This is an abridged online version of this week’s edition of the A Companhia newsletter, which details the data of a leading company in the market. To subscribe to the weekly newsletter and access the full content, click here.
This week, the highlight of the A Companhia newsletter is Movida (MOVI3), chosen by PagBank’s Research team.
The brokerage points out that car rental companies have gained a lot of visibility on the Brazilian stock market in recent years, due to changes in the consumer mentality of Brazilians, who were not in the habit of renting a car.
“Another point that also leveraged the rental sector was the increase in the number of Uber drivers, who saw in rental a possibility to work on the app without having to own a car.”
The PagBank analysis team recalls that there are three companies in this sector listed on B3: Movida (MOVI3), Unidas (LCAM3) and Localiza (RENT3). All these stocks accumulated appreciation in the year, until April 28, but the biggest highlight was Movida, which rose 15% in the interval.
Learn more about Movida
The company was founded in 2006, but its history changed when it was acquired by the JSL Group, now called Simpar (SIMH3), in 2013. Since then, the company has evolved considerably, becoming one of the main players in the segment.
Movida operates on three fronts, with car rental for individuals being the best known – identified as RAC (rent-a-car).
Another segment is the GTF (fleet management and outsourcing), which consists of vehicle rental for companies and represents one of the most important businesses for the group, as it has the highest profit margins and good revenue predictability.
Finally, the company sells used models, an activity whose objective is not to generate profit, but to renew the operating fleet of vehicles at a lower cost.
Why are Movida’s shares an opportunity to invest?
PagBank recalls that, recently, there was a sharp rise in the prices of new and used vehicles, driven by the lack of semiconductors in the world. “This has motivated many people and companies to seek the car and fleet rental service, accelerating the tendency of Brazilians to change their habits in relation to their own car.”
The rise in the basic interest rate (Selic) also drove consumers away from car financing, causing the demand for rental cars to grow, says the brokerage.
Another positive point for Movida is its ability to pass on costs to customers, says PagBank, making the effect of inflation lesser on its business. The company also benefits from higher used car prices, as it buys its new fleet at a discount directly from automakers and resells its used cars at higher prices.
PagBank’s Research team also highlights that the three main companies in the segment have just over 60% of the market, while the rest is fragmented among small rental companies. “With this, we understand that in the long term the leaders can continue to grow through the purchase of smaller competitors, thus increasing market concentration.”
points in favor
Ability to pass on costs; Possibility of organic growth (openings of stores) and inorganic (acquisitions of competitors); Focus on profitability; Growth of the fleet management and outsourcing segment, with greater predictability of results.
points against
Crisis in semiconductors can make the company have difficulties in renewing the fleet; Consumer habits can change again; Entry of the automakers themselves as competitors; Capital intensive sector.
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