July 30, 2025/Cordros Report
In this report, we update our position and estimates for Unilever Nigeria Plc (UNILEVER) for 2025E, following a stellar H1-25 performance. UNILEVER successfully implemented price increases across their product portfolio alongside achieving moderate volume expansion. This translated into a 53.5% y/y increase in revenue generated in H1-25. Given the revenue outturn, OPEX margin tapered by 635bps y/y to 24.5%, while EBITDA margin expanded by 13.42ppts y/y to 20.6% in H1-25, despite a 21.9% y/y climb in OPEX for the period. Factoring in H1-25 performance, we revise our year-end target price (TP) upward by 68.3% to NGN80.37/s (previous: NGN47.76/s), reflecting our revised outlook on the ticker. The revision particularly captures our reassessment of operating margins, supported by solid topline growth and improving macro dynamics (disinflation and relative currency stability). Accordingly, we now forecast 2025E EPS at NGN6.37 (+141.6% y/y). That said, our estimates still suggest that UNILEVER currently trades at 2025E P/E and EV/EBITDA of 11.4x and 7.9x, respectively, a discount to MEA peers’ average PE and EV/EBITDA multiples of 12.3x and 10.5x, respectively.
Strong topline position to fuel margins recovery in 2025E: We improve our revenue growth forecast for 2025E by 519bps to 35.3% (previous: +30.1% y/y), primarily driven by our expectations of a volume rebound across product segments, with sustained traction across high-margin brands – Food Products (+29.7% y/y | 61.8% of revenue), Personal Care (+25.0% y/y | 28.3% of revenue) and Beauty & Wellbeing (+110.0% y/y | 10.0% of revenue) segments. The solid topline is expected to downplay a projected 22.5% y/y climb in cost-of-sales, thereby expanding gross margin for 2025E by 595bps y/y to 42.8% from 36.9%. Our model now forecasts a significant 649bps y/y growth in EBITDA margin for 2025E to 20.6% (2024FY: 14.1%), supported by an anticipated 107bps y/y drop in OPEX margin to 24.0% (2024FY: 25.0%). Consequently, we project a significant +141.6% y/y improvement in 2025E EPS to NGN6.37 (2024FY: NGN2.64).
Sustained cash growth to unlock shareholder value in 2025E: We expect UNILEVER’s free cash flow (FCF) margin to improve significantly in 2025E, rising by 663bps y/y to 8.7% (2024FY: 2.0%), reflecting stronger operational efficiency and financial resilience. Accordingly, we project the company’s cash position to increase by 28.5% y/y to NGN87.96 billion (2024FY: NGN68.44 billion, driven by a combination of (1) operational improvements, (2) strategic refocusing, and (3) macroeconomic tailwinds (disinflation and FX stability). That said, we expect total dividend for 2025E at NGN2.89/s, indicating a 131.4% y/y climb from NGN1.25/s in 2024FY. This implies a dividend payout ratio of 45.0% (2024FY: 47.4%).
Valuation: Our year-end target price is NGN80.37/s, derived from a 50/50 blend of DCF and sector-relative valuation estimates (P/E & EV/EBITDA). Our DCF FV is derived from a 30:20 blend of FCFF (NGN84.67/s) and FCFE (NGN67.61/s), assuming a 25.7% WACC and a 4.0% terminal growth rate. Similarly, our multiple-based FV was derived from a blend of EV/EBITDA (NGN86.64/s) and P/E (NGN78.27/s) multiples, utilising Bloomberg’s Middle East and African peer median for both factors (10.5x and 12.3x) as multipliers.
