Things Look Grim For China Resources Microelectronics Limited (SHSE:688396) After Today's Downgrade

Market forces rained on the parade of China Resources Microelectronics Limited (SHSE:688396) shareholders today, when the analysts downgraded their forecasts for this year. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the downgrade, the current consensus from China Resources Microelectronics' seven analysts is for revenues of CN¥10b in 2024 which - if met - would reflect a reasonable 5.5% increase on its sales over the past 12 months. Per-share earnings are expected to swell 12% to CN¥0.96. Before this latest update, the analysts had been forecasting revenues of CN¥11b and earnings per share (EPS) of CN¥1.37 in 2024. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a pretty serious decline to earnings per share numbers as well.

See our latest analysis for China Resources Microelectronics

The consensus price target fell 8.3% to CN¥50.09, 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. The analysts are definitely expecting China Resources Microelectronics' growth to accelerate, with the forecast 7.4% annualised growth to the end of 2024 ranking favourably alongside historical growth of 6.1% per annum over the past three years. Compare this with other companies in the same industry, which are forecast to see revenue growth of 23% annually. It seems obvious that, while the future growth outlook is brighter than the recent past, China Resources Microelectronics is expected to grow slower than 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. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that China Resources Microelectronics' revenues are expected to grow slower than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of China Resources Microelectronics.

So things certainly aren't looking great, and you should also know that we've spotted some potential warning signs with China Resources Microelectronics, including its declining profit margins. For more information, you can click here to discover this and the 1 other warning sign we've identified.

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.