We came across a bullish thesis on Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. (OMAB) on Substack by Chit Chat Stocks. In this article, we will summarize the bulls’ thesis on OMAB. Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. (OMAB)'s share was trading at $78.33 as of Jan 29th. OMAB’s trailing and forward P/E were 15.71 and 16.10 respectively according to Yahoo Finance.
An aerial photo of a busy airport, showing the scale and scope of the companies freight delivery services.
Grupo Aeroportuario del Centro Norte (OMAB), a key player in Mexico’s airport sector, offers a compelling investment opportunity due to its monopoly-like status, consistent double-digit earnings growth, and impressive shareholder returns. With a history of delivering a 16.8% annual total return since going public in 2006, OMAB operates 13 airports, with a portfolio that includes major hubs, tourist destinations, and smaller cities across northern Mexico. These airports are central to the country’s economy, offering investors access to a vital part of the Mexican infrastructure that facilitates commerce and tourism.
OMAB was formed in 1998 when the Mexican government opened the door for private investment in its airports, ultimately selling a portion of the stock to investors in 2006. Since then, the company has capitalized on its exclusive management rights to these airports, growing its volume, commercial sales, and adjacent business activities. While OMAB does not technically own the airports—operating under a government contract—the company has the right to manage them through a concession agreement set to run until 2048, with the possibility of a 50-year extension. This arrangement is a key factor in the company’s long-term viability, as it ensures stable operations and continued involvement in one of Mexico’s most lucrative industries. Despite the potential for the concession not being renewed in 2048, the likelihood of this occurring is low, given the vital role these airports play in Mexico’s economy and government revenue.
The company's growth prospects are tied to the Master Development Program (MDP), which mandates that OMAB submits traffic forecasts, capital expenditure plans, and maintenance projections every five years. In exchange for this investment, the company is allowed to raise its fees charged to airlines and passengers, which provides a clear mechanism for revenue growth. The next MDP, slated to take effect in 2026, is expected to lead to higher tariffs, fueled by inflation and increased demand for airport services. Given the historic growth of air traffic and the projected expansion of Monterrey airport into a regional hub, OMAB’s revenue base should grow faster than traffic alone.
OMAB generates revenue through a combination of aeronautical fees, commercial income from airport retailers, and adjacent businesses such as cargo handling and hotel operations. Its business model is highly profitable, with operating margins regularly exceeding 56%, and a 70% operating margin when excluding construction-related revenues. This strong profitability is a testament to OMAB’s operational efficiency and its ability to pass on costs to consumers through higher fees without facing significant customer resistance. As a result, the company enjoys a robust return on invested capital (ROIC) consistently above 20%, a key indicator of the business’s competitive advantage.
The monopoly nature of OMAB’s operations, bolstered by its favorable government contracts, positions it uniquely in the airport industry. Unlike airlines, which face intense competition, OMAB has no direct competitors for the airports it manages, giving it significant pricing power. Furthermore, the company’s ability to raise fees in line with inflation—without alienating customers—makes it a strong performer in both good and bad economic climates. Even during the challenges of 2020, OMAB maintained positive returns, underscoring the resilience of its business model.
Looking ahead, OMAB’s valuation remains attractive, trading at 10x free cash flow, with analysts projecting continued earnings growth at a double-digit rate over the next decade. The company’s ability to consistently generate cash and return value to shareholders makes it an appealing investment, especially for those seeking stable, long-term growth. Furthermore, as inflation continues to impact the cost structure of many businesses, OMAB’s ability to pass these costs on through fee increases positions it well for future profitability.
In summary, Grupo Aeroportuario del Centro Norte is a well-positioned, high-margin business with a government-sanctioned monopoly over vital Mexican airports. Its strong competitive advantages, coupled with an effective growth strategy and a favorable regulatory environment, make it a solid investment for those looking for exposure to Mexico’s infrastructure sector. With a strong track record of growth, robust financial performance, and significant upside potential, OMAB is a company worth considering for a long-term portfolio.
Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. (OMAB) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 9 hedge fund portfolios held OMAB at the end of the third quarter which was 6 in the previous quarter. While we acknowledge the risk and potential of OMAB as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than OMAB but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
