Credit reviews utilities stocks, Itaú BBA raises Bradesco (BBDC4) and Citi raises Ambev (ABEV3): the standout recommendations

The week started with several stock recommendations, highlighting the Swiss bank reviewing the scenario for electric and sanitation companies. Copasa (CSMG3) left a neutral recommendation for outperform (performance above the market average) and the recommendation for AES Brasil (AESB3) was also high.

Itaú BBA, on the other hand, raised its recommendation for Bradesco (BBDC4) in a review for the banking sector. Citi, in turn, raised the recommendation for Ambev (ABEV3). Check out the highlights:

Credit Suisse reviews energy sector

Credit Suisse says 2022 is also likely to be a turbulent year, not just because some of the uncertainties seen in 2021 appear to linger, but also because the elections are likely to bring additional volatility into the equation.

Thus, in this scenario of uncertainty, the performance of the utilities sector (energy and sanitation) could outperform many others, considering that companies are protected against the pressure of inflation, the regulatory framework provides minimal regulatory returns, volumes are typically stable. and most companies have secured some level of inorganic growth (via auctions/projects under construction and M&A activity).

To face the complex political and macro scenario, companies with defensive (diversified) portfolios, good management and exposure to the network segment are preferred choices, such as Alupar (ALUP11), Engie (EGIE3), Energisa (ENGI11). The bank also highlights that CPFL (CPFE3) has a solid balance sheet and an attractive valuation, according to analysts.

“We believe it is important to point out that companies in the sector do not have very high leverage and usually have long-term maturities”, the analysts point out.

The analysis team believes in a base case growth of 2.1% on an annual basis and in volumes with a 15% water deficit and long-term prices of BRL 161 per Megawatt-hour (MWh).

They also highlight that the reservoirs are much better prepared and reached 47% on January 19, 2022, with the risk of rationing for this year getting further away. In terms of sanitation, the reservoirs are also well prepared and should not cause major concerns throughout the year, they assess.

“When we get into pricing trends, we believe that the combination of the rainy season, weaker demand and new open market capacity expected through 2024 should bring prices down again. Improved technology should also play a role in bringing long-term prices down.


Among the changes in recommendation, Copasa (CSMG3) moved from neutral to outperform (a performance above the market average) and the recommendation for AES Brasil (AESB3) was also high, based on the potential for appreciation from renewables that are under construction. .

“We continue with a positive view for Cesp, believing that the long-term call has improved with the addition of renewables to the portfolio. Omega (MEGA3) is also expected to bring with better returns for shareholders. Neoenergia (NEOE3) continues as an outperform due to the extremely discounted valuation, but the exposure to GDP is a little uncomfortable, in addition to the governance issue”, they point out.

Sabesp (SBSP3) also continues as an outperform due to valuation, positive tariff review methodology and privatization prospects. Sanepar, on the other hand, continues with an underperform recommendation (perspective of below-average performance) due to the difficulty of implementing the tariff increase in 2022 and the worse hydrology.

Check out the Credit Suisse recommendation changes below:

CompanyCodeprevious recommendationcurrent recommendationPrevious target priceCurrent target priceUpside potential*
AES BrazilAESB3NeutralOutperformBRL 17.00BRL 13.0015.9%
Alupar InvestmentsALUP11OutperformOutperformBRL 32.80BRL 30.7024.0%
CespCESP6OutperformOutperformBRL 32.40BRL 27.9023.4%
cupCSMG3NeutralOutperformBRL 17.03BRL 16.6036.3%
CPFL EnergiaCPFE3OutperformOutperformBRL 41.30BRL 41.3052.6%
Energies from BrazilENBR3OutperformOutperformBRL 24.80BRL 24.8016.5%
Energisa S/AENGI11OutperformOutperformBRL 58.80BRL 58.8042.6%
Engie BrazilEGIE3OutperformOutperformBRL 47.40BRL 45.6016.4%
NeoenergyNEOE3OutperformOutperformBRL 24.40BRL 23.3047.8%
Omega EnergyMEGA3OutperformOutperformU.S. $ 16,00BRL 14.6015.4%
knowSBSP3OutperformOutperformBRL 60.90BRL 56.6057.2%
SaneparSAPR11underperformunderperformBRL 27.10BRL 20.8010.7%
TaesaTAEE11underperformunderperformBRL 33.70BRL 32.70-13.9%

*in relation to the closing of Friday (21)

Itaú BBA reviews banking sector and raises Bradesco

Reviewing the banking sector, Itaú BBA raised the recommendation for Bradesco’s shares (BBDC4) from neutral to outperform, with the target price being raised from R$26.00 to R$28.00.

The bank says Bradesco was discounted for a while, but now sees justification for raising estimates and hoping for a reclassification. The credit spread recovery finally appears to be under way, faster and stronger than previously anticipated, to drive 18% customer net interest margin (NII) growth in fiscal 2022. Itaú estimates that non-performing loans (NPL) are not deteriorating further.


As a result, the bank expects Bradesco to deliver 10% growth in earnings per share from its 10-year low valuations. The bba also sees room for further reclassifications if Brazil’s macro climate improves and the threat from digital banks weakens.

Banco do Brasil (BBAS3) also has an outperform recommendation from BBA. Analysts expect the company to post net income of R$5.1 billion in the fourth quarter of 2021.

Itaú BBA expects credit quality to be a positive highlight, with non-performing loans (NPLs) practically stable at 1.9%, which allows provisioning expenses to remain low without harming coverage ratios. Credit margins are likely to remain under pressure from funding costs and be the quarter’s low point.

Service revenues are likely to stagnate and operating expenses will increase sequentially. The loan portfolio is likely to grow at a high single-digit rate and the net interest margin (NII) a little faster. Provisioning expenses should increase only slightly faster than the loan portfolio.

Itaú BBA, for its part, does not expect a combination of positive results from Santander, but better customer net financial margins are likely to generate “positive vibes” for the rest of the sector. The growth of the consolidated loan portfolio is expected to increase by 3%, led by individuals. The positive highlight will be the NII customer line growing 4%, with NIMs expanding.

In addition, the bank points out that operating and other expenses are likely to accelerate this quarter. The bank also says its estimated net income dropped 5% to BRL 4.1 billion, and for a still good return on equity (ROE) of 21%.

The bank maintains a market performance assessment (performance in line with the market average) for the Santander unit, and a target price of R$39.00.

Itaú BBA maintains an underperform assessment (performance below the market average) for Nubank, with a target price of US$ 8 per share traded on the New York Stock Exchange.


The bank projects total revenue of R$2.6 billion (+28%), with service revenue of R$1.4 billion, driven by a higher number of credit cards and associated interchange revenues.

The loan portfolio is projected at R$32.0 billion, up from R$28.7 billion in the previous quarter, with emphasis on credit cards and personal loans. In addition, the bank expects non-performing loans (NPLs) to start rising, from 3.3% to 3.5%.

Check out Itaú BBA’s recommendations for the financial sector.

CompanyCodeprevious recommendationcurrent recommendationPrevious target priceCurrent target priceUpside potential*
BradescoBBDC4market performOutperformBRL 26BRL 28.0034.2%
Bank of BrazilBAAS3OutperformOutperformBRL 42BRL 4234.6%
Santander BrazilSANB11market performmarket performBRL 40BRL 3924.1%
BTG PactualBPAC11OutperformOutperformBRL 32BRL 3250.0%
NubankNAKEDunderperformunderperformUS$ 8.00US$ 8.0015.9%
Pan BankBPAN4market performmarket performBRL 18BRL 1656.9%
Inter BankBIDI11OutperformOutperformBRL 65BRL 65157.0%
modal moreMODL11market performmarket performBRL 20BRL 2065.3%
ABC BrazilABCB4OutperformOutperformBRL 25BRL 2559.9%
banrisulBRSR6market performmarket performBRL 15BRL 1544.4%

*in relation to the closing of Friday (21)

Citi elevates Ambev

Citi has upgraded its Ambev stock (ABEV3) recommendation from neutral to buy, highlighting its projection of promising earnings before interest, taxes, depreciation and amortization (EBITDA) for 2023. The target went from R$17 to R$18.50, a potential increase of 26% compared to the last closing.

Analysts also highlighted the perception that the beer segment is a defensive sector in an election year and noise from covid-19.

For the bank’s analysts, the company’s recent share decline represents an attractive entry point into paper in light of the centuries-old recovery in sales volume, market share and channel mix.

Bradesco BBI also highlighted its projections for Ambev, maintaining the outperform recommendation and target price of R4 21, but highlighting the company’s portfolio with a long-term analysis.

For the bank’s analysts, the company will continue to launch new brands to try to compensate for the weakness of specific brands, says BBI

Bradesco BBI says Ambev’s flagship beer brand Skol saw its market share in Brazil drop 9 percentage points to 21% in 2019 compared to 2011, while the company’s overall market share dropped 4 pp in this period, leading investors to think that this mark may not recover. This happened as consumers increasingly sought new options and competitor Heineken expanded in Brazil.

Although it is possible to revive the brand, the bank does not believe that Ambev will try to recover Skol, but will continue to launch new brands to try to compensate for the weakness of specific brands. This strategy seems to have paid off under the new management, with Ambev gaining 3 pp of market share in 2019-21.

Learn more about Ambev by watching this Monday’s InfoMoney Radar:

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About Yadunandan Singh

Born in 1992, Yadunandan approaches the world of video games thanks to two sacred monsters like Diablo and above all Sonic, strictly in the Sega Saturn version. Ranging between consoles and PCs, he is particularly fond of platform titles and RPGs, not disdaining all other genres and moving in the constant search for the perfect balance between narration and interactivity.

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