Analysts Have Just Cut Their Ronshine China Holdings Limited (HKG:3301) Revenue Estimates By 18%

The analysts covering Ronshine China Holdings Limited (HKG:3301) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.

After the downgrade, the six analysts covering Ronshine China Holdings are now predicting revenues of CN¥57b in 2021. If met, this would reflect a meaningful 18% improvement in sales compared to the last 12 months. Prior to the latest estimates, the analysts were forecasting revenues of CN¥69b in 2021. The consensus view seems to have become more pessimistic on Ronshine China Holdings, noting the measurable cut to revenue estimates in this update.

Check out our latest analysis for Ronshine China Holdings

Notably, the analysts have cut their price target 17% to CN¥5.41, suggesting concerns around Ronshine China Holdings' valuation. 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. The most optimistic Ronshine China Holdings analyst has a price target of CN¥8.95 per share, while the most pessimistic values it at CN¥4.71. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying 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. It's pretty clear that there is an expectation that Ronshine China Holdings' revenue growth will slow down substantially, with revenues to the end of 2021 expected to display 18% growth on an annualised basis. This is compared to a historical growth rate of 32% over the past five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 14% annually. So it's pretty clear that, while Ronshine China Holdings' revenue growth is expected to slow, it's expected to grow roughly in line with the industry.

The Bottom Line

The most important thing to take away is that analysts cut their revenue estimates for this year. Analysts also expect revenues to grow approximately in line with the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of Ronshine China Holdings' future valuation. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Ronshine China Holdings going forwards.

Of course, this isn't the full story. At least one of Ronshine China Holdings' six analysts has provided estimates out to 2023, which can be seen 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.

When trading Ronshine China Holdings or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

This article by Simply Wall St is general in nature. 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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

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