Unilever: Macro Weakness In H1 Will Pass; 3.6% Dividend Yield (Preview)

Company Update (ULVR LN) (Buy)

Summary

• Unilever shares fell 5.9% on the day of H1 results on July 22, and have been weak year-to-date; the Dividend Yield is now 3.6%.

• H1 results were stable relative to ongoing COVID-related macro disruption, with revenues up 5.4% underlying and flat with FX.

• Q2 growth rates largely reflected reversals from prior-year COVID effects; Unilever gained share year-on-year but not from Q1.

• Input cost inflation is rising to high teens in H2, but margin is guided to be flat for the year, and we trust Unilever's long-term pricing power.

• With shares at 4,100p, we expect annualized returns to be in the 10-15% range, with an attractive risk/reward. Buy.

Introduction

We review our Unilever plc investment case after H1 2021 results were released on July 22. Shares fell 5.9% in London on the day of the results.

We initiated our Buy rating on Unilever in December 2020. Since then shares have lost 5.5% (after dividends) in GBP in London trading, a disappointing performance over the past 8 months.

H1 results …