Investors in Hunan Valin Steel Co., Ltd. (SZSE:000932) had a good week, as its shares rose 2.7% to close at CN¥5.38 following the release of its yearly results. It was not a great result overall. While revenues of CN¥164b were in line with analyst predictions, earnings were less than expected, missing statutory estimates by 14% to hit CN¥0.74 per share. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. 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 Hunan Valin Steel's six analysts is for revenues of CN¥169.0b in 2024. This reflects a satisfactory 2.8% improvement in revenue compared to the last 12 months. Per-share earnings are expected to rise 9.7% to CN¥0.81. In the lead-up to this report, the analysts had been modelling revenues of CN¥170.5b and earnings per share (EPS) of CN¥1.02 in 2024. The analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a pretty serious reduction to EPS estimates.
Despite cutting their earnings forecasts,the analysts have lifted their price target 13% to CN¥7.09, suggesting that these impacts are not expected to weigh on the stock's value in the long term. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Hunan Valin Steel analyst has a price target of CN¥7.60 per share, while the most pessimistic values it at CN¥6.58. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Hunan Valin Steel is an easy business to forecast or the the analysts are all using similar assumptions.
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 would highlight that Hunan Valin Steel's revenue growth is expected to slow, with the forecast 2.8% annualised growth rate until the end of 2024 being well below the historical 12% p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 10% per year. Factoring in the forecast slowdown in growth, it seems obvious that Hunan Valin Steel is also expected to grow slower than other industry participants.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Hunan Valin Steel. On the plus side, there were no major changes to revenue estimates; although forecasts imply they will perform worse than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Hunan Valin Steel 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 Hunan Valin Steel 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.