Less than a month after being privatized, the Minas Gerais Sanitation Company ( Copasa ) has been boosting the financial market, which is already pricing in increased revenue based on the projected volume of investments. On Tuesday, July 14th, Citi raised its target price from R$ 55 to R$ 79, a 44% increase. And it maintained its buy recommendation for the stock.
The privatization was completed on June 16th at B3, in a sale that yielded R$ 8.4 billion to the government of Minas Gerais in the two phases of secondary offerings.
Equatorial won the dispute and became the reference shareholder, with a 30% stake. As a result, the State's stake was reduced from 50.03% to 5.03%. However, it retains veto power.
It was the second largest privatization in the basic sanitation sector, second only to the sale of the São Paulo Sanitation Company ( Sabesp ) in 2024, which was also won by Equatorial.
According to Citi analysts, this change in leadership will be positive for the future strategic plan of the sanitation company.
"We welcome Equatorial as a reference shareholder of Copasa, as we believe its solid operational track record should support the execution of the company's restructuring, as well as the transformation we have observed at Sabesp," says the bank's report.
The change in assessment is based on the assumption that all municipalities will choose to extend their contracts until 2073, similar to the agreement signed with the City Hall of Belo Horizonte in March of this year. In this case, there is a forecast of transfers of up to R$ 1.3 billion between 2026 and 2028 to the municipal administration.
In its first-quarter earnings report, the company stated it held 636 concessions for water services and 309 concessions for sewage services in Minas Gerais.
“We also incorporated the operating expense (opex) efficiency sharing mechanism of 25% to 90%, added new sewer connections, and updated our Asset Reinvestment Agreement (RAB) assumptions to incorporate recent unitized investments and approximately R$3.1 billion in contractual assets in the first quarter of 2026,” says Citi.
Nevertheless, the bank still considers the possibility of some municipalities choosing not to renew their contracts, as well as the political instability caused by the increase in sanitation tariffs, to be a risk in its analysis.
"On the other hand, we see enormous growth potential if the company can continuously exceed annual incentive factors, implement more aggressive cost reduction initiatives, and adopt a more aggressive dividend policy," the document explains.
According to analysts, Copasa currently has the capacity to distribute 100% of its profits without compromising its balance sheet. The bank also sees other opportunities, such as optimizing its capital structure and reducing financing costs.
According to the bank's assessment, Copasa's stock has been trading at an implied real net rate of return (IRR) of 11.5%. Around 12:30 pm on Tuesday the 14th, the stock was trading at R$ 66.40, up 0.2%.
In the privatization process, the shares were priced and sold at R$ 49.03 each. This represents an appreciation of 35.4% during the period.
Immediately after the sale of the controlling stake, BTG Pactual already saw the company's potential for appreciation. In a report released by the bank at the end of June, analysts raised the target price from R$ 56.15 to R$ 81.
"We are adjusting Copasa's model and target price to reflect its new status as a private company, managed by one of the companies with the most solid recovery track record in the country (Equatorial)," the bank stated at the time.
Between January and March of this year, Copasa recorded net revenue of R$ 1.9 billion, a 2.5% increase over the same period of the previous year. EBITDA reached R$ 787 million, a 3.2% decrease. The second-quarter results will be released on August 14th.
In the accumulated total for 2026, CSMG3 shares registered a 52% increase on the B3. In 12 months, the appreciation is 150%. Copasa has a market value of R$ 25.3 billion.
