One Analyst Just Shaved Their Shanghai Mechanical & Electrical Industry Co.,Ltd. (SHSE:600835) Forecasts Dramatically

Market forces rained on the parade of Shanghai Mechanical & Electrical Industry Co.,Ltd. (SHSE:600835) shareholders today, when the covering analyst downgraded their forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analyst seeing grey clouds on the horizon.

Following the latest downgrade, Shanghai Mechanical & Electrical IndustryLtd's solitary analyst currently expects revenues in 2024 to be CN¥22b, approximately in line with the last 12 months. Per-share earnings are expected to increase 2.3% to CN¥1.00. Previously, the analyst had been modelling revenues of CN¥25b and earnings per share (EPS) of CN¥1.19 in 2024. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a real cut to earnings per share numbers as well.

See our latest analysis for Shanghai Mechanical & Electrical IndustryLtd

The analyst made no major changes to their price target of CN¥14.00, suggesting the downgrades are not expected to have a long-term impact on Shanghai Mechanical & Electrical IndustryLtd's valuation.

Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that Shanghai Mechanical & Electrical IndustryLtd's revenue growth is expected to slow, with the forecast 0.1% annualised growth rate until the end of 2024 being well below the historical 2.3% p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 19% per year. Factoring in the forecast slowdown in growth, it seems obvious that Shanghai Mechanical & Electrical IndustryLtd is also expected to grow slower than other industry participants.

The Bottom Line

The biggest issue in the new estimates is that the analyst has reduced their earnings per share estimates, suggesting business headwinds lay ahead for Shanghai Mechanical & Electrical IndustryLtd. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of Shanghai Mechanical & Electrical IndustryLtd.

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 2026, which can be seen for free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.