Upgrading CSMG to OW; SBSP & EQTL Remain Our Preferred Picks

Research evidence excerpt

Upgrading CSMG to OW; SBSP & EQTL Remain Our Preferred Picks

IdeaMFollowing EQTL’s acquisition and the BH concession extension, we increase our

valuation and estimates to reflect a higher probability of successful execution of

CSMG’s turnaround and investment plan. We also incorporate the final concession

terms, including the R$1.3bn concession fee, continued annual capex recognition,

and additional support for RAB growth. As a result, we raise our 2027-28 EBITDA

estimates by ~6% and increase price target to R$77/share, moving it closer to our

previous bull case.

Sanepar | Mostly balanced risk-reward profile, with key potential positive

catalysts either unclear or unlikely to materialize; remain EW. SAPR offers 11.5%

real equity IRR, conservative leverage (~2x 2026e net debt/EBITDA), and a period of

relatively stable regulation, with the next tariff review expected only in 2029.

However, we see a broadly balanced risk-reward profile compared to peers, e.g., 1.7x

bull/bear skew vs. ~2.7x peers average), with limited visible upside catalysts. While a

hypothetical privatization remains unclear, a positive outcome on the judicial claim

("precatórios") seems unlikely after AGEPAR's decision (here) — thus, both are not

reflected in our base case.

Updating valuation & estimates. At the sector level, we incorporate 1Q26 results

and updated macro assumptions, including inflation and interest rates. At the

companies level, key changes are on: i) CSMG — we revise assumptions following

EQTL’s acquisition and the BH concession extension, increasing expected cost

savings (33% vs. 30% previously) and growth potential; ii) SAPR — we lower our

valuation after adverse developments related to the precatórios dispute, as we now

assume a full pass‑through of proceeds to consumers.