Pig sector 2Q26 earnings under pressure; Goldman Sachs cuts WH Group and Shuanghui target prices

Overview

This report is Goldman Sachs’ 2Q26 earnings preview for WH Group and Henan Shuanghui Ltd., Chinese pork and packaged-meat companies. The report expects 2Q26 earnings to face clear headwinds: WH Group operating profit is projected to decline at a high-single-digit year-on-year rate, China packaged meat is trading margin for volume growth, and overseas businesses are pressured by high US beef, freight and diesel costs, as well as a high-base effect in European hog operations. Nonetheless, Goldman Sachs still expects full-year operating profit to be roughly stable year-over-year, and believes that controlled China promotions in the second half, US cost-structure improvement, and narrowing losses in European hog operations will be factors for recovery.

Core views

Key views include: first, WH Group’s 2Q26 operating profit growth is expected to weaken, while 1H26 is roughly flat year-over-year; second, operating profit for the China business and Henan Shuanghui is expected to decline 11% year-over-year, packaged-meat unit profit is expected to decline 13% year-over-year, but sales are expected to grow 2%; third, in the international business, US packaged-meat cost pressure remains high, the Europe segment is pressured by a high-base effect in hog operations, but Europe packaged-meat still maintains double-digit year-over-year growth; fourth, if hog prices stabilize in the second half, losses in European hog operations are expected to narrow from 3Q26 onward; fifth, on valuation Goldman Sachs cut target prices for WH Group and Henan Shuanghui, while keeping WH Group’s SOTP methodology and Henan Shuanghui’s 17x 2026P/E target multiple.

Analysis framework

The report adopts a segment-level operating-profit and valuation break-down framework, assessing profit drivers separately for China, US SFD, and Europe, and combines assumptions for North America hog-breeding profits, packer processing profits, WH Group profit summary, old versus new forecast comparison, and SOTP valuation tables to adjust profit forecasts and target prices.

Methodology notes

• Valuation methodsSOTP

  WH Group 12-month target price is based on the sum of segment valuations, with a NAV discount applied.

  Goldman Sachs applies SOTP to WH Group: the US SFD business is valued using EV/EBITDA under a US-team risk-reward framework, with downside/base/upside scenarios at 7.0x/8.0x/8.5x; the China business uses a 17x P/E multiple; the Europe business uses a 2026E 7x P/E multiple, with a 9% NAV discount applied.

• Valuation methodsP/E

  Henan Shuanghui target price is based on a 17x 2026 PE.

  Goldman Sachs maintains the 17x 2026P/E target multiple for Henan Shuanghui unchanged, but lowered the 12-month target price to Rmb25.0 because 2Q26 is expected to be weaker.

• Profit trackingNorth America hypothetical hog margin and packer margin

  Tracking hypothetical North America hog-breeding and packer margins.

  Hog profits are modeled as North American live-hog prices minus mixed feed costs, with feed assumptions set at 10 bushels of corn plus 150 pounds of soybean meal per head; packer profit is calculated as revenue per head minus processing cost per head.

• Factor analysisGS Factor Profile

  Goldman Sachs factor profile compares stock growth, financial returns, valuation multiples, and a composite factor.

  The growth factor uses forward sales, EBITDA, and EPS growth; financial-return factors use ROE, ROCE, and CROCI; valuation multiples include P/E, P/B, P/D, EV/EBITDA, and EV/FCF; the composite factor is the average of growth, financial-return, and low-valuation attributes.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• WH Group (0288.HK)

  Core coverage target

  Strengths

  Business coverage spans China, the US, and Europe with diversified segments; full-year operating profit is expected to be roughly stable year-over-year; dividend yield is about 7%; second-half US cost-structure improvement and narrowing losses in European hog operations could provide support.

  Weaknesses

  WH Group’s 2Q26 operating profit is expected to decline at a high-single-digit year-over-year rate; China packaged-meat unit profit is falling; US beef, freight, and diesel costs remain high; European hog operations are still burdened by a high-base effect.

  Comparison

  Compared with Henan Shuanghui, WH Group has clearer international business exposure and SOTP valuation characteristics, while overseas costs and the European hog cycle have a larger impact on performance.

  Risks

  US demand slowdown, protein or pork demand trends changing, lower-than-expected global demand for US pork, rising raw-material costs, regulatory costs, labor shortages, tariffs, food-safety incidents, or livestock disease.

• Henan Shuanghui Ltd. (000895.SZ)

  China business-related covered target

  Strengths

  Packaged-meat sales are still expected to grow; target multiple remains 17x 2026PE; improvements in upstream business could provide upside.

  Weaknesses

  2Q26 China business operating profit is expected to decline 11% year-over-year; packaged-meat unit profit is expected to decline 13% year-over-year; margins are exposed to promotions and competition.

  Comparison

  Compared with WH Group, Henan Shuanghui is more concentrated in China packaged meat and fresh pork demand, and valuation uses P/E rather than SOTP.

  Risks

  Changes in packaged-meat competitive intensity, volatility in fresh pork and packaged-meat end-market demand, pace of upstream execution, and hog, corn, and other raw-material price fluctuations.

Key data

• WH Group 2Q26 operating profit expectationHigh-single-digit year-over-year declineGoldman Sachs expects WH Group operating profit to weaken in 2Q26, with 1H26 remaining roughly flat year-over-year.
• China business and Henan Shuanghui 2Q26 operating profitDown 11% year-over-yearMainly due to a 13% year-over-year decline in packaged-meat unit profit, with the company driving about 2% sales growth by accepting lower unit profit.
• WH Group FY2026E revenueUS$29.502bnThe earnings summary table shows FY2026E revenue up about 5% versus FY2025.
• WH Group FY2026E underlying EBITUS$2.577bnThe earnings summary table shows FY2026E underlying EBIT down about 1% year-over-year.
• WH Group FY2026E underlying NPATUS$1.559bnThe earnings summary table shows FY2026E underlying NPAT down about 2% year-over-year.
• WH Group target priceHK$11.1Reduced from HK$11.8; SOTP method is still applied.
• Henan Shuanghui target priceRmb25.0Reduced from Rmb27.0, with the 17x 2026PE target multiple and Neutral rating maintained.
• WH Group dividend yieldAbout 7%Goldman Sachs believes the high dividend yield remains supportive.

Impact & implications

From an investment standpoint, the short-term earnings reset is broadly negative, mainly due to packaging-margin sacrifice in China and elevated overseas costs. However, stable full-year operating profit, high dividend yield, second-half US cost improvements, and narrowing losses in European hog operations mean the conclusion is not outrightly bearish. For Henan Shuanghui, the target-price cut and Neutral rating indicate valuation is currently fair, and upside depends on easing packaged-meat competition, improving end-market demand, and progress in upstream businesses.

Risks

• A slowdown in US economic activity could compress consumer spending and weaken demand.
• If consumption trends shift away from protein, pork, or higher-value products, revenue growth could be affected.
• Lower-than-expected global demand for US pork could weigh on US operations.
• Higher promotional spending, rising input costs, regulatory changes, labor shortages, or wage pressure could squeeze margins.
• Retaliatory tariffs could increase cost uncertainty for cross-border business and raw materials.
• Volatility in China live-pig prices and higher-than-expected US and China corn prices could pressure pork and packaged-meat margins.
• Commodity inflation in soybeans, corn, and pork could create cost pressure.
• Food-safety incidents or livestock disease could weaken brand trust and damage financial performance.

What to watch

• Whether 2Q26 WH Group actual operating profit matches the expected high-single-digit year-over-year decline.
• Whether China packaged-meat sales growth can offset the decline in unit profit.
• Whether US beef, freight, and diesel costs improve in 2H26.
• Whether European hog losses narrow beginning in 3Q26.
• Whether China hog prices stabilize and how feed-cost inputs like corn and soybeans evolve.
• Changes in Henan Shuanghui packaged-meat competitive intensity and end-market demand for fresh pork/packaged meat.
• Whether WH Group dividend yield and full-year operating-profit stability are sustained.