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SABESP's 2012-2015 Investment Plan

SBS VE

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Over time, Saneamento Basico do Estado de São Paulo or SABESP (SBS - Analyst Report) has been retaining its position as one of the largest water and sewage service providers in the world.


The Brazilian company recently came out with its investment plan for the period 2012-2015. SABESP intends to invest a large sum of R$7.9 billion, with every penny to be spent  for the achievement of its goals. The company aims at increasing its water supply coverage, implementing a 3% hike in sewage collection to 85% and increasing collected sewage treatment from 76% to 83%.

    
The company has allocated around R$2.0 billion, R$1.99 billion, R$1.96 billion and R$1.94 billion for the fiscal years 2012, 2013, 2014 and 2015, respectively. Prime areas of investments in these years will be Water supply, Sewage collection and Collected sewage treatment.

We believe the company’s constant efforts to improve its services and business portfolio through strategic investments will bear fruit over the long run. By the fiscal year 2019, the company targets to provide roughly 1.3 million new water connections and 1.7 million new sewage connections.


The current Zacks Consensus Estimate for the first quarter of fiscal year 2012 is $1.62, representing a year-over-year increase of 68.75%. Estimates for the fiscal years 2012 and 2013 are $7.25 and $7.43, reflecting annual growth of 22.88% and 2.48%, respectively.


The company competes with other major players of the industry including Veolia Environnement S.A. (VE). We currently maintain a Neutral recommendation on SABESP. The stock has a Zacks #1 Rank, implying a short-term (1-3 months) Strong Buy rating.
 

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