WH Group Earnings: Soft Sales in China Dragged Results; We're Maintaining FVE at HKD 6.90 per Share

Narrow-moat WH Group reported 2023 results that trailed our estimates, due to soft packaged meat sales in China in the fourth quarter and one-off charges from downsizing upstream business in the US. However, packaged meat operating margin in the US beat our expectation. We lift our 2024 forecasts for packaged meat margins across China and the US but leave our long-term earnings forecasts largely unchanged. As a result, we retain our fair value estimate at HKD 6.90 per share, which implies 11 times 2024 P/E, 5 times EV/EBITDA and 4.6% dividend yield. Management intends to prioritize shareholder returns in future, and thus we raised our long-term projected dividend payout ratio to 50%, from 40%. We sees shares as undervalued decent 2024 dividend yield of 5.8% currently.