Earnings Report: KH Neochem Co., Ltd. Missed Revenue Estimates By 8.7%

KH Neochem Co., Ltd. (TSE:4189) shareholders are probably feeling a little disappointed, since its shares fell 3.9% to JP¥2,284 in the week after its latest first-quarter results. Revenues came in 8.7% below expectations, at JP¥27b. Statutory earnings per share were relatively better off, with a per-share profit of JP¥184 being roughly in line with analyst estimates. 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.

Check out our latest analysis for KH Neochem

Taking into account the latest results, the most recent consensus for KH Neochem from three analysts is for revenues of JP¥119.0b in 2024. If met, it would imply a credible 4.9% increase on its revenue over the past 12 months. Statutory earnings per share are predicted to expand 16% to JP¥222. Yet prior to the latest earnings, the analysts had been anticipated revenues of JP¥122.4b and earnings per share (EPS) of JP¥230 in 2024. 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 JP¥2,967 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. 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. The most optimistic KH Neochem analyst has a price target of JP¥3,400 per share, while the most pessimistic values it at JP¥2,600. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting KH Neochem is an easy business to forecast or the the analysts are all using similar assumptions.

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 period to the end of 2024 brings more of the same, according to the analysts, with revenue forecast to display 6.6% growth on an annualised basis. That is in line with its 6.0% annual growth over the past five years. Juxtapose this against our data, which suggests that other companies (with analyst coverage) in the industry are forecast to see their revenues grow 5.7% per year. It's clear that while KH Neochem's revenue growth is expected to continue on its current trajectory, it's only expected to grow in line with the industry itself.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for KH Neochem. They also downgraded their revenue estimates, although as we saw earlier, forecast growth is only expected to be about the same as the wider industry. The consensus price target held steady at JP¥2,967, with the latest estimates not enough to have an impact on their price targets.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple KH Neochem analysts - going out to 2026, and you can see them free on our platform here.

Before you take the next step you should know about the 1 warning sign for KH Neochem that we have uncovered.

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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.