Which electric company has won over Itaú (and pays dividends) – Money Times

O Itau BBA revisited the electrical sector and raised the recommendation of ISA Cteep (TRPL4) from neutral to buy, with a target price of R$31.5, previously at R$26.5, which opens up potential for an increase of 28%.

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On the stock exchange, the company is not having its best days. The stock has accumulated a drop of 5.65%, amid pressure from the sale of the company's stake. Eletrobras (ELET3). However, in BBA's view, it is precisely this drop that makes the stock interesting.

Analysts point out that while ISA has fallen, returns are at 9.6% compared to other stocks in the segment, while they see the power company trading at an IRR (internal rate of return) of 9.6%, “an interesting upside potential given its low-risk business”.

Also according to the BBA, the estimates reflect:

• the final result of the last tariff redefinition for the renewed concession;
• a more optimistic outlook for brownfield investments (improvements in areas already in use);
• and a longer payment flow related to the economic component of the RBSE, which, in practice, is how much the company receives for the distribution and transmission of electricity.

BBA still sees the company paying high single-digit dividend yields in the short to medium term, potentially reaching 8.7% in 2024 (above peers), assuming a 75% payout.

Cteep shares are now the most liquid among broadcasters.

Transmission is neutral for BTG

Last month, the BTG Pactual also updated its recommendation for the company. According to analysts, the company trades at an implied real IRR of 7%, compared to 6% for Brazilian Treasury bonds. In other words, the stock is not as attractive. The recommendation is neutral.

“We also note that a pressure risk related to future divestments by Eletrobras may continue to weigh on the shares,” say the analysts.

Regarding the sustainability of dividends of the company, recognized as a good payer, BTG points out that the policy establishes a payout (part of profit reserved for dividends) minimum of 75% of regulatory profits if leverage remains below 3 times, in the net debt/EBITDA ratio.

In the second quarter of 2024, leverage reached 2.5 times. However, next year, leverage could surpass the 3 times mark in 2025, forcing the electric company to reduce its payoutresulting in dividends yelds less attractive.