Uni-President Enterprises' H1 Results Benefit From Diversified Profit Sources; Retaining TWD 64 FVE

No-moat Uni-President Enterprises Corp. reported first-half results that included top-line growth consistent with our estimates but net profit falling behind our expectations due to notable losses in an equity investment. Operating profit for the period rose by midsingle digits year on year as resilience in the upstream container/packing business and recovery in the convenience store and retail segments more than offset lower profit in the mainland China food business. We consider UPEC’s purchase of Carrefour Taiwan’s remaining stake as a defense against the potential cannibalization of supermarkets/hypermarkets on convenience store sales. We do see synergies in the group’s packaged food and retail business segments following the deal, given UPEC’s broad business coverage. We maintain our TWD 64 fair value estimate, which implies 19 times forward price/earnings, broadly consistent with the historical average. We see the shares as fairly valued.