UNVR
Contact our analyst Eka
8% Upside, Hold
30th October 2024
Price Rp 2020
Target price Rp 2250
30th October 2024
Price Rp 2020
Target price Rp 2250
Sales Decline Amid Ongoing Operational Issues
- UNVR’s sales continued to decline in Q3 2024, following a brief positive growth in Q1. Sales dropped by -18.0% YoY and -6.6% QoQ, reaching IDR 8.37 trillion. For the first nine months of 2024, total sales fell -10.1% YoY to IDR 27.4 trillion, with domestic sales down -9.9% to IDR 26.63 trillion. The decline, partly due to a consumer boycott, was exacerbated by long-standing operational issues, including inconsistent pricing across channels and reduced customer stock in Q3. Prices dropped by -4.1% YoY, with volumes down -5.8% YoY. In Q3 2024 alone, prices fell -2% while volumes decreased -16%. Export sales also dropped by -17.5% YoY.
- In the Food & Refreshment (FR) segment, sales declined by -14% YoY or -2% QoQ to IDR 3.06 trillion, with the gross profit margin (GPM) slipping from 45% to 43%.
- The Home and Personal Care (HP) segment saw a larger decline, with sales down -20% YoY and -9% QoQ to IDR 5.31 trillion, and GPM dropping from 53% to 47%.
- Looking ahead, UNVR management is working to stabilize pricing across channels and optimize stock levels. They anticipate seeing improvements by the second half of 2025.
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Q3 2024 Results: Lower margins
- The sales decline significantly impacted UNVR’s bottom line, with net profit down -62% YoY to IDR 543 billion, and the net profit margin (NPM) falling to 6.5%. This decline was driven by higher advertising and market research costs, which rose 2% in Q3 and 9.3% for the first nine months of 2024, along with a 14.5% increase in promotion costs for Q3. The advertising and promotion ratio to sales increased to 15.4%.
- Although trademark, technology, and service fees were reduced by 20% YoY, it wasn’t enough to offset the -60.4% YoY decline in operating profit to IDR 723 billion, with the operating profit margin (OPM) shrinking to 8.6% from 17.9% in Q3 2023.
- Given these results, we have revised our full-year net profit target for UNVR to IDR 4.35 trillion, representing a -9% YoY decrease.
- While we expect operational improvements in the long term, Q3 2024 results have prompted us to downgrade our recommendation to HOLD. We set a target price of IDR 2,250, reflecting an +8% upside and a 18x PE target over the next year.
Previously