Concepcion Industrial Corp (MV $325M): Philippines’ #1 HVAC (Aircon and Refrigerator) Company in An Under-Penetrated Domestic Market 23.1% ROE and Trading at EV/EBIT 9x, EV/EBITDA 8.6x

Concepcion Industrial Corp (PSE:CIC) is Philippines’ #1 market leader in air-conditioner (36.7% market share) and refrigeration (25.6% market share) which are under-penetrated appliances in the country, with household penetration rates at 6% and 35% respectively, amongst the lowest in Southeast Asia where its neighbours have at least twice the penetration rate, representing significant untapped market potential. Established in 1962 after obtaining an exclusive license to distribute Carrier brand in the Philippines and later forming a manufacturing JV with Carrier in 1997, CIC has more than 50 years of track record in manufacturing and selling these products for both consumer and commercial use. CIC’s manufacturing facilities in aircon and refrigerators are the largest of their kind in the country, with a production capacity of 500,000 and 300,000 units annually respectively. CIC provides end-to-end solutions from production to distribution to aftersales services network that spreads across the logistically-challenged country. New business include acquiring a 51% effective interest in Otis Philippines (elevator and escalator, building and industrial solutions) in Mar 2014 and forming a 40:60 JV with Midea (000333 CH) in Nov 2013. CIC was listed in the Philippines Stock Exchange in Nov 2013 at P26 per share. CIC is 71.4% owned by the Concepcion family by various members, including the family of Jose S Concepcion who also owns 20% of consumer brands company RFM Corp (PSE: RFM).

1) What Makes It a Wide-Moat Business?

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