Brazil Fuel Distribution: Tight Supply, Resilient Margins: Reiterate OW in the Sector

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Brazil Fuel Distribution: Tight Supply, Resilient Margins: Reiterate OW in the Sector

distributors... We expect integrated Price (10 Jul 26): $6.00

refining and distribution margins to normalize gradually as retail fuel prices

adjust lower – a trend already built into our estimates. Based on our margin

UGPA3.SA, UGPA3 BZ

tracker, we view integrated diesel margins (resellers + distributors) at ~R

$0.950/liter prior to the conflict, increasing to ~R$1.750/liter in April/May and Overweight

currently standing at ~R$1.500/liter as of mid-July. On a company basis, we Price (10 Jul 26): R$30.71

estimate integrated margins for Vibra brand currently at ~R$1.472/liter (+R

$0.516/L vs. pre-conflict levels) and R$1.453/liter for Ipiranga (+R$0.510/L). 2026 Integrated Margins for Diesel

In our view, the conflict acted as a catalyst for a more favorable industry (Distributors+Resellers)

structure, reinforcing recent regulatory developments and supporting a higher R$/L

profitability floor than that seen prior to the conflict. 2.000

• With a gradual pass-through of lower import costs, that should sustain

healthy sector margins in the near term. With import-parity fuel prices 1.500

moving lower, we would expect retail prices to follow eventually. So far,

however, the adjustment has been far more gradual than the correction seen in 1.000

oil prices, underpinning the supportive crack spread environment of recent

months. We note that diesel prices at the pump have declined only ~7% from 0.500

April levels, despite Brent prices retracing ~22% over the same period. In our

view, this reflects distributors and retailers still working through inventories

0.000

and purchases made at higher cost levels. As this normalizes, we expect the Pre-conflict Late-April Mid-July