After melting 36% since the maximum in October, shares of Petrobras (PETR3; PETR4) seem to have already identified the risks of the new government headed by Luiz Inacio Lula da Silva, Safra says in a report published on Tuesday (10).
Despite this, the bank says that it is necessary to wait for the next steps of the new administration, which will be led by Jean-Paul Pratis, a name that praised his experience in the sector, but refused to criticize the pricing policy.
Safra has recapped its shares with a Neutral recommendation and a price target of R$34, a potential increase of 32% compared to the last close.
Is Petrobras cheap?
According to the bank’s calculations, the stock is trading at 2x the company’s value on operating income (EV/Ebitda), a 46% discount compared to the 5-year average and more than 50% below other oil companies.
“Even looking at future results and cash flow utilization, it appears that a good portion of this has already been reflected in the current share price,” he notes.
On the other hand, analysts say more clarity is needed on the plans and actions of the new administration before a more positive attitude towards the state-owned company is taken.
The main question
For Safra, the biggest doubt is the future use of the Petrobras money.
“We see an increase in capex (investment) very likely and more spending could be directed towards renewable energy projects and increasing refining capacity,” he says.
Pratiss has defended this measure several times. On one occasion, the future CEO said he wanted the oil company to have a more diversified performance and focus on the energy transition.
“Petrobras is a long-term company. He argued, a long-term company cannot take pre-salt (oil) from the seabed and distribute profits, it needs to think about the things all other oil companies are thinking.
In addition, Safra notes that sales of new refineries are likely to be suspended. “All of this would contribute to leaving less liquidity available for dividend payments,” he adds.
Will Petrobras profits evaporate?
The bank predicts that fat profits will inevitably dry up. With a minimum repayment of 25%, set by law, the yield will drop to 9% in 2023, against the 19% expected if the old administration continues.
As of the third quarter, Petrobras has distributed R$173.4 billion in dividends, according to data from TradeMap, with returns reaching 60%.
One of the main concerns for shareholders, Safra highlights, is that recent headlines about fuel price policy have not been very subtle, “which, in our view, may indicate that no specific course of action has been established.”
Last week, shares of the oil company rose after Brits denied meddling in the company’s pricing policy. However, the PPI (International Parity Policy) is expected to decline.
“Currently, Petrobras is unlikely to be directed to fully supply the market, import fuel products and sell them on the domestic market at a loss,” she concluded.
In this session, the stock rose 0.5% to R$24.