Analysts Just Shaved Their Simcere Pharmaceutical Group Limited (HKG:2096) Forecasts Dramatically

The analysts covering Simcere Pharmaceutical Group Limited (HKG:2096) 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.

After the downgrade, the five analysts covering Simcere Pharmaceutical Group are now predicting revenues of CN¥8.0b in 2023. If met, this would reflect a major 44% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to be CN¥0.39, roughly flat on the last 12 months. Prior to this update, the analysts had been forecasting revenues of CN¥10b and earnings per share (EPS) of CN¥0.99 in 2023. It looks like analyst sentiment has declined substantially, with a sizeable cut to revenue estimates and a pretty serious decline to earnings per share numbers as well.

See our latest analysis for Simcere Pharmaceutical Group

Despite the cuts to forecast earnings, there was no real change to the CN¥12.73 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. 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. Currently, the most bullish analyst values Simcere Pharmaceutical Group at CN¥21.12 per share, while the most bearish prices it at CN¥11.96. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Simcere Pharmaceutical Group's past performance and to peers in the same industry. The analysts are definitely expecting Simcere Pharmaceutical Group's growth to accelerate, with the forecast 44% annualised growth to the end of 2023 ranking favourably alongside historical growth of 19% per annum over the past year. Compare this with other companies in the same industry, which are forecast to grow their revenue 13% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Simcere Pharmaceutical Group is expected to grow much faster than its 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 Simcere Pharmaceutical Group. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better 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 Simcere Pharmaceutical Group.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Simcere Pharmaceutical Group analysts - going out to 2025, and you can see them free on our platform here.

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.