August 4, 2026/Cordros Report
We revise our estimates for Unilever Nigeria Plc (UNILEVER) following the release of its H1-26 results. Although revenue grew a robust 22.2% y/y in H1-26, higher operating expenses (+29.8% y/y) and a sharp increase in tax expense (+39.3% y/y) weighed on earnings, resulting in a modest 8.3% y/y growth in H1-26 EPS. Notably, the stronger first-quarter performance remained the primary driver of H1-26 earnings growth. Incorporating the H1-26 results, we have revised our forecasts to reflect a higher effective tax burden and increased capital expenditure. We now assume an effective tax rate of 40.7% (Prev.: 30.0%) and 2026FY CAPEX of NGN6.40 billion (Prev.: NGN2.22 billion). Consequently, we revise our target price downward to NGN101.43/share (Prev.: NGN133.14/share), implying a “SELL” recommendation at the current market price. On our revised estimates, UNILEVER trades at a 2026E P/E of 19.6x and EV/EBITDA of 11.7x, representing premiums to the MEA peer averages of 13.6x and 9.5x, respectively. In our view, these valuation premiums are no longer justified given the weaker earnings outlook.
Higher effective tax rate to temper EPS growth: We retain our 2026E revenue growth forecast at 21.7% y/y (2026–2030E CAGR: 20.6%), supported by moderate volume growth across core and growth segments, alongside limited carryover benefits from prior pricing actions and selective SKU-level adjustments. Food Products remain the primary growth driver (+27.9% y/y | 62.7% of revenue), while Beauty & Wellbeing (+26.7% y/y | 12.8% of revenue) continues to benefit from strong brand positioning. In contrast, Personal Care (+6.5% y/y | 24.5% of revenue) is expected to lag amid still-fragile consumer purchasing power. Gross margin is projected to expand by 389bps to 45.6% (Prev.: +390bps y/y to 45.7%), supported by ongoing cost optimisation despite residual volume-related cost pressures. Operating leverage should remain robust, driven by a further 80bps y/y (Prev.: 30bps) decline in the OPEX-to-sales ratio to 22.1%, lifting EBIT and EBITDA margins by 388bps y/y and 395bps y/y to 28.0% and 25.1%, respectively (Prev.: 27.4% and 24.7%). Nonetheless, while operating profitability continues to strengthen, we now forecast 2026E EPS growth of 41.3% y/y (Prev.: +62.8%), reflecting a higher effective tax rate of 40.7% (Prev.: 30.0%), which moderates the translation of operating gains into bottom-line earnings.
Higher CAPEX and weaker cash generation weigh on FCF: We have lowered our 2026E free cash flow (FCF) forecast to NGN30.52 billion (Prev.: NGN41.29 billion), reducing our projected FCF yield to 3.8% from 5.1%. The revision reflects both a weaker operating cash flow outlook and a higher capital expenditure assumption, with OCF estimates revised downward to NGN36.92 billion (Prev.: NGN80.96 billion) and CAPEX now estimated at NGN6.40 billion (Prev.: NGN2.22 billion). Nevertheless, we expect FCF generation to strengthen over 2026–2030E, growing at a CAGR of 21.9% with an average FCF yield of 8.5%, supported by moderating capital expenditure requirements, stronger operating cash generation and an improving macroeconomic environment.
Valuation: Our year end target price is NGN101.43/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 (NGN97.52/s) and FCFE (NGN78.27/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 (NGN127.18/s) and P/E (NGN102.74/s) multiples, utilising Bloomberg’s Middle East and African peer average for both factors (9.5x and 13.6x) as multipliers, respectively.