This week, Asian retailers like SheinShopee and Aliexpress, became the target of criticism from Brazilians. Luiza Trajanowhich runs the network of stores in the Magazine Luizahe went on to say that “there is no way to compete if you pay 37% tax and someone else does not”.
The buzz took on such proportions that the President Lula is studying the possibility of taxing goods imported from foreign sites and e-commerce.
The objective is to inhibit competition from products imported from China and, thus, stimulate sales by Brazilian retailers.
To solve the problem, an alternative would be to charge the VAT (Value Added Tax) on sales of those goods. But the big question is that this measure may take time to be implemented…
This is because, even if approved, the transition from the current tax system to VAT should be gradual and the process could last until 2031. A very long time and one that does not please Brazilian women.
But, while the fight between Magazine Luiza and Shein is not resolved, a retailer outside this discussion is winning the hearts of investors.
I’m talking about a consolidated brand in the country, with more than 60 years of history and that dominates its segment, with participation of 16% in the Brazilian market.
To give you an idea of what this means, its main competitor only has a 2.1% share of this same market.
She has an ambitious retail expansion plan, which was temporarily paused due to the pandemic, and is now expected to be resumed with force. If all goes well, as expected by analysts, the share of this retailer can take off up to 70% on the stock exchange.
It is probably not among the stores you shop the most, but it may be responsible for a transformation in your assets.
And the reasons for that are as follows:
This is one of the biggest attractions of this company: the number of stores that she has. And you’ve probably already come across her in a mall in the country, since she’s present in 38% of Brazilian malls.
But of course, to have that many stores, they have to make a profit. And this retailer understands well: on average, a mature brand store earns between BRL 7 million and BRL 8 million per year.
In addition, your payback (time to recover the money invested) is one of the fastest in Brazilian retail. Between 12 and 18 months, the stores already “pay for themselves”.
For all these reasons, analysts at Empiricus Research believe that this retailer’s expansion plan has everything to work out. The expectation is that she will be able to mark her presence in 50% of malls in Brazil by 2026.
And with more stores, the brand is expected to make more profit, which could translate into a big share price.
2. She can have a jump of up to 70% on the stock market
I know that talking about appreciation of retail stocks at this moment seems out of line. After all, with high interest rates and inflation, the sector is being heavily penalized.
But the good news is that retail has become very cheap, something that has not been seen for years, according to Larissa Quaresma, an analyst at Empiricus Research.
“So, if you choose the companies in this sector very carefully and have patience, I think you can earn a lot of money with retail”, he says. And one of the analyst’s favorite bets for this sector is the retailer in question.
For her, the fundamentals of the company have not changed. In other words, it is still a quality company, which has been growing year after year and is able to put its expansion plan into practice.
“It is a company that has low leverage, has more cash than debt, so the high interest rate does not make much difference to it, and it works with high income”, explains the analyst.
This means that, even with economic activity slowing down, it is less impacted than retailers working with the lowest income.
For all these reasons, the analyst recommends buying this retailer’s shares with a target price of $40which implies a 70% appreciation at current quotes.
3. The stock is on the verge of buying
Having said all that, Larissa believes that the ideal time to invest in this retailer’s shares is now.
“When you are going to invest in a company, the most important variable to determine your return is how much you are going to pay to enter”, he says. And the “cat jump” is that, due to the high interest rate scenario, the entry price of this company’s shares was very cheap.
That is, this is an opportunity to buy a share with great potential for appreciation, paying much less than it is really worth.
The stock market anticipates what will happen in the operation of companies. At that moment, he has already priced the shares expecting the negative result that will come with the Copom signal.
In the same way, when the market has any sign that the Central Bank may again lower interest rates, that household consumption will increase and retailers’ results may improve, it will push stock prices upwards.
“Everyone wants to buy early to profit when the market recovers. At some point in the second half of the year, towards the end of the year, between September and October, this sign may happen. Just for the BC to signal this, the shares can already go up”
Don’t let this investment opportunity pass you by.
The summary is the following: although retail has been heavily penalized on the stock exchange and we are in the middle of a confusion between Asians and Brazilians, there are still opportunities for investors to seek profit from this sector.
The opportunity was identified by Rodolfo Amstalden, co-founder of Empiricus Research and who manages the portfolio called “Microcap Alert”, which brings together the stocks with the greatest potential for appreciation on the stock exchange.
He panned the stock of a retailer that, until then, is off the radar, cheap, has big expansion plans in Brazil and can appreciate up to 70% on the stock exchange.
But I understand that the moment is delicate and, perhaps, you want to be more sure about this investment before making any decision.
Therefore, I invite you to read a full and free report on this action. There, you will understand in more detail why she can have such an expressive jump on the bag.
Access to this report was released free of charge as a courtesy of Empiricus Investimentos, the group’s brokerage, to anyone interested.
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Source: Moneytimes
I am an author and journalist with a focus on market news. I have worked for a global news website for the past two years, writing articles on a range of topics relating to the stock market. My work has been published in international publications and I have delivered talks at both academic institutions and business conferences around the world.
