These Analysts Think Yuzhou Group Holdings Company Limited's (HKG:1628) Sales Are Under Threat

One thing we could say about the analysts on Yuzhou Group Holdings Company Limited (HKG:1628) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative.

Following the downgrade, the latest consensus from Yuzhou Group Holdings' 13 analysts is for revenues of CN¥29b in 2021, which would reflect a major 180% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to leap 59,427% to CN¥0.52. Prior to this update, the analysts had been forecasting revenues of CN¥37b and earnings per share (EPS) of CN¥0.53 in 2021. It looks like analyst sentiment has fallen somewhat in this update, with a pretty serious reduction to revenue estimates and a minor downgrade to earnings per share numbers as well.

View our latest analysis for Yuzhou Group Holdings

It'll come as no surprise then, to learn that the analysts have cut their price target 12% to CN¥2.86. 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 Yuzhou Group Holdings analyst has a price target of CN¥5.30 per share, while the most pessimistic values it at CN¥1.33. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely differing views on what kind of performance this business can generate. 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. The analysts are definitely expecting Yuzhou Group Holdings' growth to accelerate, with the forecast 180% annualised growth to the end of 2021 ranking favourably alongside historical growth of 12% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 14% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Yuzhou Group Holdings is expected to grow much faster than its industry.

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 Yuzhou Group Holdings. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better 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 Yuzhou Group Holdings after today.

After a downgrade like this, it's pretty clear that previous forecasts were too optimistic. What's more, we've spotted several possible issues with Yuzhou Group Holdings' business, like its declining profit margins. Learn more, and discover the 5 other concerns we've identified, for free on our platform here.

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