China MeiDong Auto Holdings Limited (HKG:1268) Beat Earnings, And Analysts Have Been Reviewing Their Forecasts
China MeiDong Auto Holdings Limited (HKG:1268) investors will be delighted, with the company turning in some strong numbers with its latest results. The company beat expectations with revenues of CN¥16b arriving 5.6% ahead of forecasts. Statutory earnings per share (EPS) were CN¥0.47, 6.0% ahead of estimates. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on China MeiDong Auto Holdings after the latest results.
See our latest analysis for China MeiDong Auto Holdings
Taking into account the latest results, the most recent consensus for China MeiDong Auto Holdings from eight analysts is for revenues of CN¥19.7b in 2020 which, if met, would be a substantial 21% increase on its sales over the past 12 months. Statutory earnings per share are predicted to surge 22% to CN¥0.58. In the lead-up to this report, the analysts had been modelling revenues of CN¥19.0b and earnings per share (EPS) of CN¥0.59 in 2020. Overall it looks as though the analysts were a bit mixed on the latest results. Although there was a a substantial to revenue, the consensus also made a small dip in to its earnings per share forecasts.
The analysts also upgraded China MeiDong Auto Holdings's price target 16% to CN¥11.04, implying that the higher sales are expected to generate enough value to offset the forecast decline in earnings. 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 China MeiDong Auto Holdings, with the most bullish analyst valuing it at CN¥13.10 and the most bearish at CN¥6.57 per share. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
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. It's pretty clear that there is an expectation that China MeiDong Auto Holdings's revenue growth will slow down substantially, with revenues next year expected to grow 21%, compared to a historical growth rate of 29% over the past five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 11% next year. So it's pretty clear that, while China MeiDong Auto Holdings's revenue growth is expected to slow, it's still expected to grow faster than 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 China MeiDong Auto Holdings. Happily, they also upgraded their revenue estimates, and are forecasting revenues to grow faster 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.
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 China MeiDong Auto Holdings analysts - going out to 2022, and you can see them free on our platform here.
Before you take the next step you should know about the 2 warning signs for China MeiDong Auto Holdings that we have uncovered.
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