As you might know, Sangfor Technologies Inc. (SZSE:300454) last week released its latest quarterly, and things did not turn out so great for shareholders. It was not a great result overall, as revenues of CN¥1.0b fell 23% short of analyst expectations. Unsurprisingly, statutory losses ended up being11% larger than the analysts expected, at CN¥1.16 per share. 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. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Following the latest results, Sangfor Technologies' 19 analysts are now forecasting revenues of CN¥7.96b in 2024. This would be a reasonable 6.3% improvement in revenue compared to the last 12 months. Statutory earnings per share are predicted to bounce 161% to CN¥0.76. In the lead-up to this report, the analysts had been modelling revenues of CN¥8.50b and earnings per share (EPS) of CN¥0.80 in 2024. The analysts are less bullish than they were before these results, given the reduced revenue forecasts and the small dip in earnings per share expectations.
Despite the cuts to forecast earnings, there was no real change to the CN¥68.90 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Sangfor Technologies analyst has a price target of CN¥90.00 per share, while the most pessimistic values it at CN¥45.40. 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.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Sangfor Technologies' past performance and to peers in the same industry. We would highlight that Sangfor Technologies' revenue growth is expected to slow, with the forecast 8.5% annualised growth rate until the end of 2024 being well below the historical 15% p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 22% annually. Factoring in the forecast slowdown in growth, it seems obvious that Sangfor Technologies 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 Sangfor Technologies. On the negative side, they also downgraded their revenue estimates, and forecasts imply they will perform worse 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 said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Sangfor Technologies going out to 2026, and you can see them free on our platform here.
Before you take the next step you should know about the 2 warning signs for Sangfor Technologies that we have uncovered.
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