Brazil Homebuilders: Upgrading DIRR to Buy, maintaining TEND as top pick ahead of 1Q26

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Brazil Homebuilders: Upgrading DIRR to Buy, maintaining TEND as top pick ahead of 1Q26

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Brazil Homebuilders

Upgrading DIRR to Buy, maintaining TEND

as top pick ahead of 1Q26

Earnings Preview

DIRR upgraded to BUY; quality on valuation disconnect 05 May 2026 Corrected

Our downgrade of DIRR in December 2025 was driven by a downward earnings revision Equity

after the company announced an R$800mn dividend, implying higher leverage amid Latin America

higher interest rates in 2026. That thesis has largely played out, with the stock down Construction/Homebuilders

~30% since then. Despite further 5% cuts to our launch, sales and revenue estimates,

Victor Tapia >>

DIRR remains one of the highest‑quality operators in the sector, having managed Research Analyst

pandemic‑related cost pressures exceptionally well (c.0% gross margin decline in Merrill Lynch (Brazil)

tapia.victor@bofa.com

2021/2022 vs. ~30% for peers). Trading at 6.2x 2027 P/E (20% below its 1‑year avg,

after re-rating during 2024), we see an attractive entry point and upgrade DIRR to BUY. Carlos Peyrelongue >> Mex Eq Strat/Research Analyst

Merrill Lynch (Mexico)

Cost shock should drive estimate cuts, not a broken story carlos.peyrelongue@bofa.com

We are cutting EPS and target prices by ~3% on average, mainly factoring in slightly

lower launch volumes for mid-high income players and higher interest rates for 26-27,

without any higher cost assumptions into our base case. The recent ~13% selloff

appears driven by fears of cost inflation. We therefore capture these risks exclusively

Exhibit 1: We are upgrading DIRR to Buythrough sensitivity analysis, not forecast revisions. Our base case gross margin

and lowering our POsassumptions remain unchanged for now, but will keep close monitoring this topic.