Earnings Beat: Hup Seng Industries Berhad Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Models

A week ago, Hup Seng Industries Berhad (KLSE:HUPSENG) came out with a strong set of annual numbers that could potentially lead to a re-rate of the stock. It was overall a positive result, with revenues beating expectations by 4.1% to hit RM318m. Hup Seng Industries Berhad also reported a statutory profit of RM0.033, which was an impressive 30% above what the analysts had forecast. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

See our latest analysis for Hup Seng Industries Berhad

Taking into account the latest results, the most recent consensus for Hup Seng Industries Berhad from three analysts is for revenues of RM328.9m in 2023 which, if met, would be a modest 3.4% increase on its sales over the past 12 months. Statutory earnings per share are predicted to surge 28% to RM0.042. Yet prior to the latest earnings, the analysts had been anticipated revenues of RM316.4m and earnings per share (EPS) of RM0.034 in 2023. There's been a pretty noticeable increase in sentiment, with the analysts upgrading revenues and making a great increase in earnings per share in particular.

With these upgrades, we're not surprised to see that the analysts have lifted their price target 14% to RM0.83per share. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Hup Seng Industries Berhad, with the most bullish analyst valuing it at RM0.86 and the most bearish at RM0.78 per share. This is a very narrow spread of estimates, implying either that Hup Seng Industries Berhad is an easy company to value, or - more likely - the analysts are relying heavily on some key 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. It's clear from the latest estimates that Hup Seng Industries Berhad's rate of growth is expected to accelerate meaningfully, with the forecast 3.4% annualised revenue growth to the end of 2023 noticeably faster than its historical growth of 0.3% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to see a revenue decline of 1.3% annually. So it's clear with the acceleration in growth, Hup Seng Industries Berhad is expected to grow meaningfully faster than the wider industry.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Hup Seng Industries Berhad's earnings potential next year. On the plus side, they also lifted their revenue estimates, and the company is expected to perform better than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.

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. At Simply Wall St, we have a full range of analyst estimates for Hup Seng Industries Berhad going out to 2025, and you can see them free on our platform here..

However, before you get too enthused, we've discovered 1 warning sign for Hup Seng Industries Berhad 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.