UNVR Feb2023

UNVR

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18.3% Upside, Hold
14th February 2023
Price Rp 4520
Target price Rp 5350

Lower margins in 4Q2022

UNVR margins continued to decrease in 4Q2022 due to cost inflation and lower volumes from a planned reduction in trader-level stocks. UNVR total sales increased by +1.7% YoY but declined by -1.8% QoQ to IDR 9.5 trillion in 4Q2022 from higher food and refreshment revenues. For 2022FY, sales grew +4.2% YoY to IDR 41.2 trillion.
Domestic sales in 2022 increased +4.3% and export sales increased +2.5% YoY after a decline in 9M2022, as in the 4Q2022 export sales were up by +5% while domestic sales only grew +1.6%.
Food & Refreshment (FR) sales increased +2.1% YoY but declined -0.8% QoQ to IDR 3.26 trillion in 4Q2022 while Home and personal care (HP) sales also increased +1.5% YoY but declined -2.2% QoQ to IDR 6.4 trillion due to higher prices YoY.
UNVR margins continued to drop in 4Q2022 and were the lowest of any quarter in 2022 due to commodity price cost inflation. The 4Q2022 gross margin in HP decreased to 44.5% from 46.6% in 3Q2022, and operating margins declined to 16.3% from 17.7% in 4Q2022.
FR GPM also decreased to 38.8% in 4Q2022, while the OPM decreased to 15.2% from 26.2% in 3Q2022.
We are targeting UNVR to maintain positive single–digit-growth for 2023F sales as we are expecting more price increases in the 1H2023.

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Lower bottom line profit

UNVR booked the lowest quarterly bottom line profit of 2022 in 4Q2022. UNVR’s bottom line reached IDR 753 billion, lower by -36.2% QoQ and -45.4% YoY. The net profit margin continued to decrease to 7.8% from 3Q2022’s 11.7%. For 2022FY, UNVR booked -7% YoY growth in bottom line profit to IDR 6.49 trillion.
Operating profit decreased by -31.7% QoQ or -43.8% YoY to IDR 1.03 trillion due to higher advertising and market research expenses in 4Q2022, up by +55% YoY. As a result, the OPM decreased to 10.8% from 15.2% in 3Q2022.
Gross profit also declined -9.3% or -5.1% YoY to IDR 4.6 trillion in 3Q2022 with a lower GPM of 45.7%.
As we are expecting more price hikes while commodities prices have declined, we are targeting UNVR’s net profit for 2023F to reach IDR 5.98 trillion or +12% YoY growth..

Valuation: HOLD with TP 5,350

We revise our target price to IDR 5,350 which represents 18.3% upside. We are targeting UNVR to trade at 34x PE within a year. We maintain our recommendation to HOLD.

Previously

UNVR Oct2022