Rotoplas Groupthe only water company listed on the Mexican Stock Exchange (BMV), will not benefit from droughts in the north of the country in January-March 2023, unlike previous quarters, Signum Research analysts said.
Despite this, the company, with the ticker WATERwill have a year-on-year growth of almost 60% in its EBITDA in the third quarter of 2023, driven mainly by favorable results in Latin America (Argentina, Brazil, Chile and Central America).
Rotoplas Group will publish its report for the period January-March 2023 on April 26, after the market closes.
Signum Research, an investment advisory firm, estimates that the company’s EBITDA will amount to 513 million pesos in the first quarter of 2023, compared to the 322 million registered in the same period of the previous year.
“We expect mixed results”, with setbacks in its product division due to the economic slowdown and the foreign exchange effect of the strength of the peso, although despite this “profitability levels would remain robust,” Signum analysts said in a note.
In Mexico, Rotoplas will suffer the “unfavorable effects” of seasonality, in addition to the fact that in the first quarter of the year “the benefits that occurred in previous quarters would not be obtained as a result of droughts in the north of the country,” according to Signum analysts.
The investment advisory firm expects the company’s revenues to total 2,887 million pesos in January-March 2023, an increase of 8.53% compared to last year.
While for the rest of Latin America where Rotoplas has operations (Argentina, Brazil and Central America), Signum Research expects favorable results, in the United States it anticipates mixed results.
In addition, Signum highlighted that the companies’ indebtedness level would have remained healthy, with an Enterprise Value/EBITDA (EV/EBITDA) ratio of 1.7 times.
The EV/EBITDA indicates the number of years that a company would take to settle all its debt obligations with the profitability levels it currently has. The lower the ratio, it means that a company would take less time to pay and vice versa.
So far this year, the share titles of Rotoplas they drop 12.04% on the BMV, to 27.70 pesos for each one.
However, Signum has a “buy” recommendation for the share, since it calculates its target price at 39 pesos for each one, with which the potential return is more than 40 percent.
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