Analysts Just Made A Major Revision To Their Morimatsu International Holdings Company Limited (HKG:2155) Revenue Forecasts

Today is shaping up negative for Morimatsu International Holdings Company Limited (HKG:2155) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic. Shares are up 4.6% to HK$4.80 in the past week. 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 most recent consensus for Morimatsu International Holdings from its three analysts is for revenues of CN¥8.5b in 2024 which, if met, would be a decent 16% increase on its sales over the past 12 months. Statutory earnings per share are presumed to expand 16% to CN¥0.82. Previously, the analysts had been modelling revenues of CN¥10b and earnings per share (EPS) of CN¥0.89 in 2024. Indeed, we can see that analyst sentiment has declined measurably after the new consensus came out, with a substantial drop in revenue estimates and a small dip in EPS estimates to boot.

See our latest analysis for Morimatsu International Holdings

The consensus price target fell 7.0% to HK$9.55, with the weaker earnings outlook clearly leading analyst valuation estimates.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Morimatsu International Holdings' past performance and to peers in the same industry. It's pretty clear that there is an expectation that Morimatsu International Holdings' revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 16% growth on an annualised basis. This is compared to a historical growth rate of 26% over the past five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 11% per year. So it's pretty clear that, while Morimatsu International Holdings' revenue growth is expected to slow, it's still expected to grow faster than the industry itself.

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 Morimatsu International Holdings. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of Morimatsu International Holdings' future valuation. 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 Morimatsu International Holdings after today.

In light of the downgrade, our automated discounted cash flow valuation tool suggests that Morimatsu International Holdings could now be moderately overvalued. You can learn more about our valuation methodology for free on our platform here.

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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.