Ge Long Hui·2025-07-22 10:21Core Viewpoint - The company is expected to achieve low double-digit growth in comparable operating profit for Q2 2025, aligning with market expectations, despite the impact of government subsidies in Q2 2024 on its U.S. business [1][2]. Group 1: China Business - In Q2 2025, the company's meat product sales are anticipated to stabilize year-on-year, with a notable reduction in losses from the breeding business due to decreased feed costs and internal efficiency improvements [1]. - The meat product segment is projected to see a year-on-year increase in profit per ton, benefiting from cost reductions, despite a 3% decline in the overall meat product industry GMV in April-May 2025, with the company's GMV down by only 1% [1]. - The slaughtering business is expected to face pressure in Q2 2025 due to a high profit base from the same period last year [1]. Group 2: U.S. Business - The comparable operating profit for the meat product business in the U.S. is expected to improve in Q2 2025, with slight increases in both sales volume and profit per ton attributed to internal efficiency enhancements [2]. - The breeding business is forecasted to see year-on-year profit improvements due to strong demand for animal protein and rising prices of other meat proteins, with live hog prices increasing by 16% year-on-year and 20% month-on-month [2]. - The slaughtering business is supported by strong domestic and import demand, with the U.S. pork price spread increasing by 10.3% year-on-year [2]. Group 3: European Business - The company anticipates continued year-on-year profit growth in Q2 2025 for its European operations, driven by internal efficiency and product structure optimization [2]. - The overall profitability of the pork business in Europe is expected to remain stable compared to the same period last year [2]. Group 4: Profit Forecast and Valuation - The company maintains its core net profit forecasts for 2025 and 2026 at $1.614 billion and $1.683 billion, respectively, trading at 8.1x and 7.8x P/E for those years [2]. - The target price is set at HKD 8.56 per share, corresponding to 8.7x and 8.4x P/E for 2025 and 2026, indicating a potential upside of nearly 7.8% [2].