by Kresna Securities
We have upgraded our recommendation to BUY, with a new 12-month TP of Rp17,400. 9M11 performance is still on track with our expectations, having formed 74.5%-75.6% of our full year estimate. We thus maintain our net profit projection for 2011, but bump a slight upgrade, by 0.8%/3.6% for 2012/13, incorporating company’s expansion and increased production capacity. New loan facility of Rp1.2tr from UFI is also positive for UNVR, as it reduces company’s WACC by 0.9% to 10.9%.
Revenue up by 1.1% QoQ. Revenue growth in 3Q11 was contributed mainly by Food & Beverages (F&B) division, which posted growth of 4.2% QoQ to Rp1.7tr, while Home & Personal Care (HPC) division posted flat sales of Rp4.2tr in the respective quarter. In 9M11, UNVR’s consolidated revenue rose 18.0% YoY to Rp17.3tr from Rp14.7tr the previous year.
Margin is sliding in 3Q11. Higher COGS (+3.4% QoQ) have thinned gross margin in 3Q11 by 1.1% QoQ to 50.8%, while aggressive promotion (+9.2% QoQ) cut into operating margin by 2.2% QoQ to 22.2%. Hence, 3Q11 gross, operating and net profit suffered a decline of 1.1%, 7.9% and 10.7% QoQ to Rp3.0tr, Rp1.3tr and Rp957.0bn, respectively.
New support from affiliated company. Unilever Finance International (UFI) has inked an agreement to provide a loan facility up to Rp1.2tr to Unilever Indonesia (UNVR) at a very attractive interest rate of 7.35% p.a. On October 18th, 2011, the company drew down US$22.0m from the facility, possibly to be used to accelerate the construction of its new state-of-the-art personal care factory as well as to expand production capacity. The objective is to enable the company to stimulate higher demand and/or mitigate increasing competition through new product launches. However, a negative consequence is the possibility the company will lower its dividend payout ratio.
No surprise in 9M11 figures. From top to bottom, 9M11 results are on track with our expectations: Revenue reached 75.6% of our FY11E of Rp22.9tr while gross, operating and net profit mark 76.3%, 74.8% and 74.5% of our FY11E of Rp11.6tr, Rp5.4tr and Rp4.1tr, respectively; we therefore continue to maintain our FY11 projection.
Upgrade FY12/13 earnings, re-rate to BUY with new TP of RpRp17,400. For 2012/13, we have upgraded our net profit forecast by 0.8%/3.6% to Rp4.8tr/Rp5.6tr as we incorporate the expansion into our model (bringing our new FY12/13 revenue higher by 1.4%/2.6%). This, coupled with a lower WACC of 10.9%, (the positive impact of the new loan from UFI) and a new base year of 2012 have yielded higher DCF TP to Rp17,400. We now become a BUYer on UNVR.