Awaiting For The Bounce Back
Lower Performance in 1H21
• UNVR booked IDR20.17 trillion revenue in 1H21 or decreased by -7.35% YoY (vs IDR21.77 trillion 1H20). The drop was mainly caused by the decline in the Home and Personal Care (HPC) segment which contributed by 66.88% to its revenue.
• HPC segment sales weakened by -10.72% YoY to IDR13.49 trillion (vs IDR15.11 trillion 1H20). On the other hand, sales of the Foods and Refreshment product were relatively stable at 0.33% YoY with IDR6.69 trillion net sales (vs IDR6.67 trillion 1H20). We believe lower purchasing power combined with social restriction impacted to the lower top-line. Meanwhile, a 0.33% growth of F&B segment helped by the Eid momentum during 2Q21.
• COGS decreased by 6.23% YoY to IDR9.93 trillion (vs IDR10.59 trillion 1H20), due to efficiency in the use of raw materials.
• UNVR’s 1H21 net profit declined by -15.5% YoY to IDR3.05 trillion (vs. IDR3.62 trillion 1H20) with 15.10% net profit margin (vs Rp16.63% 1H20). This figure is slightly in line with estimates at 48.50% of MNCS and consensus FY21E target.
Takes Innovation Route to Tackle Competition
• UNVR had innovated on price preference and packaging aspects in the midst of weakening purchasing power. UNVR offers a more economical product such as of Lifebouy liquid soap in IDR5,000 packaging and Bango soy sauce in IDR3,000 packaging.
• UNVR focuses on maintaining the sales growth of Walls ice cream with new flavor innovations. As of 1H21 UNVR released of 13 product variants, including Viennetta, Unicornetto Mini, Wall's Strawberry Cheesecake, Wall's Solero Trio. In addition, the company provides delivery speedy order through WhatsApp as well as strengthening its position through an e-commerce platform.
• To optimize the efficiency, UNVR cut their advertising and market research expenses by -8.29% or IDR1.14 trillion (vs IDR1.25 trillion in 1H20). We believe that UNVR will implement these efficiencies along the year to maximize its net profit margin.
Anticipation of VAT Hike Amidst a Slower Moving Economic Condition
Indonesia GDP grew by +3.31% QoQ /+7.07% YoY in 2Q21. The GDP growth figure in 2Q21 was slightly higher than our forecast at +3.23% QoQ/+6.95% YoY and the Bloomberg consensus median at +2.27% QoQ/+6.72% YoY. The increase was supported by the improvement in public mobility which boosted public consumption. In our point of view GDP growth in 3Q21E might be lower to +1.84% QoQ/+3.69% YoY due to the implementation of Emergency PPKM and PPKM Level 4. Subsequently, The Minister of Finance plans to increase the rate of Value Added Tax (VAT) to 11% in 2021 and 12% in 2025. The implementation of this policy has significant effect on UNVR resulting a higher cost of raw material.
Maintain BUY on UNVR with TP: IDR4,450
We move our coverage on consumer sector, especially UNVR from Victoria Venny to Rifqi Ramadhan and maintain a BUY call with a lower TP of IDR4,450 (vs IDR7,300 previously) which implied 22.05x/36.31x PE/PBV in FY21E/FY22F. UNVR has been corrected by -47.16% YTD at -2STD PE level. There is potential bounce back when mobility and purchasing power are returning back to normal. As we know UNVR has the highest ROE above 100% higher than average ROE industry at 42.58%.
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