Brazilian investment bank Itaú BBA has raised its price target on water utility Sabesp (SBSP3) by 39% to R$33.10 per share, citing what it describes as an overreaction to the company’s second-quarter results.
The bank’s utilities team, led by analysts Fillipe Andrade, Lucas Guimarães and Lorena Fernandez, reiterated a buy recommendation after Sabesp’s shares dropped 19.6% over the prior month, erasing R$17.5 billion in market value. The stock now trades at R$23.75, near its 52-week low of R$22.23 and 48% below its 52-week high of R$35.32.
Itaú BBA estimates the company’s Q2 impact package at R$800 million, with R$400 million expected to be recovered through future tariff mechanisms, R$200 million classified as non-recurring and the remaining R$200 million expected to persist in the long-term cost base. The bank projects a structural impact of R$170–200 million, translating to roughly R$1 per share.
The investment firm trimmed its EBITDA and net income forecasts for Sabesp across 2026 and 2027, reflecting weaker near-term performance. EBITDA is now projected at R$14.305 billion for 2026, down 8% from prior estimates, and R$19.152 billion for 2027, a 4% reduction. Net income is seen falling 14% in 2026 to R$5.288 billion and 23% in 2027 to R$6.218 billion. Itaú BBA’s estimates trail Bloomberg consensus by 17% in 2026 revenue and 15% in 2026 profit, widening to a 23% profit gap in 2027.
Sabesp’s valuation remains below global peers, trading at 7x EV/EBITDA for 2027 compared with 12x for United Utilities, 15x for American Water and 15x for Essential Utilities. The bank’s price target embeds an EV/RAB multiple of 1.48x for 2026, up from an implied 1.18x in 2026 and 0.91x in 2030.
On capital expenditure, Sabesp is targeting R$20 billion for 2026, with nearly R$7.5 billion executed in the first half. The company has a contracted backlog exceeding R$40 billion from July 2026 through December 2029, with Itaú BBA noting historical capex concentration in the second half of the year.
Sabesp’s provisioning rate for defaulted loans has declined from around 4% of revenues under prior management to 1.4% at the end of 2025 and Q1 2026, with Itaú BBA projecting convergence toward 2% over the long term.
