Investors in Konfoong Materials International Co., Ltd (SZSE:300666) had a good week, as its shares rose 6.1% to close at CN¥50.70 following the release of its first-quarter results. Statutory earnings per share disappointed, coming in -21% short of expectations, at CN¥0.22. Fortunately revenue performance was a lot stronger at CN¥772m arriving 15% ahead of predictions. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the current consensus from Konfoong Materials International's three analysts is for revenues of CN¥3.36b in 2024. This would reflect a solid 11% increase on its revenue over the past 12 months. Per-share earnings are expected to soar 37% to CN¥1.36. In the lead-up to this report, the analysts had been modelling revenues of CN¥3.26b and earnings per share (EPS) of CN¥1.25 in 2024. So there seems to have been a moderate uplift in sentiment following the latest results, given the upgrades to both revenue and earnings per share forecasts for next year.
With these upgrades, we're not surprised to see that the analysts have lifted their price target 5.5% to CN¥57.25per share. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Konfoong Materials International analyst has a price target of CN¥62.50 per share, while the most pessimistic values it at CN¥52.00. This is a very narrow spread of estimates, implying either that Konfoong Materials International is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that Konfoong Materials International's revenue growth is expected to slow, with the forecast 15% annualised growth rate until the end of 2024 being well below the historical 28% p.a. growth over the last 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 Konfoong Materials International is also expected to grow slower than other industry participants.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Konfoong Materials International's earnings potential next year. Fortunately, they also upgraded their revenue estimates, although our data indicates it is expected to perform worse than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
With that in mind, we wouldn't be too quick to come to a conclusion on Konfoong Materials International. Long-term earnings power is much more important than next year's profits. We have forecasts for Konfoong Materials International going out to 2026, and you can see them free on our platform here.
Plus, you should also learn about the 1 warning sign we've spotted with Konfoong Materials International .
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