Goldman Sachs has upgraded Ultrapar Participações S.A. (UGPA3) from hold to buy, despite lowering its target price from R$25.10 to R$19.70.
Goldman Sachs believes Ultrapar is well-positioned for mergers and acquisitions (M&A) in the current macroeconomic environment.
Historically, economic downturns have led to corporate consolidations, and Ultrapar’s lower debt levels provide it with greater flexibility to strengthen its market position.
Lower leverage allows the company to improve financial stability, pursue strategic investments, and return more capital to shareholders through dividends and buybacks.
Goldman expects total shareholder returns of 7% in 2024 and 9% in 2025 while keeping its Net Debt/EBITDA ratio below 1.5 times.
Ipiranga vs. Vibra
Goldman Sachs highlighted Ultrapar’s fuel distribution unit, Ipiranga, and its ongoing competition with Vibra Energia.
While Ipiranga’s margins remain lower than Vibra’s—expected at around 10%—Vibra benefits from greater scale and cost efficiency, giving it a competitive edge.
Goldman downgraded Vibra from ‘buy’ to ‘neutral’, cutting its target price from R$27.40 to R$19.50.
The downgrade reflects a 27% lower-than-expected 2025 net income forecast, as higher interest rates weigh on Vibra’s financials.
Debt concerns and cash flow strategy
Vibra’s debt levels are projected to more than double by the end of the year due to its Comerc Energia acquisition, which could limit its ability to return capital to shareholders.
Analysts expect dividends to remain at just 5% in 2025 and 2026, as the company prioritizes debt reduction.
Despite this, Goldman notes that Vibra’s free cash flow yield is expected to reach 18% by 2026-2027, signaling strong cash generation even as it works to lower its debt burden.
Goldman Sachs sees Ultrapar’s lower debt and M&A potential as key factors supporting its ‘buy’ rating, while Vibra’s debt pressures and margin challenges led to its downgrade.
As Brazil’s economic conditions remain uncertain, Ultrapar’s financial discipline and growth strategy could give it a competitive edge.
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