{"id":329365,"date":"2024-09-09T06:52:20","date_gmt":"2024-09-08T22:52:20","guid":{"rendered":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/?p=329365"},"modified":"2024-09-09T06:52:22","modified_gmt":"2024-09-08T22:52:22","slug":"stock-in-focus-universal-robina-corp-urc-9-sept-2024-by-ap-securities","status":"publish","type":"post","link":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/stock-in-focus-universal-robina-corp-urc-9-sept-2024-by-ap-securities\/","title":{"rendered":"Stock in Focus: Universal Robina Corp. (URC) – 9 Sept 2024 by AP 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>AP Securities<\/td><\/tr>
Opinion Issued on<\/strong><\/td>9 Sept 2024<\/td><\/tr>
Recommendation<\/strong><\/td>Buy<\/td><\/tr>
1-Year Target Price<\/strong><\/td>PHP 114.40<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
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We take the long view that URC has better days ahead of it and it remains one of the names that must be on every portfolio. We note that it\u2019s also trading at a deep discount to itself, with its current Price-Earnings (P\/E) ratio 1.75 standard deviations below its historical average of 23.4x. We do not expect valuations to return to this mean, given URC\u2019s diminished outlook, but the stock should at least be trading at a less demanding 17.6x P\/E at least. <\/p>\n\n\n\n

With this in mind, we remain a BUY on URC based on our downward revised Target Price of P114.40 and we advise investors to bottomfish the stock at around the P91-95 levels as we feel that the recent selling might be overdone and the market has now more than priced in the weakness into URC’s stock price.<\/p>\n\n\n\n

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

What happens when things become less sweet<\/strong><\/p>\n\n\n\n

URC moved in the opposite direction as the rallied to retest 7,000, earning the dubious honor of being the worst loser of the month with a 20.0% month-to-date drop. Most of this decline happened after August 2, when the company reported what was possibly the biggest earnings miss among all the index names. <\/p>\n\n\n\n

Much of the weakness came from the company’s Sugar & Renewables (SURE) segment, which typically accounts for around 31% of EBIT. SURE posted its worst result since 3Q 2021, with revenues dropping 2.8% YoY to P5.5-Billion and EBIT shrinking 48.5% YoY to P0.7-Billion. This comes as sugar prices normalize from peak 2023 levels, and as customers downtrade to cheaper options to cope with elevated inflation.<\/p>\n\n\n\n

Brazil fires could reignite suffering segment<\/strong><\/p>\n\n\n\n

While we do not expect sugar prices to jump back to where they were in 2022-
2023, agricultural fires in Brazil’s Sao Paulo state (the top producing region of the world’s top sugar exporting country) could keep prices underpinned. According to authorities, the fires have damaged around 60,000 hectares of crop area, some of which were just sprouting. Brazil’s association of sugar producers said that this could impact supply until next year, sending raw sugar futures contracts higher by 6.4% to $19.57 in New York trading. Coupled with easing domestic inflation, we could see SURE’s numbers improving in the succeeding quarters.<\/p>\n\n\n\n

Battered and bruised<\/strong><\/p>\n\n\n\n

URC now finds itself trading at 15.3x P\/E, which admittedly is higher than the market P\/E of 12.9x. However, note that URC almost never trades at the same P\/E levels as the overall market, and likewise trades at a premium of at least 7% vs its peers. The stock is now trading at a 13% discount to comparable names, which is understandable as the earnings miss would strip the company of its premium against names like MONDE and PGOLD which both beat earnings expectations.<\/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>