It's been a mediocre week for 3SBio Inc. (HKG:1530) shareholders, with the stock dropping 12% to HK$5.73 in the week since its latest half-year results. 3SBio reported CN¥4.4b in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of CN¥0.45 beat expectations, being 2.3% higher than what the analysts expected. 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. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Taking into account the latest results, the consensus forecast from 3SBio's eleven analysts is for revenues of CN¥8.81b in 2024. This reflects a credible 4.6% improvement in revenue compared to the last 12 months. Statutory earnings per share are predicted to expand 10% to CN¥0.78. In the lead-up to this report, the analysts had been modelling revenues of CN¥8.75b and earnings per share (EPS) of CN¥0.77 in 2024. So it's pretty clear that, although the analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.
The analysts reconfirmed their price target of HK$8.06, showing that the business is executing well and in line with expectations. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values 3SBio at HK$10.03 per share, while the most bearish prices it at HK$6.22. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We can infer from the latest estimates that forecasts expect a continuation of 3SBio'shistorical trends, as the 9.4% annualised revenue growth to the end of 2024 is roughly in line with the 10% annual growth over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenues grow 25% per year. So it's pretty clear that 3SBio is expected to grow slower than similar companies in the same industry.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting that it's tracking in line with expectations. Although our data does suggest that 3SBio's revenue is expected to perform worse than the wider industry. The consensus price target held steady at HK$8.06, with the latest estimates not enough to have an impact on their price targets.
With that in mind, we wouldn't be too quick to come to a conclusion on 3SBio. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple 3SBio analysts - going out to 2026, and you can see them free on our platform here.
However, before you get too enthused, we've discovered 1 warning sign for 3SBio that you should be aware of.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
