New Minha Casa, Minha Vida “package” makes Santander double projections for Tenda and MRV

Since last year, when the federal government reformulated the Minha Casa, Minha Vida program, prospects have been more favorable for most construction and development companies focused on the low-income segment. In recent weeks, two new developments have reinforced this scenario.

The first, RET 1, reduces the tax rate charged on properties in band 1 of the program from 4% to 1%. The second, FGTS Futuro, allows workers with a formal contract and who receive up to two minimum wages to use future FGTS deposits to buy their own homes.

These two factors, combined with other components specific to each company, are at the center of updates released by Santander on Tuesday, April 2, for two of the main players in this space: Tenda and MRV.

In the case of MRV, the bank maintained the outperform recommendation (above the market average), but raised the target price for the share, from R$13.50 to R$14, citing the continued improvement in operational metrics and generation of cash, which must be improved with RET 1 and FGTS Futuro. The stock opened trading on Monday, 2nd, at R$7.66, which indicates an appreciation potential of more than 82%.

But the main changes involved the Tent. Santander raised the developer’s recommendation, from neutral to outperform, and the target price of the paper, from R$13 to R$17, highlighting the greater confidence in the operation’s turnaround, again, due to RET 1 and FGTS Futuro . With the opening price of R$12.55, the potential appreciation for the stock is more than 91%.

“We maintain our positive outlook for low-income construction companies, as we believe that the recent changes to Minha Casa Minha Vida will continue to positively boost demand in the sector,” wrote analysts Fanny Oreng, Antonio Castrucci and Matheus Meloni.

The trio adds that the recent implementation of RET 1 and FGTS Futuro should further improve conditions for players with great exposure to band 1 of the program. At MRV, around 35% of sales are in this segment and, at Tenda, approximately 60%.

Among other factors, the revisions also incorporate recent indicators and other data from the pair. At Tenda, in addition to the share being traded at a good discount, Santander uses the balance sheet for the fourth quarter of 2023 to update some of its projections for the operation.

The bank is increasing, for example, launch and pre-sales estimates for 2024 by 9% and 7%, respectively, with the perception that the company will accelerate these two fronts based on recent changes to Minha Casa Minha Vida .

On another front, analysts now project a net profit of R$123 million for 2024 and R$350 million in 2025, which represents jumps of 67% and 29%, respectively, in relation to their previous estimates.

“Although Tenda’s gross margin is recovering more slowly than we anticipated, we believe that the implementation of RET 1, FGTS Future and the potential increase in income range limits over the next few months could accelerate the recovery process”, he points out. the bank.

Santander also highlights issues such as the prospect of improvements in gross margin, greater profitability in sales of new ventures and potentially lower provisions in the operation.

“In addition, we also see upside risks in our earnings estimates for 2024-26 if the city of São Paulo hires more units under the Pode Entrar program, as Tenda still has a pipeline of around R$523 million that could be hired in 2024”, add the analysts.

The attractive value of the shares also informs the analysis of MRV, which was also based on the balance sheet for the fourth quarter of 2023 and the guidance presented by the company during MRV Day, held on March 15th.

Among other indicators, Santander is increasing its projections for the company’s adjusted Ebitda in 2025 and 2026 by around 4%. Regarding net profit, the estimate is R$296 million in 2024 and R$929 million in 2025 , respectively, down 9% and up 3% compared to previously expected.

The bank also emphasizes that it sees a limited risk of decline in MRV shares and highlights that, currently, the company’s shares are priced in an excessively conservative scenario. And he points out that maintaining the outperform recommendation reflects the company’s business diversity.

MRV shares are expected to fall 32.2% in 2023 and the company is valued at R$4.2 billion. Tenda’s shares, which are valued at R$1.5 billion, have accumulated a devaluation of 14.8% in the year.