Global Tech Shifts And Brazil Exposure Will Cripple Diesel Models

Key Takeaways

• Accelerating shifts to electric vehicles and digital fleet solutions, plus rising competition, threaten Vamos' asset values, margins, and long-term market position.
  
• High interest rates, credit constraints, and domestic market concentration increase financial risk, raise funding costs, and heighten vulnerability to economic shocks.
  
• Broad sector exposure, pricing discipline, and innovative operational strategies are supporting resilient growth, stable margins, and sustainable long-term earnings despite macroeconomic headwinds.

Catalysts

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

• Rapid acceleration in electric and autonomous vehicle technology threatens the long-term competitiveness and relevance of Vamos' predominantly diesel-powered fleet, significantly increasing the risk of major asset write-downs, higher depreciation, and large future capital expenditures that will depress both net income and return on invested capital.
  
• Prolonged high interest rates across Brazil and global markets, coupled with a more restrictive credit cycle, continue to drive up Vamos' funding costs and compress net margins, while also sharply reducing appetite for fleet leasing among customers and resulting in persistently high idle asset inventory and lower revenue growth.
  
• Mounting exposure to early contract terminations and asset repossessions, particularly in vulnerable sectors like agribusiness and cargo transport, risks entrenching structurally lower asset utilization rates. This leads to ongoing revenue loss from non-earning assets and higher depreciation expenses, contributing to a sustained contraction in both EBITDA and EBIT margins.
  
• The company's concentration in the Brazilian market leaves it acutely exposed to cyclical downturns, inflation shocks, and currency volatility; this overexposure amplifies risks to earnings stability, increases refinancing pressures tied to the company's elevated leverage, and ultimately threatens both profitability and shareholder returns.
  
• Intensifying competition from global fleet management and rental players introducing more advanced, digital-driven leasing solutions erodes Vamos' pricing power and customer retention, triggering price wars and putting sustained downward pressure on average lease rates, revenue growth, and overall earnings.

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

Assumptions

• This narrative explores a more pessimistic perspective on Vamos Locação de Caminhões Máquinas e Equipamentos compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Vamos Locação de Caminhões Máquinas e Equipamentos's revenue will grow by 19.1% annually over the next 3 years.
• The bearish analysts assume that profit margins will shrink from 13.1% today to 8.2% in 3 years time.
• The bearish analysts expect earnings to reach R$620.9 million (and earnings per share of R$0.58) by about August 2028, up from R$586.5 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 12.9x on those 2028 earnings, up from 7.0x today. This future PE is greater than the current PE for the BR Transportation industry at 8.7x.
• Analysts expect the number of shares outstanding to decline by 3.13% 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

• The company is experiencing robust growth in sectors like e-commerce, logistics, electric energy, and urban cleaning, which are all structurally expanding in Brazil and benefiting from the secular trend of shifting to fleet outsourcing, likely supporting revenue growth and reducing volatility in top-line performance.
  
• Vamos has consistently demonstrated pricing power and disciplined contract management, achieving yield and IRR expansion through contract extensions with price adjustments that help preserve net margins despite a challenging macro environment.
  
• The used vehicle market remains deep and liquid, with record sales volumes and stable or appreciating prices for used trucks, suggesting that asset devaluation risk is contained and that Vamos can support profitability through strong residual values and additional sources of earnings from asset sales.
  
• The company's high diversification across 16 different sectors and leadership positions in segments like forklift leasing provide resilience against cyclicality in any one sector, making revenue streams more stable and mitigating the risk of concentrated losses.
  
• Operational initiatives-including expanded retail channels, digital marketing reach, and the Sempre Novo product-are increasing asset turnover, driving utilization rates back towards 90 percent and unlocking new recurring revenue streams, which underpin sustainable EBITDA and long-term earnings potential.

Valuation

• The assumed bearish price target for Vamos Locação de Caminhões Máquinas e Equipamentos is R$4.0, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Vamos Locação de Caminhões Máquinas e Equipamentos's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• 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 bearish analysts, you'd need to believe that by 2028, revenues will be R$7.6 billion, earnings will come to R$620.9 million, and it would be trading on a PE ratio of 12.9x, assuming you use a discount rate of 27.3%.
  
• Given the current share price of R$3.83, the bearish analyst price target of R$4.0 is 4.3% higher. The relatively low difference between the current share price and the analyst bearish price target indicates that they believe on average, the company is fairly priced.
  
• 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.