For Genial analysts, B3 has an attractive discount, but with few catalysts for the shares (Image: Freepik)
The Brazilian stock market has been 'cheap' for some time now. The fiscal scenario, inflation and still high interest rates are some of the factors that are preventing the stock market from 'moving' — and, consequently, the stocks of B3 (B3SA3).
According to Genial Investimentos, B3SA3 shares trade at an “attractive” multiple of 12.8 times projected earnings (P/E) for 2024 and 12.1 times P/E for 2025.
The multiple implies a 39.5% discount compared to other international exchanges, which trade on average at 20 times P/E for 2025.
Despite the attractive 'discount', Genial analysts say that the situation on the Brazilian stock exchange is unlikely to improve in the short term.
“Despite the gradual and promising diversification of revenues with some standout products, we have not identified a single, definitive solution (“silver bullet”) that can substantially boost B3’s revenues,” the report says.
Is it time to buy B3?
Considering the valuation of the owner of the stock exchange, B3, Genial analysts reiterate the buy recommendation for B3SA3 shares.
The brokerage updated the target price to R$15.80 for the end of 2025 — which represents a potential appreciation of 36.2% compared to the closing price last Friday (20).
The brokerage firm states that interest rate cuts in the United States should contribute, albeit marginally, to an increase in the allocation of risk assets in Brazil.
B3's diversification, with more significant growth in the derivatives, data and fixed income segments, should also continue to drive results.
“The trend for H2 2024 appears to be similar to Q2, with growth in derivatives, fixed income, data and infrastructure offsetting weak equity performance,” the report says.
“For the first time, the local fixed income capital market outperformed credit and bonds international as the main source of financing for companies.”
Genial analysts also state that a possible early resolution of the Marka and Fontecindam lawsuit, worth R$43 billion, and a favorable CARF decision of R$5.6 billion, regarding the premium from the merger between BM&F and Bovespa, could act as positive catalysts for B3 shares.
The brokerage firm, in turn, does not disregard the fact that the rise in interest rates should boost the attractiveness of fixed income products, “making the stock market more challenging”.