Global Research 10 June 2019
China Instant Noodles Equities
UBS Evidence Lab inside: Lower tier cities led to Asia continuous consumption recovery Food & Beverage
Christine Peng, CFA Analyst [email protected] Potential profitability upside underpinned by continuing premiumisation +852-2971 7571 In April 2019, UBS Evidence Lab conducted 2,621 interviews with Chinese consumers Ally Chen aged 18-64, residing across tier-1 to tier-5 cities, to better understand consumers' Analyst perceptions, behaviour, and brand preferences in instant noodles. This survey's results [email protected] showed the continuation of the premiumisation trend we mentioned in our 2017 and +886-2-8722 7347 2018 studies, with 60% of regular buyers now spending more than Rmb5 on average Satsuki Kawasaki on a bowl of noodles, up from 50% in 2018. Of regular buyers, 76% are willing to pay Analyst more than Rmb5 for a bowl of healthy, nutritional, and tasty instant noodles, implying [email protected] further ASP upside potential, in our view. We see mid- to long-term profitability upside +81-3-5208 6265 potential for Tingyi Cayman Islands (Tingyi) and Uni-President China (UPC), given their Ting Wang, CFA leadership in the premium noodles segment. Associate [email protected] Increased purchase frequency points to volume upside +86-021-3866 8805 The survey results showed an obvious increase in purchase frequency as average times of regular buyers purchasing instant noodles per week rebounded to 0.76 in 2019 (from 0.59 in 2018, 0.72 in 2017, and 0.81 in 2016), driven mostly by the increase in tier-2 to tier-5 cities. Increased purchase frequency implies the potential rebound of consumers' demand for instant noodles in 2019, in our view. A polarized consumption structure is likely for the noodles market Despite Tingyi's and UPC's leading positions in the premium segment, UBS Evidence Lab's survey indicated a much higher purchase frequency for non-premium over premium products, suggesting the majority of instant noodles consumed are mass products despite continuous premiumisation, in our view. We think further investments in product development and consumer education are required given consumers' still low (~30%) perception of instant noodles as "healthy" and "nutritional" in 2019. Stock picks: we prefer Tingyi over UPC given its cheaper valuation We have upgraded Tingyi from Neutral to Buy, but maintain our Sell rating on UPC, with higher earnings estimates for both. At 8.2x 2020E EV/EBITDA Tingyi is trading at a 15% discount to UPC, and we feel the earnings downside from its price cuts has been fully factored in given VAT cuts since this April. We expect Tingyi's two-tiered brand strategy of growing premium product offerings, while maintaining mass-market dominance, will grow its instant noodles share from 2019. Tingyi's bottled coffee offerings can potentially become growth drivers from 2020, as the negative impact from declining bottled water revenue abates.
Instant noodles sector valuation summary
EPS Dividend Reuters Share Rating Price EV/EBITDA ROIC (post -tax) CAGR(%) Yield(%) Company Code Price New Old target 19E 20E 19E 20E 18-21E 19E 20E Tingyi Cayman Islands 0322.HK 12.20 Buy Neutral HK$14.46 8.6x 8.2x 16.2x 18.9x 4.7% 4.5 4.8 Uni-President China Holdings 0220.HK 8.16 Sell Sell HK$8.05 9.9x 9.2x 10.7x 12.1x 7.8% 3.8 4.1 Uni-President Enterprises 1216.TW 81.50 Neutral Neutral NT$80.00 9.8x 9.5x 15.9x 16.3x 5.7% 3.1 3.4 Nissin Foods Holdings 2897.T 6,620.00 Buy Neutral ¥7,700 10.5x 9.7x NA NA 2.5% 1.5 1.8
Note: Prices as of 6 June 2019; Tingyi's EV/EBITDA has been adjusted for minority interests. Source: Thomson Reuters, UBS estimates
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This report has been prepared by UBS Securities Asia Limited. ANALYST CERTIFICATION AND REQUIRED DISCLOSURES BEGIN ON PAGE 17. UBS does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.
China Instant Noodles
P2 UBS Research THESIS MAP a guide to our thinking and what's where in this report OUR THESIS IN PICTURES
MOST FAVORED LEAST FAVORED
Tingyi Cayman Islands, Nissin Foods Uni-President China, Uni-President Enterprises
PIVOTAL QUESTIONS Q: Will the premiumisation trend lead to accelerated revenue growth for the instant noodle industry in China in 2019E? Very likely, in our view. UBS Evidence Lab survey results pointed to increased average spending per bowl of noodles, together with an obvious increase in purchase frequency in 2019. At the same time, we see additional room for product upgrading to further meet consumers’ demand for healthy, nutritional, and tasty instant noodles. This is because consumers’ positive perception towards instant noodles in the 2019 survey did not continue to grow compared with the previous years' results. As Tingyi’s and UPC's non-premium products saw much higher purchase frequency than for their premium products, we prefer Tingyi's two-tiered brand strategy, which aims to grow premium product offerings, with mass-market dominance, to UPC's focus on profitability. more
UBS VIEW We believe the mass market still accounts for the majority of instant noodles consumption as UBS Evidence Lab's survey indicated a much higher purchase frequency for Tingyi’s and UPC's non- premium products over premium products, despite their leading positions in the premium segment. We feel further investments in product development and consumer education are required given consumers' still low (about 30%) perception of instant noodles being "healthy" and "nutritional" in 2019.
EVIDENCE UBS Evidence Lab survey results showed: 1) average spending per bowl of noodles grew 7% YoY to Rmb5.82 in 2019, with 60% of regular buyers spending more than Rmb5 on average on a bowl of noodles, up from 50% in 2018, pointing to a continuing premiumisation trend in consumption of instant noodles; 2) the average times of regular buyers purchasing instant noodles per week increases to 0.76, up from 0.59 in 2018; and 3) of respondents, 32% believe instant noodles can be healthy, nutritional, and tasty in 2019, similar to 33% in 2018.
WHAT'S PRICED IN? At 8.2x 2020E EV/EBITDA Tingyi is trading at a 15% discount to UPC, and we feel the earnings downside from its price cuts has been fully factored in given VAT cuts since this April. We expect Tingyi's two-tiered brand strategy of growing premium product offerings, while maintaining mass- market dominance, will grow its instant noodles shares from 2019. Tingyi's bottled coffee offerings can potentially become growth drivers from 2020, as the negative impact from declining bottled water revenue abates. more
Average spending per bowl of instant noodles Purchase frequency now (regular buyers) (regular buyers) 100% 6% 100% 7% 7% 7% 8% 5% 6% 90% 14% 2% 1% 13% 13% 16% 90% 3% 19% 3% Only buy noodles in 80% About once every 4-6 months 80% plastic pack 25% 70% 21% About once every 2-3 months 70% 48% >RMB 20 25% 25% 37% 59% 23% About once a month 60% 60% About 2-3 times a month 50% RMB 11-20 50% 23% 29% About once a week 40% 40% 26% 29% About 2-3 times a week 30% 64% RMB 5-10 30% About 4-5 times a week 20% 46% 44% 20% 34% 20% 20% 17% Source: UBS Evidence Lab Source: UBS Evidence Lab China Instant Noodles 10 June 2019 2 China Instant Noodles UBS Research OUR THESIS IN PICTURES return Average spending per bowl of instant noodles (regular buyers) 11% 16% 5% 8% 8% 4% 100% 8% 14% 6% 6% 9% 10% 4%4% 16% 7% 90% Only buy noodles in 20% plastic pack 80% 25% 39% 70% 25% 37%48% 51% >RMB 20 60% 41% 56% 32% 65% In 2019, 60% of regular buyers spent more than Rmb5 50% 59% 68% 80% 71% 57% on a bowl of noodles, up from 50% in 2018 and 40% in 40% 75% 54% RMB 11-20 64% 44% 30% 39% 57% 2017, implying strong continuation of premiumisation 20% 46% 44% 34% 33% 26% 41% 10% 28% 16% 10% 23% RMB 5-10 0% 2016 2017 2018 2019 2016 2017 2018 2019 2016 2017 2018 2019 2016 2017 2018 2019 China Tier 1 Tier 2-3 Tier 4-5 Price willing to pay for a bowl of healthy, nutritional and tasty instant noodles, 2019 (regular buyers) 100% 3% 4% 6%13% 2%4% 3% 2% 8.00 90% 7.50 80% 71% 81% 67% 6.837.57 66% 70% 72% 7.00 >Rmb20 Of regular buyers, 76% willing to spend more than 60% 78%6.59 50% 81% 6.50 Rmb11-20 Rmb5 for a bowl of healthy, nutritional, and tasty 40% 5.91 5.99 82% instant noodles in 2019, which suggests future ASP 5.74 5.55 6.00 Rmb5-10 30% 6.05 upside potential 20% 5.50 25%24% 0% 5.00 Average price (rhs, Rmb) 2018 2019 2018 2019 2018 2019 2018 2019 China Tier 1 Tier 2-3 Tier 4-5 Instant noodles could be healthy, nutritional and tasty (all respondents) 100% 8% 7% 12% 90% 16% 80% 27% 34% 24% Not believable at all 70% Of 2,621 respondents, 32% believe instant noodles can 36% 60% Not quite believable be healthy, nutritional, and tasty, similar to 33% in 2018, 50% 33% pointing to a still-low level of consumers' positive 32% Maybe or maybe not 40% 34% perception towards instant noodles 30% 32% Quite believable 20% 20% 32% 30% Highly believable 10% 13% 0% 2% 5% 2% 2% 2016 2017 2018 2019 Average times of purchase per week (regular buyers) 1.00 0.90 0.90 0.81 0.84 0.76 0.80 0.72 0.75 0.68 0.70 0.67 0.70 0.63 0.62 0.59 0.58 2016 0.60 0.55 In 2019, average times to buy instant noodles per week 0.50 0.450.45 2017 by regular buyers moved to 0.76, up from 0.59 in 2018, 0.40 2018 driven notably by the increase in tier-2 to tier-5 cities 0.30 2019 0.20 0.10 0.00 China Tier 1 Tier 2-3 Tier 4-5 China Instant Noodles 10 June 2019 3 Brands purchased most often (regular buyers) 0% 10% 20% 30% 40% 50% 60% Master Kong 49% UPC 26% Jinmailang 9% No regular brand 6% He Wei Dao 4% Baixiang 1% 2019 Tingyi (Master Kong) and UPC have a significant lead Shin Ramyun 1% Demae itcho 1% over other brands in terms of purchase frequency Nissin 0% Nongshim 0% Baijia 0% Longyou 0% Hongrun 0% Believe brands can produce healthy, nutritional and tasty instant noodles (all respondents) 40% 38% 38% 37%36% 35% 32% 30% 30% 26% 27% In 2019, 38%/36% believed Master Kong/UPC produced 26% 2016 25% 23% healthy, nutritional, and tasty instant noodles, same as 2017 20% 16% in 2018. The two ranked first/second, of brands covered, 14% 14% 15% 13% 12% 12% 2018 in healthy, nutritional, and tasty instant noodles 10% 2019 5% 0% Master Kong UPC Hei Wei Dao Shin Ramyun Variants regularly purchased, Master Kong, China (regular buyers) 0% 20% 40% 60% 80% 100% Tang Da Shi In 2019, premium variants of Tingyi saw lower regular Hu Jiao Jin Tang purchase frequency than non-premiums, with Tang Da Express Shi being most regularly purchased. In all city tiers, Premium Ai Xian Da Can premiums got highest purchases in tier-4 and tier-5 cities Hong Shao Niu Rou Tun Gu Jin Shuang Xiang Bao Cui Guo Zhu Non-premium DIY China Tier 1 Tier 2-3 Tier 4-5 Variants regularly purchased, UPC, China (regular buyers) 0% 20% 40% 60% 80% 100% Tang Da Ren Jiang Ban Mian Man Han Da Can Du Hui Xiao Guan In 2019, premium variants of UPC saw lower regular Man Han Yan Premium purchase frequency than non-premiums, with Tang Da Guan Jun Bang Ren being the most regularly purchased. In all city tiers, Xiang Ban Yi Cheng Lai Yi Tong premiums got highest purchases in tier-4 and tier-5 cities Tong Yi 100 Qiao Mian Guan Teng Jiao Xiao Dang Jia Non-premium Xiao Huan Xiong Note: We define premiumChina productsTier as 1productsTier 2-3whose Tiercurrent 4-5 retailing price (via Tmall.com) per bowl is above Rmb5; percentage of regular buyers. Source: UBS Evidence Lab China Instant Noodles 10 June 2019 4 China Instant Noodles UBS Research PIVOTAL QUESTIONS return Q: Will the premiumisation trend lead to accelerated revenue growth for the instant noodle industry in China in 2019E? UBS VIEW Very likely, in our view. UBS Evidence Lab survey results pointed to increased average spending per bowl of noodles, together with an obvious increase in purchase frequency in 2019. We believe the mass market still accounts for the majority of instant noodles consumption, as the survey indicated much higher purchase frequency for Tingyi’s and UPC's non-premium products than for their premium products, despite their leading positions in the premium segment. We feel more investments in product development and consumer education are required given consumers' perception of instant noodles being "healthy" and "nutritional" is still low in 2019. EVIDENCE . UBS Evidence Lab survey results showed average spending per bowl of noodles grew 7% YoY, to Rmb5.82, in 2019, with 60% of regular buyers spending more than Rmb5 on average on a bowl of noodles, up from 50% in 2018, reinforcing a trend of premiumisation in the purchase of instant noodles. . The average times of regular buyers purchasing instant noodles per week increased to 0.76 in the 2019 survey (from 0.59 in 2018, 0.72 in 2017, and 0.81 in 2016), driven notably by the increase in tier-2 to tier-5 cities. The survey results lead us to believe that the purchase frequency has improved in 2019, compared with that in 2018. . In the 2019 survey, 32% of respondents believed that instant noodles can be healthy, nutritional, and tasty (close to 33% in 2018), implying a still- low level of consumers' positive perception towards instant noodles. WHAT'S PRICED IN? With Tingyi trading at 15% discount against UPC, at 8.2x 2020E EV/EBITDA, we feel the earnings downside from its price cuts has been fully factored in given VAT cuts since this April. We expect Tingyi's two-tiered brand strategy of growing premium product offerings, while maintaining mass-market dominance, will grow its instant noodles share from 2019. UBS Evidence Lab conducted 2,621 interviews with Chinese consumers aged 18-64 residing across tier-1 to tier-5 cities in April 2019, in order to better understand consumers' perceptions, consumption behaviour, and brand preferences in instant noodles. This was the fourth wave of studies, following the June-2016, Oct-2017 and June-2018 publications. Beginning from the October 2017 survey, the age group covered was extended to 18-64, whereas the June 2016 survey’s age group was 18-54. China Instant Noodles 10 June 2019 5 Premiumisation trend continued with YoY increase in average spending per bowl of noodles Among instant noodle regular buyers (those who buy instant noodles at least once every six months), the average amount spent per bowl of noodles increased 7% YoY in 2019, to Rmb5.82, driven by all city tiers. Figure 1: Average spending per bowl of noodles (regular buyers, Rmb) 8.00 7.45 7.00 7.01 6.19 6.43 6.45 6.21 6.00 5.99 5.82 5.61 5.25 5.42 5.40 5.00 4.48 4.29 5.02 4.00 3.65 3.00 2.00 1.00 0.00 2016 2017 2018 2019 China Tier 1 Tier 2-3 Tier 4-5 Source: UBS Evidence Lab In 2019, 60% of regular buyers spent more than Rmb5 on average on a bowl of instant noodles, up from 50% in 2017 and 40% in 2016, indicating the continuation of premiumisation trend. Figure 2: Average spending per bowl of noodles (regular buyers) 100% 4% 4% 4% 8% 5% 6% 11% 6% 8% 9% 10% 8% 90% 14% 16% 16% 7% 20% 80% 25% 39% 70% 48% 25% 37% 59% 51% Only buy noodles in plastic pack 60% 41% 56% 32% 57%65% 71% 50% 68% 80% >RMB 20 40% 75% RMB 11-20 64% 30% 57%54% 46% RMB 5-10 20% 44% 39% 44% 41% 34% 33% 28%26% 23% 10% 16% 0% 2016 2017 2018 2019 2016 2017 2018 2019 2016 2017 2018 2019 2016 2017 2018 2019 China Tier 1 Tier 2-3 Tier 4-5 Note: Percentage of regular buyers. Source: UBS Evidence Lab Among regular buyers 76% indicated a willingness to pay more than Rmb5 for a bowl of healthy, nutritional, and tasty instant noodles, with the average price they are willing to pay reaching Rmb5.99, 3% above the actual average price paid for a bowl of noodles of Rmb5.82, pointing to additional room for ASP increases in the future, in our view. China Instant Noodles 10 June 2019 6 Figure 3: Price regular buyers are willing to pay for a bowl of healthy, nutritious, and tasty instant noodles, 2019 (regular buyers) 100% 3% 4% 6% 13% 2% 4% 3% 2% 8.00 90% 7.50 80% 7.57 71% 67% 70% 6.83 81% 66% 72% 7.00 >Rmb20 60% 78% 6.59 Rmb11-20 50% 81% 6.50 82% 40% Rmb5-10 5.91 5.99 6.05 5.74 6.00 30% 5.55 Note: Percentage of regular buyers. Source: UBS Evidence Lab Increased purchase frequency implies possible rebound of sales volume The average number of purchasing instant noodles per week is 0.76 among regular buyers in the 2019 survey, up substantially from 0.59 in 2018, driven notably by the increase in tier-2 to tier-5 cities. In our view, increased purchase frequency implies the potential rebound of consumers' demand for instant noodles in 2019. Figure 4: Purchase frequency now (regular buyers) Figure 5: Average times of purchase per week (regular buyers) 100% 1.00 7% 7% 7% 6% 0.90 About once every 4-6 90% 0.90 0.84 13% 13% 16% months 0.81 19% 0.80 0.76 0.75 80% About once every 2-3 0.72 0.70 0.68 0.67 months 0.70 70% 0.63 0.62 25% 25% 21% 0.59 0.58 About once a month 0.60 0.55 60% 23% 0.50 0.450.45 50% About 2-3 times a 23% 29% month 0.40 40% 26% 29% About once a week 0.30 30% 0.20 20% About 2-3 times a week 20% 20% 17% 0.10 16% 10% 0.00 9% 7% 9% About 4-5 times a week 6% China Tier 1 Tier 2-3 Tier 4-5 0% 2% 1% 0% 2% 2016 2017 2018 2019 2016 2017 2018 2019 Note: Percentage of regular buyers. Source: UBS Evidence Lab Consumers' positive perception towards instant noodles could be tapped further, with Tingyi and UPC likely to lead the product upgrading and be key beneficiaries The 2019 survey revealed that 32% of respondents believe instant noodles can be healthy, nutritious, and tasty (those who consider the notion highly/quite China Instant Noodles 10 June 2019 7 believable), similar to 33% in 2018, pointing to a still-low level of consumers' positive perception towards instant noodles. Figure 6: Believe instant noodles could be healthy, nutritional and tasty (all respondents) 100% 1% 2% 8% 7% 3% 5% 4% 6% 7% 6% 9% 8% 12% 11% 15% 90% 16% 14% 18% 12% 17% 22% 80% 27% 24% 31% 24% 34% 24% 30% 39% 32% 25% 70% 32% 28% 36% 29% 40% 60% Not believable at all 35% 30% 26% 50% 33% Not quite believable 32% 33% 33% 40% 34% Maybe or maybe not 56% 35% 37% Quite believable 32% 30% 46% 52% 48% 29% 31% Highly believable 20% 38% 37% 32% 30% 20% 27% 25% 15% 10% 13% 15% 11% 10% 5% 7% 7% 0% 2% 2% 2% 2% 3% 3% 1% 3% 1% 2% 2% 2% 2016 2017 2018 2019 2016 2017 2018 2019 2016 2017 2018 2019 2016 2017 2018 2019 China Tier 1 Tier 2-3 Tier 4-5 Source: UBS Evidence Lab The discontinuation of the growth of consumers’ positive perception towards instant noodles was also reflected in the reasons for spending less now than six months earlier, as a lack of nutritional value was quoted by 76% of respondents in the 2019 survey (from 74% in 2018), remaining the primary reason. Figure 7: Reasons for spending less now than six months earlier (regular buyers) 100% 90% 86% 80% 74% 76% 70% 70% 60% 52% 48% 50% 43% 42% 40% 30% 20% 17% 17%18% 8% 10% 10% 7% 8% 6% 3% 1%1% 3% 0% Buying more Buying fewer Buying smaller Because prices Instant noodles are affordable quality variety / flavour quantity now have decreased not very nutritional products now now / healthy 2016 2017 2018 2019 Source: UBS Evidence Lab Tingyi (Master Kong) and UPC are likely to lead the product upgrading and be key beneficiaries of the premiumisation, given they are the top two of all the brands in the survey in terms of positive association of their brands with healthy, nutritional, and tasty noodles. China Instant Noodles 10 June 2019 8 Figure 8: Believe Master Kong can produce healthy, Figure 9: Believe UPC can produce healthy, nutritional and nutritional and tasty instant noodles (all respondents) tasty instant noodles (all respondents) 100% 100% 7% 5% 7% 5% 11% 14% 11% 90% 15% 90% 25% 25% 80% 80% 21% 30% 20% 34% 70% Not believable at all 70% Not believable at all 38% 39% 60% Not quite believable 60% Not quite believable 32% 30% 33% 31% 50% Maybe or maybe not 50% Maybe or maybe not 37% 40% Quite believable 40% 37% Quite believable 30% 31% Highly believable 30% 33% Highly believable 28% 27% 27% 27% 20% Don't know this brand 20% Don't know this brand 20% 19% 10% 13% 10% 11% 12% 10% 10% 6% 10% 0% 3% 0% 2% 4% 2016 2017 2018 2019 2016 2017 2018 2019 Source: UBS Evidence Lab Figure 10: Believe brands can produce healthy, nutritional and tasty instant noodles (all respondents) 40% 38% 38% 37%36% 35% 32% 30% 30% 26% 27% 26% 25% 23% 2016 20% 2017 16% 2018 15% 13% 14% 14% 12% 12% 2019 10% 5% 0% Master Kong UPC Hei Wei Dao Shin Ramyun Source: UBS Evidence Lab Continued leadership in brand awareness and purchase frequency for Tingyi and UPC Among regular buyers Tingyi and UPC continued to lead in terms of consumers’ brand awareness and purchase frequency in the 2019 survey. Of regular buyers, 93% are aware of Master Kong while 83% know UPC, both similar to 2018. Of regular buyers, 71% regularly purchased Master Kong in the 2019 survey, up 1ppt from 2018, while 44% regularly purchased UPC, up 8ppts from 2018, which is the highest increase among all noodle brands. Master Kong and UPC ranked the first place and second place, respectively, in terms of brands purchased most often among regular buyers. China Instant Noodles 10 June 2019 9 Figure 11: Brand awareness (regular buyers) 0% 20% 40% 60% 80% 100% 94% 97% Master Kong 95% 93% 86% 88% UPC 85% 83% 64% 68% Jinmailang 69% 64% 48% 55% Baixiang 48% 41% 20% 31% 2016 Shin Ramyun 34% 28% 14% 23% 2017 He Wei Dao 26% 26% 2018 Demae itcho 19% 19% 8% 2019 12% Nissin 17% 16% 13% 11% Baijia 13% 16% 12% 19% Nongshim 15% 14% 3% 4% Longyou 6% 5% Hongrun 7% 5% Note: Percentage of regular buyers. Source: UBS Evidence Lab Figure 12: Brands purchased regularly (regular buyers) 0% 20% 40% 60% 80% 100% 73% 81% Master Kong 70% 71% 38% 42% UPC 36% 44% 11% 11% Jinmailang 23% 18% 4% 4% He Wei Dao 8% 9% 4% 6% 2016 Baixiang 9% 4% 4% 4% 2017 Shin Ramyun 6% 4% 2018 Demae itcho 3% 4% 2% 2019 1% Nissin 3% 2% 3% 2% Nongshim 2% 2% 1% 1% Baijia 1% 1% Hongrun 2% 1% Longyou 1% Note: Percentage of regular buyers. Source: UBS Evidence Lab China Instant Noodles 10 June 2019 10 Figure 13: Brands purchased most often (regular buyers) 0% 10% 20% 30% 40% 50% 60% Master Kong 49% UPC 26% Jinmailang 9% No regular brand 6% He Wei Dao 4% Baixiang 1% 2019 Shin Ramyun 1% Demae itcho 1% Nissin 0% Nongshim 0% Baijia 0% Longyou 0% Hongrun 0% Note: Percentage of regular buyers. Source: UBS Evidence Lab UBS Evidence Lab investigated how each factor matters in determining people's purchase decisions among different brand choices, and different brands' strengths and weaknesses. Our analysis showed that advertising campaigns, good taste, and trustworthiness are the top three drivers for people's purchase decisions. Master Kong, UPC, and Jinmailang share very similar brand strengths, namely good taste, availability in retail shops, and affordability. Figure 14: Brand preference drivers and brand strengths/weaknesses, 2019 Brand preference Brand strengths/weaknesses drivers Master Kong UPC Jinmailang Is highly advertised or has celebrity endorsement 0.044 0 -1 -1 Good taste 0.039 2 2 1 Is a brand I or my family trust 0.030 0 0 0 Has attractive promotions (e.g. discount, bundling) 0.028 0 0 0 Is easily available in retail shops 0.026 2 2 2 Is a domestic brand 0.025 0 0 0 Good value for money 0.023 0 0 0 Positive recommendations from friends or relatives 0.022 0 0 -1 Affordably priced 0.022 1 1 1 Is easily available for purchase online 0.019 0 0 0 Positive reviews in media 0.017 -1 -1 -1 Is an affordable brand 0.008 0 1 0 Is a premium brand -0.014 -1 -1 -1 Is an international brand -0.020 -1 -2 -1 Note: Brand preference drivers measure each factor's importance in driving people's purchase decisions among different brand choices. For brand strengths/weaknesses, "2" indicates the major strengths of each brand, and "-2" indicates the major weaknesses; "1" indicates the minor strengths of each brand, and "-1" indicates the minor weaknesses; "0" indicates neutrality, i.e. neither strengths nor weaknesses. The numbers are not comparable between brands. Source: UBS Evidence Lab Of all the brands in UBS Evidence Lab's survey, Tingyi and UPC showed the third- and fourth-highest degree of brand stickiness in 2019, with the intention to re- purchase their products reaching 90% and 89%, respectively. China Instant Noodles 10 June 2019 11 Figure 15: Definitely/somewhat likely will re-purchase brand in the next six months (regular buyers) 0% 20% 40% 60% 80% 100% 120% 90% Nissin 89% 77% 92% 86% He Wei Dao 85% 92%93% 88% Master Kong 94% 88%90% 87% UPC 86%89% 89% Longyou 100% 2016 85% 93% 90% 2017 Baixiang 88% 67% 82% 2018 Demae itcho 80%82% 89% 2019 Shin Ramyun 79% 74% 81% 89% Jinmailang 86% 71% 79% 89% Baijia 63% 76%78% Hongrun 76% 95% 90% Nongshim 86% 50% 70% Note: Percentage of regular buyers. Source: UBS Evidence Lab UBS Evidence Lab designed a new dedicated session to look into buyers' preferences towards specific variants in the 2019 survey. Despite their leading positions in the premium segment, the survey indicated much higher purchase frequency for Tingyi’s and UPC's non-premium products than for their premium products, suggesting that the mass market still accounts for the majority of instant noodles consumption, in our view. The survey results imply the most frequently purchased premium product of Tingyi (Master Kong) is Tang Da Shi, with 15% of 703 respondents regularly purchasing it. The most frequently purchased premium products for UPC is Tang Da Ren, as 27% of 423 respondents are regular buyers of it. Tingyi's premium variants saw highest purchase frequency in Tier-4 and Tier-5 cities, while UPC had its in Tier-2 and Tier-3 cities. Figure 16: Variants regularly purchased, Master Kong, Figure 17: Variants regularly purchased, UPC (regular China (regular buyers) buyers) 0% 20% 40% 60% 80% 100% 0% 20% 40% 60% 80% 100% Tang Da Shi Tang Da Ren Hu Jiao Jiang Ban Mian Man Han Da Can Jin Tang Du Hui Xiao Guan Premium Express Man Han Yan Premium Ai Xian Da Can Guan Jun Bang Hong Shao Niu Rou Xiang Ban Yi Cheng Tun Gu Lai Yi Tong Tong Yi 100 Jin Shuang Qiao Mian Guan Xiang Bao Cui Teng Jiao Guo Zhu Xiao Dang Jia Non-premium DIY Non-premium Xiao Huan Xiong China Tier 1 Tier 2-3 Tier 4-5 China Tier 1 Tier 2-3 Tier 4-5 Note: We define premium products as products whose current retailing price Note: We define premium products as products whose current retailing price (via (via Tmall.com) per bowl is above Rmb5; percentage of regular buyers. Tmall.com) per bowl is above Rmb5; percentage of regular buyers. Source: UBS Evidence Lab Source: UBS Evidence Lab China Instant Noodles 10 June 2019 12 China Instant Noodles UBS Research WHAT'S PRICED IN? return Figure 18: Tingyi 12-month forward EV/EBITDA (minority interests adjusted) 25.00 +stdev: 17.2x mean: 12.9x -stdev: 8.5x 20.00 15.00 10.00 5.00 - 12-month forward EV/EBITDA Mean +stdev -stdev Source: UBS estimates Figure 19: UPC 12-month forward EV/EBITDA 14 +stdev: 11.1x mean: 9.6x --stdev: 8.0x 12 10 8 6 12-month forward EV/EBITDA Mean +stdev -stdev Source: UBS estimates Tingyi is trading at 8.2x 2020E EV/EBITDA, below HK/China peers' average of 12.3x and global peers' average of 13.8x, indicating the stock is undervalued and the top-line growth recovery, along with improved capital discipline through accelerated pace of asset disposals and higher dividend payouts, will normalize its valuation, in our view. UPC is trading at 9.2x 12-month forward EV/EBITDA, similar to its historical average of 9.6x since 2015. With the stock outperforming the HSCEI by 25.69% YTD, and valuations at the historical average, we think the stock appears fully valued. China Instant Noodles 10 June 2019 13 Our historical residual-income analysis shows that consensus has turned less positive on Tingyi's long-term growth potential in the past year, with the current share price factoring in a 49% implied long-term growth, down from 65% a year ago. Consensus over the past year has turned less positive on UPC's long-term growth potential as well, which represents 48% of its share price currently, down from 56% a year ago. Figure 20: Historical residual income analysis – Tingyi Source: UBS estimates Figure 21: Historical residual income analysis – UPC Source: UBS estimates We have upgraded Tingyi from Neutral to Buy, while we maintain our Sell rating on UPC, with higher earnings estimates for both. Given that the mass market still accounts for the majority of instant noodles consumption, in our view, we prefer Tingyi's two-tiered brand strategy by growing premium product offerings, while maintaining mass-market dominance to UPC's focus on profitability. We do not feel UPC will stick to its profitability-focus strategy if it comes across sharp share losses in the mass-market segment due to competition. At 8.2x 2020E EV/EBITDA Tingyi is trading at a 15% discount to UPC, and we feel the earnings downside from its price cuts has been fully factored in given VAT cuts since this April. Tingyi's bottled coffee offerings can potentially become growth drivers from 2020, as the negative impact from declining bottled water revenue abates. China Instant Noodles 10 June 2019 14 Figure 22: Valuation comparison Mkt Cap Share price EV/EBITDA PER Earnings CAGR PEG EV/Sales P/BV EBIT margin ROE Div Yield Company (US$m) 19E 20E 19E 20E 18-20E 19E 20E 19E 20E 19E 20E 19E 20E 19E 20E 19E 20E HK/China F&B Tingyi 8 650 HK$12.22 8.6x 8.2x 22.2x 21.0x 5% 4.8x 4.5x 0.9x 0.8x 3.0x 3.0x 6.7% 6.8% 13.6% 14.4% 4.5% 4.8% Uni-President China 4 584 HK$8.20 9.9x 9.2x 25.8x 23.8x 13% 2.0x 1.9x 1.3x 1.2x 2.3x 2.3x 6.5% 6.9% 9.0% 9.7% 3.8% 4.1% Bright Dairy* 1 843 CNY10.39 7.7x 7.4x 26.6x 23.2x 2% 14.4x 12.6x 0.7x 0.7x 2.2x 2.1x 5.2% 5.5% 8.6% 8.9% 1.4% 1.5% Changyu 2 354 HK$28.71 9.9x 9.6x 19.8x 19.0x 0% NA NA 3.3x 3.1x 1.9x 1.8x 26.0% 25.9% 10.1% 9.8% 2.0% 2.0% China Foods 1 075 HK$2.99 7.8x 6.8x 18.6x 15.2x 23% 0.8x 0.7x 0.7x 0.6x 1.7x 1.6x 5.8% 6.2% 9.1% 10.7% 2.7% 3.3% China Resources Beer 13 904 HK$33.65 15.4x 12.4x 29.3x 22.3x 31% 0.9x 0.7x 2.5x 2.3x 4.6x 4.1x 11.5% 13.7% 16.4% 19.5% 1.4% 1.8% Haitian 38 680 CNY99.02 41.8x 35.4x 50.8x 42.5x 20% 2.5x 2.1x 13.0x 11.3x 16.2x 13.8x 28.9% 29.6% 34.6% 35.1% 1.3% 1.5% Hengan 9 037 HK$58.10 9.1x 8.9x 14.0x 14.0x 8% NA NA 2.9x 2.7x 3.4x 3.2x 28.3% 26.6% 25.1% 23.6% 4.9% 4.9% H&H International* 3 499 HK$42.80 10.1x 8.3x 16.3x 12.4x 24% 0.7x 0.5x 2.4x 2.0x 4.1x 3.3x 21.8% 22.7% 27.2% 27.6% 1.4% 1.8% Jonjee 4 401 CNY38.20 29.8x 23.9x 39.7x 30.8x 28% 1.4x 1.1x 6.5x 5.3x 7.3x 6.2x 18.8% 19.5% 19.7% 21.7% 0.7% 1.0% Laojiao 14 150 CNY66.80 14.8x 12.2x 21.6x 17.9x 25% 0.9x 0.7x 5.6x 4.8x 5.1x 4.5x 36.6% 37.9% 25.1% 26.7% 3.0% 3.6% Mengniu 14 403 HK$28.85 16.7x 14.0x 26.8x 21.8x 25% 1.1x 0.9x 1.4x 1.3x 3.5x 3.1x 6.0% 6.6% 13.9% 15.3% 0.9% 1.1% Moutai 156 617 CNY862.13 16.4x 13.6x 24.4x 20.1x 24% 1.0x 0.9x 11.2x 9.4x 7.8x 6.4x 67.1% 68.2% 35.3% 34.9% 2.2% 2.7% Shuanghui 11 495 CNY24.09 10.6x 11.1x 15.2x 16.5x -1% NA NA 1.5x 1.2x 4.8x 5.0x 11.9% 9.5% 35.7% 29.7% 6.6% 6.1% Tsingtao 7 970 HK$45.10 13.3x 11.2x 29.0x 23.5x 21% 1.4x 1.1x 1.6x 1.5x 2.5x 2.3x 7.9% 9.4% 8.8% 10.2% 1.5% 1.9% Want Want 9 206 HK$5.74 10.3x 9.7x 18.3x 17.7x 7% 2.7x 2.6x 2.7x 2.6x 3.7x 3.4x 21.6% 21.8% 21.8% 20.5% 2.4% 2.4% WH Group 13 586 HK$7.24 6.9x 5.9x 9.7x 7.8x 29% 0.3x 0.3x 0.7x 0.7x 1.6x 1.5x 10.1% 10.9% 17.3% 20.0% 6.1% 7.6% Wuliangye 54 612 CNY97.29 14.9x 12.3x 22.6x 18.6x 23% 1.0x 0.8x 6.7x 5.7x 5.1x 4.5x 43.8% 45.2% 24.4% 25.7% 2.4% 3.2% Yanghe 24 343 CNY111.70 12.0x 10.6x 18.0x 15.8x 14% 1.2x 1.1x 5.4x 4.8x 4.4x 4.0x 42.2% 42.6% 26.0% 26.5% 3.8% 4.6% Yanjing Brewery 2 582 CNY6.36 11.9x 10.5x 50.4x 38.7x 61% 0.8x 0.6x 1.4x 1.4x 1.4x 1.3x 4.0% 5.3% 2.7% 3.5% 1.6% 1.6% Yili 26 369 CNY30.00 16.4x 13.7x 24.8x 20.6x 17% 1.4x 1.2x 1.9x 1.7x 7.9x 6.8x 9.4% 10.1% 28.9% 35.5% 2.8% 3.4% Average 14.0x 12.1x 24.9x 21.1x 0.2x 2.2x 1.9x 3.5x 3.1x 4.5x 4.0x 20.0% 20.5% 19.7% 20.5% 2.7% 3.1% Global F&B Coca-Cola Co 216 323 US$50.78 19.2x 17.3x 23.7x 22.7x 3% 7.2x 6.9x 6.4x 6.2x 10.7x 12.3x 30.0% 31.5% 46.5% 50.7% 3.1% 3.2% Danone SA 52 527 HK$71.70 12.2x 11.4x 19.1x 17.3x 7% 2.8x 2.5x 2.3x 2.2x 2.7x 2.4x 15.1% 15.6% 14.5% 14.6% 2.9% 3.2% General Mills 30 106 US$51.28 12.8x 12.4x 16.2x 15.6x 4% 3.8x 3.6x 2.6x 2.6x 3.9x 3.5x 16.7% 17.2% 27.3% 24.1% 3.8% 3.8% Nestle 300 157 HK$101.08 16.3x 15.8x 23.2x 21.4x 8% 2.7x 2.5x 3.5x 3.5x 5.8x 5.7x 17.6% 18.1% 23.6% 26.4% 2.6% 2.7% P&G 272 974 US$106.73 17.8x 16.5x 22.9x 21.9x 5% 5.0x 4.8x 4.4x 4.3x 4.9x 4.8x 20.9% 21.7% 21.7% 22.1% 2.7% 2.9% AB Inbev 164 408 HK$74.73 11.5x 11.0x 16.4x 16.7x 21% 0.8x 0.8x 4.8x 4.6x 2.3x 2.1x 33.2% 33.5% 14.8% 13.3% 2.4% 2.4% Average 15.0x 14.1x 20.2x 19.3x 8% 3.7x 3.5x 4.0x 3.9x 5.1x 5.1x 22.3% 22.9% 24.7% 25.2% 2.9% 3.0% Note: Prices as of 6 June 2019; Thomson Reuters estimates for companies with *; Tingyi's EV/EBITDA has been adjusted for beverage minority interests. Source: Company data, Thomson Reuters, UBS estimates China Instant Noodles 10 June 2019 15 *UBS Evidence Lab is a sell-side team of experts, independent of UBS Research, that work across 12 practice areas and 45 specialized labs creating insight-ready datasets. The experts turn data into evidence by applying a combination of tools and techniques to harvest, cleanse, and connect billions of data items each month. Since 2014, UBS Research Analysts have utilized the expertise of UBS Evidence Lab for insight-ready datasets on companies, sectors, and themes, resulting in the production of over 3,000 differentiated UBS Research reports. UBS Evidence Lab does not provide research, investment recommendations, or advice, but provides insight-ready datasets for further analysis by UBS Research and by clients. For this report, UBS Evidence Lab conducted a face-to-face survey to 2,621 consumers based on region, gender, age, and income distribution across the Mainland China (tier-1 to 5 cities) in April 2019. This report leverages the following UBS Evidence Lab assets: China consumer staples consumer survey. The margin of error for 2,621 samples is approximately 1.78% at 90% confidence level. The previous iteration of the survey ran in May 2018. Valuation Method and Risk Statement Our price target for Tingyi Cayman Islands is based on a DCF methodology. We believe the key risk for Tingyi is market share loss, especially in the beverage segment, due to intense competition. Other risks include higher-than-expected raw material prices (such as polyethylene terephthalate and palm oil) and lower- than-expected volume growth, especially in the beverage segment. Our price target for Uni-President China (UPC) is based on a DCF methodology. We believe the key risk for UPC is execution, which could result in slower-than- expected margin improvement. More severe competition could also result in potential market share losses or a stronger-than-expected margin squeeze for the noodle and beverage segments. Our price target for Uni-President Enterprises (UPE) is based on a DCF methodology. We believe the key risks for UPE are: 1) a significant slowdown in the economy and consumption; 2) competition; 3) cost inflation; 4) price resistance; 5) regulation; 6) FX; and 7) refinancing risks. Raw material costs can be volatile and difficult to hedge. The performance of Uni-President's provisions business is highly geared to commodity price fluctuations. Although we believe China's retail market has promising growth potential, it has become extremely competitive for multinational and local companies seeking growth opportunities. Also, the market is very fragmented with considerable variation between regions. Upside risks include: 1) stronger-than-expected economy/consumption growth; 2) growing market share gain; and 3) higher-than-expected margin expansion. Our price target for Nissin Foods is based on a fair value PBR. Potential risk factors include: 1) sharp increases in costs for packaging and wheat, as well as for logistics and human resources, 2) notably unproductive expenditure/investment by domestic management and 3) stiffer competition overseas. We believe key risks for the consumer industry include: 1) any significant slowdown in the economy and consumption; 2) competition; 3) cost inflation; 4) price resistance; 5) a change in government policies; 6) regulation; 7) foreign exchange; and 8) refinancing risks. China Instant Noodles 10 June 2019 16 Required Disclosures This report has been prepared by UBS Securities Asia Limited, an affiliate of UBS AG. UBS AG, its subsidiaries, branches and affiliates are referred to herein as UBS. For information on the ways in which UBS manages conflicts and maintains independence of its research product; historical performance information; and certain additional disclosures concerning UBS research recommendations, please visit www.ubs.com/disclosures. The figures contained in performance charts refer to the past; past performance is not a reliable indicator of future results. Additional information will be made available upon request. UBS Securities Co. Limited is licensed to conduct securities investment consultancy businesses by the China Securities Regulatory Commission. UBS acts or may act as principal in the debt securities (or in related derivatives) that may be the subject of this report. This recommendation was finalized on: 07 June 2019 12:27 PM GMT. 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UBS Investment Research: Global Equity Rating Definitions 12-Month Rating Definition Coverage1 IB Services2 Buy FSR is > 6% above the MRA. 47% 25% Neutral FSR is between -6% and 6% of the MRA. 39% 22% Sell FSR is > 6% below the MRA. 14% 19% Short-Term Rating Definition Coverage3 IB Services4 Stock price expected to rise within three months from the time <1% <1% Buy the rating was assigned because of a specific catalyst or event. Stock price expected to fall within three months from the time <1% <1% Sell the rating was assigned because of a specific catalyst or event. Source: UBS. Rating allocations are as of 31 March 2019. 1:Percentage of companies under coverage globally within the 12-month rating category. 2:Percentage of companies within the 12-month rating category for which investment banking (IB) services were provided within the past 12 months. 3:Percentage of companies under coverage globally within the Short-Term rating category. 4:Percentage of companies within the Short-Term rating category for which investment banking (IB) services were provided within the past 12 months. KEY DEFINITIONS:Forecast Stock Return (FSR) is defined as expected percentage price appreciation plus gross dividend yield over the next 12 months. In some cases, this yield may be based on accrued dividends. Market Return Assumption (MRA) is defined as the one-year local market interest rate plus 5% (a proxy for, and not a forecast of, the equity risk premium). 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Factors considered by the IRC include the stock's volatility and the credit spread of the respective company's debt. As a result, stocks deemed to be very high or low risk may be subject to higher or lower bands as they relate to the rating. When such exceptions apply, they will be identified in the Company Disclosures table in the relevant research piece. Research analysts contributing to this report who are employed by any non-US affiliate of UBS Securities LLC are not registered/qualified as research analysts with FINRA. Such analysts may not be associated persons of UBS Securities LLC and therefore are not subject to the FINRA restrictions on communications with a subject company, public appearances, and trading securities held by a research analyst account. The name of each affiliate and analyst employed by that affiliate contributing to this report, if any, follows. UBS AG Hong Kong Branch: Christine Peng, CFA. UBS Securities Pte. Ltd., Taipei Branch: Ally Chen. UBS Securities Japan Co., Ltd.: Satsuki Kawasaki. UBS Securities Co. Limited: Ting Wang, CFA. Company Disclosures Company Name Reuters 12-month rating Short-term rating Price Price date Nissin Foods Holdings5 2897.T Neutral N/A ¥6,620 06 Jun 2019 Tingyi Cayman Islands 0322.HK Neutral N/A HK$12.20 06 Jun 2019 Uni-President China Holdings 0220.HK Sell N/A HK$8.16 06 Jun 2019 Uni-President Enterprises 1216.TW Neutral N/A NT$81.20 06 Jun 2019 Source: UBS. All prices as of local market close. Ratings in this table are the most current published ratings prior to this report. They may be more recent than the stock pricing date 5. UBS AG, its affiliates or subsidiaries expect to receive or intend to seek compensation for investment banking services from this company/entity within the next three months. Unless otherwise indicated, please refer to the Valuation and Risk sections within the body of this report. For a complete set of disclosure statements associated with the companies discussed in this report, including information on valuation and risk, please contact UBS Securities LLC, 1285 Avenue of Americas, New York, NY 10019, USA, Attention: Investment Research. Nissin Foods Holdings (¥) Price Target (¥) Stock Price (¥) 10000 8000 6000 4000 2000 0 6 7 8 6 6 6 6 7 7 7 7 7 8 8 8 8 8 9 9 9 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 - - - ------ r t r t r t r g c g c g c n b n b n b n c c c p e p e p e p u e u e u e u u u u J O F J O F J O F J A D A D A D A - A - - - A - - - A - - - ------ - - - 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Neutral Sell No Rating China Instant Noodles 10 June 2019 18 Date Stock Price (¥) Price Target (¥) Rating 2016-03-04 5560.0 5080.0 Sell 2016-03-23 5530.0 - No Rating 2016-06-06 5670.0 5270.0 Sell 2016-11-22 5790.0 6200.0 Neutral 2017-06-23 7110.0 - No Rating 2019-04-18 7640.0 7700.0 Neutral Source: UBS; as of 06 Jun 2019 Tingyi Cayman Islands (HK$) Price Target (HK$) Stock Price (HK$) 25.0 20.0 15.0 10.0 5.0 0.0 6 7 8 6 6 6 6 7 7 7 7 7 8 8 8 8 8 9 9 9 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 - - - ------ r t r t r t r g c g c g c n b n b n b n c c c p e p e p e p u e u e u e u u u u J O F J O F J O F J A D A D A D A - A - - - A - - - A - - - ------ - - - 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Buy Neutral No Rating Date Stock Price (HK$) Price Target (HK$) Rating 2016-03-04 7.59 14.42 Buy 2016-03-11 7.49 8.02 Neutral 2016-06-21 6.8 6.94 Neutral 2016-11-02 8.43 - No Rating 2016-11-03 8.73 9.86 Buy 2017-03-28 9.72 10.84 Buy 2017-09-20 11.74 13.88 Buy 2017-12-02 12.7 17.43 Buy 2018-03-21 16.88 19.12 Buy 2018-06-27 18.1 21.35 Buy 2018-08-28 15.1 19.45 Buy 2018-11-27 10.48 13.19 Neutral 2019-02-27 10.98 12.28 Neutral 2019-03-26 12.08 12.64 Neutral Source: UBS; as of 06 Jun 2019 China Instant Noodles 10 June 2019 19 Uni-President China Holdings (HK$) Price Target (HK$) Stock Price (HK$) 15.0 10.0 5.0 0.0 6 6 6 7 7 7 8 8 8 9 9 6 6 7 7 7 8 8 8 9 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 ------ ------ r r r r t t t n g c n g c n g c n b b b p c p c p c p e e e u u e u u e u u e u J J J J A O F A O F A O F A - D - D - D - - A - - - A - - - A - - - - - - - - - 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Buy Neutral Sell No Rating Date Stock Price (HK$) Price Target (HK$) Rating 2016-03-04 5.25 7.23 Neutral 2016-03-09 5.56 - No Rating 2016-03-11 5.41 5.72 Neutral 2016-03-22 5.83 6.13 Neutral 2016-06-21 6.99 6.44 Sell 2016-08-11 6.06 5.47 Sell 2016-11-18 5.33 5.38 Neutral 2017-02-16 5.47 6.29 Neutral 2017-09-20 7.25 8.27 Buy 2018-03-30 6.79 9.09 Buy 2018-06-27 9.49 11.16 Buy 2018-12-03 7.08 6.49 Sell Source: UBS; as of 06 Jun 2019 Uni-President Enterprises (NT$) Price Target (NT$) Stock Price (NT$) 100 80 60 40 20 0 6 7 8 6 6 6 6 7 7 7 7 7 8 8 8 8 8 9 9 9 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 - - - ------ r t r t r t r g c g c g c n b n b n b n c c c p e p e p e p u e u e u e u u u u J O F J O F J O F J A D A D A D A - A - - - A - - - A - - - ------ - - - 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Buy Neutral No Rating China Instant Noodles 10 June 2019 20 Date Stock Price (NT$) Price Target (NT$) Rating 2016-03-04 56.7 59.62 Buy 2016-03-22 58.0 59.0 Neutral 2016-04-09 55.6 56.0 Neutral 2016-08-04 63.5 64.0 Neutral 2016-11-18 54.6 58.7 Neutral 2017-04-06 57.7 57.6 Neutral 2017-09-11 65.1 - No Rating 2018-01-19 69.2 68.0 Neutral 2018-07-05 77.0 74.5 Neutral 2018-12-03 73.3 71.5 Neutral Source: UBS; as of 06 Jun 2019 Company profile and fee and risk statement under the Japanese Financial Instruments & Exchange Law Company Name etc: UBS Securities Japan Co., Ltd., Financial Instruments & Exchange Firm, Kanto Local Financial Bureau (Kinsho) No.2633 Associated Memberships: Japan Securities Dealers' Association, the Financial Futures Association of Japan, and Type II Financial Instruments Firms Association and Japan Investment Advisers Association UBS Securities Japan Co., Ltd. will receive a brokerage fee (excluding tax) from clients of Wealth Management calculated by multiplying the executed amount by 1.00% at maximum (excluding tax) for trading domestic stocks; and by 1.25% at maximum (excluding tax) for trading foreign stocks. 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