It's been a sad week for West China Cement Limited (HKG:2233), who've watched their investment drop 17% to HK$0.87 in the week since the company reported its half-year result. Revenues were CN¥3.7b, 32% shy of what the analysts were expecting, although statutory earnings of CN¥0.077 per share were roughly in line with what was forecast. 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. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Taking into account the latest results, the consensus forecast from West China Cement's five analysts is for revenues of CN¥10.3b in 2024. This reflects a sizeable 24% improvement in revenue compared to the last 12 months. Statutory earnings per share are predicted to bounce 295% to CN¥0.20. In the lead-up to this report, the analysts had been modelling revenues of CN¥11.4b and earnings per share (EPS) of CN¥0.26 in 2024. The analysts seem less optimistic after the recent results, reducing their revenue forecasts and making a large cut to earnings per share numbers.
The analysts made no major changes to their price target of HK$1.44, suggesting the downgrades are not expected to have a long-term impact on West China Cement's valuation. 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 West China Cement analyst has a price target of HK$1.86 per share, while the most pessimistic values it at HK$1.10. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. It's clear from the latest estimates that West China Cement's rate of growth is expected to accelerate meaningfully, with the forecast 54% annualised revenue growth to the end of 2024 noticeably faster than its historical growth of 5.5% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 4.0% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that West China Cement is expected to grow much faster than its 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. They also downgraded West China Cement's revenue estimates, but industry data suggests that it is expected to grow faster 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.
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. We have forecasts for West China Cement 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 3 warning signs for West China Cement you should know about.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
