UNILEVER | Unilever Nigeria company update : Resilience in challenging macroeconomic times

    Revenue is set to improve in FY'24

    Despite discontinuing its Home Care line in 2023, UNILEVER has remained a key player in the FMCG space, aided by innovative strategies. As a result, we revise our FY'24E revenue projection to N173.2 billion (vs N119.0 billion per our last forecast). This revision primarily reflects the sustained investments in market penetration, innovative product launch, and notable increases in product prices. The expectation is also for UNILEVER to increase its volumes by 18.0% YoY in FY'24 (vs 8.0% per our last forecast and 16.8% YoY in Q1'24), aided by the mentioned drivers and improving demand.


    Valuation and Rating

    After deploying a combination of DCF and multiples-based approaches, our model adjustments translated to an increase in 12-month TP to N29.60 (vs N18.43 previously), indicating a potential upside of 101.4% relative to our reference price. Our DCF valuation method, which reflected a WACC of 28.6% and a perpetual growth rate of 3.0%, gave rise to a target price of N25.03 per share. 

    Elsewhere, our EV/EBITDA and P/E multiples-based approaches resulted in target prices of N39.81 and N55.61, respectively. We assigned a higher weight to the DCF to capture our assumptions, which reflect the impacts of ongoing macroeconomic changes on the company's cashflows. 


    Notably, UNILEVER is currently materially cheap from a relative valuation standpoint. The ticker is trading at significant discounts to its 5-year historical average EV/EBITDA of 11.1x and P/E ratio of 24.3x. We, therefore, retain a BUY recommendation on the counter.


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