The privatization process of Sabesp (SBSP3) is progressing at a fast pace and banks are already raising their projections for share prices, however, remaining cautious about a scenario if control does not leave the hands of the São Paulo government.
During the last crop of results, André Salcedo, president of the company, reinforced that the State is working to, by August, carry out the follow-on (issuance of additional shares) for the privatization of the sanitation company.
While this moment does not arrive, after results for the fourth quarter of 2023, Morgan Stanley increased the price for Sabesp (SBSP3) from R$67 to R$68 per share. This is the projection, however, without privatization.
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Considering the privatization, the bank continued with its price unchanged, with a projection of R$ 118.5, as fair value per share, in the optimistic view. The value represents 1.2 times the relationship between EV/RAB (EV = enterprise value, in English, or market value + net debt”; RAB = regulatory asset base).
In turn, Citi raised the target price of Sabesp shares from R$84 to R$97, reiterating a “buy” recommendation, according to this Wednesday’s report, highlighting that the price still considers the company to be state-owned.
In a “bull” scenario, which contemplates the privatization of the basic sanitation company in the State of São Paulo, Citi analysts estimate Sabesp’s target price at R$150. In the “bear” view, they calculate it at R$71.
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This Wednesday (3), Sabesp shares fell 0.71%, quoted at R$81.45. In the year, the stock rose 8.3% and, in twelve months, it increased 65.7%.
Banks raise Sabesp price
Morgan has revised its estimates for 2024 and 2025, based on new macroeconomic forecasts. The target price has been adjusted based on short-term estimates.
Regarding the results, earnings before interest, taxes, depreciation and amortization (EBITDA) was increased by 7% for the year 2024. Earnings per share (EPS) had an increased estimate by 9% for 2024.
The revisions were motivated by better than expected manageable expenses and the tariff mix presented in 2023.
For 2025, lower long-term inflation led to a reduction in the EBITDA estimate by 1%. The lower expected inflation level also led to the reduction of the company’s nominal cost of capital to 11.4% (from the previous 11.6%).
The price was also raised by Citi analysts, from R$84 to R$97, reiterating a “buy” recommendation, according to the report, highlighting that the price still considers the company to be state-owned.
In the case of Citi, analysts also increased estimates for the company’s Ebitda (earnings before interest, taxes, depreciation and amortization) in 2024 and 2025 by 10% and 9%, respectively.
In a report, they argue that the upward adjustment reflects a reduction in the long-term inefficiency assumption to R$1.5 billion per year, from R$2.2 billion previously.
“Sabesp’s management has done a good job in adjusting the company’s overall cost base. It also focuses on the proper handling of regulatory revenues, which can further reduce inefficiencies,” they said.
(With Reuters)
Tags: privatization sight banks raise price Sabesp SBSP3 stock exchange
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