UNVR Nov2020

UNVR

Contact our analyst Eka

21% Upside, BUY
5th November 2020
Price Rp 7800
Target price Rp 9450

Covid-19 Impact

COVID-19 has led to a decline in Food & Refreshment (FR) products, especially ice cream and Unilever Foods Solution products. It also negatively impacted Home & Personal Care (HP) products, especially deodorant and skin care products. But there has been a positive impact to skin cleansing, home hygiene, and savoury products.
The outbreak also boosted UNVR’s digital platform which is a management priority for the next 2—3 years. In 9M2020, digital business from UNVR’s e-commerce contributed 2%-3% of revenues and is expected to grow bigger.
As of 9M2020, UNVR sales slightly increased 0.30% YoY to IDR 32.4 trillion, While for 3Q2020, UNVR’s revenue declined by -2.0% YoY to IDR 10.7 trillion.
The negative growth is due to the FR segment decline of -3.5% YoY to IDR 9.7 trillion in 9M2020. Home & Personal Care HP sales grew +2% YoY to IDR 22.7 trillion and is still the largest contributor to UNVR’s revenues.
Since the PSBB is now in transition in 3Q2020 and not as strict as in 2Q2020, we are expecting more growth in 4Q2020.

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9M2020 Results: up QoQ

UNVR’s net profit recorded a slight decrease by -1.3% YoY to IDR 5.44 trillion in 9M2020 but growth was positive in 3Q2020, up +0.3% YoY and +3.5% QoQ to IDR 1.82 trillion. The net profit margin improved to 17% in 3Q2020 from 16.5% in 2Q2020.
Gross profit increased 2.6% YoY to IDR 16.87 in 9M2020 due to a higher ASP in 1Q2020 and efficiency in raw material and logistic costs. This resulted in a better gross profit margin in 9M2020 at 52% from 50.8% last year.
Operating profit decreased -5.6% YoY to IDR 7.1 trillion and the margin decreased to 21.9% from 23.3% in 9M2019.
We are expecting better margins in 4Q2020 and that net profit will reach IDR 7.47 trillion in 2020F as economic activity recovers in 4Q2020.

Valuation: BUY TP 9,450 with 21% upside

We are targeting UNVR to trade at 45x PE within a year. Target Price is IDR 9,450 which represents 21% upside. BUY

Previously