Itaú BBA restarted its coverage of Petrobras (PETR3;PETR4) in a report released last Sunday (26), with a recommendation outperform (performance above the market average, or equivalent to the purchase) and a target price of R$ 43 for preferred securities, upside of about 53% in relation to the beginning of the afternoon of this Monday (27). The state-owned company’s PETR4 shares were trading at R$28.80, up 5.78%, around 1 pm (Brasilia time).
The recommendation comes even amid the turbulent environment for the state-owned company, with investors raising their fears for the assets amid political threats. Names such as Morgan Stanley and Eleven, for example, have a neutral recommendation for Petrobras shares, for fear of possible interference – which is also not ruled out by the BBA.
“We believe that a possible change in pricing policy could have considerable impacts. And yes, we can still see short-term volatility related to the war. [na Ucrânia, pressionando combustíveis para cima, assim como a política de preços] may bring some additional pressure”, say the bank’s analysts.
Despite this, BBA sees that Petrobras is already going through an unprecedented positive moment with the combination of high oil prices, crack spreads and the exchange rate and that the likely decline in oil in the medium term, with Russia managing to redistribute its production, should reduce the pressure on the policy of price policy. Thus, they see more extreme changes in pricing policy as quite unlikely.
“Price-related noise is most likely currently at its highest level, with the company still struggling to keep up with international prices,” they comment.
On the other hand, regarding the risk of Petrobras returning to invest in refineries, the bank sees that the company will hardly build a new plant. This is because the construction of new parks would bring much more risks, which weigh on the choice of guidelines for the coming years.
In the past, Petrobras, for example, overestimated the growth in Brazilian demand for fuel and ended up increasing its production capacity without there being any demand for it.
Instead of increasing its investments in refineries, the state-owned company must continue to invest in the development of its mature plants, seeking to avoid excess supply, and maintain divestments in the sector, which is already contemplated in the plan that runs until 2026.
Finally, Itaú BBA states that Petrobras has on its horizon the challenge of the energy transition, but that it should grow even so, with its plan focused on greater efficiency, lower emissions and CO2 reinjections during oil and gas extraction, in the that the company is a reference – even being well ahead of its peers.
“Aggressive energy transition scenarios bring risks to the demand for fossil fuels and fuels in the long term, depending on Petrobras’ ability to adapt its business to the energy matrix”, explain the BBA analysts. “A sensitivity analysis of Petrobras’ fair value for different perpetuity growth scenarios shows that we still see advantages for the company even in scenarios of a decline in perpetuity growth”, conclude the analysts.
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