Tongwei Co.,Ltd Just Missed Earnings With A Surprise Loss - Here Are Analysts Latest Forecasts

Tongwei Co.,Ltd (SHSE:600438) last week reported its latest quarterly results, which makes it a good time for investors to dive in and see if the business is performing in line with expectations. It was a pretty bad result overall, with revenues coming in 38% lower than the analysts predicted. Unsurprisingly, the statutory profit the analysts had been forecasting evaporated, turning into a loss of CN¥0.17 per share. 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.

See our latest analysis for TongweiLtd

Taking into account the latest results, the current consensus from TongweiLtd's 22 analysts is for revenues of CN¥136.3b in 2024. This would reflect a notable 8.7% increase on its revenue over the past 12 months. Per-share earnings are expected to jump 232% to CN¥3.09. In the lead-up to this report, the analysts had been modelling revenues of CN¥157.5b and earnings per share (EPS) of CN¥2.50 in 2024. So there's been quite a change-up of views after the latest results, with the analysts making a serious cut to their revenue forecasts while also granting a very substantial lift in to the earnings per share numbers.

The consensus price target fell 5.5% to CN¥30.01, with the analysts signalling that the weaker revenue outlook was a more powerful indicator than the upgraded EPS forecasts. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on TongweiLtd, with the most bullish analyst valuing it at CN¥58.60 and the most bearish at CN¥17.29 per share. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely different views on what kind of performance this business can generate. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

Of course, another way to look at these forecasts is to place them into context against the industry itself. It's pretty clear that there is an expectation that TongweiLtd's revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 12% growth on an annualised basis. This is compared to a historical growth rate of 35% 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 23% per year. Factoring in the forecast slowdown in growth, it seems obvious that TongweiLtd is also expected to grow slower than other industry participants.

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 TongweiLtd following these results. On the negative side, they also downgraded their revenue estimates, and forecasts imply they will perform worse than the wider industry. Even so, long term profitability is more important for the value creation process. 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.

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 TongweiLtd 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 TongweiLtd , and understanding them 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.