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WH Group Ltd Shs Unitary 144A/Reg S 00288

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Stock XHKG Rating as of
HK$6.15 −0.17 (2.69%)
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As of Delayed Price Closed

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The US Business Is Set to Drive Near-Term Profit Growth for WH Group

Jacky Tsang

WH Group operates a vertically integrated value chain in the hog industry across China, the US, and Europe. Through its subsidiaries Shuanghui in China and Smithfield in the US, the company engages in hog production, slaughtering, and packaged meat processing and distribution. Shuanghui is a clear market leader in the packaged-meat industry in China, commanding around one third of value share. WH Group derives close to 90% of its operating profit from packaged meat across China and the US, although Smithfield has a lower market share in processed meat versus Hormel, Tyson, and Pilgrim’s Pride. Profitability of this segment tended to be more stable versus the company’s upstream business.

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Price vs Fair Value

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00288 is trading at a 346% premium.
Price
HK$6.15
Fair Value
HK$7.20
Uncertainty
High
1-Star Price
HK$97.20
5-Star Price
HK$3.62
Economic Moat
Dvctcx
Capital Allocation
Sbgkbdcgl

Bulls Say, Bears Say

Bulls

Scalable operations in both the US and China allow WH Group to take advantage of hog price differentials between the two countries and achieve raw material security for its packaged meat business, which is its main profit driver.

Bears

Rising geopolitical tensions between the US and China could turn against WH Group. Unexpected changes in tariffs of imported pork in China could also remove the cost advantage of US pork imports for Shuanghui.

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News

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Trading Information

Previous Close Price
HK$6.32
Day Range
HK$6.00–6.32
52-Week Range
HK$3.93–6.32
Bid/Ask
HK$6.14 / HK$6.15
Market Cap
HK$78.91 Bil
Volume/Avg
60.2 Mil / 24.9 Mil

Key Statistics

Price/Earnings (Normalized)
11.21
Price/Sales
0.40
Dividend Yield (Trailing)
5.69%
Dividend Yield (Forward)
5.69%
Total Yield
5.69%

Company Profile

WH Group is a holding company and the world’s largest vertically integrated producer of pork and related packaged meat products. Its revenue is mainly derived from activities undertaken by its China and US operations, which are respectively via 70.3%-owned Henan Shuanghui Investment & Development Co., or Shuanghui, and wholly owned Smithfield Foods Inc. In the US, its key packaged meats brands, in which it has an 8% market share, include Nathan’s hot dogs, Armour, John Morrell, and Curly’s, while in China, products are mainly under the Shuanghui brand, where it also has a 32% market share. We expect the company’s operating profit to be split almost equally between the US and China going forward with a small contribution from Europe.
Sector
Consumer Defensive
Industry
Packaged Foods
Stock Style Box
Large Value
Total Number of Employees
101,000
Website
https://www.wh-group.com

Competitors

Valuation

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Metric
00288
HRL
TSN
Price/Earnings (Normalized)
 11.2120.1823.41
Price/Book Value
 1.002.211.18
Price/Sales
 0.401.450.40
Price/Cash Flow
 4.6814.7610.88
Price/Earnings
00288
HRL
TSN

Financial Strength

Metric
00288
HRL
TSN
Quick Ratio
 0.710.980.85
Current Ratio
 1.752.291.82
Interest Coverage
 10.8813.070.98
Quick Ratio
00288
HRL
TSN

Profitability

Metric
00288
HRL
TSN
Return on Assets (Normalized)
 4.81%6.39%2.45%
Return on Equity (Normalized)
 9.33%11.08%4.97%
Return on Invested Capital (Normalized)
 6.93%8.06%4.23%
Return on Assets
00288
HRL
TSN

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