Analyst Forecasts Just Became More Bearish On Shanghai Haohai Biological Technology Co., Ltd. (HKG:6826)

Market forces rained on the parade of Shanghai Haohai Biological Technology Co., Ltd. (HKG:6826) shareholders today, when the analysts downgraded their forecasts for this year. Revenue estimates were cut sharply as the analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.

Following the downgrade, the current consensus from Shanghai Haohai Biological Technology's three analysts is for revenues of CN¥1.9b in 2022 which - if met - would reflect a notable 8.8% increase on its sales over the past 12 months. Statutory earnings per share are presumed to shoot up 44% to CN¥2.91. Previously, the analysts had been modelling revenues of CN¥2.2b and earnings per share (EPS) of CN¥2.97 in 2022. 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.

View our latest analysis for Shanghai Haohai Biological Technology

It'll come as no surprise then, to learn that the analysts have cut their price target 27% to CN¥58.30. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Shanghai Haohai Biological Technology at CN¥111 per share, while the most bearish prices it at CN¥45.37. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely differing views on what kind of performance this business can generate. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.

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. We can infer from the latest estimates that forecasts expect a continuation of Shanghai Haohai Biological Technology'shistorical trends, as the 8.8% annualised revenue growth to the end of 2022 is roughly in line with the 8.0% annual revenue growth over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenues grow 35% per year. So although Shanghai Haohai Biological Technology is expected to maintain its revenue growth rate, it's forecast to grow slower 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 Shanghai Haohai Biological Technology's revenues are expected to grow slower than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of Shanghai Haohai Biological Technology's future valuation. Given the stark change in sentiment, we'd understand if investors became more cautious on Shanghai Haohai Biological Technology after today.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Shanghai Haohai Biological Technology analysts - going out to 2023, and you can see them free on our platform here.

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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.