WH Group Earnings: Solid Margins Across Upstream, Downstream Businesses; Fair Value Estimate Intact

Narrow-moat WH Group's solid third-quarter results were underpinned by strong margins in the packaged meat businesses across China and US, as well as further improvement in US hog production segment's profitability. Revenue was broadly in line with our estimate, but operating profit exceeded our forecast by 25%. We increased our 2024 operating profit estimate by 19% as we project continued momentum in the fourth quarter. But we left our longer-term forecasts unchanged, as we have already factored in margin normalization. Therefore, our fair value estimate of HKD 6.90 remains intact. WH Group's share price is up more than 20% year to date and currently trading at a 9% discount to our valuation. We think the stock could continue to draw investors' interests given its attractive 2024 dividend yield of 6.9%.