1H26 results decelerate – Uni-President China (UPC) reported 1H26 revenue of RMB17.3bn, up merely 1.4% YoY, due to intensifying competition. Thanks to lower raw material costs (e.g., white sugar and palm oil), GPM expanded by 70bps to 35%.  However, to counter rising competition in the beverage retail sector and continue its destocking efforts, the company raised selling and marketing expenses by 4.4% YoY.  Overall, adjusted operating profit grew 2.7% to RMB1.67bn.

Premium instant noodle saw strong growth – Breaking down by revenue, beverage business (62.1% of revenue) declined marginally by 0.3% YoY to RMB10.75bn. Within this category, tea beverages fell 3.5% YoY to RMB4.89bn, and juices dropped 5.5% YoY to RMB1.72bn. Encouragingly, milk tea (led by the Assam brand) rose 7.3% YoY to RMB365mn, offsetting part of the sector’s weakness. In contrast, the food business (32.5% of revenue) saw a 4.7% YoY gain in revenue to RMB5.6bn, driven by premium instant noodle brands such as Soup Daren (湯達人) and The King of Tomato (茄皇), with the latter posting double‑digit growth. The food segment's GPM improved by 1.7 ppts to 28.5%, underscoring successful premiumization.

Our view:

Although the beverage segment faces ongoing competition and is likely to remain soft in the near term, UPC has a product portfolio that is firmly rooted in essential consumer goods. Its brand equity is very solid in a few staple food categories, where demand is relatively inelastic. Moreover, the company is cash rich with a net cash position of RMB9.66bn, equivalent to 75% of net assets and 43% of market cap.

The stock currently trades at 13x FY26E P/E with a dividend yield of 7%. (Amelia Deng)