Event

In 2023, Unilever Nigeria (“the Group”) announced plans to make changes to its business model to accelerate growth and sustain profitability, while enhancing its ability to meet consumer needs. This strategic moves, as highlighted by the management, includes exiting the Home Care and Skin Cleansing categories to concentrate on higher growth opportunities. Subsequently, production for Home Care category ceased in June 2023, and sales ceased in September 2023, while production for Skin Cleansing category ceased in December 2023. Despite these changes, the Group’s revenue grew significantly in 2023.

Q1 2024 Financial Performance

Volume sales grew by 17% year-on-year, which along with sustained pricing strategy (+41% year-on-year) pushed revenue up by 58% to N32.32 billion (Q1 2023: N20.48 billion). However, the trend of cost of goods growth outpacing revenue continued in the quarter, with cost of goods climbing higher by 75% to N18.82 billion (Q1 2023: N10.75 billion). Consequently, gross margin remained pressured, declining by 571 basis points to 42% (Q1 2023: 47%).

Outlook

Unilever Nigeria Plc has demonstrated resilience by achieving volume growth despite the discontinuation of some of its business segments, as well as the persistent macroeconomic challenges in the operating environment. Looking ahead, we anticipate that volume growth will be sustained, as market penetration deepens.

We estimate a N19.30 fair value for the Group’s stock, which implies a 10.66x justified price-to-earnings (P/E). At the current market price of N17.10, we recommend a HOLD for the stock, with a total return of 16% (13% price return and a dividend yield of 3%).

Please follow the link “Unilever Nigeria Plc FY 2023 & Q1 2024 – Sustained Value Creation Drives Optimism” to view the whole report.

Thank you.