XP and BofA initiate Multilaser coverage with purchase recommendation; valuation potential exceeds 70%

Multilaser debut (Photo: Ricardo Reis)

SAO PAULO – XP and Bank of America started this Monday (30) the coverage of Multilaser shares (MLAS3) with purchase recommendation and target price of R$ 15 and R$ 16, respectively, which implies potential an increase of around 60% and 70.2% compared to the close of trading on Friday (27). At 10:18 am (Brasilia time), MLAS3 assets rose 2.46%, to R$9.59.

According to analysts, the positive view is based on solid market positioning, supported by a diversified portfolio, as well as the “assertive and constant” product launch. A robust production and distribution network also appears among the justifications for the houses.

In addition to being one of the lowest cost manufacturers in each category in which it operates, Multilaser also has its own niche brands, in addition to partnerships and licensing with multinationals. For XP, this allows the company to have broad price positioning and consistent market share across multiple categories.

The analysis team also draws attention to the more than 1,500 sales representatives and trade marketing professionals spread across the Brazilian territory, in addition to three production plants. “This solid distribution and production base allows the company to be more competitive than its competitors, given that its scale gain is amplified by its diversified portfolio”, he writes, in a report.

In XP’s assessment, the company has a valuation “attractive”, with the stock trading at 8.5 times price to profit, a 36% discount before pairs. “We believe that the performance of the stock since the IPO (down 16% on the Stock Exchange since then) is explained by a macro movement that penalized all recent IPOs due to the lower liquidity of these papers and, therefore, we see it as unjustified”, write the analysts.

Among the main catalysts for the company in the short term, XP cites new partnership and licensing agreements – which can be accelerated given the macro and political uncertainties -, as well as the mergers and acquisitions (M&A) market. . The assessment is that both would strengthen and complement Multilaser’s current portfolio.

Among the company’s proprietary software that can be used to leverage Multilaser’s operations, XP cites Mercury and Multiplik. While the first helps to improve the assertiveness of Multilaser’s sales representatives, the second is an application that encourages salespeople at the point of sale to market the company’s products.

“Exceptional” risk-return

In BofA’s assessment, the relationship between risk and return for MLAS3 papers is “exceptional”.

The team assesses that the shares are discounted in relation to domestic and international peers, due to perceptions of cyclicality, over-reliance on tax incentives and low entry barriers.

According to analysts, the company enjoys a “rich set of opportunities in terms of brand expansion, new categories and licensing agreements, acquisitions, geographic expansion and market share growth.”

In addition, the recent exits from the local market by companies such as ZTE Corp, Sony and LG show the great difficulties of operating in Brazil and are a key element for Multilaser’s competitive environment, writes the bank.

BofA expects technology and connectivity improvements to support accelerated product cycles and new innovations across Multilaser’s scope.

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