Coinvalores starts coverage on Brazil Sao Martinho with "hold" rating
Sep 26, 2012 - Coinvalores has initiated coverage on Brazilian sugar and ethanol maker Sao Martinho (SAO:SMTO3) with "hold" recommendation and a share price target of BRL 25 for September 2013.
Coinvalores believes there will be a slight rise in sugar prices in the short term and also that the energy segment has potential to bring improvement to Sao Martinho's margins over the next several years.
On the other hand, the prospects for Brazil's ethanol market, where the company sells 90% of its ethanol output, remain unfavorable, according to Coinvalores. Nevertheless, local ethanol makers may benefit from the recently announced significant electricity tariff cuts and tax incentives. These measures are expected to translate into a much lower-than-expected inflation in early 2013, paving the way for possible increases in local retail prices of petrol (gasoline), thus boosting the competitiveness of hydrous ethanol, Coinvalores explains.
Yesterday, Sao Martinho's shares closed up 1.89% at BRL 24.20 on the Sao Paulo Bovespa Stock Exchange.