Fuel Giant Ultrapar's Profit Jumps 151% as Brazil Cracks Down on Fuel Fraud

3 Key Points

—Ultrapar (UGPA3), the group behind Brazil’s Ipiranga fuel-station network, Ultragaz cooking gas and Ultracargo terminals, posted a first-quarter net profit of R$914 million ($179M), up 151% year over year, with recurring EBITDA nearly doubling to R$2.32 billion ($455M) — about 8% above what analysts expected.

—The engine was Ipiranga — and a police operation: Brazil’s federal crackdown on adulterated fuel (Operação Carbono Oculto) is squeezing out the crime-linked distributors that undercut legal players, lifting Ipiranga’s volumes 8% and its margin to R$276 per cubic meter, 12% above estimates; segment EBITDA doubled to R$1.67 billion ($327M).

—The market has repriced the story violently: at R$31.99 the stock sits a whisker from its 52-week high of R$32.05 — more than double its 52-week low — and now trades ON TOP of the R$33 consensus target, with leverage down to 1.5x net debt/EBITDA and EPS beats in four of the last five quarters.

Ultrapar Profit Jump: What Happened