Lee & Man Paper Manufacturing Limited (HKG:2314) just released its interim report and things are looking bullish. It was a solid earnings report, with revenues and statutory earnings per share (EPS) both coming in strong. Revenues were 13% higher than the analysts had forecast, at HK$13b, while EPS were HK$0.18 beating analyst models by 77%. 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 thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the most recent consensus for Lee & Man Paper Manufacturing from seven analysts is for revenues of HK$26.0b in 2024. If met, it would imply an okay 3.2% increase on its revenue over the past 12 months. Statutory per-share earnings are expected to be HK$0.35, roughly flat on the last 12 months. Yet prior to the latest earnings, the analysts had been anticipated revenues of HK$26.1b and earnings per share (EPS) of HK$0.33 in 2024. So the consensus seems to have become somewhat more optimistic on Lee & Man Paper Manufacturing's earnings potential following these results.
The average the analysts price target fell 9.8% to HK$2.78, suggesting thatthe analysts have other concerns, and the improved earnings per share outlook was not enough to allay them. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Lee & Man Paper Manufacturing, with the most bullish analyst valuing it at HK$4.63 and the most bearish at HK$1.80 per share. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely different views on what kind of performance this business can generate. As a result it might not be a great idea to make decisions based on the consensus price target, which is after all just an average of this wide range of estimates.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. One thing stands out from these estimates, which is that Lee & Man Paper Manufacturing is forecast to grow faster in the future than it has in the past, with revenues expected to display 6.5% annualised growth until the end of 2024. If achieved, this would be a much better result than the 0.7% annual decline 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 revenue grow 10.0% per year. Although Lee & Man Paper Manufacturing's revenues are expected to improve, it seems that the analysts are still bearish on the business, forecasting it to grow slower than the broader industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Lee & Man Paper Manufacturing's earnings potential next year. On the plus side, there were no major changes to revenue estimates; although forecasts imply they will perform worse than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for Lee & Man Paper Manufacturing going out to 2026, and you can see them free on our platform here.
Don't forget that there may still be risks. For instance, we've identified 2 warning signs for Lee & Man Paper Manufacturing (1 is potentially serious) 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com