The analysts might have been a bit too bullish on Longhua Technology Group Co.,Ltd. (SZSE:300263), given that the company fell short of expectations when it released its quarterly results last week. The analysts look to have been far too optimistic in the lead-up to these results, with revenues of (CN¥708m) coming in 30% below what they had expected. Statutory earnings per share of CN¥0.05 fell 54% short. 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.
Following the latest results, Longhua Technology GroupLtd's three analysts are now forecasting revenues of CN¥3.41b in 2025. This would be a major 36% improvement in revenue compared to the last 12 months. Per-share earnings are expected to surge 176% to CN¥0.32. In the lead-up to this report, the analysts had been modelling revenues of CN¥3.49b and earnings per share (EPS) of CN¥0.35 in 2025. It's pretty clear that pessimism has reared its head after the latest results, leading to a weaker revenue outlook and a minor downgrade to earnings per share estimates.
What's most unexpected is that the consensus price target rose 6.9% to CN¥8.57, strongly implying the downgrade to forecasts is not expected to be more than a temporary blip. 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 Longhua Technology GroupLtd at CN¥8.59 per share, while the most bearish prices it at CN¥8.55. This is a very narrow spread of estimates, implying either that Longhua Technology GroupLtd is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.
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. It's clear from the latest estimates that Longhua Technology GroupLtd's rate of growth is expected to accelerate meaningfully, with the forecast 28% annualised revenue growth to the end of 2025 noticeably faster than its historical growth of 7.7% p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 16% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Longhua Technology GroupLtd to grow faster 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. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will grow faster than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
With that in mind, we wouldn't be too quick to come to a conclusion on Longhua Technology GroupLtd. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Longhua Technology GroupLtd going out to 2026, and you can see them free on our platform here..
It might also be worth considering whether Longhua Technology GroupLtd's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
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.
