The process of reopening China has disappointed analysts, who have tried to revise over the last few months the estimates for stocks exposed to the recovery of economic demand in the country.
O BTG Pactual recognizes that it made a mistake when projecting the extension of the Chinese recovery process, which proved to be more focused on services and with a slower recovery on the side of the commodities.
For the actions of OK (VOUCH3) take off, BTG assesses that the situation in China should show signs of improvement first. Still, looking forward, the bank believes that the downside (downside potential) seems limited.
“We are approaching one of those moments of risky pessimism peak, which require very little to revive the strong resumptions with which we have become accustomed over the years”, say analysts Leonardo Correa and Caio Greiner, in a report released this week.
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Lower upside potential but still “buy”
The Bank took the opportunity to revise the estimates of Vale’s investment thesis, after the earnings season for the first quarter of the year and with lower projections for the price curve for the iron ore from now on.
BTG is now working with a commodity curve for 2023-26 of $105/90/85/80 from $125/105/95/80 previously.
Thus, Ebitda estimates (earnings before interest, taxes, depreciation and amortization) for 2023-24 were cut by 30%, at a level considered more achievable by analysts.
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The target price for ADRs (American Depositary Receipts, share certificates issued in the United States and backed by securities issued by foreign companies) of Vale (OK) has been updated from $23 to $18, which limits the upside potential to around 30% right now. Despite this, analysts reiterated their buy recommendation.
For BTG, investors are only looking at the coming quarters, and the thesis is already rightly priced in the short term.
With iron ore at US$ 105/ton, the institution sees Vale delivering an Ebitda of US$ 16.7 billion in 2023, negotiating at a yield cash flow of “only” 9%.
“It is important to note that this yield is negatively impacted by some non-recurring effects”, emphasize the BTG analysts, who mention, among other things, expenses with Brumadinho/Samarcodepressed iron ore shipments and inflated costs.
Based on yield of 9%, BTG believes that the mining company can return between 8-10% of return to shareholders in the form of dividends It is share buybacks.
Source: Moneytimes
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