Last week, you might have seen that China Resources Building Materials Technology Holdings Limited (HKG:1313) released its interim result to the market. The early response was not positive, with shares down 6.6% to HK$1.56 in the past week. Revenues were CN¥10b, 12% below analyst expectations, although losses didn't appear to worsen significantly, with a statutory per-share loss of CN¥0.091 being in line with what the analysts anticipated. 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'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, China Resources Building Materials Technology Holdings' 14 analysts currently expect revenues in 2024 to be CN¥23.8b, approximately in line with the last 12 months. Per-share earnings are expected to soar 217% to CN¥0.11. In the lead-up to this report, the analysts had been modelling revenues of CN¥24.2b and earnings per share (EPS) of CN¥0.15 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.
Althoughthe analysts have revised their earnings forecasts for next year, they've also lifted the consensus price target 13% to HK$1.93, suggesting the revised estimates are not indicative of a weaker long-term future for the business. 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 China Resources Building Materials Technology Holdings at HK$3.75 per share, while the most bearish prices it at HK$1.02. 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. 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. One thing that stands out from these estimates is that shrinking revenues are expected to moderate over the period ending 2024 compared to the historical decline of 7.2% per annum 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 4.0% per year. So it's pretty clear that, while it does have declining revenues, the analysts also expect China Resources Building Materials Technology Holdings to suffer worse than the wider industry.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. 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.
With that in mind, we wouldn't be too quick to come to a conclusion on China Resources Building Materials Technology Holdings. Long-term earnings power is much more important than next year's profits. We have forecasts for China Resources Building Materials Technology Holdings 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 China Resources Building Materials Technology Holdings that we have uncovered.
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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.