(Bloomberg) -- Cia Brasileira de Aluminio has emerged as the winner among the dozens of Brazilian companies that rushed to go public last year, bucking a trend of mostly lackluster returns for the country's new issuers.
Shares of CBA, as the Sao Paulo-based aluminum producer is known, are up around 70% this year in local-currency terms, more than five times the gain of the nation's benchmark Ibovespa stock index. The shares have surged amid a record-breaking rally in aluminum prices, as Russia's invasion of Ukraine added to supply disruptions.
CBA has roughly doubled since its initial public offering in July, trouncing the average drop of 19% for the 47 Brazilian listings from last year that are still trading, data compiled by Bloomberg show. Investors welcome the company's decision to ramp up production capacity in the coming months, ahead of schedule, as well as CBA's ability to meet its energy needs through its own hydroelectric plants.
“The stock offers an attractive valuation at a moment when other aluminum producers face problems,” said Fabiano Custodio, chief investment officer at Miles Capital, a Brazilian asset manager and CBA's largest minority holder. He bought CBA shares at the IPO.
Last year, a backdrop of low interest rates spurred a wave of Brazilian IPOs, with many issuers seeking to raise funds in anticipation of market volatility ahead of this year's presidential election.
Still, about 77% of the 2021 debuts are trading below their IPO price. Shares of loyalty program company Dotz SA and home decor retailer Westwing Comercio Varejista are down over 80% each.
CBA, which is controlled by Brazil's industrial conglomerate Votorantim, posted results this month that beat estimates and also announced it's expediting an expansion project, while its rivals are delaying investments amid the energy crisis. For example, Romanian smelter Alro SA curtailed production because of surging energy prices.
Despite the gains, CBA still trades at “an unjustified” discount to peers and aluminum prices should continue to see favorable momentum, BTG Pactual's Leonardo Correa wrote in a report last week.
His price target of 25 reais ($5.10) suggests upside potential of almost 10%. , CBA shares rose for a fifth straight session in Sao Paulo, approaching their highest level since the IPO.
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