Some Analysts Just Cut Their Nine Dragons Paper (Holdings) Limited (HKG:2689) Estimates

The latest analyst coverage could presage a bad day for Nine Dragons Paper (Holdings) Limited (HKG:2689), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Revenue estimates were cut sharply as the analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well. Surprisingly the share price has been buoyant, rising 29% to HK$4.13 in the past 7 days. With such a sharp increase, it seems brokers may have seen something that is not yet being priced in by the wider market.

Following the downgrade, the latest consensus from Nine Dragons Paper (Holdings)'s nine analysts is for revenues of CN¥62b in 2025, which would reflect a satisfactory 4.6% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to shoot up 166% to CN¥0.43. Before this latest update, the analysts had been forecasting revenues of CN¥72b and earnings per share (EPS) of CN¥0.43 in 2025. So there's been a clear change in analyst sentiment in the recent update, with the analysts making a substantial drop in revenues and reconfirming their earnings per share estimates.

See our latest analysis for Nine Dragons Paper (Holdings)

The consensus has reconfirmed its price target of CN¥3.86, showing that the analysts don't expect weaker sales expectationsthis year to have a material impact on Nine Dragons Paper (Holdings)'s market value. 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. Currently, the most bullish analyst values Nine Dragons Paper (Holdings) at CN¥4.65 per share, while the most bearish prices it at CN¥3.20. 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.

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. It's clear from the latest estimates that Nine Dragons Paper (Holdings)'s rate of growth is expected to accelerate meaningfully, with the forecast 4.6% annualised revenue growth to the end of 2025 noticeably faster than its historical growth of 2.3% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to see revenue growth of 9.5% annually. So it's clear that despite the acceleration in growth, Nine Dragons Paper (Holdings) is expected to grow meaningfully slower than the industry average.

The Bottom Line

The most important thing to take away is that there's been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. Given the stark change in sentiment, we'd understand if investors became more cautious on Nine Dragons Paper (Holdings) after today.

Unfortunately, by using these new estimates as a starting point, we've run a discounted cash flow calculation (DCF) on Nine Dragons Paper (Holdings) 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 with high insider ownership.

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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.