Despite the optimism for the sector's shares, the bank maintains a neutral position for two stocks due to the lack of triggers in the short term (iStock.com/sarymsakov)
O Bradesco BBIin a weekly report, revised his theses to actions do agribusiness. Despite maintaining a neutral recommendation for SLC Agricola (SLCE3) (target price and upside potential of 23.46%) and Saint Martin (SMTO3) (target price and potential increase of 16.58%), the bank recommends purchasing 3 shares: 3tentos (TTEN3), Good Harvest (SOJA3) e Jalles (JALL3).
At 3tentos (target price of R$18 and upside potential of 63.49%) is the top pick (favorite stock) within the bank's coverage, which estimates an average annual growth rate for net profit between 2024-27 of 24%, 6p.p. above the sector average), more than justifying the 2025 P/E of 11.1x, 16% above the sector.
“The ROIC (return on invested capital) should also return to 17% by 2027, 3.5 p.p. above the sector, and this before the current investment cycle fully matures”, point out Henrique Brustolin and José Ricardo Rosalen.
The bargain and the discounted action
Boa Safra's normalized P/L for 2025 of 6.3x (target price of R$20 and upside potential of 71.53%) makes the share the cheapest in the sector (34% discount), although the opportunities growth will also remain firm, said Bradesco BBI.
“We believe that weaker volumes than initially expected this year are already priced in (SOJA3 trading at 8x the P/E multiple for 2024 means a 17% discount for the sector), and meeting our earnings expectations should be an important event risk reduction”, they explain.
For Jalles (target price of R$10 and potential increase of 55.76%), the bank projects that the sugar and ethanol producer will deliver a CAGR (weighted average annual growth rate) for EBIT between 2025-28 of 7% as investment returns mature, translating into a 29% discount for São Martinho based on fiscal year 2028 ending multiples.
“We see an attractive return as multiples contract, which should also be helped by high sugar prices and an increase in the production mix”, they add.
Bradesco sees lack of trigger in the short term
According to Bradesco BBI, the neutral recommendation for SLC and São Martinho shares has nothing to do with the quality of the companies, but rather with the lack of triggers in the short term.
“We see both companies offering high-single-digit FCFE (shareholder cash flow) yields in the next fiscal year, which should limit the potential for downside but not necessarily translate into a stronger value proposition yet.”