OSK UNVR FY09 earnings topped our estimates

A record-high quarterly net sales (Rp4,734b) with gross margin of 52.4%, the highest
in the last 22 quarters, marked Unilever Indonesia’s strong FY09 performance. The
company came with top and bottom lines slightly above the street’s consensus and
ours. The company registered FY09 net profit of Rp3,044b on net sales of Rp18,247b.
While historically UNVR traded at premium to the market, we currently have a SELL
recommendation.

A strong top line
UNVR continued to record double-digit growth pace with FY09 revenues soared by a solid 17.1% YoY to Rp18,247b. This is some 2.4% and 2.6% topping our FY09 and market’s estimates of Rp17,826b and Rp17,777b, respectively. Details on the sales mix, however, are yet to be available. Higher-than-expected GDP growth may affect the company’s performance while last year Indonesia’s GDP grew by 4.55%. We will adjust our projections following UNVR’s full published annual results.

Profit margins restored
The company managed to restore its profit margins at gross and operating levels last year. FY09 gross and operating profits came at Rp9,046b (+18.5% YoY) and Rp4,215b (+22.8% YoY), translating into gross and operating margins of 49.6% (FY08: 49.0%) and 23.1% (FY08: 22.0%), respectively. Given current rising commodity prices and electricity tariffs in 2H10, we believe UNVR may sacrifice profit margins this year.
Earnings topped Rp3.0t FY09 net profit came at a record-high Rp3,044b vs. our estimate’s Rp2,695b and market’s Rp2,902b. The stronger-than-expected FY09 net profit was due to the company’s higher net sales (Rp421b higher than our estimates) amid in line COGS (Rp33b higher than our estimates) and operating expenses (Rp26b lower than our estimates).

SELL, transfer of coverage
Currently we have a SELL recommendation on UNVR. A consistent 20% earnings growth on actual FY09 earnings for 2010 and 2011 will trade UNVR at 2010-2011F PE of 26.0x- 21.7x while our current projections value the company at 2010-2011F PE of 30.9x- 8.4x. We are transferring our coverage to Andrew Wijaya, starting on April 2010.