Shareholders might have noticed that Dexin China Holdings Company Limited (HKG:2019) filed its annual result this time last week. The early response was not positive, with shares down 3.6% to HK$2.95 in the past week. Revenues were CN¥9.5b, 19% below analyst expectations, although losses didn't appear to worsen significantly, with a per-share statutory loss of CN¥0.60 being in line with what the analyst forecast. The analyst 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. So we gathered the latest post-earnings forecasts to see what estimate suggests is in store for next year.
Taking into account the latest results, the most recent consensus for Dexin China Holdings from lone analyst is for revenues of CN¥12.4b in 2020 which, if met, would be a major 31% increase on its sales over the past 12 months. Statutory earnings per share are predicted to increase 8.8% to CN¥0.65. Yet prior to the latest earnings, the analyst had been anticipated revenues of CN¥16.0b and earnings per share (EPS) of CN¥0.71 in 2020. Indeed, we can see that sentiment has declined measurably after results came out, with a large cut to revenue estimates and a small dip in EPS estimates to boot.
Despite the cuts to forecast earnings, there was no real change to the CN¥3.66 price target, showing that the analyst doesn't think the changes have a meaningful impact on its intrinsic value.
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 clear from the latest estimates that Dexin China Holdings's rate of growth is expected to accelerate meaningfully, with the forecast 31% revenue growth noticeably faster than its historical growth of 11%p.a. over the past three years. Compare this with other companies in the same industry, which are forecast to grow their revenue 16% next year. Factoring in the forecast acceleration in revenue, it's pretty clear that Dexin China Holdings is expected to grow much faster than its industry.
The Bottom Line
The biggest concern is that the analyst reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Dexin China Holdings. They also downgraded their revenue estimates, although industry data suggests that Dexin China Holdings's revenues are expected to grow faster than the wider industry. The consensus price target held steady at CN¥3.66, with the latest estimates not enough to have an impact on their price target.
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 analyst estimates for Dexin China Holdings going out as far as 2022, and you can see them free on our platform here.
Don't forget that there may still be risks. For instance, we've identified 3 warning signs for Dexin China Holdings (1 is significant) you should be aware of.
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