The Zhitong Finance App learned that CICC released a research report stating that it maintained Wanzhou International's (00288) “outperforming the industry” rating, raised the profit of the US pork business and raised Wanzhou's 24/25 profit by 10.2%/14.6% to US$1,215/1,358 million due to the recent rise in US pig prices. The target price was raised by 10.2% to HK$6.5, taking into account the increase in profit forecasts. The company's 1Q24 revenue was US$6.181 billion, -8.3% YoY; operating profit of US$501 million, +37.3% YoY; core net profit to mother (excluding changes in biological asset value) of US$301 million, +73% YoY. The US pork business dropped significantly, and 1Q24 profit exceeded market expectations.

The main views of CICC are as follows:

Domestic: According to the announcement and the bank's estimate:

1) Meat products: 1Q24 sales volume was nearly -5% year-on-year, under pressure, and the profit per ton remained steady at nearly 5,000 yuan/ton. 2) Slaughter: The slaughter volume in 1Q24 was -21%, and the average profit was about 37.5 yuan/head. The estimate is that demand is weak compared to the same period last year, and the prices of both fresh and frozen products are low. 3) Breeding: The breeding business is mainly included in other divisions. The other divisions in 1Q24 lost 210 million yuan, an increase in losses over the previous year. The forecast is mainly related to increased losses in poultry farming (falling chicken prices).

US: According to the announcement and the bank's estimates:

1) Meat products: 1Q24 operating profit -4%, sales volume is about -4%, tonne profit is 894 US dollars/ton (remains high). The bank believes that 1Q24 sales of US meat products were under pressure due to lower ham sales than last year, but overall performance is still strong. The bank believes that the consumer demand environment in the US may be under some pressure this year, but the company's improved product structure (branded products+private brand portfolio) is expected to have stable sales throughout the year. 2) US pork business: Currently, US pig prices are rebounding, and the company expects to enter a normal seasonal cycle. According to current pig prices and feed prices, it is expected to reduce losses by about 400 million US dollars this year.

Outlook 2024:

1) Domestic business: The bank believes that the profitability of meat products is expected to remain at a high level. Sales need to observe terminal demand and the implementation of the company's 2024 “branch multiplication” channel intensive farming plan. The bank believes that the slaughter business is mainly based on volume growth, and overall profits are expected to remain stable; if pig prices and chicken prices recover, the breeding business is expected to reduce losses. 2) US business: The company plans to maintain a profit of more than 750 US dollars/ton of meat products and sales volume is expected to remain relatively steady. The bank believes that meat products are expected to maintain annual operating profit of 1 billion US dollars +; in addition, the bank suggests continuing to pay attention to pig prices and breeding costs. Based on current pig prices and breeding costs, the bank estimates that the breeding business will reduce losses of 400 million+ US dollars in 24 years.

risks

US pig prices and breeding costs fluctuate greatly, domestic demand for meat products is relatively weak; food safety risks.