The scenario that was outlined for Petrobras (PETR3;PETR4) in recent weeks was already cloudy, in the midst of the lag in fuel prices, which increased with the rise in oil, in addition to the constant pressures on the company’s price policy. state-owned.
Last Friday, back from the holiday, the turmoil against the state-owned company came back with full force. PETR4 preferred shares closed the last session of the week down 6.1%, at R$27.31, amid a new round of fuel hikes announced by the state-owned company, which caused furious reactions from politicians.
After the announcement, President Jair Bolsonaro (PL) again criticized the command of Petrobras, understanding that the action of the board of directors (which approved the readjustment) would have a political bias and that the company could “plunge Brazil into chaos”. The president of the Chamber, Arthur Lira (PP-AL), also echoed Bolsonaro’s statements and stated that
the then president of the state-owned company, José Mauro Ferreira Coelho, should resign because he is in office illegitimately.
Bolsonaro defended a Parliamentary Commission of Inquiry (CPI) to investigate Petrobras. Lira, on the other hand, threatened to double the taxation of the company’s profits and said that the new high was a retaliation from the now former president of the state-owned company, while Minister André Mendonça, from the STF, asked for explanations about the pricing policy.
This Monday, the session is volatile, with Coelho’s resignation being effected and the choice of Fernando Borges as interim president. The government had already appointed Caio Paes de Andrade, a senior official at the Ministry of Economy, to the company’s top position.
The shares even recovered after the departure of Coelho, operating slightly higher. For XP Política, Coelho’s resignation tends to cool the mood in the debate on new measures that require a change in fuel price policy, while also cooling the debates on the installation of the CPI. However, tempers remain high and uncertainties mount over the company.
Gustavo Cruz, strategist at RB Investimentos, believes that Petrobras will continue to be under pressure, even more so in a scenario of continued high oil prices. “Assuming that oil reaches US$ 150 a barrel, the wear and tear would be gigantic”, he assesses.
The specialist reinforces that, until the elections, there will be strong pressure not to have price readjustments. “The relief in the actions today is more due to the lessening of the threat of a Petrobras CPI, which would generate a gigantic attrition with internal and external shareholders. This would go further with the confirmed exchange,” he points out. However, it should be noted that news throughout the day indicated that the installation of a parliamentary commission is not ruled out.
According to Cruz, the change of CEOs is not positive in the long term, only reinforcing that this will be a topic of electoral debates. Probably, he assesses, the pricing policy initiated in the Michel Temer government will be relaxed, if not extinguished next year. “This year I would already say that she was not as pure as in the last few years but, in any case, it will be under review. We will only get a sense of what will happen to Petrobras in the post-election period”, he points out.
In any case, the strategist does not believe that this will be a positive end of process. “If we think about what was going on in recent years, that Petrobras went from loss to billionaire profit, now ahead I imagine that analysts are revising downwards expectations for the company”, he points out.
Marcelo Boragini, specialist in variable income at Davos Investimentos, also believes that the latest events bring a negative bias to the shares. “Volatility should last and the papers tend to suffer until the elections”, he points out.
Eleven Financial also highlights the continuing uncertainty over Petrobras’ actions; analysts have a neutral recommendation for the PETR4 assets, with a target price of BRL 34 (or up potential of 24.5% compared to the previous day’s closing).
“We believe that this [a renúncia] may accelerate the change of the board of directors, which is in process and that noises of government interference in the state company continue to harm the performance of the stock, together with a scenario of great uncertainty about the degree of cooling of the main world economies, which is causing the fall of the price of oil”, points out the house.
According to Felipe Ruppenthal, an Eleven analyst, the quick appointment of Fernando Borges as interim is positive, as it removes some of the uncertainty, but the state-owned company’s actions will continue to be negatively affected in the short term by government interference.
On Friday, shortly after the readjustment, Morgan Stanley reinforced the concern that the government could intensify its attempts to intervene in the company’s policy to show the population its commitment to fighting inflation before the elections. Thus, the bank’s analysts remain with an equalweight recommendation (exposure in line with the average) for ADRs (in practice, shares of companies outside the US traded in New York) and PBR (equivalent to PETR3), as they point out that the risk -reward can be very broad during the election cycle.
Still with a vision to buy
On the other hand, there are those who are still optimistic about the thesis of investments in Petrobras, based mainly on the payment of dividends.
This is the case of Goldman Sachs, which continues with a buy recommendation for the assets, as it sees the thesis of carrying the shares as attractive, although with less conviction than at the beginning of the year, due to the smaller dividend cushion until the election. (between 5% and 10% dividend yield, or dividend value in relation to the share price, versus around 30% at the beginning of the year). “Finally, we note that, in the short term, we see limited space for government intervention within the company,” Goldman analysts point out.
XP also maintains the buy recommendation for Petrobras, with a target price of R$ 47.30 for PETR4 shares, or a potential appreciation of 73.20% in relation to the closing on Friday.
Analyst Andre Vidal acknowledges that risks have increased, both internationally (global recession) and internally (political). But sensitivity analyzes indicate that Petrobras remains an asymmetric bet.
“Another way of looking at this is by comparing Petrobras with other large oil and gas companies. Petrobras stands out as the major [grande companhia] cheapest oil and gas in the world, trading at 1.7 times the EV/Ebitda [valor da firma sobre o Ebitda, ou lucro antes de juros, impostos, depreciações e amortizações] expected for 2022. For these reasons, we maintain our buy recommendation in the name”, points out Vidal.
He also points out that Petrobras is “not only” protected from interference by its statute and by the “state-owned company law” (13.303/2016), but also from physical limits (fuel shortages are even more unpopular than high oil prices). fuels). “Not to mention the personal responsibilities to which the board and management are subject if they deliberately decide to use Petrobras as a political instrument”, he highlights.
The analysis points out that it is possible that the government could change Law 13.303/2016 and Petrobras’ statute to return to using the state-owned company to subsidize fuels. However, that would not be quick – and the elections are just a few months away. “We feel that such a move could trigger a strong market reaction (exchange, interest rates) that could ultimately be bad for the government’s popularity, which explains why this move has not yet been put into action,” says Vidal.
The base case for the company’s shares, with a target price of BRL 47.30, includes a 2% political premium risk that takes into account the uncertainty of being a state-owned company. At current market prices, the analyst sees an implied nominal Internal Rate of Return (IRR) (in dollars) of 29% based on future dividend flows.
Alternatively, it also makes a projection if Petrobras is privatized. “We see a probability of privatization in the next four years still low, but this hypothesis is not null, especially given what happened with Eletrobras (ELET3;ELET6). If we cut the political premium risk by 2% from our model’s cost of equity, this would raise the target price to R$54.50 per PETR3/PETR4 and US$21.80 per PBR/PBR.A (over 100 % of potential return)”, he highlights.
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