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Company Overview: Unilever PLC (NYSE: UL) manufactures fast-moving consumer goods (FMCG), focusing on Beauty & Personal Care, Home Care, and Foods & Refreshment segments. Under the Axe, Clear, Dove, Lifebuoy, Lux, Pond's, Rexona, Signal, Suave, Sunsilk, TRESemmé, and Vaseline brands, the Beauty & Personal Care section offers skincare and hair care products, deodorants, and skin cleaning products. The Foods & Refreshment category includes ice cream, soups, bouillons, spices, mayonnaise, and ketchup, whereas the fabric solutions and home care and hygiene items are available in the Home Care area. UL markets its products in more than 190 countries.
UL Details
Key Takeaways from H1FY21 (ended June 30, 2021)
Stable Topline & Bottomline Key Highlights; Analysis by Kalkine Group
Recent Developments
Steady Dividends
On October 19, 2021, the company declared a Q3FY21 interim dividend of USD 0.4975 per ADS, which will be paid on December 01, 2021, to shareholders of record on November 05, 2021. Over the last five years, the company has regularly paid dividends, as also reflected in the chart below (every D represents a dividend payment):
Consistent Dividends (Data Source: REFINITIV)
Balance Sheet & Liquidity Position
Key Metrics: In H1FY21, UL's EBITDA and net margins were 22.1% and 13.2%, vs. the industry median of 17.1% and 9.3%, respectively. In addition, its Debt/Equity ratio as of H1FY21 end was 1.62x vs. 1.79x for H2FY20.
Profitability and Leverage Profile; Analysis by Kalkine Group
Top 10 Shareholders: The top 10 shareholders (in terms of ownership of ordinary shares listed on the LSE) together form around 18.39% of the total shareholding, while the top 4 constitute the maximum holding. BlackRock Institutional Trust Co., N.A., and The Vanguard Group, Inc. hold the maximum stake in the company at 6.53% and 3.11%, respectively, as also highlighted in the chart below:
Top 10 Shareholders; Analysis by Kalkine Group
Risk Analysis
Outlook
Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation (Illustrative)
Source: Analysis by Kalkine Group
*% Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.
Stock Recommendation: Over the past twelve months, UL corrected ~12.22%. The stock is currently trading below the mid-point of its 52-week range of USD 51.98 to USD 63.45. We have valued the stock using the Price/Earnings multiple-based illustrative relative valuation method and arrived at a target price with an upside of high teens (in percentage terms). We believe that the company can trade at a slight premium compared to its peer's average, considering its market dominance, strong profit margins, and international presence. We have taken peers like Proctor & Gamble Co. (NYSE: PG) and Colgate-Palmolive Company (NYSE: CL). Considering the stability in the top and bottom-line performances, strategic expansion plans, steady dividend yield, and current valuation, we give a "Buy" recommendation on the stock at the closing price of USD 53.54, down ~0.85% as of October 27, 2021.
UL Technical Chart, Data Source: REFINITIV
Note 1: The reference data in this report has been partly sourced from REFINITIV.
Note 2: Investment decision should be made depending on the investors' appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above.
Technical Indicators Defined
Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.
Resistance: A level where-in the stock prices tend to find resistance when they are rising, and the uptrend may take a pause due to profit booking or selling interest.
Stop-loss: It is a level to protect further losses in case of unfavorable movement in the stock prices.
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