Brazilian Homebuilders: Feedback from NDR with Moura Dubeux

Research evidence excerpt

Brazilian Homebuilders: Feedback from NDR with Moura Dubeux

ue to savings account outflow can impair the

capacity or availability of potential homebuyers to finance acquisitions, since most sales

occur with funding support from SFH (financial housing program), for which the main

resources are savings accounts, which may adversely affect sales and force banks to

change the financing conditions offered to clients.

Direcional:

We value Direcional based on DCF methodology, using CoE of 16.5% and a terminal growth

rate of 4.5%.

Main risks:

- FGTS available budget: FGTS (workers fund), the main fund of the program, losing its

sustainability through: i) a change on the destination of resources to address other

sectors of the economy (as sanitation and infrastructure), and ii) a considerable increase

in FGTS withdrawals. Both points could reduce the resources available to the real estate

sector, damaging the health of the social housing program (MCMV).

- MCMV housing program sustainability: The non-implementation, cancellation,

suspension or scarcity of ‘Minha Casa, Minha Vida’ by government may affect the conduct

of the Company's business and its results, given the huge exposure that company owns to

this projects.

- Material costs increase: Since the homebuilder recognizes the revenue from its

properties’ sales according to the accounting method of financial evolution of

construction, an increase in the cost of an incorporation project may reduce revenue and

previously calculated profit. In this sense, increases in the price of construction

materials due to an inflationary scene can increase the cost of projects and reduce the

Company's profits.

- Macro deterioration: Changing market conditions and a worsening Brazilian