Some Baowu Magnesium Technology Co., Ltd. (SZSE:002182) Analysts Just Made A Major Cut To Next Year's Estimates

The analysts covering Baowu Magnesium Technology Co., Ltd. (SZSE:002182) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously. Shares are up 4.1% to CN¥18.34 in the past week. It will be interesting to see if this downgrade motivates investors to start selling their holdings.

Following the downgrade, the most recent consensus for Baowu Magnesium Technology from its seven analysts is for revenues of CN¥9.4b in 2024 which, if met, would be a substantial 20% increase on its sales over the past 12 months. Statutory earnings per share are presumed to jump 139% to CN¥1.07. Before this latest update, the analysts had been forecasting revenues of CN¥13b and earnings per share (EPS) of CN¥1.28 in 2024. It looks like analyst sentiment has declined substantially, with a sizeable cut to revenue estimates and a real cut to earnings per share numbers as well.

View our latest analysis for Baowu Magnesium Technology

The consensus price target fell 5.7% to CN¥22.44, with the weaker earnings outlook clearly leading analyst valuation estimates.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. It's clear from the latest estimates that Baowu Magnesium Technology's rate of growth is expected to accelerate meaningfully, with the forecast 20% annualised revenue growth to the end of 2024 noticeably faster than its historical growth of 11% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 9.7% annually. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Baowu Magnesium Technology to grow faster than the wider industry.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Baowu Magnesium Technology. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.

That said, the analysts might have good reason to be negative on Baowu Magnesium Technology, given concerns around earnings quality. For more information, you can click here to discover this and the 1 other flag we've identified.

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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.