Santander raises recommendation and target price for Tenda (TEND3); see details

Santander (SANB11) raised its recommendation for Tenda (TEND3) to outperform (equivalent to purchase) and raised the target price to R$17, which represents a potential appreciation of 37.7% compared to the previous day’s closing. The new recommendation considers the bank’s greater confidence in the turnaround process (recovery) resulting from the implementation of RET 1 and FGTS Futuro, in addition to valuation (asset value, a calculation in which it is possible to estimate the most likely price of the asset or company in a given moment) attractive.

“We are more confident in Tenda’s recovery and we believe that the recent Minha Casa Minha Vida measures [MCMV] will be able to speed up the process”, highlight analysts Fanny Oreng and Antonio Castrucci.

For them, although Tenda’s gross margin is recovering more slowly than they anticipated, they believe that the implementation of RET 1, FGTS Future and the potential increase in income range limits in the coming months could accelerate the company’s recovery process. .

Furthermore, as only 4% of 2024 revenue is expected to come from legacy projects (2020-2021), the bank estimates that its gross margin-adjusted value could reach 30% in the last quarter of this year.

“The latter, in our opinion, should also be supported by the improved profitability of new sales and tax relief associated with RET 1 for sales of Track 1 units, in addition to potentially lower provisions associated with lower pro-solution concessions rates, which they currently represent 11% of sales, and may decrease slightly given the implementation of the Future FGTS, highlights Santander.

Overall, Santander also increased launch and sales assumptions by 9% and 7% on average (2024-2026) for Tenda, estimating a profit of R$123 million (+69%) in 2024 and R$350 million (+29%) in 2025.