Camil (CAML3) stock closed 9.6% lower after the result, with analysts focusing on risks beyond the end of the session.

to Camille (CAML3) recorded a net profit of R$120.2 million in the third fiscal quarter of 2021, down 6.9% from the same period in 2020, the company announced last Thursday evening (13).

Total earnings before interest, tax, depreciation and amortization (Ebitda) totaled R$200.7 million between September and November, down 15.3% on the year-over-year comparison. Ebitda’s margin (Ebitda on net revenue) was 8.8%, down 3.1 percentage points.

Net revenue rose 14% to R$2.3 billion in the first quarter, primarily driven by a 15.3% increase in sales in Brazil.

According to the company, the result was driven by sugar prices, as well as higher overall volume. Gross profit was R$471.7 million in the first quarter, up 0.6% year over year. Gross margin was 20.8%, down 2.8 percentage points.

Camille’s 2021 net debt ended at R$1.7 billion, with a leverage ratio (net debt over Ebitda) of 2.3 times.

For Itaú BBA, Camil reported healthy rice volumes, while mergers and acquisitions should continue to be the main catalyst for assets.

The Itaú BBA highlights that Camil’s adjusted Ebitda in the period was 2% higher than the home estimate, with Ebitda’s margin (Ebitda on net revenue) of 8.8% (versus 8.7%). Rice volumes in Brazil increased year-over-year as the benchmark for Q3 2020 was negatively impacted by higher retail stocks, while international volumes continued to suffer from lower raw material availability in Uruguay.

The Bradesco BBI highlighted that the Ebitda reported by Camil came in 28% higher than its forecast.

Analysts believe that although the data takes into account the number of recent acquisitions, Santa Amalia and Ecuador, the bank believes that so far it has contributed only a relatively small portion to the consolidated Ebitda.

However, Ebitda was above estimates due to stronger-than-expected returns, driven by higher-than-expected prices domestically, such as rice and sugar, as well as internationally.

BBI and BBA both have an equivalent recommendation for a neutral asset, also with a target price of BRL 11, which is a 10% upside potential compared to Friday’s close, but lower than the previous close of R$11.05.

Even with the numbers above, shares posted a sharp drop on Friday after the balance sheet, with a 9.59% drop, at R$9.99.

Bradesco BBI highlighted that despite the stronger-than-expected results, they assessed that the impact on Camil shares could be limited in light of the recent downward trend in rice prices (the main catalyst for action) which may deter investors from becoming more optimistic. Finally, they see the stock trading multiplying between the company’s value and Ebitda (EV/Ebitda) 7.2 times, which doesn’t look particularly attractive given the historical average of 6.7 times, supporting the paper’s neutral recommendation.

Bank of America also has an asset-neutral recommendation, with a target price of R$13, with a 30% upside potential.

According to the bank’s analysts, the company’s third fiscal quarter marked the end of the cycle. They now note that the company is “going into the future with a larger and more diversified product portfolio, focused on business growth and synergies.”

They expect that by 2022, Camil will achieve synergies with assets acquired in terms of cost and revenue using cross-selling and product development such as coffee.

However, although there are exciting opportunities for growth, they see increased risks in implementing new processes, especially in the scenario of high inflation and difficulty passing input prices.

According to the Refinitiv consensus, of the 5 homes the newspaper covers, only one has a buy recommendation, while four have an equivalent rating of Neutral.

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