Unilever PLC

Unilever PLC is an FTSE 100 listed FMCG (fast-moving consumer goods) Company. It markets and produces a broad portfolio of home care, food, beverages, health, and well-being products.

ULVR will pay a quarterly interim dividend of 35.9 pence per share attributable for Q1 FY22 on 16 June 2022, while the ex-dividend date was 19 May 2022.

Investment Rationale – SELL at GBX 3,825.00

• Profit Booking Opportunity: The stock price surged around 9% on 31 May 2022, driven by the news regarding the appointment of Nelson Peltz (prominent activist investor) as a non-executive director. Thus, it would be a decent opportunity to book profit at current levels.
• Weak Liquidity Levels: ULVR’s quick ratio and the current ratio remained lower than the respective industry median during FY21, illustrating a lower tendency to pay short term obligations when compared with the industry.
• Raw Materials Inflation: The increase in raw material inflation has raised the cost forecast for H2 FY22 as ULVR has anticipated input cost inflation to be around €2.7 billion. Thus, it will adversely impact profitability.
• Technical Indicator: Technically, the 14-day RSI (~65.61) approaches overbought territory, signalling a short-term decline. Also, the stock price has breached the upper Bollinger band.

Share Price Chart

(Source: REFINITIV; Analysis done by Kalkine Group)                                                                                                                                       

Valuation Methodology: Price/Earnings Approach (FY22E) (Illustrative)

Conclusion                                                                                                                                          

Please note markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Based on the raw materials inflation, low liquidity levels when compared with the industry, and unfavourable valuation conducted above, we have given a "SELL" recommendation on Unilever PLC at the closing market price of GBX 3,825.00 (as of 31 May 2022).

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Note 3: Dividend Yield may vary as per the stock price movement.

Note 4: Target Price refers to a price level which the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios.

Note 5: ‘Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.

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