Key Takeaways:
Morgan Stanley cut its price target for Uni-President China Holdings Ltd. (00220.HK) to HKD9.2 from HKD10.7, citing weaker beverage sales and rising raw material costs that are expected to pressure margins.
The bank's analysts, in a research report, reduced their earnings forecasts for 2024 and 2025 by 14 percent while maintaining an "Equalweight" rating on the stock.
The new HKD9.2 target corresponds to a 2026 price-to-earnings ratio of 16 times. Revenue forecasts for this year and next were also cut by four and five percent, respectively, with the operating expense ratio seen rising by 0.6 percentage points.
For 2024, Morgan Stanley now expects Uni-President's revenue to grow five percent year-over-year, with net profit increasing seven percent. The downgrade signals concern over intensifying competition in the beverage sector, even as the company's instant noodle business could benefit from price hikes by peers.
While the beverage business faces headwinds, the report noted that a recovery in the catering sector could provide some support. In the instant noodle segment, weak overall demand is being offset by the potential for Uni-President to gain market share as competitors raise prices. The bank introduced a 2028 earnings per share forecast of RMB0.59 for the food and beverage giant.
This article is for informational purposes only and does not constitute investment advice.
