Berenberg upgrades Unilever to 'buy'

Berenberg said higher category growth and better execution should enable Unilever to deliver organic growth at the upper end of its 3-5% mid-term guidance.

The German bank stated that Unilever's new business unit structure should also enable faster growth, release further cost efficiencies and increase portfolio management flexibility.

"Recent input cost movements and pricing actions support material margin recovery from FY23," said Berenberg. "Our base case gives 5% cost inflation for FY23, with operating margins trending back towards 18% by FY24."

Berenberg also noted that while Unilever’s long streak of underperformance had started to reverse, operating on a 17.5x full-year 2023 price-to-earnings ratio, it still trades at a 15% discount to key peers, despite its improving outlook.

The analysts also hiked their earnings per share forecasts on the stock by 4-8% and their price target on the stock from £40 to £48.

Reporting by Iain Gilbert at Sharecast.com