Dexxos Participações S.A. engages in the production and sale of thermosetting resins to the reconstituted wood panels industry in Brazil. The company also engages in the production of formaldehyde; and resale of methanol and other chemical products. In addition, it manufactures tubes for construction, infrastructure, and automobile markets; and produces steel tubes for oil and gas segment. The company was formerly known as GPC Participações S.A. and changed its name to Dexxos Participações S.A. in June 2021. Dexxos Participações S.A. was founded in 1929 and is headquartered in Rio de Janeiro, Brazil.

Brazil

Dexxos Participações S.A.

Basic Materials

The company pays dividends most of the time. It has paid dividends in almost every one of the past ten years. Dividend per share (DPS) has grown yearly, and there is an evident trend. In the past 12 months, the dividend yield has been strong and significantly above its peers. At the same time, the average five-year yield has been significantly higher and exceeded most of its peers. On average, the company pays dividends annually. 

DEXP4.SA reported revenue of BRL 1 810mn in the last 12 months, up 4% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS fell 27% from FY23 to BRL 1.42. Market expects EPS to reach BRL 0.00 in FY25.

The stock's performance has been mixed in the past six months, with growth following a decline. There is no clear price trend compared to its global peers from the same sector and industry (as shown above). The stock has outperformed this peer group by 6ppts over past six months and grown 7ppts faster in the past month. At the same time, the stock's performance relative to its the peers from the same country and sector is different. The stock outperformed these peers by 11ppts over the past six months and grew 10ppts faster in the past month. With respect to the stock's valuation against its peers, its overall price performance is neutral.

The company has reported average EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 15.3% in the last 12 months, a decline from 18.7% in FY23. 

Historically, DEXP4.SA has reported good net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 8.0%, down from 10.4% in FY23. 

In the last 12 months, the return on capital employed (RoCE) declined to 11.9%, above the peers. 

Another important profitability metric, return on assets (RoA), amounted to 9.6% in the last 12 months, a decrease from 13.1% in FY23. 

Dexxos Participações S.A. reported a return on equity (RoE) of 17.2% in the last 12 months, down from 27.8% in FY23. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 2.8 in the past several years. This ratio implies a strong shareholder value creation. 

The institutional, legal, and compliance risks associated with the company's country are close to minimal. In combination with rigorous business standards, shareholder rights are well protected.

DEXP4.SA has very poor trading liquidity. It will take considerable time for the average private investor to sell a common position under normal market conditions. Liquidity is very unstable and becomes extremely unfavourable on the days with the lowest activity. The trading volume mostly stays the same even under highly turbulent market conditions. Another factor to consider is the substantial number of days with zero trading volumes, i.e., without any ability to sell a position. The stock has a very small market capitalisation, which usually makes its trading liquidity erratic and unpredictable. 

No other major risks have been identified.

The risk of default is moderate. We note solid return on capital, strong debt servicing capacity, and an favourable capital structure, among the positive credit factors. Among the negative credit factors, we point to weak positions in its industry, slow historical revenue growth, and poor working capital management.

In highly turbulent market conditions, DEXP4.SA is highly volatile. In other words, the stock will fall substantially more than the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be significant. 

In normal market circumstances, DEXP4.SA is exceptionally volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will change quite unpredictably. The stock's losses on its worst days (less than 1-5% of the time) will range from significant to immense. 

Considering past and projected metrics, the stock is distinctly 'cheaper' than its peers. In particular, the stock is underpriced on P/E, 'cheap' on EV/EBITDA, trading at neutral levels on P/FCF. 

Dexxos Participações S.A.

R$ 8.9

4

Dexxos Participações S.A.

R$ 8.9

4

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

R$ 8.9

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