Unilever: Long Turnaround Journey Ahead, But Priced Attractively

Re-initiation of Coverage (ULVR LN) (Buy)

Problems are deep-rooted, but investors are paid for the uncertainty and wait.

Highlights

• Shares are back to mid-2022 lows, 16.5x P/E and 3.9% Dividend

• Lack of competitiveness seems deep-rooted and partly cultural

• New CEO’s program echoes P&G’s successful turnaround

• However, Unilever efforts are early-stage and so far more limited

• At 3,727.5p, we see 46% total return (14.3% p.a.) by 2026. Buy

Introduction

We revisit Unilever after its shares have fallen near their 52-week low, back to levels last seen in June 2022:

Unilever Share Price (Last 5 Years)

Source: Google Finance (19-Jan-24).

We last wrote about Unilever in July 2022. We had started publishing our research on Unilever with a Buy rating in December 2020, but let our coverage lapse after 18 months (and an approximately 4% loss) as we lost interest.

Earnings have stagnated in recent years. High inflation since 2022 has exposed Unilever’s lack of pricing power, with both volume and margin falling significantly. We believe Unilever is struct…