By Brasil Stock Guide – Sabesp, Brazil’s largest water and sanitation company, delivered a stellar second-quarter performance that sent its shares to an all-time high, leading gains on the B3 exchange on Tuesday, August 12. According to NeoFeed, the stock jumped as much as 10% in early afternoon trading, touching 122.99 reais before easing slightly, as investors cheered the results released late Monday.
Net income surged 76.6% from a year earlier to 2.14 billion reais ($400 million), fueled by a 32.8% jump in revenue to 8.96 billion reais and a 19% drop in operating expenses to 2.03 billion reais. The strong performance comes just over a year after the state of São Paulo privatized the utility, reinforcing analysts’ expectations that private ownership would drive operational efficiency.
Since the privatization in July 2024, Sabesp’s shares have climbed about 63%, boosting its market capitalization to 84 billion reais ($16 billion). “Personnel, service, material, and energy costs all came in better than expected, showing that cost-cutting initiatives continue to deliver positive surprises,” analysts at BTG Pactual wrote in a note.
As part of its post-privatization strategy, Sabesp has ramped up investments to expand access to drinking water and sewage treatment. Construction-related spending jumped 142% in the quarter to 3.08 billion reais, and totaled 5.67 billion reais in the first half, up 117% from the same period in 2024.
Even with higher construction expenses, revenue growth and lower operating costs pushed adjusted Ebitda up 29.4% to 3.89 billion reais — roughly 10% above market consensus. Billed volumes rose 4%, supported by higher consumption and 161,000 new connections over the past 12 months.
Citi analysts noted that a more favorable tariff mix underpinned revenue, likely reflecting the removal of discounts previously granted to large consumers. BTG Pactual also highlighted the narrowing of the gap between Sabesp’s actual collections and the maximum allowed by regulators, historically impacted by subsidized rates.
Not all metrics impressed. Estimated losses from unpaid bills soared 172% in the quarter to 195 million reais, well above BTG’s forecast of 113 million reais. For the first half, those losses totaled 342 million reais, an 80% jump from a year earlier.
Despite that setback, Sabesp remains a market favorite. Of 12 brokerages tracked by RocketTrader, nine recommend buying the stock, including Citi and BTG Pactual, with price targets of 134 and 138 reais, respectively. The shares have gained 38% so far this year.