -10-5
9.6%
624 653
CHART N° 50: SHAREHOLDERS
82 51 85
2019e
3.9%
-26.2% 3.7%
4.8% 4.2%4.2%
0.1%
1.2%
0.6%
CHART N° 51: SALES BY PRODUCT - 2019e
9.44 9.88
3.69 3.40
14.92 14.02
3.54
14.83
9.87
-343 -366 -353
-199 -207 -215
2.16
29.15 57.79
-2 -
466
9 10
615
2020e
0.04
119.5 119.5
0.05 0.03
2021e
2.03 2.40
-32.5% 5.7%
9
4,621
-21.7%
119.5
625
183
1,247
-28 -15
3,374
723
9.8%
Peru Equity Guide 2020
84%
14%
3%
Enel Perú S.A.C.
Pension Funds
Others
75%
24%
1%
Energy
Power
Others
Bet on consumption in the middle of global uncertainty
Marco Contreras
Head of Research
(511) 630 7528
mcontreras@kallpasab.com
Engie Energía Perú S.A.
Target Price (PEN)
Rating Hold
Market Capitalization (PEN MM)
Last TP (PEN)
Shares Outstanding (MM)
Upside
ADTV - LTM (PEN MM) Fundamentals for 2020
Range 52 weeks
YTD Change
Dividend Yield - LTM
Trading
ADTV: Average Daily Traded Volume
LTM: Last Twelve Months
Source: Bloomberg, Kallpa SAB
Financial Ratios
P / E
P / BV
EV / EBITDA
Net Debt / EBITDA
EPS (USD)
ROE
ROA
Source: SMV, Kallpa SAB
Sensitivity Analysis
Valuation
Source: Kallpa SAB
Recommendation
Source: Bloomberg
www.kallpasab.com 35
1.15
7.05 7.43 7.28
We believe that the financial strength of the company, in addition to the
high margins are the main fundamentals of the company. The stock has
shown a bullish rally in 2019, and we believe that the market has already
internalized much of the company's fundamentals. Given this, our
recommendation is to hold.
We value the company with a Free Cash Flow to the Firm (FCFF) model in
a 10-year horizon. We used an 6.2% WACC and a perpetual growth rate of
2.0%.
The oversupply of energy in the Peruvian market has stagnated energy
generation prices, which would cause Engie Peru to re-contract its
available installed capacity and / or close new contracts at lower prices.
The company, being a net buyer in the spot market, would be affected by
its cost structure due to an increase in the purchase price of energy.
Significant increase in the price of oil, which would imply an increase in the
price of inputs such as fuel (diesel), and would affect the company's
margins.
Risks
Peru Equity Guide 2020
2019e 2020e 2021e
11.42 13.44 13.51
3.00%
5.74% 8.59 9.50 10.65 12.17 14.23
6.5% 5.4% 5.1%
WACC / g 1.00% 1.50% 2.00% 2.50%
1.99 2.41 2.68
0.206 0.175 0.174
11.0% 8.9% 8.6%
1.22 1.18
5.99% 8.00 8.80 9.80 11.09 12.81
8.38 9.34 10.57
6.74% 6.55 7.11 7.78 8.62 9.68
6.24% 7.47 8.18 9.05 10.16 11.61
6.49% 6.99 7.61
Kallpa Securities SAB updates Engie Energía Perú S.A. (ENGIEC1)'s valuation
model with a hold recommendation. Our new 2020-year-end target price of PEN
9.05 is 14.6% higher than the PEN 7.90 market price as of the closing of January
7, 2020.
3,512.00
7.90
601.37
14.6%
Fundamentals already reflected in the market price9.05
(BVL: ENGIEC1)
Electricity Industry
0.68
5.47 - 8.10
CHART N° 52: ENGIEC1 vs. PERU SELECT
0.6%
4.6%
BVL
HOLD
Target Price
Engie Energía Perú S.A. PEN 9.05
We expect that the company can grow through renewable energy
generation. Intipampa is already operating and the company was awarded
the Punta Lomitas wind power plant (300 MW). We expect this diversified
matrix to be an important catalyst in the company's profits in the medium
term.
The company is fully-contracted throughout 2020, and has secured
contracts until 2030. In addition, it has presented an improvement in
margins this year. We expect an EBITDA margin of 49% by 2020.
480
500
520
540
560
580
5.0
5.5
6.0
6.5
7.0
7.5
8.0
Jan
-19
Fe
b-1
9
Ma
r-19
Ap
r-19
Ma
y-1
9
Jun
-19
Jul-
19
Au
g-1
9
Se
p-1
9
Oct-
19
Nov-1
9
Dec-1
9
Jan
-20
Pts.PENENGIEC1 PERU SELECT
Bet on consumption in the middle of global uncertainty
Engie Energía Perú: Financial Summary
INCOME STATEMENT (USD MM) BALANCE SHEET (USD MM)
Net Sales Cash and Cash Equivalents
Cost of Sales Accounts Receivable
Gross Income Inventory
Commercialization Expenses Other Short Term Assets
Administrative Expenses Current Assets
Other Income (Expenses), Net Fixed Assets, Net
Operating Income Intangibles, Net
Financial Income Other Long Term Assets
Financial Expenses Non Current Assets
FX gain (loss) Total Assets
Income Before Taxes Short Term Debt
Income Tax Accounts Payable
Net Income Other Short Term Liabilities
Shares Outstanding (MM) Current Liabilities
Earnings per Share - EPS (USD) Long Term Debt
Depreciation and Amortization Other Long Term Liabilities
EBITDA Non Current Liabilities
Equity
Liabilities + Equity
MARGINS AND GROWTH (%) CASH FLOW (USD MM)
Gross Margin Net Income
Operating Margin Depreciation and Amortization
EBITDA Margin Changes in Working Capital
Net Margin Others
Sales' Growth Operating Cash low
Operating Income's Growth Investment Cash Flow
EBITDA's Growth Financing Cash Flow
Net Income's Growth Free Cash Flow
FINANCIAL RATIOS
Current Assets / Current Liabilities
Collection Period
Debt / Equity
Net Debt / EBITDA
EBITDA / Financial Expenses
Payout Ratio
Dividends per Share (USD)
ROE
ROA
ROIC
VALUATION
EV / Sales
P / E
EV / EBIT
EV / EBITDA
P / BV
MANAGEMENT
Hendrik De Buyserie CEO
Marcelo Fernandes CFO
Adriana Burneo IRO
Source: Engie Energía Perú, SMV, Kallpa SAB
www.kallpasab.com 36
-330 -362 106 108 110
541 563 58 52 57
2019e 2021e 2019e 2020e 2021e2020e
552
-356
15 15 293 295 302
-24 -25 43 44 44 -24
15
187
3 6
201 85 91 92 196 211
-37 -45 89 89 89 -40
-
- 6 - 2,173 2,291 2,417
-1 - 1,881 1,996 2,115
150 176
3 76 74 71
202 191 1,716 1,834 1,955
0.174 446 496 585
601 601 250 284 288
124 105 13 13 13
-52 -44 59 63 64 -44
106
601
0.175 0.206
2021e 2019e 2020e 2021e
1,163 1,198 1,230
2,173 2,291 2,417
284 276 760 810 899
83 84 314 314 314 83
270
2020e2019e
-4 -2
37.3% 34.0% 83 83 84
39.0% 35.7% 124 106 105 35.6%
33.9%
48.9%
19.1%22.9%
52.5% 48.9% -11
18.6% 31 37 42
3.9% 2.0% 226 222 230 2.0%
-7.3%
-5.0%
-15.0%
0.65
2019e 2021e CHART N° 53: SHAREHOLDERS
1.17 1.05
2020e
1.04
71.3
0.59
71.3 71.3
0.54
14.7% -0.5% -16 -6 4
3.7% 2.0% -202 -29
1.22 1.15
9.95 10.48
7.05 7.28
CHART N° 54: SALES BY PRODUCT - 2019e
3.71 3.56
11.42 13.51
3.63
13.44
10.73
7.43
1.18
7.8% 6.9%
2019e
2.41
6.75
6.5% 5.1%
11.0% 8.6%
Peru Equity Guide 2020
0.109 0.121 0.118
8.9%
5.4%
-23
-41 -199
149 179 208 211
60.3% 57.0%
1.99 2.68
7.67 6.08
8.4% 2.3% -203
68.9%
2021e
7.1%
2020e
62%
31%
7%
International Power S.A.
Pension Funds
Others
65%
33%
2%Energy
Power
Others
Bet on consumption in the middle of global uncertainty
Marco Contreras Electricity Industry
Head of Research
(511) 630 7528
mcontreras@kallpasab.com
Luz del Sur S.A.A
Target Price (PEN)
Rating
Market Capitalization (PEN MM)
Market Price (PEN)
Shares Outstanding (MM)
Upside
ADTV - LTM (PEN MM)
Range 52 weeks
YTD Change
Dividend Yield - LTM
Trading
ADTV: Average Daily Traded Volume
LTM: Last Twelve Months
Source: Bloomberg, Kallpa SAB
Financial Ratios
P / E
P / BV
EV / EBITDA
Net Debt / EBITDA Risks
EPS (PEN)
ROE
ROA
Source: SMV, Kallpa SAB
Sensitivity Analysis
WACC / g
Source: Kallpa SAB
CHART N° 55: LUSURC1 vs. PERU SELECT
Source: Bloomberg
www.kallpasab.com 37
21.5% 20.8% 20.1%
13.42 13.00
2.06 2.06
9.9% 9.7% 9.5%
6.26%
5.76% 22.51 23.91 25.53 27.41 29.64
7.26% 14.80 15.42 16.10 16.86 17.71
6.76% 16.82 17.62
2.00% 2.25% 2.50% 2.75% 3.00%
13.13
19.33 20.37 21.54 22.89 24.44
13.62 14.16 14.75 15.41
18.50
Kallpa Securities SAB updates Luz del Sur S.A.A. (Luz del Sur)'s valuation
model with a hold recommendation. Our new 2020-year-end target price of PEN
18.50 is 28.8% lower than the PEN 26.00 market price as of the closing of
January 7th, 2020.
Fundamentals for 2020
We value the company with a Free Cash Flow to the Firm (FCFF) model in
a 10-year horizon. We use a 6.8% WACC and a perpetual growth rate of
2.5%.
Recommendation
Peru Equity Guide 2020
The announcement of the parent company Sempra Energy to sell the
company for USD 3,560 MM would be the main catalyst in the first months
of the year, a period in which the transaction would be closed.
19.50 20.62
2020e
20.29 19.78
4.10
20.79
4.35
13.87
2.02
2019e
3.86
4.19 4.29 4.40
Luz del Sur S.A.A
7.76%
5,333.93
Valuation
2021e
HOLD
Deal would keep market price above TP
PEN 18.50
26.00
486.81
-28.8%
(BVL: LUSURC1)
Hold
Target Price
18.50
We highlight the solid fundamentals of the company, which are based on
growth expectations and high levels of profitability. Although the stock price
trades above our target price, we believe that this situation will still be
maintained for a few months, until the company is sold. We reaffirm our
recommendation to hold.
The current oversupply of the electricity market, which we expect will
continue throughout 2020, distort the company's margins.
1.0%
4.6%
BVL
The company would continue to report solid margins, as a result of the
higher prices in the regulated market and the payment of PEN 120 MM per
year, as a result of the option agreement with generation companies.
The company has an attractive dividend payment (estimated dividend yield
of 4.6%)
Unexpected regulatory modifications in the sector could negatively affect
sales and margins of the company
1.79
10.65 - 27.01
480
500
520
540
560
580
8.0
12.0
16.0
20.0
24.0
28.0
Jan
-19
Fe
b-1
9
Ma
r-19
Ap
r-19
Ma
y-1
9
Jun
-19
Jul-
19
Au
g-1
9
Se
p-1
9
Oct-
19
Nov-1
9
Dec-1
9
Jan
-20
Pts.PENLUSURC1 PERU SELECT
Bet on consumption in the middle of global uncertainty
Luz del Sur: Financial Summary
INCOME STATEMENT (PEN MM) BALANCE SHEET (PEN MM)
Net Sales Cash and Cash Equivalents
Cost of Sales Accounts Receivable
Gross Income Inventory
Commercialization Expenses Other Short Term Assets
Administrative Expenses Current Assets
Other Income (Expenses), Net Fixed Assets, Net
Operating Income Other Long Term Assets
Financial Income Non Current Assets
Financial Expenses Total Assets
Income Before Taxes Short Term Debt
Income Tax Accounts Payable
Net Income Other Short Term Liabilities
Shares Outstanding (MM) Current Liabilities
Earnings per Share - EPS (PEN) Long Term Debt
Depreciation and Amortization Other Long Term Liabilities
EBITDA Non Current Liabilities
Equity
Liabilities + Equity
MARGINS AND GROWTH (%) CASH FLOW (PEN MM)
Gross Margin Net Income
Operating Margin Depreciation and Amortization
EBITDA Margin Changes in Working Capital
Net Margin Others
Sales' Growth Operating Cash low
Operating Income's Growth Investment Cash Flow
EBITDA's Growth Financing Cash Flow
Net Income's Growth Free Cash Flow
FINANCIAL RATIOS
Current Assets / Current Liabilities
Collection Period
Debt / Equity
Net Debt / EBITDA
EBITDA / Financial Expenses
Payout Ratio
Dividends per Share (PEN)
ROE
ROA
ROIC
VALUATION
EV / Sales
P / E
EV / EBIT
EV / EBITDA
P / BV
MANAGEMENT
Mile Cacic CEO
Luis Fernando de las Casas CFO
Hans Berger Corporate Relations Manager
Source: Luz del Sur, SMV, Kallpa SAB
www.kallpasab.com 38
0.71
55.08
0.75
2.02
10.06
83%
18.0%
3.8%
18.2%
102 949
863
36
2,519
5,454 5,735 5,992 33 35
976
19
-109
885
1,728 1,964 1,907
487 487
1.282
-261
624
102 102
609 640 267 273
1.314
6,294 6,599
934
6.2%
14.2% 3.4% 3.2%
46
2021e
-107 -115 738 762
47
2019e 2021e 2019e 2020e
1,042
278
-255 -268 315 328 342
487
-8
2,340
110 129 612
3,088 3,277
6,599 6,884
2021e
1,131
32.0%
-2,262
2020e
3,470
-2,358
1,111
-60
-111 789
-58 -62 133 138 143
504 524 543 -2,456
3,342 3,599 49
2.06
10.02
74%
0.92
9.97
72%
827 855
9486 9017.8%
6,095
6,884
2020e 2021e
624 640
-387
-20 -3
21.5% 20.1%
-418 -4012.7%
2.5%
2020e
0.93
CHART N° 56: SHAREHOLDERS
-468
20.29
2019e
12928.1%
31.6%
2,912
1,087
6,294
31.4% -31
31.8%
2020e
15.0% 2.7%
19.78
11.3%
19
2.06
55.08
0.82
55.08
0.74
32.3%
11.9% 11.6%
4.40
-8
28.4% 27.8% 110 120
15.49 15.07
13.87 13.42
4.35
1.250
1,002
2019e
609
3.7% 774
4.24
20.79
2019e 2021e
-376 -429
12.9% 2.5%
0.72
31.7%
120
1,095
2019e 2020e
-113
0.73
9.9% 9.7% 9.5%
908 461
1,060
20.8%
4.10 3.86
612
54
14.68
13.00
CHART N° 57: ENERGY DISTRIBUTED BY CLIENT TYPE (GWH)
4.09
-105
Peru Equity Guide 2020
612
1
0.92
334 467
2,577
2021e
5,556 5,837 19
1,143 51 1,080 56
84%
8%
8%Sempra Energy
Pension Funds
Others
34%
24%
6%
4%
32%
Residential
Commercial
Industrial
Others
Toll
Bet on consumption in the middle of global uncertainty
Marco Contreras Jose Inurritegui
Head of Research Analyst
(511) 630 7528 (511) 630 7529
mcontreras@kallpasab.com jinurritegui@kallpasab.com
Refinería La Pampilla S.A.A.
Target Price (PEN)
Rating
Market Capitalization (PEN MM)
Market Price (PEN)
Shares Outstanding (MM)
Upside
ADTV - LTM (PEN MM)
Range 52 weeks
YTD Change
Dividend Yield - LTM
Trading
ADTV: Average Daily Trades Volume
LTM: Last 12 months
Exchange Rate USD/PEN: 3.35
Source: Bloomberg, Kallpa SAB
Financial Ratios
P / E
P / BV
EV / EBITDA
Net Debt / EBITDA
EPS (USD)
ROE
ROA
Source: SMV, Kallpa SAB
Sensitivity Analysis
Source: Kallpa SAB Valuation
CHART N° 58: RELAPAC1 vs. PERU SELECT
Source: Bloomberg
39
7.42
0.35
2021e
6.99
0.005 0.005
0.106
0.161
5.44 5.47 4.95
0.006
0.39 0.37
2.4%
0.0%
0.095
0.12
0.09 - 0.18
4.9%
Refinería La Pampilla S.A.A.
0.107
Oil & Gas Industry
8,319.18
4.3%
Hold
1,048.22
0.126
(BVL: RELAPAC1)
Risks
Target Price
BVL
Investments would generate greater efficiencies0.131
0.106 0.134
8.55% 0.158 0.175 0.194
9.55%
2.0%
0.144
0.244
0.165
0.179
0.094 0.119
0.130
2020e
7.36
10.05%
Peru Equity Guide 2020
7.24
7.2% 4.7%
2.4%
10.55%
0.084
We value the company with a Free Cash Flow to the Firm (FCFF) model in
a 10-year horizon. We use a 9.6% discount rate (WACC) and a perpetual
growth rate of 2.0%.
Recommendation
0.065 0.074 0.083
9.05%
2019e
6.37
WACC / g 1.0% 1.5% 2.0% 2.5% 3.0%
8.05
1.9%
HOLD
Potential restructuring of its indebtedness, in order to increase its maturity
profile and further diversification of its financing.
0.118 0.131 0.147
0.201
Fundamentals for 2020
We expect that production in 2020 will not be very different from that of
2019, with a slight growth of 1.0% YoY.
0.217
Support of the parent company Repsol S.A. that participates with 92.42%
of the company
Unexpected regulatory modifications in the industry can negatively impact
We estimate that the refining margin will reach USD 5.5 per barrel in 2020
and that this level will be maintained in the long term.
Kallpa Securities SAB updates Refinería La Pampilla S.A.A. (Relapasa)
valuation model with a hold recommendation. Our new 2020-year-end target
price of PEN 0.131 is 4.3% higher than the PEN 0.126 market price as of the
closing of January 7th, 2020.
Volatility in the price of crude oil. Refining margins doesn't adjust at the
same time as oil price. Sudden changes in the price of crude oil or
international refining margins can significantly affect the company's
profitability. Trade war or disagreements of the OPEC countries could
affect the price of crude oil.
The company's results during 2019 have shown a YoY improvement. The
implementation of the Monoboya terminal project would generate lower
cost overruns. However, we believe that this is already internalized in the
market price, which is why our recommendation is to hold.
PEN 0.131
Monoboya Terminal is already operational, which would allow the company
to reduce the cost overruns generated by the rough sea (~ USD 20 MM).
480
500
520
540
560
580
0.08
0.10
0.12
0.14
0.16
0.18
Jan
-19
Fe
b-1
9
Ma
r-19
Ap
r-19
Ma
y-1
9
Jun
-19
Jul-
19
Au
g-1
9
Se
p-1
9
Oct-
19
Nov-1
9
Dec-1
9
Jan
-20
Pts.PENRELAPAC1 PERU SELECT
Bet on consumption in the middle of global uncertainty
Relapasa: Financial Summary
INCOME STATEMENT (USD MM) BALANCE SHEET (USD MM)
Net Sales Cash and Cash Equivalents
Cost of Sales Accounts Receivable
Gross Income Inventory
Sales Expenses Other Short Term Assets
Administrative Expenses Current Assets
Other Income, Net Fixed Assets, Net
Operating Income Intangibles, Net
Financial Income Other Long Term Assets
Financial Expenses Non Current Assets
FX Gains (Losses) Total Assets
Income by Subsidiary Short Term Debt
Income Before Taxes Accounts Payable
Income Tax Other Short Term Liabilities
Net Income Current Liabilities
Shares Outstanding - Average (MM) Long Term Debt
Earnings per Share - EPS (USD) Other Long Term Liabilities
Depreciation and Amortization Non Current Liabilities
EBITDA Net Equity
Total Liabilities + Equity
MARGINS AND GROWTH (%) CASH FLOW (USD MM)
Gross Margin Net Income
Operating Margin Depreciation and Amortization
EBITDA Margin Changes in Working Capital
Net Margin Others
Sales Growth Operating Cash Flow
Operating Income Growth Investment Cash Flow
EBITDA Growth Financing Cash Flow
Net Income Growth Free Cash Flow
FINANCIAL RATIOS
Current Assets / Current Liabilities
Average Days of Inventory
Debt / Equity
Net Debt / EBITDA
EBITDA / Financial Expenses
Payout ratio
Dividends per Share (USD)
ROE
ROA
ROIC
VALUATION
EV / Sales
P / E
EV / EBIT
EV / EBITDA
P / BV
MANAGEMENT
Dante Blotte CFO
Daniel Cabrera Controller
Liliana Bazán IRO
Source: Relapasa, SMV, Kallpa SAB
www.kallpasab.com 40
2020e 2021e 2019e
40
17
12
1,285
-29
10.31
2020e
0.32
3,660 13
-3,281 -3,323
3,534
212
20
2019e 2020e
537 561
1.01
-79
323
4.4%
43.00
1.07
-80
2019e
218
371
222
2021e2020e
393 391 405
2,037
Peru Equity Guide 2020
-46 -50
358
246
55
1,259
- -
2.9%
307
3
141
887
-15
3.0%
-1
7.2%
2021e
-29
0 0
-
40
1,191
3,499
1,271
49 39 42 570
2,037 2,077 2,095
807
10.95
752
-50
43.67 43.00
4.95
1.49
1.1% 1.2%
2019e
6.2%
8.5%
0.006
647 599
90 90
40
0 90
-1
-99
-
2.55
4.4% -8
1.0%
696
-13.0%
0.31
6.0%
1.32
-43
0.92
0.39
-21
12
334
3.5%
6.37
49
-1.7% 5.3% -52
-36 -38
38
8,319 8,320
8.05 7.42
4.6%
845
2020e
49 39
7.36
2.53
10.15
60
5.47
125
2.0%
0.0%
46 50
-
-20.9%
n.s.
1.4%
3.1%
n.s.
-38 -60 -64
-16 -18
63
6.1%
106
-5.9% 7.9%
n.s.
4.6%
2019e
-30
-92
-
0.0%
2021e
205 218
50
49
648
4.11
70
-66
661
8
-3,438
42
4.9%
612
CHART N° 59: SHAREHOLDERS
0.37
0.0%
2.4% 1.9%
2020e
4
155
8,319
8
1.50
153 161 806
0.35
0.005 49
2021e CHART N° 60: SALES BY PRODUCT 2019e
4.3%
0.32
0.005
6.99
-19
4.3%
2021e
4.7%
316 60
2,077 2,095 -2
109
2019e
836
1,178 1,168 -1
7.24
5.44
-79
103 111 4 3 2
8
92%
8%
Repsol Perú B.V.
Others
47%
26%
20%
7%
Destilates
Gasolines
Residuals
Others
Bet on consumption in the middle of global uncertainty
Marco Contreras
Head of Research
(511) 630 7528
mcontreras@kallpasab.com
Buenaventura
Target Price (USD)
Rating
Market Capitalization (USD MM)
Market Price (USD)
Shares Outstanding (MM)
Upside
Range 52 weeks
YTD Change
ADTV - LTM (USD MM)
Dividend Yield - LTM
Trading NYSE, BVL
ADTV: Average Daily Traded Volume
LTM: Last 12 Months
Source: Bloomberg, Kallpa SAB
Financial Ratios
P / E
P / BV
EV / EBITDA
Net Debt / EBITDA
EPS (USD)
ROE
ROA
Source: SMV, Kallpa SAB
Sensitivity Analysis
Source: Kallpa SAB
CHART N° 61: BVN vs. Gold Spot
Recommendation
Source: Bloomberg
www.kallpasab.com 41
We value Buenaventura using the Sum of Parts methodology considering
the direct operations (WACC @ 9.9%) subsidiaries and associates. Each
part was valued using the methodology of Free Cash Flow to the Firm
(FCFF).
We consider that the fundamentals of the company are already internalized
in the market price. Therefore, we affirm our recommendation to hold with
a TP of USD 14.50.
1.23
Copper and Gold play. Cerro Verde's cash flows are the main asset
Valuation
3.30 15.42 16.08 16.74 17.38 18.00
1,500
13.18
2.85
2.70
Cu / Au
14.63
13.84 14.50 15.13 15.763.00
1,400
1.39
3.15 14.30 14.96 15.62 16.26 16.89
2.1% 5.0%
10.91 11.56 12.22 12.86
12.05 12.71 13.36 14.00
1,100 1,200 1,300
2.40 1.36 1.17
-4.2%
0.27 Fundamentals for 2020
HOLD
Compañía de Minas
Buenaventura S.A.A.
24.38 16.00 16.41
0.33 0.80 0.82
2.8% 6.6% 6.4%
We estimate 14.1% increase in sales for 2020 that will be driven by higher
gold production, coming from the recovery in production levels of
Tambomayo and Orcopampa, as well as the best average price of the
precious metal (+7.6%).
Mining Industry Target Price
USD 14.50
Hold
13.84 - 17.78
-1.0%
(BVL, NYSE: BVN)
1.31
5.0%
Peru Equity Guide 2020
2019e
14.50
4,027.14
14.65
274.89
2020e 2021e
13.49
48.52 19.91 19.46
0.6%
Correction in the price of copper as trade, political or social tensions
intensify in the main economies globally, and affect their potential growth
rates.
Average life of mine of own operations including reserves and resources of
3 years, which increases uncertainty regarding the growth of the company.
However, the company´s track record in renewing reserves and resources
is a fundamental factor in the future performance of mining operations.
We expect the company to have a gold production cash cost of USD 850.0
/ Oz and a silver cash cost of USD 12.0 / Oz. We also expect a greater
impact of the De-Bottlenecking program.
Kallpa Securities SAB updates Compañía de Minas Buenaventura S.A.A.
(BVN) valuation model with a hold recommendation. Our new 2020-year-end
target price of USD 14.50 is 1.0% below the USD 14.65 market price as of the
closing of January 7th, 2020.
We expect greater dividends from Cerro Verde in the next years, due to the
efficiency of the operation and the solid fundamentals of copper in the mid
term.
Risks
Volatility of the price of gold and silver, metals that together represent more
than 50% of the income from direct operations.
1,200
1,300
1,400
1,500
1,600
13.0
14.0
15.0
16.0
17.0
18.0
Jan
-19
Fe
b-1
9
Ma
r-19
Ap
r-19
Ma
y-1
9
Jun
-19
Jul-
19
Au
g-1
9
Se
p-1
9
Oct-
19
Nov-1
9
Dec-1
9
Jan
-20
USD/Oz.USDBVN Gold Spot
Bet on consumption in the middle of global uncertainty
Buenaventura: Financial Summary
INCOME STATEMENT (USD MM) BALANCE SHEET (USD MM)
Net Sales Cash and Cash Equivalents
Cost of Sales Accounts Receivable
Gross Income Inventory
Administrative and Sales Expenses Other Short Term Assets
Exploration Expenses - Greenfield Current Assets
Other Income, Net Fixed Assets, Net
Operating Income Other Long Term Assets
Financial Income, Net Non Current Assets
FX Gains (Losses) Total Assets
Stake in Associates Short Term Debt
Income Before Taxes Accounts Payable
Income Tax Other Short Term Liabilities
Net Income Current Liabilities
Minority Interest Long Term Debt
Attributable to Buenaventura Other Long Term Liabilities
Shares Outstanding - Average (MM) Non Current Liabilities
Earnings per Share - EPS (USD) Equity Attributable to Buenaventura
Depreciation and Amortization Minority Interest
EBITDA (Exc. Associates) Total Liabilities + Equity
MARGINS AND GROWTH (%) CASH FLOW (USD MM)
Gross Margin Net Income
Operating Margin Depreciation and Amortization
EBITDA Margin Changes in Working Capital
Net Margin Others
Sales Growth Operating Cash Flow
Operating Income Growth Investment Cash Flow
EBITDA Growth Financing Cash Flow
Net Income Growth Free Cash Flow
FINANCIAL RATIOS
Current Assets / Current Liabilities
Average Days of Inventory
Debt / Equity
Net Debt / EBITDA
EBITDA / Financial Expenses
Payout Ratio
Dividends per Share (USD)
ROE
ROA
ROIC
VALUATION
EV / Sales
P / E
EV / EBIT
EV / EBITDA
P / BV
MANAGEMENT
Víctor Gobitz CEO
Leandro García CFO
Rodrigo Echecopar IRO
www.kallpasab.com 42
4.54
Peru Equity Guide 2020
n.s.
Source: Buenaventura
0.08 0.08 0.08
3.98 4.00
48.52 19.91 19.46
n.s. 83.38 106.15
24.38 16.00 16.41
1.39 1.31 1.23
CHART N° 63: TARGET PRICE BREAKDOWN
2.8% 6.6% 6.4%
2.1% 5.0% 5.0%
3.2% 6.5% 6.3%
2019e 2020e 2021e
-35.7% 52.3% -2.5% -46 -43
39.27 42.02 44.89
0.20 0.18 0.17
CHART N° 62: SHAREHOLDERS
2.40 1.36 1.17
5.07 7.73 7.54
n.s. 27.9%
-39
-687.5% 143.7% 2.3% 85 39 43
2019e 2020e 2021e
2.35 2.65 3.06
8.6% 18.3% 18.9% - - -
-19.0% 14.1% -0.6% 260 378 387
n.s. n.s. -21.4% -129 -296 -305
9.7% 16.3% 15.0% 83 202 207
-3.8% 4.8% 3.8% 217 221 226
18.6% 24.8% 24.4% -40 -45 -45
180 274 267 4,086 4,232 4,387
2019e 2020e 2021e 2019e 2020e 2021e
83 202 207 222 222 222
688 665 652
0.33 0.80 0.82 2,897 3,077 3,262
217 221 226 226 226 226
254 254 254
128 311 318 51 38 25
68 68 68
83 202 207 275 265 248
-0 -0 -0 466 443 430
-45 -109 -111
-37 53 41 1,706 1,803 1,913
3,438 3,531 3,629
- - - 4,086 4,232 4,387
195 283 297 156 158 154
-24 -20
966 1,102 1,095
-872 -923 -931
8 8 8 1,731 1,728 1,716
272
269 275 281
94 180 165 158 166 174
31 31
701 759 648
2019e 2020e 2021e
31
-34 -33 -31
-104 -102 -100
-30
191 229
2021e 2020e2019e
73%
27%
Others
Benavides Family
44%
42%
11%
3%Cerro Verde
Direct Operations
Yanacocha
Tantahuatay
Bet on consumption in the middle of global uncertainty
Marco Contreras Marco Alemán
Head of Research Senior Analyst
(511) 630 7528 (511) 630 7527
mcontreras@kallpasab.com maleman@kallpasab.com
Cerro Verde
Target Price (USD)
Rating
Market Capitalization (USD MM)
Market Price (USD)
Shares Outstanding (MM)
Upside
Range 52 weeks
YTD Change
ADTV - LTM (USD MM)
Dividend Yield - LTM
Trading BVL
ADTV: Average Daily Traded Volume
LTM: Last 12 months
Source: Bloomberg, Kallpa SAB
Financial Ratios
P / E
P / BV
EV / EBITDA
Net Debt / EBITDA
EPS (USD) Risks
ROE
ROA
Source: SMV, Kallpa SAB
Sensitivity Analysis
Source: Kallpa SAB
CHART N° 64: CVERDEC1 vs. Copper Spot
Recommendation
Source: Bloomberg
www.kallpasab.com 43
Kallpa Securities SAB updates Sociedad Minera Cerro Verde S.A.A. (Cerro
Verde)'s valuation model with a buy recommendation. Our new 2020 year-end
target price of USD 25.30 is 30.4% higher than the USD 19.40 market price as of
the closing of January 7th, 2020.
We remain positive in copper companies due to the potential beneficial
environment that the price of copper would have in the short term, given
the expected supply deficit globally. In addition to the solid fundamentals in
the price of copper, the company has an attractive generation of operating
cash flows, which would lead to an increase in the payment of dividends in
the medium term. Given this, we reaffirm our recommendation to buy.
30.4%
25.30
Buy
6,791.09
19.40
350.06
-0.41
21.90 28.60
5.16
-0.16
2.2%
(BVL: CVERDEC1)
3.25 3.50
20.28 24.19 28.01 31.73 35.42
9.34% 19.32 23.00 26.60 30.11 33.58
17.00 - 24.50
0.5%
0.09
6.4%
COK / Cu 2.50 2.75 3.00
2020e
18.71
1.04
13.58
1.43
1.21 1.15
5.98
We expect Cerro Verde will remain as a low cost producer, and would stay
in the first quartile of the copper producers' cost curve. Cash cost net of
byproducts would be around USD 1.07/Lb. in 2020.
CAPEX will be at USD 400.0 MM, and will be used mainly for the
maintenance of the unit.
Volatility in the copper price, which represents 90% of the company's
revenues.
2021e
7.6%
Fundamentals for 2020
Copper play and low debt. Potential for dividend payment
25.30
1.71
BUY
10.4%
22.96
2019e
31.88
7.0% 9.2%
4.8%
4.74
25.92 28.84
0.12
11.33
27.21 30.31
18.43
17.60 20.88 24.09
16.83 19.93
1.28
Mining Industry Target Price
Sociedad Minera
Cerro Verde S.A.A.
Peru Equity Guide 2020
9.84%
10.84%
10.34%
8.84%
Commercial discounts to the sale of concentrates can affect the company's
profitability. We estimate an average commercial discount of 8.0% for the
following 5 years in the sale of concentrates.
Valuation
We value Cerro Verde with a Free Cash Flow to the Firm (FCFF) model, in
a 27-year horizon, which is equivalent to the life of mine. We use a 9.8%
discount rate (WACC).
USD 25.30
We project that revenues have a 7.8% increase in 2020, given a growth in
the average price of copper (+4.6%) and a higher volume sold (+2.0%). We
expect the copper production level to rise to 465,000 MT, with an average
price of USD 2.85/Lb.
2.4
2.5
2.6
2.7
2.8
2.9
3.0
16
17
18
19
20
21
22
23
24
25
Jan
-19
Fe
b-1
9
Ma
r-19
Ap
r-19
Ma
y-1
9
Jun
-19
Jul-
19
Au
g-1
9
Se
p-1
9
Oct-
19
Nov-1
9
Dec-1
9
Jan
-20
USD/Lb.USD
CVERDEC1 Copper Spot
Bet on consumption in the middle of global uncertainty
Cerro Verde: Financial Summary
INCOME STATEMENT (USD MM) BALANCE SHEET (USD MM)
Net Sales Cash and Cash Equivalents
Cost of Sales Accounts Receivable
Gross Income Inventory
Sales Expenses Other Short Term Assets
Other Operating Income Current Assets
Operating Income Fixed Assets, Net
Financial Income Other Long Term Assets
Financial Expenses Non Current Assets
FX Gain (Losses) Total Assets
Income Before Taxes Short Term Debt
Income Tax Accounts Payable
Net Income Other Short Term Liabilities
Shares Outstanding - Average (MM) Current Liabilities
Earnings per Share - EPS (USD) Long Term Debt
Depreciation and Amortization Other Long Term Liabilities
EBITDA Non Current Liabilities
Net Equity
Total Liabilities + Equity
MARGINS AND GROWTH (%) CASH FLOW (USD MM)
Gross Margin Net Income
Operating Margin Depreciation and Amortization
EBITDA Margin Changes in Working Capital
Net Margin Others
Sales Growth Operating Cash Flow
Operating Income Growth Investment Cash Flow
EBITDA Growth Financing Cash Flow
Net Income Growth Free Cash Flow
FINANCIAL RATIOS
Current Assets / Current Liabilities
Average Days of Inventory
Debt / Equity
Net Debt / EBITDA
EBITDA / Financial Expenses
Payout Ratio
Dividends per Share (USD)
ROE
ROA
ROIC
VALUATION
EV / Sales
P / E
EV / EBIT
EV / EBITDA
P / BV
MANAGEMENT
Derek Cooke CEO
Rohn Householder Administration Manager
Source: Cerro Verde, SMV, Kallpa SAB
www.kallpasab.com 44
1.28 1.21 1.15
2.51
10.57 8.20 7.16
5.98 5.16 4.74
2.39
0.429 0.62 0.86
11.74
6.8% 8.6% 9.8%
2019e 2020e 2021e
203.2% 37.8%
7.0% 9.2% 10.4%
4.8% 6.4% 7.6%
0.17 0.16 0.08
0.12 -0.16
22.46
95.00
92
18.71 13.58 11.33
2.70
75 45
1,083
19.9%
1,064 1,141
CHART N° 65: SHAREHOLDERS
14.5%
526 521 516
1,210 1,403 1,527
1,014 1,014 1,014
1,918 1,466 1,014
2020e 2021e
30.4% 35.1% 37.8%
25.6%
-18.2%
2019e 2020e
13.6% 17.3%
8.8%
904
2019e
45.2% 48.6%
5,322 5,604 5,904
7,642 7,926 7,775
2020e 2021e
363 500 600
526 521 516 30.6% 33.3%
103 -32 -20
1.037 1.429 1.713
2019e
50.4%
363 500 600
350 350 350
593 808 965
1 - -
192 193 193
402 855 857
-308 -365
- 452 452
209 210 212
7,926
337
485
10 15
-103 -90
4.13 2.41
-12.3% 7.8%
28.9%
-10.3% 15.9%
95.00
15.62
7,642
2021e
814
882
2,027
2,677 2,887
-68
-230
-360 -292 -797
263 367 -53
1,132 1,079
364 382
487 491
73 77 76
2,059
3,031
-1,872
1,010
1,015
5,537
452 -
-460 -404
-0.41
-397
685 5,300
445 446 448
7,775
95.00
5,982 5,866
5,420
-1,863
60.0%60.0%
-1,885
Peru Equity Guide 2020
CHART N° 66: SALES BY PRODUCT
-119 -122 -126
2019e 2020e
23
2021e
2.36
19.8%
5.0%
125.3%
-10 -10 -10
1,146
2019e
5,748
1,660
764
2021e2020e
53%
21%
20%
6%
Cyprus Climax Metals Company(Freeport)
SMM Cerro Verde Netherlands B.V.(Sumitomo)
Compañía de Minas BuenaventuraS.A.A.
Others
82%
9%
10%
Copper Concentrates
Copper Cathodes
Others (silver and molybdenum)
Bet on consumption in the middle of global uncertainty
Marco Contreras Jose Inurritegui
Head of Research Analyst
(511) 630 7528 (511) 630 7529
mcontreras@kallpasab.com jinurritegui@kallpasab.com
Nexa Resources Perú S.A.A.
Target Price (PEN)
Rating Hold
Market Capitalization (PEN MM)
Market Price (PEN)
Shares Outstanding* (MM)
Upside
ADTV - LTM (PEN MM)
Range 52 weeks
YTD Change
Dividend Yield - LTM
Trading
ADTV: Average Daily Trades Volume
LTM: Last 12 Months
Source: Bloomberg, Kallpa SAB
Financial Ratios
P / E
P / BV
EV / EBITDA
Net Debt / EBITDA
EPS (USD)
ROE
ROA Risks
Sensitivity Analysis
Valuation
Source: Kallpa SAB
CHART N° 67: NEXAPEC1 vs. Zinc Spot
Recommendation
www.kallpasab.com 45
Kallpa Securities SAB updates Nexa Resources Perú S.A.A. (NEXAPEC1),
valuation model with a hold recommendation. Our 2020-year-end target price of
PEN 3.68 is 6.6% higher than the PEN 3.45, as of the closing of January 7th,
2020.
The company remains a cost efficient producer, with a solid cash position
of USD 432.0 MM and low leverage (Net Debt / EBITDA of -0.4x). Cerro
Lindo, with 8 years of life of mine is the main asset. The implementation of
new projects in the portfolio will be key to adding value to the company.
However, we believe that the above is already internalized in the share
price, which is why we recommend to hold with a TP of PEN 3.68.
-0.46
Volatility in the price of base metals such as zinc and copper, where the
company concentrates almost 80% of total sales.
32.0% of our target price is represented by the company´s projects. The
current project values can be changed due to delays, variation of CAPEX,
costs, among others.
0.010 0.069
3.39 3.76 4.12 4.49 4.84
6.6%
0.47
Nexa Resources Perú
S.A.A.
PEN 3.68
Drop in reserves in Cerro Lindo affects target price
Target Price
6.2% 5.6%
3.45 3.82 4.18
2.94
The costs would be around USD 40.1/MT and would tend to fall, given
synergies after the integration of Atacocha and El Porvenir.
2.07
11.64 5.34 5.67
(BVL: NEXAPEC1)
3.68
4,367.96
3.45
1,272.11
2020e 2021e2019e
68.25 14.93
2.29 2.05
Fundamentals for 2020
We expect sales to register a 5.0% growth, as the fall in the price and
production of zinc, will be offset by the higher production and prices of
metals such as copper and silver.
15.0%
BVL
(*) 1,257.7 MM common shares and 14.4 MM investment shares.
0.0%
HOLD
3.50
3.90 4.27 4.62
We value Nexa Perú with a Free Cash Flow to the Firm (FCFF) model in a
10-year finite horizon; after that the company will be liquidated. We use a
discount rate (WACC) of 8.9%.
Peru Equity Guide 2020
3.25 3.17 3.53
2.72 3.08
Cu / Zn
2.75
1.30
3.60
3.00
Source: Bloomberg
3.31
2.8% 14.5% 12.7%
1.3%
3.23
Source: SMV, Kallpa SAB
1.151.00
4.04 4.403.68
0.064
16.24
3.96
3.07 - 4.19
2.50 2.50 2.86
0.70 0.85
-0.58
Mining Industry
-0.69
We have incorporated the new Cerro Lindo mining plan in our model, which
extends mine life by one year but reduces the zinc content in reserves by
26%
We estimate that zinc production falls 3.0% and reaches 207,745 TMF due
to lower grades in Cerro Lindo. However, we expect greater production of
metals such as copper, silver and lead, which amount to almost 50% of the
company's sales.
0.9
1.0
1.1
1.2
1.3
1.4
3.0
3.2
3.4
3.6
3.8
Jan
-19
Fe
b-1
9
Ma
r-19
Ap
r-19
Ma
y-1
9
Jun
-19
Jul-
19
Au
g-1
9
Se
p-1
9
Oct-
19
Nov-1
9
Dec-1
9
Jan
-20
USD/Lb.PEN
NEXAPEC1 Zinc Spot
Bet on consumption in the middle of global uncertainty
Nexa Perú: Financial Summary
INCOME STATEMENT (USD MM) BALANCE SHEET (USD MM)
Net Sales Cash and Cash Equivalents
Cos of Sales Accounts Receivable
Gross Income Inventory
Amortization Other Short Term Assets
Sales Expenses Current Assets
Administrative Expenses Fixed Assets, Net
Other Income, Net Other Long Term Assets
Operating Income Non Current Assets
Financial Income, Net Total Assets
Income Before Taxes Short Term Debt
Income Tax Accounts Payable
Net Income Other Short Term Liabilities
Minority Interest Current Liabilities
Net Income Attributable to Nexa Perú Long Term Debt
Shares Outstanding - Average (MM) Other Long Term Liabilities
Earnings per Share - EPS (USD) Non Current Liabilities
Depreciation and Amortization Equity Attributable to Nexa Perú
EBITDA Minority Interest
Total Liabilities + Equity
MARGINS AND GROWTH (%) CASH FLOW (USD MM)
Gross Margin Net Income
Operating Margin Depreciation and Amortization
EBITDA Margin Changes in Working Capital
Net Margin Others
Sales' Growth Operating Cash Flow
Operating Income's Growth Investment Cash Flow
EBITDA's Growth Financing Cash Flow
Net Income's Growth Free Cash Flow
FINANCIAL RATIOS
Current Assets / Current Liabilities
Average Days of Inventory
Debt / Equity
Net Debt / Equity
EBITDA / Financial Expenses
Dividends per Share (USD)
Payout Ratio
ROE
ROA
ROIC
VALUATION
EV / Sales
P / E
EV / EBIT
EV / EBITDA
P / BV
MANAGEMENT
Ricardo Galvao Porto CEO
Claudia Torres CFO
Henry Aragón IRO
Source: Nexa Perú, Kallpa SAB
www.kallpasab.com 46
0.54
6.2%
2.8%
68.25 14.93 16.24
Peru Equity Guide 2020
2.05
8.34
5.67
2.07
10.5%
2021e
7.69
2.29
2.2% 11.7%
1.3%
1.64
5.6%
177 152
CHART N° 68: SHAREHOLDERS
0.54
0.015
3.24
28.45
-0.46
-81 -83 396.1% -7.7% -70
-5.8% -214 -35 -102
357.2% -8.1% -268 61 -33
630
8.68 14.41 14.32
-0.69
100.0% 100.0% 100.0%
0.60
26.91
2020e
34.1% 19 87 80
4.3% 20.3% 19.8% 73 69 68
14.1% 29.2% 29.1% -48 2 -5
11.2% 10.9% -29 18 8
3 3 3
1,447
-45
362
545
-6 1 1
774
-16
1,272
2019e 2020e 2021e2019e
81 63 60 59
239
142 131 0 0
-54 -50 176 171 166
326
-6
1,418 -15
342 342 342
1,272 215 220 203
0.064 557 562
214 17 17 18
0
0.069
1.56 1.65
325
146 661
-58 -57
721
20
158
441
2020e
227
414 475
2021e
-513 -485
14.5% 12.7%
343
2019e
247
252 38 38 38
2021e
730
336 330
-5
-12 1,382
673 688
68 568 637
1,272
87 80
2020e
-539
225
266
3.02
-85.2%
-86.6%
104
25.61
2019e
73
27.4%
-10.3%
-57
-65
203
742
13
0.010
-7
2.6%
38.17
32
266 258
737
2021e 2019e 2020e 2021e
-5.5% 15
231
34.2%
69
0.069
88
-11
-43
4
1,382 1,447 1,418
-3
CHART N° 69: SALES BY MINING UNIT 2019e
2019e
-63.0%
11.64
19
779
2020e
-0.58
3.35
0.156
117.9%
5.0%
-40
5.34
80%
12%
8%
Nexa Resources
Pension Funds
Others
64%
24%
12%
Cerro Lindo
El Porvenir
Atacocha
Bet on consumption in the middle of global uncertainty
Marco Contreras Marco Alemán
Head of Research Senior Analyst
(511) 630 7528 (511) 630 7527
mcontreras@kallpasab.com maleman@kallpasab.com
Minsur S.A.
Target Price (PEN)
Rating Buy
Market Capitalization (PEN MM)
Market Price (PEN)
Shares Outstanding* (MM)
Upside
ADTV - LTM (PEN MM)
Range 52 weeks
YTD Change
Dividend Yield - LTM
Trading
ADTV: Average Daily Traded Volume
LTM: Last 12 Months
Source: Bloomberg, Kallpa SAB
Financial Ratios
P / E
P / BV
EV / EBITDA
Net Debt / EBITDA
EPS (USD)
ROE
ROA
Source: SMV, Kallpa SAB Risks
Sensitivity Analysis
Valuation
Source: Kallpa SAB
Recommendation
Source: Bloomberg
www.kallpasab.com 47
Kallpa Securities SAB updates Minsur S.A. (MINSURI1)´s valuation model with a
buy recommendation. Our new 2020-year-end target price of PEN 2.00 is 29.2%
higher than the PEN 1.55 market price as of the closing of January 7th, 2020.
We value Minsur with a Free Cash Flow to the Firm (FCFF) model in a 16-
year horizon. We use a discount rate (WACC) of 9.4%
We project that the cash cost of San Rafael - Pisco will be USD 8,800/MT,
the cash cost of Pucamarca USD 405 / Oz. and that of Pitinga (considering
the credit for by-products) USD 10,500/MT.
2.15 2.34
We estimate a production of 28,500 MT of tin (including B2) and 100,000
oz of gold in 2020.
2.10
(*) 19.2 MM in common shares with a face value of PEN 100.0
and 960.9 MM in investment shares with a face value of PEN
1.0.
BVL
16,000 18,000
1.66
1.90
0.71
3.15 1.76 1.95
We estimate that the maintenance CAPEX will be around USD 70 MM. We
expect Mina Justa to close 2019 with an advance of around 70%, and that
about USD 520 MM remain to be disbursed in 2020 (60% corresponds to
Minsur).
Volatility in the price of tin and gold, metals that represent 74.0% and
19.0% of the company's total sales, respectively.
Fundamentals for 2020
PEN 2.00BUY
Mining Industry Target Price
2.39
Peru Equity Guide 2020
16.5%
1.91 2.10 2.30 2.49 2.68
Mina Justa execution risk. Likewise, changes in cost estimates and CAPEX
may affect the company's cash flow.
While ~ 74% of Minsur's revenues will come from tin in 2020, when Mina
Justa begins full capacity operations in 2021, copper will represent around
50% of the company's revenues. We believe that the metal it will produce
maintains solid fundamentals and that the new operation will add value.
Given the above, we reaffirm our recommendation to buy.
2.20
2020e 2021e
Cu / Sn 14,000
2.30
2.85 1.47
Bofedal 2 begins and Mina Justa follows
1.85 2.05 2.24
3.00 1.61
2.70 1.32 1.51 1.71
22,000
18.84 12.11 5.17
1.03
2.50
2019e
0.85
0.023
0.79
4.9%
20,000
2.00
4,497.48
1.55
Minsur S.A.
980.22
29.2%
2.8%
1.81 2.00
2.54
0.120
5.4%
0.038
8.1%
1.9%
0.97
1.89
5.67
-0.6%
1.37 - 1.82
7.47
(BVL: MINSURI1)
6.2%
3.30
CHART N° 70: MINSURI1 vs. Tin Spot
In 2020, we expect an increase of 11.9% in revenue, due to a 17.5%
increase in the volume of sales of San Rafael, as we added B2 project in
the company's operations. On the other hand, we expect a 6.1% drop in
the average price of tin by 2020 and a 7.6% growth in the average price of
gold.
15,000
17,000
19,000
21,000
23,000
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
Jan
-19
Fe
b-1
9
Ma
r-19
Ap
r-19
Ma
y-1
9
Jun
-19
Jul-
19
Au
g-1
9
Se
p-1
9
Oct-
19
Nov-1
9
Dec-1
9
Jan
-20
USD/TMPEN
MINSURI1 Tin Spot
Bet on consumption in the middle of global uncertainty
Minsur: Financial Summary
INCOME STATEMENT (USD MM) BALANCE SHEET (USD MM)
Net Sales Cash and Cash Equivalents
Cost of Sales Accounts Receivable
Gross Income Inventory
Administrative Expenses Other Short Term Assets
Sales Expenses Current Assets
Exploration expenses Fixed Assets, Net
Other Income, Net Intangibles, Net
Operating Income Investments in Associates
Financial Income, Net Other Long Term Assets
Stake in Associates Non Current Assets
FX Gain (Losses) Total Assets
Other Income (Expenses), Net Short Term Debt
Income Before Taxes Accounts Payable
Income Tax Other Short Term Liabilities
Net Income Current Liabilities
Minority Interest Long Term Debt
Net Attributable Income Other Long Term Liabilities
Shares Outstanding - Average Non Current Liabilities
Earnings per Share - EPS (USD) Equity Attributable to Minsur
Depreciation and Amortization Minority Interest
EBITDA Total Liabilities + Equity
MARGINS AND GROWTH (%) CASH FLOW (USD MM)
Gross Margin Net Income
Operating Margin Depreciation and Amortization
EBITDA Margin Changes in Working Capital
Net Margin Others
Sales Growth Operating Cash Flow
Operating Income Growth Investment Cash Flow
EBITDA Growth Financing Cash Flow
Net Income Growth Free Cash Flow
FINANCIAL RATIOS
Current Assets / Current Liabilities
Average Days of Inventory
Debt / Equity
Net Debt / EBITDA
EBITDA / Financial Expenses
Payout Ratio
Dividends per Share (USD)
ROE
ROA
ROIC
VALUATION
EV / Sales
P / E
EV / EBIT
EV / EBITDA
P / BV
MANAGEMENT
Juan Luis Kruger CEO
Diego Molina CFO
Aura Lía Benavides Head of Financial Planning
Source: Minsur, Kallpa SAB
www.kallpasab.com 48
13.9%
CHART N° 72: REVENUE BY METAL 2020e
1.03 0.97 0.85
55.6%
0.80
4.99
3.9% 5.1% 13.3%
5.67 2.50
8.92
18.84 12.11 5.17
2.65 2.37 1.15
3.28
2019e 2020e
7.47
11.91
2021e
CHART N° 71: SHAREHOLDERS MINSURI1
1.9% 2.8% 6.2%
0.022 0.012 0.020
5.4% 8.1% 16.5%
2019e 2020e 2021e
2.78 1.76 2.10
97.90 94.88 50.90
0.88
0.71 1.89
0.66
12.90
60.0%
687
-53 -54 -55
278
-4.9% 33.5% 172.1%
-0.1% 31.7% 127.2%
37.2% 40.1% 42.1%
35.2%
35.5% 41.8% 46.3%
10.0%
2021e
2.4%
2019e 2020e
291 491
181
359
1,266
1,309 1,377 1,570
621
166 -36.5%
-841 -741 -233
746 104
158 211 575
-31 -57 -54
15 16 17
67 111 355
297 304
2,684
62 64
1,096
0.038 0.120
-92
1,034 970
-9 -9
170
-67 -59 -183
3,322 3,409
3,680
2,210
135 538
-43 -43
264
33 33 33
94 121
891 986
260
3,962 4,197
711 795 1,632
-476
Peru Equity Guide 2020
308 324
5.37
2.30
-1
48 59 52
134.2%
15.9%
118 -347
2020e 2021e
71 111
61
2019e 2020e 2021e
3,962 4,197
95
365 375
264 269
-946
85 71 42
996 640 788
513
112
-2 -3
2,252
485 -1 491
499
113 115
120 124 132
2019e
-9
-44
319
341
333
295 295 295
1,392 1,329
94 121 181
252 333 755 3,680
2019e
22.3% 26.6%
58.9% 60.0%
213
-0 -0
2020e 2021e
679
71
-4 -
-446
1,597
260
980 980 980
0.023
11.9% 105.3%
111
- - 1
294
- -9 -
29%
20%13%
38%
AFP Prima
AFP Integra
AFP Profuturo
Others
74%
18%
8%
Tin
Gold
Others
Bet on consumption in the middle of global uncertainty
Marco Contreras Marco Alemán
Head of Research Senior Analyst
(511) 630 7528 (511) 630 7527
mcontreras@kallpasab.com maleman@kallpasab.com
Southern Copper
Target Price (USD)
Rating
Market Capitalization (USD MM)
Market Price (USD)
Shares Outstanding (MM)*
Upside
Range 52 weeks Fundamentals for 2020
YTD Change
ADTV - LTM (USD 000')
Dividend Yield - LTM
Trading BVL, NYSE
(*) Net of treasury stock, 110.89 MM approximately.
ADTV: Average Daily Traded Volume
LTM: Last 12 Months
Source: Bloomberg, Kallpa SAB
Financial Ratios
P / E
P / BV
EV / EBITDA
Net Debt / EBITDA
EPS (USD)
ROE Risks
ROA
Sensitivity Analysis
Valuation
Recommendation
Source: Bloomberg
www.kallpasab.com 49
(BVL, NYSE: SCCO) Copper play with very attractive margins
2021e
20.04
53.53
21.82 27.57
19.97 25.31
42.64 48.87
33.33
4.62
10.01
26.38 33.17 39.95
39.09
44.11
Volatility in copper price, given that it represents 82% of the company´s
revenues.
Target Price
12.1%
15.43
3.25
HOLD
USD 36.40Southern Copper
Corporation
13.3%
58.97
Hold
We expect SCCO to remain in the first quartile of the copper producer cost
curve. Implicit cash cost net of by-products would be USD 0.83/Lb. for
2020e, below the USD 0.85 / Lb. we expect for 2019.
By 2020, we expect that CAPEX rises to USD 1,319 MM, higher than the
estimated USD 854 MM in 2019, with the objective of expanding the
company's operations, mainly in Mexico.
2.08
4.04
1.19 1.11
27.0%23.6%
1.31
17.38
9.02
4.32
4.9%
32,271.32
WACC / Cu
10.04%
11.0%
3.50
2020e2019e
41.71
773.71
-12.7%
29.65 - 43.00
2.40 2.71
25.6%
Kallpa Securities SAB updates Southern Copper Corporation (SCCO)´s
valuation model with a hold recommendation. Our new 2020-year-end target
price of USD 36.40 is 12.7% lower than the USD 41.71 market price as of the
closing of January 7th, 2020.
3.00
44.84
30.65
51.54
46.74
Peru Equity Guide 2020
35.99 41.33
Source: Kallpa SAB
9.04% 23.93
2.50
Source: Southern Copper, Kallpa SAB
30.17 36.40
2.75
8.04% 29.24 36.68
CHART Nº 73: SCCO vs. Copper Spot
0.11
Although the stock had a great improvement in 2019, it was due to the
strong punishment for increased political risk in Mexico generated towards
the end of 2018. We highlight the company's expansion plans in the
medium-long term, as well as the expected efficiency in these projects.
Despite this, the upside is limited, so we recommend to hold. However, we
consider it an attractive play of copper performance.
9.54%
8.54%
Delays in the Tía María project due to social conflicts. The project
represents 2.5% of our TP. The value of the project has a 50% discount
due to the uncertainty of its development.
We value Southern Copper with a Free Cash Flow to the Firm (FCFF)
model in a 10-year horizon. We use a discount rate (WACC) of 9.0% and a
perpetual growth rate of 2.0%.
Mining Industry
8.23
36.40
-1.7% With Toquepala operating at full-capacity, we expect sales to register a
growth of 6.7% in 2020, given an increase in the average price of copper
(+4.8%) and higher volumes of copper production (+3.0%) and
Molybdenum (+5.6%). We expect the copper production level to reach 1.04
MM of MT.
Political risk in Mexico due to the government´s position against the mining
activity.
2.5
2.6
2.7
2.8
2.9
3.0
25.0
30.0
35.0
40.0
45.0
Jan
-19
Fe
b-1
9
Ma
r-19
Ap
r-19
Ma
y-1
9
Jun
-19
Jul-
19
Au
g-1
9
Se
p-1
9
Oct-
19
Nov-1
9
Dec-1
9
Jan
-20
USD/Lb.USDSCCO Copper Spot
Bet on consumption in the middle of global uncertainty
Southern Copper: Financial Summary
INCOME STATEMENT (USD MM) BALANCE SHEET (USD MM)
Net Sales Cash and Cash Equivalents
Cost of Sales Short Term Investments
Gross Income Accounts Receivable
SG&A Expenses Inventory
Exploration Expenses Other Short Term Assets
Operating Income Current Assets
Financial Income, Net Fixed Assets, net
Other Income, Net Other Long Term Assets
Income Before Taxes Non Current Assets
Income Tax Total Assets
Net Income Short Term Debt
Result. By affiliates, net of taxes Accounts Payable
Results for Minority Interest Other Short Term Liabilities
Net Income Attributable to SCCO Current Liabilities
Shares Outstanding - Average (MM) Long Term Debt
Earnings per Share - EPS (USD) Other Long Term Liabilities
Depreciation and Amortization Non Current Liabilities
EBITDA Net Equity
Total Liabilities + Equity
MARGINS AND GROWTH (%) CASH FLOW (USD MM)
Gross Margin Net Income
Operating Margin Depreciation and Amortization
EBITDA Margin Changes in Working Capital
Net Margin Others
Sales' Growth Operating Cash Flow
Operating Income's Growth Investment Cash Flow
EBITDA's Growth Financing Cash Flow
Net Income's Growth Free Cash Flow
FINANCIAL RATIOS
Current Assets / Current Liabilities
Average Days of Inventory
Debt / Equity
Net Debt / EBITDA
EBITDA / Financial Expenses
Payout Ratio
Dividends per Share (USD)
ROE
ROA
ROIC
VALUATION
EV / Sales
P / E
EV / EBIT
EV / EBITDA
P / BV
MANAGEMENT
Óscar González CEO
Raúl Jacob CFO
Víctor Pedraglio Financial Planning Manager
www.kallpasab.com 50
3,329
10.01 9.02 8.23
4.62
Source: Southern Copper Corporation
CHART N° 75: SALES BY METAL
14.5% 15.8%
10.06
53.0% 55.2%
21.8% 23.6% 25.3%
2.9%
15.4% 12.7%
-564 -2,072
6.7% 5.2%
2.0% 13.3% 11.3%
1.31
5.10
15.43
2019e 2020e 2021e
3.00 3.19 3.14
84.16
80.2% 85.0% 85.0%
-23
-15 -15
3,014 3,397
1,592 1,838 2,072
2019e 2020e 2020e 2021e
773
42.3% 44.8% 47.3% 1,611 1,857 2,092
4,530
1,934
6,363 6,364
410 410 410
826
2021e
12 12
6 7 7
1,611
-4,302 -4,326 -4,211
2,939
9,323 9,822
15,394
415
15,898
2.40 2.71
1,358 1,144 1,130
6,560
3,725 4,131
787 802
1,857 2,092
773
415
12
334 322 314
2019e
-435 -109
-124 -133 -139
363 363 363
3,092 3,493
4,070 3,646 3,548
400
10,416
1,919
200 200
3,205
-1,018 -1,175 -1,325
530 516
415
787 802
2,033 1,597 1,488
2021e2019e 2020e 2021e2019e 2020e
Peru Equity Guide 2020
15,313
2,956
51.0%
544
965 952 940
3,877
55 55 55
45.2%
4.04
11,243
23.6%
826
12.69
2020e 2021e
773
1.76 2.03
1.00 0.88
4.78
3,704
-301
7,303 7,795 8,202
2,610 11,748 12,350
1,926
CHART N° 74: SHAREHOLDERS2019e
27.0%
11.0% 12.1% 13.3%
81.33 79.82
1.19
0.82
703
-1,441
-25 -26
11.20
6,970 6,773 6,774
15,898
2.08
40.2% 42.7%
4.32
4.54
17.38
-1,874
1,291
25.6%
1.11
1.60
10.9% 9.7%
3.6%
4.8%
-315
-14
-29 -31 -33
13.5%
20.04
15,313 15,394
-854 -1,319
655 678
-292
6,984 7,477 7,994
11.84 13.72 15.54
2,708
89%
11%
Grupo México S.A.B.
Others
82%
10%
4%3%
1%
Copper
Molybdenum
Silver
Zinc
Others
Bet on consumption in the middle of global uncertainty
Marco Contreras Jose Inurritegui Mining Industry
Head of Research Analyst
(511) 630 7528 (511) 630 7529
mcontreras@kallpasab.com jinurritegui@kallpasab.com
Trevali Mining Corp.
Target Price (USD)
Rating
Market Capitalization (USD MM)
Market Price (USD)
Shares Outstanding (MM)
Upside
ADTV - LTM (USD MM)
Range 52 weeks
YTD Change
Dividend Yield - LTM
Trading
Financial Ratios
P / E
P / BV
EV / EBITDA
Net Debt / EBITDA
EPS (USD)
ROE
ROA
Source: SMV, Kallpa SAB
Risks
Sensitivity Analysis
Source: Kallpa SAB
Valuation
CHART N° 76: TV vs. Zinc Spot
Recommendation
Source: Bloomberg
www.kallpasab.com 51
We value the company with a Free Cash Flow to the Firm (FCFF) model in
a 19-year finite horizon. We use a discount rate (WACC) of 11.3%.
Kallpa Securities SAB updates Trevali Mining Corp. (TV)´s valuation model with
a hold recommendation. Our new 2020-year-end target price USD 0.492 is
168.7% higher than the USD 0.183 market price, as of the closing of January 7th,
2020.
Source: Bloomberg, Kallpa SAB
13.32% 0.311 0.387 0.464 0.541 0.619
Operational risk. The company needs to successfully execute its cost
reduction plan, otherwise it can generate losses with an adverse juncture of
metal prices.
0.325 0.425 0.525 0.626 0.727
0.29 0.29
1.65
1.30
0.643
-4.3% 0.2%
0.70 0.85 1.00 1.15
-0.3%
-0.10 -0.41
2.14 2.22
-0.042 0.001 -0.004
-7.2% 0.4% -0.4%
The T90 cost reduction program, which begins in 4Q2020, could reduce
the AISC to USD 0.90/Lb. in 2022 (USD 1.00 / Lb. in 2019e). In addition, it
would generate an increase of between 60% and 80% in the production of
Rosh Pinah (2019e: 94 MM of Lb. of zinc). The program is partially
incorporated into our model.
10.32% 0.321 0.414 0.508 0.602 0.696
11.32% 0.317 0.404 0.492 0.580 0.668
12.32% 0.314 0.395 0.477 0.560
0.183
813.15
168.7%
0.04
(BVL, TSX: TV)
0.492
2020e 2021e
n.s. n.s.
We expect a 9.1% YoY sales drop, mainly because of a fall of 9.2% YoY of
the zinc price.
We estimate that zinc production will remain stable and reach 405.6 MM
pounds by 2020.
0.121 - 0.350
USD 0.492HOLD
5.8%
0.0%
TSX, BVL
ADTV: Average Daily Trading Volume
LTM: Last 12 Months
Hold
148.81
Peru Equity Guide 2020
Target Price
0.31
0.38
2019e
n.s.
Fundamentals for 2020
In 2019, the company will reach production and cost guidance without
problems. Management has shown interest in implementing operational
efficiency programs to reduce costs and increase production. However,
due to past results, the market still does not trust the company. The T90
program, volatility in the price of zinc and refining and smelting costs (which
do not depend on Trevali) will be the factors to be observed in the short
and medium term. In this way, we recommend to hold.
9.32%
WACC / Zn
Trevali Mining Corp.
In the hands of Ricus and the T90 program
We forecast that the company's cash-cost is USD 77.0/MT, which would be
equivalent to a reduction of 2.4% YoY, given the normalization of Caribou
production and operating efficiencies in Perkoa.
Volatility in the price of base metals, which could be caused by commercial
tensions between China and the United States. It is estimated that by 2020,
83% of total sales would be zinc.
0.95
1.00
1.05
1.10
1.15
1.20
1.25
1.30
1.35
1.40
0.10
0.15
0.20
0.25
0.30
0.35
0.40
Jan
-19
Fe
b-1
9
Ma
r-19
Ap
r-19
Ma
y-1
9
Jun
-19
Jul-
19
Au
g-1
9
Se
p-1
9
Oct-
19
Nov-1
9
Dec-1
9
Jan
-20
USD/Lb.USDTV Zinc Spot
Bet on consumption in the middle of global uncertainty
Trevali: Financial Summary
INCOME STATEMENT (USD MM) BALANCE SHEET (USD MM)
Net Sales Cash and Cash Equivalents
Cost of Sales Accounts Receivable
Gross Income Inventory
General and Administrative Expenses Other Short Term Assets
Other Expenses, Net Current Assets
Operating Income Fixed Assets, Net
Financial Income, Net Exploration and Evaluation Assets
Other Income, Net Other Long Term Assets
Income Before Taxes Non Current Assets
Income Tax Total Assets
Net Income Short Term Debt
Minority Interest Accounts Payable
Net Income Attributable to Trevali Current Liabilities
Shares Outstanding - Average (MM) Long Term Debt
Earnings per Share - EPS (USD) Other Long Term Liabilities
Depreciation and Amortization Non Current Liabilities
EBITDA Equity Attributable to Trevali
Minority Interest
Total Liabilities + Equity
MARGINS AND GROWTH (%) CASH FLOW (USD MM)
Gross Margin Net Income
Operating Margin Depreciation and Amortization
EBITDA Margin Changes in Working Capital
Net Margin Others
Sales' Growth Operating Cash Flow
Operating Income's Growth Investment Cash Flow
EBITDA's Growth Financing Cash Flow
Net Income's Growth Free Cash Flow
FINANCIAL RATIOS
Current Assets / Current Liabilities
Average Days of Inventory
Debt / Equity
Net Debt / EBITDA
EBITDA / Financial Expenses
Payout ratio
Dividends per Share (USD)
ROE
ROA
ROIC
VALUATION
EV / Sales
P / E
EV / EBIT
EV / EBITDA
P / BV
MANAGEMENT
Ricus Grimbeek CEO
Gerbrand Van Heerden CFO
Brendan Creaney IRO
Source: Trevali, Kallpa SAB
www.kallpasab.com 52
1.1%
-3
485
CHART N° 78: SALES BY MINE - 2019e
-81
59 58
-34 1
-0.3%
0.09
-28
2.11
82
-81 -59 -51 -73.1%
-0.4%
-4.3%
1.93
2019e
0.6%
0.2%
2021e
2021e
63.00
5.6% 2.1%
-0
n.s. n.s.
0.29 0.29
-19.2% -22.9% -3.3%
-34 45
-7.2%
n.s.
0.51
12.81
89.51 8.31
2020e
24.10
2019e 2020e 2021e
-89 -78
2020e
731 758
23
146
24.4% 24.2%
815
81
51 -1
146 146
-3 -3
78
46
1
2019e
214 192 169
458 488
64 81
465 446
83
2
-28 3 -1
-6 -5
-41 2
-8 -2 -2
2019e
385
-355 -330
30 16 11
2020e 2021e
350 341
-334
5
1 -3 23
2
34
121
56
-36
76
2021e
80
32 32
558
416
121
734
122
-2 0 -0
-0.04 0.00 0.00
-3
121
55
176
-9 -9
83
2019e
Peru Equity Guide 2020
609 589
731 758
169
778 778 68
2020e
31
-8 6
18.14
22 7
57
6
-
2020e
7.8% 4.6% 3.1%
85
0.0%
2.10
-8.8% 0.3% -0.8%
-0.10 -0.41
- -
0.0%
-68 21
-102.8% -393.2%
56.00
CHART N° 77: SHAREHOLDERS2019e
3
-68.9%
-
64 -4.3%
-65.5%
0.31
0.0%
61.00
15.08
0.16 0.14
0.38
- -
5
0.53
- -
61
-
-9
0.4%
89
0.4%
0.47
n.s.
23
111 85
-9.1% -2.6%
-34
1.65 2.14 2.22
4.9%
28.8%
2021e
734
-5
21 23 22
35%
26%
6%
33%
Institutional Investors
Glencore PLC
Blackrock
Others
33%
29%
21%
17%Perkoa
Caribou
Rosh Pinah
Santander
Bet on consumption in the middle of global uncertainty
Marco Contreras Jose Inurritegui Mining Industry
Head of Research Analyst
(511) 630 7528 (511) 630 7529
mcontreras@kallpasab.com jinurritegui@kallpasab.com
Volcan Cia Minera (BVL: VOLCABC1)
Target Price (PEN)
Rating Hold
Market Capitalization (PEN MM)
Market Price (PEN)
Shares Outstanding (MM)
Upside
ADTV - LTM (PEN MM) Fundamentals for 2020
Range 52 weeks
YTD Change
Dividend Yield - LTM
Trading
Source: Bloomberg, Kallpa SAB
Financial Ratios
P / E
P / BV
EV / EBITDA
Net Debt / EBITDA
UPA (USD)
ROE Risks
ROA
Source: SMV, Kallpa SAB
Sensitivity Analysis
Source: Kallpa SAB Valuation
Recommendation
Source: Bloomberg
www.kallpasab.com 53
Volatility in zinc and silver grades in its main units like Chungar and Yauli.
Kallpa Securities SAB updates the valuation of Volcan Compañía Minera S.A.A.
(VOLCABC1) with a hold recommendation. Our new 2020-year-end target price
of PEN 0.62 is 17.0% above the PEN 0.53 market price as of the closing of
January 7th, 2020.
We project that the cost be increased to USD 54.9/ MT due to the sale of
low-cost units.
We value Volcan with a Free Cash Flow to the Firm (FCFF) model in a 16-
year finite horizon. We use a discount rate (WACC) of 8.8%.
0.26
0.007
0.1% 4.1%
2.52
2.77
10.36
0.62
2020e
(*) Includes 1,427 MM type A shares that trade at PEN 4.00
ADTV: Average Daily Trading Volume
We estimate that CAPEX would stay at USD 150.0 MM, which would be
used mainly to sustain the company's operating units.
LTM: Last 12 Months
We highlight the sale of the Óxidos and Cerro de Pasco units, which aims
to reduce leverage (Net Debt / EBITDA greater than 3.0x). However, the
current situation of lower prices and the deterioration of commercial terms
continues to affect the company's performance. In the absence of catalysts
in the short term and awaiting a new strategy for financial restructuring, we
recommend to hold.
Volatility in the price of zinc and silver, that account for 60.7% y 24.7% of
the company's total sales, respectively.
HOLD
0.52 0.63 0.75
0.85
0.007
0.70 0.85
0.45 0.57
0.37 0.49 0.60 0.72
0.87 0.98
CHART Nº 79: VOLCABC1 vs. Zinc Spot
2019e
Peru Equity Guide 2020
0.0%
BVL
2.96
0.69
2021e
0.44 0.55 0.67 0.79
1.30
0.62
1.00 1.15
4.2%
0.0% 1.3% 1.4%
0.000
n.s. 68.22 65.26
19.1%
11.14
The company has an interesting portfolio of projects, but still in early stages
of development. Production growth (excluding Romina 2) in the short-
medium term will depend on positive exploration results.
2.44
2.66
0.31 - 0.76
0.74
We expect a 16.7% drop in sales, due to lower prices in metals such as
zinc and lead; and the sale of the Cerro de Pasco and Oxides units.
Ag / Zn
Target Price
PEN 0.62
6,271.25
0.53
3,858.68
17.0%
0.91
2.88
10.70
0.38 0.50
0.32
0.80 0.92
22.00
20.00
18.00
16.00
14.00
We forecast a production of 228,000 MT of zinc, below the 241,000 MT
that it would produce in 2019, due to the sale of the Cerro de Pasco and
Óxidos units. The foregoing would be offset by the income it will receive
from the transaction with Cerro de Pasco Resources.
Volcan Compañía Minera
S.A.A.
Waiting for a new restructuring strategy
0.95
1.00
1.05
1.10
1.15
1.20
1.25
1.30
1.35
1.40
0.3
0.4
0.5
0.6
0.7
0.8
Jan
-19
Fe
b-1
9
Ma
r-19
Ap
r-19
Ma
y-1
9
Jun
-19
Jul-
19
Au
g-1
9
Se
p-1
9
Oct-
19
Nov-1
9
Dec-1
9
Jan
-20
USD/Lb.PENVOLCABC1 Zinc Spot
Bet on consumption in the middle of global uncertainty
Volcan: Financial Summary
INCOME STATEMENT (USD MM) BALANCE SHEET (USD MM)
Net Sales Cash and Cash Equivalents
Cost of Sales Accounts Receivable
Gross Income Inventory
Sales Expenses Other Short Term Assets
Administrative Expenses Current Assets
Other Operating Income, Net Fixed Assets, Net
Impairment of Non-Financial Assets Intangibles, Net
Operating Income Other Long Term Assets
Financial Income Non Current Assets
Financial Expenses Total Assets
FX Gain (Loss) Short Term Debt
Income Before Taxes Accounts Payable
Income Tax Other Short Term Liabilities
Net Income Current Liabilities
Shares Outstanding - Average (MM) Long Term Debt
Earnings per Share - EPS (USD) Other Long Term Liabilities
Depreciation and Amortization Non Current Liabilities
EBITDA Net Equity
Total Liabilities + Equity
MARGINS AND GROWTH (%) CASH FLOW (USD MM)
Gross Margin Net Income
Operating Margin Depreciation and Amortization
EBITDA Margin Changes in Working Capital
Net Margin Others
Sales Growth Operating Cash Flow
Operating Income Growth Investment Cash Flow
EBITDA Growth Financing Cash Flow
Net Income Growth Free Cash Flow
FINANCIAL RATIOS
Current Assets / Current Liabilities
Average Days of Inventory
Debt / Equity
Net Debt / EBITDA
EBITDA / Financial Expenses
Payout Ratio
Dividends per Share (USD)
ROE
ROA
ROIC
VALUATION
EV / Sales
P / E
EV / EBIT
EV / EBITDA
P / BV
MANAGEMENT
Juan Ignacio Rosado CEO
Jorge Murillo CFO
Source: Volcan, SMV, Kallpa SAB
www.kallpasab.com 54
2019e
-24
2.44
5.36 6.47 6.48
0.0% 0.0% 0.0%
- - -
42.0%
731
0.0% 1.3% 1.4%
2.4% 3.8% 5.4%
109 100 98
351 321
-23 -17
-90
4.1% 4.2%
177 251 226
-160 -124 -125
-40
252 260 242
0.1%
36
-93
2019e 2020e 2021e
1 27 29
83 82
19 2 2
-47 -40
24
393 393
3,858 677 87
393
1,123 1,069 480
649
852
0.96
2.96 2.52
0.000 0.007 0.007
199
11
CHART N° 80: SHAREHOLDERS - VOLCAAC1
199 177
40
1.08
-97.5% n.s. 4.5%
-4.2% -16.7%
-7.0%3.3%
177 160
40.2%
0.1% 4.4%
-1.0%
0.32
2 6 1
2,067 2,036
29
3,858
1
4.8%
-66.7% 55.8%
2019e 2020e 2021e
21.7% 17.8% 18.3%
7.1% 13.4%
-17
-23
160
2,123
188 167 164
763 768
35
749
-
27
13.6%
33.9%
676 705
-508 -492
161 110
3,858
-42
31
-
-1
783
590
58
53
2019e 2020e 2021e
Peru Equity Guide 2020
-
1,850 1,795 1,760
2,123 2,067 2,036
211 209 209
-17 -23
-56 -42
-29 31
-37
743 618 602
-581
-
134 112
-
109
273 272 277
50.79 32.60
4.48
n.s. 68.22 65.26
44
43.0 43.0
2020e
0.85 0.85
1.21
2021e
40 75 85
31 25 25
68 60
46
-17
2.88 2.77 2.66
891 823
54 54
32.95
2021e
2019e 2020e 2021e
43.0
2019e 2020e
4.35
110
CHART N° 81: TARGET PRICE BREAKDOWN
3.63
10.70 10.36 11.14
-23.1%
-2.7%
42%
11%10%
10%
8%
8%
11%
Glencore International
Empresa Minera Paragsha
José Ignacio de Romaña Letts
Irene Florencia LettsColmenares
Blue Streak International
Sandown Resources
Others
61%13%
6%
20%Mining Operations
Mining Projects
Cemento Polpaico
Chancay Port
Bet on consumption in the middle of global uncertainty
Recommendation
Buy +
Buy
Hold
Sell
Under Review (U.R.) -
www.kallpasab.com 55
Definition of qualification ranges
Kallpa Securities SAB has 4 qualification ranges: Buy +, Buy, Hold and Sell. The analyst will assign the coverage one of these
ranges.
Upside
The fair value calculated by Kallpa SAB is based in one or more valuation methodologies commonly used by financial analysts,
including but not limited to discounted cash flows, In Situ valuations or any other applicable methodology. It should be noted that the
publication of a fair value does not imply any guarantee that the value will be achieved.
Appendix – Disclaimer
Analyst certification
The economic compensation of the analyst that prepared this report is based in several factors, including but not limited to Kallpa
Securities SAB’s profitability and the profits generated by its different areas, including investment banking. In addition, the analyst
does not receive any kind of economic compensation from the companies he/she covers.
This valuation report was prepared by Kallpa Securities SAB’s employees that maintain the position of Analyst. Persons involved in
the elaboration of this report are authorized to maintain shares.
Share prices in this report are based on market prices as of closing of the day prior to the publication of this report, unless it is
strictly stated.
General statement
Kallpa Securities SAB has reasonably designed policies to prevent or to control the exchange of non-public information used by
areas such Research and Investment, Capital Markets, among others.
Peru Equity Guide 2020
< -15%
> +30%
+15% - +30%
-15% - +15%
The analyst that prepared this report hereby certifies that: i) the opinions and views expressed in this valuation report, in regard with
the issuer and with the company’s overview, reflected his/her personal opinion and ii) No part of his/her salary compensation was, is
or will be related directly or indirectly to the recommendations expressed in this report.
This document is for informative purposes only. Under no circumstances it should be used / be considered as an offer of sale or an
application of purchase of shares or any other securities mentioned in this document. The information herein has been obtained
from sources which are believed to be reliable, but Kallpa Securities SAB does not guarantee the trustfulness or accuracy of the
content of this report, or the future market values of shares or other securities mentioned in this document. The views and opinions
expressed in this document constitute our opinion at the time of this report and are subject to change without any notice. Kallpa
Securities SAB does not guarantee analysis updates before any change in the circumstances of the market. The products referred
in this document may not be available for purchase in some countries.
The range assigned to each company covered by the analyst in these reports is based on the analysis/monitoring Kallpa Securities
SAB has been developing for the company. In some cases, the analyst can express his/her short-term points of view to traders,
vendors and some Kallpa Securities SAB’s clients but this point of view may differ in time by market volatility and other factors.
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