Success Of Projects Like Lyne Campo Limpo Will Boost Future Prospects

Key Takeaways

• Strong demand and strategic pricing in key areas drive revenue growth, enhancing margins and future net profitability through higher-income targeting.
  
• Expansion of a robust land bank and government support facilitate sustained growth and stable revenues, backed by significant cash generation and high ROE.
  
• Significant reliance on sales and government programs, plus rising costs and increased debt, presents risks to future financial stability and profits.

Catalysts

Operates in real estate businesses.

• Strong sales and the successful launch of projects such as Heitor dos Prazeres Colombina and Lyne Campo Limpo indicate high demand for properties in strategic areas, which is expected to drive future revenue growth.
  
• The company has demonstrated an ability to maintain and potentially expand margins due to strategic price increases and targeting higher-income brackets, which are expected to positively impact future net margins.
  
• The expansion and strategic management of a robust land bank with a record PSV of R$19.5 billion position the company for sustained growth in new property launches, directly contributing to future earnings.
  
• Continued government support through programs like Minha Casa Minha Vida ensures funding availability for target consumers, suggesting stable or growing revenues in lower-income housing segments.
  
• The company maintains a strong financial position with significant cash generation capability and an ROE of 64.2%. This financial strength positions the company to capitalize on growth opportunities and maintain attractive shareholder returns.

Cury Construtora e Incorporadora Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Cury Construtora e Incorporadora's revenue will grow by 19.8% annually over the next 3 years.
• Analysts assume that profit margins will increase from 17.4% today to 18.5% in 3 years time.
• Analysts expect earnings to reach R$1.2 billion (and earnings per share of R$3.9) by about January 2028, up from R$644.4 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 12.3x on those 2028 earnings, up from 8.8x today. This future PE is greater than the current PE for the BR Consumer Durables industry at 11.1x.
• Analysts expect the number of shares outstanding to grow by 1.32% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 20.99%, as per the Simply Wall St company report.

Cury Construtora e Incorporadora Future Earnings Per Share Growth

Risks

• The company's significant reliance on achieving high sales success and strong demand in strategic areas may become a risk if market conditions change, affecting future revenue projections.
  
• Dependence on government policies and programs such as Minha Casa Minha Vida presents a potential risk, as changes or reductions in these programs could impact the company's ability to maintain past financial performance and thus affect future earnings.
  
• Rising costs in São Paulo, notably in labor and raw materials, along with competition for plots of land, may exert pressure on margins, potentially reducing net profit margins if the company cannot pass these costs on to customers effectively.
  
• With a stated gross debt increase of 79.7% since December 2023, higher financial leveraging could pose risks to liquidity and financial stability, which might impact net earnings and investor confidence.
  
• The dependency on external funding sources, with potential changes in interest rates or terms from financial institutions like Caixa Econômica Federal, could impact financing costs and constrain net cash flow, directly affecting the company's earnings stability.

Valuation

• The analysts have a consensus price target of R$27.14 for Cury Construtora e Incorporadora 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$32.0, and the most bearish reporting a price target of just R$21.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be R$6.4 billion, earnings will come to R$1.2 billion, and it would be trading on a PE ratio of 12.3x, assuming you use a discount rate of 21.0%.
  
• Given the current share price of R$19.52, the analyst's price target of R$27.14 is 28.1% 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.