March 4, 2024

XP starts covering companies in the auto parts sector; Randon is the preferred stock, with a 57% upside potential.

SAO PAULO – XP started covering the shares of companies in the auto parts sector, at a sensitive stage for this sector. Last month, the Brazilian auto industry production It fell by more than 20%, according to Anfavya, which needed to revise industry-specific forecasts down this year. XP analysts highlight that light vehicles are the category most affected in production volumes, not only in Brazil, but worldwide. On the other hand, heavy vehicles showed relatively better performance, especially in the domestic market.

to me XP AnalystsDespite a difficult moment in the short term for the sector, with the scarcity of semiconductors (disrupting vehicle production) and increasing raw material prices, there are investment opportunities.

My favorite XP pick is Randon (RAPT4), whose buy recommendation and target price was set at R$18 per share, or an increase of 57% over the previous day’s close. For analysts, the company has strong operational performance and levels Evaluation attractive. Analysts acknowledge that the company is more exposed to the Brazilian macroeconomic environment, with 86% of its revenue coming from the domestic market. However, it highlights Randon’s “strong operating moment,” driven by agribusiness.

XP thinks EBITDA in 2021 will be 64% higher than pre-pandemic levels in 2019. Analysts also say Randon is trading at attractive multiples. Among the company’s risks, in addition to exposure to the Brazilian macroeconomic scenario, XP also points to the possibility of a slowdown in Brazil’s grain production.

Find out how the decline in vehicle production is affecting the steel sector business

The analysts also have a buy recommendation for Tupy (TUPY3, with a target price of R$32) and Iochpe-Maxion (MYPK3Target price: 27 BRL. From XP’s point of view, the two companies are alternatives to diversification, as they both have significant exposure to the foreign market. Tupy has 18% of its revenue originating in the domestic market and Iochpe-Maxion, 25%. In addition, for analysts, stocks of companies are trading at a level Evaluation Cheap, with 20% to 25% discounts compared to the historical average.

In terms of risks to companies, XP refers to a slowdown in global manufacturing activity with impacts on the capital goods sector and exchange rate fluctuations.

XP also began, on a neutral recommendation, with Fras-le coverage (FRAS3, with a target price of R$16) and Marcopolo (Pomo 4Target price 2.80 Brazilian Real. Analysts are taking a more cautious view of the companies, saying that both are with Evaluation “Extended”. In Fras-le’s case, recent operational improvements will already be priced into stocks, which have relatively low liquidity.

About Marcopolo, analysts point to concerns about competition in the urban bus market with other mobility alternatives and also the uncertainty regarding the recall of products exposed to tourism, which directly affects the intercity bus sector, which is the company’s highest value-added product.

Bradesco BBI also believes that poor performance in the bus segment should affect Marcopolo’s third-quarter results. In a report distributed to customers earlier this month, analysts also cited Randon and Toby as two companies that should benefit from increased truck sales, at the cost of lower light vehicle production.

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