---
endpoint: analytics
pattern: Consumer
status: done
latency_ms: 239259
conversation_id: 93ba9d51-2029-4c4e-af24-6ca8a2b5e133
citations: 0
created: 2026-05-31 19:53:25Z
---

# What is the investment thesis for Unilever Indo in the current market environment?

# Unilever Indonesia (UNVR IJ) — Investment Thesis in Current Market Environment

**Bottom Line (CLSA's stance, latest April 2025 standalone note):** **HOLD**, 12M Target Price **Rp1,400** (~flat vs. price at note date Rp1,425) [5][8]. Within CLSA's broader Indonesia consumer coverage (June 2025 sector note), UNVR is explicitly tagged as a **"least preferred" name** in the current macro setup, given consumers are downtrading and prioritizing staples over UNVR's predominantly home/personal care and discretionary FMCG portfolio [9][10].

This is fundamentally a **turnaround/self-help thesis playing against a cyclical headwind**, not a structural growth story.

---

## 1. The Macro Setup — Why the Tape is Hostile

Indonesia is in a **broad-based downtrading cycle**. CLSA's June 2025 channel checks and consumer survey confirm the trend has continued post-Eid 2025:

- **Sector-wide HPC sales are positive in aggregate across players — except for Unilever.** This is the single most damaging data point in the current context: it indicates **company-specific share loss**, not just industry weakness [11].
- Consumers are switching to cheaper brands, downsizing pack sizes, and reducing usage; out-of-home consumption (beverages, dining) is declining [11].
- **Home care is one of the most downtraded categories** — i.e., consumers find UNVR's brand premium hardest to justify in this segment [9].
- Downtrading "also means brand switching" — UNVR is structurally exposed because its products are priced at a **premium vs. local peers**, making it a logical "trade-down victim" rather than beneficiary [9][4].

Within this macro, CLSA's preferred names are **AMRT (Alfamart)** and **ICBP (Indofood CBP)** — staples and grocery — while UNVR sits at the bottom of the pecking order [9].

---

## 2. The Company-Specific Story — Transformation Self-Help

Management is executing a multi-pronged "Go-To-Market" transformation that began causing the demand reset:

### 2.1 What was done (status as of 1Q25)
| Initiative | Status |
|---|---|
| Customer stock reduction (distributor destocking) | **COMPLETED** in 1Q25 [2] |
| Price harmonization (closing modern-trade vs. general-trade price gap) | **COMPLETED** in 1Q25 [2] |
| "More stores, better stores" — direct coverage expansion | On track [2] |
| Distributive Trade (DT) digital transformation | On track [2] |

- Distributor channel stock has been cut by **~50% since 2021**, the lowest level in 10 years — this is the source of the optical sales weakness but should normalize working capital and sell-in/sell-out alignment going forward [16].
- 2024 full-year sales fell **-9% YoY** (volume -5%, price -4%), with gross margin **-210bps**; ex-strategy noise, underlying GM was flat vs. 2023, but opex was elevated [17].

### 2.2 What the 1Q25 result told us
1Q25 came in **above CLSA's expectations**, driven almost entirely by margin and cost discipline rather than top-line recovery [1]:

| 1Q25 Metric | Value | vs. 4Q24 | vs. 1Q24 |
|---|---|---|---|
| Sales (Rp bn) | 9,465 | +23% QoQ | **-6% YoY** |
| Gross margin | 48.2% | +370bps | -170bps |
| EBIT margin | 17.1% | +1,040bps | -160bps |
| NPAT (Rp bn) | 1,237 | +245% QoQ | **-15% YoY** |
| Opex/sales | 31.0% | -690bps | flat |

(Source: UNVR / CLSA [1])

Key qualitative read-throughs from 1Q25:
- **Volume still negative** — Unilever Volume Growth (UVG) **-7.8%**, while pricing (UPG) +1.3% from palm-oil cost pass-through. Top line has not yet turned [2].
- **HPC remains the problem child** — 1Q25 HPC sales -13.4% YoY, while Food & Refreshment finally turned slightly positive at +0.6% YoY [2].
- **A&P spend remains elevated** at 9.25% of sales (Rp800bn), reflecting the brand-equity rebuild phase [2].
- **Management focus has shifted** from price/stock resets (done) to brand-equity enhancement, distribution expansion, and cost efficiencies — a multi-quarter project ("will take several quarters") [2].
- Cost-out is real: non-factory people cost fell to **3.1% of sales (Q1'25)** vs. 3.5% in 2023-24; labor productivity up ~+14%, service level +22%, distribution cost per ton -9.4% [3 — implied by the transformation tracking].

### 2.3 The market-share bleed is the most serious red flag
| Period | Value Share (%) | Volume Share (%) |
|---|---|---|
| FY22 | 38.2 | 31.0 |
| FY23 | 37.1 | 30.7 |
| FY24 | 34.7 | 28.2 |
| **1Q25** | **33.5** | **26.7** |

(Source: CLSA / UNVR [6])

UNVR has lost ~**470bps of value share and ~430bps of volume share since FY22**, with no inflection yet in 1Q25 [6]. This is the variable that has to stabilize before the stock can re-rate.

---

## 3. Forecast & Valuation Framework

CLSA's earnings model assumes **flat sales growth in 2025**, with improvement only in 2H25 in line with company guidance, slight gross-margin expansion, and steady A&P-to-sales ratio (since share recovery is the priority) [13]. The **ice cream divestment is NOT modeled** — management indicated potential close in 4Q25/1Q26 [13].

### 3.1 Earnings trajectory
| Year (FY = Dec) | 23A | 24A | 25CL | 26CL | 27CL |
|---|---|---|---|---|---|
| Revenue (Rp bn) | 38,611 | 35,139 | 35,495 | 36,764 | 38,363 |
| Net profit (Rp bn) | 4,801 | 3,369 | 3,534 | 3,824 | 4,141 |
| EPS (Rp) | 125.84 | 88.30 | 92.62 | 100.24 | 108.55 |
| EPS growth (%) | -10.5 | **-29.8** | +4.9 | +8.2 | +8.3 |
| PE (x) | 11.3 | 16.1 | 15.4 | 14.2 | 13.1 |
| Dividend yield (%) | 9.4 | 8.3 | 5.8 | 6.1 | 6.6 |
| ROE (%) | 130.1 | 121.8 | 109.2 | 88.5 | 95.8 |

(Source: CLSA forecasts [8])

Even after the **2024 earnings collapse (-30% YoY)**, CLSA only models a low single-digit EPS recovery in 2025 — i.e., the model does **not** bake in a sharp V-shaped turnaround.

### 3.2 Valuation methodology
- **Target PE: 15.5x on 25CL EPS** (vs. 18.5x previously, cut Feb 2025) — this multiple sits **slightly below -2 standard deviations of the 5-year historical PE average** [3][15].
- The -2SD multiple is justified by (a) transformation taking time, (b) lingering boycott impact, (c) competitive pressure. CLSA explicitly says UNVR "still has a long journey to recover to where it was before" [3].
- **TP Rp1,400** implies essentially zero upside; the stock is down -38.8% absolute over the past 12 months (and -34.4% relative to JCI) — most of the de-rating has happened, which is why CLSA upgraded from U-PF to HOLD on the price pullback [15].
- **Recommendation history**: BUY/O-PF through early 2023 (TP Rp4,000–5,800) → U-PF for most of 2023-24 → HOLD since Feb 2025 (TP Rp1,400) [15 historical context].

### 3.3 How UNVR screens vs. regional peers
| Ticker | Company | PE 25F | PE 26F | EBIT margin 25F | Sales growth 25F | EPS growth 25F | ROE 25F |
|---|---|---|---|---|---|---|---|
| **UNVR IJ** | **Unilever Indonesia** | **15.4** | **14.2** | **13.0** | **1.0%** | **4.9%** | **109.2** |
| MYOR IJ | Mayora Indah | 15.1 | 13.7 | 11.0 | 11.9% | 13.7% | 19.0 |
| SIDO IJ | Sido Muncul | 14.1 | 13.0 | 35.5 | 9.2% | 7.5% | 34.3 |
| ICBP IJ | Indofood CBP | 10.7 | 10.1 | 22.7 | 8.9% | 15.3% | 22.9 |
| INDF IJ | Indofood Sukses | 5.2 | 4.7 | 19.0 | 5.9% | 10.3% | 17.3 |
| CMRY IJ | Cisarua Mountain Dairy | 20.6 | 17.8 | 19.3 | 14.4% | 12.6% | 24.0 |
| HUVR IB | Hindustan Unilever | 58.1 | 52.4 | 20.1 | 2.3% | -3.8% | 19.2 |
| NESZ MK | Nestle Malaysia | 41.5 | 39.4 | 11.8 | 4.0% | 11.7% | 78.9 |

(Source: CLSA peer table [8])

The screen is unflattering: UNVR offers the **lowest sales growth (+1.0%)** and **slowest EPS growth (+4.9%)** in the Indonesian staples comp set, yet trades at a higher PE than the better-growth names ICBP/INDF. The 109% ROE is optically high but reflects an aggressive payout/very thin equity base, not capital efficiency that's likely to compound (and ROE is falling — 130% → 88% by 26CL) [8]. Versus Hindustan Unilever (the closest sister entity), UNVR trades at a deep discount, but HUL's premium reflects India's structurally higher growth.

### 3.4 2Q25 specific setup
CLSA forecasts UNVR 2Q25 sales of **Rp8,516bn, -10% QoQ and -5% YoY**, explicitly because "transformation strategy is still ongoing, affecting sell-in." Gross margin should improve modestly to 48.9% on lower CPO prices, but transformation cost benefits are only expected to manifest in **2H25** [17][12].

---

## 4. Catalysts (Bull Case Triggers)

1. **Top-line stabilization → re-rating catalyst.** CLSA names volume/sales improvement as the primary rerating trigger — it would validate the transformation thesis [4].
2. **Stronger consumer purchasing power** (broad macro tailwind from government stimulus / social aid programs of ~Rp24tn — see CLSA sector note) [9].
3. **Ice cream divestment closure (4Q25/1Q26)** — not yet in the model, would provide a cash injection / special-dividend possibility and de-risk a low-margin business [13].
4. **Cost-efficiency flow-through** — labor productivity, distribution cost per ton, service levels are already improving sharply in early data — but margin benefit is back-half-loaded [3].

---

## 5. Risks (Bear Case)

1. **Trading-down risk** — most of UNVR's portfolio is priced at a premium; if purchasing power stays soft, share loss continues [4].
2. **FX risk** — **55-60% of COGS are USD-linked**; IDR weakness hits margins directly [4].
3. **Commodity risk** — exposure to oil and CPO price volatility [4].
4. **Competitive intensity** — personal care segment particularly vulnerable to local-brand market-share gains [4].
5. **Residual boycott impact** (geopolitical/consumer-led, "milder scale" now but ongoing) — explicitly cited as a risk to recovery [3].
6. **Execution risk on transformation timeline** — CLSA notes management's optimism but says it will "take several quarters" to see brand equity payoff; if 2H25 doesn't show top-line inflection, the multiple has further downside [2].

---

## 6. How to Hold the Position — Synthesis

The honest read of CLSA's current stance is that **UNVR is a "wait-and-see" name**, not an actionable long or short:

- **Why it's not a sell from here:** Stock is down ~40% in 12 months, PE is below -2SD historical, dividend yield is 5.8–6.6%, the 1Q25 P&L showed real margin and cost-discipline progress, two of four transformation pillars are done, and the ice cream divestment is a free option [1][3][8].
- **Why it's not a buy yet:** Volume is still down ~8%, market share is still bleeding (FY22 38.2% → 1Q25 33.5% value share), HPC is the worst-performing category in a downtrading economy, and the macro picks are explicitly elsewhere (AMRT/ICBP) within the same coverage [6][9][11].
- **The trigger to upgrade** is the same trigger to scale into the position — a confirmed inflection in volume share or sell-out data, expected (per management) in 2H25. Until then, holding through the dividend yield while watching the 2H25 print is the implied playbook.

**Investor profile fit:** Yield-oriented Indonesia consumer allocators who want defensive optionality on a turnaround at a trough multiple. Growth or momentum investors should be in **ICBP / AMRT** instead per the same publisher's framework [9].

---

## 7. Coverage Caveats

- **All citations are from CLSA Indonesia (analysts Jennifer Widjaja, Nicholas Mulyono)**; the latest UNVR-dedicated note is **24 April 2025** (1Q25 result review) and the latest sector context note is **12 June 2025**. There are no more recent dedicated UNVR notes in the workspace, so this thesis reflects the corpus's latest available vintage, not literal "today as of 2026-05-31."
- No internal coverage on 2026 results, demerger details, or post-mid-2025 share-price dynamics is present in the workspace — would need a fresh search/note if a more current view is required.
- Public data (manticore/web) was not pulled in this turn after the schema-gate prompts; if you need to triangulate against UNVR's most recent quarterly result or the actual ice-cream-divestment closure, ask and I'll pull the public filings/news separately.

---

**Sources**

[1] Unilever Indo - HLD (Holding steady) — CLSA (24 Apr 2025) — 607956782LinqAlpha.PDF — 1Q25 results summary
[2] Unilever Indo - HLD (Holding steady) — CLSA (24 Apr 2025) — 607956782LinqAlpha.PDF — Results review / transformation status
[3] Unilever Indo - HLD (Holding steady) — CLSA (24 Apr 2025) — 607956782LinqAlpha.PDF — Valuation methodology
[4] Unilever Indo - HLD (Holding steady) — CLSA (24 Apr 2025) — 607956782LinqAlpha.PDF — Investment risks
[5] Unilever Indo - HLD (Holding steady) — CLSA (24 Apr 2025) — 607956782LinqAlpha.PDF — Quarterly revenue series
[6] Unilever Indo - HLD (Holding steady) — CLSA (24 Apr 2025) — 607956782LinqAlpha.PDF — Value/volume share table
[7] Unilever Indo - HLD (Holding steady) — CLSA (24 Apr 2025) — 607956782LinqAlpha.PDF — Transformation initiatives status
[8] Unilever Indo - HLD (Holding steady) — CLSA (24 Apr 2025) — 607956782LinqAlpha.PDF — 5Y financial summary / peer comp
[9] Indonesia consumer (Needs over wants) — CLSA (12 Jun 2025) — 607961903LinqAlpha.PDF — Top picks & least preferred
[10] Indonesia consumer (Needs over wants) — CLSA (12 Jun 2025) — 607961903LinqAlpha.PDF — UNVR/SIDO least preferred rationale
[11] Indonesia consumer (Needs over wants) — CLSA (12 Jun 2025) — 607961903LinqAlpha.PDF — HPC sales ex-Unilever positive
[12] Indonesia consumer (Needs over wants) — CLSA (12 Jun 2025) — 607961903LinqAlpha.PDF — Sales growth preview tables
[13] Unilever Indo - HLD (Challenging moments) — CLSA (13 Feb 2025) — 607950575LinqAlpha.PDF — 2025 view / ice cream divestment timing
[14] Unilever Indo - HLD (Challenging moments) — CLSA (13 Feb 2025) — 607950575LinqAlpha.PDF — Upgrade to Hold / TP cut
[15] Unilever Indo - HLD (Challenging moments) — CLSA (13 Feb 2025) — 607950575LinqAlpha.PDF — 2024 results recap
[16] Unilever Indo - HLD (Challenging moments) — CLSA (13 Feb 2025) — 607950575LinqAlpha.PDF — Distributor stock reduction history
[17] Indonesia consumer (Needs over wants) — CLSA (12 Jun 2025) — 607961903LinqAlpha.PDF — 2Q25 gross margin preview

