JPMorgan raises Sabesp price target to R$ 35 with overweight rating

JPMorgan increased its price target for Sabesp (SBSP3) from R$ 34 to R$ 35 for December 2027 and maintained its overweight rating. This new target implies a potential upside of 31.9% relative to the stock's closing price of R$ 26.53 on the previous trading day (Friday). By 10:10 local time, Sabesp shares traded higher at R$ 27.13, up 2.26%. The bank adjusted its estimates after meeting with the company's chief financial officer. JPMorgan raised its EBITDA projections for 2027 and 2028 by 3%, driven by expectations of larger regulatory compensation that will more than cover a slower pace of operational expense reductions. Net profit estimates were lifted by 15% for 2028 and 2029, primarily due to downward revisions on investment plans. Capital expenditure (capex) is now estimated at R$ 75 billion between 2026 and 2029, down from the previous forecast of R$ 89 billion. Sabesp management confirmed there is room for further operational expense cuts following a reduction of approximately 20% in expenses per unit since privatization. However, JPMorgan now projects these cuts to occur more gradually at an average real rate of 5% annually between 2027 and 2031.