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Investing.com - Goldman Sachs has initiated coverage on CPFL Energia (NYSE:CPL) with a Neutral rating and a price target of R$41.00, according to a research note released Wednesday.
The investment bank views CPFL as a premium integrated utility operator trading at a 9.3% real internal rate of return (IRR) compared to approximately 7% for inflation-linked bonds, with a 6.8% dividend yield expected for 2025.
Goldman Sachs notes that CPFL’s slightly lower IRR compared to peers (which average 10.6%) is justified by several factors, including the company’s exposure to high-quality distribution concessions in developed regions of Brazil, specifically São Paulo and Rio Grande do Sul states.
The firm also highlights CPFL’s contracted generation portfolio in the medium term with low exposure to GSF (Generation Scaling Factor) risk, as well as its history of recurring dividends averaging approximately 85% payout between 2019-2024, with guidance of 70-80% for the coming years.
Goldman Sachs’ analysis already incorporates the recently announced BRL 4.7 billion (before taxes) CPFL Paulista lawsuit resolution, which the firm models to be received over a five-year period, supporting the company’s predictable cash flow profile and relatively low leverage ratios of 2.4x BRGAAP (excluding equity income) and 2.1x IFRS.
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