Last week saw the newest interim earnings release from Haidilao International Holding Ltd. (HKG:6862), an important milestone in the company's journey to build a stronger business. The result was fairly weak overall, with revenues of CN¥17b being 9.6% less than what the analysts had been modelling. 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Haidilao International Holding after the latest results.

View our latest analysis for Haidilao International Holding

Taking into account the latest results, the current consensus from Haidilao International Holding's 28 analysts is for revenues of CN¥40.0b in 2022, which would reflect a modest 5.9% increase on its sales over the past 12 months. Earnings are expected to improve, with Haidilao International Holding forecast to report a statutory profit of CN¥0.15 per share. Before this earnings report, the analysts had been forecasting revenues of CN¥44.7b and earnings per share (EPS) of CN¥0.20 in 2022. It looks like sentiment has declined substantially in the aftermath of these results, with a real cut to revenue estimates and a pretty serious reduction to earnings per share numbers as well.

What's most unexpected is that the consensus price target rose 12% to HK$18.08, strongly implying the downgrade to forecasts is not expected to be more than a temporary blip. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Haidilao International Holding at HK$22.20 per share, while the most bearish prices it at HK$12.67. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

Of course, another way to look at these forecasts is to place them into context against the industry itself. It's pretty clear that there is an expectation that Haidilao International Holding's revenue growth will slow down substantially, with revenues to the end of 2022 expected to display 12% growth on an annualised basis. This is compared to a historical growth rate of 22% over the past three years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 30% annually. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Haidilao International Holding.

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. Unfortunately, they also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. 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 Haidilao International Holding. Long-term earnings power is much more important than next year's profits. We have forecasts for Haidilao International Holding going out to 2024, and you can see them free on our platform here.

And what about risks? Every company has them, and we've spotted 1 warning sign for Haidilao International Holding 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.