Sunac China Holdings Limited Just Beat Earnings Expectations: Here's What Analysts Think Will Happen Next

Sunac China Holdings Limited (HKG:1918) investors will be delighted, with the company turning in some strong numbers with its latest results. It was overall a positive result, with revenues beating expectations by 3.8% to hit CN¥231b. Sunac China Holdings reported statutory earnings per share (EPS) CN¥7.74, which was a notable 14% above what the analysts had forecast. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

See our latest analysis for Sunac China Holdings

After the latest results, the 22 analysts covering Sunac China Holdings are now predicting revenues of CN¥281.5b in 2021. If met, this would reflect a substantial 22% improvement in sales compared to the last 12 months. Statutory earnings per share are forecast to decrease 8.7% to CN¥7.14 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of CN¥270.2b and earnings per share (EPS) of CN¥7.24 in 2021. There doesn't appear to have been a major change in sentiment following the results, other than the small lift in revenue estimates.

It may not be a surprise to see thatthe analysts have reconfirmed their price target of CN¥38.09, implying that the uplift in sales is not expected to greatly contribute to Sunac China Holdings's valuation in the near term. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Sunac China Holdings, with the most bullish analyst valuing it at CN¥54.06 and the most bearish at CN¥28.87 per share. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.

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 Sunac China Holdings' revenue growth will slow down substantially, with revenues to the end of 2021 expected to display 22% growth on an annualised basis. This is compared to a historical growth rate of 41% 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 15% annually. So it's pretty clear that, while Sunac China Holdings' revenue growth is expected to slow, it's still expected to grow faster than the industry itself.

The Bottom Line

The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. Pleasantly, they also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider industry. The consensus price target held steady at CN¥38.09, with the latest estimates not enough to have an impact on their price targets.

With that in mind, we wouldn't be too quick to come to a conclusion on Sunac China Holdings. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Sunac China Holdings going out to 2025, and you can see them free on our platform here..

We don't want to rain on the parade too much, but we did also find 3 warning signs for Sunac China Holdings (1 doesn't sit too well with us!) that you need to be mindful of.

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This article by Simply Wall St is general in nature. 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.
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