Unilever Indonesia Exciting growth TP18,300

Our View
􀂃 Unilever will continue to grow strongly from new product launches. Just this month, the company rolled out Fair & Lovely, a skincare product targeting the mid‐ to low‐end consumers. With the same attribute as Pond’s (Unilever’s leading skincare product for the middle class) – a moisturiser with safe whitening effects – but priced more affordably, the growth potential of Fair & Lovely is sizeable.

􀂃 With the economy thriving in Sulawesi, Sumatra and Kalimantan, mini markets are expanding their presence aggressively in these regions. Unilever has plans to ride the boom in mini markets in these commodityrich regions outside Java.

􀂃 We are not worried about the competition from L’Oreal and P&G as they expand their factories in Indonesia. Unilever has allocated €350m (US$500m) for capacity expansion in 2010‐12 for practically all its product categories. This is much higher than its competitors (eg, P&G’s is US$100m). It has already spent Rp2.1t (US$249m) in 2010‐1H11.

Action & Recommendation
􀂃 We raise our FY11‐12 net profit forecasts by 8%. Reiterate BUY with TP of Rp18,300 (pegging the stock at FY12F 30.2x PER, 22.2x EV/EBITDA, 5.4x P/S). We like Unilever’s superb ROE (1H11: 118.4%), sound management, leading market shares and solid distribution network.

source: KIMENG dated 28 July 2011