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Analysts Have Been Trimming Their Maanshan Iron & Steel Company Limited (HKG:323) Price Target After Its Latest Report

Maanshan Iron & Steel Company Limited (HKG:323) shareholders are probably feeling a little disappointed, since its shares fell 8.8% to HK$2.37 in the week after its latest yearly results. The results were positive, with revenue coming in at CN¥78b, beating analyst expectations by 3.3%. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

View our latest analysis for Maanshan Iron & Steel

SEHK:323 Past and Future Earnings April 2nd 2020
SEHK:323 Past and Future Earnings April 2nd 2020

Following the recent earnings report, the consensus from 15 analysts covering Maanshan Iron & Steel is for revenues of CN¥75.0b in 2020, implying a discernible 4.2% decline in sales compared to the last 12 months. Statutory earnings per share are forecast to fall 14% to CN¥0.13 in the same period. Before this earnings report, the analysts had been forecasting revenues of CN¥73.8b and earnings per share (EPS) of CN¥0.27 in 2020. So there's definitely been a decline in sentiment after the latest results, noting the pretty serious reduction to new EPS forecasts.

The average price target fell 7.4% to CN¥2.52, with reduced earnings forecasts clearly tied to a lower valuation estimate. 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. Currently, the most bullish analyst values Maanshan Iron & Steel at CN¥3.28 per share, while the most bearish prices it at CN¥1.68. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast revenue decline of 4.2%, a significant reduction from annual growth of 12% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 3.6% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Maanshan Iron & Steel is expected to lag the wider industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Maanshan Iron & Steel. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Maanshan Iron & Steel's revenues are expected to perform worse than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Maanshan Iron & Steel's future valuation.

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 estimates - from multiple Maanshan Iron & Steel analysts - going out to 2022, and you can see them free on our platform here.

It is also worth noting that we have found 4 warning signs for Maanshan Iron & Steel that you need to take into consideration.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.