Oi (OIBR3) expects the end of judicial recovery in a few weeks to reposition the brand and focus on fiber; stocks go up

In a conference call on the results of the first quarter of 2022, numbers that were postponed more than once, executives at Oi (OIBR3;OIBR4) said they expect the end of the judicial recovery to happen within a few weeks. The conclusion depends on the sentence of Judge Fernando Viana, of the 7th Business Court of Rio de Janeiro.

After the approval of the end of RJ, Oi said that it hopes to focus more on its new businesses, breaking free judicially from the constraints stipulated by the Court, in addition to working on the repositioning of the new brand.

“Regarding bank payments, we are working on our liquidity to reach the minimum cash that we need to have until December. We need a few months to finalize the discussions regarding the sale of Oi Móvel and InfraCo, to see if there will be any price adjustments that reduce our liquidity”, said Cristiane Barretto Sales, CFO of the company.

With the end of judicial recovery scheduled for the next few weeks, Rogério Takayanagi, Director of Strategy and Customer Experience, said that Oi should focus on investments in the new core business.

He added that the company will “surf” if it manages to “leave the concession systems to move to an authorization system”, with a discount on its Ebitda margin and also focusing on its capex [montante de dinheiro despendido na aquisição de bens de capital] for fiber service.

During the presentation of the balance sheet and conversation with analysts, the executives also talked about novelties in the portfolio. Second, Takayanagi, oi_fibra X, launched in the first quarter of this year, will focus on delivering connection quality in every room of a house, avoiding WiFi connectivity problems and targeting the “internet of things”.

On the divestiture front, Oi expects to proceed with the sale of its TV assets to Sky, having already started the exchange of documents – within the definitions imposed by the judicial recovery.

“From the beginning, our idea in the recovery plan is that this transaction neutralizes our expenses with the contracting of satellites. We project something close to R$ 20 million”, explained Rogério Takayanagi, Director of Strategy and Customer Experience. “It is a complicated business, which requires scale and investment”.

The administrator of the judicial reorganization of Oi presented the general list of creditors (QGC) of the company to the Justice last Monday (27). Now, the Court will open a view of the process to the Public Prosecutor’s Office, which needs to express its opinion on the report presented.

Reversal of the loss

Oi recorded a net profit of BRL 1.782 billion in the first three months of 2022, reversing a loss of BRL 3.038 billion from the same quarter of 2021, the company said in the early hours of Wednesday (29).

The company attributes the profit to a positive net financial result of R$ 1.87 billion and an income tax and social contribution expense of R$ 363 million.

Routine earnings before interest, taxes, depreciation and amortization (Ebitda) grew 9.9% in the first three months of this year, totaling R$ 1.252 billion.

Net operating revenue in the first quarter of 2022 was BRL 4.41 billion, practically in line with the BRL 4.45 billion last year.

The routine Ebitda margin (Ebitda over net revenue) reached 28.4% in the first three months of the year, an increase of 2.8 pp compared to the margin recorded in 1Q21.

Results were well received

In the assessment of Fabiano Vaz, an analyst at Nord Research, Oi had already been showing good numbers on the operational side in recent quarters.

“If we look at what this new company will be, what this new Oi is proposing to be in relation to fiber for retail and companies, we see a very interesting expansion. They manage to grow fiber more than the decline in continuing operations, fixed telephony and copper broadband,” he says.

Vaz explains that the legacy of continued operations still weighs on the final results and, therefore, it is not yet possible to see more robust growth.

“It was a very important quarter with the sale of Oi Móvel and control of V.Tal. In the next quarter, we’re going to see some debt coming off the balance sheet, so we’re going to see a company with the lowest debt. Still far from ideal, but it is already a very interesting advance”, says the analyst.

Genial also gave a positive assessment of the results and raised the recommendation to OIBR3, from “hold” to “buy”. The target price was R$ 1.10 (with potential to upside of 103.7% in relation to the closing of this Tuesday (28)).

“On the operational side, the company showed margin improvements in the annual comparison, supported by an effective cost reduction, not to mention the strong expansion within the fiber market”, says the analysis.

However, according to analysts, the change in rating it was more based on the strong devaluation of the stock throughout the year, at the same time that the great regulatory risks were overcome and the debt issue “is being addressed”.

At 3:07 pm (Brasília time) this Wednesday, OIBR4 shares rose 5.77%, at R$ 1.10. The more liquid OIBR3 shares rose 3.70% to R$0.56.

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