Unilever Nigeria Plc Q3 17- Earnings momentum to moderate beyond 2017
- Aided by higher prices across its product lines, Unilever reported a 39% YoY increase in revenue to N69 billion over 9M 17. The foregoing, combined with tamer input cost pressure, provided boost for Unilever’s 9M 17 EPS of N3 (+4.5x YoY).
- Price to remain crucial to 2017 earnings: Over the rest of the year, we expect higher prices (relative to Q4 16) to uphold robust topline performance and as such we upwardly revise our estimates for FY 17 revenue to ₦5 billion (+33% YoY). However, we expect rising crude oil prices to underpin higher cost of petrochemical inputs which should leave COGS (+30.4% to N69.4 billion) at currently elevated levels. Overall, the foregoing translates to gross profit of ₦29 billion (+43% YoY) with related margin of 31% (previous estimate: 33%, 9M 17: 31%). Similarly, reflecting elevated S&D and marketing & admin expenditure over the nine-month period, we have revised Unilever’s operating costs higher to ₦16.4 billion (+12% YoY). In addition, we forecast finance expense at ₦4.2 billion (+56% YoY) to reflect the company’s elevated level of borrowing relative to prior year. Net impact of our model revisions translates to PBT and PAT of N9.3 billion (+126% YoY) and N6.5 billion (+111% YoY) respectively – EPS of N1.71. (vs. previously N2.37).
- Earnings momentum should subside beyond FY 17. Beyond 2017, we opine that Unilever’s current price-induced revenue growth is unsustainable given the backdrop of softer real income levels, rising cost of living as well as intense competition from imports following the improvement in FX availability. Given the foregoing, we project a volume-led increase in turnover over the remainder of our forecast horizon which should restrain top line growth from currently elevated levels.
- Unilever trades at a forward P/E of 25.7x vs 16.8x for Bloomberg Middle East and Africa. We have a SELL rating on the stock with a FVE of N48.
ARM Securities Limited is a full-service brokerage house that offers best-in-class brokerage services to local as well as foreign private and institutional investors. Formerly known as Hamilton Hammer, the Company commenced operation in 1994 and was acquired by ARM Investment Managers in 2008--an acquisition which has successfully re-positioned the company as a recognized brokerage firm in Nigeria. The Company is a dealing member of the Nigerian Stock Exchange (NSE) and is regulated by Securities and Exchange Commission (SEC). ARM Securities research team provides insightful commentaries on the Nigerian economy and its equity and debt markets using an approach which incorporates a thorough understanding of the fundamentals of the industries and companies under coverage. The research therefore adopts an integrated methodology of top-down analysis and bottom-up stock selection, which focuses on publicly quoted companies on the Nigerian Stock Exchange that are judged to offer the highest potential for earnings growth. In addition, its analysts provide periodic commentaries on a range of topical global and local issues which provide investing clients with a holistic view of the opportunities and risks in today’s financial market landscape.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.