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Consumer Staples Stock Investment

Why you should invest in Unilever!

Head Analyst: Neil Mann Analysts:


Gary Chimuzinga Sachit Dighe Emily Nunn Sam Yeow Jesse Harvey Ayush Gowriah Thomas Sheehan Lim Wise Matthew Kinder

Unilever Consumer Staples

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Company Summary:

Target Price:
2420

CEO:
Paul Polman

52wk low/high:
1965.79-2360.00

Market Price:
2320

CFO:
Jean-Marc Huet

Free Float: M. Cap $bn:


68.714

% Upside:

Index:

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CEO & CFO:

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More about Unilever


Unilever challenges UK households to waste less and save more and uses new research to understand barriers to reducing food waste and help consumers to live more sustainability In their annual report they state they will halve the environmental footprint of their products and will source 100% of agricultural raw materials sustainably. They are well positioned for growth:
2bn consumers worldwide using a Unilever product on any given day Consumers buy 170bn Unilever packs around the world every year Over 171,000 employees at the end of 2011 Products sold in more than 190 countries More than 50 years experience in some countries $6.1bn spent on advertising their products in 2011

Unilever is branching out to developing countries, and tackling problems such as child deaths caused by pneumonia and diarrhoea hand washing with soap is one of the most effective and inexpensive ways to prevent this. Asia, Africa, and Central and Eastern Europe have the largest turnover and growth in 2011 compared to America and Western Europe. Kindly Sponsored By:

Brand Strength

What is the company doing regarding its brand?

Some may consolidate their brand name, change names, increase marketing.
A strong brand means that a company keeps its competitive advantage for longer (think Coca Cola).

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Investment Thesis:

This page should have 4+ reasons why you are recommending the company.

It is good to be specific and use figures to back up your points. Graphs or charts are Also good.

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Company Outlook:

What are the economic conditions facing the various business segments of the company.? Will the assist or hamper the companies profits in the foreseeable future? It is good to include a pie chart of the business and/or geographic segments on this section to highlight what percentage or revenue is being talked about. (This is found on factset on the company snapshot page).

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Fundamental Analysis:
Profitability 2011 2012 2013 2014

Revenue (Mil)
EBIT (Mil) Gross margin (%)

40,333
5,584 39.9

40,123
5,376

42,277
5,888 41.4

41.1

Liquidity : 2011 Current ratio Quick ratio Cash ratio 0.797 0.53 0.28 2012 0.864 0.57 0.3 2013 0.933 0.61 0.31

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Valuation of Unilever
EPS P/E
Investor ratios-Valuation 1.41 1.55 20.2 18.3 1.60 17.8 1.70 16.8

P/E

Investor ratios-Valuation EPS 1.41 1.55 P/E / EPS growth-PEG 5.77 20.2 1.83 18.3 P/E / EPS growthEV/EBITDA 13 PEG 5.77 1.83 13 EV/EBITDA 13 13 DPS 0.9 0.9 DPS 1.02 1.02 Div yield 3.20% 3.6% Div yield FCF (post dividend) 846 1193

1.60 17.8 6.14 11.1 1.02 3.6% 1313

1.70 6.14 16.8 2.71 11.1 10.4 1.05 1.02 3.7% 1750

2.71 10.4 1.05 3.7% 1750

FCF (post dividend)

3.20% 846

3.6%

3.6%

1193

1313

Some valuation comparisons


Investor ratios comparison ULVR.L Industry P/E (TTM): 20.14 31.05 EPS (TTM): 1.15 -ROI: 16.4 11.33 ROE: 28.45 19.33
Unilever Vs Benchmarks

Sector 31.79 -6.36 20.92

1 week Unilever PLC FTSE 100 index GB/Consumer staples GB/Food products 1.20% 1.68% 0.72% 0.79%

1 month 0.13% -0.70% 1.74% 1.38%

6 months 10.09%

1 year 5 years 13.15 % 38.15% -8.49% -

3.48% 5.66% 5.09% 8.81% 9.08% 11.35 %

Unilever Vs Benchmarks

Technical Analysis:

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Relative Valuation:

Valuation of Unilever calculated using DCF methodology WACC of 9%, Long term growth of 2% Intrinsic value of 24.20 obtained for December 2013 (our target price) Security is overweight (J.P Morgan- Nov 2012)

Risk to our rating: 1. Unexpected currency movements (downwards or upwards) 2. Changes in price of raw materials
Consumer discretionary companies Ratios: (as per third quarter) Beta Unilever PLC 0.58 Tate and Lyle PLC 0.75 Associated British Foods PLC 0.57

ROE
ROI

28.45
16.4

27.50
12.34

9.58
8.04

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Market Risks:
Competition, economic conditions and customer consolidation translates into increasing pressure on pricing and promotion levels and market growth rates, especially in Europe. The Group seeks to mitigate this risk through active category, brand and customer relationship management programmes supported by on-going investment into new product development. The expiry of the Groups exclusive licence for Suboxone in the United States in 2009 and the rest of the world in 2016 is likely to expose the business to competition from generic variants. The Group has developed a new and patented sublingual film delivery method for this product which partially mitigates the risk exposure from the expected generic variant entry against tablets.

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Financial Risks:
Foreign Exchange Risk For transactions, it is the Groups policy to monitor and, only where appropriate, hedge its foreign currency transaction exposures. These transaction exposures arise mainly from foreign currency receipts and payments for goods and services, and from the remittance of foreign currency dividends and loans. Credit Risk The Group has no significant concentrations of credit risk. Financial institution counterparties are subject to approval under the Groups counterparty risk policy and such approval is limited to financial institutions with a BBB+ rating or above. Market Price Risk The Group is not exposed to equity securities price risk. Due to the nature of its business the Group is exposed to commodity price risk related to the production or packaging of finished goods such as oil-related, and a diverse range of other, raw materials. This risk is, however, managed primarily through medium-term contracts with certain key suppliers. Kindly Sponsored By:

Conclusion:
We recommend the purchase of 215 shares which equates to approximately the full amount of 5000. Unilever is the 3rd largest consumer staples company and has seen constant high returns above the industry average. Dividend returns are on the rise, and share price is increasing greater by comparison to the industry average. We see Unilever as a less risky, long term investment.

Thanks for listening and if you have any questions please feel free to ask or email me at nm343@kent.ac.uk.
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