Company Reports

No-moat Uni-President Enterprises’, or UPEC’s, first-quarter results were broadly consistent with our estimates. Revenue growth was driven by the consolidation of Carrefour Taiwan into its retail segment, while the mainland China food business drove operating profit growth. We keep our 2024-28 earnings forecasts unchanged and retain our fair value estimate at TWD 68 per share, which implies 17 times 2024 price/earnings, 5 times enterprise value/EBITDA, and 4.3% dividend yield. We think shares are currently overvalued, and we prefer names in the China packaged food sector, such as Tingyi and WH Group, with higher dividend yields.

Uni-President Enterprises, or UPEC, upholds a “one core and four pillars” strategy model, with the core being “brand management,” supplemented by the pillars of “manufacturing and R&D,” “customer experience & retail operations,” “trade & distribution,” and “strategic acquisitions & alliances.” These strategies are executed via its various subsidiaries, with the two major ones being President Chain Store and Uni-President China.

No-moat Uni-President Enterprises, or UPEC, reported 2023 results that moderately trailed our revenue and margin estimates. Revenue and margin declines in the upstream packaging business were the major causes for the miss, while other major operating segments mostly met our expectations. Our long-term forecasts are largely unchanged, and we retain our fair value estimate of TWD 68 per share, which implies 17 times 2024 price/earnings, 5 times EV/EBITDA, and a 4.3% dividend yield. We think UPEC’s shares look overvalued at the current price, and we prefer shares of its subsidiary Uni-President China, which are undervalued and trade at a 14% discount to our fair value estimate.

Uni-President Enterprises, or UPEC, upholds a “one core and four pillars” strategy model, with the core being “brand management,” supplemented by the pillars of “manufacturing and R&D,” “customer experience & retail operations,” “trade & distribution,” and “strategic acquisitions & alliances.” These strategies are executed via its various subsidiaries, with the two major ones being President Chain Store and Uni-President China.

No-moat Uni-President Enterprises', or UPEC's, third-quarter results trailed our estimates due to margin pressure across its mainland China food business and Taiwan retail segment. Top-line growth was broadly consistent with our estimates, thanks to momentum from convenience stores and consolidation of Carrefour Taiwan revenue. We do not expect a meaningful profit contribution from Carrefour Taiwan this year. We lower our 2023 operating profit projection due to weaker results but retain our fair value estimate at TWD 68 per share. There is limited change to our post-2023 profit estimate, which implies 17 times 2024 price/earnings and 6 times EV/EBITDA. We think UPEC is fairly valued.

Uni-President Enterprises, or UPEC, upholds a “one core and four pillars” strategy model, with the core being “brand management,” supplemented by the pillars of “manufacturing and R&D,” “customer experience & retail operations,” “trade & distribution,” and “strategic acquisitions & alliances.” These strategies are executed via its various subsidiaries, with the two major ones being President Chain Store and Uni-President China.

June-quarter results for no-moat Uni-President Enterprises, or UPEC, were mostly consistent with our expectations for revenue and operating profit. Sequential improvement in operating margin to 5.7% from 5.2%, in line with our projection, was driven by the food and beverage business in mainland China, whereas retail and convenience store, or CVS, franchises in Taiwan and the Philippines were drivers of top-line growth. UPEC completed the acquisition of an additional 49.5% stake, to a total of 70%, in Carrefour Taiwan during the quarter. We update our medium-term forecasts for UPEC and project the hypermarket business to add 2% and 1% to revenue and net profit CAGR, respectively, through 2027. We note however, the lower margin of Carrefour Taiwan versus its existing retail portfolio. The acquisition generated a noncash fair value gain of TWD 10.9 billion for the quarter. We maintain our fair value estimate at TWD 68 per share, which implies 17 times 2023 price/earnings, 6 times EV/EBITDA, and 4.7% dividend yield. The earnings multiple is roughly consistent with the three-year average of 18 times. The share price looks moderately overvalued to us.

Uni-President Enterprises, or UPEC, upholds a “one core and four pillars” strategy model, with the core being “brand management,” supplemented by the pillars of “manufacturing and R&D,” “customer experience & retail operations,” “trade & distribution,” and “strategic acquisitions & alliances.” These strategies are executed via its various subsidiaries, with the two major ones being President Chain Store and Uni-President China.

We attended an investor group discussion with the management of no-moat Uni-President Enterprises, or UPEC, in which the company laid out medium-term growth strategies for its major businesses, including narrow-moat President Chain Store, or PCSC, and no-moat Uni-President China, or UPC. The key message delivered was that revenue scale would be the primary target for UPEC across its major markets in food and retail businesses. We left our fair value estimates unchanged for the three companies under our coverage and consider Uni-President China shares to be moderately undervalued, whereas Uni-President Enterprises and President Chain Store shares are slightly overvalued.

No-moat Uni-President Enterprises’, or UPEC's, first-quarter performance was mixed, with revenue seeing strength but operating margin disappointing, as weakness in the mainland China packaged food business more than offset growth in 7-Eleven across the Philippines and Taiwan. So, while the top line is tracking higher, the bottom line is not presently benefiting. But we expect sequentially improving operating profit for Uni-President China, with selling, general and administrative expenses to be concentrated in the earlier part of the year. As a result, we retain our fair value estimate at TWD 68 per share, which implies 17 times 2023 P/E and is broadly in line with the three-year average of 18 times. We think UPEC’s share price is moderately overvalued at the moment.

No-moat Uni-President Enterprises hosted an annual results joint meeting to recap 2022 results for its various subsidiaries including narrow-moat President Chain Store and no-moat Uni-President China. A key focus was its growth strategies for Uni-President China. We keep our fair value estimates unchanged for the three companies and retain our view that Uni-President China’s current strategies could support high-single-digit sales growth for 2023, but we remain cautious over it continuing such growth rates in the medium term. 7-Eleven in the Philippines is considered a key medium-term growth driver for President Chain Store, consistent with our view.

No-moat Uni-President Enterprises, or UPEC, reported 2022 revenue that exceeded our expectations as the mainland China subsidiary, Uni-President China, or UPC, ramped up volume sales through channel expansion. Net income missed our below-consensus estimates, however, due to inflationary pressure on the food business across Taiwan and mainland China, as well as lower-than-expected profit in the upstream container segment. But we think UPEC could continue to benefit from volume momentum in mainland China this year, thanks to reopening and channel expansion efforts. Lower input costs could also drive margin recovery for 2023. As a result, we raise our top line and net income estimates for the year, and raise our fair value estimate to TWD 68 per share (from TWD 67).

Uni-President Enterprises, or UPEC, upholds a “one core and four pillars” strategy model, with the core being “brand management,” supplemented by the pillars of “manufacturing and R&D,” “customer experience & retail operations,” “trade & distribution,” and “strategic acquisitions & alliances.” These strategies are executed via its various subsidiaries, with the two major ones being President Chain Store and Uni-President China.

No-moat Uni-President Enterprises, or UPEC, reported third-quarter results with resilient top line growth which exceeded our estimates, but gross margin came in lower than our forecasts and operating profit only trended flattish year on year. The food, retail, and convenience store segments delivered solid sales growth, but declining profit in food and container/packing businesses were a drag on UPEC’s bottom line. We raise our revenue projection for 2022, but lower the gross and net margin estimates.

Uni-President Enterprises, or UPEC, upholds a “one core and four pillars” strategy model, with the core being “brand management,” supplemented by the pillars of “manufacturing and R&D,” “customer experience & retail operations,” “trade & distribution,” and “strategic acquisitions & alliances.” These strategies are executed via its various subsidiaries, with the two major ones being President Chain Store and Uni-President China.

No-moat Uni-President Enterprises Corp. reported first-half results that included top-line growth consistent with our estimates but net profit falling behind our expectations due to notable losses in an equity investment. Operating profit for the period rose by midsingle digits year on year as resilience in the upstream container/packing business and recovery in the convenience store and retail segments more than offset lower profit in the mainland China food business. We consider UPEC’s purchase of Carrefour Taiwan’s remaining stake as a defense against the potential cannibalization of supermarkets/hypermarkets on convenience store sales. We do see synergies in the group’s packaged food and retail business segments following the deal, given UPEC’s broad business coverage. We maintain our TWD 64 fair value estimate, which implies 19 times forward price/earnings, broadly consistent with the historical average. We see the shares as fairly valued.

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.

No-moat Uni-President Enterprises, or UPEC, reported 2021 results with revenue and net margin coming in 1 percentage point and 20 basis points higher than our estimates. Uni-President China and the container/packing businesses were top-line and profit growth drivers. Due to rising commodity prices and the effect of the coronavirus, the operating margin for the group’s food and beverage, or F&B, and convenience store/retail segments fell year on year. The container/packing segment benefited from rising commodity prices and expanded its profit contribution to the group, partially offsetting the drags from some other businesses. We raise our fair value estimates moderately to account for better-than-expected 2021 earnings, to TWD 64 per share from TWD 63 per share . Our fair value estimate implies 16 times forward P/E and 4.5% dividend yield, assuming a 75% payout ratio in 2022. We see the company’s stock as fairly valued and consider the current share price to have largely priced in a post-COVID-19 recovery for the group.

Uni-President Enterprise, or UPEC, upholds a “one core and four pillars” strategy model, with the core being “brand management,” supplemented by the pillars of “manufacturing and R&D,” “customer experience & retail operations,” “trade & distribution,” and “strategic acquisitions & alliances.” These strategies are executed via its various subsidiaries, with the two major ones being President Chain Store and Uni-President China.

We transfer coverage of Uni-President Enterprise with the no-moat rating maintained but our fair value estimate revised down to TWD 63 per share from TWD 72 per share. We think the stock is slightly overvalued, with short-term downside risks from volatility in President Chain Store's profitability. We think revenue and margin pressure in 2021 has been mostly priced in, but more muted bottom-line growth over the medium term would drag stock price down the road. Our fair value estimate implies 2022 forward P/E of 18 times, which lands roughly at the lower midpoint of its historical multiples range (15 to 22 times), and EV/EBITDA of 6 times. These multiples are reflective of the company's lukewarm growth outlook in topline and earnings. Our fair value estimate also implies a 4% dividend yield, which is reasonable in our view based on historical valuations.