Investors point out preferred stocks in the energy sector
June 13, 2022 - CE Noticias Financieras
In recent days, investors' attention has been focused on the privatization process of Eletrobras, with analyses pointing to a potential appreciation of up to 85% for the company's shares on the Stock Exchange, a result of the efficiency gains when it is no longer under state control.
It is not only Eletrobras, however, that has attracted the attention of investors.
With more defensive characteristics (stocks that generally do not cause scares, even in periods of crisis) and known for being good payers of dividends, companies in the energy sector have marked their presence in the portfolios of fund managers, focusing on transmission, generation or distribution.
Electricity transmission line towers in Brasilia (DF) - Ueslei Marcelino - 6.Jun.2022/Reuters
The generators are responsible for the actual production of energy, with operations from hydroelectric plants and renewable sources such as wind and solar, while the transmitters are responsible for the midfield between the energy produced by the generators and the distributors
The distributors, on the other hand, are the ones that bring the energy to the final consumer, and are more susceptible to demand fluctuation according to the economic scenario.
The essential nature of energy and the rules of operation of the electric sector give companies in this segment greater predictability, which attenuates the average volatility of their shares on the stock exchange.
Securities in the energy sector tend to appreciate below the market average at times of euphoria and strong Ibovespa growth, but when the pessimism takes over and the stock market, in general, goes through a period of sharper decline, the shares of the electric companies tend to be more resistant to the gale.
In the 12-month period up to June 10, while the broad Ibovespa stock index is down 18.9%, B3's IEE (Electric Power Index) is down a more modest 6.61%.
Partner and analyst of the asset management company Perfin, Marcelo Sandri says that, besides Eletrobras itself, he also carries in the funds portfolio the shares of Alupar, Auren Energia (formerly Cesp) and Equatorial.
The main focus of the selected companies, says Sandri, is in the areas of transmission and renewable energy generation, considered of greater predictability from the point of view of future cash generation in the long term.
"The sector has regulatory stability and is very predictable in terms of cash generation. And in this context of crisis, these are companies whose demand is inelastic, less susceptible, therefore, to the impacts of the population's loss of income," says the partner at Perfin, adding that the contracts are adjusted for inflation, which guarantees a real gain for the companies and their shareholders.
Sandri also says that, besides the long-term appreciation of the shares on the stock exchange, investors are also usually attracted by the distribution of dividends characteristic of power companies.
The specialist calculates between 6% and 7% the annual dividend yield (proportion distributed in dividends in relation to the stock market value) of the power companies in Perfin's portfolio.
The partner understands that, in general, the shares of the energy sector are under priced - what the market calls overdiscounted -, because of the sale on the part of investors who intended to buy shares in the Eletrobras offering.
The shares of the state-owned company already accumulated a high of about 20% this year, but may rise even more, according to Sandri, as efficiency gains with the new management of the company materialize.
"Eletrobras today is highly inefficient, from the point of view of costs in relation to installed generation capacity, which is almost double the average of the private companies in the sector. With the privatization, the company should have the opportunity to reduce costs by half, or even more than that," says the partner from Perfin, which invested in the stock offering.
CEO of Finacap Investimentos, Luiz Fernando Araújo says that, besides Eletrobras, in the funds' portfolio since the middle of last year, already because of the expectation of post-privatization efficiency gains, he also has shares of companies in the sector such as Transmissão Paulista, AES Tietê, Taesa, Cemig and Energisa.
"We really like the electric sector, especially the generation and transmission part, with about 20% of the fund's portfolio exposed to the segment," says Finacap's CEO, who estimates in something between 8% and 10% the dividend yield for the electric companies in the portfolio.
He says that the electrification of the economy in the long term, with the still early stage transition from fossil fuel to alternatives with less climate impact, tends to boost the demand for power generators in the long term horizon. One of these factors will be the increasing adoption of electric cars.
According to Finacap's CEO, the discussions in Brasilia about a possible reduction in the electricity bill, in case of approval of the bill that limits the ICMS rate to 17%, should have a positive impact for the electric companies in general.
This is because, with the relief in the price of energy charged, the tendency is a reduction in the delinquency of bills in arrears, encouraging an increase in the use of energy by the population, says Araújo.
The variable income manager of AF Invest, Leandro Saliba says that, besides Eletrobras, he also holds a position in Neoenergia, which is more focused on the area of electricity distribution.
Although companies in the distribution segment are more susceptible to the macroeconomic environment - with delays in the payment of bills and reduction in consumption by the population and by companies -, Saliba says he sees Neoenergia with a price well below the justifiable one, considering the operational results that the company has presented in the last quarterly balance sheets.
"We think the company is extremely cheap," says the AF Invest manager. He affirms that Neoenergira practices tariffs, on average, up to 25% cheaper than peers that also operate in distribution, such as Equatorial, for example, which makes its business more resilient in low economic growth scenarios, with less impact of default on results.
Saliba adds that Neoenergia has recently made important investments to improve the quality of the distribution network in the markets where it operates - Bahia, Pernambuco, Rio Grande do Norte, São Paulo, Mato Grosso do Sul and Distrito Federal.
The amounts spent - around R$ 6.1 billion in 2021 - were considered quite high by investors in general, says the AF Invest manager, who says he does not agree with the vision that prevails in the market about the growth strategies of Neoenergia's operations.
"We are very optimistic with the company's paper and we see a potential for appreciation of about 90% in the next 2 years," says Saliba.