Time To Worry? Analysts Just Downgraded Their China International Capital Corporation Limited (HKG:3908) Outlook

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. Revenue estimates were cut sharply as analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.

After the downgrade, the consensus from China International Capital's 15 analysts is for revenues of CN¥28b in 2021, which would reflect a perceptible 3.1% decline in sales compared to the last year of performance. Prior to the latest estimates, the analysts were forecasting revenues of CN¥33b in 2021. The consensus view seems to have become more pessimistic on China International Capital, noting the substantial drop in revenue estimates in this update.

Check out our latest analysis for China International Capital

There was no particular change to the consensus price target of CN¥21.61, with China International Capital's latest outlook seemingly not enough to result in a change of 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. The most optimistic China International Capital analyst has a price target of CN¥31.82 per share, while the most pessimistic values it at CN¥20.22. This shows there is still some diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that sales are expected to reverse, with a forecast 4.2% annualised revenue decline to the end of 2021. That is a notable change from historical growth of 27% 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 10.0% per year. It's pretty clear that China International Capital's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The most important thing to take away is that analysts cut their revenue estimates for this year. They're also anticipating slower revenue growth than the wider market. Given the stark change in sentiment, we'd understand if investors became more cautious on China International Capital after today.

That said, the analysts might have good reason to be negative on China International Capital, given dilutive stock issuance over the past year. For more information, you can click here to discover this and the 1 other warning sign we've identified.

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.

If you're looking for stocks to buy, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted

This article by Simply Wall St is general in nature. 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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

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