Santos: profit falls faster than revenue, and the portal's model sees 42% downside

On August 25, Santos reported results for the first half of 2026: revenue rose 1.6% to $5,000 million, but EBITDA fell 17.6% and net profit dropped 19.1%. Given the weak dynamics and a valuation above its own three-year history, the share looks unattractive: the portal's model implies 42% downside.

Key takeaways

— Revenue rose only 1.6% while EBITDA fell 17.6% – margin compressed from 59.2% to 48.0%

— Net profit declined 19.1%, and net margin fell from 17.0% to 13.5%

— Debt increased by $0.5 billion over the half-year and $0.7 billion over the year, net debt/EBITDA at 1.65

— Dividend yield of 3.6% – below historical norm and key rate, making the payout less attractive

— EV/EBITDA multiple of 9.2 – 41% above its own three-year average of 6.5

— The portal's model implies fair value 42% below the current price

Attractiveness

Key figures, USD bn

Revenue rose only 1.6% while EBITDA fell 17.6% – margin compressed from 59.2% to 48.0%

In the first half of 2026, Santos revenue reached $5,000 million, only 1.6% higher than the same period last year. EBITDA for the same period fell 17.6% – to $2,634.6 million over the trailing twelve months, but in the reported half-year the margin dropped from 59.2% to 48.0%.

The margin squeeze of 11.2 percentage points is the main signal of the report. With nearly stagnant revenue, operating profitability fell sharply, indicating rising costs or deteriorating price environment, though the exact cause is not disclosed in the facts.

Net profit declined 19.1%, and net margin fell from 17.0% to 13.5%

Net profit for the first half of 2026 stood at $734.0 million over the trailing twelve months, but in the reported period it fell 19.1% year on year. Net margin dropped from 17.0% to 13.5%.

The decline in net profit was deeper than the EBITDA fall, suggesting higher interest expenses or tax burden. However, without additional data the exact reason cannot be identified.

Debt increased by $0.5 billion over the half-year and $0.7 billion over the year, net debt/EBITDA at 1.65

Santos' net debt stood at $4,354.0 million at the latest balance sheet date, up $0.5 billion from the previous reporting date and $0.7 billion over the trailing twelve months. Net debt/EBITDA for the trailing twelve months is 1.65.

Rising debt amid falling EBITDA means leverage has likely increased, though the comparative figure for the prior period is not in the facts. The level of 1.65 remains moderate, but the direction of the trend raises questions.

Dividend yield of 3.6% – below historical norm and key rate, making the payout less attractive

Over the trailing twelve months Santos paid dividends, providing a yield of 3.6% at the current price. This is noticeably below the key rate, reducing the share's appeal as an income source.

When the dividend yield does not compensate for risk and profit is falling, the likelihood of payout cuts increases. However, the exact policy is not disclosed in the facts.

EV/EBITDA multiple of 9.2 – 41% above its own three-year average of 6.5

The current EV/EBITDA multiple for the trailing twelve months is 9.2, while the three-year average is 6.5. This means the share trades at a 41% premium to its own history.

Such valuation looks stretched, especially amid falling margins and weak revenue growth. Investors are paying more for a company whose financials are deteriorating.

The portal's model implies fair value 42% below the current price

According to our portal's model, which re-prices EBITDA at current commodity prices at the target EV/EBITDA, the fair value of the share is 42% below the current market capitalization of $19,940.98 million.

This means the market is pricing in either higher commodity prices or margin improvement that is not yet confirmed by the results. The downside potential is significant.

Valuation on the latest reported figures

Bottom line

Santos' report for the first half of 2026 showed stagnant revenue and a notable margin squeeze: EBITDA fell 17.6%, net profit 19.1%. Debt increased, and a dividend yield of 3.6% does not compensate for risks. Meanwhile, the share trades at a 41% premium to its own three-year EV/EBITDA multiple, and the portal's model indicates 42% downside. The verdict is unattractive: until there are signs of a turnaround in operating metrics or a valuation de-rating, holding the share is unjustified.