/UNVR Stock Analysis 2025: The Challenges of Selling Declines, Business Transformation, and Special Dividend Potential
Stock UNVRFebruary 15, 2025

UNVR Stock Analysis 2025: The Challenges of Selling Declines, Business Transformation, and Special Dividend Potential

PT Unilever Indonesia Tbk (UNVR) is facing tough challenges due to declining sales and margin pressures. However, the company still has recovery prospects, especially with its transformation strategy and the potential for special dividend distribution in 2025. What is the outlook for UNVR stocks? Is it a good time to buy? Let’s dive deeper.

2024 Performance: Sales Weaken, Profitability Depressed

2024 will be a difficult period for Unilever Indonesia. 4Q24 revenue decreased to Rp7.7 trillion (-7.8% QoQ; -4.7% YoY), with total FY24 revenue reaching Rp35.1 trillion (-9.0% YoY). This decrease was caused by a price reset and a reduction in distributor stock.

On the profitability side, 4Q24 operating profit plummeted to Rp515 billion (-29.4% QoQ; -37.5% YoY), with total FY24 operating profit at Rp4.4 trillion (-29.4% YoY). Operating costs increased significantly, mainly due to increased remuneration costs and business transformation, including machine replacement and employee severance pay which reached Rp204 billion.

Overall, 4Q24 net profit declined to Rp359 billion (-33.9% QoQ; -41.3% YoY), with a margin of only 4.6% (vs. 7.6% in 4Q23). For FY24, net profit decreased to Rp3.4 trillion (-29.8% YoY), with a net profit margin of 9.6% (vs. 12.4% in FY23).

Factors Causing Performance Decline

A number of main factors are the causes of the decline in UNVR performance:

  • Price adjustments and distributor stock reductions: Distributors reduced stocks by up to 50% compared to 2021, which helped reduce the risk of bad loans.
  • Business transformation: Large expenditures on machine modernization and operational efficiency impact profits in the short term.
  • Margin pressure: The weakening rupiah increases production costs, while consumer purchasing power is still depressed.
  • Consumer boycotts: A number of products have experienced a decline in demand due to negative sentiment in the market.

2025 Outlook: Can UNVR Bounce Back?

Unilever management projects improvements in the second half of 2025. Business transformation will still weigh on performance in 1H25, but on a smaller scale than in 2024.

In the Fast Moving Consumer Goods (FMCG) sector, industry growth slowed throughout 2024:

  • 1H24: +4%
  • 2H24: +2%
  • 4Q24: only about 1%

However, UNVR is optimistic that it will record 4% growth in 2025, especially in the second half of the year, supported by a pricing adjustment strategy and increased sales volume.

Ice Cream Business Divestment and Special Dividends

One of the big steps taken by UNVR is the divestment of the ice cream business worth IDR 7 trillion. From this transaction:

  • IDR 2 trillion will be recorded as the value of assets.
  • Rp1.2 trillion is used to pay taxes.
  • IDR 3.8 – IDR 3.9 trillion is allocated for special dividends.

This dividend is expected to be distributed at the end of 2025 or early 2026, which is certainly an attraction for investors who are eyeing stocks with high dividend yields.

Recommended Stocks: Upgrade to “Buy”

Although UNVR’s performance is still challenging, we raise our stock recommendation to “Buy” with a price target of IDR 1,700, which reflects a potential upside of 20% from the current price (IDR 1,415 as of February 13, 2025).

However, there are some risk factors to consider:

  • Internal pressures: Operational efficiencies are still ongoing, and the impact on margins is not yet fully visible.
  • Price adjustments: If consumers don’t respond positively to the new pricing strategy, sales recovery could be slower.
  • Margin pressure: The depreciation of the rupiah can increase production costs.
  • Product boycotts: Negative sentiment towards the Unilever brand in some market segments could have an impact on sales volumes.

Conclusion: Are UNVR Shares Worth Buying?

UNVR faces major challenges, but with strategic measures such as business transformation and ice cream business divestment, there is a recovery opportunity in the second half of 2025. If you are a long-term investor eyeing stocks with potential dividend play, UNVR can be an attractive option.

However, if you’re more conservative and avoid uncertainty, it may be better to wait until the Q1 2025 financial report to see the direction of UNVR’s recovery more clearly.

What do you think? Is it a good time to get into UNVR stock?

References ((Unilever Indonesia))

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