Uniao Pet Participacoes SA（AUAU3.SA）：恢复覆盖，维持中性/HR评级：EBITDA转自由现金流改善，但风险收益仍保持平衡

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16 Sep 2026 08:31:47 ET │ 14 pages

Uniao Pet Participacoes SA (AUAU3.SA)

Resuming Coverage with Neutral/HR: Improving EBITDA-to-FCF

Conversion, but Risk-Reward Remains Balanced

CITI'S TAKE

We are resuming coverage of AUAU with a Neutral/High Risk rating

following a period of Rating Suspended. The company has delivered

surprisingly resilient top-line performance despite a softer consumer

backdrop in Brazil, reinforcing the view that pet spending remains more

defensive than most discretionary categories. We expect this resilience to

continue through 2H. Gross margin should also gradually improve,

supported by stronger bargaining power with suppliers and a more

favorable sales mix. Our main concern, however, remains the evolving

competitive landscape. Aggressive and still highly promotional

marketplaces continue to pressure industry economics and may limit the

sector’s ability to sustain more meaningful gross margin and EBITDA

margin expansion over time. At 10x 2027 P/E, we see some upside

potential, particularly as cash conversion improves, which we view as the

most compelling aspect of the investment case.

Updated Estimates — We expect digital and services to continue outperforming

brick-and-mortar operations, with physical stores delivering high-single-digit

same-store sales growth and supporting consolidated revenue growth in the highsingle digits through 2026-27. We are also giving the company some credit for

improved supplier negotiations, which supports our assumption of approximately

50bps of gross margin expansion across 2026-27 and translates into EBITDA

margin improvement. The most notable positive development is cash generation.

We forecast EBITDA-to-FCF conversion of ~55%, a level that, in our view, warrants a

higher-quality valuation framework than the stock has historically received.

Neutral / High Risk from Rating Suspended

Price (15 Sep 26 18:00)

R$3.97

Target price

R$4.80

from Expected share price return

20.9%

Expected dividend yield

0.3%

Expected total return

21.2%

Market Cap

R$3,417M

US$663M

João Pedro SoaresAC

Felipe Husein

Adding Back a DCF-Derived TP — Following two quarters since the merger, and

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