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Unilever PLC due diligence

Hatchworks has conducted due diligence on Unilever plc, one of the leading groups worldwide, specializing in the manufacture and marketing of food and care products. Its products include food, energy drink, ice cream and beverages, cleaning agents, beauty products, and personal care products.

Headquartered in London, England and Rotterdam, Netherlands, Unilever plc is listed on the London Stock Exchange, under the symbol ‘’ULVR’’.

Financials — Unilever PLC
(Source: Marketscreener.com, investing.com)

Unilever Plc’s current market cap is £113B and stock price is around £3,878.

With a predicted net-income of 5.2% for 2020E and 2021E, and a net income estimate for 2021E of in excess of £6.8B, this points to a P/E ratio of 16x.

The revenue/sales forecast is £52.9B for 2020E, indicating an EV/Sales ratio of 2.58x.

In terms of profitability, an operating margin of 19.6% is predicted for 2020E. This is moderately higher than competitors such as, The Clorox Company (CLX) for example, who has a lower operating margin of 18.2% for 2020E.

Unilever is a yielding equity with a relatively high yield of 4% for 2020E.

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It is worth noting that, after the previous recession, the share price made a drop of 28.6%. Another important note is that Unilever plc’s largest net sales consists 42.1% of Beauty & Personal Care products. Whereas, 37.1% net sales are coming from Foods & Refreshment and 20.8% net sales come from Home Care. According to a recent article, Unilever plc closed its washing-powder factory in Warrington, England, due to “a decline in demand” of the product. The market volumes for the factory product had fallen 15% in the last four years as consumers have been switching particularly to laundry liquids and capsules.

The Covid-19 (a.k.a. Coronavirus) pandemic, that started in Wuhan, China has already taken a heavy toll. Many emerging market currencies have weakened. It is still very uncertain how this will play out over time; there is currently lots of speculation circulating about a potential vaccine for the virus.

According to our analysis, Unilever plc has a solid operating margin, modest debt position, cheap P/E and EV/Revenue ratio, relative to its peers. However, due to uncertainty caused, in part, by Covid-19, Hatchworks will keep Unilever on its radar but will not be investing right now.

The Hatchscore is 5 out of 10. Full details can be found on Hatchnet: www.hatch-net.com/companies

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What is Unilever plc?

Unilever plc is one of the leading groups worldwide, specializing in the manufacture and marketing of food and care products.

Big Investors:

  • The Unilever Group.
  • Wellington Management Co. LLP.
  • The Vanguard Group, Inc.
  • Norges Bank Investment Management.

Advisors and Bookrunners:

  • Deutsche Bank Securities.
  • J.P. Morgan.
  • UBS Investment Bank.

What are the risks?

  • They might have to reduce their product prices to customers, which eventually could hurt Unilever plc profitability over time.
  • Reduced consumer wealth driven by adverse economic conditions may result in Unilever plc consumers becoming unwilling or unable to purchase our products, which could adversely affect their profit margins.
  • Any breakdown in the relationships with customers could reduce the availability to Unilever plc consumers of existing products and new product launches and therefore impact their profit margins.
  • Two-thirds (66%) of the raw materials that Unilever plc buys come from agriculture. Changing weather patterns, water scarcity and unsustainable farming practices threaten the long-term viability of agricultural production.

Competitors:

  • The Clorox Company (CLX).
  • Church & Dwight Co, Inc. (CHD).
  • Colgate-Palmolive Company (CL).
  • Procter & Gamble Company (PG).

Management team:

  • Nils Smedegaard Andersen: Chairman.
  • Alan Jope: CEO.
  • Nitin Paranjpe: COO.

The Hatchworks Team

The forecast figures are based on the data of Marketscreener.com, and not from hatchworks: https://www.marketscreener.com/UNILEVER-PLC-9590186/financials/

Legal Disclaimer — This report summary has been generated as a result of Hatchworks’ proprietary company vetting and filtering system. The level of due diligence conducted on investible assets conducted ranges from mediocre to significant, the latter being the case where Hatchworks has explicitly taken strategic positions in. By no means is the information in this file to be relied on as investment advice; this includes Hatchworks’ algorithmic composite score known as ‘Hatchscore’. Hatchworks has not received any compensation for this research. For more information you can reach us at info@hatchworksvc.com. This report is not for distribution in the United States of America. It is closed to U.S citizens. If you are a U.S. citizen, you should delete this report or return to sender.

Written by

Heading up the group’s R&D activities for Hatchworks.

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