Qualitas Controladora SAB de CV: Risk Reward Update

Research evidence excerpt

Qualitas Controladora SAB de CV: Risk Reward Update

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Key: Historical Stock Performance Current Stock Price Price Target View descriptions of Risk Rewards Themes here

Source: Refinitiv, Morgan Stanley Research

BULL CASE M$250.00 BASE CASE M$190.00 BEAR CASE M$140.00

Nearshoring-driven super cycle & execution Soft macro & rising competition pressure Macro, execution, & competition challenges

success EPS ensue

Sustainable low rates and nearshoring could Economic activity & foreign investments Macro conditions deteriorate and persist

be a decade-plus growth driver of new remain week on the back of policy longer than expected. Demand for autos

vehicle sales, insurance penetration of used uncertainty. Hence, premium growth slows falls steeply, particularly as unemployment

vehicles, and low claims. And Qualitas' down. Rising competition results in slightly and wages deteriorate, pressuring premium

superior brand, management, and lower market share and underwriting growth. Competition intensifies and pricing

competitive advantages position it well to margins. Claims remain under control, but power weakens, while claims increase and

capitalize. Success in international increase as frequency and weather events remain high over a prolonged period,

operations and new verticals plays out normalize. International expansion and resulting in market share losses and

faster than expected, driving better earnings turnaround of US operation continue to underwriting margin compression. Macro

growth and ROE expansion. perform well. Financial income remains and execution challenges impact

under pressure on lower interest rates. international operations and new verticals.

Statutory taxes increase & insurers lose tax

audits.