Multiple Profit Drivers to Aid UPEC in Navigating 2022, Maintaining TWD 64 Fair Value Estimate

No-moat Uni-President Enterprises Corp. delivered high-single-digit top-line growth in the first quarter of 2022, thanks to the food and beverage, container and packing, and overseas retail businesses. Operating profit also grew by high single digits year on year as strength in the retail and container segments more than offset lackluster performance from Uni-President China. Although nonoperating losses dragged on net profit, we like UPEC’s multiple profit drivers, including the upstream commodity business and overseas operations, which should serve as a buffer to the worsening operating environment for UPC and softer per-store daily trends for Taiwan 7-Eleven. We moderately lowered our 2022 revenue and net profit estimates to account for softer sales from Taiwan 7-Eleven and lower profitability in mainland China. But we retain our TWD 64 fair value estimate, which implies 17 times 2022 price/earnings and a 4.5% dividend yield. The shares look fairly valued to us.