Analysts Just Made A Major Revision To Their Sunac China Holdings Limited (HKG:1918) Revenue Forecasts

Market forces rained on the parade of Sunac China Holdings Limited (HKG:1918) shareholders today, when the analysts downgraded their forecasts for this year. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.

Following the downgrade, the latest consensus from Sunac China Holdings' three analysts is for revenues of CN¥99b in 2023, which would reflect an okay 2.4% improvement in sales compared to the last 12 months. Prior to the latest estimates, the analysts were forecasting revenues of CN¥112b in 2023. It looks like forecasts have become a fair bit less optimistic on Sunac China Holdings, given the measurable cut to revenue estimates.

See our latest analysis for Sunac China Holdings

The consensus price target fell 51% to CN¥1.06, with the analysts clearly less optimistic about Sunac China Holdings' valuation following this update. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Sunac China Holdings analyst has a price target of CN¥1.30 per share, while the most pessimistic values it at CN¥0.97. 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 Sunac China Holdings shareholders.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that Sunac China Holdings' revenue growth is expected to slow, with the forecast 2.4% annualised growth rate until the end of 2023 being well below the historical 10% p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 9.0% annually. Factoring in the forecast slowdown in growth, it seems obvious that Sunac China Holdings is also expected to grow slower than other industry participants.

The Bottom Line

The clear low-light was that analysts slashing their revenue forecasts for Sunac China Holdings this year. They're also anticipating slower revenue growth than the wider market. Furthermore, there was a cut to the price target, suggesting that the latest news has led to more pessimism about the intrinsic value of the business. 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 Sunac China Holdings after today.

But wait - there's more! We have estimates for Sunac China Holdings from its three analysts out until 2025, 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.