Simcere Pharmaceutical Group Limited Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Predictions

It's been a good week for Simcere Pharmaceutical Group Limited (HKG:2096) shareholders, because the company has just released its latest yearly results, and the shares gained 7.4% to HK$10.58. Revenues of CN¥5.0b fell slightly short of expectations, but earnings were a definite bright spot, with statutory per-share profits of CN¥0.58 an impressive 27% ahead of estimates. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Simcere Pharmaceutical Group after the latest results.

See our latest analysis for Simcere Pharmaceutical Group

Taking into account the latest results, the current consensus from Simcere Pharmaceutical Group's four analysts is for revenues of CN¥6.32b in 2022, which would reflect a huge 26% increase on its sales over the past 12 months. Statutory earnings per share are forecast to crater 40% to CN¥0.34 in the same period. Before this earnings report, the analysts had been forecasting revenues of CN¥6.61b and earnings per share (EPS) of CN¥0.37 in 2022. It's pretty clear that pessimism has reared its head after the latest results, leading to a weaker revenue outlook and a small dip in earnings per share estimates.

Despite the cuts to forecast earnings, there was no real change to the HK$12.86 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Simcere Pharmaceutical Group, with the most bullish analyst valuing it at HK$14.16 and the most bearish at HK$11.89 per share. This is a very narrow spread of estimates, implying either that Simcere Pharmaceutical Group is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. It's clear from the latest estimates that Simcere Pharmaceutical Group's rate of growth is expected to accelerate meaningfully, with the forecast 26% annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 1.4% p.a. over the past three years. Compare this with other companies in the same industry, which are forecast to grow their revenue 14% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Simcere Pharmaceutical Group 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. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will grow faster than the wider industry. The consensus price target held steady at HK$12.86, with the latest estimates not enough to have an impact on their price targets.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Simcere Pharmaceutical Group going out to 2023, 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 Simcere Pharmaceutical Group (at least 1 which can't be ignored) , 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.