J.P. Morgan
In this report, we ran a scenario based analysis for the
Brazilian oil and gas companies to measure the possible upside or
downside to shares as result of a possible deterioration of the
domestic macroeconomic scenario.
In our view, the stress test helps investor to see shares "floor
value". Having this in mind, we believe Braskem (ticker: BAK)
offers the best upside on a combination of Brazil real depreciation
and lower naphtha [a petroleum byproduct] costs amidst weak Brent
prices. We see Ultrapar Holdings ( UGP) as a resilient story and
our stress scenario indicates that Petrobras's ( PBR) shares might
have some downside on weakening of economic environment with lower
Brent prices and weak Brazil real. Among choices, our one pick
would be Braskem.
Our stress scenario considers: 1) Country risk moving up to 500
basis points; 2) the real depreciating to 2.80 per dollar; 3) Selic
[overnight] rates increasing to 13%; 4) GDP decreasing 0.5% in
2015; and 5) Brent prices averaging $88 a barrel in 2015 and $90 a
barrel forward.
Petrobras (rated at Neutral): Our back-of-envelope calculations
suggest Petrobras shares could reach about $11 per American
depositary receipt (ADR) considering a price/earnings target of 10
times for 2015. Our stress scenario considers particularly for
Petrobras: 1) the exclusion of our 3% fuel price readjustment that
we have in our official estimates; and 2) the exclusion of Jupiter
project as net present value/barrels of oil equivalent (NPV/boe)
decreases below the breakeven. All other pre-salt projects would
remain, but with lower NPV/boe.
Braskem (rated at Overweight): In our view, Braskem is likely to
benefit in the short term from a combination of real depreciation
and lower naphtha prices amidst weak Brent prices. Our estimates
are that Braskem's implied valuation would reach about $16 per ADR
while our multiple-based implied valuation reaches $17 per ADR.
Ultrapar (rated at Overweight): In our view, the company's
shares are yielding an implied valuation of about $19 per ADR with
a limited downside to current prices. According to our simulations,
the company's shares would be trading at about 20 times
price/earnings multiple for 2015 -- that is a small change from
historical forward multiples of 21 times. In Ultrapar's specific
case, we see investors also focusing on the company's growth for
next year as the stocks main trigger while Ultrapar's more
defensive characteristics could yield a floor value to the
company's shares.
-- Felipe Dos Santos
-- Marcos M Severine
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