Huagong Tech Company Limited Just Missed Earnings And Its Revenue Numbers Were Weaker Than Expected

The analysts might have been a bit too bullish on Huagong Tech Company Limited (SZSE:000988), given that the company fell short of expectations when it released its annual results last week. Results look to have been somewhat negative - revenue fell 9.9% short of analyst estimates at CN¥10b, and statutory earnings of CN¥1.00 per share missed forecasts by 4.1%. 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. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

Check out our latest analysis for Huagong Tech

Taking into account the latest results, the most recent consensus for Huagong Tech from nine analysts is for revenues of CN¥13.1b in 2024. If met, it would imply a major 29% increase on its revenue over the past 12 months. Per-share earnings are expected to jump 30% to CN¥1.30. In the lead-up to this report, the analysts had been modelling revenues of CN¥14.8b and earnings per share (EPS) of CN¥1.42 in 2024. It looks like sentiment has fallen somewhat in the aftermath of these results, with a real cut to revenue estimates and a minor downgrade to earnings per share numbers as well.

The analysts made no major changes to their price target of CN¥39.62, suggesting the downgrades are not expected to have a long-term impact on Huagong Tech's valuation. 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 Huagong Tech at CN¥45.00 per share, while the most bearish prices it at CN¥36.00. This is a very narrow spread of estimates, implying either that Huagong Tech is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. The analysts are definitely expecting Huagong Tech's growth to accelerate, with the forecast 29% annualised growth to the end of 2024 ranking favourably alongside historical growth of 20% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 18% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Huagong Tech is expected to grow much faster than its 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. They also downgraded Huagong Tech's revenue estimates, but industry data suggests that it is expected to grow faster 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.

With that in mind, we wouldn't be too quick to come to a conclusion on Huagong Tech. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Huagong Tech going out to 2026, and you can see them free on our platform here..

You can also see our analysis of Huagong Tech's Board and CEO remuneration and experience, and whether company insiders have been buying stock.

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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.