Credit Suisse: Petrobras Will Continue To Underperform

In a report published Thursday, analysts at Credit Suisse maintained their Underperform rating on

. The price target has been maintained at $5. With the stock having surged more than 50 percent within a period of about a month from its previous lows, the analysts believe that there could be downside risk. Given that the company continues to do "do just enough to guarantee liquidity and funding to keep executing capex, but with no focus for positive free-cashflow generation or high returns," the stock valuation is at a "dangerous place," the analysts believe. Impairment of R$44 billion and write-downs of R$6 billion offer credibility for Petrobras. However, with the 2015-16 capex at $29-25 billion, cash generation of $23 billion seems unlikely in 2015. In addition, the company has guided to production growth of 3 percent for 2016, which Credit Suisse believes is likely to disappoint the rating agencies. The company has also planned for divestments worth $3 billion in 2015 and $10 billion in 2016. "Price hikes beyond parity 'are not fair'. CEO didn't fully dismiss the possibility of an equity raise or debt-to-equity conversion," the analysts said. The company is expected to reports its Q1 results on May 15 and a fresh strategic plan by the end of May.