WH Group Q4 Profit In Line; 2023 Margin Pressured by Inflation; Lowering FVE to HKD 7.80

Narrow-moat WH Group reported 2022 results that broadly met Refinitiv consensus on net profit despite a slight miss on revenue. Operating profit was consistent with expectations. Management noted that inflationary pressure could continue to weigh on margins in 2023. We have lowered our operating margin estimates primarily on the U.S. upstream business and reduced our fair value estimate to HKD 7.80 per share (from HKD 8.10), which implies 11 times 2023 P/E and is within the 10-year historical multiple range of 7 and 15 times. We think shares are undervalued, but the market could be concerned about persistent margin pressure in the near term.