Upward price adjustment

Investment Thesis

Positive on premium food development. We are positive on UPC’s development on premium products, which now account for c.40% of noodles sales versus 14% in 2016 due to rising consumption appetite for premium packaged products (instant hotpot and instant rice).

Beverage growth to normalise. Despite the fluctuation of the COVID-19 situation, beverage sales have seen stable recovery. We expect gradual improvement under fluctuation of COVID-19 pandemic to drive improvement in beverage sales.

Gross profit margin to recover with stabilising commodity prices. We expect the gross profit margin to contract 1.2ppt and thereafter recover by 0.9ppt with a stabilising commodity pricing in 2022E.