JPMorgan maintains “Overweight” rating on Unilever (UL.US): The new mid-term framework strengthens growth quality, and high single-digit EPS growth is expected to drive revaluation.

According to information from Zhitong Finance APP, JPMorgan has published a research report maintaining its "Overweight" rating on Unilever (UL.US), setting its target price for the European stock at 65 euros and for the UK stock at 5,700 pence. The report points out that, ahead of Capital Markets Day (CMD), Unilever released a new medium-term growth framework following the divestment of its Foods business, as well as a new operating model centered on "global strategy, local execution." The bank believes that these new objectives enhance the quality of the company's growth plan, and the productivity savings targets further reinforce market confidence in its profit growth potential.

Unilever announced that the group's medium-term goal is to achieve 4%-6% organic sales growth, including at least 2% volume growth. This target aligns with the company's previous statements regarding the growth potential of its Core Home & Personal Care (Core HPC) business and matches the current market's widespread expectation for organic sales growth above 4% for fiscal years 2026-2032.

The company also expects its underlying operating margin to experience moderate expansion, supported by aiming to achieve £1 billion in productivity savings by fiscal year 2029. These savings will come from the elimination of residual costs related to the Foods transaction and broader organizational simplification.

For fiscal year 2027, management expects performance to be within the above medium-term growth plans; JPMorgan currently forecasts core organic sales growth of 5.6% and a year-on-year margin contraction of 22 basis points (on a simulated basis), considering this guidance consistent with the consensus for fiscal 2027.

In terms of operating model, Unilever will retain a streamlined corporate center focused on portfolio strategy, long-term resource allocation, and scaling Power Brands globally; operational and commercial execution will be delegated to local markets. The market will be organized into six performance units, each led by a regional president with full P&L responsibility for their categories.

The new leadership team is largely drawn from the existing organization, with the North America president being the sole external appointment, expected to join on January 1 next year, and to be formally announced in the coming weeks.

Unilever states that the new model aims to combine centralized global strategy with local execution capability, driving portfolio focus and simplification while leveraging market-leading brands and high-end digital challenger brands. CEO Fernando Fernandez commented: "Our new operating model will combine centralized global strategy with outstanding local execution, aiming to achieve portfolio focus and simplification, fully leveraging our market-leading brands and high-end digital disruptors. We are starting from a position of strength, with our top priority being to achieve continuous, competitively-driven volume growth and reliable hard-currency profit expansion."

Alongside the implementation of the new operating model, Unilever will also adjust its reporting standards. Going forward, the company will report by three main categories: Beauty & Personal Care, Home Care, and Others; geographical disclosures will cover five regions: North America, Europe, Latin America/Africa/Middle East/Turkey, India, and Asia (combining Northeast Asia and South Asia Pacific). JPMorgan believes this adjustment will help investors track the execution performance of each category and region more clearly.

JPMorgan states in the report that, following leadership changes in business units, revised incentive structures, and greater focus on value creation (with metrics linked to USG, ROIC, and TSR), Unilever is seeking to shift towards a sustainable growth model. As these changes gradually translate into operating results, volume growth combined with improved gross margins will drive higher operating profit margins, with the potential for high single-digit EPS growth in the medium term and help with share re-rating; at the same time, a lower net debt/EBITDA ratio also enhances the potential to boost total shareholder return through buybacks.