Brazilian low-income developers face stock declines amid stricter credit rules

Low-income real estate developers in Brazil are experiencing a significant decline in stock prices, with companies such as Cury, Direcional, MRV, Plano&Plano, and Tenda seeing an average drop of 18% over the last three months. This downturn is attributed to a more challenging environment for the Minha Casa Minha Vida program, driven by stricter credit approval criteria implemented by Caixa Econômica Federal and delays in contract transfers due to employee strikes.

BTG Pactual analysts suggest that the market is being overly pessimistic. While the bank cut earnings per share (EPS) estimates for several companies—including a 45% cut for MRV and Plano&Plano due to weaker margins and leverage—they maintain a 'buy' recommendation for all five companies. Analysts argue that the restrictions from Caixa are normalizing and that the stocks remain attractive due to low price-to-earnings ratios and high dividend yields.