Time To Worry? Analysts Are Downgrading Their Sunac China Holdings Limited (HKG:1918) Outlook

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. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

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Following the latest downgrade, the twin analysts covering Sunac China Holdings provided consensus estimates of CN¥66b revenue in 2025, which would reflect a chunky 11% decline on its sales over the past 12 months. Losses are predicted to fall substantially, shrinking 57% to CN¥1.11 per share. However, before this estimates update, the consensus had been expecting revenues of CN¥109b and CN¥0.69 per share in losses. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.

Check out our latest analysis for Sunac China Holdings

There was no major change to the consensus price target of CN¥1.33, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Sunac China Holdings, with the most bullish analyst valuing it at CN¥2.51 and the most bearish at CN¥0.47 per share. With such a wide range in price targets, the analysts are almost certainly betting on widely diverse outcomes for the underlying business. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

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 would also point out that the forecast 11% annualised revenue decline to the end of 2025 is better than the historical trend, which saw revenues shrink 15% annually 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 revenue grow 4.5% per year. 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 increased their loss per share estimates for this year. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Sunac China Holdings' revenues are expected to grow slower than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Sunac China Holdings after the downgrade.

That said, the analysts might have good reason to be negative on Sunac China Holdings, given 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.