China Literature Limited Just Missed Earnings; Here's What Analysts Are Forecasting Now

It's been a good week for China Literature Limited (HKG:772) shareholders, because the company has just released its latest annual results, and the shares gained 3.5% to HK$26.65. The results don't look great, especially considering that the analysts had been forecasting a profit and China Literature delivered a statutory loss of CN¥0.21 per share. Revenues of CN¥8.1b did beat expectations by 4.9% though. 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on China Literature after the latest results.

View our latest analysis for China Literature

Following last week's earnings report, China Literature's twelve analysts are forecasting 2025 revenues to be CN¥8.24b, approximately in line with the last 12 months. China Literature is also expected to turn profitable, with statutory earnings of CN¥1.10 per share. Yet prior to the latest earnings, the analysts had been anticipated revenues of CN¥8.08b and earnings per share (EPS) of CN¥1.19 in 2025. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but the analysts did make a minor downgrade to their earnings per share forecasts.

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It might be a surprise to learn that the consensus price target was broadly unchanged at HK$31.86, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on 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. There are some variant perceptions on China Literature, with the most bullish analyst valuing it at HK$37.13 and the most bearish at HK$22.96 per share. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.

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. From these estimates it looks as though the analysts expect the years of declining revenue to come to an end, given the flat forecast out to 2025. That would be a definite improvement, given that the past five years have seen revenue shrink 3.8% annually. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 8.3% annually. So it's pretty clear that, although revenues are improving, China Literature is still expected to grow slower than the industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for China Literature. On the plus side, there were no major changes to revenue estimates; although forecasts imply they will perform worse than the wider industry. The consensus price target held steady at HK$31.86, with the latest estimates not enough to have an impact on their price targets.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple China Literature analysts - going out to 2027, and you can see them free on our platform here.

We also provide an overview of the China Literature Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.

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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.