Jakarta, CNBC Indonesia – Consumer issuers PT Unilever Indonesia Tbk (UNVR) already reported the performance of semester I-2021 or a period of 6 months i.e. January-June from the same period last year. However, net profit as of June was recorded at Rp 3.05 trillion, down 15.75% from the same period last year of Rp 3.62 trillion.
From the capital market, this decline in performance was also responded to by the movement of UNVR’s stock price which has not yet recovered. Trading data on the Indonesia Stock Exchange (IDX) recorded that on Monday trading yesterday (26/7), UNVR shares closed down 2.08% at Rp 4,700/share.
During the past month, UNVR’s stock has corrected 6% and the last 3 months have also been minus 26%. Even year to date, the stock of the Pepsodent toothpaste producer, Lifebuoy soap, Sunlight, Rexona deodorant, and Bango soy sauce still dropped 36%.
Not only that, the downward trend in UNVR shares also occurred in the last year, falling 41% and in the last 5 years it was down 45%.
This decline has been calculated by the corporate action of splitting the nominal value of UNVR (stock split) which began on January 2, 2020. At that time, UNVR shares were traded early at Rp. 8,400, from the end of December to Rp. 42,000/share.
Research by PT Mirae Asset Sekuritas Indonesia predicts that UNVR’s financial performance this year will still be depressed from the previous year.
Unilever recorded a weak Q2-21 net profit of Rp 1.3 trillion, which brought cumulative net profit in the first semester of 21 to only Rp 3.0 trillion or -15.9% YoY.
“Clearly this profit achievement is far below Mirae Asset’s expectations. We note that the last time UNVR posted a quarterly net profit of below Rp 1.5 trillion was in Q2-2016,” wrote Mirae Asset research analyst Mimi Halimin, in a recent study on July 26, quoted by CNBC Indonesia, Tuesday (27/6).
According to Mimi, the sluggish performance of net profit in the first half was not only driven by performance top-line or weak earnings but also lower profitability margins, partly due to rising commodity prices.
UNVR’s revenue was recorded at IDR 20.18 trillion in the first semester of 2021, down 7.30% from June 2020 of IDR 21.77 trillion. Domestic sales reached Rp 19.29 trillion, down from Rp 20.77 trillion, while exports also fell to Rp 888.11 billion from Rp 1 trillion.
Sales to the largest affiliated parties were to Unilever Asia Private Limited, Unilever (Malaysia) Holdings Sdn Bhd, Unilever Philippines, Inc., Unilever EAC Myanmar Company Limited, Unilever Australia Ltd, and Unilever Thai Trading Limited.
Mimi explained that during Q2-21, both the Home and Personal Care (HPC) division and the Foods & Refreshments (F&R) division faced challenging times.
Q2-21 HPC sales were down 8.6% YoY (or 3.2% QoQ), while Q2-21 F&R sales were down 3.0% YoY (or 5.0% QoQ). “This we believe is due to intense competition in the market and relatively quiet celebrations of the season during the quarter,” he said.
“Going forward, we are concerned that the imposition of stricter social restrictions in Q3-21 will disrupt economic activity, which could cause consumer purchasing power to weaken. Thus, we think that Q3-21 may still be a challenging time for UNVR,” said Mimi.
Recommendation
He explained that the increase in commodity prices could also continue to suppress the company’s gross margin. “We estimate UNVR’s full year-21 gross margin will reach 50.3%, versus 52.3% in FY-20. Meanwhile, we estimate that the total cost of advertising, market research and promotion of UNVR FY21 will decrease by around 2.1% YoY,” he said.
For that reason, Mirae Asset trimmed its earnings and net profit estimates at UNVR.
“We revised UNVR’s revenue and net profit forecasts, largely due to our downward adjustment to UNVR’s HPC and F&R division sales growth estimates.”
“We expect HPC segment sales to decline by around 10.0% YoY in FY21, versus our previous forecast of 0.5% YoY growth, and F&R segment sales to decline by around 0.6% YoY in FY21, versus our previous growth forecast of 4 ,7% YoY,” said Mimi.
It estimates that UNVR will book FY21 and FY22 revenues of IDR 39.9trillion (-7.2% YoY) and IDR 41.5 trillion (+3.9% YoY) respectively.
Meanwhile, Mirae Asset estimates that UNVR’s net profit will fall by 12.5% YoY to Rp 6.3 trillion in FY21 and up 8.6% YoY to Rp 6.8 trillion in FY22.
With that in mind, “we lowered our ‘Hold’ recommendation to ‘Sell’ or sell with a lower price target of IDR 4,300/share,” Mimi wrote.
He explained, because the Covid-19 pandemic was still spreading with relatively high daily new cases recorded recently, his party cut the revenue and net profit estimates.
“We lowered our recommendation on UNVR to Sell with a target price lower than IDR 4,300 from the previous IDR 5,400). We lowered our target price by implementing a P/E target [price earnings] by 26.2 times, close to -4.2 SD [standar deviasi] from a 5-year average P/E of 44.6 times, to our 2021F EPS.”
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Photo: Mirae Asset UNVR Research 26 July 2021 Mirae Asset smiles UNVR 26 July 2021- – |
He explained that although UNVR’s current price earnings or P/E (price to profit ratio) is relatively much lower than its historical average, he believes that investors will still consider UNVR’s assessment to be unattractive.
This is due, firstly, to relatively weaker revenue growth potential where 2010-2020 net profit CAGR (annual average) is around 7.8% versus 2017-2022F net profit CAGR of around -0.6%, with net profit growth forecast ( YoY) negative for FY21F.
Second, the lack of positive catalysts due to the prolonged Covid-19 pandemic.
Third, potential flow problems (due to the new indexing methodology), and fourth, the relatively higher P/E ratio for UNVR 2021 projections (29.2 times, using closing price on 23 July) compared to competitors in the consumer sector. Its competitors include PT Indofood CBP Sukses Makmur Tbk (ICBP), PT Indofood Sukses Makmur Tbk (INDF), and PT Kalbe Farma Tbk (KLBF).
Ira Noviarti, President Director of Unilever Indonesia, said that the growth of the FMCG (Fast Moving Consumer Goods) market has not fully recovered due to the Covid-19 pandemic. This causes consumers to be careful in choosing consumption patterns in several basic categories.
“These various challenges certainly affect the growth rate of the company. This condition is also coupled with the increase in commodity prices which have begun to affect product costs,” said Ira, in an official statement, quoted on Friday (23/7).
Therefore, the company chose to focus on overcoming these challenges. The Company has a strategy that balances short-term and long-term business sustainability.
“We manifest into five priority strategies, driving market growth through stimulating consumer consumption, expanding and enriching the portfolio to value and premium segments, strengthening leadership in innovation and future channels, implementing E-Everything in all lines including sales, operations and data processing, and remain at the forefront of implementing sustainable business.”
(bag bag)
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