June 29, 2026/Cordros Report
We update our views on Unilever Nigeria Plc (UNILEVER), following the release of their Q1-26 results. The company delivered a strong earnings outturn (+26.4% y/y), underpinned by solid topline growth of +26.0% y/y and EBITDA margin expansion (+138bps y/y). In our view, product optionality within the savoury segment, alongside its entrenched market position in the skincare category, should continue to support volume growth (+10.2% y/y) through 2026FY. In addition, the company’s strong pricing power should enable modest inflation-linked price adjustments (+10.4% y/y) across key product categories, supporting revenue growth (+21.7% y/y) and gross margin expansion (+390bps y/y). On our analysis, we project a year end target price of NGN133.14/share, implying a HOLD rating at current market price. While we remain constructive on UNILEVER’s operating outlook, we believe the stock’s strong YTD gain (+94.4%) has outpaced improvements in underlying fundamentals. Current market valuations imply a premium that appears difficult to justify based on our earnings outlook and intrinsic value assessment.
Margin expansion to drive earnings growth: We project revenue growth of 21.7% y/y for 2026E (2026-2030E CAGR: 20.5%), reflecting moderate volume growth across core and growth segments, alongside limited carryover support from prior pricing actions and selective SKU-level adjustments. Food Products remain the primary growth anchor (+26.8% y/y | 62.2% of revenue), underpinned by product optionality within the culinary category through Knorr and Royco, which cater to different consumer income segments and reinforce resilient mass market demand. Beauty & Wellbeing (+26.6% y/y | 12.8% of revenue), should continue to benefit from strong brand positioning across Vaseline and Dove, while Personal Care (+8.7% y/y; 25.0% of revenue) is expected to lag group growth amid still fragile consumer purchasing power. We expect improved sourcing efficiencies and lower FX exposure to support a 390bps expansion in gross margin to 45.7% (2025FY: 41.8%). On the aforementioned, and lower OPEX ratio (-30bps y/y), EBITDA margin is projected to expand by 351bps y/y to 24.7%. Consequently, we forecast EPS growth of 62.8% y/y to NGN8.71 in 2026E.
Portfolio optimization enhances capital returns: We expect return on equity (ROE) to improve materially to 42.2% in 2026E, from 29.0% in 2025FY, 17.8% in 2024FY and 11.3% in 2023FY, marking a significant recovery from the 2020–2024FY average of 11.0% and comfortably exceeding the pre-COVID (2013–2019FY) average of 20.9%. The improvement reflects the company’s portfolio optimization strategy, which has refocused the business on higher margin categories, alongside sustained margin expansion and improved capital efficiency. Consequently, we expect ROE to average 54.1% over 2026–2030E, underscoring the structural enhancement in the company’s earnings quality and its strengthened ability to generate returns from shareholders’ capital.
Valuation: Our year end target price is NGN133.14/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 (NGN103.48/s) and FCFE (NGN83.20/s), assuming a 23.5% WACC and a 4.0% terminal growth rate. Similarly, our multiple based FV was derived from a blend of EV/EBITDA (NGN153.78/s) and P/E (NGN192.10/s) multiples, utilising Bloomberg’s Middle East and African peer average for both factors (12.0x and 22.1x) as multipliers, respectively.