S H Kelkar and Company Limited Beat Revenue Forecasts By 19%: Here's What Analysts Are Forecasting Next

The investors in S H Kelkar and Company Limited's (NSE:SHK) will be rubbing their hands together with glee today, after the share price leapt 32% to ₹117 in the week following its second-quarter results. S H Kelkar beat revenue forecasts by a solid 19% to hit ₹3.6b. Statutory earnings per share came in at ₹2.56, in line with expectations. 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. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

See our latest analysis for S H Kelkar

Taking into account the latest results, the consensus forecast from S H Kelkar's five analysts is for revenues of ₹12.7b in 2021, which would reflect a meaningful 14% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to leap 25% to ₹6.43. In the lead-up to this report, the analysts had been modelling revenues of ₹11.7b and earnings per share (EPS) of ₹5.28 in 2021. So it seems there's been a definite increase in optimism about S H Kelkar's future following the latest results, with a great increase in the earnings per share forecasts in particular.

With these upgrades, we're not surprised to see that the analysts have lifted their price target 9.0% to ₹116per share. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values S H Kelkar at ₹136 per share, while the most bearish prices it at ₹102. This is a very narrow spread of estimates, implying either that S H Kelkar is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.

Of course, another way to look at these forecasts is to place them into context against the industry itself. The analysts are definitely expecting S H Kelkar's growth to accelerate, with the forecast 14% growth ranking favourably alongside historical growth of 4.2% per annum over the past five years. Other similar companies in the industry (with analyst coverage) are also forecast to grow their revenue at 16% per year. S H Kelkar is expected to grow at about the same rate as its industry, so it's not clear that we can draw any conclusions from its growth relative to competitors.

The Bottom Line

The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards S H Kelkar following these results. They also upgraded their revenue forecasts, although the latest estimates suggest that S H Kelkar will grow in line with the overall 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.

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 S H Kelkar analysts - going out to 2023, and you can see them free on our platform here.

However, before you get too enthused, we've discovered 4 warning signs for S H Kelkar that you should be aware of.

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