Analysts Have Just Cut Their Huagong Tech Company Limited (SZSE:000988) Revenue Estimates By 11%

The latest analyst coverage could presage a bad day for Huagong Tech Company Limited (SZSE:000988), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative. Shares are up 9.0% to CN¥36.80 in the past week. We'd be curious to see if the downgrade is enough to reverse investor sentiment on the business.

After the downgrade, the nine analysts covering Huagong Tech are now predicting revenues of CN¥13b in 2024. If met, this would reflect a sizeable 29% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to leap 30% to CN¥1.30. Prior to this update, the analysts had been forecasting revenues of CN¥15b and earnings per share (EPS) of CN¥1.42 in 2024. It looks like analyst sentiment has fallen somewhat in this update, with a measurable cut to revenue estimates and a minor downgrade to earnings per share numbers as well.

View our latest analysis for Huagong Tech

Despite the cuts to forecast earnings, there was no real change to the CN¥39.62 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's clear from the latest estimates that Huagong Tech's rate of growth is expected to accelerate meaningfully, with the forecast 29% annualised revenue growth to the end of 2024 noticeably faster than its historical growth of 20% p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 18% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Huagong Tech 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 Huagong Tech. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. Given the stark change in sentiment, we'd understand if investors became more cautious on Huagong Tech after today.

Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Huagong Tech going out to 2026, and you can see them free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies 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.