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Fundamental Equity Research |
We value Afya based on a discount free cash flow model (FCFE), employing a Ke and perpetual growth assumptions of 13.9% and 5.0%, respectively, yielding a 12-month target price of US$14.0/share.
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Our key risks and concerns for the target price are: 1) better/worse-than-expected operating margins; 2) occupation rate stays higher for longer or deteriorates; 3) continuing education starts to/fails to ignite sales; 4) better/worse-than-expected digital services execution; 5) faster/slower-than-expected increase in the supply of medical seats, affecting returns and margins.
If the impact on the company from any of these factors proves to be greater than we anticipate, the stock will likely have difficulty achieving our target price.
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