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Wednesday, November 30, 2022

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Porto Seguro (PSSA3): Forget the bad semester; stock may jump 36% in 12 months

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Underwater: for analysts, Porto Seguro (PSSA3) will change the game in the coming quarters (Image: Reproduction / Porto Seguro Youtube)

THE safe harbor (PSSA3) had one first semester difficult. The company was mainly impacted by the high loss ratio at the insurance company and the growth in delinquency in the financial vertical.

But for the series analysts Best Stocks on the Stock Exchangegives Empiricus Research, “the worst has gone”. According to Fernando Ferrer and Henrique Cavalcante, the reading is of the company’s recovery in the coming quarters.

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They explained the problems that hit the company’s three verticals – insurance, health and finance – and indicated what they expect from the action.

Porto Seguro Auto, the company’s main arm, suffers from claims

Approximately 50% of the company’s total revenue comes from the Auto insurance vertical, which has presented disappointing results in recent quarters due to the acceleration of prices in the automotive industry. As a result, Porto had higher maintenance costs.

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The company even tried to act in 4Q21 in order to offset the high costs by readjusting the price of insurance. However, the incremental revenue from the adjustment is gradually recognized in the result over 12 months.

Thus, there was an increase in the loss ratio. In insurance, the loss ratio is the ratio of the procedures performed by the beneficiaries to the amount collected by the company. In other words, the cost of use by users in relation to the amount received by Porto.

Porto Saúde: Covid-19 affected vertical loss ratio

In the Porto Saúde vertical, the pace of revenue growth and expansion of the beneficiary base was positive in 2Q22, but affected by the growth in costs.

Despite the drastic reduction in the number of Covid-19 cases requiring hospitalization (which implies more expenses), the loss ratio is also at high levels and far from the historical average, reaching 82.7% in 2Q22.

For the company, the increase in the frequency of non-urgent events is one of the reasons for the increase in costs. Many surgical procedures that were left aside during the pandemic are being performed now, and they are costly for Porto.

The climate change in greater São Paulo – where the company has about 90% of the portfolio – also affects the number of hospitalizations and, consequently, costs.

Financial arm was affected by default

Responsible for 15% of Porto’s consolidated revenue, Porto Bank is the company’s financial arm.

The vertical showed a strong increase in the level of customer delinquency in recent quarters.

As a result, executives signaled at the last earnings conference that they had adopted more restrictive measures in the granting of direct consumer credit and card origination. In addition, the idea is also to focus on customers who already have a long-standing relationship with Porto.

And now? What will be the future of Porto?

As stated earlier, despite the problems presented in recent quarters, analysts believe that the worst is behind us.

In the Insurance vertical, which suffered from the loss ratio, the deflation in consumer prices (IPCA) since July indicates a drop in prices in the automotive industry. In addition to that, the…


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Source: Moneytimes

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