After its stock rose nearly 6% on Friday with the publication of a more optimistic guidance for the next harvest, SLC Agrícola today received two opposing calls.
While BTG defined the company as a “cash cow” in the high and a growth machine in the low – maintaining its buy recommendation – JP Morgan downgraded the Logemann company from ‘buy’ to ‘neutral’ believing that the current value of the stock is fair and not expecting any catalysts for the stock in the short term.
As a result, JP Morgan reduced the price target from R$ 26 to R$ 23 – a potential upside of 27% from the screen price. BTG kept the price target at R$ 24, a potential increase of 32%.
For now, the market is buying into JP Morgan’s thesis: the shares are down 3% early in the afternoon, but amidst a weak market.
In a guidance published on Friday, SLC predicted an expansion of its planted area in the 2024/25 harvest by 11.4%, to 736.9 thousand hectares. Slightly over half of the land will be allocated for soybeans, 26% for cotton, 16% for corn, and the rest would be divided for other crops.
The company also announced that soybean productivity will increase by 13% year over year due to more favorable weather conditions, while cotton productivity will rise by 3%. Overall, the average cost per hectare is expected to decrease by 5% in the next harvest.
Even with these more positive numbers, JP Morgan had mixed feelings about the guidance. According to the bank, cotton productivity was below expectations, but soybean productivity compensated for it.
But what supports JP Morgan’s more conservative view is the outlook for more challenging prices for soybeans – despite analysts believing the price is near the bottom – and also for cotton.
For analysts Lucas Ferreira and Larissa Perez, the stock could rise if there were an increase in cotton prices – “which we no longer anticipate at this time.” As a result, the analysts reduced the adjusted EBITDA for 2025 by 6% to R$ 2.6 billion – still 8% above consensus.
Meanwhile, BTG is betting on an EBITDA of R$ 2.75 billion, an increase of over 14%.
For BTG, despite last week’s rise, the company continues to trade at an “attractive” multiple of 5.1x EV/EBITDA for next year, compared to a historical average of 7x.
However, the bank admits that the stock is likely to continue to follow commodity prices and that there are few short-term catalysts.
SLC’s shares have dropped 7% in the last twelve months. The company is valued at R$ 7.2 billion on the B3.
Source
Arwen Volkov, A graduate of the University of St. Gallen in Switzerland with a degree in International Finance, Arwen specializes in sustainable finance and green investments. She began her career at an investment bank in London, where she developed financing models for environmentally friendly projects. Known for her analytical and strategic thinking skills, Arwen is a sought-after financial consultant. In her spare time, she mentors fintech startups, contributing to their growth strategies. She is also a nature enthusiast and an amateur photographer.
