Itaú BBA Raises Eletrobras (ELET3) Target Price for 2025: "One of the Market’s Biggest Valuation Asymmetries"
- Why Did Itaú BBA Upgrade Eletrobras’ Price Target?
- Electricity Prices: Market vs. Itaú’s Bullish Thesis
- RBSE Agreement and Capital Allocation: A Game Changer?
- Risks and Counterpoints
- FAQs: Eletrobras (ELET3) Price Target Update
Itaú BBA has upgraded its price target for Eletrobras (ELET3), citing a bullish outlook on Brazil's electricity prices and favorable earnings from RBSE. The new 2026 target is R$63.30, up from R$54.90, with analysts highlighting the stock's potential for dividend growth and repricing. Regulatory shifts and energy market dynamics are key drivers, while the recent agreement with the Brazilian government adds stability. Here’s a DEEP dive into the opportunities and risks.
Why Did Itaú BBA Upgrade Eletrobras’ Price Target?
Itaú BBA’s research team, led by Fillipe Andrade, has raised its price target for Eletrobras (ELET3) to R$63.30 by 2026, up from R$54.90. The upgrade reflects Optimism about electricity price trends and RBSE (Rede Básica do Sistema Existente) earnings. "We believe the company offers one of the most significant valuation asymmetries in our coverage and could become a top dividend payer in the sector," the analysts noted. The current market assumption of declining electricity prices contrasts with Itaú’s view, which anticipates higher long-term prices due to regulatory and structural factors.
Electricity Prices: Market vs. Itaú’s Bullish Thesis
The market projects electricity prices to fall to R$251/MWh by 2026 (from ~R$310 today), with further declines to R$160/MWh by 2033. Itaú disagrees, arguing that Eletrobras’ stock price embeds an overly conservative R$108/MWh long-term assumption. Key factors supporting their bullish outlook include:
- Regulatory Shifts: Changes to Brazil’s SIN (Sistema Interligado Nacional) now require hourly (vs. daily) energy planning, amplifying price volatility as solar/wind generation fluctuates.
- CMSE Caution: The Comitê de Monitoramento do Setor Elétrico has maintained risk parameters for PLD (energy price calculations), likely keeping prices elevated to account for thermal plant usage.
- Battery Adoption: Future grid-scale battery deployments could boost demand and sustain higher prices.
Every R$10/MWh increase in short/mid-term prices (2026–2032) WOULD lift Itaú’s target by 3.6%; long-term hikes (post-2033) would add 3%.
RBSE Agreement and Capital Allocation: A Game Changer?
The recent Eletrobras-União agreement resolved governance disputes and locked in RBSE payment flows, removing earlier fears of tariff cuts. The company also plans to ramp up brownfield investments (regulated by ANEEL) from R$3.3B in 2024 to ~R$6B annually long-term. While RBSE earnings are temporary, these investments aim to offset the decline. "This strategy enhances cash Flow visibility," Itaú emphasized.
Risks and Counterpoints
Not everyone’s convinced. Critics point to:
- ANEEL’s tariff revisions gradually phasing out RBSE income.
- Execution risks in Eletrobras’ R$6B/year investment plan.
- Potential political interference despite the recent accord.
Still, with a 2025 dividend yield projected at ~6% and upside from repricing, Itaú’s bet hinges on Brazil’s energy crunch playing out as expected.
FAQs: Eletrobras (ELET3) Price Target Update
What is Itaú BBA’s new price target for ELET3?
Itaú raised its 2026 target to R$63.30 (from R$54.90), citing higher electricity price assumptions and RBSE stability.
Why does Itaú expect electricity prices to stay high?
Regulatory changes (SIN hourly planning, CMSE conservatism) and future battery demand could tighten supply.
How does the RBSE agreement help Eletrobras?
It ends governance uncertainty and secures cash flows, allowing focused investments in regulated assets.
