Results Review:
Unilever Indonesia (UNVR IJ, Neutral, TP: IDR48,500),
Being Ready For Future Growth
Unilever Indonesia (UNVR IJ, Neutral, TP: IDR48,500),
Being Ready For Future Growth
In
anticipation of better consumer spending, Unilever has almost doubled its capex
spending to increase HPC production capacity and purchase more ice cream
cabinets. It also relocated its office as it needed more space. Unilever is
cutting opex too by reducing advertising costs and booking more online
advertisements. However, given the counter’s rich valuation, we maintain our
NEUTRAL call and DCF-based IDR48,500 TP (9% upside), which implies 52x FY17F
P/E.
¨
Capex
doubled as it anticipates better demand. Anticipating better consumer spending
next year, Unilever Indonesia (Unilever) has almost doubled its 9M16 capex
spending to IDR1,260bn (+43% YoY). The disbursements were for:
i. An increase in home personal care(HPC)
production capacity;
ii. The purchase of more ice cream cabinets to
expand distribution;
iii. The relocation to an office in a new area to
meet larger space needs.
Better consumer spending ahead should boost
Unilever’s sales volume and provide more room to adjust selling prices to
offset higher production costs.
¨
Improved
operating cost efficiencies. The firm is reducing its opex/unit, driven by
a lower number of stock keeping units (SKUs) and more online marketing
campaigns. In the last five years, Unilever has reduced SKU numbers by 20% and
we see more SKUs reduction going forward. The firm’s low-cost online
advertising strategy should improve EBIT margins too. So far, its advertising
& promotions (A&P) expenses-to-sales ratio has declined to 11% in 9M16
(9M15: 12%).
¨ 3Q16 earnings: in line
¨ 3Q16 performance in line, reiterate NEUTRAL. Unilever’s 3Q16earnings reached IDR1.5trn, or74% of our full-year estimates. Lower QoQ net profit was driven by cyclically low sales in 3Q, ie after the Lebaran festivities. Given its rich valuation, we maintain our NEUTRAL recommendation and DCF-based TP of IDR48,500 (9% upside). This implies 52x FY17F P/E.
¨ 3Q16 performance in line, reiterate NEUTRAL. Unilever’s 3Q16earnings reached IDR1.5trn, or74% of our full-year estimates. Lower QoQ net profit was driven by cyclically low sales in 3Q, ie after the Lebaran festivities. Given its rich valuation, we maintain our NEUTRAL recommendation and DCF-based TP of IDR48,500 (9% upside). This implies 52x FY17F P/E.
Kindly click the following link for the full report: Unilever Indonesia : Being Ready For Future Growth
Best regards,
Andrey Wijaya
Senior Vice President
Research Analyst – Auto,
Consumer, Cement
PT. RHB Securities
Indonesia
