Analysts Just Shipped A Substantial Upgrade To Their 3SBio Inc. (HKG:1530) Estimates

3SBio Inc. (HKG:1530) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's statutory forecasts. The analysts greatly increased their revenue estimates, suggesting a stark improvement in business fundamentals. The market may be pricing in some blue sky too, with the share price gaining 12% to HK$31.76 in the last 7 days. It will be interesting to see if today's upgrade is enough to propel the stock even higher.

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After this upgrade, 3SBio's 14 analysts are now forecasting revenues of CN¥19b in 2025. This would be a sizeable 105% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to surge 305% to CN¥3.99. Previously, the analysts had been modelling revenues of CN¥16b and earnings per share (EPS) of CN¥3.00 in 2025. 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 3SBio

Although the analysts have upgraded their earnings estimates, there was no change to the consensus price target of CN¥29.95, suggesting that the forecast performance does not have a long term impact on the company's valuation. 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 3SBio at CN¥42.36 per share, while the most bearish prices it at CN¥11.45. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how think this business will perform. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

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. The analysts are definitely expecting 3SBio's growth to accelerate, with the forecast 3x annualised growth to the end of 2025 ranking favourably alongside historical growth of 11% 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 26% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that 3SBio is expected to grow much faster than its industry.

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, analysts also upgraded their revenue estimates, and our data indicates sales are expected to perform better than the wider market. The lack of change in the price target is puzzling, but with a serious upgrade to this year's earnings expectations, it might be time to take another look at 3SBio.

Better yet, our automated discounted cash flow calculation (DCF) suggests 3SBio could be moderately undervalued. For more information, you can click through to our platform to learn more about our valuation approach.

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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.