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Cesp Gains as Credit Suisse Sees More Cash Flow: Sao Paulo Mover

March 11 (Bloomberg) -- Cia. Energetica de Sao Paulo, Brazil’s second-largest power generator by capacity, rose to a one-month high as Credit Suisse Group AG recommended buying the stock, citing rule changes that are expected to boost cash flow.

Shares rose 4 percent to 20.02 reais at the close of trading in Sao Paulo, the highest level since Feb. 6. The benchmark Bovespa index rose 0.2 percent.

Cesp, as the company is known, stands to benefit from new rules affecting the cost and pricing of the electricity it sells, Credit Suisse analysts Vinicius Canheu and Adelia Souza wrote in a note to clients today. The changes “brought two important upsides for Cesp’s cash generation in the short term,” they wrote.

The Sao Paulo-based utility’s total revenue was 3.4 billion reais ($1.7 billion) in 2012, according to the average estimate of 13 analysts surveyed by Bloomberg. Credit Suisse projects sales will rise to 3.92 billion reais this year and 4.24 billion reais in 2014.

Credit Suisse raised its recommendation on the stock to the equivalent of buy from hold with a target price of 24 reais. Cesp fell 0.7 percent this year through March 8 while the Bovespa declined 4.1 percent during the same period.

To contact the reporter on this story: Denyse Godoy in Sao Paulo at dgodoy2@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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