Shenzhen Investment Limited (HKG:604) last week reported its latest full-year results, which makes it a good time for investors to dive in and see if the business is performing in line with expectations. It was a pretty bad result overall, with revenues coming in 54% lower than the analysts predicted. Unsurprisingly, the statutory profit the analysts had been forecasting evaporated, turning into a loss of HK$0.029 per share. 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.
Following the latest results, Shenzhen Investment's twin analysts are now forecasting revenues of HK$37.0b in 2024. This would be a major 134% improvement in revenue compared to the last 12 months. Shenzhen Investment is also expected to turn profitable, with statutory earnings of HK$0.44 per share. In the lead-up to this report, the analysts had been modelling revenues of HK$38.1b and earnings per share (EPS) of HK$0.41 in 2024. If anything, the analysts look to have become slightly more optimistic overall; while they decreased their revenue forecasts, EPS predictions increased and ultimately earnings are more important.
The analysts have cut their price target 17% to HK$1.44per share, suggesting that the declining revenue was a more crucial indicator than the expected improvement in earnings.
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 Shenzhen Investment's rate of growth is expected to accelerate meaningfully, with the forecast 134% annualised revenue growth to the end of 2024 noticeably faster than its historical growth of 13% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 6.2% annually. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Shenzhen Investment to grow faster than the wider industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Shenzhen Investment's earnings potential next year. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will grow faster than the wider industry. Even so, earnings are more important to the intrinsic value of the business. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Shenzhen Investment's future valuation.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. At least one analyst has provided forecasts out to 2026, which can be seen for free on our platform here.
You still need to take note of risks, for example - Shenzhen Investment has 3 warning signs (and 2 which make us uncomfortable) we think 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.