Isa Energia: Tight Risk Premium and Mixed Signs - Downgrade to Neutral

Research evidence excerpt

Isa Energia: Tight Risk Premium and Mixed Signs - Downgrade to Neutral

J P M O R G A N Latin America Equity Research

27 July 2026

Isa Energia ▼Neutral

Previous: Overweight

Tight Risk Premium and Mixed Signs - Downgrade to ISAE4.SA, ISAE4 BZ

Price (24 Jul 26):R$26.46

Neutral ▼Price Target (Dec-27):R$26.50

Prior (Dec-26):R$30.00

We downgrade ISAE to Neutral and establish a YE27 PT of R$26.50 as we see a LatAm Utilities

ACless favorable risk asymmetry. What has changed? 1) Valuation: ISAE now Arthur Pereira, CFA

stands at the lower end of our IRR, as we incorporate JPM’s higher rates (see Tilts (55-11) 4950-4101

& Tolls - Sector Picks), 2) Upside risks: the 20-30% upside risk from a potential arthur.pereira@jpmorgan.com

settlement with SP gvt. “Sefaz” seems less likely in the near term as we see mixed Banco J.P. Morgan S.A.

signs from the recent R$1.2bn primary offering (details below).

Key Changes (FYE Dec)

Prev Cur Δ

What has changed? Sector valuation and upside risks Adj. EBITDA - 26E (R$ mn) 4,264 4,299 0.8%

Back in Dec/2025, we double-upgraded ISAE as a laggard with potential catalysts Adj. EBITDA - 27E (R$ mn) 4,839 4,926 1.8%

amidst tight risk premium across the sector (see report). Since then, the sector’s risk

Quarterly Forecasts (FYE Dec)premium widened and ISAE’s upside risks had few developments.

Revenue (R$ mn)

2025A 2026E 2027E

Q1 1,132 1,226A 1,399

Sefaz receivable: limited news and mixed signs Q2 1,029 1,212 1,399

We see a potential settlement with SP gvt. as less likely in the near term because: Q3 1,072 1,399 1,588

Q4 1,121 1,399 1,588

1) ISAE’s recent R$1.2bn primary offering seems to be an indication of unlikely FY 4,354 5,236 5,974

short-term proceeds, 2) Oct/2026 general elections could slow down negotiations.

Style Exposure