After years seen as a guy, WEG (WEGE3) becomes an indication to buy BTG; stocks soar – Money Times

Weg
Today’s high highlight, WEG’s share rose 5.56%, quoted at R$ 24.10 (Image: WEG/Disclosure)

The actions of WEG (WEGE3) ended up sharply this Monday (20), after the BTG Pactual raise the buy recommendation.

Today’s high highlight, the company’s share rose 5.56%, quoted at R$ 24.10.

In addition to the change in recommendation, BTG presented a new estimated target price of BRL 40 for 2023, which implies an upside potential of 70% in relation to the last closing price.

This is BTG’s first buy recommendation for the name, whose stock has been part of the bank’s hedging for years. For analysts, WEG has one of the best value creation stories within the Brazilian stock market.

“Fundamentals are stronger than ever, reflecting its impressive delivery during the pandemic and reinforcing its crisis-proof business model,” said Lucas Marquiori, Fernanda Recchia and Aline Gil, BTG analysts who signed the report released this Monday.

Action for “all types of weather”

In BTG’s assessment, WEG is a defensive stock, good for moments of market uncertainty.

The bank draws attention to the resilience of its businesses, maintaining healthy growth and good margins. Analysts point out that WEG is leveraging its vertically integrated production process to gain share from other producers that rely heavily on outsourced suppliers.

In addition, the company began operating in other promising regions, such as India and Turkey. The expansion of operations in these markets should support the continuous growth in the foreign market, assess Marquiori, Recchia and Gil.

Inside the trends

WEG has a “unique characteristic”, says BTG. The company is exposed to several long-term trends in global manufacturing industry.

The bank cited the four main trends in the sector that WEG’s business model can take advantage of:

  1. energy efficiency;
  2. renewable energy;
  3. digitization; and
  4. electric mobility.

The global sustainability movement has driven the search for “greener” energy sources, such as solar and wind.

WEG is already reaping the fruits of this trend. At the beginning of the year, the company announced the signing of a wind turbines along with the CGT Eletrosul.

The R$ 2.1 billion agreement includes 72 turbines with a capacity of 4.2 MW and reinforces WEG’s increasingly strong position (although smaller than that of global peers Siemens, GE, Vestas and Nordex) within the industry, comments the BTG.

good entry point

The main reason for BTG’s neutral rating for WEG was the exaggerated premium of the stock relative to global peers. However, after falling around 30% year-to-date, the paper started to offer a good entry point.

“Given the recent fall in equities, we see that the valuation closing significantly, which makes us more optimistic about WEG. For comparison, we see WEG pricing a 54% premium to other global producers, materially below the 92% premium seen in recent years”, explain the house’s analysts.

The current premium is fair, says BTG, considering the company’s greater growth potential due to its strong presence in emerging markets.

THE XP Investimentos, who also spoke about WEG again this Monday, reinforces the positive outlook for the company. The broker starts from the same perspective: stocks are attractive after the stock crash in 2022.

“While a contraction of multiples should be reasonable after the recent rise in interest rates, we do not see current levels of valuation reflecting WEG’s strong growth prospects and return spreads”, comment analysts Lucas Laghi and Pedro Bruno.

For XP, WEG has a “rare alignment of growth and return”.

The broker has a buy recommendation and a target price of R$45 for the shares.

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O Money Times publishes informative articles of a journalistic nature. This publication does not constitute an investment recommendation.

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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