Tue 30 May 2023

Resilient consumption
lifts earnings in 1Q23

Consumer companies post higher profits in 1Q23 AllHome Corp

BUY
PHP6.00
Consumer companies generally performed within or below expectations during the first Century Pacific Food, Inc.
BUY
quarter. Among the thirteen companies we cover, six (CNPF, EMI, MONDE, RRHI, SSI, URC) PHP28.00
performed in line with estimates. Meanwhile, five (DNL, HOME, MAXS, PIZZA, WLCON) D&L Industries, Inc.
underperformed and only two (JFC, PGOLD) exceeded expectations. Earnings of consumer BUY
PHP11.40
companies grew by a median rate of 11.9% y/y on the back of resilient domestic spending
Emperador, Inc.
and resumption of pent-up demand as the economy continued to reopen. The latest figure HOLD
PHP14.30
marks a slight slowdown from the comparable 16.3% in 4Q22 and 25.6% in FY22 as pent-
up consumer demand and companies’ respective cost bases began to normalize. Among Jollibee Foods Corporation
BUY
the different sectors, restaurants logged the fastest growth (+85.8% y/y) owing to the PHP293.00
recovery of domestic demand despite cost inflation, followed by retailers (+13.1%) and Max’s Group, Inc.
BUY
manufacturers (+6.0%). PHP9.80
Monde Nissin Corporation
BUY
PHP10.60
Manufacturers post mixed performance
Puregold Price Club, Inc.
BUY
Manufacturers delivered mixed results in 1Q23, as CNPF, EMI, and URC delivered higher PHP55.70

y/y profits while DNL and MONDE posted lower earnings. Nonetheless, core earnings of Robinsons Retail Holdings, Inc.
BUY
manufacturers grew by a median rate of 6% y/y. EMI’s profits (+10.5% y/y) were driven PHP91.10
by strong topline growth coming from a relatively low base last year. Similarly, higher Shakey’s Pizza Asia Ventures
sales coupled with controlled opex spend lifted profits of URC (+8.5%) and CNPF (+6.0%) BUY
PHP10.20
despite these companies seeing a y/y contraction in GPM. On the other hand, higher opex
SSI Group, Inc.
spend and lower sales dampened profits of DNL (-24.0%) and higher lock-in prices and BUY
PHP4.50
elevated input costs weighed on profits of MONDE (core EBITDA -4.6%).
Universal Robina Corporation
BUY
Exhibit 1: Manufacturer profits summary PHP163.00
% of Forecast Wilcon Depot, Inc.
in PhpMil 1Q22 1Q23 % Chg HOLD
COL Consensus
PHP31.70
CNPF 1,410 1,495 6.0 26.8 26.5
DNL 780 593 (24.0) 15.0 16.1
EMI 2,098 2,318 10.5 21.8 21.0 Denise Joaquin
URC* 3,990 4,328 8.5 24.8 - Research Analyst
MONDE* 3,601 3,434 (4.6) 26.9 25.2 denise.joaquin@colfinancial.com
Median 6.0
Carlos Matthew De Leon
*Core profits (URC), Core EBITDA (MONDE) Research Analyst
source: Company data, COL estimates, Bloomberg matthew.deleon@colfinancial.com

Disclaimer: All content provided in COL Reports are meant to be read in the COL Financial website. Accuracy and completeness of content cannot be guaranteed if reports are viewed outside of
the COL Financial website as these may be subject to tampering or unauthorized alterations.
 Consumer Sector I Consumer companies see earnings rise 19.5% y/y on resilient consumption

Tue 02 May 2023

Retailers’ profits boosted by reopening

For the most part, retailers continued to deliver higher y/y profits as the sector’s earnings
grew by a median rate of 13.1% y/y. Growth was led by higher profits of SSI (+573%
y/y) as pent-up demand drove the recovery of Fast Fashion. Similarly, earnings of RRHI
(+18.8%) and WLCON (+13.1%) continued to be driven by healthy topline growth and
GPM expansion albeit an uptick in opex. In contrast, HOME’s core income declined further
(-22.9%) as sales of its hard category products remained weak.

Exhibit 2: Retailer profits summary

% of Forecast
in PhpMil 1Q22 1Q23 % Chg
COL Consensus
HOME* 275 212 (22.9) 15.6 15.9
PGOLD 2,151 2,406 11.9 24.3 25.0
RRHI* 1,098 1,305 18.8 18.5 -
WLCON 851 962 13.1 21.3 21.5
SSI 68 456 573.4 22.9 36.1
Median 13.1
*Core income

source: Company data, COL estimates, Bloomberg

Restaurant profits recover in 1Q23

Restaurants’ earnings grew at a median rate of 85.8% y/y in 1Q23. JFC’s operating profits
surged 80.9% from higher revenues and margin expansion. PIZZA (+164.5%) and MAXS’
(+85.8%) bottom-line numbers also rebounded on the back of topline growth amid
eased mobility restrictions. However, higher raw material costs weighed on PIZZA and
MAXS’ margins, tempering earnings growth.

Exhibit 3: Restaurant profits summary

% of Forecast
in PhpMil 1Q22 1Q23 % Chg
COL Consensus
JFC* 1,988 3,597 80.9 26.0 27.6
MAXS 41 77 85.8 10.3 10.9
PIZZA 76 201 164.5 19.8 21.4
Median 85.8

*Operating profits

source: Company data, COL estimates, Bloomberg

COL Financial Group, Inc. 2

 Consumer Sector I Consumer companies see earnings rise 19.5% y/y on resilient consumption

Tue 02 May 2023

Resilient consumption lifts topline

Total revenues of consumer companies grew by 15.6% y/y as consumer firms generally
benefitted from minimal mobility restrictions and the reopening of the domestic economy.
Growth was led by the rebound of restaurant sales (+31.0%), followed by higher sales
from retailers (+14.3%) and manufacturers (+9.1%).

Resilient consumption buoys manufacturers’ revenues

Revenues of manufacturers rose by 9.1% y/y on the back of resilient consumption.

Topline growth was led by EMI (+26.4% y/y), which posted double-digit growth across
its Brandy and Whisky businesses following eased restrictions and the recovery of travel
retail. This was followed by URC (+11.2%), which was boosted by higher sales of its
agro-industrial and commodities units. Similarly, revenues of MONDE (+9.6%) and CNPF
(+6.0%) were mainly driven by their core branded businesses. In contrast, DNL registered
lower revenues (-15.8%) amid weak volumes mainly due to high customer orders in prior
periods.

Exhibit 4: Manufacturer revenues summary

% of Forecast
in PhpMil 1Q22 1Q23 % Chg
COL Consensus
CNPF 14,733 15,617 6.0 22.9 22.5
DNL 9,996 8,414 (15.8) 19.7 19.2
EMI 12,333 15,591 26.4 22.9 23.1
URC 35,783 39,807 11.2 25.0 24.8
MONDE 18,298 20,050 9.6 25.6 25.5
Total 91,143 99,479 9.1
source: Company data, COL estimates, Bloomberg

Retailers selectively benefit from reopening

Most retailers continued to benefit from the reopening of the economy, with the sector’s
revenues growing by 14.3% y/y. SSI sustained its recovery momentum, driven by the
rebound of Fast Fashion sales amid pent-up demand. Same-store-sales growth (SSSG)
of PGOLD (+11.3%) and RRHI’s supermarket segment (+8.7%) also remained healthy.
Meanwhile, home retailers posted a more subdued topline performance. SSSG of WLCON
(+3.3%) and HOME (-12.1%) were dampened by lower transaction count due to store
cannibalization and by smaller ticket sizes, respectively.

COL Financial Group, Inc. 3

 Consumer Sector I Consumer companies see earnings rise 19.5% y/y on resilient consumption

Tue 02 May 2023

Exhibit 5: Retailer revenues summary

% of Forecast
in PhpMil 1Q22 1Q23 % Chg
COL Consensus
HOME 3,239 2,921 (9.8) 19.4 20.8
PGOLD 38,507 44,352 15.2 22.4 22.9
RRHI 39,423 44,593 13.1 22.9 22.6
WLCON 7,652 8,527 11.4 21.6 22.3
SSI 4,485 6,218 38.6 25.2 26.8
Total 93,306 106,611 14.3
source: Company data, COL estimates, Bloomberg

Restaurants revenues rebound

Restaurant revenues rebounded in 1Q23, owing to the easing of mobility restrictions

in 1H22. Recall that 1Q22 results were dragged by the Omicron surge. As foot traffic
recovered, JFC posted SSSG of 22.4%, led by its domestic business’ SSSG (+31.0%).
Likewise, PIZZA and MAXS, saw their same-store-sales surge by 28% (ex-Potato Corner)
and 25%, respectively. Overall, higher system-wide sales across the three companies
allowed consolidated revenues to grow 31.0% y/y.

Exhibit 6: Restaurant revenues summary

% of Forecast
in PhpMil 1Q22 1Q23 % Chg
COL Consensus
JFC 42,857 55,091 28.5 22.5 23.0
MAXS 2,167 2,854 31.7 22.5 24.6
PIZZA 1,610 3,132 94.5 25.8 31.0
Total 46,634 61,077 31.0
source: Company data, COL estimates, Bloomberg

GPM trends improve for manufacturers, but worsen for

restaurants

In contrast to the previous quarter’s results, GPM trends improved for manufacturers
but worsened for restaurants. Meanwhile, retailers continued to post healthy y/y margin
expansion owing to strong demand and lengthy inventory days.

COL Financial Group, Inc. 4

 Consumer Sector I Consumer companies see earnings rise 19.5% y/y on resilient consumption

Tue 02 May 2023

Manufacturers see narrower GPM contraction

Gross margins of manufacturers contracted by a median -40bps y/y, marking a significant

improvement from -250bps in 4Q22 and -240bps in FY22. Lower raw material costs and
higher prices benefitted GPM of DNL (+320bps y/y) and EMI (+130bps), respectively. In
contrast, high inventory costs still weighed on margins of MONDE (-470bps) and CNPF
(-230bps); nonetheless, GPM of the two manufacturers still improved q/q and softer
inventory and lock-in costs for the firms’ branded businesses are expected to be fully
reflected in 2H23.

Exhibit 7: Manufacturer GPM summary

in % 1Q22 1Q23 Chg (bps)

CNPF 25.9 23.6 (230.0)
DNL 13.4 16.6 320.0
EMI 32.1 33.4 130.0
URC 27.3 26.9 (40.0)
MONDE 35.1 30.4 (470.0)
Median (40.0)

source: Company data

Retailers continue to enjoy healthy margin expansion

Most retailers continued to see margin expansion, bringing the group’s GPM to expand
by a median 110bps y/y. Gross margins of SSI jumped by 800bps y/y owing to the strong
demand for its merchandise. GPM expansion of home retailers such as HOME (+150bps)
and WLCON (+110bps) were also driven by long inventory days at 239 days and 324
days, respectively. Among the retailers we cover, only PGOLD saw y/y margin contraction
(-80bps) as higher costs dragged margins of S&R.

Exhibit 8: Retailer GPM summary

in % 1Q22 1Q23 Chg (bps)
HOME 36.1 37.6 150.0
PGOLD 20.0 19.2 (80.0)
RRHI 23.0 23.6 60.0
WLCON 38.3 39.4 110.0
SSI 36.9 44.9 800.0
Median 110.0
source: Company data

COL Financial Group, Inc. 5

 Consumer Sector I Consumer companies see earnings rise 19.5% y/y on resilient consumption

Tue 02 May 2023

Margins make or break for restaurants

Margins were the primary differentiating factor of the restaurants’ results. Higher raw
material costs dragged PIZZA and MAXS’ GPM by 410bps and 50bps y/y, respectively.
These stunted margin expansion at the operating profit level. On the other hand,
JFC managed to expand its GPM by 210bps thanks to improvements in store and
manufacturing costs. According to JFC, the full impact of price adjustments implemented
in 2022 also helped alleviate the cost pressures amid higher inflation.

Exhibit 9: Restaurant GPM summary

in % 1Q22 1Q23 Chg (bps)

JFC 16.1 18.2 210.0
MAXS 31.5 31.0 (50.0)
PIZZA 24.2 20.1 (410.0)
Median (50.0)
source: Company data

COL Financial Group, Inc. 6

 Consumer Sector I Consumer companies see earnings rise 19.5% y/y on resilient consumption

Tue 02 May 2023

Important Rating Definitions

BUY
Stocks that have a BUY rating have attractive fundamentals and valuations based on our analysis. We expect the share price to outperform the market in the
next six to 12 months.

HOLD
Stocks that have a HOLD rating have either 1) attractive fundamentals but expensive valuations 2) attractive valuations but near-term earnings outlook might
be poor or vulnerable to numerous risks. Given the said factors, the share price of the stock may perform merely in line or underperform in the market in the
next six to twelve months.

SELL
We dislike both the valuations and fundamentals of stocks with a SELL rating. We expect the share price to underperform in the next six to12 months.

Important Disclaimer

Securities recommended, offered or sold by COL Financial Group, Inc. are subject to investment risks, including the possible loss of the principal amount invested.
Although information has been obtained from and is based upon sources we believe to be reliable, we do not guarantee its accuracy and said information may
be incomplete or condensed. All opinions and estimates constitute the judgment of COL’s Equity Research Department as of the date of the report and are
subject to change without prior notice. This report is for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of
a security. COL Financial and/or its employees not involved in the preparation of this report may have investments in securities of derivatives of the companies
mentioned in this report and may trade them in ways different from those discussed in this report.

COL Reseach Team

April Lynn Tan, CFA

First Vice President & Chief Equity Strategist
april.tan@colfinancial.com

Charles William Ang, CFA George Ching Richard Laneda, CFA

Head of Research Senior Research Manager Senior Research Manager
charles.ang@colfinancial.com george.ching@colfinancial.com richard.laneda@colfinancial.com

Denise Joaquin Carlos Matthew De Leon Charmaine Co

Research Analyst Research Analyst Research Analyst
denise.joaquin@colfinancial.com matthew.deleon@colfinancial.com charmaine.co@colfinancial.com

COL Financial Group Inc.

24/F East Tower, Tektite Towers,
Exchange Road, Ortigas Center, Pasig City
Philippines 1605
Tel No. +632 636-5411
Fax No. +632 635-4632
Website: www.colfinancial.com

COL Financial Group, Inc. 7