Analyst Anne Ling of Jefferies maintained a Buy rating on WH Group Limited (WHGRF – Research Report), with a price target of HK$5.84.
Anne Ling’s Buy rating for WH Group Limited is based on a nuanced analysis of the company’s financial outlook and market conditions. Despite expecting a year-on-year decrease in net profit and a decline in sales volume for the second half of 2023, Ling anticipates a recovery in profitability per ton that exceeds management targets in China, and an improvement in profit per ton in the U.S. for the same period. This suggests that even with the current market challenges, WH Group is managing to navigate effectively, maintaining a solid profit margin.
Looking ahead to 2024, Ling projects a notable increase in net profit, driven by a modest rise in sales and a reduction in losses from the U.S. pork business due to cost efficiencies and a better price spread. Additionally, the expectation of a greater profit contribution from frozen meat in the second half of 2024, along with strategic streamlining of the U.S. upstream business, indicates potential for improved operational performance. The anticipated maintenance of the dividend payout, coupled with a yield of 6.5% at the current stock price, further strengthens the case for a Buy rating, reflecting both the company’s resilience and its commitment to shareholder returns.
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WH Group Limited (WHGRF) Company Description:
WH Group, listed on the Hong Kong exchange, is a holding company and the world’s largest vertically integrated producer of pork and related packaged meat products. Its revenue is mainly derived from activities undertaken by its China and U.S. operations, which are respectively via 70.3%-owned Henan Shuanghui Investment & Development Co., or Shuanghui, and wholly owned Smithfield Foods Inc. In the U.S., its key packaged meats brands, in which it has an 8% market share, include Nathan’s hot dogs, Armour, John Morrell, and Curly’s, while in China, products are mainly under the Shuanghui brand, where it also has a 32% market share. we expect the company’s operating profit to be split almost equally between the U.S. and China going forward with a small contribution from Europe.
