(Image: YouTube/SLC Agrícola)
O JP Morgan downgraded the stock SLC Agricola (SLCE3) from buy to neutral, with the target price for the end of 2025 going from R$26 to R$23 (discharge potential of 26.58%)after the strong performance of shares last Friday (27), which closed with an increase of 5.84%, in reaction to the release of the guidance for 2024/2025.
“Despite expectations of a significantly better harvest in 2025, with an expected EBITDA increase of 20% year-on-year, we believe current valuations are fair, trading at 5.3x 2025E EBITDA and a FCF yield of 5.9% ”, see Lucas Ferreira and Larissa Perez.
Like most farmers in Brazil, SLC is expected to face a year of tight margins ahead, with climate risks still present as we await the rains forecast for October and November, he highlights.
According to analysts, an upside potential for the stock would come from better commodity prices, mainly for cotton, which they are not projecting at the moment.
While JP Morgan appreciates the strong execution, growth strategy and risk management of SLC Agrícola, the bank believes that these strengths are already largely reflected in the current share price.
As a result, the bank reduced its Ebitda estimate for 2025 by 6%, to R$2,618 billion (8% above the Bloomberg consensus), as they incorporate lower price estimates for soybeans.
O guidance of SLCE3 for the 2024/2025 harvest
On Thursday night (26), SLC released its guidance for 2024/2025, in which it projected a planted area of 736.9 thousand hectares, with growth of 11.4% in relation to the 2024/2025 harvest.
According to JP Morgan, cotton yields are expected to increase 3% year on year, which, while positive, would be slightly below the bank's previous estimates.
“However, this is more than offset by the positive outlook for soybean yields, which are expected to increase by 13% annually, driven by more favorable weather conditions and significantly exceeding our previous estimates. Furthermore, average costs per hectare should decrease by 5% year on year in reais”, they explain.
As for dividends, analysts believe that the prospect of payments appears less attractive at this time, given that due to the heated land market in Brazil, it would not be irrational for SLC to prioritize expansion capex over dividend payments and share repurchases in the future. short term.