Our view: a reset in 2027, a pricing-led recovery in 2028

We expect UNVR's growth to shift from volume to price. Unilever's group guidance points to pricing stepping up again in 4Q26 and to higher pricing in 2027 than in 2026, so we assume HPC price growth of c.3% in 4Q26F and 3.5% in FY27F, while volume growth eases to 3% as the price rises bite and as share gains bought with flat pricing become harder to repeat. Input costs decide the margin path: our HPC margin bridge sets 4.9% gross input-cost inflation in FY27F (CPO up 5% in USD, a 2.5% weaker Rupiah, Brent flat) against 1.5% productivity savings and 3.5% pricing, holding HPC gross margin at 45.3% before it widens to 47.1% in FY28F as inflation fades. We also assume A&P rebuilds from 8.1% of sales in 3Q26 to 10.5% in 4Q26F and 10.8% in FY27F to defend share, so EBIT margin recovers more slowly than gross margin. The 2027 social protection budget rises to IDR549.9tn from IDR508.2tn, mostly paid in cash, which should cushion lower-income demand. On these assumptions we trim FY26F core profit by 1.8% to IDR4,138bn and cut FY27F by 12.2% to IDR3,434bn (-17.0% YoY). Foods & Refreshment leaving the consolidation from mid-2027 explains the YoY fall, while input costs, the A&P rebuild and lower finance income as cash is paid out explain the cut versus our previous forecast. FY28F core profit should recover 8.1% to IDR3,713bn as pricing rebuilds margins. Input costs remain the swing factor: a 10% move in CPO shifts FY27F core EPS by c.8%, which c.1.5pp of extra pricing would offset. Cash returns stay generous: FY26F DPS of IDR132 (9.6% yield), and the after-tax Foods gain of c.IDR320/share lifts FY27F DPS to IDR392 at a 95% payout.

Downgrade to HOLD with lower TP of IDR1,350

Our SOTP-based TP of IDR1,350 (from IDR2,000) uses a 13.4% cost of equity and 4.0% terminal growth (Exhibits 16-17). With 2.5% downside, we downgrade UNVR to HOLD (from BUY). Scenarios, the MSCI-related foreign-exit stress test and sensitivities are in Exhibits 18-25. Risks: CPO, crude, the Rupiah, A&P spending and the Foods price.

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