Morgan Stanley cuts Vibra Energia to neutral after 70% rally

Morgan Stanley downgraded Vibra Energia to equal-weight from overweight on October 8, 2026. The bank simultaneously raised its price target for the stock to R$ 43 from R$ 41 for the end of 2027, implying roughly 14% upside compared to the previous close of R$ 37.55. The downgrade followed a share rally of approximately 70% over the last 12 months and 120% over 18 months, which analysts noted was roughly 2.8 times the return of the Ibovespa.

The bank also lowered its rating on peer Ultrapar to underweight from equal-weight while cutting its view on the broader Latin American fuel distribution sector to in-line from attractive. Morgan Stanley analysts stated that fuel distributors are priced for perfection, as margin expansion and market-share gains played out faster than expected. Over the past 18 months, informal fuel distributors lost about 5.5 percentage points of market share, allowing formal players to increase margins from around R$ 150 per cubic meter to over R$ 200, excluding extraordinary gains from the last two quarters.

Distributors also benefited from historic diesel crack spreads averaging near US$ 70 per barrel during Middle East tensions, peaking at US$ 110 per barrel, while Petrobras sold domestic diesel below import parity. Morgan Stanley expects this arbitrage to narrow as Petrobras raises diesel prices by the end of 2026. Consequently, the bank forecasts Vibra's net income will drop from R$ 8.08 billion in 2026 to R$ 5.01 billion in 2027, representing a 34% contraction in earnings per share and leaving the shares trading at approximately 9 times projected 2027 earnings.

Despite near-term headwinds, Morgan Stanley raised its EBITDA projections for Vibra by about 12% for 2026 and 2027, anticipating structural margins around R$ 230 to R$ 240 per cubic meter and a return on invested capital between 22% and 23% from 2027 through the end of the decade. The bank established an optimistic bull-case target of R$ 50 and a bear-case target of R$ 28 for Vibra, concluding that investors should await a more attractive entry point despite solid cash generation and ongoing deleveraging.