Earnings Update: Sunac Services Holdings Limited (HKG:1516) Just Reported And Analysts Are Trimming Their Forecasts

It's been a pretty great week for Sunac Services Holdings Limited (HKG:1516) shareholders, with its shares surging 10% to HK$4.85 in the week since its latest full-year results. Sunac Services Holdings reported in line with analyst predictions, delivering revenues of CN¥7.9b and statutory earnings per share of CN¥0.41, suggesting the business is executing well and in line with its plan. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

View our latest analysis for Sunac Services Holdings

Taking into account the latest results, the most recent consensus for Sunac Services Holdings from 18 analysts is for revenues of CN¥10.3b in 2022 which, if met, would be a major 30% increase on its sales over the past 12 months. Per-share earnings are expected to shoot up 23% to CN¥0.51. Yet prior to the latest earnings, the analysts had been anticipated revenues of CN¥11.1b and earnings per share (EPS) of CN¥0.56 in 2022. It's pretty clear that pessimism has reared its head after the latest results, leading to a weaker revenue outlook and a minor downgrade to earnings per share estimates.

The consensus price target fell 27% to HK$9.04, with the weaker earnings outlook clearly leading valuation estimates. 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. The most optimistic Sunac Services Holdings analyst has a price target of HK$20.04 per share, while the most pessimistic values it at HK$5.00. With such a wide range in price targets, analysts are almost certainly betting on widely divergent outcomes in the underlying business. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's pretty clear that there is an expectation that Sunac Services Holdings' revenue growth will slow down substantially, with revenues to the end of 2022 expected to display 30% growth on an annualised basis. This is compared to a historical growth rate of 45% over the past three years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 11% annually. Even after the forecast slowdown in growth, it seems obvious that Sunac Services Holdings is also expected to grow faster 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 downgraded their revenue estimates, although industry data suggests that Sunac Services Holdings' revenues are expected to grow faster than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.

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 estimates - from multiple Sunac Services Holdings analysts - going out to 2024, and you can see them free on our platform here.

Don't forget that there may still be risks. For instance, we've identified 2 warning signs for Sunac Services Holdings that you should be aware of.

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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.