XP has just updated its thesis for Marcopolo, placing the company as its top pick in the capital goods sector.
The brokerage’s analyst team reiterated their ‘buy’ recommendation and increased the price target for the bus body manufacturer from R$ 8 to R$ 11.50 – a potential upside of 40% from the current price.
Marcopolo closed today with a 3.45% increase.
Analysts Lucas Laghi, Fernanda Urbano, and Guilherme Nippes gave four reasons for optimism about the stock: attractive valuation; strong momentum in the sector due to pent-up demand for buses; higher dividend expected in the coming years; and increased liquidity of the stock.
XP sees Marcopolo trading at 6.4x the estimated profit for 2025 – a discount of 33% compared to the broker’s fair value and 51% below historical average.
The current outlook for the sector is positive, according to XP. Analysts believe there is significant pent-up demand since the pandemic and an aging bus fleet. The volatility of airfares also works in favor of the sector.
According to analysts’ calculations, there is an accumulated gap of 3.9 thousand units between 2019-2023 – and as Marcopolo maintains around 50% market share, it should absorb a good portion of the demand.
With this promising scenario, XP also foresees a better cash generation outlook in the coming years – which should lead to a resumption of distributing more robust dividends.
In the analysts’ calculations, Marcopolo’s dividend yield is expected to rise to 8% this year, 9% in 2025, and 10% in 2026 – remaining between 8% and 10% until 2030.
“After more than six years with limited dividend distribution, we see the dividend yield mitigating some of the risk if higher multiples do not materialize,” wrote the analysts.
With a 250% appreciation in the last two years, XP also sees increased market interest in the stock, which has seen a significant increase in liquidity. Currently, the stock trades around R$ 77 million per day, 2.7x more than in October last year.
“Finally, if the stock is included in the Ibovespa, additional flow could increase interest in the name,” wrote the analysts.
Marcopolo’s stock has risen 82% in the last 12 months. The company is valued at R$ 8.6 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.
