WH Group Q2 Results In-Line, Profit Momentum to Continue in Second Half; FVE Remains at HKD 8.40

Narrow-moat WH Group reported second-quarter results that were consistent with PitchBook consensus estimates and our expectations. Strength in the packaged-meat business in the United States was the main driver for the over-30% year-on-year growth in operating profit during the period. Rising hog prices in China put pressure on packaged-meat profit during the quarter, but the divisional operating margin stayed at an elevated level. We project modest top-line growth in the second half aided by recovering China hog prices whereas we expect operating profit will continue to be maintained by a favorable packaged-meat outlook across China and the U.S. We retain our fair value estimate of HKD 8.40 per share and continue to view the stock as undervalued with 2022 P/E at 6 times, below historical range of 7-17 times.