Shareholders of Yanzhou Coal Mining Company Limited (HKG:1171) will be pleased this week, given that the stock price is up 11% to HK$6.08 following its latest full-year results. It was an okay result overall, with revenues coming in at CN¥68b, roughly what the analysts had been expecting. The 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. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Taking into account the latest results, the ten analysts covering Yanzhou Coal Mining provided consensus estimates of CN¥64.8b revenue in 2020, which would reflect a perceptible 4.5% decline on its sales over the past 12 months. Statutory earnings per share are forecast to tumble 22% to CN¥1.50 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of CN¥65.1b and earnings per share (EPS) of CN¥1.62 in 2020. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but the analysts did make a small dip in their earnings per share forecasts.
It might be a surprise to learn that the consensus price target fell 5.1% to CN¥6.85, with the analysts clearly linking lower forecast earnings to the performance of the stock price. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values Yanzhou Coal Mining at CN¥8.97 per share, while the most bearish prices it at CN¥4.82. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast revenue decline of 4.5%, a significant reduction from annual growth of 21% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 0.8% next year. It's pretty clear that Yanzhou Coal Mining's revenues are expected to perform substantially worse than the wider industry.
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. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Yanzhou Coal Mining's revenues are expected to perform worse than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
With that in mind, we wouldn't be too quick to come to a conclusion on Yanzhou Coal Mining. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Yanzhou Coal Mining analysts - going out to 2022, and you can see them free on our platform here.
It is also worth noting that we have found 3 warning signs for Yanzhou Coal Mining (1 doesn't sit too well with us!) that you need to take into consideration.
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