How far will Ambev go?

From Infomoney - Beer production in Brazil fell by 7,3% in March compared to the same month last year. On a quarterly basis, beer production volumes fell 4,1% year-on-year, as did soft drink production, which fell 5,5% quarter-on-quarter.

And, BTG Pactual points out, there was a negative effect from the World Cup, which affected volumes last year.

And what are the effects on Ambev (ABEV3)? The company's stock, despite the slowdown in numbers, is up about 18% in 2015. According to BTG Pactual's analysis, at this point, a drop in Ambev's beer volume of 1,4% is expected this year and 2,9% in the first quarter.

However, despite this negative news, the outlook is not necessarily bad for the company. This is because product prices have increased above inflation.

Using the IPCA-15 as a base, the price of beer has risen 9,7% in the last 12 months, above inflation, which is positive for the company, analysts point out. However, they state that the risks of a slowdown are increasing, while the valuation remains at record levels, with the accumulated 18% increase in performance this year attributed mainly to a lack of options in the market, which increases the risk of a downturn.

"We see increasing potential for downward revisions to Ambev's profit estimates, given the single-digit cost increases, while recent production volume data confirm our expectations of lower revenue growth," says BTG.

BTG maintains its hold recommendation for Ambev shares, with a target price of R$17,50 per share. "We remain neutral, seeing limited upside potential unless there are positive surprises," they assess, not seeing any further upside potential for the stock.