Ultrapar upgraded to Outperform from Sector Perform at Scotiabank

Scotiabank upgraded Ultrapar (UGP) to Outperform from Sector Perform with a price target of R$22, up from R$21. The firm says Petrobras’ pricing policy has created arbitrage opportunities that have been exploited by small players in Brazil’s diesel market, driving sharp losses for the three main distributors – Vibra, Raizen, and Ultrapar. However, Ultrapar’s decision to focus on higher-loyalty costumers has paid off, and the company is much less exposed to market price swings than Vibra, the analyst tells investors in a research note. Scotiabank believes Ultrapar is currently the best positioned player regarding unfair competition from smaller players.