Founded in 1992 and headquartered in Shanghai, China, Uni-President China Holdings Ltd., is a Hong Kong-based investment holding company that primarily focuses on the production and sale of beverages and instant noodles. Its offerings include ready-to-drink tea, milk tea, coffee, and juice drinks, amongst other products. The company also manufactures bowl noodles, packet noodles, and snack noodles. In addition, via its subsidiaries, the company operates in the wholesale distribution of forage and fertilizers and provides catering services. The company, which has over 33,750 employees, is listed on the Hong Kong Stock Exchange.
Uni-President operates primarily in two segments: The Beverages segment, which includes juice drinks, ready-to-drink tea, milk tea, coffee, and bottled water, accounts for 63% of the FY 2024 sales mix. The Food segment, comprising bowl noodles, packet noodles, and snack noodles, contributes 33%. Other services make up the remaining 4% of the sales mix.
Strategic innovation in food and beverage
In FY 24 Uni-President's business research institute focused on product innovation and optimization to meet customer needs, promote industrial development and achieve sustainable development. The company enhanced its R&D project management by aligning approvals with business strategy, concentrating resources, and reducing unnecessary activities. Emphasizing "Ice Tea" and "Stewed Beef Flavoured Noodles," the company streamlined its R&D organizations for beverages and food, fostering commercial success and talent development.
New beverage products included "Uni Green Tea Spring Breeze Green Tea," "Haizhiyan" grapefruit isotonic drink, "LA RIVE GAUCHE DE LA SEINE" refrigerated milk tea, and "Uni Assam" sugar-free milk tea. In food, the company introduced non-fried "Danggui Huadiao Chicken Noodle" under the "Da Bu Tie" brand. The research institute also responded to customer demands for customized products. The Company prioritized developing core patented technologies, winning awards for five technologies and securing 179 authorized patents with 50 pending. Focusing on mass-taste products with revenues over CNY1bn.
Positive free cash flows
Uni-President has reported steady revenue growth over the last three years (FY 21-24), posting a CAGR of 6.3% to reach CNY30.3bn in FY 24. EBIT grew with a similar CAGR of 6.3% to CNY2.2bn, with a margin of 7.2% in FY 24. Net profit grew at a higher CAGR of 7.2%, reaching CNY1.9bn, with margins expanding by 15bp to 6.1%.
The company has had positive FCF over the last three years, reaching CNY3.3bn in FY 24 from CNY1.8bn in FY 21. As a result, cash and cash equivalent increased from CNY2.1bn to CNY3.4bn as of end-FY 24. Moreover, total debt also increased from CNY150m to CNY290m, leading to an increase in gearing ratio from 1.1% to 2.2% over the same period.
In comparison, the company’s local peer, Swire Pacific Ltd., posted a negative revenue CAGR of 3.5% over the last three years, reaching CNY82bn in FY 24. EBIT dropped, with a negative CAGR of 6.2% to CNY10.1bn in FY 24. However, net income rose at a CAGR of 8.8% to CNY4.3bn in FY 24.
Looking ahead, analysts project Uni-President's revenue to grow at a CAGR of 6.2% over FY 24-27 to CNY36.3bn with EBIT expected to grow at a CAGR of 11% to CNY3.1bn, while its margin should expand by 105bp to 8.5%. Net profit is expected to grow at a CAGR of 11.7% to CNY2.6bn, with its margin expanding by 100bp to 7.1%. In comparison, Swire Pacific’s EBIT should grow at a CAGR of 9.2%, while its net income is forecast to grow at a higher CAGR of 45.8%.
Consistent dividend yield
Over the past 12 months, Uni-President’s stock has delivered impressive returns of approximately 39.6%, mainly driven by revenue growth due to the increase in Beverage sales. In comparison, Swire Pacific experienced negative returns of approximately 3.4% over the same period. Furthermore, Uni-President distributed dividends of CNY0.4 per share in FY 24, resulting in a dividend yield of approximately 5.8%. Analysts project that Uni-President will maintain a dividend yield of around 5.8% over the next three years, indicating consistent shareholder returns.
Uni-President shares are currently trading at a P/E of 18.8x, based on the FY 25 estimated EPS of CNY0.5. This is higher than Swire Pacific’s P/E of 9.2x and Uni-President’s three-year historical average of 18.2x. In terms of EV/EBIT, the stock is currently trading at 14.5x, based on the FY 25 estimated EBIT of CNY2,548m, which is higher than its three-year historical average of 13.7x and Swire Pacific’s 13.1x.
Uni-President is generally liked by 17 analysts, with 10 having ‘Buy’ ratings, four having ‘Outperform’ ratings and three having ‘Hold’ ratings for an average target price of CNY9.06. However, due to the recent rally in the company’s stock, the target price has already been reached. Any correction in the near term could provide a decent buy opportunity for investors.
Overall, Uni-President’s FY 24 results demonstrated business resilience, driven by growth in Beverage sales. The company posted significant increases in revenue, EBIT, and net profit. Strategic innovation in food and beverage products and positive cash flow support its growth trajectory. Analysts project consistent dividend yields and strong future performance. However, Uni-President faces significant risks including supply chain disruptions, rising transportation costs, shifting consumer preferences, and intense competition. These factors could potentially impact the company's performance and growth trajectory.
