China Tobacco International (HK) Company Limited (HKG:6055) investors will be delighted, with the company turning in some strong numbers with its latest results. It was a solid earnings report, with revenues and statutory earnings per share (EPS) both coming in strong. Revenues were 16% higher than analysts had forecast, at HK$9.0b, while EPS were HK$0.53 beating analyst models by 23%. Following the result, 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 collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
After the latest results, the dual analysts covering China Tobacco International (HK) are now predicting revenues of HK$11.1b in 2020. If met, this would reflect a substantial 24% improvement in sales compared to the last 12 months. Statutory per share are forecast to be HK$0.53, approximately in line with the last 12 months. In the lead-up to this report, analysts had been modelling revenues of HK$8.32b and earnings per share (EPS) of HK$0.48 in 2020. So we can see there's been a pretty clear increase in analyst sentiment following the latest results, with both revenues and earnings per share receiving a decent lift in the latest estimates.
With these upgrades, we're not surprised to see that analysts have lifted their price target 55% to HK$24.10 per share.
Further, we can compare these estimates to past performance, and see how China Tobacco International (HK) forecasts compare to the wider market's forecast performance. It's clear from the latest estimates that China Tobacco International (HK)'s rate of growth is expected to accelerate meaningfully, with forecast 24% revenue growth noticeably faster than its historical growth of 7.9%p.a. over the past three years. Compare this with other companies in the same market, which are forecast to grow their revenue 7.6% next year. Factoring in the forecast acceleration in revenue, it's pretty clear that China Tobacco International (HK) is expected to grow much faster than its market.
The Bottom Line
The most important thing to take away from this is that analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards China Tobacco International (HK) following these results. Pleasantly, analysts also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider market. Analysts also upgraded their price target, suggesting that analysts believe the intrinsic value of the business is likely to improve over time.
With that in mind, we wouldn't be too quick to come to a conclusion on China Tobacco International (HK). Long-term earnings power is much more important than next year's profits. We have analyst estimates for China Tobacco International (HK) going out as far as 2022, and you can see them 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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