Wednesday, November 04,
2020 / 01:02 PM / by FBNQuest Research / Header Image
Credit: Brandpower Magazine
-14% Cut to Price Target; Underperform Rating
Nigeria's (Unilever) Q3 2020 recovery from last year's distribution crisis
and Q2's lockdown was eroded by a material increase in overheads and borrowing
Specifically, sales surged 94% y/y and 24% q/q, but the company
recorded a pretax loss of -N2.0bn. The loss was largely caused by a 68% y/y
increase in opex, and a net interest expense of -N584 vs an income of N561m a
The results also showed that sales are still well below historical
average. This suggests that Unilever is yet to fully regain market share lost
in Q3 2019 despite double-digit volume growth delivered in both the Food
Products and Home & Personal Care businesses.
Although the pretax loss in Q3 was lower by 50% y/y, it was 4x
worse than our forecast. As such, we have doubled our 2020E pretax loss
forecast to -N2.2bn whilst adjusting our 2021-22E EPS forecasts downwards by an
average of -12%.
These changes are largely on the back of upward revisions to opex
as well as cuts in net interest income estimates for the periods. AS such, we
have reduced our price target price by -14% to N9.6.
Year-to-date, Unilever shares have sold off by -38%,
underperforming the broad index by -52%. From current levels, our price target
implies a downside potential of -30%. We therefore retain our Underperform
rating on the stock.
Topline Growth Muted by OPEX
The main positive in the Q3 2020 results was the y/y sales growth.
In addition to the opex increase, other loss of -N442m was 5x higher y/y while
net interest expense of -N584m compares with a net interest income of N561m in
Q3 2019. Nevertheless, the pretax loss halved y/y thanks to the topline
Sequentially, the pretax loss was 34% higher, driven by an 18% q/q
increase in opex and a reversal of Q2's net interest income to an expense.
Relative to our forecasts, opex and other loss surprised negatively, by 55% and
2x respectively. As such, Q3 pretax loss was far worse than our forecast of
declares N2.1bn Loss in Q3 2020 Unaudited Results; (SP:N13.15K)
Notifies of Commencement of Closed Period
Notifies of Dealing in 67m Volume of Shares By Unilever Overseas Holdings B.V
Notifies of Dealing in 17m Volume of Shares By Unilever Overseas Holdings B.V.
Nigeria Q2 2020 Results Review: Recovery in Earnings Undermined by Pandemic
declares N519m Loss in Q2 2020 Unaudited Results; (SP:N12.85K)
Holds 95th AGM, Declares N60.48bn Turnover; Assures Stakeholders on Growth,
Announces Commencement of Closed Period for Q2 2020
Nigeria Q1 2020 Results Review: Growth Gradually Gathering Pace
Delivers Hygiene Products, To Support Nigeria's COVID-19
declares N1.1bn PAT in Q1 2020 Result,(SP:N11.00k)