COFCO Meat Holdings Limited (HKG:1610) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's statutory forecasts. The analysts have sharply increased their revenue numbers, with a view that COFCO Meat Holdings will make substantially more sales than they'd previously expected. Investors have been pretty optimistic on COFCO Meat Holdings too, with the stock up 12% to CN¥2.13 over the past week. It will be interesting to see if today's upgrade is enough to propel the stock even higher.
After the upgrade, the four analysts covering COFCO Meat Holdings are now predicting revenues of CN¥14b in 2020. If met, this would reflect a huge 28% improvement in sales compared to the last 12 months. Statutory earnings per share are supposed to decrease 3.8% to CN¥0.39 in the same period. Previously, the analysts had been modelling revenues of CN¥12b and earnings per share (EPS) of CN¥0.37 in 2020. Sentiment certainly seems to have improved in recent times, with a nice increase in revenue and a small increase to earnings per share estimates.
Despite these upgrades, the analysts have not made any major changes to their price target of CN¥2.16, suggesting that the higher estimates are not likely to have a long term impact on what the stock is worth. 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 COFCO Meat Holdings analyst has a price target of CN¥2.97 per share, while the most pessimistic values it at CN¥1.07. 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.
Of course, another way to look at these forecasts is to place them into context against the industry itself. It's clear from the latest estimates that COFCO Meat Holdings' rate of growth is expected to accelerate meaningfully, with the forecast 28% revenue growth noticeably faster than its historical growth of 15% 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 10% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect COFCO Meat Holdings to grow faster than the wider industry.
The Bottom Line
The biggest takeaway for us from these new estimates is that analysts upgraded their earnings per share estimates, with improved earnings power expected for this year. Fortunately, analysts also upgraded their revenue estimates, and our data indicates sales are expected to perform better than the wider market. Given that analysts appear to be expecting substantial improvement in the sales pipeline, now could be the right time to take another look at COFCO Meat Holdings.
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