GPA (PCAR3) can rise up to 95% according to Itaú BBA; stock leads gains on the stock market
Analysts estimate that paper has upside potential even with possible labor provisions on the radar
The actions of Pão de Açúcar Group (PCAR3) lead Ibovespa gains and rise close to 5% on the stock market after Itaú BBA resumed coverage of the share with an outperform recommendation, equivalent to a purchase.
The new target price for the paper is R$32, which represents an upside potential of 95% compared to the last closing price of the paper, at R$16.42.
Even with significant discounts for each GPA business unit – Brazilian operation, Éxito and Cnova – the action offers a positive risk-return ratio, according to the BBA report released this Tuesday, 28.
“We performed a sensitivity analysis on the current share price and possible monetization values for Éxito and Cnova to assess the implicit value of the Brazilian operation. We conclude that, even with the discount of approximately 50% in the screen price of Éxito and Cnova, the value attributed to the Brazilian operation is close to zero. Therefore, we believe that potential monetization would generate value for PCAR3”, said the analysts led by Thiago Macruz.
In BBA’s assessment, growing concerns about potential labor provisions are partly responsible for the current share price. The main doubt of investors is the sale of the Extra operation.
“The transaction included the closing of some stores and a distribution center, as well as the dismissal of employees, which may require some labor provisions ahead. Although it is still too early to estimate the value of these provisions, they could reach billions of reais”, they evaluated.
As next steps, GPA should focus on the premium food retail segment, a move that began with the sale of the hyper division in the company’s operations. The focus is now on accelerating stores with the “proximity” banner, neighborhood units with essential items, as well as improving revenue under the Pão de Açúcar brand.
For BBA, the shares are a good investment opportunity, with an eye on the monetization potential of operations that are GPA’s new focus.