Warehousing And Infrastructure Platforms Will Transform This Essential Services Group’s Long Term Outlook

Catalysts

About SIMPAR

SIMPAR is a Brazilian holding company focused on essential services across logistics, vehicle rental, equipment leasing, infrastructure, dealerships and financial services.

What are the underlying business or industry changes driving this perspective?

• The creation of JSL’s intralogistics company, INTRALOG, with BRL 2.2b in revenue, BRL 440m in EBITDA and a 23.1% EBITDA margin gives SIMPAR a focused warehousing and internal logistics platform that can pursue organic growth in high value contracts, which can support consolidated revenue and EBITDA.
• VAMOS’ long term truck, machinery and equipment leasing model, supported by consistent monthly CapEx deployment around BRL 270 million to BRL 300 million and contract extensions of more than 40% of expiring 5 year contracts, points to sustained contracted volumes that can help underpin future lease revenue and cash generation.
• Movida’s maturing, modernized store base, stabilized depreciation, average fleet age of 10 months and consistent used car sales, together with hundreds of thousands of new customers, position the rental and used car operation to capture higher utilization and pricing, which can support EBITDA margins and earnings quality.
• AUTOMOB’s 12 to 18 month cycle of store renovations, relocations, openings and systems optimization, combined with higher sales per store and growing F&I contribution on an unchanged infrastructure base, creates operating leverage that can support revenue per store and net margins as the network approaches the 2026 to 2027 maturity target.
• CS Infra’s ports, highways and mobility concessions, many already built or near completion with contracted or guaranteed revenue and long term service based contracts, together with the upcoming ferry operation in São Paulo, create a portfolio of relatively visible cash flows that can support group EBITDA, productive ROIC and gradual deleveraging.

Assumptions

How have these above catalysts been quantified?

• This narrative explores a more optimistic perspective on SIMPAR compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming SIMPAR's revenue will grow by 12.6% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from -0.2% today to 3.9% in 3 years time.
• The bullish analysts expect earnings to reach R$2.5 billion (and earnings per share of R$4.26) by about June 2029, up from -R$74.2 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as R$1.6 billion.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 8.6x on those 2029 earnings, up from -45.3x today. This future PE is lower than the current PE for the BR Transportation industry at 9.8x.
• The bullish 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 27.29%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The group is still reporting net losses at the consolidated level, with a BRL 119 million loss in 3Q 2025 and a high interest rate environment similar to 2016 putting pressure on financial expenses. If interest rates stay elevated for longer or rise again, that could keep earnings under strain even if operating indicators improve, limiting net margin and earnings.
• SIMPAR carries sizeable net debt of BRL 41.4b and holding company net debt of BRL 3.2b. Although leverage ratios have moved to 3.5x on the bonds definition and 2.2x on the local definition, the group is still relying on robust cash generation, disciplined CapEx and occasional asset sales to reduce this. Any setback in asset monetization, funding access or EBITDA growth could slow deleveraging and keep a larger share of cash flow tied up in interest costs, affecting earnings and potentially constraining revenue growth initiatives.
• Several businesses are at key points in their cycles, such as AUTOMOB still working through a 12 to 18 month refurbishment and integration phase and only targeting full maturity around late 2026 or early 2027. CS Infra’s ports and the São Paulo ferry concessions are still ramping to full capacity, so if these projects take longer than expected to reach planned usage levels or face operational or regulatory issues, the expected contribution to consolidated revenue and EBITDA margins could fall short.
• The group has exposure to sectors that can be cyclical, illustrated by AUTOMOB’s one off impairment on new agricultural machinery inventory after the agricultural market failed to recover and conditions worsened during the year. A prolonged weak cycle in agriculture, logistics demand or used vehicle markets could pressure pricing, require further write downs and weigh on both gross margins and net margins.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bullish price target for SIMPAR is R$24.0, which represents up to two standard deviations above the consensus price target of R$15.58. This valuation is based on what can be assumed as the expectations of SIMPAR's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of R$24.0, and the most bearish reporting a price target of just R$10.1.
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2029, revenues will be R$63.1 billion, earnings will come to R$2.5 billion, and it would be trading on a PE ratio of 8.6x, assuming you use a discount rate of 27.3%.
• Given the current share price of R$7.87, the analyst price target of R$24.0 is 67.2% 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.