Ultrapar (UGPA3) is BTG Pactual’s New ‘Top Pick’ for Oil & Gas in 2024: Why Buy Now?

• Why Did BTG Pactual Upgrade Ultrapar to ‘Top Pick’?
• What’s Driving the Bull Case for UGPA3?
• Is Ultrapar Secretly Betting on Rumo (RAIL3)?
• Dividend Bonanza Ahead?
• FAQ: Ultrapar (UGPA3) Investment Thesis

In a sector-wide review, BTG Pactual has reaffirmed its "buy" rating for Ultrapar (UGPA3), crowning it as the top pick in Brazil’s oil and gas space. With a 12-month price target of R$31 (39% upside), the bank highlights Ultrapar’s diversified energy-infrastructure portfolio, disciplined capital allocation, and potential catalysts across its subsidiaries—Ipiranga, Ultragaz, Hidrovias, and Ultracargo. Here’s why analysts are bullish.

Why Did BTG Pactual Upgrade Ultrapar to ‘Top Pick’?

BTG’s analysts Rodrigo Almeida and Gustavo Cunha cite Ultrapar’s "refreshed strategy" post-shareholder restructuring and a proactive approach to portfolio management. The conglomerate’s focus on high-ROIC businesses (targeting 20%+) and reduced earnings volatility compared to pure-play fuel distributors makes it stand out. "With R$3.1B in dry powder (13% of market cap), Ultrapar can chase growth or boost shareholder payouts while maintaining a comfortable 1.6x net debt/EBITDA by 2026," they note. The stock rallied 1.2% intraday following the report.

What’s Driving the Bull Case for UGPA3?

Brazil’s crackdown on illegal fuel operations could lift Ipiranga’s EBITDA margins to R$165/m³ by 2026 (vs. R$144/m³ in 2024), with volume growth of 2.5% annually. BTG praises Ultrapar’s "disciplined reinvestment" of Ipiranga’s cash flows into organic/inorganic growth.

Proposed LPG (cooking gas) rule changes by Brazil’s ANP are unlikely to materialize, per BTG, avoiding market disruption. Ultragaz’s EBITDA/ton is projected at R$1,045 by 2026, aided by new ventures like Stella and Neogas.

Operational efficiency gains and selective capacity expansions could revive this logistics arm. "A successful turnaround here WOULD significantly improve sentiment," says BTG.

Storage unit EBITDA may hit R$634M in 2024 (+10% YoY) on higher asset utilization.

Is Ultrapar Secretly Betting on Rumo (RAIL3)?

After Brazil Journal reported Ultrapar’s ~5% stake in rail operator Rumo (RAIL3) in late 2023—later confirmed by seller Cosan (CSAN3)—BTG speculates this could signal deeper infrastructure ambitions. "Given CEO Marcos Lutz’s rail expertise from his Cosan days, we wouldn’t rule out strategic synergies," they write. A full acquisition seems unlikely, but even a minority stake would only bump leverage to 1.7x.

Dividend Bonanza Ahead?

Ultrapar’s R$1.2B dividend payout for 2024 implies a 5% yield. BTG expects further distributions as deleveraging progresses, calling the balance sheet "comfortable."

FAQ: Ultrapar (UGPA3) Investment Thesis

What is Ultrapar’s 12-month price target?

BTG Pactual’s R$31 target implies 39% upside from UGPA3’s January 16 close of R$22.26.

Which Ultrapar subsidiary has the highest margins?

Ipiranga leads with projected 2026 EBITDA margins of R$165/m³, per BTG.

Could Ultrapar acquire Rumo (RAIL3)?

Unlikely—but a strategic stake aligns with its infrastructure focus. Leverage impact would be minimal (+0.1x).