A week ago, SKSHU Paint Co.,Ltd. (SHSE:603737) came out with a strong set of second-quarter numbers that could potentially lead to a re-rate of the stock. The company beat forecasts, with revenue of CN¥3.7b, some 5.5% above estimates, and statutory earnings per share (EPS) coming in at CN¥0.31, 90% ahead of expectations. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. 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 current consensus from SKSHU PaintLtd's 13 analysts is for revenues of CN¥13.5b in 2024. This would reflect a notable 8.2% increase on its revenue over the past 12 months. Statutory earnings per share are predicted to shoot up 621% to CN¥1.00. In the lead-up to this report, the analysts had been modelling revenues of CN¥14.0b and earnings per share (EPS) of CN¥1.13 in 2024. The analysts seem less optimistic after the recent results, reducing their revenue forecasts and making a real cut to earnings per share numbers.

Despite the cuts to forecast earnings, there was no real change to the CN¥41.36 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. 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. The most optimistic SKSHU PaintLtd analyst has a price target of CN¥94.00 per share, while the most pessimistic values it at CN¥24.00. With such a wide range in price targets, analysts are almost certainly betting on widely divergent outcomes in the underlying business. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. The period to the end of 2024 brings more of the same, according to the analysts, with revenue forecast to display 17% growth on an annualised basis. That is in line with its 17% annual growth over the past five years. Compare this with the broader industry, which analyst estimates (in aggregate) suggest will see revenues grow 15% annually. It's clear that while SKSHU PaintLtd's revenue growth is expected to continue on its current trajectory, it's only expected to grow in line with the industry itself.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for SKSHU PaintLtd. They also downgraded their revenue estimates, although as we saw earlier, forecast growth is only expected to be about the same as 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.

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 SKSHU PaintLtd going out to 2026, and you can see them free on our platform here..

And what about risks? Every company has them, and we've spotted 4 warning signs for SKSHU PaintLtd you should know about.

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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.

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