Uni-President China Earnings: Food Segment Remains a Drag; Reduce FVE, but Shares Still Undervalued

No-moat Uni-President China, or UPC, reported 2023 results that trailed our expectations on the top line and core operating profit, dragged by weaker-than-expected food segment sales and higher selling expenses. However, a one-off land sales gain and lower tax rate drove net income higher than our estimate. We reduced our five-year sales CAGR projection by 30 basis points to 3.7% as we project a milder recovery in instant noodles sales in 2024. The firm’s double-digit top-line growth target for 2024 is a tall order, in our view. We also lowered our 2024-28 net income forecasts by 1%-16% to account for a slower rebound in margins. As a result, we reduce our fair value estimate to HKD 6.60 per share, from HKD 7.20.