Our TP is set at R$8.50/sh based on our DCF model, and we consider a 15% WACC and 3.5% nominal growth (inline with LT inflation). At our TP, the implied multiple is still below ~10% its 10-year average of 8.0x EV/EBITDA, reflecting further room for re-rating as deleveraging and turnaround initiatives advances.

We rate Dexco High Risk due to the combination of its elevated leverage amid high-interest rate environment, and the execution risks associated with the turnaround of its Finishings division.

More details and other key risks to Dexco’s earnings and price target:

• Leverage and Cash Flow Volatility: Elevated net debt and potential volatility in FCF generation remain a key concern, particularly in a high-interest rate environment. That said, the company has taken steps to manage its balance sheet. Moreover, the outlook could improve meaningfully if Brazil’s interest rates fall faster than expected, in 2026. 
• Execution Risk: The success of Dexco’s turnaround strategy in its Finishings divisions (Metals & Sanitary Ware and Tiles) depends on execution, including delivering operational efficiencies, improving mix, and ramping up new capacity (Botucatu plant). Delays or setbacks could limit the margin recovery path. 
• Brazil Domestic Demand: Given Dexco’s exposure to construction and home improvement cycles, a weaker-than-expected macro recovery or prolonged stagnation in household demand could weigh on volume recovery, especially in the Tiles and Sanitary Ware segments. 
• Raw materials Volatility: Potential upward pressure on raw material costs – particularly urea and other chemicals inputs that are USD-denominated – poses a risk to margins. Although partially offset by operational efficiencies, raw material inflation could challenge profitability if sustained.