Earnings Beat: China General Plastics Corporation Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Models

A week ago, China General Plastics Corporation (TPE:1305) came out with a strong set of yearly numbers that could potentially lead to a re-rate of the stock. It was overall a positive result, with revenues beating expectations by 2.7% to hit NT$14b. China General Plastics also reported a statutory profit of NT$2.95, which was an impressive 33% 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on China General Plastics after the latest results.

View our latest analysis for China General Plastics

Taking into account the latest results, the consensus forecast from China General Plastics' five analysts is for revenues of NT$16.2b in 2021, which would reflect a decent 18% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to reduce 9.9% to NT$2.65 in the same period. Before this earnings report, the analysts had been forecasting revenues of NT$15.9b and earnings per share (EPS) of NT$2.50 in 2021. The analysts seems to have become more bullish on the business, judging by their new earnings per share estimates.

The consensus price target was unchanged at NT$28.32, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. 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. The most optimistic China General Plastics analyst has a price target of NT$34.00 per share, while the most pessimistic values it at NT$22.00. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

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 China General Plastics' rate of growth is expected to accelerate meaningfully, with the forecast 18% annualised revenue growth to the end of 2021 noticeably faster than its historical growth of 0.4% p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 8.2% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect China General Plastics to grow faster than the wider industry.

The Bottom Line

The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards China General Plastics following these results. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple China General Plastics analysts - going out to 2022, and you can see them free on our platform here.

Even so, be aware that China General Plastics is showing 1 warning sign in our investment analysis , you should know about...

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