April 30, 2025/Cordros Report
In this report, we present our outlook for UNILEVER for 2025E. UNILEVER’s topline growth remained resilient in Q1-25, with their food products segment continuing as the key revenue contributor. Following a decline in EBITDA margin to 14.1% in 2024FY (2023FY: 22.2%), driven by a volatile operating environment, we expect a recovery in 2025E. This will be supported by strong top-line growth, improved operational efficiency, and rising cash reserves, with EBITDA margin projected to rise by 139bps to 15.5%. That said, we retain our “HOLD” recommendation for the ticker, as suggested by our estimates, with our target price settling at NGN47.76/s (previously: NGN27.66/s). Based on our estimates, UNILEVER trades on 2025E P/E and EV/EBITDA multiples of 8.7x and 5.3x, respectively, relative to respective MEA peers’ forward averages of 10.8x and 8.5x.
Strong revenue growth to boost margins recovery: We project a revenue growth of 30.1% y/y in 2025E, supported by strategic price increases and volume growth across product segments – Food (+29.7% y/y), Personal Care (+25.0% y/y), and Beauty & Wellbeing (+50.0% y/y). Meanwhile, we project an average revenue growth of 26.5% over the medium term (2026E–2029E), helped by sustained traction across high-margin brands, expanded retail reach, and improved product accessibility/affordability. We expect UNILEVER’s cost optimisation measures to yield further positives, dampening the cost-to-sales ratio by 80bps to 62.3% (2024FY: 63.1%). Factoring in the company’s operational efficiencies, we expect gross and EBITDA margins to expand to 37.7% and 15.5% in 2025E (2024FY: 36.9% and 14.1%) respectively. Ultimately, we expect UNILEVER to leverage their strategic strong cash position to continue to support growth initiatives without resorting to interest-bearing liabilities, thus limiting finance costs. Hence, we estimate EPS to rise to NGN4.96 in 2025E (2024FY: NGN2.64).
Robust cash position underpins dividend prospects: UNILEVER’s strong liquidity profile, supported by improved operating cash flow from stronger sales and low CAPEX intensity, provides a solid foundation for sustaining and growing dividends. We project the company’s cash balance to rise to NGN90.10 billion (2024FY: NGN68.44 billion) in 2025FY, aided by efficient working capital management and swift inventory turnover. This healthy cash buffer also offers protection against potential increases in trade finance-related interest expenses. Thus, with earnings expected to grow (+88.3% y/y) and assuming a payout ratio of 27.0% (2024FY: 28.0%), we forecast a dividend per share of NGN1.34 for 2025E (2024FY: NGN0.75) which translates to a dividend yield of 3.1% on the last closing price of NGN43.00/s (30 Apr).
Valuation: Our year-end target price is NGN47.76/s, derived from a 60/40 blend of DCF and sector-relative valuation estimates (P/E & EV/EBITDA). Our DCF FV is derived from an equal blend of FCFF (NGN52.26/s) and FCFE (NGN34.57/s), assuming a 33.3% WACC, 34.7% cost of equity and a 4.0% terminal growth rate. Similarly, our multiple-based FV was derived from a blend of EV/EBITDA (NGN55.17/s) and P/E (NGN53.39/s) multiples, utilising Bloomberg’s Middle East and African peer median for both factors (8.5x and 10.8x) as multipliers.
