Eletrobras resists the stock market crash after privatization

In the two weeks following the conclusion of its capitalization process, Eletrobras accumulated gains in the stock market in what is the worst moment of the year for the Brazilian Stock Exchange.

Since June 9, the day of the formation of the price of shares whose issuance took control of the company from the hands of the federal government, the company’s shares have appreciated by 2.81%, considering the market closing this Friday (24). In the same range, the Ibovespa sank 7.86%.

Domestic turmoil, triggered by President Jair Bolsonaro’s (PL) dissatisfaction with the possible electoral damage from the increase applied by Petrobras to fuels, and the fear of global recession, amplified by the historic high of interest rates in the United States, brought the Ibovespa to its lowest level. in a year and a half.

Resistance to market fluctuations is one of the characteristics of the electricity sector and the utilities sector, as the essential services segment is called, in which companies supplying gas, water and sanitation can be included. That’s why investors call the shares of companies in this group defensive.

“These are companies resistant to crises because they have an inelastic demand. They have little relation to economic growth and are predictable in terms of cash flow, which is very constant”, comments economist Paulo Henrique Duarte, from Valor Investimentos.

Even compared to its segment, however, Eletrobras has superior performance. While the company has recorded gains on the stock exchange since its capitalization, the IEE (Electric Energy Index) dropped 2.26%.

“The electric ones were better [do que o Ibovespa no período]and Eletrobras was better among her peers”, says Duarte. “She shows strength [desde a privatização]this is true, but this is also a characteristic of the sector.”

In the accumulated result for the year, Eletrobras’ performance is six times higher than that of the sector on the Stock Exchange. While Eletrobras’ common shares rose 32%, the IEE rose 5.5%. The result accumulated in 2022 by the Ibovespa is negative by 5.87%.

The expectation that preceded the privatization is, according to Duarte, what explains the discrepancy. “Atypical trading volume is normal before such a large cap, then the paper tends to go back to reasonably priced margins,” he says.

The company’s next steps in relation to good governance practices, cost reduction and investments should also dictate the pace of Eletrobras’ appreciation in the eyes of the market, according to Ilan Arbetman, an analyst at Ativa Investimentos.

“There is a lot to do, but it has great potential for operational, financial and governance triggers after this transformational step for the company, which is now in its infancy”, says Arbetman. “A lot must change in the search for efficiency and resource allocation.”