Citi has released a research report indicating that WH Group (00288) subsidiary Smithfield has further cut its guidance due to weak demand and declining pork/live hog price trends. The bank has reduced its net profit forecasts for WH Group for 2026 to 2028 by 10% to 11%, and lowered its North American operating profit forecast by 18%, primarily impacted by the pork business.

Due to the lowered earnings forecasts and an increased holding company discount, the target price has been cut from HK$9.9 to HK$8.2. The 'Buy' rating is maintained, as the dividend yield still exceeds 5% under conservative payout assumptions.

The bank has also revised its dividend payout ratio assumption down from 66% to 50%, citing cash flow uncertainties at WH Group amid operational challenges, as well as the absence of an interim dividend from Shuanghui. In the sum-of-the-parts valuation, the holding company discount has been raised from 10% to 20% to reflect uncertainties in the dividend outlook, despite the company reaffirming its intention to maintain stable shareholder returns.

Citi expects net profit to decline 15% year-on-year in 2026, with a potential stabilization expected in 2027.