[ET Net News Agency, 15 June 2018] Daiwa Research cut its target price for WH Group
(00288) to HK$10.55 from HK$10.9, and retained its "buy" rating.
The research house hosted WH Group's NDR in Tokyo on 12 and 14 June. Management provided
recent business updates: (1) direct exports from the US to China are at very low levels
currently due to low hog prices in China, (2) the packaged meat business contributes 80%
to total group revenue, and (3) the fresh pork export business will have a limited impact
at the group level.
Management believes the China business remains strong as lower hog prices are
benefitting both fresh pork and packaged meat businesses. Also, its US packaged meat
business is witnessing a recovery.
Management expects the packaged meat business to recover and offset the near-term
pressure on volatile outlook for fresh pork prices. Daiwa noted that the competitive
landscape has changed since 3Q 2017 as more players entered the meat processing business;
hence, it expects hog price to rise.
Management expects trade war talks to be settled in the near term and pork prices to
become more visible in 2H. Daiwa sees no impact on the China business in the near term as
pork prices remain low. (KL)