After the biggest market skepticism regarding Petrobras (PETR3🇧🇷PETR4), UBS BB analysts double-downloaded the company’s PN shares, from buy to sell, in a report titled “The Phoenix Returns to Its Nest.”
Analysts Luiz Carvalho, Matheus Enfeldt and Tasso Vasconcellos also cut their price target for the asset by 53%, from R$47 to R$22, in light of seeing an upcoming change in direction for the company. This price target, taking into account the dividend adjustment (the stock was ex-dividend on Tuesday, the 22nd), corresponds to a decline of 6.5% compared to its last closing price.
The company’s shares recorded a falling session this Tuesday, with PETR3 declining by 3.33%, to 26.11 Brazilian reals, while the assets of PETR4 fell by 3.06%, also at 22.80 Brazilian reals. With investors exiting the asset after trading the shares Previous right to proceeds.
The analysis team recalls starting coverage of Petrobras stock positively in 2016, maintaining a positive outlook for most of that period, based on a three-step thesis: 1) a debt shift with improved operations and divestitures (with total debt down from over $120 billion to $54 billion); 2) large dividends (more than $47 billion since the beginning of 2021); 3) a potentially positive reassessment of its complications. “Six years have passed and we now believe these phases are on a reversal path,” with the next few years looking even bleaker, analysts estimate.
There are three turning points that push the Bank to reduce the recommendation: fuel prices, investments and overheads. None of that is clear now; however, comments from the transfer team [do novo governo, de Luiz Inácio Lula da Silva] He offered some insights, and given Petrobras’ past, we’ve become considerably more cautious,” Carvalho, Enfeldt and Vasconcelos highlighted.
With regard to fuel prices, there is no definition of the company’s new pricing policy, and analysts expect refining margin pressure. They also feel that there is significant risk in higher investments. He estimates that “increasing investments and driving diversification into renewable energy and the energy transition will require Petrobras to become ‘bigger’ and these overheads become a concern.”
In addition, this could mean a lower dividend for shareholders, with analysts modeling that Petrobras could pay out a payout (dividend in relation to earnings) of 25%, the minimum required by law.
The new price target mainly consists of the negative impact of BRL 10 aiming to compress refining margins, plus the negative impact of BRL 6 of cost increases (possibly returning to levels seen before 2019), plus negative BRL 6 with the most negative views on exploration and production. , with the weakening of the economy resulting from the increase in the share of PES in production.
It should be noted that in addition to UBS BB, Itaú BBA has also strengthened a cautious view of Petrobras, but maintains the recommendation market performance (performance in line with market average, equivalent to neutral) with a target price of R$38 for the PETR4.
“We believe that any potential change in the Company’s pricing policy could lead to material impacts (particularly if the cost-of-production pricing policy proposal goes ahead). Given the lack of clarity regarding the future of the Company’s pricing policy, we believe this represents a significant risk to date. Petrobras investment We repeat our recommendation for market performance to take action, while we await more clarity on the company’s future, particularly with regard to guidance on pricing policy and capital allocation,” he notes.
Bradesco BBI said in a briefing note that the company’s shares are trading ex-dividend today. The total dividend declared was R$3.35 per asset, which means that the readjustment of shares should be 11% for ON shares and 12.51% for PN shares.
For analysts, investors are unlikely to reinvest most of the dividends received, given the perceived high risk to the investment case over the next 12 months.
The vision matches Analyze other experts consult them fur Infomoney who do not recommend reinvesting the amounts in new Petrobras shares.
Flávio Conde, from Levante, advises investors to invest dividends received from Petrobras in Eletrobras (ELECT6) to reduce country risk on the portfolio as well as exposure to oil prices.
At VG Research, clients are also advised to reinvest dividends in other companies. According to Luan Alves, there are better options that haven’t crossed the safety cap.
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