Petrobras (PBR): First take: Hikes diesel price by BRL 1.00/liter

On September 16th, the Brazilian government effectively implemented the previously announced subsidy of BRL 1.00/liter for diesel producers and importers, increasing the incentive to BRL 2.12/liter. The measure will be valid for 30 days and might be extended for an additional 30 days. Following the effective implementation of the additional subsidy, Petrobras announced a BRL 1.00/liter hike in diesel prices, so there should be no change in diesel prices charged by PBR and perceived by fuel distributors. We now see PBR's perceived diesel prices 24% below import parity (8% above when incorporating subsidies to importers), suggesting additional subsidies and/or an additional hike in PBR's diesel price could be necessary. For fuel distributors, an increase in subsidies could narrow the gap between local diesel prices and the subsidized importing alternative, likely reducing the competitive advantage of the largest distributors (from ~45% to ~34% below import parity). We maintain Neutral ra