As ações de energia e saneamento que podem ter um ‘rali Flávio’

The upcoming election on Sunday is being viewed by the market as a potential positive trigger for some shares of companies in the electricity and sanitation sectors. While entrepreneurs do not expect any changes in the concession bidding agenda or sectoral policies, whichever party wins the votes could impact long-term low interest rates, which are crucial for capital-intensive industries.

Analysts from utilities told Brazil Journal that if the opposition wins, the market would believe in a fiscal adjustment and the sector would be very sensitive to long-term interest rates. Among the names that may rise on Monday if the poll shows favorable numbers for Flávio are mainly distributors of energy and sanitation companies.

Several analysts specifically mentioned Energisa, which mainly operates in distribution, and Equatorial, which has distribution and sanitation, as well as Sabesp and the renewable generator Auren – the latter due to its high leverage. From a broader perspective, the assessment is that stocks in general tend to rise if Flávio wins, or fall with a good performance of Lula.

"As energy and sanitation are more defensive and have less aggregate volatility, they should move less in either direction. That said, there are single names within these sectors that may be more sensitive up or down," said an analyst from a large bank. Companies with longer concession terms tend to gain a greater boost with a potential victory for the opposition.

"The longer the concession, the greater the sensitivity of the asset to longer-term interest rates – in addition to the level of debt and capex," said a third analyst. For this source, Sabesp and the transmitter Alupar could stand out positively in this scenario. In a pro-Lula scenario, names with low duration and low leverage may fare better, as well as transmitters, seen as a safe haven, said the second analyst.

In case of a petiste victory, sanitation and electricity stocks may generally "outperform" the market in the short term due to their more defensive characteristics. However, while signals about the future fiscal policy and its impact on interest rates are a key variable, the UBS analyst team said there is still a lot of uncertainty in this front, especially in a highly contested election.

After several conversations with external consultants, UBS warned that investors may be waiting for a higher degree of fiscal discipline than the natural incentives of Brazilian policy encourage. "Under this view, future administrations of any ideological orientation are likely to face significant political constraints when trying to implement fiscal adjustments."