(Image: Reproduction/São Martinho)
O JP Morgan raised its recommendation to Saint Martin (SMTO3) from neutral to purchase (overweight) by a combination of valuation attractive, limited negative news flow and an optimistic outlook for prices of sugar e ethanol.
On Tuesday (17), Morgan Stanley downgraded the stock from equal-weight (neutral) to underweight (sell).
Despite the update and the optimistic view on sugar and ethanol prices going forward, the bank reduced its target price from R$38 to R$35 per share (still offering 30% upside), weaker than expected year-to-date sugar prices and weaker sugar/higher capex mix, as per theuidance of the company,
“Although the company has been affected by the forest fires that have been happening in Brazil in recent weeks, it has already assessed the damage and adjusted its guidancewhich leads us to believe that the worst seems to be behind us in terms of news flow. Furthermore, we remain optimistic about sugar and ethanol prices, with sugar prices 23% above the 2025/26 consensus,” assess Lucas Ferreira and Froylan Mendez.
For the 25/26 season, JP Morgan raised EBITDA by 19% based on the stronger sugar price estimate and weaker exchange rate forecasts, now 13% above consensus at R$4.3 billion.
“With most of the company’s sugar production for the year already hedged, especially now that wildfires could lead to a slight reduction in the sugar mix, we believe consensus revisions will likely be triggered by ethanol prices. In other words, if prices rise beyond R$2.8 per liter, we could have further upside in our numbers, and so could consensus, with a potential best-case adjusted EBITDA close to R$4.0 billion.”