These Analysts Think Sunac China Holdings Limited's (HKG:1918) Sales Are Under Threat

The latest analyst coverage could presage a bad day for Sunac China Holdings Limited (HKG:1918), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.

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After the downgrade, the consensus from Sunac China Holdings' twin analysts is for revenues of CN¥63b in 2025, which would reflect a considerable 15% decline in sales compared to the last year of performance. Before the latest update, the analysts were foreseeing CN¥88b of revenue in 2025. The consensus view seems to have become more pessimistic on Sunac China Holdings, noting the sizeable cut to revenue estimates in this update.

View our latest analysis for Sunac China Holdings

Notably, the analysts have cut their price target 26% to CN¥0.99, suggesting concerns around Sunac China Holdings' valuation. 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. The most optimistic Sunac China Holdings analyst has a price target of CN¥1.49 per share, while the most pessimistic values it at CN¥0.47. We would probably assign less value to the forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. 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.

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. One thing that stands out from these estimates is that revenues are expected to keep falling until the end of 2025, roughly in line with the historical decline of 15% per annum over the past five years. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 4.2% annually. So it's pretty clear that, while it does have declining revenues, the analysts also expect Sunac China Holdings to suffer worse than the wider industry.

The Bottom Line

The most important thing to take away is that analysts cut their revenue estimates for this year. They also expect company revenue to perform worse 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 Sunac China Holdings' future valuation. 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.

There might be good reason for analyst bearishness towards Sunac China Holdings, like dilutive stock issuance over the past year. Learn more, and discover the 2 other flags we've identified, for 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.