Large 146-Med Seat Approval, with an Equally Large Earn-Out

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M

Update

August 7, 2026 01:49 PM GMT

Cruzeiro do Sul | Latin America

Morgan Stanley C.T.V.M. S.A.+

Mauricio I Cepeda

Equity Analyst

Large 146-Med Seat Approval,

with an Equally Large Earn-Out

Lucas Nagano

Research Associate

Artur D Alves

Equity Analyst

Key Takeaways

Cruzeiro was granted 146 med seats at FAPI, which had been acquired in 2024.

At a first glance, the authorization appears very accretive: assuming R$1.0-1.5m/

seat, it would add R$146-219m to the market cap (8.8-13.2% upside).

However, the FAPI transaction involves a R$185m earn-out, making the approval

essentially neutral in terms of value creation.

Cruzeiro do Sul (CSED3.SA, CSED3 BZ)

Brazil Education Services | Brazil

Stock Rating

Industry View

Price target

Shr price, close (Aug 6, 2026)

Mkt cap, curr (mm)

52-Week Range

Underweight

In-Line

R$5.00

R$4.55

R$1,659

R$7.03-3.39

We stay UW. Our recent downgrade highlights the erratic trajectory of margins

and earnings, and a narrower valuation discount vs. peers.

What's new? Cruzeiro do Sul announced that MEC authorized 146 additional

medical undergraduate seats at FAPI (Pinhais, PR), increasing the school's capacity

from 154 to 300, and bringing the company's total seats count to 1,275. FAPI was

acquired by Cruzeiro in June 2024, and the transaction included an earn-out

contingent on this authorization. As a result, Cruzeiro now owes R$185m to FAPI's

former owners, payable in 3 annual installments: (i) 50% within 30 days (R$92.5m),

(ii) 20% after one year (R$37m), and (iii) 30% after two years (R$55.5m).

Apparently accretive, but largely offset by the earn-out trade-off. Assuming ~R

$1.0-1.5m NPV per seat based on precedent transactions, the authorization could

create ~R$146-219m of value for Cruzeiro (8.8-13.2% of yesterday's market cap)

while adding a meaningful, incremental cash flow stream, potentially challenging

our recent downgrade to UW. However, the R$185m earn-out obligation absorbs

most of this benefit, making the net impact of the approval broadly neutral.

Our view. We recently shifted CSED from OW to UW following (i) the intake

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