Times China Holdings Limited (HKG:1233) Analysts Are More Bearish Than They Used To Be

The analysts covering Times China Holdings Limited (HKG:1233) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon. Bidders are definitely seeing a different story, with the stock price of HK$3.14 reflecting a 34% rise in the past week. It will be interesting to see if the downgrade has an impact on buying demand for the company's shares.

Following the downgrade, the latest consensus from Times China Holdings' twelve analysts is for revenues of CN¥46b in 2022, which would reflect a satisfactory 4.7% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to increase 7.1% to CN¥1.66. Before this latest update, the analysts had been forecasting revenues of CN¥51b and earnings per share (EPS) of CN¥2.58 in 2022. 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.

See our latest analysis for Times China Holdings

The consensus price target fell 21% to CN¥3.73, with the weaker earnings outlook clearly leading analyst valuation estimates. 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. There are some variant perceptions on Times China Holdings, with the most bullish analyst valuing it at CN¥13.58 and the most bearish at CN¥2.53 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.

Of course, another way to look at these forecasts is to place them into context against the industry itself. It's pretty clear that there is an expectation that Times China Holdings' revenue growth will slow down substantially, with revenues to the end of 2022 expected to display 4.7% growth on an annualised basis. This is compared to a historical growth rate of 17% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 11% annually. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Times China Holdings.

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 Times China Holdings' revenues are expected to grow 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 Times China Holdings.

That said, the analysts might have good reason to be negative on Times China Holdings, given its declining profit margins. Learn more, and discover the 4 other warning signs we've identified, for free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

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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.