What You Need To Know About The Zhaojin Mining Industry Company Limited (HKG:1818) Analyst Downgrade Today

One thing we could say about the analysts on Zhaojin Mining Industry Company Limited (HKG:1818) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Revenue estimates were cut sharply as analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well. The stock price has risen 9.2% to HK$12.82 over the past week. It will be interesting to see if this downgrade motivates investors to start selling their holdings.

Following this downgrade, Zhaojin Mining Industry's six analysts are forecasting 2023 revenues to be CN¥7.8b, approximately in line with the last 12 months. Per-share earnings are expected to jump 139% to CN¥0.29. Before this latest update, the analysts had been forecasting revenues of CN¥8.8b and earnings per share (EPS) of CN¥0.31 in 2023. It looks like analyst sentiment has fallen somewhat in this update, with a measurable cut to revenue estimates and a minor downgrade to earnings per share numbers as well.

See our latest analysis for Zhaojin Mining Industry

What's most unexpected is that the consensus price target rose 8.9% to CN¥8.30, strongly implying the downgrade to forecasts is not expected to be more than a temporary blip. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Zhaojin Mining Industry analyst has a price target of CN¥11.70 per share, while the most pessimistic values it at CN¥7.70. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Zhaojin Mining Industry's past performance and to peers in the same industry. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 1.6% by the end of 2023. This indicates a significant reduction from annual growth of 2.4% 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 5.5% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Zhaojin Mining Industry is expected to lag 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 Zhaojin Mining Industry. 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. There was also an increase in the price target, suggesting that there is more optimism baked into the forecasts than there was previously. 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 Zhaojin Mining Industry after today.

After a downgrade like this, it's pretty clear that previous forecasts were too optimistic. What's more, we've spotted several possible issues with Zhaojin Mining Industry's business, like recent substantial insider selling. For more information, you can click here to discover this and the 2 other flags 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.

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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.