Unilever PLC – 400+ Unilever Brands, and €52 billion Turnover in 2019
 

Unilever PLC (LON: ULVR) is a global company selling fast-moving consumer goods. The company has divided its operations into three reportable segments, namely Foods & Refreshment, Home Care and Beauty & Personal Care.
On 23^rd July 2020, the company will release its second quarter & half-year results of 2020.

Recent News
On 1^st April 2020, the company has successfully completed the merger of HUL (Hindustan Unilever Limited) with GSKCH (GlaxoSmithKline Consumer Healthcare Limited.

Trading Update for the First Quarter of 2020 – Improving Momentum and Competitiveness Prior to March 2020


(Source: Trading Update, Company Website)

Underlying sales were flat against 2019, with a growth of 0.2% in volume and negative price of 0.2%. In Q1 FY20, the group saw growth in Developed markets of 2.8%, while emerging markets tumbled 1.8%. Turnover for the first quarter of 2020 increased by 0.2%. From a negative impact of 0.4% from currency and acquisitions net of disposals, the business showed a positive impact of 0.6%.
In food service, the company has closed the food outlets in many markets, due to implementation of the lockdown. In China, there is a negative impact from late January. In India, the growth was impacted by both the lock-down implemented and the slowing market at the end of March, which stopped shipping and production for several days. In E-commerce, shoppers are moving to online channels from offline channels, reflecting an increase in this market.

From the perspective of the segment, the underlying sales from Beauty & Personal Care increased by 0.3%, Home Care surged by 2.4%, and Foods & Refreshment reduced by 1.7%. The quarterly dividend per share maintained at €0.4104.

Share Price Performance

Daily Chart as at April-23-20, before the market closed (Source: Thomson Reuters)

Unilever PLC’s shares were trading at GBX 4,026 before the market close (at 10:08 AM GMT) on 23^rd April 2020 and were down by 5.11% versus the previous day closing price. Stock 52 weeks High and Low are GBX 5,333.00/GBX 3,583.50.

Valuation Metrics

(Source: LSE)

As on 31st March 2020, the Price to Earnings multiple of the ULVR was around 18.7x, which was slightly lower as compared to the Personal goods industry multiple. It reflects, shares are undervalued against its peers.

ULVR Supporting Communities In COVID-19 Pandemic
The company is contributing €100 million to assist global and national efforts to tackle the Covid-19 pandemic via donations of sanitiser, food, soap, and bleach as well as leveraging the procurement network. For the small-scale retail customers, most vulnerable small and medium-sized suppliers, it is also giving a €500 million of cash flow relief.

Conclusion
The business is delivering superior long-term financial performancethrough the sustainable business model. ULVR has strong cash and liquidity position. The group is keeping the factories running through the several unprecedented challenges in local operating environments across the value chain, while it is also opening new capacity for hand hygiene and food. As well as, the business has been able to maintain the supply of a product. The group saw upswings in sales of hygiene and in-home food products and is also adapting to new demand patterns. Through donations and partnerships, it is supporting communities. Whilst the Domestos and Lifebuoy brands are leading the way on hygiene education programmes. Led by the unprecedented crisis created by COVID-19 pandemic, the company is withdrawing the prior growth and margin outlook for 2020. There is a short-term impact on consumption habits.

Based on the above rationale, we have given a “Hold” recommendation at the current price of GBX 4,001.52 (as on 23rd April 2020, before the market close at 8:36 AM GMT).

Anglo American PLC - $10bn Underlying EBITDA and $2.3bn Attributable Free Cash Flow in 2019

Anglo American PLC (LON: AAL) is an international mining group having operations in Australia, Southern Africa, South America, and North America, and is headquartered in London, United Kingdom. The company also undertakes exploration projects, which is divided into brownfield exploration to identify resources close to existing operations and greenfield exploration to find entirely new resources.

Production Report for the First Quarter Ended 31 March 2020

(Source: Production Report, Company Website)

Rough diamond production was in line with the previous year at 7.8 million carats in Q1 FY20, with limited impact from Coronavirus measures introduced in producer countries. During the Q1 production, the Minas-Rio continued its robust operational performance in Brazil, with a premium grade of 6.4 million tonnes iron ore production, reflecting P101 productivity initiatives. Driven by higher copper recovery, higher plant throughput, and planned higher grades, the attributable production surged by 16 per cent to 66,500 tonnes at Collahuasi in Chile. In South Africa, the company had a limited impact of 2 per cent on Q1 production during the start of a COVID-19 lockdown. The group has completed the cash acquisition of Sirius Minerals Plc and its UK Woodsmith polyhalite project for a total consideration of $0.5 billion, with net debt of $0.2 billion plus fair value adjustments. However, refined PGMs (Platinum Group Metals) production was decreased by the announced convertor plant outage.

Share Price Performance

Daily Chart as at April-23-20, before the market closed (Source: Thomson Reuters)

Anglo American PLC’s shares were trading at GBX 1,375.60 before the market close (at 10:15 AM GMT) on 23^rd April 2020 and were up by 1.21% versus the previous day closing price. Stock 52 weeks High and Low are GBX 2,294.00/GBX 1,018.20.

Valuation Methodology


Valuation Metrics


(Source: LSE)

As on 31st March 2020, the Price to Earnings and EV/EBITDA multiples of the AAL were around 7x and 3.1x respectively, which were lower as compared to the industry multiples. It reflects, shares are undervalued against its peers.

Growth Catalysts
The company is well-positioned to take benefits from growth trends across the energy and industrial markets. The company using its cost synergies, had optimized its operational structure to achieve sustainable growth in the future. The company has many value-accretive projects in the pipeline with low risk and higher production.

Conclusion
On 23^rd April 2020,the company is providing an update on the present status of its production guidance for 2020, international operations, and several actions it is taking across the business given the uncertainty surrounding the impact of the COVID-19 pandemic. The onset of varying degrees of COVID-19 lockdown couples with the impact of longwall moves in the Metallurgical Coal business, resulted in 4 per cent lower production in Q1 FY2020, despite continued robust iron ore production at Minas-Rio. The company is planning to increase its production from its old and new operations in the coming future.

Over the course of 4 years (FY15 - FY19), the company’s revenue surged from USD 20,455 million in FY15 to USD 29,870 million in FY2019. Compounded annual growth rate (CAGR) stood at 9.93 per cent.

Based on the decent growth prospects and the valuation done using the above method, we have given a “Buy” recommendation at the current price of GBX 1,349.00 (as on 23rd April 2020, before the market closed, GMT 1:05 PM), with lower double-digit upside potential based on 4.10x NTM EV/EBITDA (approx.) on FY20E EBITDA (approx.).
 
*All forecasted figures and Peers information has been taken from Thomson Reuters.

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