The Zhitong Finance App learned that DBS released a research report saying that maintaining Wanzhou International's (00288) “buy” rating, the target price was lowered from HK$5.49 to HK$5.34. It is hoped that a potential spin-off of Smithfield Foods would be listed in the US, which could bring a re-rating opportunity for the US business. Taking into account short-term profit margin pressure on the US pork business, the bank lowered its earnings forecast for fiscal year 2023 and 2024 by 6% and 18%, respectively.

According to the report, due to the late Lunar New Year and weak consumer expectations, it is expected that Wanzhou's sales volume in the fourth quarter of last year may be under pressure, but it will then recover moderately this year. Although pig prices may rise this year, since the company has certain frozen inventory, DBS expects Wanzhou's profit per ton to be maintained this year. As pig prices rise, frozen pork profits may also have more room to improve this year, while packaged meat profits in China will remain strong.

The bank pointed out that the US market continues to improve, and pig and pork prices were low in the fourth quarter of last year, and it is believed that the trend of increasing profits will continue. In terms of pork business, Wanzhou closed part of its business in Utah since December last year, reducing upstream production capacity to less than 15 million heads this year. It is expected that the pork business segment losses will narrow drastically this year.