Urbanization, Water Scarcity And Digitalization Will Transform Infrastructure

Key Takeaways

• Faster-than-expected restructuring, investment, and cost reductions set up Orbia for improved profitability and accelerated revenue growth.
  
• Growth in fiber, electrification, and agricultural solutions positions Orbia to benefit structurally from long-term global infrastructure and sustainability trends.
  
• Heavy reliance on cyclical commodity businesses, rising debt, and lagging sustainability innovation expose Orbia to earnings volatility, regulatory risk, and diminishing long-term competitiveness.

Catalysts

Orbia Advance Corporation, S.A.B. de C.V.

• Analyst consensus sees $250 million in annual cost savings by 2027, but with restructuring and plant optimization progressing ahead of schedule and SG&A already down $48 million year-over-year, Orbia could exceed this target faster, leading to a more rapid and substantial improvement in net margins and overall profitability.
  
• Analysts broadly agree that revenue growth will come from new products and geographic expansion, yet current growth investments in Indonesia, North America, and Connectivity Solutions are ramping faster than expected, positioning Orbia for outsized revenue acceleration as market demand recovers and infrastructure cycles turn more positive.
  
• Orbia's Data Communications and Connectivity Solutions businesses are poised to benefit from the multiyear global wave of fiber build-out and electrification, with only 50% fiber penetration in key U.S. markets and explosive demand for power grid infrastructure-these trends could trigger sustained, double-digit top-line growth beyond current expectations.
  
• Precision Agriculture and the new digital farming platform are set to accelerate adoption in large emerging markets, as intensifying water scarcity throughout countries like Brazil, India, and Africa boosts long-term demand for Orbia's solutions, structurally lifting division revenues and margins.
  
• Recent declines in input costs, especially ethane, coincide with historical lows in polymer pricing, implying imminent mean reversion in market cycles; as volumes recover, Orbia's operating leverage-built through aggressive streamlining-can deliver outsized EBITDA and cash flow growth as pricing normalizes and input savings flow through to net earnings.

Orbia Advance Corporation. de Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Orbia Advance Corporation. de compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Orbia Advance Corporation. de's revenue will grow by 6.9% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 2.2% today to 3.4% in 3 years time.
• The bullish analysts expect earnings to reach $313.7 million (and earnings per share of $0.14) by about July 2028, up from $165.0 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 33.9x on those 2028 earnings, up from 7.6x today. This future PE is greater than the current PE for the MX Chemicals industry at 14.4x.
• Analysts expect the number of shares outstanding to decline by 0.37% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 22.11%, as per the Simply Wall St company report.

Orbia Advance Corporation. de Future Earnings Per Share Growth

Risks

• Orbia's persistent dependency on PVC and commodity-linked businesses leaves it highly exposed to cyclical price volatility and market overcapacity, as evidenced by a nine percent decline in Polymer Solutions revenues driven by weak pricing and oversupply, which could continue to compress net margins and introduce significant unpredictability to future earnings.
  
• Accelerating global regulatory and consumer pressures towards sustainable alternatives pose a significant challenge, with Orbia's legacy plastics and chemical portfolios increasingly at risk of demand erosion and elevated compliance costs, threatening long-term revenue growth especially if the company's current pace of innovation does not keep up with ESG-driven market shifts.
  
• The company's already high leverage, with net debt to EBITDA rising from 3.3x to 3.67x this quarter, reduces financial flexibility and increases vulnerability to interest rate fluctuations and refinancing risk, heightening pressure on net income as additional debt may be required for near-term maturities in a challenging interest rate environment.
  
• Geopolitical fragmentation and protectionism, including the risk of escalating trade wars and regionally divergent regulatory regimes, threaten to disrupt Orbia's supply chains and reduce export opportunities, potentially dampening revenues and elevating input costs despite current mitigation through regional diversification.
  
• The chemical sector's requirement to decarbonize and transition towards circular economy models is intensifying, and Orbia faces the risk that continuing underinvestment in new bio-based and sustainable product lines will result in the company losing relevance, with profitability pressured as traditional petrochemical markets shrink and face margin compression.

Valuation

• The assumed bullish price target for Orbia Advance Corporation. de is MX$57.72, which represents two standard deviations above the consensus price target of MX$29.24. This valuation is based on what can be assumed as the expectations of Orbia Advance Corporation. de's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of MX$62.86, and the most bearish reporting a price target of just MX$10.92.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $9.1 billion, earnings will come to $313.7 million, and it would be trading on a PE ratio of 33.9x, assuming you use a discount rate of 22.1%.
• Given the current share price of MX$12.31, the bullish analyst price target of MX$57.72 is 78.7% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.