November 7, 2025/Cordros Report
This report updates our outlook on Unilever Nigeria Plc (UNILEVER) for the rest of the year. In Q3-25, UNILEVER maintained resilient operating leverage, as tighter control over operating costs (+2.2% y/y) helped cushion margins despite cost of sales (+52.4% y/y) rising faster than revenue (+43.5% y/y). The performance reflects a shift back to volume-led growth under a disciplined pricing strategy that emphasized affordability and market share amid limited room for further price hikes. We raise our target price by 1.5% to NGN81.60/s (previous: NGN80.37/s) indicative of a HOLD rating, and an 8.8% upside from the current price of NGN75.00/s. The revision reflects stronger topline expectations and enhanced cash generation, prompting a 155bps downward adjustment to the 2025E gross margin—reflecting volume-related cost escalation—and a 50bps upward revision to the EBITDA margin on sustained operational efficiency. On our estimates, UNILEVER currently trades at 2025E PE and EV/EBITDA of 11.7x and 7.2x – compared to MEA peer average of 12.9x and 10.5x, respectively.
Stronger topline and OPEX grip supports earnings visibility: We raise our revenue growth forecast for 2025E to 47.0% y/y (Previous: +35.3% y/y), reflecting a stronger volume rebound and sustained pricing efficiency. Beauty & Wellbeing is set to lead growth (+102.5% y/y | 11.9% of revenue) on renewed consumer traction, while Food Products remain the core growth driver (+50.0% y/y | 62.8% of revenue) and Personal Care delivers decent gains (+25.0% y/y | 24.9% of revenue) on stable market share retention. The volume rebound prompted a 14.40 ppts upward revision to 2025E cost of sales growth rate (36.9% y/y vs. 22.5% y/y prior), resulting in a 155bps y/y downward adjustment to our gross margin estimate (41.2% vs 42.8% prior). Nonetheless, the gross margin remains well above historical levels, with the medium-term average projected at 44.3% (2020 – 2024A: 32.1%). Improved cost discipline saw OPEX-to-revenue revised to 21.7% (Previous: 24.0%), strengthening our EBITDA margin projection by 50bps to 21.1% (Previous: 20.6% | 2024FY: 14.1%). Consequently, 2025E EPS is now forecast at NGN6.40 (Previous: NGN6.34 | 2024FY: NGN2.64), reflecting solid operating leverage and improved earnings visibility.
Improved capital efficiency strengthens return profile: We project a sharp improvement in capital productivity, with ROCE rising to 34.6% in 2025E (2024A: 17.2%) on enhanced asset turnover and sustained cost discipline. Over 2026–2029E, ROCE is forecast to average 39.9% (vs. 6.0% in 2020–2024A), reflecting improved earnings conversion and efficient working capital management across core segments. This stronger capital efficiency underpins a higher 2025E dividend yield of 4.3% (2024A: 3.8%), reinforcing sustained cash generation and supporting valuation re-rating potential.
Valuation: Our year-end target price is NGN81.60/s, derived from an equal blend of DCF and sector-relative valuation estimates (P/E & EV/EBITDA). Our DCF FV is derived from an equal blend of FCFF (NGN82.55/s) and FCFE (NGN63.94/s), assuming a 25.1% WACC and a 4.0% terminal growth rate. Similarly, our multiple-based FV was derived from a blend of EV/EBITDA (NGN82.86/s) and P/E (NGN97.06/s) multiples, utilising Bloomberg’s Middle East and African peer average for both factors (10.5x and 12.9x) as multipliers.
