UNVR Oct2022

UNVR

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22% Upside, BUY
1st November 2022
Price Rp 4640
Target price Rp 5680

Margin decreased

Despite higher revenues due to higher prices, despite lower volumes, most of UNVR’s business margins decreased in 3Q2022. Lower volumes were due to a reduction in traders stock levels as UNVR started to transform their trade channels in order to innovate new products starting in 3Q2022 and into 4Q2022.
UNVR total sales increased by +2% YoY but declined by -5% QoQ to IDR 10.07 trillion in 3Q2022 from higher food and refreshment revenues. For 9M2022, sales grew +5% YoY to IDR 31.5 trillion. Domestic sales in 9M2022 increased +5.2% while export sales declined -1.7% YoY, while in the 3Q2022 domestic sales only grew +1.9% with export sales up by a double digits 11%.
Food & Refreshment (FR) sales increased +7.27% YoY to IDR 10.7 trillion in 9M2022 while Home and personal care (HP) sales also increased +3.9% YoY to IDR 20.8 trillion due to higher prices.
UNVR segment margins dropped in 3Q2022 from higher commodity prices. The 3Q2022 gross margin in HP decreased to 46.6% from 50% in 2Q2022, and operating margins declined to 17.7% from 25.2% in 2Q2022.
FR GPM also decreased to 43.8% in 3Q2022, while the OPM increased to 26.2% from 17.4% in 3Q2021.
Because of the higher prices, we are targeting UNVR to maintain their positive growth for 2022F and for sales to reach IDR 41.9 trillion or +6% YoY growth.

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3Q2022 Result: Lower bottom line profit

UNVR booked bottom line profit of IDR 1.18 trillion, lower by -16% QoQ and -11.4% YoY. The net profit margin continued to decrease to 11.7% from 1Q2022’s 18.6%. For 9M2022, UNVR still booked +5.3 YoY growth in bottom line profit of IDR 4.6 trillion.
Operating profit decreased by -16.6% QoQ or -13.4% YoY to IDR 1.53 trillion due to higher advertising and market research expenses in 3Q2022, which were up by +24% YoY. As a result, the OPM decreased to 15.2% from 18% in 3Q2021.
Gross profit also declined -9.3% or -5.1% YoY to IDR 4.6 trillion in 3Q2022 with a lower GPM of 45.7%.
We are targeting UNVR’s net profit for 2022F to reach IDR 6.39 trillion or +11% YoY growth.

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Valuation: Maintain BUY with TP 5,680

Based on 3Q2022 results, we revise our target price to IDR 5,680 which represents 22% upside. We are targeting UNVR to trade at 32x PE within a year. We maintain our recommendation to BUY.

Previously

UNVR Jul2022