Hengan International Group Company Limited (HKG:1044) came out with its yearly results last week, and we wanted to see how the business is performing and what industry forecasters think of the company following this report. The result was positive overall - although revenues of CN¥24b were in line with what the analysts predicted, Hengan International Group surprised by delivering a statutory profit of CN¥2.42 per share, modestly greater than expected. 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Hengan International Group after the latest results.
Taking into account the latest results, the current consensus from Hengan International Group's 15 analysts is for revenues of CN¥24.6b in 2024. This would reflect an okay 3.3% increase on its revenue over the past 12 months. Per-share earnings are expected to swell 12% to CN¥2.70. Yet prior to the latest earnings, the analysts had been anticipated revenues of CN¥25.5b and earnings per share (EPS) of CN¥2.64 in 2024. So it's pretty clear that while sentiment around revenues has declined following the latest results, the analysts are now more bullish on the company's earnings power.
There's been no real change to the average price target of HK$33.64, with the lower revenue and higher earnings forecasts not expected to meaningfully impact the company's valuation over a longer timeframe. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Hengan International Group at HK$45.80 per share, while the most bearish prices it at HK$25.88. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying 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. The analysts are definitely expecting Hengan International Group's growth to accelerate, with the forecast 3.3% annualised growth to the end of 2024 ranking favourably alongside historical growth of 1.8% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to see revenue growth of 8.9% annually. It seems obvious that, while the future growth outlook is brighter than the recent past, Hengan International Group is expected to grow slower than the wider industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Hengan International Group's earnings potential next year. Unfortunately, they also downgraded their revenue estimates, and our data indicates underperformance compared to the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. Even so, earnings per share are more important to the intrinsic value of the business. 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 Hengan International Group. Long-term earnings power is much more important than next year's profits. We have forecasts for Hengan International Group going out to 2026, and you can see them free on our platform here.
You should always think about risks though. Case in point, we've spotted 1 warning sign for Hengan International Group 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.
