China Galaxy Securities Co., Ltd. (HKG:6881) Analysts Are Reducing Their Forecasts For This Year

The analysts covering China Galaxy Securities Co., Ltd. (HKG:6881) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the latest downgrade, the current consensus, from the nine analysts covering China Galaxy Securities, is for revenues of CN¥17b in 2021, which would reflect a substantial 33% reduction in China Galaxy Securities' sales over the past 12 months. Statutory earnings per share are supposed to decrease 9.1% to CN¥0.67 in the same period. Before this latest update, the analysts had been forecasting revenues of CN¥23b and earnings per share (EPS) of CN¥0.75 in 2021. Indeed, we can see that the analysts are a lot more bearish about China Galaxy Securities' prospects, administering a pretty serious reduction to revenue estimates and slashing their EPS estimates to boot.

View our latest analysis for China Galaxy Securities

Analysts made no major changes to their price target of CN¥5.08, suggesting the downgrades are not expected to have a long-term impact on China Galaxy Securities' valuation. 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 Galaxy Securities, with the most bullish analyst valuing it at CN¥7.82 and the most bearish at CN¥4.54 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 42% by the end of 2021. This indicates a significant reduction from annual growth of 8.8% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 9.7% annually for the foreseeable future. It's pretty clear that China Galaxy Securities' revenues are expected to perform substantially worse than 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 China Galaxy Securities. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower 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 Galaxy Securities 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 Galaxy Securities analysts - going out to 2023, 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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