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UNILEVER NIGERIA PLC Q1'18 - Reassuring Q1’18 results, positive outlook reiterated

Reassuring Q1’18 results, positive outlook reiterated                                                                   

UNILEVER released its Q1’18 financial statements posting a record quarterly topline figure of ₦25.8 billion (Q1’17: ₦22.2 billion, Vetiva: ₦24.9 billion) translating to an impressive 19% q/q rise. The performance was driven by stronger turnover in both the Home & Personal (+24% q/q) and Food (+15% q/q) segments. Though operating profit margin normalized following the spike in Q4’17 to 13.7%, the figure came in 124bps and 50bps above Q1’17 figures and Vetiva estimate respectively. As such, Q1’18 operating profit came in 28% higher y/y and 7% above our estimate. Further supported by a buoyant cash balance, net finance income came in at ₦396 million (Vetiva: ₦272 million), compared to the ₦575 million net interest expense recorded in the same period last year.     

We raise our FY’18 revenue estimate marginally to reflect the mild beat in Q1’18 - ₦103 billion (Previous: ₦100 billion). Whilst production costs rose faster than we had expected in the quarter, marketing & admin expenses came in markedly below our estimate thus leaving total costs relatively flat compared to our estimate. Also following a downward revision to our tax expense, our FY’18 PAT estimate is revised higher to ₦10.4 billion (Previous: ₦9.5 billion) – translating to a 40% y/y growth. Consequently, our 12-Month Target Price is revised to ₦34.15 (Previous: ₦33.72) and maintain a SELL rating. UNILEVER trades at a FY’18 forward P/E basis of 30.3x.