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UNILEVER NIGERIA PLC Q1'17- Strong start to 2017, PAT up 58% y/y

​Strong start to 2017, PAT up 54% y/y     
Following a tough operating year, UNILEVER began 2017 on a positive note with Q1’17 revenue up 32% y/y to ₦22.2 billion – the largest quarterly revenue figure on record. Given the price increases implemented in H2’16, the impressive y/y performance was largely supported by the lower pricing base of Q1’16. We are more impressed by the strong q/q performance recorded, with revenue up 11% q/q, 5% above Vetiva estimate. Surprisingly, the Food Segment (which typically records the strongest growth) was the underperformer in this quarter, recording a mild 2% q/q growth. Thus, the notable Q1’17 revenue was driven by strong performances in the Home and Personal Care (HPC) segments as revenue rose 19% q/q and 23% q/q respectively.

Following the revenue outperformance recorded in Q1’17, we revise our FY’17 revenue growth forecast to 13% (Previous: 8%). Given that Q1’17 is one of the faster selling quarters, we expect q/q revenue decline in Q2’17. We remain slightly optimistic on production costs in the coming quarter, noting the downtrend in global oil palm prices (key imported raw material) since the start of the year (down 20% ytd) and relatively stable exchange rate environment. Our major revision however is to the OPEX line. In line with the strategy of its parent company, it is clear UNILEVER intends to leverage on cost savings strategy to support earnings performances. Thus, we revise our OPEX (as a % of sales) estimate lower to 18% (Previous: 21%). With this, FY’17 EPS estimate is revised higher to ₦1.36 (Previous: ₦0.88). Our 12-month target price is revised higher to ₦22.52 (Previous: ₦20.12).