Cesp Gains as Credit Suisse Sees More Cash Flow: Sao Paulo Mover
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 20.01 reais at 1:57 p.m. in Sao Paulo. A close at that level would be the highest since Feb. 6. The benchmark Bovespa index fell 0.8 percent.
Cesp, as the company is also known, stands to benefit from new rules affecting both the cost as well as pricing of the electricity it sells, Credit Suisse analysts Vinicius Canheu and Adelia Souza wrote in a note to clients dated 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.
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