Last week, you might have seen that Sinopharm Group Co. Ltd. (HKG:1099) released its annual result to the market. The early response was not positive, with shares down 2.2% to HK$19.96 in the past week. Sinopharm Group reported in line with analyst predictions, delivering revenues of CN¥597b and statutory earnings per share of CN¥2.90, suggesting the business is executing well and in line with its plan. 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Sinopharm Group after the latest results.
After the latest results, the 15 analysts covering Sinopharm Group are now predicting revenues of CN¥649.2b in 2024. If met, this would reflect a solid 8.8% improvement in revenue compared to the last 12 months. Per-share earnings are expected to increase 8.1% to CN¥3.14. In the lead-up to this report, the analysts had been modelling revenues of CN¥672.4b and earnings per share (EPS) of CN¥3.20 in 2024. The analysts are less bullish than they were before these results, given the reduced revenue forecasts and the small dip in earnings per share expectations.
Despite the cuts to forecast earnings, there was no real change to the HK$27.18 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. 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. Currently, the most bullish analyst values Sinopharm Group at HK$32.31 per share, while the most bearish prices it at HK$21.91. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Sinopharm Group shareholders.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Sinopharm Group's past performance and to peers in the same industry. The period to the end of 2024 brings more of the same, according to the analysts, with revenue forecast to display 8.8% growth on an annualised basis. That is in line with its 10% annual growth over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenues grow 11% per year. So although Sinopharm Group is expected to maintain its revenue growth rate, it's forecast to grow slower 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. Unfortunately, they also downgraded their revenue estimates, and our data indicates underperformance compared to the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. The consensus price target held steady at HK$27.18, with the latest estimates not enough to have an impact on their price targets.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple Sinopharm Group analysts - going out to 2026, and you can see them free on our platform here.
It might also be worth considering whether Sinopharm Group's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
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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.