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Unilever Nigeria PLC 9M'21 Earnings Release - Positive year-end outlook despite waning growth base

HPC growth smooths over decline in Food segment.

Unilever Nigeria PLC recently released its 9M’21 financial results reporting ₦58.7 billion in Revenue, a 31% y/y expansion - mildly shy of our ₦59.4 billion expectation. Despite the quarter-long promotion on its Knorr seasoning cubes, HPC segment growth (+10% q/q, +33% y/y) outsized the Food segment which contracted (-10% q/q, -3% y/y) in the period. However, underpinned by stronger y/y prices and volume growth from its value-tier products in both segments – appealing to weakened consumer wallets like key industry players - Unilever’s Q3 topline improved 13% y/y. Meanwhile, we note that the growth spurt from the H1 period (+43% y/y) has begun to wane, marking an exit from the low base in the first half of 2020.

For the last quarter of the year, our adjusted Revenue forecast reflects the increased growth expectation from the HPC segment, given Q3’s performance. Thus, we expect FY’21 Revenue to print at ₦79.5 billion (+28% y/y). Meanwhile, we retain our gross margin forecasts, given current FX liquidity and the company’s focus on mass market products. However, we mildly increase our full year OPEX projection to ₦19.9 billion (FY’20: ₦15.2 billion) and account for the impairment charges reported in Q3. Accordingly, we expect EBIT to print at ₦1.6 billion, maintaining EBIT margin at 2% (FY’20: -10%). Finally, we expect PBT and PAT to remain positive at ₦3.1 billion and ₦2.1 billion respectively and estimate a target price of ₦15.41, retaining our HOLD rating.