2023-08-18 11:43:05
BTG Pactual has just published a buy recommendation for XP’s share — for the first time since the IPO of Guilherme Benchimol’s company in 2019.
For analyst Eduardo Rosman, the best operational moment and the selloff A recent one, with the stock down 13% this month, created “a good entry point.”
“Although we continue to have medium-term concerns, communication has improved and we believe they are aware of the challenges ahead,” wrote the analyst.
Rosman raised his estimates for XP for the third time since May, this time including second-quarter numbers, which came in above consensus, in the model.
“After a difficult 2022, management humbly admitted their mistakes and XP executed major cost cuts.”
Rosman sees the stock trading at 12x next year’s estimated earnings, a multiple he considers attractive. The target price is US$ 32. The stock closed yesterday at US$ 23.63 (R$ 118 in BDR).
Despite the ‘buy’ recommendation, BTG says it has mid-term concerns which, if not addressed, might become structural issues for XP.
One of these concerns is the company’s growth potential in investments.
“XP already has a 20% market share in the high-income segment, but has a small share in the ‘high net worth’ and low-income segment,” the report says. “With the recovery of the market, the pressure on autonomous agents (with M&As or competition for rebates) should return. We also have questions regarding XP’s growth strategy beyond investments.”
He asks, for example, where Banco XP is going, and what are the company’s plans for the credit business.
Despite these misgivings, Rosman said he was more optimistic regarding the case on account of the resumption of the capital market, which should boost revenues in the coming quarters, and the prospect of falling interest rates, which should make many investors (who had migrated to lower risk products from banks) migrate back to the products of the XP.
The analyst also notes that seven banks (including XP) earned a commission of almost BRL 1 billion on the issuance of Aegea debentures. “Assuming that XP had a share of 15-20%, it would be another R$ 150-200 million in fees in the third quarter, definitely a value that moves the pointer.”
BTG raised XP’s earnings per share forecast for 2023, 2024 and 2025 by 5%, 7% and 5%, respectively. Now, the bank projects a net profit of BRL 4.25 billion this year, BRL 5.2 billion next year and BRL 5.7 billion in 2025, with ROE around 23%.
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