Shifting Leasing Models Will Redefine Long-Term Market Dynamics

Key Takeaways

• Transition to leasing and secular demand in logistics positions the company for recurring revenue, market share gains, and higher profitability through scale and digitalization.
  
• Strong used vehicle sales, expanding dealership network, and disciplined management support margin improvement, sustainable earnings, and greater resilience to tough economic cycles.
  
• Rising asset repossessions, low fleet utilization, weak used asset performance, and sector concentration are straining margins, profitability, and growth amid challenging macroeconomic conditions.

Catalysts

Together with its subsidiaries engages in the leasing, reselling, and selling of trucks, machinery, and equipment in Brazil.

• The accelerating market shift from asset ownership to leasing models, as evidenced by growing demand across intralogistics, e-commerce, energy, and services sectors, positions Vamos to benefit from resilient and recurring lease revenue streams. This trend should support predictable top-line growth and enhanced operating leverage, driving both revenue and long-term net margin expansion.
  
• Robust performance in used vehicle sales-with only 4.5% market share in the up-to-10-year-old truck segment and record sales volumes despite a challenging macro environment-signals significant room for market share gains as the company expands its dealership network and commercial reach. This ongoing shift is likely to boost revenue and improve cash generation, underpinning stronger earnings and potential for margin improvement as inventory is optimized.
  
• Infrastructure investment and the continued emphasis on agribusiness and logistics throughout Latin America continue to widen Vamos' addressable market. With infrastructure and sector-specific leasing needs rising, the company is poised to leverage favorable secular demand, supporting consistent revenue growth and higher fleet utilization rates over time.
  
• Increased scale and asset base are enabling Vamos to exercise greater pricing power and purchasing efficiency, as shown by internal rate of return and yield expansion on new and extended contracts. Improved scale and disciplined credit management should help support sustainable profitability and enhanced net margins, even in tougher macroeconomic cycles.
  
• Growing professionalization, digitalization, and consolidation in the logistics and equipment rental space favor well-capitalized, technologically enabled players like Vamos, allowing for further market share gains via organic growth and M&A. Adoption of telematics, digital marketing, and expanded distribution support recurring customer engagement, improving fleet utilization and revenue predictability.

Vamos Locação de Caminhões Máquinas e Equipamentos Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Vamos Locação de Caminhões Máquinas e Equipamentos's revenue will grow by 16.0% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 12.8% today to 11.7% in 3 years time.
• Analysts expect earnings to reach R$903.6 million (and earnings per share of R$0.85) by about August 2028, up from R$634.6 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting R$1.1 billion in earnings, and the most bearish expecting R$557.0 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 17.2x on those 2028 earnings, up from 6.7x today. This future PE is greater than the current PE for the BR Transportation industry at 8.8x.
• Analysts expect the number of shares outstanding to decline by 2.03% per year for 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.

Vamos Locação de Caminhões Máquinas e Equipamentos Future Earnings Per Share Growth

Risks

• Persistently high levels of asset repossessions and early returns-driven by economic pressure, sector cyclicality (especially in agribusiness), and stricter credit analysis-have led to increased idle inventory, negatively affecting fleet utilization rates, reducing recurring lease revenue, and contributing to EBIT margin contraction.
  
• Elevated inventory of non-revenue-generating assets results in higher depreciation expenses and increased financial costs (due to debt used to acquire these assets), directly pressuring net income and weighing on returns on invested capital and equity in the near to medium term.
  
• Slower-than-expected adoption and performance of the Sempre Novo (second-cycle assets) product, combined with challenges in preparing and leasing returned assets, increases reliance on accelerated used vehicle sales that can erode gross margin as the company accepts lower prices to improve cash flow and fleet utilization.
  
• Stricter credit conditions in Brazil's macroeconomic environment are suppressing new contract demand, slowing top-line growth, and complicating both lease and used vehicle sales-this headwind is likely to persist until there is a meaningful reduction in base interest rates, which continues to elevate net financial expenses.
  
• Exposure to cyclical and seasonal sectors (notably grain transportation and agribusiness) has resulted in outsized portfolio volatility; while diversification efforts are underway, dependence on these sectors remains a risk for revenue consistency and asset value stability during downturns or commodity shocks.

Valuation

• The analysts have a consensus price target of R$7.523 for Vamos Locação de Caminhões Máquinas e Equipamentos 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$15.0, and the most bearish reporting a price target of just R$4.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be R$7.7 billion, earnings will come to R$903.6 million, and it would be trading on a PE ratio of 17.2x, assuming you use a discount rate of 27.3%.
  
• Given the current share price of R$4.0, the analyst price target of R$7.52 is 46.8% 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.