Analysis of Brazil's oil investment value

2. The second level of thinking is: the extreme undervaluation has fully reflected the objective facts; and once the government's attitude changes or the government becomes a more pro-capitalist government; Petrobras' valuation will be repaired. I have not studied Brazil's history or politics, so this possibility is estimated to be small. Welcome friends who understand to talk about it.

3. Petrobras has been completely supported by dividends in recent years. If you look at the unadjusted stock price, Petrobras has not risen since May 2018, and has been hovering around 15 yuan. In fact, this state is very good, because it means that if you bought it in 2018, you have recovered all your investment at that time through dividends, and now the cost of the stock in your hand is 0, and you can still generate a lot of cash every year. Therefore, the dividend policy is the focus of market attention. At the current share price, even without paying a special dividend, the dividend yield is close to or higher than 12%. The premise is that the international oil price remains around $80 and the company still distributes 45% of free cash flow as dividends.

4. Risk. Petrobras' risks come from internal rather than external sources. If Petrobras uses a large amount of cash to invest in inefficient projects instead of returning profits to shareholders, it is destroying value; changes in external oil prices are only temporary, and Petrobras has sufficient cost advantages. Even in the darkest year of 2020, the company still maintained profitability.