BTG Pactual chose Simple Minds’ classic song to illustrate the moment Cosan is going through: yes, the company has become increasingly complex to analyze and has increased its indebtedness a lot, but a turning point is approaching.
And that could make the share price of Rubens Ometto’s holding practically double to R$ 30, the bank’s target price.
So, don’t forget about it, write analysts Thiago Duarte, Pedro Soares and Henrique Brustolin, noting that the next cycle of falling interest rates will directly impact Cosan’s balance sheet.
“Interest rate sensitive stocks have started to perform well. We think Cosan’s time has also come,” the analysts wrote.
With a last strong cycle of investments, Cosan’s debt, which was R$ 17.5 billion in 2020, will reach R$ 33 billion at the end of this year, in BTG’s accounts.
These numbers concerned part of the market, especially after the R$ 17 billion allocated to the stake in Vale.
BTG, however, says it is comfortable because of the negotiation that Cosan made with creditors for the deal with the mining company: they only receive when Compass, Raízen and Vale pay dividends.
When this does not happen, interest simply accrues. “As we see it, this affects equity but poses no threat to cash flow,” the analysts wrote.
And this year, with the reduction in the cost of capital, Cosan should start deleveraging, reaching 1.9x in 2023 and 1.6x next year – which will help the market to price its assets in a less pessimistic way, says BTG.
One case is Compass. Analysts see that the company has advanced a lot since the last private capitalization – which valued the gas holding at R$ 18.8 billion – with the acquisitions of Sulgás and Gaspetro.
The bank sees Compass with an annualized EBITDA of BRL 4.4 billion and 1x leverage, even after these movements.
To complete, Moove and Radar are jewels forgotten by the market in BTG’s view.
While the lubricants company continues to grow rapidly – valued at R$5.5 billion by the bank – Radar already has a land portfolio of 318,000 hectares, which the bank values at R$4.2 billion.
The stock is up 6.5% around midday, outperforming a bull market. At BRL 16.34, Cosan is now worth BRL 30.7 billion.
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