Zacks Investment Research upgraded shares of Companhia de Saneamento Basico (SBS) from UNDERPERFORM to NEUTRAL on September 19, 2013, with a target price of $11.00.
SABESP is making earnest efforts and investments to achieve its targets of over 1.3 million new water connections and 1.7 million new sewage connections by 2019. Recently, the company signed an agreement to control the water and sewage services of Diadema for the next 30 years. Talking of the company's financial performance, second quarter 2013 results were quite impressive. Earnings per ADR at US$0.26 registered 18.2% increase and revenue grew 13.0% on higher water supply, sewage collection and treatment in the quarter. Considering all these, we upgraded SABESP from Underperform to Neutral recommendation. The upgrade has been restricted to a neutral view due to near-term concerns arising out of rising cost of sales and services as well as operating expenses, debt levels, political interference among others. In the second quarter 2013, cost of sales and services increased 10.5%, operating expenses rose by 30.8% and loans and financings reflected 3.4% sequential increase.
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