Earnings Release: Here's Why Analysts Cut Their Tianqi Lithium Corporation (SZSE:002466) Price Target To CN¥39.75

Investors in Tianqi Lithium Corporation (SZSE:002466) had a good week, as its shares rose 2.4% to close at CN¥26.15 following the release of its half-year results. Tianqi Lithium beat revenue forecasts by a solid 11%, hitting CN¥6.4b. Statutory losses also blew out, with the loss per share reaching CN¥0.80, some 122% bigger than the analysts expected. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

See our latest analysis for Tianqi Lithium

Taking into account the latest results, the 21 analysts covering Tianqi Lithium provided consensus estimates of CN¥13.4b revenue in 2024, which would reflect a substantial 39% decline over the past 12 months. Statutory losses are predicted to increase slightly, to CN¥2.48 per share. In the lead-up to this report, the analysts had been modelling revenues of CN¥13.4b and earnings per share (EPS) of CN¥0.53 in 2024. So despite reconfirming their revenue estimates, the analysts are now forecasting a loss instead of a profit, which looks like a definite drop in sentiment following the latest results.

With the increase in forecast losses for next year, it's perhaps no surprise to see that the average price target dipped 9.1% to CN¥39.75, with the analysts signalling that growing losses would be a definite concern. 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 Tianqi Lithium, with the most bullish analyst valuing it at CN¥55.00 and the most bearish at CN¥24.00 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that revenue is expected to reverse, with a forecast 63% annualised decline to the end of 2024. That is a notable change from historical growth of 49% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 16% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Tianqi Lithium is expected to lag the wider industry.

The Bottom Line

The biggest low-light for us was that the forecasts for Tianqi Lithium dropped from profits to a loss next year. On the plus side, there were no major changes to revenue estimates; although forecasts imply they will perform worse than the wider industry. 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.

With that in mind, we wouldn't be too quick to come to a conclusion on Tianqi Lithium. Long-term earnings power is much more important than next year's profits. We have forecasts for Tianqi Lithium going out to 2026, and you can see them free on our platform here.

It is also worth noting that we have found 1 warning sign for Tianqi Lithium that you need to take into consideration.

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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.