China SCE Group Holdings Limited (HKG:1966) Analysts Just Slashed This Year's Estimates

One thing we could say about the analysts on China SCE Group Holdings Limited (HKG:1966) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. 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. Bidders are definitely seeing a different story, with the stock price of HK$1.57 reflecting a 15% rise in the past week. Whether the downgrade will have a negative impact on demand for shares is yet to be seen.

Following the downgrade, the current consensus from China SCE Group Holdings' ten analysts is for revenues of CN¥41b in 2022 which - if met - would reflect a notable 9.4% increase on its sales over the past 12 months. Statutory earnings per share are forecast to be CN¥0.72, approximately in line with the last 12 months. Before this latest update, the analysts had been forecasting revenues of CN¥48b and earnings per share (EPS) of CN¥1.09 in 2022. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a pretty serious decline to earnings per share numbers as well.

See our latest analysis for China SCE Group Holdings

The consensus price target fell 18% to CN¥2.67, 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 China SCE Group Holdings, with the most bullish analyst valuing it at CN¥5.94 and the most bearish at CN¥1.84 per share. 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. 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.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the China SCE Group Holdings' past performance and to peers in the same industry. We would highlight that China SCE Group Holdings' revenue growth is expected to slow, with the forecast 9.4% annualised growth rate until the end of 2022 being well below the historical 23% p.a. growth over the last five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 11% annually. Factoring in the forecast slowdown in growth, it looks like China SCE Group Holdings is forecast to grow at about the same rate as the wider 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 China SCE Group Holdings. There was also a drop in their revenue estimates, although as we saw earlier, forecast growth is only expected to be about the same as 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 China SCE Group Holdings.

So things certainly aren't looking great, and you should also know that we've spotted some potential warning signs with China SCE Group Holdings, including its declining profit margins. For more information, you can click here to discover this and the 3 other concerns we've identified.

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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.