Results Review:
Unilever Indoensia (UNVR IJ, Neutral, TP: IDR48,500)
Higher ASPs Likely To Boost Margin
Unilever Indoensia (UNVR IJ, Neutral, TP: IDR48,500)
Higher ASPs Likely To Boost Margin
Our ground checks
suggest that Unilever has aggressively raised its ASPs in Dec 2016 and Jan
2017. This should boost its EBIT margin. However, it is likely be on the
expense of slower sales volume growth. We saw some strengthening of consumer
demand in 2016, although it has not fully recovered yet. 4Q16’s earnings were
in line with expectations thanks to the widened EBIT margin, especially in the
food & refreshment divisions. Maintain NEUTRAL with a DCF-based TP of
IDR48,500 (10% upside), implying 52x FY17F P/E.
Higher
ASPs boosted margins. Our ground checks – at a hypermarket located in South
Jakarta – suggest that Unilever Indonesia (Unilever) has raised 4Q16 retail
selling prices, such as:
i. Personal care
products retail selling price, up 2% QoQ (on average);
ii. Detergent products
retail selling price, up 1% QoQ (on average);
iii. Ice cream retail
selling price, up 4% QoQ (on average);
iv. Ready to
drink(RTD)-juice retail selling price, up 4% QoQ (on average).
This was likely the main driver of the food
& refreshment divisions’ and home personal care’s (HPC) 4Q16 EBIT margins
to improve to 23% (3Q16: 17%) and 30.7% (3Q16: 30.5%) respectively.
However,
higher ASPs are likely to cause slower volume growth. Unilever further
raised its retail selling prices in Jan 2017. In our view, this should boost
EBIT margin further, but its sales volume growth may slow down. Although we see
some strengthening of consumer demand in 2016, it has not fully recovered yet.
However,
higher ASPs are likely to cause slower volume growth. Unilever further
raised its retail selling prices in Jan 2017. In our view, this should boost
EBIT margin further, but its sales volume growth may slow down. Although we see
some strengthening of consumer demand in 2016, it has not fully recovered yet.
In
line. Unilever’s
4Q16 earnings reached IDR1.6trn (+12.9% QoQ, -0.8% YoY). The company revealed
that its sales growth was driven by product innovation, such as Molto Super and
Sunsilk re-launches. Earnings were also driven by higher ASPs.
Maintain
NEUTRAL with
a DCF-based TP of IDR48,500, implying 52x FY17FKindly click the following link for the full report: Unilever Indonesia : Higher ASPs Likely To Boost Margin
Best regards,
Andrey
Wijaya
Senior
Vice President
Research
Analyst – Auto, Consumer, Cement
PT.
RHB Securities Indonesia
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