Grupo Traxion SAB de CV: On low growth and USCMA uncertainty: down to Underperform, cut PO to P$12

Research evidence excerpt

Grupo Traxion SAB de CV: On low growth and USCMA uncertainty: down to Underperform, cut PO to P$12

Hitting a speed trap; Downgrading to

Underperform. PO down to P$12

We downgrade Traxion to Underperform from Neutral due to: (1) a lack of short-term

catalysts; (2) uncertainty regarding the outcome from the July 1st USMCA negotiation

deadline, the potential prolonged negotiations between the governments of MX/US/CA

over key trade provisions, and its potential negative impact on new investment

decisions; and (3) sluggish Mexican 2026 and 2027 GDP growth (0.8% and 1.5%

respectively), dragged down by weak demand and soft labor market dynamics.

Traxion has faced several challenges on various fronts, increased uncertainty as global

trade and tariff dynamics have changed amidst one of the largest structural geopolitical

shifts in the last fifty years. This has led to uncertainty on several issues with many

investment decisions now placed on hold. The most pressing issue, the outcome of the

USMCA negotiations expected on July 1st, should alleviate tension, but negotiations could

be prolonged. These conditions, in our view, are dragging down the cargo business in

Mexico, especially in the auto and auto part sector (a key driver for the company).

A closer look at our key reasons for our downgrade.

I. Lack of short-term catalysts

Traxion has stood out as one of the few clear nearshoring stocks in Mexico since going

public back in 2017. The expectation of nearshoring manufacturing growth fueled

attractive double-digit growth expectations. This changed however when President

Trump implemented global tariffs leading to tariff uncertainty and lower visibility on

new investment decisions.

As structural growth has inched down for the Cargo business, as well as the hefty