Vivara (VIVA3): XP sees ‘lots of room’ for market gain, even after slashing price target

THE XP Investimentos lowered the target price of the shares of Vivara (VIVA3), from R$37 to R$31.

In a report released this Tuesday (28), the brokerage says that the reduction comes after the incorporation of the company’s latest quarterly results, a higher cost of capital (13.6% vs. 11.2% previously) and a new Life brand modeling.

Despite the reduction in the target price, the buy recommendation was reiterated.

In XP’s view, Vivara is the absolute leader in its market, with a 16% share. Despite its prominent position, the brokerage still sees “plenty of room” for the company to gain share by:

• expansion of Life, with 35-40 stores a year and an estimated R$5 billion silver market;
• market consolidation through the expansion of the Vivara brand – expansion of 15-20 stores per year; and
• potential new segments that can be added to the portfolio.

XP highlights that Vivara is open to both Fusions and acquisitions (BAD) regarding international opportunities, “although the latter should be a lever for medium-term growth”, he points out.

Life, main route of profitability

According to XP, Life is Vivara’s main avenue for growth and profitability in the coming years, “given that the company is expanding its addressable market through more accessible products, with very attractive returns”.

“As a reference, Life should already become the second largest Brazilian jewelry brand by the end of 2022”, highlights the brokerage.

Solid results in the short term

In the short term, XP doesn’t believe it has reason to worry. Mother’s Day and Valentine’s Day were strong and important events for Vivara, and the company has not seen any slowdown in demand.

“In addition, as Life stores mature and gain share of consolidated sales, we should see positive effects on consolidated gross margin, while operating leverage should bring SG&A (general selling administrative expenses) dilution for the next few years”, he adds. .