URC shares pick up on optimistic outlook

STOCKS on Universal Robina Corp. (URC) inched up last week as analysts saw better performance with taxes on junk food and sweetened beverages scrapped and inflation easing.

A total of 8.07 million shares amounting to P932.39 million were traded from Feb. 12 to 16, data from the Philippine Stock Exchange (PSE) showed, with URC closing as the 10th most actively traded stock last Friday.

Shares of the Gokongweiled food and beverage company went up by 6% week on week, closing at P118 apiece last Friday from its P111.30 closing on Feb. 8.

Year to date, however, URC’s stock slipped by 0.2%.

Mercantile Securities Corp. Head Trader Jeff Radley C. See said in an e-mail exchange that aside from overall market sentiment boosting URC’s stock last week, the abolishment of the tax reform on junk food and sweetened beverages was also bullish news for the company.

Finance Secretary Ralph G. Recto announced in January that the department would refrain from introducing new taxes to keep inflation from spiking. Instead, it would focus on improving its collection system to achieve its target revenue of P4.3 trillion this year.

“Aside from that, the company still has a buyback program with a remaining balance of P4.7 [billion] as of [Feb. 16],” Mr. See said.

On the other hand, China Bank Securities Corp. (Chinabank) Research Associate Stephen Gabriel Y. Oliveros said that URC’s gain last week was mainly due to the net foreign buying on the stock and better margins this year as raw material costs normalized on easing inflation.

“With respect to its planned capacity expansion, we think this is a welcome development for URC as this would allay investor fears on capacity constraints, enable URC to develop new products, and position them to capitalize on incremental demand for its products going forward,” he said in a separate e-mail.

“Recall that URC experienced capacity limitations in some of its products last year given the stronger-than-expected resurgence in demand,” he added.

URC announced last week its new production plant based in Malvar, Batangas, which aims to expand its production capacity.

With construction beginning this year to finish in 10 to 15 years, the “mega plant” is estimated to bring 3,000 jobs directly and indirectly.

“We also think that URC has the capacity to finance this investment given its healthy cash flows and relatively low gearing ratios,” Mr. Oliveros said.

The food and beverage firm’s net income increased by 5.8% to P10.29 billion in the third quarter last year from P9.72 billion in the same period in 2022.

Similarly, net attributable income rose by 4.2% to P9.74 billion from P9.35 billion in 2022.

However, URC’s attributable net income in the Julyto-September quarter slid by 2.3% to P3.07 billion from P3.15 billion in the same period in 2022.

Additionally, the monetary board decided to keep its interest rates steady at 6.5% for a third straight meeting.

While companies expected the move and have factored in the possibility of elevated rates for a while, Chinabank’s Mr. Oliveros said that for URC specifically, movements in interest rates could affect its profitability as the stock’s borrowings are short-term in nature as of September last year.

“We project full-year 2023 net income to be at P13.3 billion,” he said.

For the week, Mr. See penciled his support at P155 and P110, while resistance at P122 and P124.

Meanwhile, Mr. Oliveros pegged his support and resistance levels at P114.4 and P121, respectively.

“A key headwind we are monitoring for the company is how the international business would fare following the price rollbacks it implemented last year in select markets in response to softer demand for its products,” he said. —