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Mogi Guaçu Operations And African Markets Will Shape Our Future

AN
Consensus Narrative from 10 Analysts
Published
17 Jan 25
Updated
01 May 25
Share
AnalystConsensusTarget's Fair Value
R$13.28
35.2% undervalued intrinsic discount
01 May
R$8.60
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1Y
-23.1%
7D
-6.5%

Author's Valuation

R$13.3

35.2% undervalued intrinsic discount

AnalystConsensusTarget Fair Value

Key Takeaways

  • Integration of acquired companies and synergy capture aims to enhance results, reduce leverage, and improve net margins.
  • Market expansion into Africa and increased South America exports, alongside product innovation, expected to drive future revenue growth.
  • Rising costs, reduced demand, and economic uncertainties threaten Randon's revenue and margins, with potential impacts from closures and regulatory changes.

Catalysts

About Randon Implementos e Participações
    Manufactures and sells trailers and semi-trailers in Latin America and internationally.
What are the underlying business or industry changes driving this perspective?
  • Randon Implementos is planning to intensify the integration of acquired companies and capture synergies, which should help improve results and reduce leverage, impacting net margins and overall earnings positively.
  • The start of operations at Mogi Guaçu and the addition of revenues from new businesses driven by the group's synergy are catalysts for future revenue growth.
  • The delivery of more than 2,000 trailers by Hercules in the U.S. after a complex period in the market is expected to boost revenue in foreign markets.
  • Expansion into new markets such as Africa and increased exports to South America, along with a buoyant replacement market, are expected to positively impact future revenue streams.
  • The approval of new products for the agricultural machinery segment and growth in rents, as well as the continuous development of innovative products, are anticipated to boost revenues and potentially improve net margins over time.

Randon Implementos e Participações Earnings and Revenue Growth

Randon Implementos e Participações Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?
  • Analysts are assuming Randon Implementos e Participações's revenue will grow by 13.1% annually over the next 3 years.
  • Analysts assume that profit margins will increase from 3.4% today to 4.4% in 3 years time.
  • Analysts expect earnings to reach R$750.7 million (and earnings per share of R$1.71) by about May 2028, up from R$408.5 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting R$938 million in earnings, and the most bearish expecting R$563.4 million.
  • In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 11.6x on those 2028 earnings, up from 7.4x today. This future PE is greater than the current PE for the BR Machinery industry at 7.5x.
  • Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
  • To value all of this in today's terms, we will use a discount rate of 26.12%, as per the Simply Wall St company report.

Randon Implementos e Participações Future Earnings Per Share Growth

Randon Implementos e Participações Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?
  • The update of the ERP system, loss of tax incentives, and expenses with contingency provisions have posed challenges, which might affect net margins.
  • The closure of the factory in Uruguay and the slowdown in demand from agribusiness may lower revenue projections.
  • The reduction in sales in trailers in the U.S. and the global logistics crisis have increased costs and limited sea freight availability, impacting revenue and profitability.
  • Rising interest rates are likely to slow down demand for trailers and heavy trucks, affecting future earnings.
  • Fluctuations in exchange rates and inflation pose uncertainties in the domestic market, which could impact revenue and net margins.

Valuation

How have all the factors above been brought together to estimate a fair value?
  • The analysts have a consensus price target of R$13.28 for Randon Implementos e Participações based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of R$16.0, and the most bearish reporting a price target of just R$9.5.
  • In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be R$17.2 billion, earnings will come to R$750.7 million, and it would be trading on a PE ratio of 11.6x, assuming you use a discount rate of 26.1%.
  • Given the current share price of R$9.2, the analyst price target of R$13.28 is 30.7% higher.
  • We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

How well do narratives help inform your perspective?

Disclaimer

Warren A.I. is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by Warren A.I. are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that Warren A.I.'s analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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