UNVR - 1Q25 net income: persistent pressure anticipated

KBVS Update
Thursday, 27 February 2025

UNVR - 1Q25 net income: persistent pressure anticipated
(Downgrade to HOLD; TP: IDR1,270)

* 1Q25 PATMI could remain soft, possible slight turnaround likely in 3Q25. On the revenue front, our 1Q25 forecast of IDR 9.53tn reflects a more cautious stance (1.5% below the street's estimate). Our projection for 1Q25 PATMI stands at IDR 1.08tn, representing approximately 29.4% of ‘25F run-rate (Consensus: IDR 1.14tn), and significantly lower vs IDR 1.45tn in 1Q24.

* The resolution of persistent pricing challenges within UNVR's distribution channels and product portfolio is critical; failure to address these issues promptly risks perpetuating a cycle of diminished earnings in the quarters ahead. We anticipate that DPO will remain consistent YoY, solidifying its position as a primary catalyst for the stock.

* UNVR's robust brand equity and commitment to innovation are expected to act as countervailing forces, mitigating further earnings erosion. Consequently, sustained brand investment through increased advertising expenditure is deemed essential, in our view.

* In light of persistent earnings weakness, a sombre growth outlook, and the stock's pronounced YTD decline of 34%, we have undertaken a comprehensive revision of our financial model. This refinement stems from a downward adjustment of our volume and price index assumptions across both the HPC and F&B segments. Additionally, we also increased our ‘25F RM and maintain our Rf assumption.

* Downgrade to HOLD. We used blended valuation of DCF, DDM, single stage fair PBV and rolling P/E to fairly valued UNVR stocks. Our revised down TP for UNVR of IDR 1,270 (-27% vs cons: -35%) implying 13.2x ‘25F P/E, while it is currently trading at 12.4x ‘25F P/E, or below its -2SD of 19.9x P/E.

Regards,
Akhmad Nurcahyadi - KBVS Research team