YPF - YPF Sociedad Anónima: Structural Fiscal Tailwinds Driving Equity Gains

2024-06-07 12:26:52 ET

Summary

• YPF Sociedad Anónima stock has increased by over 95% since the 2023 Argentinian presidential election results.
• The new government's ambitious target of reducing the budget deficit has led to significant spending cuts, particularly in non-discretionary spending.
• YPF has potential tailwinds, including record-high oil production in the Neuquen region and the construction of a new oil pipeline, which could be major catalysts for the company.

Investment Summary

Since my last publication on YPF Sociedad Anónima ( YPF ), shares in the company have lifted by more than 95% to the upside. The catalysts were 1) the favourable results of the 2023 Argentinian presidential election, where many stocks in this basket caught a strong bid due to a more favourable outlook of business in the coming years, and 2) improving fundamentals. The new government has set an ambitious target of a budget deficit reduction of five percentage points of GDP, and this has seen early promise, as seen in Figure 1. This has been underlined by large spending cuts - in particular, real primary expenditures being cut by 35% year over year....

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