WEG: Incorporating a more conservative T&D ramp-up; Move Brasil approvals slow

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WEG: Incorporating a more conservative T&D ramp-up; Move Brasil approvals slow

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Daily Boarding

WEG: Incorporating a more conservative

T&D ramp-up; Move Brasil approvals slow

Industry Overview

WEG: T&D ramp-up near-term drag; medium term upside 01 July 2026

We revised our estimates to reflect a more conservative T&D capacity ramp-up in both Equity

revenue and margins. WEG should add capacity in Brazil in 3Q-4Q26, followed by Mexico Latin America

and Colombia in early 2027, doubling its T&D capacity (currently >20% of revenue). Daily Boarding

While this reinforces the medium-term growth story, we estimate the ramp-up could Rogerio Araujo >>

weigh on 2H26 EBITDA margin by ~1pp, bringing it closer to the lower end of the Research Analyst

company's recent 22-23% historical range, as part of fixed costs - especially Merrill+55 11Lynch2188 (Brazil)4255

personnel - should be incurred ahead of full revenue recognition. This pressure should be rogerio.araujo@bofa.com

partly mitigated by the nature of the incremental backlog. We believe a meaningful Gabriel Frazao >>

Research Analyst

portion of the new volume will be long-cycle equipment recognized under PoC Merrill Lynch (Brazil)

accounting, allowing production to start flowing through revenue and EBITDA early in +55 11 2188 4252

gabriel.frazao@bofa.com

the ramp-up. From 2028 onward, we estimate 2H26`s ~1pp margin headwind could turn

into a ~1pp tailwind, all else equal, as capacity absorption improves and the incremental

T&D mix carries structurally higher margins. See: T&D capacity ramp-up: near-term BNDES: Brazil`s National

margin drag, medium-term upside. Maintain Neutral rating. Development Bank

Financing for Uber & taxi drivers starts slow PoC: Percentage of Completion