Earnings Update: Sobute New Materials Co., Ltd (SHSE:603916) Just Reported And Analysts Are Trimming Their Forecasts

Shareholders might have noticed that Sobute New Materials Co., Ltd (SHSE:603916) filed its first-quarter result this time last week. The early response was not positive, with shares down 2.4% to CN¥7.73 in the past week. Revenues came in 2.3% below expectations, at CN¥579m. Statutory earnings per share were relatively better off, with a per-share profit of CN¥0.39 being roughly in line with analyst estimates. 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. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

View our latest analysis for Sobute New Materials

Taking into account the latest results, the current consensus from Sobute New Materials' five analysts is for revenues of CN¥3.86b in 2024. This would reflect a meaningful 11% increase on its revenue over the past 12 months. Per-share earnings are expected to surge 103% to CN¥0.66. In the lead-up to this report, the analysts had been modelling revenues of CN¥4.08b and earnings per share (EPS) of CN¥0.80 in 2024. The analysts seem less optimistic after the recent results, reducing their revenue forecasts and making a real cut to earnings per share numbers.

It'll come as no surprise then, to learn that the analysts have cut their price target 26% to CN¥12.25. 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. There are some variant perceptions on Sobute New Materials, with the most bullish analyst valuing it at CN¥14.94 and the most bearish at CN¥9.55 per share. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

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 Sobute New Materials' rate of growth is expected to accelerate meaningfully, with the forecast 14% annualised revenue growth to the end of 2024 noticeably faster than its historical growth of 4.9% p.a. 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. Factoring in the forecast acceleration in revenue, it's pretty clear that Sobute New Materials is expected to grow at about the same rate as 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. Sadly, they also downgraded their revenue forecasts, but the business is still expected to grow at roughly the same rate as the industry itself. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.

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. We have forecasts for Sobute New Materials going out to 2026, and you can see them free on our platform here.

It is also worth noting that we have found 3 warning signs for Sobute New Materials that you need to take into consideration.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.