[ET Net News Agency, 6 February 2018] HSBC Global Research lifted its target price for
WH Group (00288) to HK$11.8 from HK$10.3, and maintained its "buy" rating.
Despite WH Group's shares having gained 22% in the past three months, the research house
sees multiple growth drivers this year and believes consensus is too conservative on its
margin outlook.
HSBC believes the Smithfield US business will see a meaningful margin turnaround in 2018
given better product mix, cost efficiency, and lower hog prices. Second, the US business
will also benefit from a weaker USD as it means the price difference between China and US
average hog prices will further widen, and this is positive for the export business.
It added that China Shuanghui business should also see a modest recovery in sales volume
and margin this year given higher contribution from new products and a favourable hog
price trend.
Finally, WH Group also benefit from a lower US tax rate, and HSBC expects the company to
raise its dividend payout from 47% in 2016 to 55% in 2017 and 60% in 2018 given better
cash flow. (KL)