November 3, 2026/Cordros Report
We revise our estimates for Unilever Nigeria Plc (UNILEVER) following the release of its 9M-26 results. During the period, the company reported EPS growth of 20.1% y/y, supported by a 529bps expansion in gross margin and a lower tax charge in Q3-26. However, we note that OPEX margin expanded by 362bps y/y, exceeding our expectations and reflecting greater energy cost pressures than initially anticipated. Incorporating the 9M-26 results, we have revised our forecasts to reflect stronger OPEX growth and higher capital expenditure. Specifically, we now project an OPEX margin of 25.3% (Prev.: 22.1%) and 2026FY CAPEX of NGN9.61 billion (Prev.: NGN6.40 billion) in line with 9M-26 run rate.
Consequently, we lower our target price to NGN83.16/share (Prev.: NGN101.43/share), implying a SELL recommendation at the current market price. At our revised estimates, UNILEVER trades at a 2026E P/E of 16.8x and EV/EBITDA of 9.5x, compared with MEA peer averages of 12.5x and 7.3x, respectively. This represents premiums of 34.4% and 30.1% to peer averages. In our view, the valuation premiums appear difficult to justify given UNILEVER’s weaker earnings outlook.
Higher OPEX intensity to temper EPS growth: We retain our 2026E revenue growth forecast at 21.7% y/y (2026E–2030E CAGR: 20.6%), supported by favourable price/mix effects, with the Food Products remaining the primary growth driver (+32.4% y/y | 64.9% of revenue), while Beauty & Wellbeing (+19.4% y/y | 12.1% of revenue) continues to benefit from strong brand positioning. In contrast, Personal Care (-0.0% y/y | 23.0% of revenue) is expected to lag amid still-fragile consumer purchasing power. We also retain our gross margin projection at 45.6% (+387bps y/y), supported by ongoing cost optimization, naira appreciation and favourable pricing arrangements with raw material suppliers. However, we now expect OPEX margin to expand by 225bps y/y to 25.3% (Prev.: +80bps to 22.1%), reflecting stronger-than-anticipated operating cost pressures. Consequently, we lower our EBITDA margin forecast to 22.0% (+95bps y/y | Prev.: +395bps to 25.1%). Reflecting our downwardly revised operating profitability outlook, we now forecast 2026E EPS growth of 18.9% y/y (previously: 41.3%), while retaining our effective tax rate assumption at 40.7%.
Higher CAPEX and weaker cash generation weigh on FCF: We have lowered our 2026E free cash flow (FCF) forecast to NGN24.39 billion (Prev.: NGN30.52 billion), reducing our projected FCF margin to 9.3% from 11.7%. The revision reflects both a weaker operating cash flow outlook and a higher capital expenditure assumption, with OCF estimates revised downward to NGN34.00 billion (Prev.: NGN36.92 billion) and CAPEX now estimated at NGN9.61 billion (Prev.: NGN6.40 billion). Nevertheless, we expect FCF generation to strengthen post-2026E, growing at a CAGR of 20.0% over 2026E–2030E with an average FCF margin of 14.1%. This will be supported by normalization of capital expenditure requirements, stronger operating cash generation and an improving macroeconomic environment.
Valuation: Our year end target price is NGN83.16/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 (NGN88.95/s) and FCFE (NGN71.15/s), assuming a 23.4% WACC and a 4.0% terminal growth rate. Similarly, our multiple based FV was derived from a blend of EV/EBITDA (NGN89.47/s) and P/E (NGN83.07/s) multiples, utilising Bloomberg’s Middle East and African peer average for both factors (7.3x and 12.5x) as multipliers, respectively.