Nine Dragons Paper (Holdings) Limited (HKG:2689) shareholders are probably feeling a little disappointed, since its shares fell 2.2% to HK$3.49 in the week after its latest interim results. Results were roughly in line with estimates, with revenues of CN¥31b and statutory earnings per share of CN¥0.06. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, the current consensus from Nine Dragons Paper (Holdings)'s 14 analysts is for revenues of CN¥61.6b in 2024. This would reflect a solid 9.7% increase on its revenue over the past 12 months. Earnings are expected to improve, with Nine Dragons Paper (Holdings) forecast to report a statutory profit of CN¥0.18 per share. In the lead-up to this report, the analysts had been modelling revenues of CN¥64.6b and earnings per share (EPS) of CN¥0.15 in 2024. Although the analysts have lowered their revenue forecasts, they've also made a considerable lift to their earnings per share estimates, which implies there's been something of an uptick in sentiment following the latest results.
The consensus has made no major changes to the price target of HK$4.34, suggesting the forecast improvement in earnings is expected to offset the decline in revenues next year. 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. There are some variant perceptions on Nine Dragons Paper (Holdings), with the most bullish analyst valuing it at HK$5.50 and the most bearish at HK$3.50 per share. 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.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's clear from the latest estimates that Nine Dragons Paper (Holdings)'s rate of growth is expected to accelerate meaningfully, with the forecast 20% annualised revenue growth to the end of 2024 noticeably faster than its historical growth of 2.4% 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 10% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Nine Dragons Paper (Holdings) is expected to grow much faster than its industry.
The Bottom Line
The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Nine Dragons Paper (Holdings) 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. Yet - earnings are more important to the intrinsic value of the business. The consensus price target held steady at HK$4.34, with the latest estimates not enough to have an impact on their price targets.
With that in mind, we wouldn't be too quick to come to a conclusion on Nine Dragons Paper (Holdings). Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Nine Dragons Paper (Holdings) analysts - going out to 2026, and you can see them free on our platform here.
However, before you get too enthused, we've discovered 1 warning sign for Nine Dragons Paper (Holdings) that 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.