NISP Unilever Indonesia net income jumps 26% (UNVR, Rp13,850, Hold)

• For the first quarter of 2010, Unilever Indonesia booked net income of Rp971.8bn
which was a 26% YoY jump from Rp769.1bn in 1Q09. Revenue for the company increased to Rp4.97tn, increased by 11% YoY from Rp4.48tn a year before. Net income was slightly below our expectation as it only accounted for 24% of our full year figure for 2010F of Rp20.98tn, however net income beat our expectation as it was 28% from our full year figure for 2010F of Rp3.45tn.

• The company successfully continued their upward streak which started from the third quarter last year, as revenue on quarterly basis was also up by 5% from Rp4.7tn in 4Q09.

• As 70%-80% of the company’s raw materials are closely related to the movements of the US Dollar and oil price, the stronger IDR and the soft commodities prices led to improvement to gross margin which is now 52%, up from 47% last year. However, a more important feature was their ability to suppress operating costs as operating costs was actually down 9% QoQ from Rp1.42tn in 4Q09 to Rp1.29tn in 1Q10. As a result, operating and net margin now stands at 26.24% and 19.54%.

• We will examine our assumptions regarding margins for the company and effect to net income. Currently UNVR is trading at 2010F PER of 30.6x and EV/EBITDA of 21.8x, Hold.