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Industrial and Commercial Bank of China Limited (HKG:1398): What Does The Future Look Like?

Simply Wall St

Since Industrial and Commercial Bank of China Limited (HKG:1398) released its earnings in September 2018, it seems that analyst forecasts are fairly optimistic, as a 6.7% increase in profits is expected in the upcoming year, against the past 5-year average growth rate of 1.5%. Currently with trailing-twelve-month earnings of CN¥282b, we can expect this to reach CN¥301b by 2020. In this article, I’ve outline a few earnings growth rates to give you a sense of the market sentiment for Industrial and Commercial Bank of China in the longer term. Investors wanting to learn more about other aspects of the company should research its fundamentals here.

View our latest analysis for Industrial and Commercial Bank of China

How is Industrial and Commercial Bank of China going to perform in the near future?

Over the next three years, it seems the consensus view of the 24 analysts covering 1398 is skewed towards the positive sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. I’ve plotted out each year’s earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of 1398’s earnings growth over these next few years.

SEHK:1398 Past and Future Earnings, March 10th 2019

From the current net income level of CN¥282b and the final forecast of CN¥300b by 2022, the annual rate of growth for 1398’s earnings is 4.8%. EPS reaches CN¥0.96 in the final year of forecast compared to the current CN¥0.79 EPS today. This high rate of growth of revenue squeezes margins, as analysts predict an upcoming margin contraction from the current 51% to 36% by the end of 2022.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For Industrial and Commercial Bank of China, I’ve compiled three fundamental aspects you should further examine:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Valuation: What is Industrial and Commercial Bank of China worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Industrial and Commercial Bank of China is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Industrial and Commercial Bank of China? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.