Our 12-month target price of P$20.0/share is based on a sum-of-the-parts valuation, in which Alfa’s stake in Alpek (82%) is included at market price as of February 28, while we value non-listed assets using a DCF model or at 6.7x-6.4x 2024E EV/EBITDA. 

The main risks to Alfa achieving our target price include the following: 1) FX: Appreciation or depreciation of the MXN could impact the earnings from export-oriented business (Alpek). 2) Commodities price volatility: This could increase/decrease feedstock prices and margins for Alpek and others. 3) Economy slow cycles: Slower-than-expected margin expansion in Europe could affect margins and investment case.

If the impact on the company from any of these factors proves to be greater than we anticipate, investment case will have difficulty materializing. Likewise, if any of these factors proves to have less of an effect than we anticipate, shares could materially outperform our target price.