Goldman Sachs has issued a research report adjusting its outlook for WH GROUP (00288). The firm has reduced its net profit forecasts for the years 2026 to 2028 by 1% to 2%, citing expectations of a softer performance in the second quarter. Consequently, the price target has been lowered from HK$11.8 to HK$11.1, while a "Neutral" rating is maintained.
The report projects that the company's operating profit for the second quarter of this year will show a high single-digit percentage decline year-on-year. This is expected to pull the overall first-half performance to roughly flat compared to the same period last year. Specifically, the operating profit from the China business is forecast to fall by 11% year-on-year in Q2. Hog production in China remains weak due to declining pig prices, although operational improvements are anticipated to narrow losses compared to the first quarter.
Regarding international operations, the US packaged meats business faces rising beef and freight costs. However, the commodity price environment for hog production there remains supportive. In Europe, the hog production business is expected to record a high double-digit percentage decline, impacted by a high base of comparison from last year. In contrast, the European packaged meats segment is projected to maintain strong double-digit growth.
Looking ahead to the second half of the year, Goldman Sachs views the mainland Chinese consumer environment as mixed. Nevertheless, the firm believes WH GROUP's China business has the flexibility to manage promotional activities for packaged meats, and the cost structure of its US operations could see improvement. For the European hog business, losses are expected to narrow starting from the third quarter, assuming pig prices stabilize.
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