Arca Continental Earnings: Capacity Expansion, Commercial and Digital Efforts Buoy Growth Outlook

We plan to raise our MXN 182 fair value estimate of wide-moat Arca Continental by a mid-single-digit percentage after digesting the bottler's solid 2024 results and strong guidance for the 2025-29 period. In 2024, sales and adjusted EBITDA rose 11% and 15% respectively, outpacing our estimates (9% and 8%), which we attribute to agile in-market execution, distribution efficiency gains, and a favorable currency impact from its US exposure (20% of total volumes). For the next five years, management's outlook calls for currency-neutral sales to grow by 6%-8% annually and adjusted EBITDA by 8%-10%, ahead of our 5% growth projections for both metrics. We think the targets look achievable backed by higher-capacity investments (6%-7% of sales, versus our 5% estimates) to support growth initiatives in traditional trade and on-premises channels and for new categories including beer, spirits, and groceries, and we plan to update our projections. That said, after a 25% rally in the past three months, shares look rich, even after our planned fair value estimate increase.