One of the questions that plague investors is: to invest in the subsidiary or the parent company? This is the case of cosan (CSNA3). In the last month, the root (ROOT4), a joint venture between the company and the shell, held your IPO (Public Offering of Shares), raising R$6.9 million.
O Bank of America, which started covering both Cosan and Raízen, has the answer: it depends.
“In our opinion, both stocks have significant upside potential and growth opportunities that are not priced. But we note that the timing of this growth will begin to materialize is different. We estimate that Raízen may grow Ebitda by almost 50% over the next two years, while Cosan’s other businesses should grow more gradually, especially Compass”, points out.
BofA says that while the Gaspetro acquisition and future gas infrastructure projects are potentially cumulative, they should take a few years to become relevant.
“Finally, the performance of Cosan’s shares also depends on the narrowing of the SOTP (Sum-of-the-Parts Valuation, in Portuguese) discount, for which we still don’t see a clear catalyst”, he adds.
See the comparison of the two actions, according to BofA:
Also according to Bank of America, Raízen is the most important business for Cosan, accounting for 60% of the net asset value (NAV) and the 2022 Ebitda.
“We also estimate that Raízen will account for 60% of Cosan’s Ebitda growth over the next three years (assuming a 30% stake in Rumo), mainly due to the recovery in sugarcane productivity and high commodity prices”, he adds. .
For BofA, Cosan has been delivering the plan to simplify the corporate structure and unlock the value of its subsidiaries (IPO of Raízen, sale of stake in Compass), in addition to accelerating growth (acquisition of Gaspetro, mining joint venture, Compass regasification terminal, E2G, biogas).
“Although we do not yet include these growth initiatives in our model, given their long-term horizons and the lack of some financial details, we believe that the value of existing businesses is not yet fully reflected in the share price, while we see a sum of – 13% discount on parts”, he completes.
Why is Raízen’s action more than a promise?
Last Friday (10), the UBS started the coverage of actions Raízen is very optimistic.
Evaluating the entire spectrum of business of the Brazilian company, which operates with distribution of fuels in Brazil and Argentina, also counting on operations in Renewables and Sugar, UBS analysts highlight a unique point reached by Raízen:
“In Renewables and Sugar, Raízen achieved a scale that we consider difficult to succeed, allowing the company to surf the fundamentals of the sector, and from a structural point of view, the scenario for sugar and ethanol it’s positive”, comments the team of specialists.
For the Swiss bank, the strong results that Raízen should deliver — mainly in both sectors already mentioned — may seem beyond the horizon that investors can take into account, and reinforces that the action is a rare opportunity to expose the investment portfolio to the biofuels business and renewable energy.
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