UBS released a research report stating that it reaffirmed Wanzhou International's (00288) “buy” rating. The first-quarter results beat expectations, mainly driven by European and American business. The net profit forecast for next year was raised by 10% and 5% respectively. The latest forecast shows that the 2023-25 net profit compound annual growth rate is 48%, slightly increasing the target price by 1.6% to HK$6.5. The company's revenue for the first quarter of this year fell 8% year on year to 6.181 billion US dollars, and net profit before biofair value adjustment was US$301 million, up about 73% year on year. Both beat UBS expectations, and the European and US business offset weak mainland business.
In terms of business in China, Vanke's management expects the average pig price to be roughly the same as year on year, lower at the beginning of the year, and higher later this year. The average price for the whole year will not exceed RMB 16 per kilogram. Management predicts that profits per ton of packaged meat will increase further this year, building on last year's strong profit margins. Management also estimates that the US pig production business may turn a loss into a profit in the 2nd/3rd quarter of this year. Despite rising pork prices in the US, management reiterated plans to continue to reduce pig production capacity to less than 15 million heads by the end of this year, and further reduce it to less than 10 million heads over the next 1-3 years.