These Analysts Think Aoyuan Healthy Life Group Company Limited's (HKG:3662) Sales Are Under Threat

The latest analyst coverage could presage a bad day for Aoyuan Healthy Life Group Company Limited (HKG:3662), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.

After this downgrade, Aoyuan Healthy Life Group's five analysts are now forecasting revenues of CN¥2.2b in 2021. This would be a huge 59% improvement in sales compared to the last 12 months. Per-share earnings are expected to bounce 48% to CN¥0.51. Prior to this update, the analysts had been forecasting revenues of CN¥2.7b and earnings per share (EPS) of CN¥0.54 in 2021. It looks like analyst sentiment has fallen somewhat in this update, with a substantial drop in revenue estimates and a small dip in earnings per share numbers as well.

See our latest analysis for Aoyuan Healthy Life Group

The consensus price target fell 17% to CN¥6.76, 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. The most optimistic Aoyuan Healthy Life Group analyst has a price target of CN¥11.02 per share, while the most pessimistic values it at CN¥3.76. With such a wide range in price targets, the analysts are almost certainly betting on widely diverse outcomes for the underlying business. 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.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. It's clear from the latest estimates that Aoyuan Healthy Life Group's rate of growth is expected to accelerate meaningfully, with the forecast 59% annualised revenue growth to the end of 2021 noticeably faster than its historical growth of 30% p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 14% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Aoyuan Healthy Life Group is expected to grow much faster than its industry.

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, although our data indicates revenues are expected to perform better than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of Aoyuan Healthy Life Group's future valuation. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Aoyuan Healthy Life Group going forwards.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Aoyuan Healthy Life Group analysts - going out to 2025, and you can see them free on our platform here.

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