Freedom Broker has maintained its “Buy for up to 2 years” recommendation on Movida Europe S.A. (MOVIBZ) eurobonds with a 9.7% coupon and a 10.9% yield to maturity. Analysts kept a positive credit outlook on the bonds despite a temporary deterioration in free cash flow (FCF) due to a sharp expansion of the fleet. The indicative issue price is 94.49%, and the current yield is 10.3%.
Movida: car rentals in Brazil
Movida Europe S.A. is an issuer of eurobonds affiliated with Brazil’s Movida transportation group. The company provides short- and long-term car rentals and sells vehicles after they are used in the rental fleet.
The 9.7% coupon is the regular interest income on the bond, while the 10.9% yield to maturity reflects the expected average annual return if the security is held to maturity, taking into account the purchase price and all future payments
Strong operating momentum supports the credit thesis
Strong operating results are supporting improved credit metrics, but fleet growth put pressure on FCF, Freedom Broker analysts note. In Q2 2026, Movida’s total revenue amounted to $746 mln and increased by 2% y/y. At the same time, car-rental revenue in the short-term and long-term rental segments rose to $455 mln, up 21% y/y and 4% q/q.
Meanwhile, revenue from used-car sales declined to $291 mln, down 18% y/y and 7% q/q. Analysts see the key positive factor as improving efficiency in the core rental business. The company’s EBITDA increased to $334 mln, up 22% y/y and 8% q/q, and the EBITDA margin of the rental segments expanded to 72.8% versus 71.8% a year earlier and 70.3% the previous quarter.
RAC grows on demand
In the short-term rental (RAC) segment, the average operating fleet increased to nearly 114k vehicles, up 19% y/y and 7% q/q. Average gross revenue per vehicle was about $741 per month, up 9% y/y, though down 3% q/q. The average daily rate reached about $33, up 7% y/y and 2% below the prior quarter’s level. Utilization was 76.2% and increased by 2.1 p.p. y/y, but decreased by 1.1 p.p. q/q. At the same time, the number of rental days rose to 7.4 mln, up 22% y/y and 5% q/q. Analysts attribute the stronger metrics to high rental demand and Movida’s increasing market share.
GTF provides visibility into future revenue
In the long-term rental (GTF) segment, the average operating fleet remained roughly at 131k vehicles and increased by 4% y/y. Average gross revenue per vehicle rose to about $651 per month, up 12% y/y and 4% q/q. The yield on new contracts was 3.7% versus 3.2% for the existing portfolio.
Contracted revenue increased to about $1.95 bln, up 40% y/y. In Freedom Broker’s view, this provides solid visibility into future results and potential for further growth in revenue per vehicle as older contracts are replaced with higher-yielding ones.
Aggressive fleet expansion temporarily hit FCF
The main negative factor of the quarter was a sharp increase in vehicle purchases. In Q2, Movida acquired about 38.6k vehicles, up 22% y/y and 165% q/q, while sales fell to 19.4k vehicles, down 25% y/y and 6% q/q. As a result, the total fleet at quarter-end grew to nearly 286k vehicles, up 9% y/y and 7% q/q. The RAC fleet increased to almost 140k vehicles, up 16% y/y and 12% q/q.
Higher investments affected cash flows. Cash capital expenditures increased to $705 mln, up 74% y/y and 43% q/q. FCF worsened to minus $221 mln versus plus $161 mln a year earlier and minus $71 mln in Q1 2026. Analysts do not yet view the fleet increase as a return to Movida’s strategy of permanently aggressive expansion. Management explains the decision by seasonal demand growth during Brazil’s July winter holidays. For this period, the company additionally deployed about 18k vehicles.
Leverage declines, but the maturity schedule remains tight
At the end of Q2, Movida’s gross financial debt including leases totaled about $4.0 bln. Cash and liquid short-term financial assets decreased to $658 mln from $762 mln the previous quarter. Net debt/EBITDA improved to 2.8x from 2.9x the prior quarter due to EBITDA growth. The covenant metric remained nearly stable at 2.66x with a maximum permitted level of 3.5x.
After quarter-end, Movida continued refinancing about $310 mln of debt, including the extension of roughly $210 mln in debentures to 2033 and $100 mln in loans to 2029. Debentures are debt securities a company issues to raise financing. Extending them to 2033 allows Movida to push back part of its maturities and reduce liquidity pressure in the coming years.
In analysts’ view, the transactions confirm the company’s continued access to funding. However, the maturity schedule remains material: about $307 mln falls due in the remainder of 2026, $607 mln in 2027, and $722 mln in 2028.
Chinese vehicles create a new credit risk
Another risk factor for the bonds is the rapid increase in the share of Chinese manufacturers in Brazil’s car market. In H1 2026, registrations of cars imported from China nearly doubled y/y to 141k, accounting for about half of all imported vehicles. For Movida, this trend matters due to the high capital intensity of the business: rental income from a vehicle and its subsequent sale must offset the cost of acquisition and funding, Freedom Broker experts believe.
At the same time, analysts still consider the risk manageable. About 84% of Movida’s vehicles are in the most affordable price category, with an average current residual value of about $14.5k and an expected resale value of about $13.1k. The average price of new Chinese cars in a comparable category is about $25.7k.
Rate cuts support the bonds
An additional positive factor for Movida’s credit profile is the easing of Brazil’s monetary policy. In August, the Central Bank of Brazil cut the Selic policy rate for the fourth consecutive time by 0.25 p.p. to 14% per annum. Analysts believe further rate cuts could support free cash flow (FCF) and accelerate deleveraging. Freedom Broker expects FCF to remain negative in 2026 at about $81 mln, be close to zero in 2027, and improve to around $116 mln in 2028. At the same time, net debt/EBITDA, according to analysts’ estimates, may decline to about 2.4x, 2.2x, and 2.1x, respectively.
MOVIBZ 9.7'33 maintains an attractive yield
Freedom Broker maintains a positive credit view on Movida and its “Buy for up to 2 years” recommendation on MOVIBZ 9.7'33 eurobonds. The issue is rated BB- by S&P, Ba3 by Moody’s, and BB by Fitch; the seniority is senior unsecured debt. The coupon is 9.7%, payments are made semiannually, yield to maturity is 10.9%, and current yield is 10.3%. The indicative price is 94.49%, the maturity date is 11 October 2033, the outstanding amount is $350 mln, and the minimum lot is $200k.
This is not an individual investment recommendation.