Unilever Indonesia (UNVR IJ)
Signs of Stabilization Amid Ongoing Recovery; Upgrade Rating to Hold
- UNVR posted soft 2Q25 net profit (-9.8% yoy/-25.8% qoq), but exceeded our and consensus’ conservative expectations.
- We adjusted our earnings estimates by +23.5%/22.8% in FY25/26F reflecting expectations of modest vol. improvement, higher ASP and cost efficiency.
- We upgraded our rating to Hold with TP Rp1,750, implying 16.3x PE FY25F.
Soft 2Q25 results yet surpasses estimates
UNVR posted a relatively soft 1H25 performance, despite having both revenue and earnings exceeding consensus’ estimates given the conservative expectations. 2Q25 revenue fell 3% yoy and 8% qoq, primarily supported by a +1.6% increase in ASP. However, volume remained in negative territory of -4.2% yoy albeit improving from -7.8% yoy in 1Q25. At the operating level, opex fell 6.7% yoy in 1H25, driven by lower ads & marketing research and remuneration expenses, which partially offset the decline in operating margin to 15.9% (gross margin fell to 48.1%). Net profit dropped 12.6% yoy in 1H25 but accounted for 65% of our FY25F.
Eyeing sequential growth recovery in 2H25
Management highlighted several strategic initiatives during the call, which include: 1) strengthening the brand portfolio, 2) enhancing cost competitiveness, and 3) delivering growth from 3Q25 onwards. While we anticipate better topline performance in 2H25, supported by a favorable base from 2H24 and continued progress in distributive trade (DT) digital transformation as part of the initiatives, we prefer to see another 1-2 quarters of consistent improvement in volume growth before turning more optimistic.
Raise our FY25/26F net profit estimates by +21.4/3.5%
Following the 2Q25 results, we raised our FY25/26F revenue by +2.6/0.3%, reflecting expectation of modest volume improvement and higher ASP. With the ongoing operational discipline and transformation, we expect further room for opex efficiency particularly from the normalization of service fees, royalties, and remuneration costs. Consequently, we raised our FY25/26F operating margin forecast to 15.6%/ 15.9% and net profit estimates by +23.5%/+22.8% yoy, which translates to net profit growth of +21.4%/+3.5% yoy.
Upgrade to Hold rating with a TP of Rp1,750
We upgrade our rating to Hold given the expectation of earnings turnaround in FY25F, supported by some volume recovery, firmer pricing, and ongoing cost efficiencies. UNVR has also announced a share buyback plan of up to Rp2tr with a maximum price of Rp1,700/share, offering a short-term boost to share price. Nonetheless, we think UNVR’s current valuation at 16.0x PE FY25F remains demanding compared to its peers, which trades at an average of 11.9x. Upgrade to Hold with our DCF-based TP of Rp1,750.
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