Party Time: Brokers Just Made Major Increases To Their Shougang Fushan Resources Group Limited (HKG:639) Earnings Forecasts

Shareholders in Shougang Fushan Resources Group Limited (HKG:639) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term forecasts. Consensus estimates suggest investors could expect greatly increased statutory revenues and earnings per share, with the analysts modelling a real improvement in business performance. Investors have been pretty optimistic on Shougang Fushan Resources Group too, with the stock up 13% to HK$3.00 over the past week. It will be interesting to see if today's upgrade is enough to propel the stock even higher.

Following this upgrade, Shougang Fushan Resources Group's four analysts are forecasting 2022 revenues to be HK$7.2b, approximately in line with the last 12 months. Statutory earnings per share are forecast to be HK$0.51, approximately in line with the last 12 months. Prior to this update, the analysts had been forecasting revenues of HK$5.5b and earnings per share (EPS) of HK$0.35 in 2022. So we can see there's been a pretty clear increase in analyst sentiment in recent times, with both revenues and earnings per share receiving a decent lift in the latest estimates.

View our latest analysis for Shougang Fushan Resources Group

It will come as no surprise to learn that the analysts have increased their price target for Shougang Fushan Resources Group 8.1% to HK$3.02 on the back of these upgrades. 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. Currently, the most bullish analyst values Shougang Fushan Resources Group at HK$3.50 per share, while the most bearish prices it at HK$2.09. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Shougang Fushan Resources Group shareholders.

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. It's pretty clear that there is an expectation that Shougang Fushan Resources Group's revenue growth will slow down substantially, with revenues to the end of 2022 expected to display 1.8% growth on an annualised basis. This is compared to a historical growth rate of 15% 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 3.8% 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 Shougang Fushan Resources Group.

The Bottom Line

The most important thing to take away from this upgrade is that analysts upgraded their earnings per share estimates for this year, expecting improving business conditions. Fortunately, they also upgraded their revenue estimates, and are forecasting revenues to grow slower than the wider market. Given that the consensus looks almost universally bullish, with a substantial increase to forecasts and a higher price target, Shougang Fushan Resources Group could be worth investigating further.

Using these estimates as a starting point, we've run a discounted cash flow calculation (DCF) on Shougang Fushan Resources Group that suggests the company could be somewhat undervalued. You can learn more about our valuation methodology on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are upgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

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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.