Itaú starts coverage and sees 25% discount; time to buy? – Money Times

O Itau BBA began its coverage for the shares of BrasilAgro (AGRO3) with a buy recommendation and a target price of R$34 (upside potential of 32%) by the end of 2025.

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According to the bank, the company presents a compelling growth story within agribusiness, driven by its strategic land acquisitions, diversified crop portfolio and commitment to sustainable practices.

For analysts, the company is negotiating with a 25% discount for the Net Asset Value (NAV), translated as net asset value.

According to them, BrasilAgro's focus on optimizing land use, while generating recurring FCF (Free Cash Flow) through its agricultural operations, will continue to support long-term value creation.

“We note that the stock has a strong correlation with grain prices, which could imply that the entry point for a long-term trade could be near, as commodity prices have hit a 5-year low,” Gustavo Troyano and Bruno Tomazetto.

As for Brazil, the bank sees the country as well positioned on the global stage to capitalize on increased yields and area expansions without the need to deforest new areas.

Will BrasilAgro go shopping for farmland?

For BBA, while lower commodity prices may impact short-term revenues from crop sales, it provides an attractive environment for land acquisition. This is because willingness to sell land typically increases amid more challenging profitability dynamics.

“BrasilAgro is strategically positioned to take advantage of these conditions by focusing on the acquisition and development of new properties to enhance its long-term growth prospects. In addition, diversified operations, such as the dual focus on land transformation and agriculture ensures that it can generate value even in challenging market conditions,” they explain

Furthermore, diversification across different agricultural crops also provides the company with a portfolio that should support mitigation of specific challenging dynamics in soybean and corn margins in the near term.

“This flexibility allows BrasilAgro to adapt its strategy based on prevailing market dynamics, while maintaining resilience and growth potential.”