Core Viewpoint - The report from China Merchants Securities (Hong Kong) indicates that Uni-President China (00220) is showing an attractive dividend yield of 6.5%, and if the industry competition stabilizes, the rating may be upgraded to "Overweight" from the current "Neutral" rating [1] Group 1: Financial Performance - Uni-President China's Q3 performance shows challenges, with net profit increasing by 8% to 726 million RMB, which is below market expectations for double-digit growth [1] - Revenue remained flat year-on-year, with the food segment achieving low to mid-single-digit growth, offset by a decline in the beverage segment [1] - The OEM business continued to grow at a triple-digit rate, reflecting ongoing headwinds from competition in ready-to-drink beverages and execution risks under the company's volume-driven strategy [1] Group 2: Market Conditions and Outlook - The management reiterated a full-year sales growth target of 6-8%, but achieving this goal may be challenging due to ongoing inventory destocking in beverages, sluggish consumption, and increased promotional efforts [2] - The company remains cautiously optimistic for Q4, expecting continued improvement in gross margins and further optimization of expense ratios despite low consumer demand and heightened competition [2] - Long-term growth is supported by investments in freezer units and sales point upgrades, although these may not alleviate current pressures in the short term [2] Group 3: Valuation and Estimates - The target price has been adjusted to 8.4 HKD from a previous 9.9 HKD, based on an updated mid-2026 P/E ratio of 14.5 times, reflecting a valuation that is one standard deviation below the long-term average since 2020 [1] - The beverage segment continues to face pressure, particularly in the juice category, with intensified pricing competition [1] - Looking ahead to 2026, stable raw material costs and product structure upgrades in beverages and instant noodles are expected to further drive gross margin expansion [2]