Central China New Life Limited (HKG:9983) Analysts Are More Bearish Than They Used To Be

The latest analyst coverage could presage a bad day for Central China New Life Limited (HKG:9983), 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 the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

After the downgrade, the four analysts covering Central China New Life are now predicting revenues of CN¥3.2b in 2023. If met, this would reflect an okay 2.1% improvement in sales compared to the last 12 months. Statutory earnings per share are anticipated to nosedive 92% to CN¥0.037 in the same period. Previously, the analysts had been modelling revenues of CN¥3.6b and earnings per share (EPS) of CN¥0.50 in 2023. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a large cut to earnings per share numbers as well.

Check out our latest analysis for Central China New Life

It'll come as no surprise then, to learn that the analysts have cut their price target 19% to CN¥3.05. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic Central China New Life analyst has a price target of CN¥5.11 per share, while the most pessimistic values it at CN¥1.87. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how think this business will perform. 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.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's pretty clear that there is an expectation that Central China New Life's revenue growth will slow down substantially, with revenues to the end of 2023 expected to display 2.1% growth on an annualised basis. This is compared to a historical growth rate of 27% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 10% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Central China New Life.

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 Central China New Life. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Central China New Life.

There might be good reason for analyst bearishness towards Central China New Life, like concerns around earnings quality. Learn more, and discover the 1 other risk we've identified, for free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.