{"id":327815,"date":"2024-05-08T16:59:07","date_gmt":"2024-05-08T08:59:07","guid":{"rendered":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/?p=327815"},"modified":"2024-05-08T16:59:09","modified_gmt":"2024-05-08T08:59:09","slug":"stock-in-focus-universal-robina-corp-urc-8-may-2024-by-rcbc-securities","status":"publish","type":"post","link":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/stock-in-focus-universal-robina-corp-urc-8-may-2024-by-rcbc-securities\/","title":{"rendered":"Stock in Focus: Universal Robina Corp. (URC) – 8 May 2024 by RCBC Securities"},"content":{"rendered":"\n

Summary of Broker’s Recommendation<\/h2>\n\n\n\n
Stock Code<\/strong><\/td>URC<\/td><\/tr>
Company Name<\/strong><\/td>Universal Robina Corp.<\/td><\/tr>
Broker<\/strong><\/td>RCBC Securities<\/td><\/tr>
Opinion Issued on<\/strong><\/td>8 May 2024<\/td><\/tr>
Recommendation<\/strong><\/td>Buy<\/td><\/tr>
1-Year Target Price<\/strong><\/td>PHP 133.00<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
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We cut our target price (TP) for Universal Robina Corp. (URC) by 8% from Php145.00\/share to Php133.00\/share as we reduced our net income estimates and
adjusted our risk-free rate and cost of debt assumptions in line with the current
interest rate environment. <\/p>\n\n\n\n

Nonetheless, we retain a BUY rating on URC as we expect the improved macro-environment and mid-term pre-election spending to support demand recovery for URC. We also believe that URC is more attractive at current levels as its share price has slightly recovered, but still underperformed by 14% year-to-date (YTD) and is trading cheaply with a PE of 16.3x, which is below its 5-year historical PE of 26.3x. We also believe that URC is still poised for further recovery as the overhang from the proposed junk food and additional sugar taxes is already priced in.<\/p>\n\n\n\n

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Analysis and Opinion<\/h2>\n\n\n\n

Earnings miss expectations<\/h3>\n\n\n\n

URC posted 2023 core net income of Php12.6 billion, 6% higher year-on-year (y\/y), below consensus and house estimates. Consolidated sales increased 6% to Php158.4 billioin, driven by 16% growth in Agro-Industrial & Commodities Group (AICG) business, while Branded Consumer Foods Group (BCFG) sales were up by only 2% on a high base and mixed performances across brands and categories. Gross profits rose 10% to Php43.0 billion on a 1.0ppt margin expansion to 27.0%. Operating income climbed 14% to Php17.4 billion on an 80bps margin improvement to 11.0% on better pricing mechanisms and cost management.<\/p>\n\n\n\n

AIC remains as revenue driver; Branded recovers<\/h3>\n\n\n\n

Topline grew 6% on top of the 28% growth in 2022 mainly due to the AIC business.
However, this was slightly offset by the year-on-year drop in sugar prices (~15% down) in 4Q 2023 resulting in an 18% and 7% decline in the 4Q23 SURE unit and Agro-industrial (AIG) segment, respectively. Nonetheless, the BCF business followed with a q\/q improvement on holiday spending, resulting in a flattish 4Q 2023 topline.<\/p>\n\n\n\n

Pricing comes through<\/h3>\n\n\n\n

While inflation was the key headwind for URC, from demand on its BCF segment and input costs, URC was able to expand margins on higher pricing and over-delivery of its fuel-for-growth savings target. Regardless, commodity prices remain in an impasse \u2013 while some commodities have come down from their highs like palm oil (-31% y\/y), raw materials like robusta coffee (+15% y\/y) remain elevated.<\/p>\n\n\n\n

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Check how many brokers recommend this stock<\/h2>\n\n\n\n
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All Stock Rankings<\/a><\/blockquote>