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Will Sinopec Shanghai Petrochemical Company Limited's (HKG:338) Earnings Grow In The Next 12 Months?

Simply Wall St

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On 31 December 2018, Sinopec Shanghai Petrochemical Company Limited (HKG:338) released its earnings update. Generally, analysts seem cautiously bearish, with earnings expected to grow by 3.6% in the upcoming year compared with the higher past 5-year average growth rate of 36%. With trailing-twelve-month net income at current levels of CN¥5.3b, we should see this rise to CN¥5.5b in 2020. Below is a brief commentary around Sinopec Shanghai Petrochemical's earnings outlook going forward, which may give you a sense of market sentiment for the company. Investors wanting to learn more about other aspects of the company should research its fundamentals here.

See our latest analysis for Sinopec Shanghai Petrochemical

How is Sinopec Shanghai Petrochemical going to perform in the near future?

The longer term expectations from the 10 analysts of 338 is tilted towards the negative sentiment. Broker analysts tend to forecast up to three years ahead due to a lack of clarity around the business trajectory beyond this. To understand the overall trajectory of 338's earnings growth over these next fews years, I've fitted a line through these analyst earnings forecast to determine an annual growth rate from the slope.

SEHK:338 Past and Future Earnings, April 4th 2019

This results in an annual growth rate of -2.2% based on the most recent earnings level of CN¥5.3b to the final forecast of CN¥5.3b by 2022. EPS reaches CN¥0.39 in the final year of forecast compared to the current CN¥0.49 EPS today. The main reason for 338’s earnings contraction is cost growth exceeding top-line growth of 0.3% in the next three years. With this high cost growth, margins is expected to contract from 4.9% to 4.8% by the end of 2022.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For Sinopec Shanghai Petrochemical, there are three pertinent aspects you should look at:

  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 Sinopec Shanghai Petrochemical 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 Sinopec Shanghai Petrochemical is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Sinopec Shanghai Petrochemical? 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.