Zhaojin Mining Industry Company Limited (HKG:1818) missed earnings with its latest annual results, disappointing overly-optimistic forecasters. Unfortunately, Zhaojin Mining Industry delivered a serious earnings miss. Revenues of CN¥6.3b were 12% below expectations, and statutory earnings per share of CN¥0.15 missed estimates by 23%. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, the consensus forecast from Zhaojin Mining Industry's eight analysts is for revenues of CN¥7.84b in 2020, which would reflect a huge 24% improvement in sales compared to the last 12 months. Per-share earnings are expected to leap 72% to CN¥0.26. In the lead-up to this report, the analysts had been modelling revenues of CN¥8.37b and earnings per share (EPS) of CN¥0.32 in 2020. From this we can that sentiment has definitely become more bearish after the latest results, leading to lower revenue forecasts and a pretty serious reduction to earnings per share estimates.
Despite the cuts to forecast earnings, there was no real change to the CN¥9.72 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Zhaojin Mining Industry at CN¥12.43 per share, while the most bearish prices it at CN¥7.65. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
Of course, another way to look at these forecasts is to place them into context against the industry itself. The analysts are definitely expecting Zhaojin Mining Industry's growth to accelerate, with the forecast 24% growth ranking favourably alongside historical growth of 4.3% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 3.1% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Zhaojin Mining Industry to grow faster 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. They also downgraded their revenue estimates, although industry data suggests that Zhaojin Mining Industry's revenues are expected to grow faster than the wider industry. 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.
With that in mind, we wouldn't be too quick to come to a conclusion on Zhaojin Mining Industry. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Zhaojin Mining Industry analysts - going out to 2022, and you can see them free on our platform here.
Don't forget that there may still be risks. For instance, we've identified 1 warning sign for Zhaojin Mining Industry that you should be aware of.
If you spot an error that warrants correction, please contact the editor at email@example.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.
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