High-End São Paulo Projects Will Attract Affluent Urban Demand

Key Takeaways

• Premium project focus and desirable locations enable resilient revenues, strong margins, and sustained profitability despite broader market or credit cycle pressures.
  
• Solid capital discipline and ability to expand prime land acquisitions position the company for growth in launches, market share, and improved returns.
  
• Heavy reliance on luxury segments and São Paulo, rising leverage, cost pressures, and credit risks threaten stability, margins, and long-term profitability amid economic uncertainty.

Catalysts

Operates as a real estate developer and builder in Brazil.

• Even's significant inventory of high-end and luxury projects, most of which are under construction and already largely pre-sold, positions the company to capitalize on sustained demand from Brazil's urbanizing and affluent middle-class, supporting robust top-line revenue growth over the coming years.
  
• The company's disciplined capital structure-with low net leverage (9% of equity), strong cash generation, and readiness to selectively acquire prime land as competitors retreat-suggests an ability to expand launches and market share, driving future earnings growth and improved return on equity.
  
• A resurgence in inventory and project margins (excluding one-off hotel sales), combined with a healthy receivables portfolio skewed toward higher-value customers less dependent on restrictive credit, indicates potential for expanding net margins as market conditions normalize.
  
• Even's focus on São Paulo's most desirable neighborhoods and ongoing investments in project quality and operating efficiency enable premium pricing and sustained sources of profitability, supporting resilient earnings even in volatile credit cycles.
  
• The high concentration of sustainable, well-located projects and a forward pipeline in mixed-use and vertical living formats are aligned with market movements toward eco-friendly and integrated developments, improving sales absorption and supporting both revenue and margin expansion.

Even Construtora e Incorporadora Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Even Construtora e Incorporadora's revenue will grow by 19.6% annually over the next 3 years.
• Analysts assume that profit margins will increase from 0.6% today to 20.8% in 3 years time.
• Analysts expect earnings to reach R$617.7 million (and earnings per share of R$2.06) by about August 2028, up from R$9.7 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 4.5x on those 2028 earnings, down from 142.6x today. This future PE is lower than the current PE for the BR Consumer Durables industry at 9.0x.
• Analysts expect the number of shares outstanding to decline by 1.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 23.29%, as per the Simply Wall St company report.

Even Construtora e Incorporadora Future Earnings Per Share Growth

Risks

• Heavy concentration in the high-end and luxury segments, as well as in prime São Paulo neighborhoods, exposes Even to localized economic downturns, demographic shifts (such as a slowing or aging population), and softened demand that could negatively impact long-term revenue growth and net margins.
  
• Management highlights ongoing uncertainty and volatility in global and Brazilian economic conditions-including restrictive credit/funding environments and closely monitored interest rates-which increases risk to future sales volumes, cash generation, and ultimately, earnings.
  
• Despite current healthy leverage and liquidity, management expects leverage to rise to around 30% as new project launches ramp up, increasing the company's sensitivity to higher interest rates or tighter credit cycles, with the potential to amplify future interest expenses and compress net margins.
  
• There are persistent cost pressures relating to sales and administrative expenses, with some sales costs recorded up-front for large launches, and the company admits that transferring receivables/financing remains "a point that requires attention," exposing Even to heightened SG&A, cash flow, and collection risks if Brazil's credit conditions further deteriorate.
  
• The company's references to "oscillation" in administrative expenses, challenging transfer processes for middle-income projects, and exposure to industry-wide issues-such as rising construction costs and compliance with evolving sustainability regulations-may limit operating efficiency gains and threaten long-term profitability and earnings growth.

Valuation

• The analysts have a consensus price target of R$7.786 for Even 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$9.0, and the most bearish reporting a price target of just R$6.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be R$3.0 billion, earnings will come to R$617.7 million, and it would be trading on a PE ratio of 4.5x, assuming you use a discount rate of 23.3%.
  
• Given the current share price of R$7.03, the analyst price target of R$7.79 is 9.7% 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.