Market consensus is still conservative on their 2022-23 estimates of sky (CIEL3), evaluates the BTG Pactual (BPAC11).
Although it remains cautious with the payments sector, the bank sees major upside risks for the company, which combines valuation attractive (traded close to 8 times P/E [preço sobre lucro] to 2023), strong operational momentum and a successful transformation agenda.
“We believe that a buy recommendation on paper is justifiable”, say analysts Eduardo Rosma, Thiago Paura, Ricardo Buchpiguel and Vitor Melo, in a report released earlier this week. The target price is R$6.
strong second quarter
Cielo will continue to show “decent” growth in TPV (total volume of payments), in addition to positive margins from catenesays BTG.
In the analysts’ assessment, the recurring net income reported by the company in the second quarter, of R$ 383 million, should be seen as a floor for the results of the third quarter.
“We see an upside risk for this number (potentially BRL 400-450 million)”, they comment.
In addition to the R$383 million profit, Cielo reported a 9.7% drop in net operating revenue, to R$2.54 billion, considering Merchant.
Disregarding MerchantE, whose divestiture was completed in April, net operating income “Cielo + Cateno” recorded a 33.7% year-on-year expansion.
Consolidated Ebitda (earnings before interest, taxes, depreciation and amortization) reached R$ 1.18 billion, an annual growth of 103.7%, considering the impacts related to the sale of MerchantE.
Disregarding MerchantE, Ebitda still advanced 54.2% year-on-year.
On a recurring basis, Ebitda rose 57.5%, totaling R$914.7 million.
With results surprising positively, Cielo has gained the trust of analysts, who are optimistic about the company for the first time in years.
“Unstable Balance”
According to BTG, the more rational price dynamics, which boosted the sector’s profitability recovery, could be an “unstable balance”.
“We do not rule out a scenario of fiercer competition when interest rates fall”, say Rosma, Paura, Buchpiguel and Melo.
Filipe Oliveira and Daniel Diniz, respectively CFO and head of IR at Cielo, said in a conversation with BTG and local investors that Cielo is not willing to stand still and lose market share.
On the other hand, the CFO understands that more players are aware that price elasticity in relation to volumes is not so high. So a very aggressive competitive approach doesn’t generate much higher revenue.
Following the line of repricing of its customer base in April, Cielo implemented new repricing rounds in July and August. Although on a smaller scale, transferring a customer base with higher prices is “definitely good for profits”, points out BTG.
There is still room for improvement in logistics processes, in the customer journey and, especially, in the service channels.
“But the NPS (customer satisfaction level metric) has increased since 2019, while the NPS of competitors has dropped,” the bank points out.
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Source: Moneytimes
I am an author at Global happenings and I mostly cover automobile news. In my time working in the automotive industry, I have developed a keen interest in the latest developments and trends. My writing skills have also allowed me to share my knowledge with others through articles and blog posts.
