Earnings Update: Sinopec Shanghai Petrochemical Company Limited (HKG:338) Just Reported Its Yearly Results And Analysts Are Updating Their Forecasts
Sinopec Shanghai Petrochemical Company Limited (HKG:338) last week reported its latest annual results, which makes it a good time for investors to dive in and see if the business is performing in line with expectations. The results don't look great, especially considering that statutory losses grew 100% to per share. Revenues of CN¥100b did beat expectations by 9.6%, but it looks like a bit of a cold comfort. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Check out our latest analysis for Sinopec Shanghai Petrochemical
Following the recent earnings report, the consensus fromeight analysts covering Sinopec Shanghai Petrochemical is for revenues of CN¥73.0b in 2020, implying a disturbing 27% decline in sales compared to the last 12 months. Statutory earnings per share are expected to shrink 7.1% to CN¥0.19 in the same period. In the lead-up to this report, the analysts had been modelling revenues of CN¥89.0b and earnings per share (EPS) of CN¥0.19 in 2020. So there's been a clear change in sentiment after these results, with the analysts making a substantial drop in revenues and reconfirming their earnings per share estimates.
The average price target was steady at CN¥2.09 even though revenue estimates declined; likely suggesting the analysts place a higher value on earnings. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Sinopec Shanghai Petrochemical, with the most bullish analyst valuing it at CN¥2.78 and the most bearish at CN¥1.38 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that sales are expected to reverse, with the forecast 27% revenue decline a notable change from historical growth of 4.4% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue decline 1.2% annually for the foreseeable future. So it's pretty clear that Sinopec Shanghai Petrochemical's revenues are expected to shrink faster than the wider industry.
The Bottom Line
The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. Unfortunately they also downgraded their revenue estimates, and our analysts estimates suggest that Sinopec Shanghai Petrochemical is still expected to perform worse than the wider industry. Even so, earnings are more important to the intrinsic value of the business. The consensus price target held steady at CN¥2.09, with the latest estimates not enough to have an impact on their price targets.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Sinopec Shanghai Petrochemical analysts - going out to 2022, and you can see them free on our platform here.
However, before you get too enthused, we've discovered 3 warning signs for Sinopec Shanghai Petrochemical that you should be aware of.
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