Last week saw the newest annual earnings release from China Hongqiao Group Limited (HKG:1378), an important milestone in the company's journey to build a stronger business. Results look mixed - while revenue fell marginally short of analyst estimates at CN¥84b, statutory earnings beat expectations 4.9%, with China Hongqiao Group reporting profits of CN¥0.70 per share. 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. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the most recent consensus for China Hongqiao Group from four analysts is for revenues of CN¥88.0b in 2020 which, if met, would be a modest 4.5% increase on its sales over the past 12 months. Statutory earnings per share are forecast to drop 13% to CN¥0.62 in the same period. Before this earnings report, the analysts had been forecasting revenues of CN¥90.7b and earnings per share (EPS) of CN¥0.83 in 2020. The analysts seem less optimistic after the recent results, reducing their sales forecasts and making a large cut to earnings per share numbers.
Despite the cuts to forecast earnings, there was no real change to the CN¥5.30 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values China Hongqiao Group at CN¥6.91 per share, while the most bearish prices it at CN¥4.18. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
Of course, another way to look at these forecasts is to place them into context against the industry itself. It's pretty clear that there is an expectation that China Hongqiao Group's revenue growth will slow down substantially, with revenues next year expected to grow 4.5%, compared to a historical growth rate of 19% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 2.6% next year. So it's pretty clear that, while China Hongqiao Group's revenue growth is expected to slow, it's still expected to grow faster than the industry itself.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. They also downgraded their revenue estimates, although industry data suggests that China Hongqiao Group's revenues are expected to grow faster than the wider industry. The consensus price target held steady at CN¥5.30, with the latest estimates not enough to have an impact on their price targets.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At Simply Wall St, we have a full range of analyst estimates for China Hongqiao Group going out to 2021, and you can see them free on our platform here..
Don't forget that there may still be risks. For instance, we've identified 3 warning signs for China Hongqiao Group (1 makes us a bit uncomfortable) you should be aware of.
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