Some Zhaojin Mining Industry Company Limited (HKG:1818) Analysts Just Made A Major Cut To Next Year's Estimates

Market forces rained on the parade of Zhaojin Mining Industry Company Limited (HKG:1818) shareholders today, when the analysts downgraded their forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon. The stock price has risen 8.0% to HK$10.78 over the past week. It will be interesting to see if this downgrade motivates investors to start selling their holdings.

Following the latest downgrade, the eight analysts covering Zhaojin Mining Industry provided consensus estimates of CN¥7.4b revenue in 2023, which would reflect a discernible 5.5% decline on its sales over the past 12 months. Per-share earnings are expected to soar 59% to CN¥0.21. Before this latest update, the analysts had been forecasting revenues of CN¥8.3b and earnings per share (EPS) of CN¥0.29 in 2023. Indeed, we can see that the analysts are a lot more bearish about Zhaojin Mining Industry's prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.

View our latest analysis for Zhaojin Mining Industry

Analysts made no major changes to their price target of CN¥12.39, suggesting the downgrades are not expected to have a long-term impact on Zhaojin Mining Industry's valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Zhaojin Mining Industry, with the most bullish analyst valuing it at CN¥16.04 and the most bearish at CN¥10.22 per share. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Zhaojin Mining Industry shareholders.

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. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 11% by the end of 2023. This indicates a significant reduction from annual growth of 2.7% 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 7.1% per year. It's pretty clear that Zhaojin Mining Industry'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 earnings per share estimates, expecting a clear decline in business conditions. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Zhaojin Mining Industry's revenues are expected to grow slower than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of Zhaojin Mining Industry.

Unfortunately, by using these new estimates as a starting point, we've run a discounted cash flow calculation (DCF) on Zhaojin Mining Industry that suggests the company could be somewhat overvalued. Learn why, and examine the assumptions that underpin our valuation by visiting our free platform here to learn more about our valuation approach.

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.