Redsun Services Group Limited (HKG:1971) shareholders are probably feeling a little disappointed, since its shares fell 4.3% to HK$4.50 in the week after its latest annual results. Revenues were CN¥768m, approximately in line with expectations, although statutory earnings per share (EPS) performed substantially better. EPS of CN¥0.20 were also better than expected, beating analyst predictions by 11%. 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. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Following the latest results, Redsun Services Group’s twin analysts are now forecasting revenues of CN¥1.27b in 2021. This would be a major 65% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to shoot up 96% to CN¥0.39. In the lead-up to this report, the analysts had been modelling revenues of CN¥1.15b and earnings per share (EPS) of CN¥0.37 in 2021. It looks like there’s been a modest increase in sentiment following the latest results, withthe analysts becoming a bit more optimistic in their predictions for both revenues and earnings.
Despite these upgrades,the analysts have not made any major changes to their price target of CN¥7.81, suggesting that the higher estimates are not likely to have a long term impact on what the stock is worth.
Of course, another way to look at these forecasts is to place them into context against the industry itself. The analysts are definitely expecting Redsun Services Group’s growth to accelerate, with the forecast 65% annualised growth to the end of 2021 ranking favourably alongside historical growth of 32% per annum over the past three years. Compare this with other companies in the same industry, which are forecast to grow their revenue 15% annually. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Redsun Services Group to grow faster than the wider industry.
The Bottom Line
The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Redsun Services Group following these results. Pleasantly, they also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider industry. The consensus price target held steady at CN¥7.81, with the latest estimates not enough to have an impact on their price targets.
With that said, the long-term trajectory of the company’s earnings is a lot more important than next year. At least one analyst has provided forecasts out to 2023, which can be seen for free on our platform here.
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
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