JPMorgan thinks Assaí Atacadista, one of the largest retailers in Brazil, is a strong investment play as the company begins to reflect better operating trends. Analyst Joseph Giordano upgraded Assaí, a Brazilian self-service wholesale company with almost 300 stores that trades on the New York Stock Exchange, to overweight from neutral. JPMorgan also raised its price target by $2.50 to $17.50, implying upside of almost 30% over the next year. So far in 2024, the stock has fallen almost 4%. ASAI 1Y mountain ASAI ADRs in the U.S. over past 12 months. “We revisit our views on the Brazilian cash & carry space ahead of 1Q24 results,” Giordano wrote in a note Tuesday. “Overall, we see that food inflation has been recovering. Our proprietary pricing tool shows that players have been passing prices to final consumers, tracking food CPI (up to mid April), albeit food inflation is likely to become more supportive to higher margin gains just into 2H24E.” JPMorgan sees Assaí shares benefiting from: Better operating results as stores mature and it achieves greater efficiency, potentially leading to higher gross margins this year Higher short-term, same-store sales compared to rival Atacadão, another Brazilian chain of warehouse stores Faster-than-expected de-leveraging trends, making Assaí’s short-term expansion plan less risky Giordano said Assaí would profit from rebalancing its capital structure, given its existing debt. A more flexible balance sheet would enable Assaí to take advantage of the fact that major competitors are not opening new stores, he said. “Overall, we see Assaí offering a higher degree of visibility amid a convoluted retail sector in Brazil, while valuation … is not particularly demanding given the expected EPS recovery,” Giordano said in the note.
Sumber: www.cnbc.com
