Deutsche Bank sees more upside at Unilever after strong annual results

Deutsche Bank has kept a 'buy' rating for consumer products group Unilever, saying that while risks remain there is still earnings growth potential within the group after a solid 2023 performance.

The stock rose strongly on Thursday after annual results showed full-year underlying sales grew by 7% in 2023, with underlying operating profit rising 2.6% as underlying operating margins improved 60 basis points to 16.7%.

"Gross margin surprised to the upside as did volume growth and this before the new management have fully mobilised their action plan," Deutsche Bank said in a research note.

"There remains a high skew between the outperformers and underperformers in the group which could provide some volatility, but we see Unilever progressing towards a steadier compounding performance under the new management's action plan."

The stock, which trades at 17.8 times 2024 earnings, is currently valued at an 11% discount to the weighted average multiple across the global food/household and personal care sector – a discount "which we regard as too high", the bank said.

The shares, having gained 3% the previous day, were 0.4% at 4,008.44p by 1030 GMT on Friday, with Deutsche Bank's target price of 4,600p indicating further upside.