Gruma’s Appeal Grows Amid Favorable Expectations for 2020
In the midst of a highly volatile environment in the financial markets, in which the main indicator of the Mexican Stock Exchange (BMV) and the majority of the issuers register a downward trend, the attractiveness of Gruma‘s papers is every ever higher, especially given the good expectations regarding its financial results report for the second quarter of the year, which is expected to be published towards the end of this month.
The increased demand for the shares of the world’s leading company in the production of corn flour, tortillas and wraps, led several analysis groups to adjust the target price of the issuer’s securities upwards, including Banco Base and Grupo Invex Financial.
Luis Alvarado, capital market specialist at Banco Base, explained that the adjustments to the target price of Gruma’s shares are related to the good expectations that there are for the issuer regarding its sales volume and profits in the markets in which it operates. , which registered an increase due to a greater demand for their products in the midst of the health emergency due to Covid-19, and due to the depreciation of the peso against the dollar. “At Banco Base, we expect a moderate increase in the multinational’s sales volume of just under 2%. This is due to a decrease in panic purchases, although it maintains stability due to how essential the consumer food sector is; however, for total sales, an increase of around 10% is expected, mainly due to an exchange rate effect, since in the first quarter the depreciation of the peso was not captured when the strong episode of uncertainty began in the financial markets , in March”.
Considering the above, he said, a rapid recovery in the US economy and a scenario of low interest rates for a long time in the following years, Gruma’s target price is around 285 pesos per share, which implies an increase 21%, compared to the closing of last July 8. He added that the countercyclical that is usually the food sector, one of the main factors to monitor in the following quarters will be the foreign exchange market, since most of the company’s income comes from the United States. “A depreciation of the Mexican peso would favor Gruma’s books.” For its part, the analysis group of Grupo Financiero Invex, explained that in addition to the positive effect of the exchange rate, Gruma would be favored in the second quarter, in the rest of the year and part of 2021 by lower international costs of corn , the main input of the company. Taking these considerations into account, “we improved our target price to 265 pesos per share, from the previous level of 220 pesos, due to a higher relative valuation, as we believe that the market is recognizing Gruma’s strength in the current economic
Gruma's Appeal Grows Amid Favorable Expectations for 2020 - /10
In the midst of a highly volatile environment in the financial markets, in which the main indicator of the Mexican Stock Exchange (BMV) and the majority of the issuers register a downward trend, the attractiveness of Gruma