what to expect for stocks?

It wasn’t just Luiza Trajano, from Magazine Luiza (MGLU3), who left the Forbes list of billionaires in June. Three other Brazilian businessmen left the list, with the loss of equity closely related to the sharp drop in their companies’ shares.

In addition to Luiza, the publication points out, the co-founder and CEO of the construction company MRV (MRVE3), Rubens Menin left the list of billionaires, as did Candido Koren de Lima Junior and his brother Jorge Koren de Lima, sons of the founder and members of the board of Hapvida (HAPV3). Now, their fortunes are less than US$ 1 billion (equivalent to more than R$ 5 billion).

According to Forbes, the CEO of MRV reached US$ 3.9 billion in wealth in July 2021. In the same year, Candido and Jorge had a fortune of US$ 2.1 billion. Luiza Trajano had already reached a fortune of US$ 5.6 billion.

The loss of fortune comes amid the accumulated fall of Magalu shares of 67% until June 17, while Hapvida shares accumulated a decrease of 43% and MRV, 32%.

In a report, XP highlighted the reasons for the drop in the three stocks, which impacted the wealth of the now ex-billionaires, as well as the perspective of the house for the assets.

Magazine Luiza: pressure continues

One of the sectors that has been penalized the most on the Stock Exchange since the market’s change of mood in June last year is e-commerce, points out the analysis team, amidst the scenario of macroeconomic deterioration, more persistent inflation than projected, in addition to the conflict between Russia and Ukraine and the continuation of lockdowns in China.

“We have seen a strong reduction in the purchasing power of Brazilians, which, combined with a scenario of strong interest rates, translates into a highly weakened demand for consumer goods, especially discretionary and higher average prices”, highlight the analysts. In addition, the increase in the cost of capital and competition, as well as the change in the market’s focus, weighs heavily on the sector.

In the first quarter of 2022, Magalu presented mixed results, with growth pressured by the macro scenario and cash burn, while profitability showed signs of improvement.

XP highlights that, even with the recent fall in shares, they still have a neutral recommendation for MGLU3 shares, as well as for the segment as a whole. “We still do not recommend purchasing e-commerce papers as we expect a very challenging macro dynamics ahead, both from the point of view of inflation (which should remain close to the double digit level throughout the year) and interest rates ( with at least one more high expected in Brazil and a cycle yet to come in the US).”

XP’s view is in line with that of many market analysts, who point out that, even with the recent fall in shares, both the macro scenario and greater competition in the sector should continue to put pressure on the paper.

Hapvida: more positive expectations with synergies

Hapvida also suffers a significant drop in its shares. As XP highlighted in an analysis of the company’s first-quarter balance sheet, organic growth is still a problem.

The high level of claims also contributed to the negative data in the period, “still pressured by costs related to Covid-19, acquisitions and the negative price adjustment of individual plans”.

Priscila Araújo, from Macro Capital, highlighted at the Super Clássicos da Bolsa 2022 event that Hapvida had low tickets, influenced by the readjustments of ANS plans and which had a strong impact on the company until the first quarter of 2022, the increase in costs and the synergies of merger with GNDI announced by the company.

For Rafael Barros, health sector analyst at XP, “the merger with GNDI should create considerable synergies”, which reinforces the buy recommendation for the company’s shares.

In a report this week, Itaú BBA reinforced a positive outlook for the stock, with an outperform recommendation (a performance above the market average) for HAPV3 paper, albeit reducing the target price from R$17 to R$10.

While analysts at the bank acknowledge that short-term dynamics are likely to remain challenging, they still highlight confidence with the long-term outlook for Hapvida, as they believe it will be the player best able to control medical costs once inflation returns to normal levels. .

“Looking beyond the current turbulent (but temporary) scenario of rising unit costs in health, we believe that the thesis that Hapvida has the winning model in the Brazilian health sector is still valid”, points out the BBA.

MRV: Radar optionalities make action more attractive

In the case of MRV, XP highlights that the results of recent years have been hampered by the gross margin below expectations for the company’s main operation (Brazilian operation), due to costs under pressure, mainly affected by the strong increase in the price of steel . As a result, the company’s net income has been below the house’s estimates.

As highlighted by an analysis by Ygor Altero, head of Real Estate at XP, in the face of the most challenging inflationary scenario, with higher interest rates, most companies in the civil construction sector had difficulty passing on prices, given their more limited purchasing power. of the consumer.

On the positive side for the company, according to the analyst, the more challenging cost dynamics within the Casa Verde e Amarela (CVA) program increased, mainly, the difficulty in the operation of small operators, which have a relevant participation in the program.

“This, consequently, should reduce competition within the segment. In this way, MRV should benefit from gaining share within the CVA,” he said. In addition, AHS (MRV’s North American subsidiary) has shown a positive performance, which has supported the company’s results.

“That said, we see MRV’s share price as discounted and we have a buy recommendation for the company with a target price of BRL 19 per share.”

MRV has been constantly identified as an opportunity in the sector, mainly due to its American operation, although with downward revisions in earnings expectations. Earlier this month, Credit Suisse had reinforced the company as its top pick (preferred) in the construction segment.

Bradesco BBI, on the other hand, pointed to MRV among the favorites in the sector, but not “the favorite”, which is Cyrela (CYRE3). Analysts maintained the buy recommendation for MRVE3 as they still like the options, stock liquidity, positive execution on AHS (MRV’s American operation, to be renamed Resia) and the discount on valuation (price multiple over book value per share, or P/VPA, 0.8 times).

However, a sharper-than-expected drop in MRV Brasil’s margins in 4Q21 and 1Q22 led BBI to cut its 2022 profit estimate by 35% (21% below consensus) and increased reliance on a capitalization so far AHS as a trigger for the stock (which they hope will help shed light on AHS’s potential value), they noted.

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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