Unilever: H1 Showed Inflation Impact, Earnings Should Improve After H2

(Preview) Company Update (ULVR LN) (Buy)

Summary

• Unilever shares rose 3.0% in London today following H1 2022 results; its earnings were hit by inflation but should recover from 2023.

• Turnover rose 8.1% in local currencies and 14.9% in Euros, but EBIT margin fell 180 bps as cost increases were only partially passed on.

• EPS rose 1.0% in euros in H1, and full-year outlook implies a low-single-digit decline. Margin and EPS should both expand from 2023.

• Unilever shares are trading at 18x 2021 EPS and a 3.6% Dividend Yield. We believe EPS growth will resume at 6% and P/E should be 21x.

• With shares at 4,032p, we expect an exit price of 5,413p and a total return of 48% (12.7% annualized) by 2025 year-end. Buy.

Introduction

Unilever released their H1 2022 results this morning (July 26), and shares closed up 3.0% in London.

We initiated our Buy rating on Unilever in December 2020. Since then Unilever shares in London have lost 3.8% (after dividends) in GBP, though the GBP has lost approximately 9% of its value against USD in this period.).

H1 …