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A XP Investments assessed the reflections and timing of the request judicial recovery and Agrogalaxy (AGXY3). The broker sees effects for 3 companies listed on the Stock Exchange, they are: 3tentos, Good Harvest (SOJA3) e Shit (VITT3).
Although most of the presence of the 3tentos As an agricultural retailer in Rio Grande do Sul, with 57 stores, the current expansion in Mato Grosso (14 new stores) will allow some passive gain in market share.
For analysts Leonardo Alencar, Pedro Fonseca and Samuel Isaak, the credit restriction situation should not be a problem, as TTEN3's leverage is low by industry standards, at 0.5x ND/Ebitda, since the agricultural retail business represents around 28% of net revenue.
For Boa Safra, in turn, the effects should be negative. “The company does not disclose the portion of its revenue exposed to AGXY3, if any. On the other hand, due to its size and leadership market sharewe expect pressure on seed prices, directly or indirectly, as peers attempt to secure a shrinking trade channel, especially as producers continue to defer input purchases.”
The effects on Vittia are expected to be mixed, as there is no expectation of impacts on sales. “However, other players (i.e. Biotrop) could divert sales from the agricultural retailer and increase competition for some SKUs/regions.”
Despite the different effects, XP recommends buying the 3 stocks:
- 3tentos (buy and target price of R$ 14.10, upside potential of 20.10%)
- Good Harvest (buy and target price of R$20.90, upside potential of 71.88%)
- Vittia (buy and target price of R$8.70, upside potential of 54.26%)
Does AGXY3's judicial recovery point to a crisis in agribusiness?
The RJ news was seen as a partial surprise, as all agricultural inputs players face similar challenges, although the timing thas been the “coup de grace”. According to them, producers impacted by below-average margins are postponing purchases of inputs in addition to delaying payments for inputs already purchased.
However, the institution does not believe that the event represents a systemic crisis in agribusiness, since the sector is much larger, composed of companies in better situations, than some players entering into judicial recovery, despite more than 100 producers filing for RJ in 2024. “However, the availability of credit is already an issue, and will represent an obstacle for the sector”, they point out.
According to XP, the impacts will be mixed, as some suppliers will divert volumes to other agricultural retailers, which could be positive for 3tentos (TTEN3) e Work (LVRO). “Balance sheet strength should be the main driver for market share gains in the near future.”