Grupo Mexico SAB is charging ahead into the worst metals market in 15 years, taking advantage of the slump to ramp up growth while competitors cut back and hunker down.
Mexico’s biggest copper producer is leveraging its relatively low debt and strong profit margins to invest more than $4.6 billion expanding some of its mines, making it one of the favorite picks for analysts’ covering the sector this year. Almost two-thirds of 21 analysts surveyed by Bloomberg recommend buying Grupo Mexico’s shares, according to a Bloomberg survey.
That’s a leap of faith for investors who’ve watched copper prices post three straight annual losses, with a fourth loss forecast for 2016 as global production continues to outpace consumption. The metals producer will be resilient this year as its growth and operating margins counteract a six-year low in copper prices, according to analysts at BBVA and Grupo Bursatil Mexicano SA, known as GBM.
“Grupo Mexico is one of the few companies in the mining industry that has growth plans while most peers suffer,” Jean-Baptiste Bruny, a BBVA Research analyst, said in a phone interview from Mexico City. “They continue to invest, and they have relatively low debt levels. They are well-positioned to see share growth when the copper price recovers.”