Unilever Indonesia – (UNVR) – BUY (Unchanged)
Price: IDR 6,975 – Target Price: IDR 7,900
Attractive Valuation Despite Slower Growth
We project UNVR to record average EPS growth of +5.9% throughout FY21-22F, although there is a potential for its margins to be depressed due to rising soft commodity prices. In FY20, the company’s revenue grew slightly +0.1% yoy, while its net profit fell -3.1% yoy. The decline in net profit was mainly caused by the increase in operating expenses (+9.2% yoy), which was higher than sales growth. In terms of business segment, HPC segment grew slightly (revenue +0.4% yoy, gross profit +1.4% yoy) while FNR segment declined (revenue -0.6% yoy, gross profit -0.2% yoy). We maintain our BUY recommendation while lowering our TP to IDR 7,900.
FY21F outlook: Margins to be depressed; EPS growth potential. The company’s input costs may increase in FY21F, since there is a potential for soft commodity prices to increase significantly in FY21F. We consider UNVR’s policy of increasing its ASPs by +1.5% each year not enough to keep up with the increase in COGS. In FY20, the cost of raw materials contributed ~ 82% to UNVR’s total COGS. We forecast the company’s GPM to drop by -52bps on FY21F. However, with our more conservative margin assumptions, UNVR’s net profit still has the potential to grow by + 5.5% yoy in FY21F and +6.4% yoy in FY22F.
FY20 results: Flat sales (+ 0.1% yoy) and decline in net profit (-3.1% yoy). In FY20, UNVR’s sales were flat (+0.1% yoy) while its net profit fell -3.1% yoy. Its GPM rose +93 bps yoy, while NPM decreased -55 bps, mainly due to the fact that the increase in opex (+9.2% yoy) was considerably higher than sales growth (+0.1% yoy). In terms of segment, FNR segment declined in FY20 (revenue -0.6% yoy, gross profit -0.1% yoy), due to the impact of the pandemic on the hotel, restaurant, and café (HoReCa) sector, which in turn affect the revenue of UNVR’s B2B business unit in the sector, Unilever Food Solution (UFS). Meanwhile, HPC segment was relatively flat in FY20 (revenue +0.4% yoy, gross profit + 3.0% yoy). Another factor that reduced the growth of UNVR was the contraction in export sales (-11.4% yoy), while domestic sales remained flat (+0.7% yoy).
Low Valuation reflects limited downside risk; maintain BUY. Even though its EPS growth potential is not too significant, UNVR’s current valuation is very attractive (36.2x FY21F P/E (-2SD of its 5-year band). We believe that the current correction in UNVR’s share price will provide a more attractive entry point, while also reflecting lower risk. We maintain our BUY recommendation for UNVR with a lower target price of IDR 7,900 (-1 SD of its 5-year band). Downside risks: Higher input costs due to the increase in soft commodity prices.
Unilever Indonesia – (UNVR) – BUY (Unchanged)
Price: IDR 6,975 – Target Price: IDR 7,900
Attractive Valuation Despite Slower Growth
Kami memproyeksikan UNVR masih mampu mencatatkan pertumbuhan EPS secara rata-rata +5.9% sepanjang FY21-22F, meskipun terdapat potensi tertekannya marjin dari meningkatnya harga soft commodity. Selama FY20, revenue tumbuh tipis +0.1% yoy dan laba bersih turun -3.1% yoy. Penurunan laba diakibatkan kenaikan beban operasional (+9.2% yoy) yang lebih tinggi dari kenaikan penjualan. Segmen HPC tumbuh tipis (+0.4% yoy revenue, +1.4% yoy gross profit) dan segmen FNR masih tertekan (-0.6% yoy revenue, -0.2% yoy gross profit). Kami masih mempertahankan rekomendasi BUY, namun menurunkan TP menjadi IDR 7,900.
FY21F outlook: Marjin berpotensi tertekan, namun EPS masih dapat bertumbuh. Terdapat potensi meningkatnya input cost dari kenaikan harga bahan baku melihat potensi kenaikan harga soft commodity di sepanjang FY21F. Kebijakan UNVR dalam menaikkan ASP sebesar +1.5% setiap tahunnya kami lihat belum dapat bisa mengimbangi naiknya COGS. Bahan baku sendiri memiliki kontribusi ~82% terhadap COGS pada FY20. Kami proyeksikan GPM turun -52bps pada FY21F. Meski demikian, dengan asumsi marjin kami yang lebih konservatif, net profit tetap berpotensi untuk bertumbuh +5.5%/6.4% pada FY21/22F.
FY20 Results: Sales tumbuh flat +0.1%yoy dan net profit terkoreksi -3.1% yoy. Selama FY20, sales cenderung flat +0.4% yoy dan net profit tertekan -3.1% yoy. GPM naik +93 bps namun NPM turun -55 bps. Hal ini terjadi karena kenaikan opex (+9.2% yoy) tidak dapat diimbangi oleh kenaikan penjualan (+0.1% yoy). Secara segmen, terdapat kontraksi dari segmen FNR (revenue -0.6% yoy, gross profit -1.1% yoy) dikarenakan terdapat tekanan dari Unilever Food Solution (UFS) yang memiliki eksposur pada hotel, restaurant, dan cafe (HoReCa). Segmen HPC sendiri cenderung flat (revenue +0.4% yoy, gross profit +3.0% yoy). Hal lain yang dapat dicermati, melambatnya pertumbuhan disebabkan pula oleh kontraksi penjualan ekspor yang turun -11.4% yoy (domestik flat +0.7% yoy).
Valuasi -2SD merefleksikan downside risk yang rendah, pertahankan BUY. Meskipun EPS growth hanya berpotensi tumbuh single digit, namun UNVR saat ini memiliki valuasi yang menarik pada 36.2x 21F P/E (-2SD dari band 5 tahun). Kami melihat koreksi pada harga saham UNVR saat ini akan memberikan entry point yang lebih menarik, serta merefleksikan risiko yang lebih rendah. Kami pertahankan rating BUY untuk UNVR namun dengan target price yang lebih rendah pada IDR 7,900 (-1SD band 5 tahun). Downside risk: Input cost yang lebih tinggi dari meningkatnya harga soft commodity.