Goldman Sachs upgrades the investment case for Brazilian utilities following a 16% correction, citing attractive valuations and defensive characteristics against macro risks.
Key Takeaways
- 1.Brazilian Utilities remain attractive due to reasonable valuations (avg ~4p.p. real IRR spreads) and role as a hedge against inflation and GDP volatility.
- 2.High duration and leverage in names like Equatorial and Energisa provide significant upside potential in a rate mean-reversion scenario.
Table of Contents
- BRAZIL UTILITIES
- Stock calls
- Inflation protection
- Natural GDP deceleration hedge
- Rates near historical highs offer positive asymmetry
- APPENDIX - More color on optionalities and valuation
- Valuation and key risks
- Disclosure Appendix
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Authors
Bruno Amorim, CFAGuilherme BossoHuama Belmonte
Securities
EQTL3.SASBSP3.SA
Themes
Inflation ProtectionRate Mean Reversion
Regions
Asia PacificBrazil
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