Bull Case Playing Out: Raising Targets on a Wider Risk-Reward Skew

Research evidence excerpt

Bull Case Playing Out: Raising Targets on a Wider Risk-Reward Skew

Idea

July 12, 2026 10:39 PM GMT

Morgan Stanley C.T.V.M. S.A.+MLatAm Fuel Distribution & Midstream | Latin Bruno Montanari

America Equity Analyst

Bruno.Montanari@morganstanley.com +55 11 3048-6225

Thiago S Casqueiro

Research AssociateBull Case Playing Out: Raising Thiago.Casqueiro@morganstanley.com +55 11 3048-9507

Luiza B Belem

Research AssociateTargets on a Wider Risk-Reward Luiza.Belem@morganstanley.com +55 11 3048-4276

LatAm Fuel Distribution & MidstreamSkew Latin America

Industry View Attractive

What’s Changed

Vibra Energia SA (VBBR3.SA) From To

Price Target R$34.00 R$41.00

Ultrapar Participacoes (UGPA3.SA)

Price Target R$27.00 R$34.00

Our margin capture thesis is playing out — faster and larger

than we expected. Brazil's unique 2Q26 fuel market allowed

distributors to capture outsized margins, and we now see this

extending into 3Q26, pushing FY26e EBITDA/m3 ~40% above

our prior forecasts.

Key Takeaways

Large distributors are capturing exceptional — but temporary — margins in

2Q26–3Q26, sustaining positive momentum for VBBR and UGPA shares.

Industry data and historical margin correlations point to 2Q26 profitability above

R$400/m3, with 3Q26 tracking near R$300/m3.

We raise 2026e EBITDA estimates by 33% (VBBR) and 26% (UGPA) to reflect

these gains.

We keep our preference for VBBR: greater upside to target (25% vs. UGPA's 12%)

and a stronger bull:bear skew (6.5:1.0 vs. 3.0:1.0).

Volatile oil prices opened a rare window for fuel distributors in 2Q26 … ANP

distribution selling prices combined with Petrobras price-formation data give a

reliable read on distributor profitability (0.83 correlation). This points to peak

EBITDA/m3 of R$470–510 in the quarter ( Exhibit 1 ); accounting for intra-quarter