EQI Research is starting to cover Good Harvest (SOJA3), considered the leader in the production of soybean seeds in Brazil. The recommendation is to buy and with a target price set at R$ 16.00 for December 2023, meaning an appreciation potential of 18.8%.
Boa Safra is a seed production company, with participation in states representing together more than 70% of the national territory, operating in the Midwest, Southeast, North and Northeast regions.
The Seeds processing units are located in the cities of Formosa and Cabeceiras, in Goiás, Buritis, in Minas Gerais and in the Federal District. These are regions with altitudes above 920 meters, which have an average rainfall of up to 1,200 mm per year and with little rain during the harvest period, points that contribute significantly to the production of higher quality seeds. There are five Units that together produce almost 3 million bags of 40 kg of soybean seeds.
Shareholders Marino Stefani Colpo and Camila Stefani Colpo each hold 30.1670% interest and are the controlling shareholders. HIX Investimentos Ltda holds 7.8810% and Truxt Investimentos holds a further 4.8700%. The company’s free float is 26.9150%.
Why invest in Boa Safra (SOJA3)?
The investment thesis on Boa Safra (SOJA3) is based on three points: secular trend of growth in planted area and soybean consumption; pulverized and expanding market, with opportunities to gain market share and consolidation; and expansion investment plan, tripling production capacity by 2026.
“Our purchase recommendation for SOJA is based on the expansion plan to triple production capacity by 2026, opening new seed processing units (UBS) and distribution centers (DC) to expand its operations nationally”, points out an excerpt from the report. from EQI Research.
The report also says that the company’s business model is boosted by the pulverized seed market. This is because there are many Small and Medium Enterprises (SMEs), in addition to informal producers.
“We believe that Boa Safra is in a privileged position to gain share or even consolidate this market. Finally, there is a secular trend of growth in soybean consumption, leading to an increase in planted area and demand for better quality seeds”, points out another excerpt from the report.
On the other hand, the main risks of this investment thesis are related to the concentration of net revenue in soybeans, making Boa Safra exposed to the specific cycles and risks of a single crop.
Another risk is related to the company’s dependence on the genetic companies responsible for the development of the seeds, which have bargaining power since Boa Safra does not have its own patents.
“Finally, we believe that materializing the expansion plan is fundamental to the thesis, since a large part of the company’s value is centered on it”, says another excerpt from the report.
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