The bank's analysts see an improvement in the outlook for the cattle cycle in Brazil in 2025, which should benefit Minerva (Photo: Minerva Foods)
O Goldman Sachs maintained its recommendation of buy and target price of R$7.55 (upside potential of 13.2%) for shares of Minerva (BEEF3) after the approval of Cade (Administrative Council for Economic Defense) for the R$ 7.5 billion agreement with Marfrig (MRFG3), involving the sale of 16 plants and a distribution center.
According to the institution, the approval of the acquisition of some Marfrig assets in South America by the Brazilian antitrust authority should bring the investor debate about Minerva back to market fundamentals, as it removes the burden of accumulated interest on the main acquisition price.
“Although we recognize that the agreement in Uruguay may bring some uncertainty, we see the announcement as positive. We note that the outlook for the cattle cycle in Brazil in 2025 is gradually improving”
Based on Marfrig's reporting and adjustments for intercompany transactions, Goldman estimates that the assets Minerva is acquiring from Marfrig in Brazil, Chile and Argentina are operating at EBITDA of R$905 million pre-synergies.
Downside risks for BEEF3
According to analysts, these conditions imply a final acquisition price of 6.3x LTM EV/Ebitda, against BEEF3's current 5.1x and the sector average of c.5.0x. Among the downside risks, the bank highlights:
- Integration risks of the pending agreement with Marfrig;
- Future dividends;
- New export embargoes, bans and/or health disruptions;
- A potential slowdown in demand from China;
- Exchange rate volatility;
- Ongoing political and macro volatility in Argentina;
- Increased competition for beef exports.