RBC Capital Markets has lifted up its view on Unilever PLC (LSE:ULVR) to Sector Perform, from Underperform, claiming the market has already absorbed much of the pain from management’s controversial food disposal plan.
The bank's analysts call the proposal "fairly reflected" in the current share, even as the broker kept to a 4,200p price target (vs 4,219p today).
The broker remains distinctly cool on the deal itself. RBC said the planned sale of the food business to McCormick comes with a minimal control premium, a complicated structure and the prospect of Unilever shareholders receiving stock in a business “they didn’t sign up for”.
Even so, after a sharp share price reaction following the announcement, the analysts concluded that those misgivings are now largely reflected in the valuation.
RBC’s deeper criticism is that the reshaped Unilever may not end up looking meaningfully better than the old one
. Management has pitched the transaction as a route to a faster-growing home and personal care-focused group, but RBC’s analysis suggests the post-deal business would hold broadly the same competitive standing as before.
The bank also pushed back on the idea that the simplified portfolio materially changes operational gearing.
One of the sharper points in the note centres on pay. RBC said Unilever’s revised remuneration structure appears more forgiving than the company’s public growth ambitions imply, with bonus and long-term incentive payouts beginning at sales growth levels below the group’s 4% to 6% target range.
The absence of any explicit organic volume growth condition also stood out, particularly given management’s 2% volume growth aspiration.
That tension feeds into RBC’s financial stance, as the broker’s forecasts remain below consensus on organic growth, volume growth and earnings, yet still sit within the zone where management incentive plans could pay out.
In RBC’s view, that suggests both investors and Unilever’s remuneration committee may already be treating the company’s guidance more cautiously than headline messaging suggests.