Hundsun Technologies Inc. (SHSE:600570) came out with its quarterly results last week, and we wanted to see how the business is performing and what industry forecasters think of the company following this report. Revenues fell 8.2% short of expectations, at CN¥1.2b. Earnings correspondingly dipped, with Hundsun Technologies reporting a statutory loss of CN¥0.02 per share, whereas the analysts had previously modelled a profit in this period. 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 Hundsun Technologies after the latest results.
After the latest results, the 23 analysts covering Hundsun Technologies are now predicting revenues of CN¥7.98b in 2024. If met, this would reflect a decent 8.7% improvement in revenue compared to the last 12 months. Statutory earnings per share are predicted to leap 46% to CN¥0.90. Before this earnings report, the analysts had been forecasting revenues of CN¥8.05b and earnings per share (EPS) of CN¥0.92 in 2024. The analysts seem to have become a little more negative on the business after the latest results, given the minor downgrade to their earnings per share numbers for next year.
It might be a surprise to learn that the consensus price target was broadly unchanged at CN¥32.24, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Hundsun Technologies analyst has a price target of CN¥54.00 per share, while the most pessimistic values it at CN¥19.40. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely different views on what kind of performance this business can generate. As a result it might not be a great idea to make decisions based on the consensus price target, which is after all just an average of this wide range of estimates.
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 pretty clear that there is an expectation that Hundsun Technologies' revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 12% growth on an annualised basis. This is compared to a historical growth rate of 17% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 22% per year. Factoring in the forecast slowdown in growth, it seems obvious that Hundsun Technologies is also expected to grow slower than other industry participants.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Hundsun Technologies. On the plus side, there were no major changes to revenue estimates; although forecasts imply they will perform worse than the wider industry. The consensus price target held steady at CN¥32.24, 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 Hundsun Technologies. Long-term earnings power is much more important than next year's profits. We have forecasts for Hundsun Technologies going out to 2026, and you can see them free on our platform here.
You should always think about risks though. Case in point, we've spotted 1 warning sign for Hundsun Technologies you should be aware of.
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