[ET Net News Agency, 14 August 2019] Credit Suisse cut its target price for WH Group
(WHG)(00288) to HK$9.3 from HK$10.7 and maintained its "buy" rating.
The research house said WHG's core operating profit (ex-bio fair value adjustment)
declined 11.8% on flattish sales in 1H. The results were below market expectation by 4-5%.
This implies sales up 5.3% and profit down 13.1% in 2Q. The negative surprise mainly
comes from US fresh pork business, where loss amounted to US$83mn (worse than US$26mn loss
in 2Q 2018), and thus nearly offset the profit earned from hog production, leading to a
2.6% decrease in total US profit in 2Q.
During the briefing, management highlighted (1) sequential improvement in China's
profitability with the help of low-cost inventory and price hike and (2) Shuanghui is
likely to import more pork from the US to ease margin pressure in 2H, justified by the
widening price gap.
Credit Suisse expects the continued recovery of the US export market would help the US
fresh pork business turn profitable in 2H. It cut its FY2019/20 earnings forecast by 4-5%
to reflect the lower-than-expected results. (KL)