Rongsheng Petrochemical Co., Ltd. Beat Revenue Forecasts By 5.2%: Here's What Analysts Are Forecasting Next

Last week saw the newest annual earnings release from Rongsheng Petrochemical Co., Ltd. (SZSE:002493), an important milestone in the company's journey to build a stronger business. Results overall were respectable, with statutory earnings of CN¥0.12 per share roughly in line with what the analysts had forecast. Revenues of CN¥325b came in 5.2% ahead of analyst 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Rongsheng Petrochemical after the latest results.

View our latest analysis for Rongsheng Petrochemical

Taking into account the latest results, the current consensus from Rongsheng Petrochemical's eleven analysts is for revenues of CN¥355.5b in 2024. This would reflect a notable 9.4% increase on its revenue over the past 12 months. Per-share earnings are expected to shoot up 397% to CN¥0.59. In the lead-up to this report, the analysts had been modelling revenues of CN¥331.2b and earnings per share (EPS) of CN¥0.61 in 2024. Overall it looks as though the analysts were a bit mixed on the latest results. Although there was a a notable to revenue, the consensus also made a small dip in its earnings per share forecasts.

The consensus price target was unchanged at CN¥12.17, suggesting the business is performing roughly in line with expectations, despite some adjustments to profit and revenue forecasts. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Rongsheng Petrochemical at CN¥14.30 per share, while the most bearish prices it at CN¥6.40. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Rongsheng Petrochemical's past performance and to peers in the same industry. It's pretty clear that there is an expectation that Rongsheng Petrochemical's revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 9.4% growth on an annualised basis. This is compared to a historical growth rate of 32% 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 16% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Rongsheng Petrochemical.

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. They also upgraded their revenue estimates for next year, even though it is expected to grow slower than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At Simply Wall St, we have a full range of analyst estimates for Rongsheng Petrochemical going out to 2026, and you can see them free on our platform here..

That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Rongsheng Petrochemical (at least 2 which are potentially serious) , and understanding these should be part of your investment process.

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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.