Some Analysts Just Cut Their Dongfeng Motor Group Company Limited (HKG:489) Estimates

One thing we could say about the analysts on Dongfeng Motor Group Company Limited (HKG:489) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative.

Following the latest downgrade, the current consensus, from the ten analysts covering Dongfeng Motor Group, is for revenues of CN¥92b in 2022, which would reflect a considerable 19% reduction in Dongfeng Motor Group's sales over the past 12 months. Statutory earnings per share are expected to be CN¥1.34, roughly flat on the last 12 months. Previously, the analysts had been modelling revenues of CN¥116b and earnings per share (EPS) of CN¥1.37 in 2022. It looks like analyst sentiment has fallen somewhat in this update, with a pretty serious reduction to revenue estimates and a small dip in earnings per share numbers as well.

Check out our latest analysis for Dongfeng Motor Group

Analysts made no major changes to their price target of CN¥6.45, suggesting the downgrades are not expected to have a long-term impact on Dongfeng Motor Group's valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Dongfeng Motor Group, with the most bullish analyst valuing it at CN¥11.08 and the most bearish at CN¥5.60 per share. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.

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. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 34% by the end of 2022. This indicates a significant reduction from annual growth of 4.2% over the last year. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 21% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Dongfeng Motor Group is expected to lag 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 Dongfeng Motor Group. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Dongfeng Motor Group's revenues are expected to grow slower than the wider market. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on Dongfeng Motor Group 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 Dongfeng Motor Group going out to 2024, and you can see them 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.