CHDRAUI B: Margin Discipline Will Support Upside Despite Underperform Downgrade

Analysts slightly trimmed their price target on Grupo Comercial Chedraui, easing it from MXN 159.79 to MXN 157.00. They factored in a modestly higher discount rate while maintaining broadly unchanged assumptions for growth, profitability, and valuation multiples.

Analyst Commentary

Recent research has highlighted a more cautious stance on Grupo Comercial Chedraui, with the latest moves reflecting concerns around the balance of risk and reward at current valuation levels.

Bullish Takeaways

• Bullish analysts note that the revised MXN 157.00 price target still implies a moderate upside from current trading levels, suggesting the market may be overly discounting execution risks.
• Underlying assumptions for growth and profitability remain broadly intact, indicating continued confidence in the company's core business model and operational discipline.
• The retail footprint and diversification across formats and geographies are seen as supportive of steady top line expansion, even as the discount rate is nudged higher.
• Resilient margins and disciplined cost management are expected to help sustain earnings growth and support valuation relative to regional retail peers.

Bearish Takeaways

• Bearish analysts view the downgrade to an Underperform rating as a signal that risk adjusted returns may be less compelling, with limited room for multiple expansion at the new target.
• The higher discount rate underscores rising macro and competitive risks, which could pressure future cash flows and justify a more conservative valuation framework.
• Slower than expected same store sales growth or delays in integrating new formats could challenge execution, putting the current earnings trajectory at risk.
• At the revised MXN 157.00 target, the margin of safety is perceived to be relatively thin, leaving the stock vulnerable to disappointments in growth, profitability, or capital allocation.

Valuation Changes

• Fair Value Estimate remained unchanged at approximately MX$159.79 per share, indicating no revision to the modelled intrinsic value.
• Discount Rate increased slightly from 15.18 percent to about 15.18 percent, reflecting a marginally higher perceived risk profile.
• Revenue Growth Assumption was effectively unchanged, holding at around 6.83 percent in the long term model.
• Net Profit Margin stayed virtually flat at roughly 2.86 percent, signaling no material change in profitability expectations.
• Future P/E Multiple edged up slightly from about 22.47x to 22.47x, suggesting a marginal adjustment in valuation multiples applied to forward earnings.