温氏食品集团（300498 CH）成本改善超预期

EquitiesFood Products Hold:Better-than-expected cost improvement China ◆Hog costsofRMB12/kg in April, down RMB2.4/kg y-o-y,better than our expectation… MAINTAIN HOLD TARGET PRICE(CNY)PREVIOUS TARGET(CNY)16.6016.70SHARE PRICE(CNY)UPSIDE/DOWNSIDE16.17+2.7%(as of28 May 2025) ◆…while poultryprofits under pressure due to weak chickenprices ◆Maintain Hold, trim target price to RMB16.60 from RMB16.70 Strong improvement in hog costs.According tothecompany’s announcement,1Qhog costs decreased by RMB2.6/kg y-o-y.The prices impact, such as raw materialcost and eliminated sow prices, represents c40% ofthecostreduction in 1Q25,whiletheremaining60%isfromimprovedproduction indicatorsandstronginternalmanagement. Hog costsfellfurtherto RMB12/kg inApril2025,downc17% y-o-y,better thanour expectation.Wens’hog breedingcosts arecompetitiveand we expectthecost reduction trend will continue in 2025 asthecompanyadopts many methodsto reduce costs, suchastheintroduction of digital and intelligent systems, cost rankingsto encourage internal competition to narrow the cost gaps between different teams,and so on.However, wemaintain our view thathog prices are still onadowntrend in2025-26e, so Wens may have limited upside despite resilient net profits thankstoeffectivecost control.If the cost reductionsarebetter than our expectation, we mayturn more positiveon Wens’earnings. Weak poultry pricesdragonprofits.1Q poultry prices are below our expectationdue to ample chicken supply, and Wens made losses from poultry in 1Q. We lowerour chicken price for 2025. On the other side, Wens announcedarestructuring ofitspoultry business,a move that could improve internal efficiency and reducecosts, in our view. If this move works, we may turn more positive on Wens. We reviseour2025-26 earnings estimatesto reflectthecompany’s cost improvementand weak chicken prices in 1Q25.We lower our hog breeding cost by 5-8% andlowerourchicken prices estimates by 8-11% for 2025-26e. Finally, we slightly lowerour2025 net profit estimate by 1.2% to RMB11.0bn and raiseour2026 net profitestimate by 24.9% to RMB13.2bn. We also introduceour2027net profit estimate ofRMB20.7bn in this report. Yihui Sha* (Reg. No.S1700519100001)Head of A-share Agriculture ResearchHSBC Qianhai Securities Limitedyihui.sha@hsbcqh.com.cn+86 21 5066 2004 * Employed by a non-US affiliate of HSBC Securities (USA) Inc, and isnot registered/ qualified pursuant to FINRA regulations Maintain Hold and trim TP to RMB16.60(from RMB16.70).We continue to use aPB-ROE methodology to value the stock, with a 1x PB multiple corresponding to a10% ROE (unchanged).Based on our22.7% (from23.5%)2025e ROE estimate, weuse a2.27x (from2.35x)target PB multiple. Based on our RMB7.29(fromRMB7.12)2025e BVPS estimate, we derive our target price of RMB16.60 (from RMB16.70).Our target price impliesc.3% upside from thecurrent share price, and we maintainour Hold rating.See key risks onpage5. HSBC Global Research Podcasts Listen to our insights Find out more Issuer of report:HSBC Qianhai Securities Limited Disclosures & DisclaimerThis report must be read with the disclosures and the analyst certifications in the Disclosure appendix, and with the Disclaimer, which forms part of it. View HSBCQianhai Securitiesat:https://www.research.hsbc.com Financials & valuation:Wens Foodstuff Group Estimate changes Wensreported 2024 netprofits of RMB9.23bn and 1Q25net profits of RMB2bn, largely in linewith our expectations. However, its hog costswere below our expectation while the chickenpriceswereweaker than our expectation. As a result, we lower our hog breeding cost by 5-8%and lowerourchicken prices estimates by 8-11% for 2025-26e. Finally, we slightly lowerour2025 net profit estimate by 1.2% to RMB11.0bn and raiseour2026 net profit estimate by 24.9%to RMB13.2bn. We also introduceour2027 net profit estimate of RMB20.7bn(and full set of2027 estimates)in this report. Sensitivity analysis We conducted a 2025e earnings sensitivity analysis and found that: ◆Every 5% change in production would result in a5% change in 2025e net profit in the samedirection.◆Every 2% change in the average hog price would result in an 10% change in 2025e netprofit in the same direction. Where we are different from consensus Our 2025-26 revenue estimates are 6.6-7.3% below the consensus, as weexpect hog pricestocontinue theirdowncycle in 2025-26 due to ample sow inventories. However, our 2025-27 netprofit estimates are 18.7%-51.9% above the consensus as we factor in better-than-expectedcost improvement in April and expect thistrendwill continue given strong internal management. Wens is trading at a 1-yearforwardPBof 2.1x, lowerthan its historical average of 3.5x andaround the bottom, so we believe there is limited downside for Wens. Meanwhile, hog prices arestill onadowntrend,thusthe upside is also limited, in our view. Valuation and risks We continue to use a PB-ROE methodology to value the stock, with a 1x PB multiplecorresponding to a 1