Santander began covering Vivara with a buy recommendation, citing the jewelry retailer’s attractive valuation and the expansion potential of Life, the company’s silver accessories brand.
The bank sees Vivara trading at 13x its estimated earnings for next year and at a PEG Ratio — the division of P/E by the CAGR of recent years — of 0.7x (compared to Arezzo’s 0.9x and 1.5x). 1x by Renner).
This metric “makes Vivara a bargain and an attractive addition to any long-term portfolio,” write analysts Eric Huang and Ruben Couto.
Santander has set a target price of BRL 33 for the next twelve months — a potential upside of around 40% in relation to the screen price. Around noon, the stock is up 7.5%.
For analysts, one of the key points of the investment thesis is the expansion of Life, which emerged in 2011 as a product line and was recently separated as an independent brand.
Santander estimates that Vivara can “easily” open 30 to 40 Life stores a year by 2026, reaching more than 200 stores. In this scenario, the brand would account for almost half (42%) of the company’s revenue.
“We believe that the pricing of their products positions them to compete directly with other accessories and clothing (such as high heels and dresses) when buying gifts, which implies an expansion of their growth potential.”
This growth at Life should also contribute to an increase in the company’s margins, given that the brand has a higher gross margin than Vivara.
Santander also said that Vivara’s dominant position (a market share of 14% compared to 2.8% for the second player in the sector) allows it to have a vertical business model, which contributes to the results.
“This scale allowed the company to operate a factory in the Manaus Free Trade Zone, where 80% of the products sold are manufactured,” the analysts wrote. “In our view, only this scale makes it possible to dilute production and logistics costs, justifying its vertical model.”
For Santander, the biggest risks of the thesis are the execution of this aggressive expansion plan and the end of two tax benefits that Vivara has today, which could reduce the company’s fair value by 20%.