Narrow-Moat Femsa Is Recovering Well From Coronavirus Disruptions; Shares Slightly Undervalued

Despite lingering effects of the pandemic, narrow-moat Femsa’s results for 2021’s third quarter (revenue growth of 12.6% and a 9.1% operating margin) keep it on track to reach our full-year estimates of 8.2% revenue growth and an operating margin of 8.3%. We do not expect to make any material change to our fair value estimate of $92 per ADR and view Femsa as slightly undervalued. However, we see greater potential upside in its subsidiary, narrow-moat Coca-Cola Femsa, which trades at a roughly 22% discount to our fair value estimate of $69 (see our Oct. 28 note).