Brazil Protein： 2Q24 earnings season warm~up； Buy JBS

Investment Rating - The report maintains a Buy rating for JBS with a target price of R$38.7, indicating a positive outlook for the company [14][18]. - BRF is rated Neutral with a target price of R$19.5 for local shares and US$3.60 for ADRs [16][18]. Core Insights - JBS is expected to report solid earnings driven by strong global chicken market demand, with a forecasted EBITDA of R$9.0 billion, which is 10% above Bloomberg's consensus [3][8]. - BRF is also anticipated to have a solid quarter, but expectations may be overly optimistic, with a significant year-to-date revision to consensus EBITDA [4][10]. - The report highlights a positive asymmetry for JBS shares, noting that while other competitors have seen significant stock price increases, JBS has lagged, suggesting an attractive entry point [3][8]. Summary by Sections JBS Overview - JBS's earnings preview indicates a net revenue of R$104.1 billion, with a gross profit of R$14.8 billion and an EBITDA margin of 8.6% [8]. - The company is expected to benefit from a diversified business mix, with chicken accounting for 54% of its revenue [3][8]. BRF Overview - BRF's consolidated net revenue is projected at R$14.5 billion, with an adjusted EBITDA of R$2.4 billion and an EBITDA margin of 16.4% [10][17]. - The report notes that BRF's operational momentum is strong, but the market may have already priced in much of the expected growth [4][10]. Market Dynamics - The report discusses key market dynamics, including resilient demand in the US and a positive beef cycle in Brazil, which supports volume growth for companies like Minerva and Frigol [4][5]. - It also mentions potential challenges such as increased chicken supply in the domestic market and the impacts of Newcastle disease on earnings [5]. Valuation Metrics - JBS is valued at a forward EV/EBITDA of 6.0x, which is considered undemanding compared to its peers [3][12]. - BRF's valuation reflects a target EV/EBITDA of 5.7x, indicating a more cautious outlook given the recent performance [16][17].