Unilever Nigeria Q3 2018 Results Review: Upgrading to Neutral

Proshare

 Friday, December 07, 2018 10:42 AM /FBNQuest Research

 

Slight changes to EPS forecasts

Unilever Nigeria’s (Unilever) Q3 2018 earnings, which beat our forecast by 29%, were largely boosted by gains recorded from the sale of the spreads business (Blue Band). Stripping this gain out, we estimate that PBT would have shown a negative surprise of 30%. Turning to Unilever’s operating line items, underperformance in sales (-11%) and operating margin (-294bps) negatively impacted normalised earnings for Q3, despite a positive surprise in gross margin (+65bps). 

We have made slight changes to our forecasts, with the net effect being a 1% reduction in our average EPS forecasts over the 2018-2020E period. Consequently, our new price target of N43.3 is -4% lower than previous. We nevertheless still hold a positive growth outlook for Unilever over the near-to-medium term with 2018-2020E sales and earnings CAGR forecasts of 16% and 8% respectively. 

Year-to-date, Unilever shares have lost 3.7%, but have outperformed the broad index which is down 18.5%. From current levels, our N43.3 price target implies an upside potential of 11.2%. As such, we have upgraded our rating on the stock to Neutral. At current levels, Unilever shares are trading on a 2018E P/E multiple of 17.5x for an average EPS growth of 12% over the 2018-20E period.

 

Q3 2018 PBT and PAT up significantly

Q3 2018 results showed that sales grew by 7% y/y to N24.2bn. A 5% y/y growth in the Food Products category was offset by a sales decline of -3% y/y in the Home and Personal Care segment. PBT and PAT, both of which grew significantly, were boosted by the one-off gain from the spread business’ sale. Both gross and operating margins contracted by 118bps and 366bps respectively. 

On a sequential basis, sales were up 8% q/q while PBT and PAT were up 41% and 42% respectively. Compared with our forecasts, while sales came in 11% behind our N27.1bn estimate, PBT was 25% higher while PAT was 29% higher.

 

Proshare Nigeria Pvt. Ltd.

Visit Unilever Nigeria Plc IR Page on Proshare MARKETS

 

Proshare Nigeria Pvt. Ltd.

 

Related News

1.       UNILEVER Declares N9.57bn PAT in Q3 2018 Results,(SP:N39.50k)

2.      Unilever Nigeria Q2 2018 Results Review: Retaining Underperform Rating

3.      UNILEVER Q2 2018 Results: Sales Grew By 9.0% YoY to N22.3bn

4.      UNILEVER Declares N5.72bn PAT in Q2 2018 Results,(SP:N51.85k)

5.      Unilever Nigeria Plc Announces Its Closed Period and Board Meeting

6.   Unilever Nigeria Plc Holds 93rd AGM; Declares N2.87bn Dividends
READ MORE:
Related News
SCROLL TO TOP