Liberum upgrades Unilever to 'buy'

2nd Dec 2019 08:15

(Sharecast News) - Liberum upped its stance on shares of consumer goods giant Unilever to 'buy' from 'hold' on Monday, lifting the price target to 5,100p from 4,735p following the company's shift in strategic focus.
"Unilever's recent investor days highlighted a move away from a dizzying pace of bolt-on deals towards integration, disposals and continuing digital transformation," it said.

Liberum said that focusing on reaping the rewards of newly-acquired businesses and selling off slow-growth assets is likely to transition Unilever to a mid-single-digit growth company.

It said that by slowing the pace of acquisitions and redirecting management bandwidth towards integration, Unilever can boost its top line while improving its return in invested capital.

"This is a key reason for our upgrade," Liberum said.

The broker sees scope for €2bn of cost savings a year even beyond 2020, providing firepower to reinvest and to expand margins beyond the 20% target. It noted Unilever's commitment to regular share buybacks and said this boosts its earnings per share estimates by 1.7%, taking Liberum 3% above consensus FY21 estimates.

At 1310 GMT, the shares were up 0.1% at 4,583.50p.