Precision Tsugami (China) Corporation Limited (HKG:1651) Analysts Are Reducing Their Forecasts For This Year

The analysts covering Precision Tsugami (China) Corporation Limited (HKG:1651) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon. At HK$7.40, shares are up 6.2% in the past 7 days. Investors could be forgiven for changing their mind on the business following the downgrade; but it's not clear if the revised forecasts will lead to selling activity.

Following the downgrade, the consensus from dual analysts covering Precision Tsugami (China) is for revenues of CN¥4.0b in 2023, implying a perceptible 7.0% decline in sales compared to the last 12 months. Statutory earnings per share are anticipated to sink 10% to CN¥1.39 in the same period. Previously, the analysts had been modelling revenues of CN¥4.6b and earnings per share (EPS) of CN¥1.72 in 2023. Indeed, we can see that the analysts are a lot more bearish about Precision Tsugami (China)'s prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.

Our analysis indicates that 1651 is potentially undervalued!

It'll come as no surprise then, to learn that the analysts have cut their price target 15% to CN¥10.59. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Precision Tsugami (China) at CN¥12.96 per share, while the most bearish prices it at CN¥10.00. With such a narrow range of valuations, analysts apparently share similar views on what they think the business is worth.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 7.0% by the end of 2023. This indicates a significant reduction from annual growth of 15% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 13% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Precision Tsugami (China) 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 Precision Tsugami (China). Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Precision Tsugami (China)'s revenues are expected to grow slower 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.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At least one analyst has provided forecasts out to 2025, which can be seen for 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.