Unilever Indonesia (UNVR IJ)

FY24 Earnings Missed; Potential One-Off Gain to Support FY25 Earnings and Dividend

• Following FY24 results miss, we cut our FY25/26 net profit forecasts by 10%/13% due to lower volume, lower ASP, and higher opex.
• Mgmt guides that stock reduction will continue until 1Q25, which will prevent UNVR from delivering a strong quarter despite the Eid festive.
• One-off gain from selling Ice Cream business could increase dividend yield up to 11%. We upgrade our rating to HOLD with TP Rp1,500.

UNVR FY24 result miss: soft top line, lower gross margin and higher opex

In 4Q24, UNVR’s revenue declined by 5% yoy and 8% qoq, driven by the company’s ongoing efforts to reduce stock at the distribution level and implement price harmonization. Stock reduction and transformation costs pressured the FY24 gross margin, which contracted by 2.1ppt to 47.6%. On the opex side, higher remuneration costs and increased A&P spending weighed on FY24 operating profit, which declined by 30% yoy. This impact filtered through to the bottom line, with UNVR reporting an FY24 net profit of Rp3.37tr, down 30% yoy, missing both our/ consensus FY24 net profit est. (at 93%/ 90% of FY24F).

We cut our FY25/26 NP by 10%/13% due to lower volume, ASP and higher opex

The company guided that stock reduction and price harmonization efforts will continue until 1Q25. On the cost side, it plans to adjust the selling prices of selective products in response to rising commodity prices. With a recovery expected to begin in 2H25, the company anticipates positive volume growth (versus FY24 UVG of -5.25%) and margin improvement in FY25. Following the release of the FY24 results, we have trimmed our FY25/26 net profit forecasts by 10%/13%, reflecting lower volume and ASP assumptions alongside higher operating expenses. We now project FY25 net profit to decline by 1.9% yoy to Rp3.3tr, followed by a 3.8% growth in FY26 to Rp3.4tr. Our forecast has not yet excluded the ice cream business.

Higher dividend expectation may support the share price, upgrade to Hold

While other FMCG companies anticipate a strong 1Q25 due to the Eid season, this is unlikely for UNVR given its ongoing stock reduction and price harmonization efforts. Therefore, the next potential catalyst will only come from the improvement expected in 2H25, as well as the dividend payment from the proceeds of the ice cream business sale, which could lift the dividend yield to 11%. Taking our new forecast into account, we set our new TP of Rp1,500 based on DCF valuation, implying a 17.3x FY25 PE. We upgrade our rating to Hold.

… Read More 20250214 UNVR