China International Capital Corporation Limited (HKG:3908) Analysts Are More Bearish Than They Used To Be

Today is shaping up negative for China International Capital Corporation Limited (HKG:3908) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business.

After this downgrade, China International Capital's twelve analysts are now forecasting revenues of CN¥29b in 2023. This would be a solid 10% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to shoot up 23% to CN¥1.70. Previously, the analysts had been modelling revenues of CN¥33b and earnings per share (EPS) of CN¥2.08 in 2023. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a real cut to earnings per share numbers as well.

View our latest analysis for China International Capital

Despite the cuts to forecast earnings, there was no real change to the CN¥19.16 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. 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. There are some variant perceptions on China International Capital, with the most bullish analyst valuing it at CN¥23.11 and the most bearish at CN¥13.97 per share. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's clear from the latest estimates that China International Capital's rate of growth is expected to accelerate meaningfully, with the forecast 22% annualised revenue growth to the end of 2023 noticeably faster than its historical growth of 18% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 14% annually. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect China International Capital to grow faster 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. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on China International Capital after the downgrade.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple China International Capital analysts - going out to 2025, 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.