Sabesp 3Q26: Good Results - 3 Focus Points

Sabesp reported good and in-line 3Q26 results, with adj. EBITDA at R$3.63bn (matching JPMe and +4% consensus). We see results as net positive as we weigh 3 main focus points: 1) Opex: -10% below JPMe, 2) Capex: ~65% of estimated capex for FY26 deployed in 9M26, 3) Capex-to-RAB eligibility: short of estimates at R$2.6bn (below 20% expected for FY26), but with positive caveats. We keep our OW rating with a new R$35 YE27 PT (from R$41) as we incorporate higher cost of capital following Brazil's soaring interest rates. Sabesp's reported EBITDA was impacted by non-cash and non-recurring items such as R$300mn in tax credits, R$38mn non-recurring expenses related to the Jaguare accident, financial results and taxes of R$48mn and non-cash construction margin of -R$6mn from Emae; adjusting for this, core EBITDA reached R$3.63bn. Operations: lower average tariffs (-2% vs JPMe) should be partially compensated in future tariff adjustments; opex came in 10% below JPMe driven by ~R$110mn lower third