Things Look Grim For SKSHU Paint Co.,Ltd. (SHSE:603737) After Today's Downgrade

One thing we could say about the analysts on SKSHU Paint Co.,Ltd. (SHSE:603737) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business. At CN¥31.80, shares are up 8.1% in the past 7 days. We'd be curious to see if the downgrade is enough to reverse investor sentiment on the business.

Following the downgrade, the latest consensus from SKSHU PaintLtd's 13 analysts is for revenues of CN¥14b in 2024, which would reflect a notable 11% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to rise 7.2% to CN¥1.19. Prior to this update, the analysts had been forecasting revenues of CN¥16b and earnings per share (EPS) of CN¥2.02 in 2024. Indeed, we can see that the analysts are a lot more bearish about SKSHU PaintLtd's prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.

View our latest analysis for SKSHU PaintLtd

The consensus price target fell 23% to CN¥45.90, with the weaker earnings outlook clearly leading analyst valuation estimates.

Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that SKSHU PaintLtd's revenue growth is expected to slow, with the forecast 15% annualised growth rate until the end of 2024 being well below the historical 24% p.a. growth over the last five years. Compare this to the 484 other companies in this industry with analyst coverage, which are forecast to grow their revenue at 16% per year. Factoring in the forecast slowdown in growth, it looks like SKSHU PaintLtd is forecast to grow at about the same rate as the wider industry.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Lamentably, they also downgraded their sales forecasts, but the business is still expected to grow at roughly the same rate as the market itself. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.

Worse, SKSHU PaintLtd is labouring under a substantial debt burden, which - if today's forecasts prove accurate - the forecast downgrade could potentially exacerbate. You can learn more about our debt analysis for free on our platform here.

You can also see our analysis of SKSHU PaintLtd's Board and CEO remuneration and experience, and whether company insiders have been buying stock.

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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.