Sino Biopharmaceutical Limited (HKG:1177) shares fell 6.2% to HK$10.62 in the week since its latest third-quarter results. Sino Biopharmaceutical beat revenue expectations by 3.2%, recording sales of CN¥6.9b. Earnings per share (EPS) came in at CN¥0.065, some 5.2% short of analyst estimates. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We thought readers would find it interesting to see analysts' latest post-earnings forecasts for next year.
Following the latest results, Sino Biopharmaceutical's 20 analysts are now forecasting revenues of CN¥28.4b in 2020. This would be a decent 16% improvement in sales compared to the last 12 months. Earnings per share are expected to plummet 59% to CN¥0.30 in the same period. Before this earnings report, analysts had been forecasting revenues of CN¥28.7b and earnings per share (EPS) of CN¥0.31 in 2020. Analysts seem to have become a little more negative on the business after the latest results, given the small dip in their earnings per share forecasts for next year.
It might be a surprise to learn that the consensus price target was broadly unchanged at HK$11.96, with analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. The consensus price target just an average of individual analyst targets, so - considering that the price target changed, it would be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values Sino Biopharmaceutical at HK$14.50 per share, while the most bearish prices it at HK$8.07. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Sino Biopharmaceutical shareholders.
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 can infer from the latest estimates that analysts are expecting a continuation of Sino Biopharmaceutical's historical trends, as next year's forecast 16% revenue growth is roughly in line with 18% annual revenue growth over the past five years. Compare this with the wider market, which analyst estimates (in aggregate) suggest will see revenues grow 16% next year. So although Sino Biopharmaceutical is expected to maintain its revenue growth rate, it's only growing at about the rate of the wider market.
The Bottom Line
The biggest highlight of the new consensus is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Sino Biopharmaceutical. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider market. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Sino Biopharmaceutical going out to 2022, and you can see them free on our platform here.
We also provide an overview of the Sino Biopharmaceutical Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.
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