Yofi Lasini (analyst) initiates coverage on UNVR with an Underperform rating, PxT Rp6,500 or 17% downside. She forecasts 18.4% and 7.6% EPS growth for 2009-10, placing the stock on 21.0x and 19.5x P/E. The stock trades in-line with regional household & personal care (HPC) stock basket, that trades on an average P/E of 20.0x FY09. Among the comparables are Hindustan Lever (20.0x), Colgate Palmolive (22.5x), Godrej consumer (20.9x), Kao corp (18.5x), etc.
My take – considering the high global markets volatility we live in today, I would question the stability of UNVR’s earnings outlook (and hence the >20x P/E for the HPC segment). It almost feels like investors could be better off holding Indo gov’t bonds yielding 11-12%, vs. UNVR with 4.0% dividend yield. For UNVR, 76% of cost-of-goods-sold is oil-related. Assuming no pass-on to the consumer, every 5% increase in oil price may bring down EPS by 7%.
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