Mon, Aug 13, 2018 - Page 15 News List

UPE to see CAGR of 6.3% over two years: Citigroup

By Chen Cheng-hui  /  Staff reporter

Uni-President Enterprises Corp (UPE, 統一企業), the nation’s largest food and beverage conglomerate, might see its earnings grow at a compound annual growth rate (CAGR) of 6.3 percent from this year to 2020, Citigroup Global Markets Inc said, citing profit contributions from Uni-President China Holdings Ltd (統一中國控股) and President Chain Store Corp (統一超商).

The Tainan-based company would continue to adjust the product mix of its food and beverage business toward higher-margin items, while the two major subsidiaries would remain solid earnings contributors, Citigroup said.

Uni-President China, which is 70.5 percent owned by UPE, has proven itself superior to rival Tingyi (Cayman Islands) Holding Corp (康師傅控股) in instant noodles and beverages, while President Chain Store, which is 45.4 percent owned by UPE, has been evolving from a merchandise retailer to a competent service provider, with e-commerce being the key driver, Citigroup analysts led by Timothy Chen (陳建光) wrote in a report.

“Together, the two subsidiaries are forecast to account for 53 percent of [UPE’s] profit in 2020, versus 43 percent in 2017,” Citigroup said.

UPE on Wednesday last week reported that net profit in the April-to-June quarter rose 16.5 percent year-on-year to NT$5.48 billion (US$178.5 million).

The company’s earnings per share of NT$0.97 for the second quarter beat a market consensus forecast of NT$0.85 and KGI Securities Investment Advisory Co’s (凱基投顧) estimate of NT$0.92.

“The company’s better-than-expected profit was driven mainly by improving margins as the company continues to upgrade the value of its products,” KGI analyst Angus Chuang (莊政翰) said in a note on Friday.

In the second quarter, gross margin rose by 0.97 percentage points from a year earlier to 34.22 percent and operating margin grew by 0.79 percentage points to 7.1 percent, UPE’s quarterly financial report showed.

The figures were supported by the recovery of its Chinese business, revenue growth at its convenience store unit at home and the consolidation of President Starbucks Coffee Corp’s (統一星巴克) business in Taiwan, which helped consolidated sales rise 10.24 percent annually to NT$110.36 billion, Yuanta Securities Investment Consulting Co (元大投顧) said.

Among UPE’s major subsidiaries, Uni-President China posted second-quarter profit of 457 million yuan (US$66.76 million), up 15.5 percent annually, while Ton Yi Industrial Corp (統一實業), a tin plate and tin can unit, said profit surged 914.3 percent to NT$1.07 billion, which helped offset a 5.66 percent earnings decline at President Chain Store to NT$2.63 billion.

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