2025-10-30 02:01Summary of WH Group and Shuanghui Earnings Call Industry Overview - Industry: China Consumer Staples, specifically focusing on pork production and packaged meat - Companies: WH Group and Shuanghui Key Highlights from the Earnings Call Financial Performance - WH Group's 3Q25 operating profit (OP) increased by 4% year-over-year (yoy), surpassing Goldman Sachs' estimate of 2% yoy growth, driven by improved performance in China and the US [1][2] - In China, packaged meat profits rose by 8% yoy, with unit profit reaching Rmb5,200 per ton, although fresh meat faced increased pressure [1][2] - The US operations showed better-than-expected results in hog production and packaged meat, with a projected operating profit of US$302 million for packaged meat in 4Q25 [2] Management Insights - China Operations: - Management observed a larger-than-expected drop in hog prices in 3Q25, anticipating continued declines into 4Q25 and FY26, which could stabilize packaged meat unit profits at Rmb4,700 in 2025 and 2026 [2] - Fresh meat is expected to face headwinds due to tariffs, while hog production profits are projected to improve in 2026 compared to a loss in 3Q25 [2] - US Operations: - Hog production strength is expected to offset near-term input cost pressures, with management projecting a positive outlook into FY26 [2] - For FY25, adjusted EBIT guidance for packaged meat is set at US$1,091 million, with overall adjusted EBIT expected to be US$1,305 million [2] - European Operations: - Hog prices in Europe are expected to decline further into 4Q25, with management remaining optimistic about cost savings and vertical integration benefits in hog and poultry production [2][14] Adjustments and Projections - Following the earnings results, WH Group's 2025E underlying net income (NI) was fine-tuned upwards by 2.2%, while 2026E/27E NI was revised down slightly [3][19] - The 12-month target price (TP) for WH Group was lowered to HK$8.9 from HK$9.0, reflecting a narrowing of net asset value (NAV) discounts from 35% to 28% [3][19] - Shuanghui's 2025-27E net profit projections were increased by 0.7-0.9% due to a better outlook for packaged meat unit profits, with a new TP of Rmb25 [3][20] Market Dynamics - Management noted significant sales volume growth in new channels, with expectations of 40% yoy growth in 4Q25 and FY25 [2][13] - The company plans to increase investments in marketing and new channels to drive sales volume expansion [2][13] - Fresh meat profit per head is expected to improve in 4Q25, with management focusing on stabilizing unit profits amid market competition [2][13] Risks and Considerations - Fresh meat profits are under pressure due to tariffs and market competition, which may impact overall profitability [2][13] - Rising raw material costs and cautious consumer spending in the US could pose challenges for packaged meat revenue growth [2][13] Conclusion WH Group and Shuanghui are navigating a complex market environment with varying performance across regions. The management's focus on cost control, marketing investments, and adapting to market dynamics will be crucial for sustaining growth and profitability in the coming quarters.