Key Takeaways:
Goldman Sachs trimmed its target price for Muyuan Foods (02714.HK) to HK$64 from HK$68, citing lower near-term hog price assumptions while forecasting a cyclical rebound from 25-year lows.
"The bank noted that hog prices have fallen to a 25-year low of RMB 8.7/kg and are expected to rebound in the second half of the year," the Goldman Sachs report released April 16 said.
The bank lowered its target for the company's A-shares (002714.SZ) to RMB 58 from RMB 62, while reiterating a "Buy" rating on both share classes. Goldman reduced its 2026 recurring profit forecast by 17 percent to reflect the current price weakness but left its 2027 and 2028 estimates largely unchanged.
Goldman believes the industry is at a cyclical bottom, with current prices forcing cash losses on nearly all producers and likely accelerating capacity exits. The bank forecasts a 4 to 7 percent contraction in hog supply in the coming quarters, driving prices to RMB 15/kg in the second half of 2026.
The report highlighted that the current valuation presents an attractive risk-reward profile. Goldman's analysis suggests Muyuan's H-share price has approximately 60 percent upside to its mid-cycle valuation, versus 10 percent upside to its historical trough.
The bank's forecast anticipates hog prices will rise further to RMB 15.3 per kilogram in 2027, supporting profitability for major producers like Muyuan Foods.
The lowered target could pressure the stock in the short term, but the maintained "Buy" rating points to long-term confidence. Investors will watch for signs of supply-side contraction and the initial price recovery in the second half of the year as the next major driver.
This article is for informational purposes only and does not constitute investment advice.
