We recently reiterated our Neutral recommendation on
), a leading sugar and ethanol producer in Brazil.
Cosan's long-term growth prospects appear quite compelling
especially as sugar and ethanol demand is increasing steadily. In
addition to this core business, exposure into energy, food,
logistics, infrastructure and farmland development and management
businesses appear added advantages for the company.
Moreover, Cosan has been expanding its business portfolio through
acquisitions and long-term contracts or agreements. The company's
association with Camil, and its stake acquisitions in Comma,
América Latina Logística (ALL), and the recent 10% stake
acquisition in the capital stock of STP (Serviços e Tecnologia de
Pagamentos S.A.) would undoubtedly result in increased
competitiveness in their respective businesses.
Effective the quarter ended Jun 30, 2013, Cosan made a couple of
strategic changes. Firstly, the company started reporting its
financial results on a calendar year basis with an exceptional
nine months operating period for 2013. Secondly, Cosan adopted
IFRS 11 to recognize Raízen under the equity pick-up method.
For 2013, management guided net revenue in R$35.0-R$38.0 billion
range and EBITDA in the range of R$3.95-R$4.35 billion. Capital
spending to be used for the improvement of capacity and services
has been fixed in the range of R$2.95-R$3.2 billion.
Despite these positives, the near-term risks surrounding the
stock have forced us to maintain a neutral stance on Cosan.
Adverse weather conditions, rising competition, higher cost of
sales and operating expenses as well as rising long-term debt are
detrimental to the company's performance.
Other Stocks to Consider
Cosan currently has a market capitalization of $3.6 billion.
Other players that are worth a mention in the industry are
The Andersons, Inc.
), with a Zacks Rank #1 (Strong Buy) while
Gruma S.A.B. de CV
), each come with a Zacks Rank #2 (Strong Buy).
ANDERSONS INC (ANDE): Free Stock Analysis
COSAN LTD-A (CZZ): Free Stock Analysis Report
GRUMA SA-ADR B (GMK): Free Stock Analysis
MONSANTO CO-NEW (MON): Free Stock Analysis
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