Latin America Education: 2Q26 earnings preview; Downgrading ANIM to Sell

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Latin America Education: 2Q26 earnings preview; Downgrading ANIM to Sell

Goldman Sachs Latin America Education

Anima Educacao (ANIM3, Sell, 12m TP of BRL 2.00): Downgrade to Sell; earnings momentum, levered

balance sheet and capital allocation strategy in focus

Apart from previewing its 2Q26 results, we downgrade ANIM3 to Sell (from Buy) and

set a new 12m TP of BRL 2.00/sh (from BRL 5.50/sh before). Our new target price

implies a total return of 9% in comparison to the average total return of 39% for our

Education coverage. Since we added the shares of ANIM3 to the Americas Buy List on

December 3, 2024, the shares are up 2%. Over the same period, the Ibovespa is up 38%.

Our more bearish view on the investment story is based on three key reasons:

1) We anticipate lackluster earnings momentum for the company, with a deceleration in

top-line growth in 2Q26 (underscored by weaker Anima Core on higher dropout rates,

and hence an expected lower base of students YoY) and softer working capital dynamics

leading to cash consumption in 2Q26 (though we recall weaker FCF seasonality for past

2Qs).

2) ANIM has the most leveraged balance sheet among Brazil Education names in our

coverage (YE26E net debt/EBITDA of 2.7x, post IFRS16, GS methodology; or 2.2x under

covenants methodology, pre-IFRS16), which in our view poses a downward risk for

earnings given expectations of higher-for-longer interest rates in Brazil (net financial

expenses represent 50% of EBITDA in 2026E).

3) While we take no view on a successful conclusion of the FMU deal and do not factor

this transaction into our model (as it not yet closed), we believe that the pending

acquisition of FMU (see more detail here) could potentially not only increase ANIM’s