Suzano S.A.(SUZ) seekingalpha.com·2024-05-19 04:02Investment Thesis - Suzano is recommended as a buy due to its position as the world's largest producer of eucalyptus short fiber pulp and its competitive advantages in Brazil's favorable climate and soil conditions [1][5]. Company Overview - Suzano has experienced strong growth through mergers and acquisitions, with an EBITDA margin exceeding 40%, significantly higher than competitors' margins around 10% [2]. - The company operates 11 industrial units across Brazil and manages 1.4 million hectares of planted forests [6][7]. - Approximately 65% of the wood used by Suzano is sourced from its own forests, with an average distance of 186 km between forests and production plants, enhancing logistical efficiency [8]. Market Position - In 2023, Brazil was the largest pulp exporter globally, exporting 22.5 million tons, and ranked third in production behind the USA and China [3]. - The cellulose segment accounts for 80% of Suzano's net revenue, while the paper segment contributes 20% [9]. Financial Performance - Suzano's market capitalization is 7.6 billion and a five-year revenue growth rate of 19% [12][13]. - The company has the highest EBITDA margin (43%) and net income margin (24%) among its peers, with a return on equity (ROE) of 21.9% [13][14]. - The EV/EBITDA multiple for Suzano is 7.89, which is below the peer average of 8.67, indicating a potential undervaluation [15][17]. Recent Developments - In Q1 2024, Suzano reported an EBITDA of 15 billion, which could impact its leverage and market perception [24][25]. Competitive Advantages - The shorter tree rotation time in Brazil (approximately 7 years for eucalyptus) compared to 15-20 years in the USA and Europe provides a significant cost advantage [5][29]. - Local environmental conditions contribute to high productivity in raw material production, supporting expansion potential [4].