Unilever deserves more credit for its revamp, Berenberg says

Unilever has done more than its competitors to overhaul its business but the market has not recognised this, Berenberg analysts said as they raised their target price for UK shares of the Marmite and Dove soap maker.

Unilever’s 1.9% organic sales growth was slower than expected at the company’s second-quarter results, Berenberg’s analysts, led by James Targett, said. But volume growth of 2.2%, excluding the effect of a strike in Brazil, is ahead of the market and global peers and cost savings are producing results.

Berenberg restated its ‘buy’ rating on Unilever and increased its target price on the Anglo-Dutch company’s UK shares to 4,800p from 4,700p. Berenberg left its target on Unilever's Netherlands-listed shares unchanged at €54.

The US market is tough but group margins widened as efficiency measures outweighed inflation. Berenberg’s forecast for 3.3% annual organic growth and 4.1% overall growth "looks realistic", the analysts said. Results will get a boost from the sale of Unilever’s spreads business, which was a drag in the second quarter.

"We think Unilever has taken the biggest steps among peers to increase its agility, reduce costs, embrace digital channels and future-proof its portfolio, which is not reflected in valuation," Berenberg said.

At 1400 BST, the shares were up 0.7% to 4,358.50p.