By Clarence Leong


Shares of WH Group Ltd. fell sharply in early trade on Wednesday, after the world's largest pork producer reported a drop in third-quarter profit and warned of inflationary pressure.

WH Group's Hong Kong-listed stock lost 8.0% to 4.14 Hong Kong dollars (US$0.53). A close at this level would be its biggest one-day decline since mid-March. Its shares have fallen 15% this year.

WH Group underperformed the wider market, with the city's benchmark Hang Seng Index last up 2.6%.

The Chinese company said late Tuesday that net profit for the first nine months of the year rose 16% from a year earlier to US$914 million. But that translates to third-quarter profit of US$213 million, which is 13% lower than the year-earlier period.

Revenue for the nine-month period gained 1.7% from a year earlier to US$20.41 billion, implying a third-quarter growth of 4.0%.

"The inflation environment has been adding unprecedented pressure to our margin and market competition is becoming more intense," WH Group said in a statement. Uncertainty stemming from slowing economic growth, geopolitical tensions and the divergent pandemic response globally is also expected to persist through year-end, it added.

But Citigroup still thinks the stock's valuation is relatively attractive in the Chinese food-and-beverage sector, "especially amid currently volatile market," analysts Xiaopo Wei and Vincent Yang said in a note.

They expect the company's U.S. packaged meat business will benefit from a recovery in the food service sector, while margin pressure on its Chinese business can be alleviated by cheaper frozen pork inventories in the second half of next year.

The U.S. bank keeps a buy rating and HK$7.23 target price on the stock.


Write to Clarence Leong at clarence.leong@wsj.com


(END) Dow Jones Newswires

10-26-22 0002ET