Hypermarcas SA (HYPE3), the maker of consumer products from diapers to generic drugs, rose to the highest in two years after Credit Suisse Group AG named the stock its only buy among Brazilian consumer companies.
Credit Suisse started coverage of 10 Brazilian consumer stocks, and the Sao Paulo-based consumer-health products manufacturer was the only one with a rating the equivalent of buy, analyst Tobias Stingelin wrote in a research note to clients today. Hypermarcas is poised to benefit from its line of relatively inexpensive staple products that will remain in demand while other companies that depend on more discretionary spending face a “tougher” outlook over the next 12 to 18 months, according to the report.
“After over two years of zero M&A activity and a clear focus on improving its operations, we believe Hypermarcas provides an attractive alternative to play the Brazilian consumer sector,” he wrote. “Cash flow and earnings growth are largely dependent on measures under management’s control that have been implemented already.”
Hypermarcas made 15 acquisitions from 2009 to 2011, according to data compiled by Bloomberg. There have been no acquisitions since then, the data show.
Credit Suisse set a 12-month price target of 23 reais for the shares, according to the research note, 16 percent higher than today’s price.
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