Magazine Luiza (MGLU3) shares continue to gain and are the highlight of Ibovespa’s rise for the year, maintaining the post-crisis appreciation of Americanas (AMER3). In the January cumulative until the eve session, MGLU3 shares rose by 60%; since its rival disclosed accounting mismatches of around R$20 billion (last 11), shares have already jumped 45% (as of last Tuesday).
With the high reaching 6.38% (R$ 4.67) at the day’s high on Wednesday (25th), the accumulated gains for the month exceeded 70%. However, shares trimmed gains, declined as investors pocketed profits and finished the session down 0.91% to R$4.35.
With the crisis culminating in the judicial recovery of Americanas, investors stopped exposure to AMER3 and increased exposure to MGLU3.
Furthermore, while Americanas suffers on the stock market, the thesis has strengthened in recent days that Magazine Luiza would be one of the biggest beneficiaries (if not the biggest) with the loss of strength of its rival. Indeed, analyzes along these lines gained momentum after Americanas asked RJ on Jan. 19.
Following the opening of the trial, Citi highlighted that Magalu would be the biggest beneficiary of an increase in online traffic and gross merchandise volume (GMV), if all operations of Americanas were disrupted due to its trial. judicial recovery.
Luiza magazine would increase its volume by 18% this year. Followed by Via (VIIA3), with an increase of 15%, and Mercado Livre, with 11%.
In the bank’s assessment, Magalu would “inherit” a 14% share of direct online sales of Americanas and 25% of market sales (3P), while Via would receive 12% and 24%, respectively. Mercado Livre would receive 11% of market sales.
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The impact on Americans’ dissipation in brick-and-mortar store sales is more difficult to measure, due to the fragmentation of the sector, the bank points out, involving smaller companies and companies from different sectors.
Morgan Stanley, in turn, reiterated that Mercado Livre should lead part of the acquisition of the 15% of e-commerce that will be left by Americanas, while Magalu and Via are among the potential beneficiaries (mainly in own shares, 1P and stores ).
The bank’s expectation for 2022 is that Americanas would have a GMV of R$55 billion, of which 28% is in stores and 72% online; in online operations, 36% of the mix is 1P and 64% is 3P.
“Although the extent and timing of Americanas’ loss of stake are linked to the outcome of the restructuring process, in all scenarios we see negative effects in the relationship with suppliers and in the ability to invest to grow,” he underlines. When considering potential market share beneficiaries, analysts believe category and 1P/3P mix are key factors.
Based on category share analysis, Morgan experts estimate that Americanas online GMV is approximately 40% electronics, appliances and accessories, with the largest exposure in 1P (estimated at 60% in electronics) and a lower exposure in 3P (about 25%) .
If Mercado Livre acquires approximately 50% of the exclusive GMV of the Americanas market, this would represent an increase of approximately 16% in Mercado Livre’s GMV Brazil and approximately 7% in total GMV (compared to projections for 2022).
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For Magalu, with a 30% market share in the electronics e-commerce segment, Morgan’s assessment is that the company is well positioned for the sales opportunity in this category. However, when considering the 1P store and the sharing opportunity for Magalu and Via, it notes the associated need for inventory space and working capital, which could limit the pace of 1P’s growth, while seeing fewer barriers related to sales changes in the market.
Guide Investimentos has also carried out an analysis restricted to the digital segment of Americanas, since physical points of sale have a different dynamic and points of sale could be used by players from other segments.
By mapping data on the companies’ current market share and their growth potential against the market held by Americanas, the analysts concluded that Mercado Livre would benefit the most in nominal terms, while in relative terms Magazine Luiza is in head.
Check competitors’ market share gain estimates in the table below:
“The explanation logically passes through the already large sales base that Mercado Livre currently has, while Magazine Luiza is a little smaller and also manages to gain ground from the digital 1P. Via, given its current representativeness in terms of market shares, in theory it would have less capacity to capture shares of Americanas”, points out Guide. On the other hand, the experience of the owner of Casas Bahia e Ponto in terms of physical 1P billing could help win outlets throughout the country, which is not the focus of the specific analysis.
“Also for the sector, other impacts can be expected, but with a difficult quantitative precision: with a greater concentration of large companies in the segment, the conditions between sellers and retailers can be revised, just as negotiations with suppliers can have new conditions , thinking above all of those smaller companies, which today depend heavily on the Americans”, he evaluates.
Thus, the house concludes, the share gain was already happening naturally throughout 2022, and the judicial recovery process has the potential to accelerate this movement in the coming quarters.
Despite the recent sharp increase in Magalu’s assets, market analysts are still showing some skepticism towards the stock, mainly due to the macroeconomic scenario, even if the assets are believed to be discounted.
Morgan Stanley continues with a recommendation equal weight (exposure in line with the market average, equal to neutral) for MGLU3, with a target price of BRL 3.50 (20.3% less than the previous closing date). The overall backdrop is one of caution for the sector, with analysts having a more positive view of Mercado Livre.
“We see digitalisation and interest rate headwinds continue to weigh on industry margins”; the bank’s macro team also recently raised its projection for the selic from 11% to 13.5% at the end of 2023. With the selic high for a longer period of time, the projection is for an impact on equities in the consumer sector. Therefore, analysts are waiting for a “positive downturn” to reconsider their valuations. Among consumer actions, the greatest optimism is with wholesale and retail food companies, with buy-equivalent recommendations for Assaí (ASAI3) and Carrefour Brasil (CRFB3).
According to a compilation made by Refinitiv with analysis houses, out of 13 houses covering MGLU3, five recommend the purchase and eight the maintenance, with an average target price of R$ 5.06, still a potential appreciation of 15% compared to the closing from the day before.
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