Why Sabesp (SBSP3) Became a Top Pick for Fund Managers in 2025

• Sabesp’s Q2 Earnings: More Than Just a Beat
• The Privatization Effect: From Bureaucracy to Bottom Line
• Why Fund Managers Are All In
• The Sell-Side’s Mea Culpa Moment
• Execution Over Promises
• The Risks Nobody’s Talking About (Yet)
• FAQ: Your Burning Sabesp Questions, Answered

Sabesp’s Q2 2025 results didn’t just beat expectations—they shattered them, reinforcing why this once-overlooked utility stock is now a darling of fund managers. With soaring revenue, controlled costs, and a transformative privatization push, Sabesp is proving it’s no longer the sluggish state-owned enterprise of yesteryear. Here’s why analysts (and the market) are finally waking up to its potential.

Sabesp’s Q2 Earnings: More Than Just a Beat

When Sabesp dropped its Q2 2025 numbers, the market reacted like it had chugged a triple espresso—shares jumped nearly 10% in a single day. Net revenue hit R$5.64 billion, EBITDA reached R$3.40 billion, and net profit landed at R$1.82 billion, all cruising past even the rosiest analyst forecasts. As the BTCC team noted, “This wasn’t just a beat; it was a full-blown symphony of operational efficiency.”

The Privatization Effect: From Bureaucracy to Bottom Line

Remember when Sabesp was that clunky state-run water utility? Yeah, neither do investors anymore. Since Equatorial took the wheel post-privatization, the company’s been shedding inefficiencies faster than a marathon runner sheds sweat. Debt costs? Down. Tariff mix? Optimized. And those sanitation universalization targets? Suddenly looking achievable. It’s like watching a hippo turn into a racehorse—you keep blinking to make sure it’s real.

Why Fund Managers Are All In

Talk to any portfolio manager who’s overweight SBSP3, and you’ll hear the same trifecta: (1) inflation-resistant cash flows (because people won’t stop flushing toilets during economic crises), (2) a valuation that still doesn’t reflect the turnaround, and (3) Equatorial’s ruthless execution culture. As one hedge fund analyst quipped, “This is the rare infrastructure play where the Excel model keeps needing upward revisions.”

The Sell-Side’s Mea Culpa Moment

Even the most bullish analysts have been playing catch-up. BTG Pactual—which maintains Sabesp as a top pick—admits their initial targets now look “unnecessarily conservative.” The irony? Many funds missed the early rally because they were still pricing SBSP3 like it was 2022’s version. As TradingView data shows, the stock’s EV/EBITDA multiple still trails peers despite superior growth prospects.

Execution Over Promises

What’s most striking isn’t the numbers themselves, but how they’re being delivered. Management’s hitting every KPI with Swiss-watch precision: reducing water losses by 180 basis points YoY, accelerating new connections, and renegotiating debt terms. In infrastructure investing, where projects often MOVE at glacial speeds, Sabesp’s tempo feels like a speed metal track.

The Risks Nobody’s Talking About (Yet)

Before you YOLO your life savings into SBSP3, consider the elephants in the room: regulatory lag (tariff adjustments still trail inflation), political noise around privatization, and Equatorial’s aggressive leverage. That said, with Brazil’s interest rates finally descending from orbit, the carry trade alone makes Sabesp’s 6% dividend yield smell like a bakery at dawn.

FAQ: Your Burning Sabesp Questions, Answered

Why did Sabesp’s stock surge after Q2 earnings?

The results weren’t just good—they revealed structural improvements most investors hadn’t priced in, from financial expense reductions to operational efficiencies.

Is Sabesp still undervalued after the 2025 rally?

According to TradingView metrics, yes. Its EV/EBITDA of 5.3x remains below the sector average of 7.1x despite superior growth rates.

What’s the biggest risk to the investment thesis?

Execution stumbles under Equatorial’s aggressive targets or regulatory pushback on tariff adjustments.