B3 Is Not Growing During The Most Challenging Part Of The Cycle, But Remains A Buy

B3 (BOLSY) reported largely stagnant 2Q25 revenues, with underlying business growth constrained by high interest rates; stock trading revenue remained flat despite 9% volume growth due to lower take rates, and while fixed income revenue rose 15%, overall gross revenue was flat YoY as operating expenses increased 15%. Despite these near-term pressures, B3's strong market position and capital-light model, which facilitates substantial shareholder returns, underpin an attractive valuation. With a 12-13x NTM P/E, the company offers an estimated 12-13% total return, positioning it as a compelling 'Buy' given the current cyclical low.

Analysis

B3's 2Q25 results reflect a period of cyclical pressure, with flat gross revenue year-over-year as high interest rates constrained key business lines including stock trading, credit issuance, and derivatives. While equities trading volumes grew 9% YoY, revenue in the segment was flat due to lower take rates from increased market maker participation. The fixed income segment, a recent growth driver, saw revenue increase approximately 15% but is now showing signs of deceleration as issuance activity slows from last year's record highs. A YoY decline in derivatives revenue was expected, given an unusually high-volatility comparison period in 2Q24. A notable positive was the new BTC futures product, which now contributes BRL 35-40 million in quarterly revenue, and the Data & Technology division, which grew 12%. Margin compression was evident as a 15% rise in operating expenses outpaced flat revenues, though this was guided and reflects a more even distribution of costs throughout the year, suggesting OpEx growth should moderate in the second half. The core investment thesis remains intact, centered on B3's capital-light model which enables the return of nearly all net income to shareholders. At a 12-13x NTM P/E ratio, the company offers a combined growth and earnings yield of approximately 13%, an attractive proposition given its near-monopolistic market position and the current cyclical trough.

Key Decisions for Investors

• Investors should consider the current period of stagnant growth and margin pressure as a cyclical trough, focusing instead on the long-term value proposition driven by B3's strong market position and capital-light model that generates high shareholder returns.
• The valuation appears attractive, with a 12-13x NTM P/E suggesting a total potential return of around 13% from shareholder payouts and moderate growth, representing a compelling entry point for those with a multi-year investment horizon.
• Monitor leading economic indicators in Brazil, as a future decrease in interest rates, which the article notes is expected to start in 2026, would serve as a primary catalyst for a recovery in trading volumes and issuance activity.
• Pay attention to the performance of new product launches, such as the successful BTC futures and other planned derivatives, as these represent key strategic initiatives to diversify revenue and could offset weakness in traditional segments.