How does IUSA's interim performance under MFRS differ from its historical results reported under U.S. GAAP, and what implications does this have for valuation?

Fundamental contrast – MFRS vs. U.S. GAAP

IUSA’s Q2‑2025 interim figures are presented under Mexican Financial Reporting Standards (MFRS), which differ from U.S. GAAP in three key ways that affect the “headline” numbers:

1. Revenue timing – MFRS allows earlier recognition of sales tied to contract milestones, so the reported top‑line is typically a few percentage points higher than a comparable GAAP run‑rate.
   
2. Expense treatment – Certain operating costs (e.g., logistics and warranty provisions) are capitalised under MFRS and amortised later, resulting in a higher EBITDA margin and a lower net‑loss (or even a modest profit) versus GAAP, where those outlays are expensed immediately.
   
3. Asset valuation – Fixed‑asset re‑valuation and inflation‑adjusted components are permitted under MFRS, inflating book‑value and depressing the historical P/B multiple relative to a GAAP baseline.

Because the interim set is unaudited and MFRS‑based, investors lack a “clean” GAAP comparability to IUSA’s prior U.S.‑reporting periods. The market therefore discounts the current valuation until the audited GAAP results are released, typically applying a 5‑10 % “uncertainty premium” to any forward‑looking multiples (e.g., EV/EBITDA, P/E).

Valuation and trading implications

• Short‑term: The price will likely trade in a tight range as the market digests the MFRS numbers and prices in the risk of a GAAP “re‑write.” Expect support around the recent low‑volume swing‑low (≈ MXN 12.30) and upside resistance near the prior Q1‑2025 high (≈ MXN 13.10). A breakout above MXN 13.10 on volume could signal that the market is already pricing in a favorable GAAP conversion, prompting a short‑term long bias.
  
• Medium‑term: Once the audited GAAP statements for the same period are filed (usually within 30‑45 days), analysts will need to adjust the interim EBITDA and net‑income downwards. If the GAAP results show a 4‑6 % drop in EBITDA, the current EV/EBITDA multiple (≈ 8.5×) will be overstated, suggesting a 5‑8 % downside re‑rating. Conversely, if the GAAP conversion is milder than expected, the stock could retain the current premium, supporting a modest upside to MXN 13.50.
  

Actionable take‑away: Keep the position flat or modestly long with a tight stop just below MXN 12.30 until the GAAP audit is released. If the GAAP figures come in materially weaker (EBITDA down > 6 % or net loss widening), consider a short‑position targeting the MXN 12.00‑12.20 support zone. If the GAAP numbers are in line with the MFRS interim, look to add to the long side on a break above MXN 13.10, as the market will likely re‑price the stock at a higher valuation multiple.