Shareholders of Lufax Holding Ltd (NYSE:LU) will be pleased this week, given that the stock price is up 15% to US$17.20 following its latest full-year results. The result was positive overall - although revenues of CN¥52b were in line with what the analysts predicted, Lufax Holding surprised by delivering a statutory profit of CN¥5.59 per share, modestly greater than expected. 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. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Taking into account the latest results, the current consensus from Lufax Holding's twelve analysts is for revenues of CN¥60.1b in 2021, which would reflect a decent 15% increase on its sales over the past 12 months. Per-share earnings are expected to ascend 14% to CN¥6.40. In the lead-up to this report, the analysts had been modelling revenues of CN¥58.7b and earnings per share (EPS) of CN¥6.24 in 2021. So there seems to have been a moderate uplift in sentiment following the latest results, given the upgrades to both revenue and earnings per share forecasts for next year.
Althoughthe analysts have upgraded their earnings estimates, there was no change to the consensus price target of CN¥119, suggesting that the forecast performance does not have a long term impact on the company's valuation. 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. There are some variant perceptions on Lufax Holding, with the most bullish analyst valuing it at CN¥21.10 and the most bearish at CN¥14.77 per share. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or thatthe analysts have a strong view on its prospects.
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 Lufax Holding's rate of growth is expected to accelerate meaningfully, with the forecast 15% revenue growth noticeably faster than its historical growth of 12%p.a. over the past three years. Compare this with other companies in the same industry, which are forecast to grow their revenue 15% next year. Factoring in the forecast acceleration in revenue, it's pretty clear that Lufax Holding is expected to grow at about the same rate as 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 Lufax Holding's earnings potential next year. They also upgraded their revenue forecasts, although the latest estimates suggest that Lufax Holding will grow in line with the overall industry. The consensus price target held steady at CN¥119, with the latest estimates not enough to have an impact on their price targets.
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. We have forecasts for Lufax Holding going out to 2025, and you can see them free on our platform here.
And what about risks? Every company has them, and we've spotted 1 warning sign for Lufax Holding you should know about.
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