Afya Limited, the Nasdaq-listed Brazilian medical-education group, delivered a second-quarter print on August 13, 2026 that validates the operating thesis the equity has been waiting for: pricing discipline and capital return, not enrollment, drove the result. Revenue of R$972.1 million grew 5.7% year over year, with the organic line up 5.4% once the FUNIC acquisition (closed May 2025) is stripped out; that gap of roughly 30 basis points tells the reader the underlying business did almost all the work, with bolt-on M&A contributing a small but real top-line tail. Adjusted EBITDA of R$406.5 million was up 1.4% on a margin that compressed 180 basis points to 41.8%, a margin print that is below recent quarters and that company commentary explicitly attributes to a less favorable Continuing Education mix and to higher payroll, sales, and marketing spend in the Medical Practice Solutions investment cycle. Net income of R$201.3 million was up 14.0%, the disconnect from EBITDA coming almost entirely from a tax line that benefited from Brazil's adoption of the OECD Pillar Two global minimum tax framework, which lifted deferred tax adjustments and reduced the effective rate. Basic EPS of R$2.22 was up 16.7%, ahead of net income because weighted-average share count fell 1.8% versus a year ago on continued repurchases.
The market, in our view, is mispricing the line between EBITDA and free cash. EBITDA margin compressed, but the cash machine kept running. First-half cash flow from operating activities reached R$797.8 million, up 3.4% year over year, and the company returned R$447.9 million of that to shareholders in the form of dividends (R$314.9 million) and share repurchases (R$133.0 million), a payout equal to 106% of first-half free cash flow to equity. Net debt excluding IFRS 16 lease obligations was effectively flat at R$1,394.0 million despite that capital return, because operating cash flow covered both the buyback and the dividend. At mid-point 2026 guidance, the leverage ratio sits at 0.8 times Adjusted EBITDA, and Moody's reaffirmed the AAA.br domestic-currency rating on May 5, 2026, citing "very strong credit metrics, exceptional cash generation, and robust liquidity." The thesis, in short, is that Afya has converted a balance-sheet story into a self-funding capital-return story while still funding the operating investment cycle, and the equity should rerate as the market accepts that a 0.8-times-leverage, AAA-rated Brazilian medical-education platform with double-digit FCFE yield and a 100%-plus payout ratio is worth more than the current discount embedded in the multiple.
The single load-bearing risk is regulatory. Brazilian medical-school seat creation has been the company's growth engine for six years, and the federal government has signaled tighter scrutiny on new-seat authorizations through the ENAMED exam framework, which acts as a national licensing gate. Management discloses that reported medical-school seat counts "do not reflect any potential reductions resulting from ENAMED." Any meaningful seat clawback would compress the medical-school net average ticket and slow the operating leverage that drives the financial story. The falsifiable clock is the second-semester 2026 enrollment cycle, when new-student intake for the 2026/2 academic year is finalized. If the company reports a sequential decline in medical-school operating seats or a deceleration in the net average ticket beyond the 3.9% first-half uplift, the 2027 growth narrative comes under pressure and the rating rationale narrows.