1

June 15, 2012

MEXICHEM, S.A.B DE C.V.

The World Is Not Enough An Appealing Growth Story, BUY

Stock performance

Buy

■ We are revising our MEXCHEM’s target price to MP 65 .00 a share (+22% upside), reflecting 1) a new valuation model for the company , 2) the incorporation of Wavin (European plastic pipe producer) and 3) new expansi on projects.

■ In this special report we present 1) Wavin’s acquis ition, 2) a deep analysis on Mexichem’s production processes, 3) expansion proje cts (with emphasis on shale gas opportunities), 4) historical acquisitions’ ana lysis, among others.

■ Our 2012 estimates assume revenue and EBITDA growth s of 49.8% and 30.9% YoY, respectively. We expect Wavin’s incorporation to ac count for 68.5% of total revenue growth and 46.1% of the consolidated EBITDA’s incre ase.

An appealing growth story . We like Mexichem’s growth story. By analyzing Mexichem’s M&As history we can observe a consistent generation of value (average NTM [next-twelve-months] multiple reduction of 25% since 2004) and a successful integration of each of the acquired companies. We were particularly cautious on Wavin’s acquisition (on its “vis-à-vis” lower profitability and exposure to Europe), but is not expected Wavin to be the exception. Mexichem’s management has mentioned it is aiming at integrating Wavin’s operations “as soon as possible”. It expects to extract synergies of USD 75 million over the next 18 months. Wavin’s forward acquisition multiple becomes quite attractive at 5.6x (versus 7.9x @acquisition). Exposure to Europe should be mitigated by a higher exposure to developing countries in CEE and the introduction of Wavin’s products and technology to LatAm markets. Further expansion projects’ news flow should contin ue in 2H12 . For the Chlorine-Vinyl chain we expect soon an announcement regarding the JV with Pemex, it should be finally approved by Pemex Board of Directors. This project should secure the production of 400k tpy of VCM. The company is also analyzing a potential investment (under a condo-basis) to develop a natural gas-based ethylene cracker in the United States. Regarding the Fluorine chain we are eager to have more news related to the company's downstream expansion to higher value-added fluoro-polymers and elastomers. Hector Valle mentioned that we should expect them to reach a potential alliance with a global partner to develop this segment. We are rising our target price (TP) of MEXCHEM to M P 65.00 a share, BUY. The change reflects 1) a new valuation model , 2) Wavin’s incorporation starting May, 2012 and 3) growth projects (organic and inorganic) disclosed by the company. Our new TP of MP 65.00, offers a potential return of 21.6% over current stock trading prices. It was determined through a DCF valuation model. It assumes a weighted average cost of capital (WACC) of 7.7%, with a debt-capitalization ratio of 53%, using a risk-free rate of 3.5%, company beta of 1.0x, market risk premium of 5.5%, and a 4.0% nominal perpetual growth. The implicit target EV/NTM EBITDA multiple of 8.5x is practically in-line with MEXCHEM’s historical average.

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2010 2011 2012E 2013E 2014E Estimates Revenue (MXN mn) 36,472 47,642 71,371 83,469 89,674 EBITDA (MXN mn) 8,124 10,271 13,447 16,530 18,393 EBITDA margin 22.3% 21.6% 18.8% 19.8% 20.5% Net income (MXN mn) 3,913 2,755 6,153 7,715 9,038 EPS (MXN) 2.17 1.53 3.33 4.13 4.84 DPS MEXCHEM (MXN) 0.22 0.28 0.40 0.68 0.80 ROE 24.1% 12.1% 23.4% 23.9% 23.1%

Valuation EV/EBITDA 9.9x 8.8x 9.1x 7.3x 6.5x P/E 17.5x 28.0x 16.3x 13.0x 11.1x P/BV 3.5x 3.2x 3.6x 2.9x 2.4x

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MEXCHEM IPC

Pablo Duarte de León Conglomerates, Industrials and Mining � pduarte@actinver.com.mx ℡ +52 (81) 8173 5200 x80161

Corporación Actinver Calzada del Valle # 331 Ote. Col. Del Valle Monterrey, N.L. 66220

Local Ticker MEXCHEM.*Price Target MXN 65.00Last Price MXN 53.64Expected Return 21.2%2012E Div. Yield 0.4%Total Expected Return 21.6%Mkt. Cap (Million) MXN 96,552

Ent. Value (Million) MXN 109,752

LTM Price Range (38.70 - 53.64)

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Contents

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Table of contents Valuation …….…………………………………………………..…….… Discounted Cash Flows (DCF) Method….……………………..…..… Sensitivity Tables………………………………..……..……..……....… Petrochemicals: Relative Valuation Table…………………...….….…

Mexichem: The Business Broad Picture …………...…………..

Wavin At A Glance ……………………………...………...…………..

Wavin’s Integration ……………………………..………...………….. Acquisition Rationale……………………………………..…..……....… Synergies At Both, The Top Line And Costs’ Side…..…..…….….… Key Longer-Term Strategic Benefits………………………………….. New 2012 Guidance, Reflecting Wavin……….…………………….… Mexichem’s Historical Acquisition Multiples…….....……………….… Potential Upside On Wavin’s 2015 Strategy…..…………..……….…

The Next Strategic Moves / Expansion Projects …...….…….. Chlorine Vinyl: “The Missing Links” ………..…………………....… Joint Venture (JV) With Pemex………………………………………… The Chlorine-Vinyl-Pipes Process……..……………………………… “Fracking”, Changing The Global Energy Picture….………………… Mexichem’s Ethylene Cracker Project………………………………… Fluorine Chain: The Chemicals Favorite ………..……………....… Fluorita De Mexico Acquisition………………………………………… HF Plant In Korea…………………...…..………………………………

2012 Financial Forecasts …………...…………..……...…………..

Operating Highlights By Chain ………………..……...…………..

Forecasted Operating Metrics And Income Statement …….

Forecasted Balance Sheet And Cash Flow Statement ….....

Company Profile: Mexichem …………………………………........

Disclaimer ………………..……...…………………………………..…..

Corporate Directory …………………...…………..……...…………..

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Valuation Discounted Cash Flows (DCF) Method . We are rising our target price (TP) of MEXCHEM from MP 53.00 to MP 65.00 per share. The change reflects 1) our new valuation model for the company, 2) Wavin’s incorporation starting May, 2012 and 3) the latest growth projects (organic and inorganic) disclosed by the company. Our new TP of MP 65.00, offers a potential return of 21.6% over current stock trading prices. Our MEXCHEM’s TP was determined through a DCF valuation model. It assumes a weighted average cost of capital (WACC) of 7.7%, with a debt-capitalization ratio of 53%, using a risk-free rate of 3.5%, company beta of 1.0x, market risk premium of 5.5%, and a 4.0% nominal perpetual growth. At this price level, MEXCHEM’s share would be trading at a 8.5x implicit forward EV/EBITDA multiple, which compares slightly above its historical average multiple of 8.3x.

MEXCHEM’s target 8.5x EV/EBITDA forward multiple compares 10% higher against the Petrochemical group’s multiple of 7.7x. However we believe that this premium is justified considering the growth nature of Mexichem. For the 2011-2013 period we expect an EBITDA CAGR of 27%, significantly higher against the 12% of the industry. We find Mexichem’s vertical integration (superior and more stable operating margins), exposure to developing economies in LatAm and Eastern Europe and future growth prospects (both organic and M&As) as additional supporters for MEXCHEM’s above-average valuation. We are reiterating BUY recommendation.

Discounted Cash Flows (DCF) Model (MP mn)

2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E Perp.

EBIT 9,528 11,908 13,093 13,931 14,707 15,462 16,249 17,061 17,914 18,810 19,750Taxes 2,696 3,151 3,515 3,326 3,591 3,874 4,160 4,368 4,586 4,815 5,056Tax rate 30% 29% 28% 28% 28% 28% 28% 28% 28% 28% 28%NOPLAT 6,831 8,757 9,579 10,605 11,116 11,588 12,089 12,694 13,328 13,995 14,694D&A 3,920 4,622 5,300 5,823 6,389 6,957 7,041 7,393 7,763 8,151 8,559CAPEX 16,780 8,625 10,918 10,128 11,370 11,600 12,132 12,739 13,376 14,045 14,747Change in WC 1,297 -517 577 425 418 395 443 487 512 537 564FCFF -7,325 5,272 3,383 5,875 5,717 6,550 6,555 6,860 7,203 7,563 7,942 215,398NPV FCFF - 4,895 2,917 4,704 4,251 4,523 4,203 4,085 3,983 3,884 3,787 102,710

6.5x

7.0x

7.5x

8.0x

8.5x

9.0x

9.5x

10.0x

Apr-10 Aug-10 Dec-10 Apr-11 Aug-11 Dec-11 Apr-12

Source: Actinver.

MEXCHEM: Historical EV/NTM EBITDA

-1σ = 7.6x

Avg.= 8.3x

+1σ = 8.9x

8.0x

12.0x

16.0x

20.0x

24.0x

28.0x

32.0x

Apr-10 Aug-10 Dec-10 Apr-11 Aug-11 Dec-11 Apr-12

Source: Actinver.

MEXCHEM: Historical P/NTM Earnings

+1σ = 24.9x

Avg.= 19.0x

-1σ = 13.2x

Firm value 143,943Net debt 22,406Minority interest 81Estimated market cap 121,456ADS Equivalent Shares 1,868.0Fair value / share (MP) 65.00Target Fwd EV/EBITDA 8.5xCurrent price (MXN) 53.6Upside to fair value 21.2%+ Dividend yield 2012E 0.4%Total upside potential 21.6%Source: Actinver.

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Sensitivity Tables We are also including sensitivity tables to account for unexpected changes in our EBITDA and earnings forecasts at different 2012E EV/EBITDA and P/E multiples, respectively. It can be appreciated that at our MXN 65.00 /share TP, MEXCHEM’s share would be trading at a NTM 2012E EV/EBITDA multiple of 8.5x and 15.7x P/E.

7.5x 8.0x 8.5x 9.0x 9.5x15% 66.2 71.3 76.3 81.4 86.510% 62.8 67.7 72.6 77.4 82.35% 59.5 64.1 68.8 73.4 78.10% 56.2 60.6 65.0 69.4 73.8-5% 52.8 57.0 61.2 65.4 69.6

-10% 49.5 53.5 57.4 61.4 65.4-15% 46.1 49.9 53.7 57.4 61.2

EV/EBITDA 2012E Forward Multiple

Non

-Exp

ecte

d C

hang

e in

EB

ITD

A

14.7x 15.2x 15.7x 16.2x 16.7x15% 70.0 72.4 74.8 77.1 79.510% 67.0 69.2 71.5 73.8 76.05% 63.9 66.1 68.3 70.4 72.60% 60.9 62.9 65.0 67.1 69.1-5% 57.8 59.8 61.8 63.7 65.7

-10% 54.8 56.6 58.5 60.4 62.2-15% 51.7 53.5 55.3 57.0 58.8

PE 2012E Forward Multiple

Non

-Exp

ecte

d C

hang

e in

Ear

ning

s

Sensitivities to our Target Price

Petrochemicals: Relative Valuation 3 4 5 6 7 9 17 18 19 20 16 10 11 12 13Dividend

Price Mkt. Cap EV Return Return yield P/BVSector/Company Ticker (Local) (USD) (USD) YTD YoY 2012E 2011A actual 2012E 2013E actual 2011A actual 2012E 2013E

ChemicalsExxon Mobil XOM.US 82.1 384,053 388,138 -3% 2% 0.7% 5.9x 5.7x 4.3x 4.2x 2.4x 10.2x 9.6x 10.0x 9.6xChina Petroleum 386.JT 6.9 85,282 125,026 -15% -7% 1.6% 5.1x 4.6x 4.3x 3.9x 1.0x 7.5x 9.0x 8.7x 8.4xBASF BAS.GR 54.9 63,750 77,949 2% -15% 4.7% 5.2x 4.9x 4.9x 4.7x 2.0x 8.0x 9.2x 9.2x 8.6xDu Pont DD.US 49.6 46,430 58,358 8% -1% 0.9% 13.0x 13.5x 7.8x 7.2x 4.8x 11.2x 13.1x 11.4x 10.3xReliance RIL.IN 716.4 42,155 45,204 3% -20% 1.2% 6.8x 7.1x 7.3x 6.9x 1.3x 10.7x 11.9x 11.5x 10.7xDow Chemical DOW.US 32.0 38,252 60,391 11% -10% 1.0% 8.0x 9.1x 7.2x 6.3x 2.0x 10.3x 15.1x 12.8x 9.6xFormosa Petrochemical 6505.TT 79.0 25,139 29,906 -16% -22% 5.2% 22.3x 27.4x 14.9x 14.2x 3.2x 23.1x 84.3x 26.7x 19.4xShin-Etsu 4063.JT 4,185 22,788 19,428 10% 1% 1.2% 7.5x 6.6x 6.1x 5.6x 1.2x 18.1x 18.0x 15.4x 13.9xLyondellBasell LYB.US 37.6 21,606 24,015 16% 8% 1.1% 4.4x 5.0x 4.6x 4.1x 1.9x 6.2x 10.4x 7.9x 6.7xLG Chem 051910.KS 288,500 16,440 16,707 -9% -43% 1.5% 6.9x 7.0x 5.8x 4.8x 2.1x 11.5x 10.8x 7.4x 6.7xFormosa Plastics 1301.TT 73.7 15,069 14,921 -9% -33% 5.4% 15.2x 16.7x 11.9x 11.4x 1.8x 10.5x 17.7x 13.8x 11.0xNan Ya Plastics 1303.TT 55.3 14,505 16,702 -8% -30% 3.8% 18.3x 22.4x 18.1x 17.1x 1.6x 13.9x 40.3x 17.4x 12.9xFormosa Chemicals 1326.TT 73.6 13,990 14,562 -8% -33% 5.4% 15.0x 18.8x 14.2x 13.9x 1.6x 9.4x 23.3x 14.0x 10.7xSolvay SOLB.BB 80.5 8,610 12,585 26% -25% 1.5% 8.0x 8.2x 4.9x 4.5x 1.1x 17.0x 31.4x 11.3x 9.2xMexichem MEXCHEM*.MM 53.6 7,100 8,130 25% 18% 0.7% 9.0x 9.4x 9.1x 7.3x 3.5x 21.2x 26.1x 16.3x 13.0xFMC FMC.US 50.0 6,858 7,796 16% 25% 0.2% 9.0x 10.0x 9.0x 8.4x 5.5x 16.0x 17.5x 14.1x 12.6xEastman Chemical EMN.US 46.7 6,448 7,394 20% -7% 0.6% 4.8x 5.8x 4.8x 4.1x 3.2x 8.4x 10.2x 8.7x 7.3xHonam Petrochemical 011170.KS 228,000 6,246 6,836 -23% -40% 0.8% 8.2x 6.5x 5.0x 4.1x 1.4x 12.7x 9.7x 7.0x 6.9xCelanese CE.US 36.5 5,715 7,955 -17% -24% 0.2% 9.2x 8.7x 6.1x 5.4x 3.7x 10.7x 8.8x 8.0x 6.7xSumitomo 4005.JT 239.0 4,986 18,502 -15% -41% 2.5% 9.6x 8.6x 7.4x 6.9x 0.8x 24.0x 70.8x 9.7x 7.9xBraskem BRKM5.BZ 11.8 4,298 10,534 -8% -49% N.A. 5.9x 5.8x 5.9x 4.8x 1.0x N.A. N.A. 17.3x 10.8xIndorama IVL.TB 28.0 4,280 5,888 -4% -40% 1.8% 11.8x 15.1x 8.4x 7.1x 2.2x 6.4x 21.7x 9.6x 7.8xHuntsman HUN.US 13.0 3,102 6,580 30% -27% 0.8% 4.9x 4.9x 4.8x 4.6x 1.6x 8.0x 8.9x 6.0x 6.0x

Median (Chemicals) 14,505 16,702 -3% -22% 1.2% 8.0x 8.2x 6.1x 5.6x 1.9x 10.7x 14.1x 11.3x 9.6xAverage (Chemicals) 36,831 42,761 1% -18% 1.9% 9.3x 10.1x 7.7x 7.0x 2.2x 12.5x 21.9x 12.0x 9.9x

Source: Consensus, Actinver.

EV/EBITDA P/E

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Process Main products End uses / products Main raw materials Main clients Facilities Mkt. share / competitors

Chlorine-Vinyl chain

VCM Pemex Chlorine-Soda 1,025 (k tons) Chlorine-Soda in N.A.

Titanium dioxide OXY Mexico 1,000Chlorine Bleach Procter & Gamble Colombia 25

Agrochemicals UnileverWater purification DupontOils Detergentes Ltda.Soap & detergents Ceiva Químicos

Caustic Soda Bleach UnivexRefined sugar Prod. Q. Epaquim Phosphates in Mexico

General cleaningDetergents Others diversified in: Phosphates 164 (k tons)Fertilizers Bottling Mexico 164Ceramics AgrochemicalTextiles Pulp and paperFood & beverage MetalworkingToothpaste Drugs

Water pipes MB Barter and Trading PVC resins 956 (k tons) Global PVC

Wire coatings Helm AG Mexico 549PVC resins Window frames Marna Plástica Colombia 407

Floors Simil Cuero P.Housing Conductores M.E.Cables Eureka Plast. Compounds 363 (k tons)Pipes Ind. Plásticas Intl. Mexico 185

Compounds Flexible / rigid films Crearplast US 82Curtains Zenit Trade Colombia 36Coating Tuberías Advance UK 61

Integral Solutions chain

Water and sanitary PVC piping 580 (k tons)Electrical systems Latam 580

Fluid Conduction Troughs and gutters Europe 780 EEnergy and TelecomsGas Mainly diversified in:Water drip systems • Construction

Agricultural Mobile sprinkling • InfrastructureTurnkey systemsGeo-textilesGeo-drainsSacks for concreteGeo-structures

Fluorine chain

Steel Britannia Ref. Metals Fluorite 1,471 (k tons)Glass Noranda Sales Mexico 1,471Ceramic SojitzCement NorfalcoHF Cemex MexicoAluminum Industrial Minerca C.

Refrigerant gases Arkema Hydrofluoric acid 132 (k tons)Fuels Dupont Mexico 132Pickling stainless steel HoneywellTeflon MDA Manufacturing Sulfur 210 (k tons)Batteries (F. lithium) Ineos Fluor Mexico 210Toothpaste (sodium) QuimobásicosAluminum Alcoa Alum. Fluoride 60 (k tons)Refrigerant gases Mexico 60

Fluorocarbons 104 (k tons)US 39

Refrigerators UK 39Refrigerants Fluorocarbons (FC) Air conditioners Highly diversified Japan 26

Freezers

Source: Company data, Actinver.

Capacity

HF

Phosphates

Chroline-Soda

Aluminum Fluoride

Hydrofluoric acid

Vinyl

Geosystems

Integral Solutions

Acid grade

Metallurgical gradeFluorite

Salt20%

Electricity51%

Natural Gas17%

Others11%

Water1%

Dow27%

Olin14%

PPG13%FPC

6%

OxyChem22%Mexichem

3%GeorgiaG

3%

Shintech2%

Others10%

Imports8%

Inophos20%

Quimir73%

VCM89%

Water 2%

Nat Gas 2%

Electricity2%

Other 5%

Oxy5%

Shin-Etsu4%

Formosa11%

Others32%

Shin-tech

8%IMHCG

7%

LG Chem

5%

SolVin5%

Xinjiang5%

Tianjin4%

GeorgiaG4%

Mexichem4%

Ineos6%

PVC80%

Carbonate10%

Electricity10%

Tigre27%

Amanco38%

Others25%

Aliaxis10%

Other68%

Consumables20%

Electricity11%

Water1%

Mexichem20%

CIS / Mongolia

16%

Others10%

China49%

Africa5%

Others18%

Fluorite56%

Sulfur4%

Electricity16%

Natural Gas 6%

Mexichem67%

Honeywell24%

Solvay9%

In North America

HF35%

Trichloro-ehtylene

40%Others

25%DuPont

16%

Honeywell8%

China13%

Arkema12%

Solvay10%

Others10%

Mexichem31%

Mexichem: The Business Broad Picture

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Wavin At A Glance Wavin (sales USD 1,847 mn; EBITDA USD 136 mn) is a Dutch producer of plastic (PVC, PP and PE) pipe systems and solutions used in above and below ground solutions for hot & cold tap water, surface heating and cooling, soil and waste, rain-water management and last mile telecom. It is the market leader in Europe with a top 2 position in half the countries in which it is present. Wavin operates in Europe with sales and distribution locations in 25 countries. Products are supplied from 40 manufacturing and assembly sites. Outside Europe, Wavin’s systems and know-how are distributed via a network of agents, licensees and distributors. Above ground segment (37% of sales). Activities comprise a full range of pipe systems and solutions applied in residential and commercial buildings. Main business driver is the ongoing substitution of traditional materials (metals) by plastics. In recent years Wavin has grown substantially in the Hot & Cold segment. Below ground segment (61% of sales). Wavin offers intelligent solutions for managing rainwater runoff from hard surfaces, such as roofs and roads to ground water. Difficulties arising storm water management in large urban areas (flooding) have made the Water Management business to expand in both the residential and non-residential sectors despite the European economic situation.

■ Hot & Cold. Includes systems (pipes, fittings, manifolds) used in residential and non-residential buildings to supply hot and cold tap water, radiator connections, and surface heating and cooling.

■ Soil & Waste. Offers pipes, fittings, siphons and accessories designed to discharge waste water from kitchens and bathrooms to sewer collection systems.

■ Other Building Systems. Includes complete roof gutter systems and a full range of PVC pipes and fittings for in-house electrical conduits.

■ Foul Water Systems. Used to discharge foul water or storm water from buildings and hard surfaces to purification plants.

■ Water Management. Systems used to catch, convey, infiltrate, attenuate and clean rainwater.

■ Cable Ducting. Systems including micro fittings, micro ducts and corrugated pipes used to guide and protect power lines as well as fibre-optic cables and bundles for data transmission.

■ Water & Gas. Systems comprising pressure pipes and fittings for the supply and distribution of gas and potable water.

Above ground products Below ground products

Wavin’s sales distribution by end market is 60% residential, 25% infrastructure and 15% non-residential.

Hot & Cold21%

Soil & Waste13%

Other Building Systems

3%

Fould Water

Systems32%Water &

Gas14%

Cable Ducting

5%

Other2%

Sales by segments / products

WaterMgmt11%

Above G. 37%

Below G. 61%

Other2%

North West

Europe37%

South West

Europe27%Central &

Eastern Europe

17%

South East

Europe15%

RoW4%

Sales distribution by region

Source: Wavin, Actinver.

North West

Europe38%

Central & Eastern Europe

30%RoW17%

South East

Europe10%

South West

Europe6%

EBITDA distribution by region

Source: Wavin, Actinver.

Wavin's 2015 Strategy (Long-Term Targets)

Operational TargetsMarket leadership: Achieve #1 / #2 mkt position in countries where operate.Portfolio & Segmentation: Increase to 40% of total sales Water Mgmt. And Hot & Cold (key) segments.Innovation: From 15% to 20% of total sales products with less than five years in the market.Operational Excellence: Realise 95% of orders in time and in full; 20% reduction in carbon footprint.

Financial TargetsRevenue: Organically grow by year 2% ahead of the European construction activity.Profitability : Return to pre-crisis EBITDA margins (13%).

Wavin's acquisition rationale

• Global leader in Integral Solutions (PVC pipes).• Platform to consolidate the industry in Europe.• Geographic diversification.• New technologies and product portfolio.• Synergies (USD 75mn).• Unique competitive advantages.

290

153138 136 145

13%

10%9%

8%

7%8%

0%

2%

4%

6%

8%

10%

12%

14%

0

50

100

150

200

250

300

350

2007 2008 2009 2010 2011 2012E

EB

ITD

A m

argi

n

EB

ITD

A (

US

D m

n)

Source: Wavin, Mexichem, Actinver.

Wavin's EBITDA (USD mn)

Wavin's target margin

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Wavin’s Integration We have turned more optimistic on MEXCHEM now that Wavin’s acquisition has finally materialized and management has presented the investors’ community (during its Investor Day in New York of May 31) its short and long-term effects to the Integral Solutions chain of the company. We were cautious before as we believed Mexichem was moving heavily (USD 704 million investment) into a weakening European market through a “vis-à-vis less profitable” company (EBITDA margin of 7.4% vs. 15% of Mexichem’s IS) at an expensive deal (acquisition multiple at 7.8x EV/LTM EBITDA). We are still cautious on the European economic environment, however, expected 18-month synergies by the company at USD 75 million and longer term key strategic benefits make very worth the deal, in our view. Acquisitions’ Rationale Mexichem has always followed a strict set of fundamentals behind any acquisition: 1) the target firm should be well known by Mexichem (clients, competitors, suppliers, management and footprint), 2) the acquisition price should be at or below MEXCHEM’s EV/EBITDA multiple, 3) there should exist an attractive synergies’ potential in order to reduce valuation, 4) possibility to become a sustainable company and 5) should improve the company’s vertical integration. By analyzing Mexichem’s M&As history we can observe a consistent generation of value (average NTM [next-twelve-months] multiple reduction of 25% since 2004) and a successful integration of each of the acquired companies. Wavin is not expected to be the exception. Wavin’s Acquisition Rationale (Combined Entity) The rationale behind the acquisition of the European-based plastic pipes producer lies in the following key strategic reasons: 1) Mexichem becomes the global leader in Integral S olutions. The immediate effect we will observe on Mexichem’s IS chain will be in its results, with a ~120% increase in revenue generation starting 2Q12 (from USD 1.5 billion to USD 3.3 billion yearly). The combination creates the largest global player of overall plastic integrated solutions and a leader with unique competitive advantages such as innovation and pricing power. 2) Platform to consolidate the industry in Europe. Mexichem has already detected opportunities in expanding in Eastern European countries. 3) Geographic diversification. Through Wavin, Mexichem expands its IS operations to 25 new European countries, with overseas’ operations that reach every continent through licenses of the brand (2% of Wavin’s sales). Mexichem is becoming a “very” European company (33% of its total sales). However, we should distinguish the differences among Wavin’s markets across the region: a) Wavin has no exposure to Spain, Portugal or Greece (countries with the most difficult economic situations in the region), b) there is a more promising construction activity outlook for Germany, Poland, Scandinavia and Eastern European countries (Wavin to leverage its strong market position in these countries), and c) Mexichem’s objective is not to be substantially exposed to the European economy but to bring Wavin’s technology and products to LatAm, so the much weaker performance of key markets such as Italy, Netherlands and UK, is mitigated. Our impression is that Wavin is moving to LatAm rather than Mexichem to Europe. Additionally, we believe that Wavin’s operations have better growth prospects for the next years as the company’s results are indicative that they have reached bottom levels (with a historical low EBITDA margin at 7.4%). Mexichem will focus on extracting synergies to offset potential earnings risks. In the next 8 months, just by synergies Mexichem will be raising Wavin’s EBITDA margin to 9.2% (+1.8pp YoY).

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Matamoros

Altamira

St. Gabriel, LAGeismar, LA

Orange, TX

Calbert, KY

Veracruz (2)

San Luis Potosí (2)

Source: Mexichem, Actinver.

Fluorite mineSulfur plant

US facilitiesPort terminal

HF production

Mexichem’s strategic locations

4) New technologies and product portfolio. Mexichem is increasing its plastic pipe systems’ portfolio to above and below ground solutions applied in residential and non-residential buildings, some of which are patented by Wavin and have not been yet introduced to the LatAm markets. Solutions include: hot & cold, soil & waste, other building systems (Above Ground segment); and foul water systems, water management, cable ducting and water & gas (Below Ground segment). Mexichem is also expanding its downstream business through Wavin’s production of PE and PP piping, reaching a full integration of the Integral Solutions’ chain (pipes) as outlined by Mexichem’s 2015 strategy for this unit. 5) Synergies. Mexichem’s management has mentioned it is aiming at integrating Wavin’s operations “as soon as possible”. It expects to extract synergies of USD 75 million over the next 18 months, ranging from short-term, easy to obtain synergies (cheap PVC resin supply [from Altamira, Tamaulipas, Mexico] to Wavin) to the relocation of European production technology (and machinery) to LatAm. Synergies At Both, The Top Line And Costs’ Side Mexichem gave us a good insight on the USD 75 million expected synergies to be extracted from Wavin during the next 18 months at four main fronts:

1) PVC supply to Wavin. Wavin has faced material negative effects on its operating margins from increases in raw material costs during the last couple of years. Mexichem estimates short-term synergies of USD 16.4 million just by supplying Wavin with its cheaper PVC resin from its facilities in Altamira, Tamaulipas, in Mexico (location with access to one of the major port terminals in Mexico; strategically located to export products to the US and Europe). On the back of this, Mexichem is planning to expand its PVC production from 1.0 mn metric tons to 1.5 mn by 2015.

We find strong growth opportunities from the introduction of Wavin’s products portfolio to the developing LatAm markets, particularly from its water management solutions. In the region, there are still 93 million people without access to drinking water and 120 million without sewer services.

Mexico26%

Colombia12%

Brazil12%

NW Europe

12%

SW Europe

11%

Other LatAm

8%

US5%

C&E Europe

5%

SE Europe

5%

Asia1%

Combined entity (Mexichem + Wavin)

Source: Wavin, Mexichem, Actinver.

North West

Europe37%

South West

Europe27%Central &

Eastern Europe

17%

South East

Europe15%

RoW4%

Sales distribution Wavin

Source: Wavin, Actinver.

Expected synergies from WavinTotal next

EBITDA 2012E 2013E 18 months % of Total

PVC supply to Wavin USD 6.4 mn USD 10.0 mn USD 16.4 mn 22%

New products' portfolio and manufacturing technologies

Operational efficiencies USD 4.8 mn USD 9.6 mn USD 14.4 mn 19%

Administrative USD 6.2 mn USD 15.1 mn USD 21.3 mn 28%

Total synergies per year USD 25.0 mn USD 50.0 mn USD 7 5 mn 100%

Source: Mexichem, Actinver.

USD 7.6 mn USD 15.3 mn USD 22.9 mn 31%

10

2) New products’ portfolio and manufacturing techno logy. Mexichem anticipates that synergies from new products line and manufacturing technologies will add USD 22.9 million to the combined entity’s EBITDA by 2013. With regard to Wavin’s products, we found Mexichem as particularly optimistic on Water Management solutions. This segment includes systems used to catch, convey, infiltrate, attenuate and clean rainwater. Major cities in Mexico (Mexico City and Monterrey, particularly) tend to present flooding issues arising heavy storms as their water drainage systems are pretty inefficient. We expect a positive response from LatAm countries to the introduction of these solutions. Mexichem is already in the process to implement these products in Mexico and Colombia through Amanco’s operations. Regarding manufacturing technology, Mexichem should save up to 15%-20% in the use of PVC resin through the implementation of Wavin’s Micro Cellular Foam (MCF) processing technology in plastics. The MCF is a relatively new process that works by heating and pressuring a non-flammable gas to a supercritical state (which has characteristics similar to a fluid). The foaming agent is then injected into the plastics melt, yielding uniform closed cells as small as 10 microns, substantially saving PVC. The MCF technology must comply with Mexican regulations in order to be implemented locally. However Mexichem does not expect any issues on this behalf as it is already working with Conagua (National Water Commission) to introduce the new technology in the country. 3) Operational efficiencies. One of the major reasons behind Wavin’s acquisition was its “state-of-the-art” technology and best practices from Europe. Mexichem is seeking to relocate machinery from Europe to LatAm beginning the second half of 2012. We believe this will result in higher efficiencies and higher capacity utilization rates at Amanco’s facilities (currently operating at 86%). These synergies will total USD 14.4 million by 2013, according to Mexichem. 4) Administrative. We expect these USD 21.3 million synergies to result from key raw material purchasing consolidation (Wavin to leverage in Europe from Mexichem’s purchasing power), the implementation of SAP and other IP systems and human resources. It is worth recalling that, as part of Wavin’s acquisition deal, both entities agreed that there would not be layoffs of Wavin’s labor force as a result of the transaction. However, Mexichem stated that this does not refer to a reduction of personnel on operational terms (efficiencies). Before the acquisition, Wavin announced (early 2012) it will reduce the number of employees by ~80 people in the UK on restructuring measures and a further ~70 workers reduction from other of its European operations during 1H12. Key Longer-Term Strategic Benefits Besides the aforementioned strategic and financial benefits, we believe Mexichem is acquiring three key things from Wavin: 1) Its highly efficient operations (technology) wit h strong R&D capabilities (6-7 years ahead Mexichem’s, as stated by management). 2) Its strong product line (patents) and market pen etration. 3) Its experienced and professional management team .

11

New 2012 Guidance, Reflecting Wavin During the Investor Day in New York, Mexichem’s management announced the new 2012 results guidance for the company which reflects Wavin’s 8 months operations. Despite the weak economic situation in the eurozone, Wavin is expected to generate USD 1,307 million revenues and USD 120 million EBITDA from the 8-month period it will be consolidated in 2012. The EBITDA margin would be 9.2%, which compares 1.8 percentage points higher versus 2011. For the full 2012 period (including pre-Mexichem’s consolidation) Wavin should register a top line growth of 7.6% YoY to EUR 1,428 million (USD 1,827 million) and EBITDA of +15.9% to EUR 114 million (+6.6% in USD). After a weak set of results in 1Q12 (revs. down 4.7% YoY in euros, EBITDA +6.4% YoY with a margin of 4.1%), this seems quite impressive (Mexichem driving Wavin’s margin to 9.2% just from the extraction of synergies). For 2013, Wav-in will be already registering 12% margins (with upside potential on Wavin’s own ‘2015 Strategy’). At a consolidated level, Mexichem now expects to register revenues of USD 5,667 million, +32% YoY (from previous USD 4,360 mn); and EBITDA of USD 1,120 million, +37% YoY (from previous USD 1,000 million). The only modification to the previous guidance was the incorporation of Wavin. As we anticipated since Wav-in’s tender offer announcement, its incorporation will result in a short-term impact on Mexichem’s consolidated EBITDA margin. Our forecasts, which compare slightly below guidance (EBITDA of USD 1,034 mn), show a 2.7pp YoY contraction in Mexi-chem’s margin to 18.8%. What we find relevant to highlight is the effect Wavin’s acquisition is expected to have on MEXCHEM’s valuation through its value creation in 2012, once the aforementioned synergies are extracted. MEXCHEM’s EV/EBITDA 2012E multiple becomes 5% cheaper against the multiple observed at Wavin’s acquisition (8.2x).

Under a stand-alone basis we observe a 28% contraction in Wavin’s acquisition multiple, from 7.8x EV/EBITDA LTM @acquisition to 5.6x 2012E. For 2013 the multiple turns cheaper, falling to 4.4x (reaching an EBITDA margin of 12%), exactly the same level we foresaw under a pro-forma basis (optimistic scenario) assuming normalized mid-cycle EUR 170 million EBITDA for Wavin at the acquisition announcement (please refer to our report “MEXCHEM: Mexichem Finally Acquires Wavin At EUR 10.50 /Share” released on February 08, 2012). We found difficult to believe that Mexichem would be able to reach that multiple (on margin expansion) for Wavin considering tough economic conditions and uncertainty in Europe.

New Guidance 2012

Revenue 2012E EBITDA 2012E Revenue 2012E EBITDA 2012E

Fluorine Chain USD 992 mn USD 385 mn USD 1,006 mn USD 385 mn

Chlorine-Vinyl Chain USD 2,234 mn USD 350 mn USD 2,148 mn USD 347 mn

Integral Solutions Chain USD 2,811 mn USD 390 mn USD 2,830 mn USD 370 mn

Mexichem with Wavin USD 5,667 mn USD 1,120 mn USD 5,98 4 mn USD 1,034 mn

EV/EBITDA 2012E* 7.8x 8.4x

Mexichem without Wavin USD 4,360 mn USD 1,000 mn USD 4 ,732 mn USD 921 mn

EV/EBITDA 2012E* 8.2x 8.8x

Assuming MEXCHEM price @MP 48.50Source: Mexichem, Actinver.

Actinver EstimatesMexichem's Guidance

12

We present an analysis on Mexichem’s M&A history. As previously mentioned, the company has proven to be quite successful in developing value accretive transactions and integrating new firms into Mexichem’s existing businesses. Recent acquisitions have turned Mexichem a more global (and profitable) petrochemical company. Should we wait for further M&A announcements going forward.

Potential Upside On Wavin’s 2015 Strategy Wavin’s ‘2015 Strategy’ is not incorporated into Mexichem’s USD 75 mn synergies. Mexichem considers this as organic plan of the company. We believe its main drivers will add additional value to the acquisition, but not only to Wavin but to Mexichem’s LatAm operations as well. Wavin’s 2015 Strategy consists of the following long-term operational and financial targets: Operational: 1) Market leadership: Achieve #1 or #2 market position in countries in which Wavin operates. 2) Portfolio & segmentation: Increase to 40% of total sales Water Management and Hot & Cold (key) segments. 3) Innovation: From 15% to 20% of total sales should correspond to products with less than five years in the market. 4) Operational excellence: Realize 95% of orders in time and in full, 20% reduction in carbon footprint. Financial: 1) Revenue: Organically grow 2% ahead of the European construction activity. 2) Profitability: Return to pre-crisis EBITDA margins (13%).

Mexichem's historical acquisitions' multiples

Products Country Company Acq. DateEnterprise

Value (USD mn)

LTM @ acquisition

NTM@

Acquisition1 YR later

PVC / Plasticizers Mexico Primex Dec-04 215 6.3x 4.0x 10%PVC compounds US Bayshore Group Feb-06 16 3.9x 15%PVC / PVC pipes / Geotextiles Colombia Amanco Feb-07 579 7.0x 4.1x 8% 14%PVC Colombia Petco Mar-07 279 9.6x 5.1x 8% 16%PVC compounds Colombia Geon Andina Jun-07 7 1.3x 18%EPS products Mexico Frigocel Sep-07 2 0.6x 23%Fluid conduction Argentina Dripsa Jan-08 2 3.6x 1.5x 14% 15%PVC pipes / Fluid conduction Brazil Plastubos Jan-08 43 7.0x 5.0x 10% 14%Fluorite Mexico Fluorita de Río verde Apr-08 7 4.1x 3.6x 39% 44%Geotextiles Brazil Bidim Jun-08 28 5.6x 15%Phosphates Mexico Quimir Jun-08 48 3.2x 2.3x 8% 12%Geosynthetics Peru Geosistemas del Peru Jun-08 8 5.6x 12%PVC pipes / Agricultural solutions Colombia Colpozos Nov-08 7 4.7x 13%PVC pipes Peru Plastisur Jan-09 15 4.5x 4.2x 31%PVC, CPVC, PE and PP pipes Mexico Tubos Flexibles Mar-09 28 3.0x 4.1x 11% 17%PVC Compounds Colombia Geon Andina Oct-09 14 2.0x 23%HF / Fluorocarbons US, UK, Japan Ineos Fluor Mar-10 354 4.9x 2.9x 21%PVC Mexico PolicydPVC pipes Mexico Plásticos RexPVC compounds USA, Canada, UK AlphaGary Jan-11 326 8.7x 6.2x 16%Fluorite Mexico Fluorita de México Jan-12 75 6.3x 5.0x 40% 44%PVC Systems Europe Wavin May-12 1,009 7.8x 5.6x 7% 9%

Historical acquisitions average 155 5.3x 4.0x

Source: Company data, Actinver.

EV/EBITDA EBITDA Margin

6.4x 5.4x 12%Oct-10 204

13

Sales Growth Target: 2% Ahead European Construction Market In 2011, Wavin’s sales increased 7.8%, well ahead the European construction activity (-1.6%). Wavin has proven to grow faster (on average since 2004) against the construction activity on an organic basis. We highlight five main drivers that should enable Wavin to maintain this positive trend ahead. 1) Reduction of operations in non-performing countr ies such as France (divestiture of irrigation and geocomposite business). Activities in Spain were closed. 2) Exposure to the emerging markets. Central and Eastern Europe (17% of total sales) is growing faster against the rest of the group (+9pp above). Wavin is increasing its exposure to this countries as they expect them to continue growing faster as an emerging region. 3) Turkey’s development. Turkey is part of the South East Europe division and it is difficult to track its performance as Wavin does not disclose its financial figures. However, the construction market in this country grew at a 10% rate in 2011. Wavin is looking forward to expand its Above Ground segment in this country. 4) Substitution of traditional materials (metals) b y plastics. This trend is said to be stronger in the Hot & Cold segment (plastics replacing copper products) as plastics are easier “out-of-sight” heating solutions and are cheaper to install (on their lower density, lower transportation costs). Plastics in the Hot & Cold division are currently 55% of the market, versus 22% in 1992. 5) Urbanization: In urban areas, rainwater is not able to infiltrate as deep and easy as in rural areas (surface characteristics), which result in floodings in many large cities when heavy storms arise. Wavin’s products tend to act as a buffer to prevent floodings (below ground products). As urbanization increases in Wavin’s main markets, we should expect a consistent growth ahead the market. Opportunities in Mexico and other LatAm countries seem huge.

Source: Source: FISRWG (Federal Interagency Stream Restoration Working Group), Actinver.

Importance of Water Management in urban areas

14

Profitability Target: EBITDA Margin To Pre-Crisis L evels At 13% Since 2008, Mexichem has not been able to reach EBITDA margins above 10.0%. Notwithstanding Wavin’s costs savings initiatives, rising raw material costs have limited the company’s operating leverage. Main drivers for Wavin to post 13% margins include: 1) Structural costs saving. Since the start of the market downturn in 2008, Wavin has achieved structural costs savings of EUR 20 million a year. Along with Mexichem’s cost reduction initiatives, this will translate into an incremental margin, making “easier” for Wavin to reach a 13% margin. 2) Improvement in the sales mix to higher value added products with premium margins (Water Management, Hot & Cold). This has also been outlined as one of Wavin’s operational targets. 3) Reduction of raw material costs. As other indust ry participants, Wavin (a non-fully-vertically integrated plastic pipes producer) has historically faced difficulties in passing sharp raw material price increases to the customers in a timely manner. This has been particularly true in a European market with oversupply and increased competition issues. However, this will be achieved through Mexichem’s supply of cheap and competitive PVC resin from Mexico, which would lower Wavin’s costs significantly.

The Next Strategic Moves / Expansion Projects We are presenting a very detailed analysis of Mexichem’s chlorine-vinyl-pipe systems and fluorine processes. We went as deep as we could into the chemical processes of the different chains as to better understand the importance of (key) raw materials, where are the “missing links”, at which part of the process the next strategic move may come (further alliances, M&As or greenfields), where are Mexichem’s competitive advantages, among others. The various types of chemical processes followed in order to become fully vertical integrated require heavy R&D capabilities (we found this particularly in the more complex Fluorine process). There’s not necessarily just one way to obtain a certain product, but several ways may lead to the “accidental” production of an end product obtained as a co-product of another chemical. We had the opportunity to support this research with the support of experienced scientists in the field. Please refer to the following figures.

Chlorine Vinyl: The “Missing Links” Joint Venture (JV) with Pemex. Mexichem is currently working on a JV with Pemex to develop an existent VCM (vinyl chloride monomer) facility (Pajaritos) in Itamira, Tamaulipas, Mexico. The JV (60% Mexichem, 40% Pemex) should secure Mexichem with the supply of 400k tons of VCM a year from this facility, requiring it to operate at full capacity (currently running at 60%). In order to reach that, Mexichem will need to inject a USD 200 million cap-ital and its salt dome and chlorine assets (raw materials in the process). Pemex will supply ethane (250k tons per year), the ethylene cracker and the EDC-VCM plants. The key from this project is that Mexichem will be able to secure a more stable supply of VCM, as it has presented significant bottlenecks in the past. Through the alliance, Mexichem will increase Pemex efficiency and capacity at Pajaritos, reducing the amount of imports from other US companies such as OXY and Dow. The company’s total needs of VCM are 1.0 million tons /year. Pemex is currently supplying it with ~180k tons and the rest is being purchased in the spot market at higher prices. Mexichem will need 600k additional tons of VCM to completely secure

VCM is a key raw material needed for the production of PVC resin. It represents roughly 89% of the vinyl process costs.

15

its total VCM needs. Mexichem has reached a 24-year agreement with Oxy Vinyls for the supply of this raw material. However it is not enough. Mexichem has decided to produce the rest 600k ton /year by itself through a greenfield project, which may take ~2 years to develop. The key is moving backwards to the production of ethylene (based on natural [shale] gas), taking the advantages of historical low NG prices.

SodiumChloride

(NaCl)

Chlorine(Cl2)

Caustic Soda(NaOH)

Compounds

EthyleneDichloride

(EDC)

Source: Actinver.

Hydrogen(H2)

SodiumPhosphates

PhosphorusTrichloride

(PCl3)

PhosphateEsters

PhosphoricAcid

(H3PO4)

Ethane(C2H6)

Natural Gas

PetroleumGas

PolyvinylChloride

(PVC)

+ Water

Propane(C3H8)

Plasticizers(Phosphate)

Additives

Polyolefins

PVC PipingPE

PipingPP

Piping

Vinyl ChlorideMonomer

(VCM)

Ethylene(C2H4; E)

Propylene(C3H6; P)

Poly-propylene

(PP)

Poly-ethylene

(PE)

Additives

Geo-textiles

Geo-membranes

Produced by Mexichem

Not produced by Mexichem

Produced by Pemex

CA

R

R

P (S/E)

PY

R (DC/OC)

P

P

SC

SC

Processes:CA= Chloralkali; R = Reaction; P= Polimerization; DC= Direct chlorination; OC= Oxychlorination; PY= Pyrolysis; SC= Steam cracking; C= Chlorination; S= Suspension; E= Emulsion

AromaticAlcohols

PhthalicAnhydride(C8H4O3)

AlcoholsC4-C13

Plasticizers(Phthalate)

[DOP, DINP]R

Plasticizers(Trimellitate)

[TOTM]

TrimelliticAnhydride(C9H4O5)Alcohols

C7-C10

R

Plasticizers

R

PhthalateEsters

TrimellitateEsters

ChlorinatedPolyvinyl

Chloride (CPVC)

C

Process

Intermediate

The key is on ethylene margins, not on VCM production.

Source: Mexichem, Actinver.

VCM Joint Venture with Pemex

The Chlorine-Vinyl-Pipes process

16

“Fracking”, Changing The Global Energy Picture We believe the entire Industrial sector is experiencing a huge change motivated by the shale gas boom around the globe. Companies from petrochemicals to steel-makers are moving and adapting quickly to new technologies and processes that use natural gas as the main source of energy (replacing oil). Particularly in the Mexican petrochemical industry we have observed an active wave of producers to the production of ethylene trough crackers based on shale gas. Braskem (Mexichem’s competitor in Brazil), announced recently that it is planning to develop a shale gas-based ethylene cracker in the US. The huge differential between oil and natural gas prices (@ 38x) has motivated many plastics’ (and other petrochemical producers, such as Alpek) to analyze the option of integrating back-wards with the manufacture of their own ethylene. Why have natural gas prices gone to historical low levels, increasing the oil derivative - natural gas price spread substantially? Since 2006, natural gas produced from shale resources has been gaining more relevance in the US market as the hydraulic fracturing gas extraction technique (known just as “fracking”) has enable producers to extract gas at more reasonable costs, which resulted uneconomical a few years ago. It is also worth noting that shale gas production is rapidly increasing due to the significant decrease in production from the conventional gas. Conventional gas reservoirs form when NG migrates toward the Earth's surface from an organic-rich source formation into highly permeable reservoir rock. In contrast, shale gas resources form within the organic-rich shale source rock. The low permeability of the shale greatly inhibits the gas from migrating to more permeable reservoir rocks. According to EIA, US domestic NG supply from shale resources accounted for 23% of the total supply in 2010 (from 14% in 2009), being the second largest NG source after tight gas (26%) and non-associated onshore (21%). However, shale resources will become the single largest NG source by 2035, with 49% of the entire US supply. According to estimates from the Mexican industry, Mexico’s shale gas reserves may be the forth largest in the world, below the US, China and Argentina. Etileno XX1. Braskem is actually participating in a project in Mexico with local Grupo IDESA and Pemex to develop a cracker based on ethane with a total capacity of 1.0 million tons per year (and two PE plants with the same capacity).

Mexichem’s Ethylene Cracker Project Mexichem has decided to develop its own 600k ton /year capacity ethylene cracker as well as it has observed that there’s where the big margin gains can be extracted (not as it was previously believed, on VCM). Mexichem has three possibilities for that: 1) Install an ethylene cracker under a condo-basis with a partner in the United States (in Texas). This would require a co-investment of ~USD 1.5 - 1.7 billion. We believe this is the most feasible project. Management mentioned it has already talked with 2-3 potential partners partners. 2) A potential acquisition of an already integrated company in the US (should be a company Mexichem already operates with). 3) Opportunities in Mexico with Pemex (less feasibl e). With the positive higher openness of Pemex to private capital, Mexichem could develop current inefficient crackers through larger alliances with the State-owned company. However, Pemex has not enough ethane to supply. Thus we believe this way seems more complicated to develop.

0

5

10

15

20

25

30

1990 1996 2002 2008 2014 2020 2026 2032

Tril

lion

cubi

c fe

et

Source: EIA, Actinver.

US Natural gas production 1990-2032E

Shale gas

Tight gas

2010 Projections

23%

26%

Non-associated onshore

21%

49%

21%

9%

“Ethane prices have remained at the same high prices while gas prices have gone very low”. “Suppliers didn’t want to lower their prices”. “That’s why we have decided to build our own cracker”. Mexichem’s management said.

17

Fluorine: The Chemicals Favorite Mexichem has also important strategic plans for its more complex Fluorine chain. It is worth mentioning that this chain is also almost fully vertically integrated backwards. However, there’s still a long way to develop higher value added fluoro-elastomers and fluoro-polymers, the Fluorine chain’s strategic objective for 2015. These down-stream products offer high EBITDA margins (>50%E). Besides the company’s HF projects and the longer-term production on elastomers and polymers (2-3 year project), we find opportunities in the short-term with the potential to integrate with Trichloro-ethylene (TCE), a relevant raw material for the production of hydro-fluorocarbons (refrigerants), Perchloro-ethylene (PCE), Chloroform, and Aluminum Hydroxide. It is worth noting that Mexichem has already plans to expand its Aluminum Fluoride capacity by 40% to 84k metric tons in 2012 (we have already incorporated this into our model). Fluorita de Mexico acquisition On January 2012, Mexichem acquired Fluorita de Mexico at USD 75 million (120k tpy fluorite production capacity). This mine posses one of the richest grades in the world and has 15 mn tons in reserves. Through fluorite de Mexico, Mexichem is reaching a total of 55 million reserves of mineral (>50 years of reserves, versus China’s ~8YR reserves). China currently has the largest reserves, however, in the near future, it might become a net importer and Mexichem is already prepared to supply the world.

Fluorite(CaF2)Mine Fluorite

Acid grade(>97% CaF2)

FluoriteMet. Grade

(60–85% CaF2)

HydrofluoricAcid

(HF aq)

Sulfur(S)

+ Oxygen+ Water

SulfuricAcid

(H2SO4)

AluminumFluoride

(AlF 3) AluminumHydroxide(Al [OH] 3)

Trichloro-ethylene

(TCE)

Tetrafluoro-ethane

(HFC-134)

Source: Actinver.

Chloroform(CHCl3)

Tetrafluoro-ethylene

(C2F4; TFE)

Polytetrafluoro-ethylene

(PTFE; Teflon)

Ethylene tetra-fluoroethylene(ETFE; Fluon)

Ethylene(C2H4; E)

Difluoro-ethane

(HFC-152A)

Chlorodifluoro-ethane

(HCFC-142B)

VinylideneFluoride

(VF2; VDF)

Hexafluoro-propylene(C3F6; HFP)

Perfluoro-methyl Vinyl Ether (PMVE)

Fluoro-EthylenePropylene

(FEP)

FKM 1-5 Fluoro-

Elastomers

PolyVinylideneFluoride

(PVDF; Kynar)

Fluoro-ethane

(HFC-161)

Chlorofluoro-ethane

(HCFC-151A)

Vinyl Fluoride(VF)

Poly-Vinyl Fluoride

(PVF; Tedlar)

Fluoro-polymers

Fluoro-elastomers

Produced by Mexichem

Not produced by Mexichem

Produced by PemexChlorotrifluoro-

ethylene(CTFE) Hydrogen

Chloride(HCl)

Ethylene(C2H4; E)

Ethylene-Chlorotrifluoroethylene(ECTFE; Halar)

Poly-Chlorotri-fluoroethylene(PCTFE; Kel-F)

P

P

DHC

C

C DHC

R

C-P

C-P

R

PY

R

C-P

P

P

C-P

R

RR

WS

A/

DC

DA

Processes:R = Reaction; P= Polimerization; C-P= Copolimerization; C= Chlorination; DHC= Dehydrochlorination; HDC= Hydrodechlorination; PY= Pyrolysis; WSA= Wet Sulfuric Acid; DCDA= Contact process

Hydrofluorocarbon (HFC)

(Hydro)Chlorofluorocarbon (HCFC, CFC)

Propylene(C3H6; P)

Trifluoro-methane(HFC-23)

Chlorodifluoro-methane(HCFC-22)Difluoro

-methane(HFC-32; DFM)

HDC

Perchloro-ethylene

(PCE)

R

Pentafluoro-ethane

(HFC-125)

Hexafluoro-ethane

(HFC-116)

Hydrochloro-fluorocarbon

(HCFC)

R

Trifluoro-ethane

(HFC-143)R

Process

Intermediate

Co-product

+ Water

The Fluorine / Fluorocarbons process

18

HF Plant in Korea Mexichem is planning to build an HF production facility in Korea to supply Japan’s fluorocarbon’s plants and increase their presence in the fast-growing Asian market. The plant is expected to begin operations in October 2012, with a total capacity of 60 thousand tons per year.

2012 Financial Forecasts We are introducing our Mexichem’s new forecasts as we are premiering a new valuation model for the company. We are introducing Wavin’s operations starting May, 2012. Our estimates assume revenue (MP 71,371 million) and EBITDA (MP 13,447 million) growths of 49.8% and 30.9% YoY, respectively. We expect Wavin’s incorporation to account for 68.5% of total revenue growth and 46.1% of the consolidated EBITDA’s increase. We expect demand and pricing to remain strong for the rest of the year. Mexichem’s management has anticipated that they will continue operating at near-full capacity at the overall of their plants. Infrastructure projects in Brazil, Colombia, Mexico and Venezuela are boosting demand, despite the economic slowdown observed in the mature economies. Government programs of drinking water and housing in LatAm countries remain supportive for demand in the Integral Solutions business. Further organic and non-organic growth projects of the company will continue being the major driver of results in 2012-2012, in our view. For the longer-run, our forecasts seem to be quite aligned with Mexichem’s goals. With consolidated EBITDA of USD 1,658 million for 2015, we are practically in-line with Mexichem’s USD 1,660 million target. Regarding Mexichem’s financial profile (addressed with Wavin’s acquisition), we expect it to remain at manageable levels, below the company’s target cap of 2.0x and its debt covenants of 2.5x. Our estimates assume that Mexichem will close 2Q12 with a net debt to EBITDA ratio of 2.0x in 2Q12 and will reduce it to 1.7x by YE2012. The company’s guidance shows a similar ratio, at 1.75x (from which Wavin adds 0.75x). Considering cash flow generation expectations, Mexichem anticipates a strong reduction to 0.9x (lower versus our 1.2x estimate). The company’s long-term debt accounts for 90% of the firm’s total debt.

101 117 125

484

30 30 29 20

500

350 350

234

0

100

200

300

400

500

600

700

'12 '13 '14 '15 '16 '17 '18 '19 '22

Am

ortiz

atio

n (U

SD

mn)

Source: Mexichem, Actinver.

Mexichem's debt maturity profile (USD million)

Rev

olvi

ng

CB

UR

Bon

d

CB

UR

19

Operating Highlights By Chain

Operating Highlights By Chains

Period 2010 1Q11 2Q11 3Q11 4Q11 2011 1Q12 2Q12E 3Q12E 4Q12E 2012E 2013E 2014EUSD/MXN Rate (Average) 12.56 11.90 11.71 13.90 13.40 12.73 12.81 13.45 12.93 12.72 12.98 12.83 12.08

Integral SolutionsSales (MXN mn) 16,293 4,276 4,549 4,877 5,068 18,770 4,990 9,848 10,610 11,289 36,736 45,247 50,717YoY change 15.1% 20.7% 10.9% 14.9% 15.2% 16.7% 116.5% 117.5% 122.8% 95.7% 23.2% 12.1%

Selling Volume (k ton) 455 120 126 125 124 494 127 233 278 278 916 1,116 1,262YoY change 14.0% 23.0% 10.0% 4.0% 8.7% 6.0% 85.3% 121.9% 125.2% 85.3% 21.9% 13.1%Avg. Price Per Ton (MXN '000) 35.8 35.7 36.2 38.9 41.0 38.0 39.3 42.3 38.2 40.6 40.1 40.5 40.2YoY change -2.0% 9.5% 5.2% 11.4% 5.9% 10.2% 16.8% -2.0% -1.1% 5.6% 1.0% -0.9%

EBITDA (MXN mn) 2,829 682 783 820 711 2,996 908 1,247 1,321 1,322 4,798 6,407 7,699YoY change 0.6% 21.0% -10.9% 21.7% 5.9% 33.1% 59.3% 61.1% 85.9% 60.1% 33.5% 20.2%EBITDA margin 17.4% 15.9% 17.2% 16.8% 14.0% 16.0% 18.2% 12.7% 12.5% 11.7% 13.1% 14.2% 15.2%EBITDA Per Ton (MXN '000) 6.2 5.7 6.2 6.5 5.8 6.1 7.2 5.4 4.8 4.8 5.2 5.7 6.1YoY change -14.4% 9.8% -15.4% 18.0% -2.6% 25.8% -14.1% -27.4% -17.4% -13.6% 9.6% 6.3%

Sales (USD mn) 1,298 359 388 351 378 1,477 390 732 821 888 2,830 3,527 4,200EBITDA (USD mn) 225 57 67 59 53 236 71 93 102 104 370 499 637

Chlorine-VinylSales (MXN mn) 16,808 6,249 6,253 6,357 5,894 24,753 6,661 7,193 6,997 7,023 27,873 30,007 30,845YoY change 44.5% 38.9% 57.2% 49.7% 47.3% 6.6% 15.0% 10.1% 19.2% 12.6% 7.7% 2.8%

Selling Volume (k ton) 1,852 526 538 507 473 2,044 528 539 554 559 2,181 2,328 2,488YoY change 20.0% 23.0% 11.0% 10.0% 10.4% 0.0% 0.2% 9.5% 18.1% 6.7% 6.7% 6.9%Avg. Price Per Ton (MXN '000) 9.1 11.9 11.6 12.6 12.5 12.1 12.6 13.3 12.6 12.6 12.8 12.9 12.4YoY change 33.4% 6.2% 14.8% 0.5% 0.9% 5.6% 0.9% -3.8%

EBITDA (MXN mn) 2,751 990 1,011 995 953 3,949 1,110 1,165 1,095 1,136 4,506 4,889 5,151YoY change 19.3% 38.7% 30.9% 120.6% 43.5% 12.1% 15.3% 10.1% 19.2% 14.1% 8.5% 5.4%EBITDA margin 16.4% 15.8% 16.2% 15.7% 16.2% 16.0% 16.7% 16.2% 15.7% 16.2% 16.2% 16.3% 16.7%EBITDA Per Ton (MXN '000) 1.5 1.9 1.9 2.0 2.0 1.9 2.1 2.2 2.0 2.0 2.1 2.1 2.1YoY change -0.9% 17.7% 11.2% 146.3% 30.1% 11.7% 15.1% 0.5% 0.9% 7.0% 1.7% -1.4%

Sales (USD mn) 1,338 525 534 457 440 1,956 520 535 541 552 2,148 2,339 2,554EBITDA (USD mn) 219 83 86 72 71 312 87 87 85 89 347 381 426

FluorineSales (MXN mn) 6,927 2,907 3,032 2,416 2,499 10,853 3,172 4,368 2,845 2,715 13,100 15,472 15,910YoY change 286.5% 49.9% 16.4% 20.4% 56.7% 9.1% 44.1% 17.8% 8.6% 20.7% 18.1% 2.8%

Selling Volume (k ton) 1,037 345 256 275 336 1,212 303 302 309 348 1,261 1,437 1,490YoY change 65.0% 24.0% 5.0% 40.0% 16.8% -8.0% 18.3% 12.1% 3.5% 4.1% 13.9% 3.7%Avg. Price Per Ton (MXN '000) 6.7 8.4 11.9 8.8 7.4 9.0 10.5 14.5 9.2 7.8 10.4 10.8 10.7YoY change 34.1% 24.5% 21.8% 5.0% 4.9% 16.0% 3.7% -0.9%

EBITDA (MXN mn) 2,694 1,030 1,307 836 807 3,980 1,235 1,747 1,053 977 5,012 6,105 6,511YoY change 201.2% 77.8% 8.2% -4.4% 47.7% 19.9% 33.7% 25.9% 21.1% 25.9% 21.8% 6.7%EBITDA margin 38.9% 35.4% 43.1% 34.6% 32.3% 36.7% 38.9% 40.0% 37.0% 36.0% 38.3% 39.5% 40.9%EBITDA Per Ton (MXN '000) 2.6 3.0 5.1 3.0 2.4 3.3 4.1 5.8 3.4 2.8 4.0 4.2 4.4YoY change 79.9% 82.5% -5.8% -6.4% 26.4% 36.7% 13.0% 12.3% 17.0% 21.0% 6.9% 2.8%

Sales (USD mn) 550 244 259 174 186 863 248 325 220 213 1,006 1,203 1,314EBITDA (USD mn) 214 87 112 60 60 318 96 130 81 77 385 474 538

Source: Actinver

20

Forecasted Operating Metrics And Income Statement

Mexichem, S.A.B de C.V.

Period 2010 1Q11 2Q11 3Q11 4Q11 2011 1Q12 2Q12E 3Q12E 4Q12E 2012E 2013E 2014EUSD/MXN Rate (Average) 12.56 11.90 11.71 13.90 13.40 12.73 12.81 13.45 12.93 12.72 12.98 12.83 12.08

Operating Metrics

Total Volume Sold 3,205 991 919 907 933 3,750 958 1,074 1,141 1,185 4,358 4,880 5,240 YoY change 10.6% 17.0% -3.4% 16.8% 25.8% 27.0% 16.2% 12.0% 7.4%Integral Solutions 442 120 126 125 124 494 127 233 278 278 916 1,116 1,262 Chlorine-Vinyl 1,790 526 538 507 473 2,044 528 539 554 559 2,181 2,328 2,488 Fluorine 973 345 256 275 336 1,212 303 302 309 348 1,261 1,437 1,490

Avg. Price Per Ton (MXN '000) 11.4 12.3 13.4 13.6 11.6 12.7 14.1 18.3 16.5 16.3 16.4 17.1 17.1 YoY change 18.7% 11.6% 14.8% 37.1% 21.1% 40.9% 28.9% 4.4% 0.1%

Income Statement (MXN million)

Total Revenue 36,472 12,187 12,295 12,353 10,807 47,642 13,516 19,695 18,816 19,345 71,371 83,469 89,674YoY change 52.4% 38.1% 23.1% 13.3% 30.6% 10.9% 60.2% 52.3% 79.0% 49.8% 16.9% 7.4%Total Op. Costs & Expenses 30,826 10,194 9,946 10,586 9,556 40,282 11,325 16,746 16,464 17,048 61,583 71,349 76,380Other Income (Expenses), Net - -68 -87 7 73 -75 -74 -48 -66 -73 -260 -211 -200

Operating Income (EBIT) 5,645 1,925 2,262 1,775 1,324 7,286 2,116 2,902 2,286 2,224 9,528 11,908 13,093YoY change 42.3% 41.0% -4.7% 60.3% 29.1% 9.9% 28.3% 28.8% 67.9% 30.8% 25.0% 10.0%Operating Margin 15.5% 15.8% 18.4% 14.4% 12.3% 15.3% 15.7% 14.7% 12.1% 11.5% 13.3% 14.3% 14.6%

D&A 2,479 670 722 759 835 2,985 821 1,049 1,010 1,039 3,920 4,622 5,300EBITDA 8,124 2,595 2,984 2,533 2,159 10,271 2,938 3,951 3,296 3,263 13,447 16,530 18,393YoY change 46.3% 41.0% 2.3% 22.8% 26.4% 13.2% 32.4% 30.1% 51.1% 30.9% 22.9% 11.3%EBITDA Margin 22.3% 21.3% 24.3% 20.5% 20.0% 21.6% 21.7% 20.1% 17.5% 16.9% 18.8% 19.8% 20.5%

Net Financial Result -835 24 -198 -1,595 -845 -2,614 535 -1,693 312 168 -679 -1,042 -541Exceptional Items - - - - - - - - - - - - -Pretax Profit (EBT) 4,810 1,949 2,064 179 479 4,672 2,651 1,209 2,598 2,391 8,849 10,866 12,553

Taxes 751 704 735 109 318 1,867 837 363 779 717 2,696 3,151 3,515Effective Tax Rate 16% 36% 36% 61% 66% 40% 32% 30% 30% 30% 30% 29% 28%Discontinued Operations -146 - -3 -33 -14 -51 - - - - - - -Minority Interest - - - - - - - - - - - - -Majority Net Income 3,913 1,245 1,326 37 147 2,755 1,814 846 1,818 1,674 6,153 7,715 9,038YoY change 36.9% 64.9% -97.1% -84.2% -29.6% 45.8% -36.2% 4827.0% 1040.3% 123.4% 25.4% 17.2%Net Margin 10.7% 10.2% 10.8% 0.3% 1.4% 5.8% 13.4% 4.3% 9.7% 8.7% 8.6% 9.2% 10.1%

Shares Outstanding 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,868 1,868 1,868 1,868 1,868 1,868EPS (MXN) 2.17 0.69 0.74 0.02 0.08 1.53 1.01 0.45 0.97 0.90 3.33 4.13 4.84DPS MEXCHEM (MXN) 0.22 0.07 0.07 0.07 0.07 0.28 0.10 0.10 0.10 0.10 0.40 0.68 0.80

Sales (USD mn) 3,186 1,128 1,181 982 1,005 4,296 1,157 1,592 1,582 1,653 5,984 7,070 8,068EBITDA (USD mn) 646 218 255 182 161 816 229 294 255 257 1,034 1,287 1,521Net Income (USD mn) 312 105 113 3 11 231 142 63 141 132 477 601 747EPS (USD) 0.17 0.06 0.06 0.00 0.01 0.13 0.08 0.03 0.08 0.07 0.26 0.32 0.40

Valuation Metrics

EV / EBITDA 9.9x 10.3x 9.8x 8.8x 8.8x 8.8x 9.4x 10.7x 9.9x 9.1x 9.1x 7.3x 6.5xPrice / Earnings 17.5x 18.4x 17.4x 20.9x 28.0x 28.0x 26.1x 35.2x 21.7x 16.3x 16.3x 13.0x 11.1xPrice / BV 3.5x 3.7x 3.7x 3.1x 3.2x 3.2x 3.5x 3.9x 3.7x 3.6x 3.6x 2.9x 2.4xPrice / EBIT 12.2x 12.6x 12.1x 10.9x 10.6x 10.6x 11.6x 12.3x 11.6x 10.5x 10.5x 8.4x 7.7xPrice / EBT 14.3x 14.3x 12.7x 15.9x 16.5x 16.5x 16.1x 22.2x 14.4x 11.3x 11.3x 9.2x 8.0x

Closing Share Price 38.1 43.5 46.1 41.1 42.9 42.9 48.1 53.6 53.6 53.6 53.6 53.6 53.6Shares Outstanding 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,868 1,868 1,868 1,868 1,868 1,868

Source: Actinver

21

Mexichem, S.A.B de C.V.

Period 2010 1Q11 2Q11 3Q11 4Q11 2011 1Q12 2Q12E 3Q12E 4Q12E 2012E 2013E 2014EUSD/MXN Rate (Average) 12.56 11.90 11.71 13.90 13.40 12.73 12.81 13.45 12.93 12.72 12.98 12.83 12.08

Balance Sheet (MXN million)

Total Assets 49,957 52,501 55,349 58,067 59,722 59,722 64,597 78,692 78,455 79,492 79,492 86,361 94,311Short Term Assets 19,811 19,533 22,454 24,282 25,187 25,187 28,786 33,541 33,378 33,149 33,149 35,890 38,054 Cash and Equivalents 6,605 4,091 5,369 6,662 7,676 7,676 10,950 6,706 7,293 6,626 6,626 7,247 7,322 Accounts Receivable 6,771 9,132 9,475 9,343 8,991 8,991 9,844 15,357 14,633 14,665 14,665 16,236 17,443 Other Accounts Receivable 809 1,060 1,231 1,251 1,719 1,719 1,621 1,707 1,721 1,760 1,760 2,058 2,211 Inventories 4,484 4,701 6,121 6,457 6,658 6,658 6,032 9,313 9,334 9,648 9,648 9,822 10,512 Other ST Assets 1,142 550 257 569 144 144 340 458 396 450 450 526 565Long Term Assets 30,146 32,968 32,895 33,785 34,535 34,535 35,811 45,152 45,077 46,343 46,343 50,471 56,257 Net Fixed Assets 20,427 21,165 21,214 22,202 22,943 22,943 22,888 32,747 32,673 33,938 33,938 38,067 43,852 Intangible Assets, Net 9,609 11,410 11,273 11,150 11,207 11,207 11,823 11,823 11,823 11,823 11,823 11,823 11,823 Deferred Tax Assets - - - - - - 518 - - - - - - Other LT Assets 110 393 408 432 385 385 581 581 581 581 581 581 581

Total Liabilities 30,302 31,456 32,679 34,461 35,789 35,789 39,824 53,212 51,574 51,300 51,300 51,928 52,869Short Term Liabilities 11,647 16,536 17,531 15,543 15,951 15,951 14,459 22,132 21,064 21,486 21,486 23,917 25,371 Accounts Payable 6,281 7,242 8,219 8,603 8,290 8,290 8,048 14,633 13,418 13,216 13,216 14,841 15,883 Tax Payable 176 - 38 - - - - 89 34 20 20 - - Short Term Debt 2,231 6,271 6,281 3,759 3,792 3,792 2,463 3,115 3,050 2,970 2,970 2,765 2,706 Other ST Liabilities 2,960 3,023 2,994 3,181 3,868 3,868 3,947 4,295 4,562 5,280 5,280 6,312 6,781Long Term Liabilities 18,655 14,919 15,148 18,918 19,838 19,838 25,365 31,080 30,510 29,815 29,815 28,010 27,498 Long Term Debt 15,824 11,737 11,969 15,681 16,836 16,836 21,612 27,327 26,757 26,062 26,062 24,258 23,746 Other LT Liabilities 2,831 3,182 3,179 3,237 3,002 3,002 3,753 3,753 3,753 3,753 3,753 3,753 3,753

Shareholders Funds 19,654 21,046 22,670 23,605 23,933 23,933 24,773 25,480 26,881 28,192 28,192 34,433 41,441Minority Interest 43 63 68 72 72 72 74 77 79 81 81 91 103Shareholders Equity 19,612 20,983 22,602 23,534 23,862 23,862 24,698 25,404 26,802 28,110 28,110 34,342 41,339Total Liabilities and Equity 49,957 52,501 55,349 58,067 59,722 59,722 64,597 78,692 78,455 79,492 79,492 86,361 94,311

Total debt 18,055 18,009 18,250 19,440 20,628 20,628 24,076 30,442 29,807 29,032 29,032 27,022 26,452Net debt 11,450 13,918 12,880 12,777 12,953 12,953 13,125 23,735 22,513 22,406 22,406 19,776 19,130Net Debt / LTM EBITDA 1.41x 1.56x 1.31x 1.29x 1.26x 1.26x 1.24x 2.05x 1.82x 1.67x 1.67x 1.20x 1.04xDebt Capitalization 48% 46% 45% 45% 46% 46% 49% 55% 53% 51% 51% 44% 39%ROE 24% 24% 24% 16% 12% 12% 14% 12% 18% 23% 23% 24% 23%

Cash Flow (MXN million)

Majority Net Income 1,245 1,326 37 147 2,755 1,814 846 1,818 1,674 6,153 7,715 9,038D&A 670 722 759 835 2,985 821 1,049 1,010 1,039 3,920 4,622 5,300Other Non-Cash Items -393 -58 1,328 545 1,423 -830 1,314 -826 -668 -1,010 -879 -1,205Adjusted Cash Flow 1,522 1,990 2,123 1,527 7,163 1,805 3,210 2,002 2,045 9,063 11,458 13,132Changes in Working Capital -1,388 -657 -1 482 -1,563 -487 -619 -253 62 -1,297 517 -577Change in Debt 46 388 -779 1,668 1,323 4,053 5,500 - -313 9,240 -1,460 -68Capital Expenditures (CapEx) -334 -768 -1,512 -2,958 -5,573 -2,849 -10,681 -975 -2,275 -16,780 -8,625 -10,918Dividends -126 -126 -126 -126 -504 -180 -187 -187 -187 -740 -1,270 -1,494Other -2,233 450 1,587 421 225 933 -1,468 - - -535 - -Net Cash Flow -2,514 1,278 1,293 1,013 1,071 3,275 -4,244 587 -667 -1,049 620 75Beginning Cash 6,605 4,091 5,369 6,662 6,605 7,676 10,950 6,706 7,293 7,676 6,626 7,247Ending Cash 4,091 5,369 6,662 7,676 7,676 10,950 6,706 7,293 6,626 6,626 7,247 7,322

Source: Actinver

Forecasted Balance Sheet And Cash Flow Statement

22

Company Profile: Mexichem, S.A.B. de C.V. (MEXCHEM)

The core Major Shareholders Revenue Breakdown By ProductIndustry: Petrochemical Country: MEXLast Price (MXN): 53.64 Rating BUYTarget Price 65.00 Mkt. Cap (USD mn): 7,162Expected Dividend Yield 0.4% Mkt. Cap (MXN mn): 100,201Total Upside Potential 21.6% IPO date: 24/10/2005

Company Description

Investment Thesis - Positives

Key Operating MetricsInvestment Thesis - Risk Factors 2010 2011 2012E 2013E 2014E

Total Volume Sold (k ton) 3,205 3,750 4,358 4,880 5,240YoY change 10.6% 17.0% 16.2% 12.0% 7.4%Integral Solutions 442 494 916 1,116 1,262Chlorine-Vinyl 1,790 2,044 2,181 2,328 2,488

Income Statement (MXN mn) Fluorine 973 1,212 1,261 1,437 1,4902010 2011 2012E 2013E 2014E Avg. Price /Ton (MXN '000) 11.4 12.3 16.4 17.1 17.1

Total Revenue 36,472 47,642 71,371 83,469 89,674YoY change 18.9% 30.6% 49.8% 16.9% 7.4% Macroeconomic AssumptionsIntegral Solutions 16,293 18,770 36,736 45,247 50,717 2010 2011 2012E 2013E 2014EChlorine-Vinyl 16,808 24,753 27,873 30,007 30,845 Mx GDP Growth 5.5% 3.9% 4.2% 3.2% 4.0%Fluorine 6,927 10,853 13,100 15,472 15,910 Mx Inflation (INPC) 4.2% 3.4% 3.5% 4.2% 4.0%

US GDP Growth 3.0% 1.7% 2.2% 2.4% 2.9%Total Operating Costs 30,826 40,282 61,583 71,349 76,380Other Income (Expenses) - -75 -260 -211 -200 Valuation MetricsOperating Income (EBIT) 5,645 7,286 9,528 11,908 13,093 2010 2011 2012E 2013E 2014EYoY change 121.5% 29.1% 30.8% 25.0% 10.0% EV / EBITDA 9.9x 8.8x 9.1x 7.3x 6.5xOperating Margin 15.5% 15.3% 13.3% 14.3% 14.6% Price / Earnings 17.5x 28.0x 16.3x 13.0x 11.1x

Price / BV 3.5x 3.2x 3.6x 2.9x 2.4xD&A 2,479 2,985 3,920 4,622 5,300 Price / EBIT 12.2x 10.6x 10.5x 8.4x 7.7xEBITDA 8,124 10,271 13,447 16,530 18,393 Price / EBT 14.3x 16.5x 11.3x 9.2x 8.0xYoY Change 1 26.3% 26.4% 30.9% 22.9% 11.3%EBITDA Margin 22.3% 21.6% 18.8% 19.8% 20.5% Operating Profitability

Net Financial Result -835 -2,614 -679 -1,042 -541Pretax Profit (EBT) 4,810 4,672 8,849 10,866 12,553Taxes 751 1,867 2,696 3,151 3,515Effective Tax Rate 15.6% 40.0% 30.5% 29.0% 28.0%Minority Interest - - - - -Majority Net Income 3,913 2,755 6,153 7,715 9,038Net Margin 10.7% 5.8% 8.6% 9.2% 10.1%Return on Equity (ROE) 24.1% 12.1% 23.4% 23.9% 23.1%

Balance Sheet (MXN mn)2010 2011 2012E 2013E 2014E

Total Assets 49,957 59,722 79,492 86,361 94,311Short Term Assets 19,811 25,187 33,149 35,890 38,054 Cash and ST Investments 6,605 7,676 6,626 7,247 7,322Long Term Assests 30,146 34,535 46,343 50,471 56,257 Net Fixed Assets 20,427 22,943 33,938 38,067 43,852 Intangible Assets 9,609 11,207 11,823 11,823 11,823 Leverage

Total Liabilities 30,302 35,789 51,300 51,928 52,869Short Term Liabilities 11,647 15,951 21,486 23,917 25,37 1 Accounts Payable 6,281 8,290 13,216 14,841 15,883 Short Term Debt 2,231 3,792 2,970 2,765 2,706 Other ST Liabilities 2,960 3,868 5,280 6,312 6,781Long Term Liabilities 18,655 19,838 29,815 28,010 27,498 Long Term Debt 15,824 16,836 26,062 24,258 23,746 Other LT Liabilities 2,831 3,002 3,753 3,753 3,753

Shareholders Funds 19,654 23,933 28,192 34,433 41,441Minority Interest1 43 72 81 91 103Shareholders Equity 19,612 23,862 28,110 34,342 41,339Total Liabilities and Equity 49,957 59,722 79,492 86,36 1 94,311Net Debt 11,450 12,953 22,406 19,776 19,130Net Debt / EBITDA 1.4x 1.3x 1.7x 1.2x 1.0x

1) Execution of VCM JV with Pemex. 2) Legal barriers to implement Wavin's technologies and products in LatAm. 3) Economic weakening in LatAm (particularly Mexico, Brazil and Colombia). 4) Execution of Wavin's expected synergies. 5) Economic deteoriation in Europe (mainly NW and emerging economies). 6) Raw material price increases. 7) Price volatility of main products.

Mexichem is a leader in plastic pipe systems (PVC, PE, PP) and in the chemical and petrochemical industry in LatAm, with more than 50 years of experience in the region. The company is based in Tlalnepantla, close to Mexico City and has been listed on the Mexican Stock Exchange since 1978. It operates in America, Europe and Asia. More than 70% of sales stem from operations outside Mexico.

1) Significant cost reduction potential in VCM production through backward integration to ethylene. 2) Wavin's USD 75 mn synergies. 3) Introduction of Wavin's technology and products' portfolio in LatAm. 3) Downstream expansion in the Fluorine chain to higher value-added products . 4) Solid growth prospects in LatAm construction markets. 5) Attractive organic growth plans. 6) Positive M&A history and prospects. 7) Solid financial position. 8) Experienced management team.

G.E. Kaluz48%Free

Float39%

Control Group Shareholders

18%

Piping34%

PVC27%

HF 3%

Soda 3%

As of 2011

Fluoro-carbons

13%

Compounds12%

Fluorite 3%

Chlorine 1%Others 2%

Phosphates 2%

17.0%

18.0%

19.0%

20.0%

21.0%

22.0%

23.0%

800

2,800

4,800

6,800

8,800

10,800

12,800

14,800

16,800

18,800

20,800

2010 2011 2012E 2013E 2014E

EB

ITD

A m

argi

n

EB

ITD

A (M

XN

mn)

EBITDA (MXN mn) EBITDA Margin (%)

0.0x

0.2x

0.4x

0.6x

0.8x

1.0x

1.2x

1.4x

1.6x

1.8x

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

2010 2011 2012E 2013E 2014E

Net

Deb

t / E

BIT

DA

Deb

t Rat

io

Debt Ratio (%) Net Debt / Adj. EBITDA (x)

23

Disclaimer

Analyst Certification for the following Analysts: Pablo Adolfo Riveroll Sanchez Jaime Ascencio David Foulkes Karla Peña Martin Lara Pablo Duarte Ramón Ortiz Roberto Galván

The analyst(s) responsible for this report, certifies(y) that the opinion(s) on any of the securities or issuers mentioned in this document, as well as any views or forecasts expressed herein accurately reflect their personal view(s). No part of their compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in this document.

Any of the business units of Grupo Actinver or its affiliates may seek to do business with any company discussed in this research document. Any past or potential future compensation received by Grupo Actinver or any of its affiliates from any issuer mentioned in this report has not had and will not have any effect our analysts’ compensation. However, as for any other employee of Grupo Actinver and its affiliates, our analysts’ compensation is affected by the overall profitability of Grupo Actinver and its affiliates.

Guide to our Rating Methodology Total Expected Return on any security under coverage includes dividends and/or other forms of wealth distribution expected to be implemented by the issuers, in addition to the expected stock price appreciation or depreciation over the next twelve months based on our analysts’ price targets. Analysts uses a wide variety of methods to calculate price targets that, among others, include Discounted Cash Flow models, models based on expected risk-adjusted multiples, Sum-of-Parts valuation techniques, break-up scenarios and relative valuation models.

Changes in our price targets and/or our recommendat ions. Companies under coverage are under constant surveillance and as a result of such surveillance our analysts update their models resulting in potential changes to their price targets. Changes in general business conditions potentially affecting either the cost of capital and/or growth prospects of all companies under coverage, or a given industry, or a group of industries are typical triggers for revisions to our price targets and/or recommendations. Other micro- and macroeconomic events could materially affect the overall prospects of an individual company under coverage and, as a result, such event-driven factors could lead to changes in our price targets and/or recommendation of the company affected. Even if our overall expectations for a given company under coverage have not materially changed, our recommendations are subject to revision if the stock price has changed significantly, as it will affect total expected return.

Terms such as "price targets, our price targets, total expected return, analyst's price targets” or any other similar phrase are used in this document as complementary to our recommendation or as a condition that could change in our point of view and, according to article 188 of Securities Market Act, do not imply in any way that Actinver, its agents, or its related companies are in any form providing assurance or guarantee, nor assuming any responsibility for the risks associated with any investment in the discussed securities.

Recommendations for companies, both in the Índice d e Precios y Cotizaciones (IPyC) Index and also not belonging to the index. For stocks, we have three possible recommendations: a) BUY, b) HOLD or c) SELL. A stock classified as BUY is expected to yield returns at least 5% above than that of the IPyC Index. Stocks rated as HOLD are expected to yield returns similar to the IPyC Index, within a range of +5/-5%. Many of the companies within this range are often times solid companies which have reached their potential in a short amount of time and should still be considered as a good investment. Stocks rated as SELL are expected to yield returns below 5% of the IPyC Index.

Rating Distribution as of June 8, 2012

All Companies in the BMV

BUY: 71%

HOLD: 23%

SELL: 6%

24

Research

Pablo Adolfo Riveroll Sánchez Managing Director of Research and Risk

(52) 55 1103-6600

x5800

priveroll@actinver.com.mx

Jaime Ascencio Economy & Markets (52) 55 1103-6600 x5032 jascencio@actinver.com.mx

David Foulkes Retail (52) 55 1103-6600 X5045 dfoulkes@actinver.com.mx

Karla Peña Food & Beverages (52) 55 1103-6600 x5035 kbpena@actinver.com.mx

Martín Lara Telecoms, Media & Financials (52) 55 1103-6600 x5033

mlara@actinver.com.mx

Pablo Duarte Conglomerates, Industrial & Mining (52) 55 8173-5200 x80161 pduarte@actinver.com.mx

Ramón Ortiz Concessions, Construction & Real Estate (52) 55 1103-6600 x5034 rortiz@actinver.com.mx

José Luis Saiz Analyst Jr. (52) 55 1103-6600 x5023 jgarcias@actinver.com.mx

Roberto Galván Technical Analysis (52) 55 1103 -6600 x5039 rgalvan@actinver.com.mx

Investment Strategy

Ernesto O’Farrill Head, Investment Strategy (52) 55 1103-6645 eofarril@actinver.com.mx

Sales & Trading

Gerardo Román Head, Sales & Trading (52) 55 1103-6690 groman@actinver.com.mx

Julie Roberts Head, Institutional Sales (210) 298 - 5371 jroberts@actinversecurities.com

Tulio Chávez Institutional Sales (52) 55 1103-6762 mchavez@actinver.com.mx

José María Celorio Institutional Sales (52) 55 1103-6606 jcelorio@actinver.com.mx

María Antonia Gutiérrez Institutional Sales (52) 55 1103-6796 agutierrez@actinver.com.mx