We expect Unilever’s LFL sales growth to accelerate driven by a rebound in key Asian EM businesses. Unilever is one of the most EM-exposed stocks within global consumer staples, with a disproportionate share coming from EMs other than China. Unilever has, therefore, been disproportionately impacted by a sluggish EM economy 

(particularly ex-China) over the past few years. Unilever’s key EMs such as India, Indonesia, and the Philippines also took a big hit during COVID because of stringent lockdowns. However we now expect a rebound in Unilever’s EM businesses (particularly in Asia), which will help accelerate growth. In this report, we turn the spotlight on Unilever’s subsidiaries in India and Indonesia (that represent ~30% of its EM sales), which are poised for a recovery.  

HUL’s portfolio mix made it a laggard during COVID, is now poised for a recovery. HUL’s business was most impacted among Indian consumer stocks by COVID and organic growth, at 3% in the Sep-2020 quarter, lagged peers which grew double digits. The reason is, however, not structural or execution related, but its portfolio mix with ~40% contribution from categories like discretionary personal care and fabric care which were impacted by lower mobility and less frequent socialising among consumers during COVID. However, as vaccination progresses, we expect a recovery. HUL’s growth in other categories are in line with competitors. We also expect revenue synergies for the HFD business to flow in 2021. 

Unilever Indonesia also likely to see a gradual recovery. Unilever Indonesia saw a slowdown in 2020, driven by the COVID impact on ice-creams and cosmetics and a broader impact of COVID on low-income consumption. In FY21 also, we see challenges for low-end consumers given the still-fragile economy, resulting in a weak job market and the lack of minimum wage hike. However, due to the low base, we expect revenue growth to recover to ~3.9% in FY21E from ~0.7% in FY20. We also expect FY22E growth to further improve to 5.6% as business activities return to normal, leading to improving income conditions.