Earnings Miss: Sunny Optical Technology (Group) Company Limited Missed EPS By 15% And Analysts Are Revising Their Forecasts

It's been a mediocre week for Sunny Optical Technology (Group) Company Limited (HKG:2382) shareholders, with the stock dropping 17% to HK$43.70 in the week since its latest full-year results. Revenues were in line with forecasts, at CN¥32b, although statutory earnings per share came in 15% below what the analysts expected, at CN¥1.01 per share. 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 thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

View our latest analysis for Sunny Optical Technology (Group)

Taking into account the latest results, the most recent consensus for Sunny Optical Technology (Group) from 27 analysts is for revenues of CN¥35.3b in 2024. If met, it would imply a meaningful 11% increase on its revenue over the past 12 months. Statutory earnings per share are predicted to leap 67% to CN¥1.69. In the lead-up to this report, the analysts had been modelling revenues of CN¥37.4b and earnings per share (EPS) of CN¥2.24 in 2024. The analysts seem less optimistic after the recent results, reducing their revenue forecasts and making a pretty serious reduction to earnings per share numbers.

The consensus price target fell 12% to HK$71.28, with the weaker earnings outlook clearly leading valuation estimates. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Sunny Optical Technology (Group) at HK$159 per share, while the most bearish prices it at HK$44.81. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely different views on what kind of performance this business can generate. As a result it might not be a great idea to make decisions based on the consensus price target, which is after all just an average of this wide range of estimates.

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. For example, we noticed that Sunny Optical Technology (Group)'s rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 11% growth to the end of 2024 on an annualised basis. That is well above its historical decline of 0.2% a year over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 13% annually. So it looks like Sunny Optical Technology (Group) is expected to grow at about the same rate as 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. Sadly, they also downgraded their revenue forecasts, but the business is still expected to grow at roughly the same rate as the industry itself. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Sunny Optical Technology (Group)'s future valuation.

With that in mind, we wouldn't be too quick to come to a conclusion on Sunny Optical Technology (Group). Long-term earnings power is much more important than next year's profits. We have forecasts for Sunny Optical Technology (Group) going out to 2026, and you can see them free on our platform here.

It is also worth noting that we have found 1 warning sign for Sunny Optical Technology (Group) that you need to take into consideration.

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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.