We recently maintained a Neutral recommendation on Brazilian
sugar and ethanol producer,
ARCHER DANIELS (ADM): Free Stock Analysis
COSAN LTD-A (CZZ): Free Stock Analysis Report
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Cosan's long-term growth prospects appear bright with strategic
acquisitions, growing sugar and ethanol demand, energy
co-generation and transportation businesses acting as the major
growth driving catalysts. Cosan's dividend payments and share
buyback activities are an added advantage for the company.
Formation of Raizen, a joint venture between Cosan and Shell, has
proved to be a boon for the company enabling better access to the
ethanol consumer market and increased competitiveness in biofuels
and fuel distribution businesses. The joint venture is expected to
be one of the largest ethanol producers in the world with 2.2
billion litres of annual production capacity.
Besides, Cosan's association with Camil will bring recognised
brands in sugar, rice and canned fish under one roof. Also, the
acquisition of stakes in Comgas will strengthen Cosan's presence in
energy business while the additions of Esso Petroleum Company and
Comma will solidify the company's presence in the European
lubricant and specialties markets. Share acquisition in América
Latina Logística (ALL) will provide Cosan access to the former's
For fiscal year 2013, management anticipates that consolidated net
revenue would be in the range of R$26.0-R$29.0 billion; EBITDA in
the range of R$2.2-R$2.5 billion and capital expenditure in the
range of R$2.1-R$2.4 billion.
Despite the solid long-term growth prospects, Cosan's near-term
performance has forced us to remain on the sidelines. Cosan posted
disappointing fiscal first quarter 2013 results with a net loss of
R$24 million as compared with earnings of R$986 million in the
year-ago quarter. Revenue increased 18%, which was more than offset
by a 23% jump in cost of sales.
The current Zacks Consensus Estimate for the fiscal second quarter
of 2013 is 25 cents. Estimates for fiscal 2013 and 2014 are 71
cents and $1.48, reflecting annual growth of (72.8%) and 108.5%,
Cosan currently has a Zacks #3 Rank, translating into a short-term
(1-3 months) Hold rating while its nearest competitor
Archer Daniels Midland Company
) bears a Zacks #5 Rank, indicating a Strong Sell rating.