Bci lifts Chile IPSA target to 12,050 on narrow earnings bet
Bci raised its year-end IPSA target to 12,050 points on a sharply higher earnings forecast, but the modest index bump exposes a deepening disconnect between corporate profits and a deteriorating macroeconomic backdrop.
Bci lifted its end-2026 and early-2027 IPSA target to 12,050 points from 11,900, implying roughly ten percent upside from Tuesday’s level near 10,970. That trajectory would clear the index's January all-time high of 11,721. However, the 1.3 percent target increase drastically understates the brokerage's upgraded earnings outlook.
The bank's analysts raised their forecast for aggregate Chilean listed earnings growth from 15.2 percent to 19.8 percent. That 4.6-point surge in the engine of equity valuations was almost entirely absorbed by downgrades to the broader economy. Bci cut its Chilean GDP forecast to one percent and raised its inflation projection to 3.7 percent.
The headline earnings growth figure also obscures a high concentration of risk. SQM accounts for 15.6 percent of the projected growth, Banco de Chile contributes 11.1 percent, and Latam Airlines adds 8.7 percent. Together, these three names drive over a third of the index's expected profit expansion, tethering the broader market to lithium prices, elevated inflation and a single strong quarter from one carrier.
This mixed fundamental picture is reflected in a striking divergence among Bci's own valuation models. A bottom-up discounted cash flow approach yields a target of 12,835, while a risk-premium comparison against government bonds produces just 11,302. That nearly 14 percent gap highlights deep uncertainty, reinforced by an equity risk premium of 5.1 percent that remains higher than pre-pandemic or pre-2019 unrest levels.
Ultimately, the path to meaningful upside hinges on politics rather than pure corporate performance. Bci's bull case of 12,432 points requires a corporate tax cut from 27 percent to 23 percent, which would lift aggregate earnings by 23 percent. The base case of 12,050 deliberately assumes this tax relief does not fully pass, reflecting the reality that President Kast's coalition lacks a congressional majority and the bill has already faced resistance in committee.
