Bank of China International released a research report stating that while maintaining Wanzhou International's (00288) “buy” rating, the target price was raised from HK$5.8 to HK$6.5. The bank believes that since Wanzhou is still considering a spin-off of the Smithfield business, improvements in its US business will help reassess Wanzhou's valuation.
According to the report, the company's fundamentals improved in the first quarter, showing resilience, and net profit increased 140% year over year to US$465 million. Although the Chinese business continues to be dragged down by low pig prices, the US business is showing strong signs of “turning over”. The bank believes this supports this year's overall profit, and considering last year's low base, it is expected that this year's year-on-year growth figures will also be strong.