- RE-ITERATE BUY Entry – 5.55 Target – 6.20 Stop Loss – 5.25
- WH Group Ltd is an investment holding company mainly engaged in the pork business. The Company operates its business through three segments. The Packaged Meats segment is engaged in the production, wholesale and retail of low temperature and high temperature meat products. The Pork segment is engaged in the slaughtering, wholesale and retail of fresh and frozen pork and hog farming businesses. The Others segment is engaged in the slaughtering and sales of poultry. The Segment is also engaged in the sales of ancillary products and services such as provision of logistics services, manufacturing of flavouring ingredients and natural casings, manufacture and sales of packaging materials, operating finance companies, property development companies, a chain of retail food stores, sales of biological pharmaceutical materials, trading of meat related products and others.
- Live pig price rebounding. As of 20th May, the average live pig price in the rural retail market arrived at RMB20.9/kg, up 13.6% MoM. The turnaround was due mainly to supply chain disruptions resulting in traffic congestion. But the utilisation rates of the meat processing plants started to edge up. Currently, the number of pig stock is 424mn, compared to 449mn at the end of 2021. The number of pig breeds dipped by 0.2% MoM and fell by 4.3% YoY in April. The destocking of live pigs has come to an end. The demand weighs more among factors impacting live pig prices in the near term. With China easing lockdowns soon, the demand is expected to revive again.
China Retail Price: Rural Market Fair: Live Pig
Source: CEIC
- 1Q22 results review. Total operating income dropped by 24.7% YoY to RMB13.8bn. Net profit dipped by 1.6% YoY to RMB1.5bn. Operating margin increased by 3.6ppts to 13.8%. Shuanghui Development’s external sales volume of meat products increased by 1.8% YoY to 0.76mn metric tonnes.
- The updated market consensus of the EPS growth in FY22/23 is 37.5%/7.3% YoY respectively, which translates to 7.1x/6.6x forward PE. The current PER is 9.8x. Bloomberg consensus average 12-month target price is HK$7.87.
