Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

Smartkarma

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As a part of our Long Term Leaders vertical, we would like to discuss Unilever Indonesia (UNVR), which continues to be a leading provider of consumer staples in the country, however, the recent price action implies that the stock is being overvalued at the current juncture: <ul><li>UNVR is trading close to its highest p/e levels (44x), having outperformed JCI index by 12% in the past six months and by 10% YTD, its also outperformed the JAKCONS index by 7% YTD and over the past six months. In our view, fundamentals don't support the current valuations as recent price performance has increasingly been driven by p/e multiple expansion with little or no signs of earnings playing catch-up.</li><li>Analysts continue to remain negative on the stock, and have been cutting earnings estimates. Moreover, with another royalty hike scheduled for 2015, we see little room for a meaningful upside surprise in earnings in the near term.  </li><li>While the long-term potential of the stock remains unquestionable, given the large population base, however, considering the macro is more favourable for cyclicals (steady/declining inflation, stable Rupiah, more infrastructure spending etc), we would be more inclined to switch into cyclicals for now.</li></ul>

As a part of our Long Term Leaders vertical, we would like to discuss Unilever Indonesia (UNVR), which continues to be a leading provider of consumer staples in the country, however, the recent price action implies that the stock is being overvalued at the current juncture: UNVR is trading close to its highest p/e levels (44x), having outperformed JCI index by 12% in the past six months and by 10% YTD, its also outperformed the JAKCONS index by 7% YTD and over the past six months. In our view, fundamentals don't support the current valuations as recent price performance has increasingly been driven by p/e multiple expansion with little or no signs of earnings playing catch-up.Analysts continue to remain negative on the stock, and have been cutting earnings estimates. Moreover, with another royalty hike scheduled for 2015, we see little room for a meaningful upside surprise in earnings in the near term.  While the long-term potential of the stock remains unquestionable, given the large population base, however, considering the macro is more favourable for cyclicals (steady/declining inflation, stable Rupiah, more infrastructure spending etc), we would be more inclined to switch into cyclicals for now. 

Unilever Indonesia (UNVR IJ) - Priced beyond perfection, time to switch

Indonesia

PT Unilever Indonesia Tbk manufactures soaps, detergents, margarine, oil and dairy based foods, tea based beverages, ice cream, and cosmetics.

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Unilever Indonesia (UNVR IJ) - Priced beyond perfection, time to switch

As a part of our Long Term Leaders vertical, we would like to discuss Unilever Indonesia (UNVR), which continues to be a leading provider of...

Sumeet Singh