The analyst covering HKR International Limited (HKG:480) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative.
Following the latest downgrade, the one analyst covering HKR International provided consensus estimates of HK$3.7b revenue in 2021, which would reflect a sizeable 20% decline on its sales over the past 12 months. Statutory earnings per share are supposed to plunge 53% to HK$0.51 in the same period. Before this latest update, the analyst had been forecasting revenues of HK$4.3b and earnings per share (EPS) of HK$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.
Despite the cuts to forecast earnings, there was no real change to the HK$4.05 price target, showing that the analyst don't think the changes have a meaningful impact on its intrinsic value.
Of course, another way to look at these forecasts is to place them into context against the industry itself. These estimates imply that sales are expected to slow, with a forecast revenue decline of 20%, a significant reduction from annual growth of 13% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 15% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - HKR International is expected to lag the wider industry.
The Bottom Line
The most important thing to take away is that the analyst cut their earnings per share estimates, expecting a clear decline in business conditions. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. 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 HKR International after today.
That said, the covering analyst might have good reason to be negative on HKR International, given its declining profit margins. For more information, you can click here to discover this and the 3 other concerns we've identified.
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.
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