Shareholders might have noticed that West China Cement Limited (HKG:2233) filed its yearly result this time last week. The early response was not positive, with shares down 7.1% to HK$1.04 in the past week. Results overall were not great, with earnings of CN¥0.077 per share falling drastically short of analyst expectations. Meanwhile revenues hit CN¥9.0b and were slightly better than forecasts. 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. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Taking into account the latest results, the consensus forecast from West China Cement's four analysts is for revenues of CN¥11.2b in 2024. This reflects a substantial 25% improvement in revenue compared to the last 12 months. Per-share earnings are expected to bounce 262% to CN¥0.28. Yet prior to the latest earnings, the analysts had been anticipated revenues of CN¥10.7b and earnings per share (EPS) of CN¥0.32 in 2024. So it's pretty clear the analysts have mixed opinions on West China Cement after the latest results; even though they upped their revenue numbers, it came at the cost of a real cut to per-share earnings expectations.
Curiously, the consensus price target rose 9.9% to HK$1.12. We can only conclude that the forecast revenue growth is expected to offset the impact of the expected fall in earnings. 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. There are some variant perceptions on West China Cement, with the most bullish analyst valuing it at HK$1.50 and the most bearish at HK$0.64 per share. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
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 West China Cement's rate of growth is expected to accelerate meaningfully, with the forecast 25% annualised revenue growth to the end of 2024 noticeably faster than its historical growth of 7.1% 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 3.3% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect West China Cement 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. Happily, they also upgraded their revenue estimates, and are forecasting them to grow faster 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 West China Cement. 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 West China Cement going out to 2026, and you can see them free on our platform here..
Don't forget that there may still be risks. For instance, we've identified 3 warning signs for West China Cement (1 makes us a bit uncomfortable) 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.