O JPMorgan raised the recommendation of IRB (IRBR3) from underweight, which is equivalent to selling, to neutral, with a target price of R$1.40.
It is true that the bank is not so optimistic about the company as to recommend the purchase of the paper, but analysts led by Guilherme Grespan listed some points that may favor the reinsurer in the coming months, such as:
- normalization of rural losses, which according to the JPMorgan have already been felt;
- the R$ 1.2 billion raised from the stock offering and R$ 185 million in new funds from the sale of properties;
- earnings may return in the third or fourth quarter of 2022;
according to JPMorganafter falling 70% of the year, against a 6% rise in the Ibovespa, the IRB trades at more consistent multiples.
“Following the recent stock price correction, we see the IRB trading at 0.9x tangible BV plus NPV tax credits, more consistent in our view with the long-term expected ROE (return on equity) of 14-18% of the business,” he calculates.
In addition, the bank also sees a boost from retail investors for the shares. Currently, the IRB It has more than 200 individual investors in its shareholder base.
improvement in the field
In JPMorgan’s view, the loss ratio in rural areas, which has exploded in recent months, should normalize. The segment was the main factor for the 194% decrease in the May loss.
“We see (the bad results) as less recurrent. Looking ahead, we already see better trends for the rural performance of primary insurers during May and June, which we expect will be reflected in the results of reinsurers in 3Q22”, he argues.
Better options than IRB
Even highlighting that the IRB actions are less risky, the JPMorgan points out that there are better options on the stock market.
Analysts cite Harbor (PPSA3) and BB Security (BBSE3), which trade at a price-to-earnings ratio of 8.4 times and 9 times for 2023, respectively, against 13 times for the IRB.
Shares touched R$1.10 in this session, but recovered their breath, closing at R$1.20.
Even if brokers maintain skepticism with paper, at least two houses, Inter and Elevenmaintained the neutral recommendation, as well as JPMorgan.
This means that analysts indicate that the investor who is long on paper, keep the position and who is out, do not buy.
To the ElevenO high discount on the offer was already expected and should reduce the selling pressure on paper, since the funds raised regularize the regulatory non-compliance with Susep.
“The level of uncertainty is still high and the turbulent scenario should remain for a few more quarters”, say analysts Carlos Daltozo and Raul Grego Lemos, who signed the report.
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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.
