Shandong Hi-speed Company Limited Just Missed Earnings - But Analysts Have Updated Their Models

As you might know, Shandong Hi-speed Company Limited (SHSE:600350) recently reported its full-year numbers. Results were mixed, with revenue coming in 35% at CN¥27b, yet statutory earnings came up 14% short, at CN¥0.57 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Shandong Hi-speed after the latest results.

View our latest analysis for Shandong Hi-speed

Following last week's earnings report, Shandong Hi-speed's three analysts are forecasting 2024 revenues to be CN¥26.1b, approximately in line with the last 12 months. Statutory earnings per share are predicted to rise 2.3% to CN¥0.70. In the lead-up to this report, the analysts had been modelling revenues of CN¥20.5b and earnings per share (EPS) of CN¥0.71 in 2024. Although revenue sentiment looks to be improving, the analysts have made a small dip in per-share earnings estimates, perhaps acknowledging the investment required to grow the business.

Curiously, the consensus price target rose 28% to CN¥9.75. We can only conclude that the forecast revenue growth is expected to offset the impact of the expected fall in earnings. 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 Shandong Hi-speed at CN¥10.01 per share, while the most bearish prices it at CN¥9.48. Still, with such a tight range of estimates, it suggeststhe analysts have a pretty good idea of what they think the company is worth.

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. We would highlight that revenue is expected to reverse, with a forecast 1.5% annualised decline to the end of 2024. That is a notable change from historical growth of 23% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 7.5% per year. It's pretty clear that Shandong Hi-speed's revenues are expected to perform substantially worse than 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. They also upgraded their revenue estimates for next year, even though it is expected to grow slower than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Shandong Hi-speed 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 2 warning signs with Shandong Hi-speed (at least 1 which is 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.