After the disclosure of the operating data for the first quarter, the enthusiasm of the market to long the unified enterprise China (00220) seems to have been ignited again.
A few days ago, the company issued a unified announcement to disclose that the company's unaudited after-tax profit in the first quarter of this year was 457 million yuan (RMB, the same as below). Although the figure fell by 6.3% from the same period last year, if the income from the sale of land at the Hefei plant in the first quarter of last year (about 256 million yuan) was excluded, the core net profit of Uni-President doubled year-on-year.
After the performance, the stock price of Uni-President China was also driven by the strong growth of the performance and hit upward. Zhitong Financial APP noticed that in the morning of May 10, the unified stock price opened sharply higher, and the largest intraday increase once exceeded 13%. However, it then fell back, and as of the close of the day, it closed at HK$6.73, corresponding to an increase of 9.97%.
If you stretch your horizon, there have been endless controversies in the capital market over the years about the lack of stamina for unified growth, especially after the "Tukeng Sauerkraut" incident caused it to fall into a crisis of confidence, and the market's doubts about the old beverage and instant noodle manufacturer's "cheap old man can still eat" have reached a small climax. As the company's profitability continues to improve, it will be interesting to see if Uni-President can regain the favor of investors.
Profitability improved, and expectations of high revenue growth were disappointed
Since the beginning of the 90s of the last century, the unified enterprise China seems to have entered the development stage of "thirty years and standing". From the perspective of business territory, in addition to the traditional instant noodle business and traditional beverage business, Uni-President is also actively exploring new scenarios, new flavors and emerging categories.
Despite the unification actively seeking changes, combined with the financial performance in recent years, the company's development results may be more appropriate to describe as mixed. Looking back at the performance of Uni-President China in the last five full years, from 2019 to 2023, the revenue of Uni-President will be 22.02 billion yuan, 22.76 billion yuan, 25.23 billion yuan, 28.26 billion yuan, and 28.59 billion yuan respectively, and the net profit attributable to the parent company will be 1.37 billion yuan, 1.63 billion yuan, 1.5 billion yuan, 1.22 billion yuan, and 1.67 billion yuan. From the perspective of performance trends, the unified profit performance in 2023 will refresh a new high, but the "other side of the coin" is that the company's revenue growth rate has dropped significantly, and the scale growth has almost stagnated.
Further, in 2023, the unified food and beverage segment will achieve revenue of 9.85 billion yuan and 17.78 billion yuan, respectively, with the former decreasing by 10.6% year-on-year, while the latter increasing by 8.4%. It can be seen that the current unified fundamentals have also diverged between various businesses, and the income of the food business is obviously under pressure.
After entering 2024, the unified overall revenue in the first quarter achieved low double-digit growth, of which the beverage business continued its growth momentum and achieved double-digit growth during the period; The food business achieved low-single-digit growth and underperformed the business.
It is understood that the low double-digit growth in unified revenue in the first quarter was mainly due to the impact of the Spring Festival staggered period and the good sales of the beverage business, while the food business also recorded positive growth. In terms of beverages, ready-to-drink tea, Assam milk tea and fruit juice all achieved double-digit growth. In terms of food business, Laotan Sauerkraut and Eggplant achieved double-digit growth, and the product structure of the food business continued to be optimized, and the proportion of revenue from products above 5 yuan increased by 0.5 pct year-on-year to 44%.
In terms of profitability, as mentioned at the beginning of this article, China continues to be strong. According to the research report of Huatai Securities, the gross profit margin of the company in 24Q1 increased by 4-5 pct year-on-year, and the gross profit margin of the beverage and food business increased. Among them, the food business has increased even more. Specifically, raw materials contributed about 1 PCT, which benefited from the cancellation of tariffs on milk powder, the main raw material for milk tea, and the prices of core raw materials such as PET and palm oil declined year-on-year; The improvement of capacity utilization rate and the optimization of product structure contributed about 2 PCTs; In addition, there is 0.5-0.7pct from reducing promotions and thus storing a certain amount of profit.
Accelerate the launch of new products to alleviate scale anxiety?
The clock is set to May 2024, and it has been a year since Luo Zhixian of Uni-President Group set a goal of doubling revenue within five years, maintaining annual growth of 8%-12%, and reaching the scale of 50 billion yuan.
Despite the unification vows, it is a pity that the company's revenue growth rate is slowing down year by year, and the lack of growth has become an indisputable fact. In 2023, Uni-President China's annual revenue growth rate will only be 1.2%, and the growth has almost stagnated. In comparison, the unified revenue growth rate in 2022 is as high as 12%, and in 2021, this data is also 10.8%.
Revenue growth has slowed significantly, and the seemingly unified "50 billion" goal still seems out of reach. However, as mentioned above, perhaps in order to achieve the goal as soon as possible, Uni-President has spared no effort in cultivating new categories over the years.
For example, the unified launch of the "open small stove" brand to test the prefabricated food business; At the end of last year, "Kaixiaozao" also launched a private food family banquet gift box, officially entering the Spring Festival gift box market. It is true that from the perspective of market prospects, the prefabricated food industry is very imaginative. According to public data, the size of China's prefabricated food market will reach 516.5 billion yuan in 2023, a year-on-year increase of 23.1%, and is expected to reach nearly 1,072 billion yuan by 2026.
Although the development of the prefabricated food industry is in full swing, it must be admitted that under the tuyere, players from all walks of life have entered the game, and the intensity of market competition is also rising rapidly. Judging from the current situation, the current industry concentration is not high, homogenization is serious, and the overall profitability is low. In this context, I am afraid that there needs to be a question mark over whether the reunification of the new entrant can break out of the encirclement.
In the beverage business, Uni-President is also actively building new product lines. For example, drawing on the development trend of street drink store products, Tongyi will launch a new "Hitty Milk Tea" in 2023, which is available in two flavors, Da Hong Pao and Rose, focusing on the tea market that can attract more young consumer groups. For another example, in January this year, the "Aishang Tomato" product, which is claimed to be 100% NFC tomato juice, was launched in a unified manner, with the intention of occupying the minds of consumers with its freshness and health. In addition, over the years, Uni-President has also conformed to the tide of the times and actively laid out low-sugar and sugar-free product lines, and the products currently on the market include sugar-free green tea, sugar-free jasmine tea, and tea-free Wang Shengsheng squeezed green tea.
Judging from the measures to accelerate the launch of new products, it is not difficult for the outside world to get a glimpse of the strong willingness of this long-established beverage and instant noodle manufacturer to innovate. However, judging from the existing achievements, the scale of the unity seems to have hit the "bottleneck", but the profitability is continuing to optimize in the context of scale effect and declining raw material costs, and this may also be the confidence of the unity to adhere to high dividends in recent years.
All in all, the current unified fundamentals are mixed, and it is still unknown whether the growth stamina can support its sprint to the 50 billion revenue mark. Returning to the perspective of the capital market, investors are clearly divided on the prospect of reunification, which may explain why the unified stock price opened high and went low after the results, and failed to go further. From the perspective of the market outlook, if Uni-President is unable to cultivate new large single products, the unimaginative fundamentals may be difficult to continue to attract more funds, and its stock price rise is expected to be difficult for a long time.