Hypermarcas SA, the maker of consumer products from diapers to generic drugs, climbed to a two-year high after Credit Suisse Group AG named the stock its only buy among Brazilian consumer companies.
The shares jumped 2.5 percent to 19.88 reais at the close of trading in Sao Paulo, the highest since May 2011. The Ibovespa benchmark gained 1.9 percent.
Credit Suisse started coverage of 10 Brazilian consumer stocks, and Hypermarcas was the only one with a rating the equivalent to buy, analyst Tobias Stingelin wrote in a research note to clients today. The Sao Paulo-based consumer-health products manufacturer is poised to benefit from its line of less expensive 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 Stingelin.
“Hypermarcas provides an attractive alternative to play the Brazilian consumer sector,” Stingelin wrote. “Cash flow and earnings growth are largely dependent on measures under management’s control that have been implemented already.”
Inflation pressures in Brazil persist and threaten to damp consumption, the International Monetary Fund said last week. The fund kept unchanged its 2.5 percent growth forecast for Latin America’s largest economy this year while reducing its 2014 estimate to 2.5 percent from 3.2 percent.
Credit Suisse set a 12-month price target of 23 reais for Hypermarcas’s shares, according to the research note. That’s 16 percent higher than today’s price.