Citi: Cuts WH GROUP (00288) target price to HK$10.1 and lowers earnings forecast.
Due to the traditionally weaker seasonal prices of live hogs in the fourth quarter, it is still too early to determine whether the price cycle of live hogs in the United States has reversed.
Citi released a research report stating that it has lowered its expected profit for WH GROUP (00288) for 2026-2028 by 6-11% to reflect a lower forecast for its businesses in the United States and China, with the target price adjusted from HKD 12.3 to HKD 10.1. Assuming dividends remain unchanged, it maintains a "Buy" rating based on an attractive yield.
WH Groups subsidiary Smithfield's second quarter operational performance aligned with Citis expectations for WH GROUP in the U.S. and Mexico; however, its adjusted operating profit guidance for 2026 has been lowered by 7%, which is below expectations. Citi believes that Smithfield's guidance reduction is due to the declining trend in live hog futures prices. This downward trend is likely attributed to increased industry supply and inflation dampening demand. However, as live hog prices typically weaken seasonally in the fourth quarter, it is still too early to determine whether the U.S. live hog price cycle has reversed.
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