Some Xinyi Solar Holdings Limited (HKG:968) Analysts Just Made A Major Cut To Next Year's Estimates

The latest analyst coverage could presage a bad day for Xinyi Solar Holdings Limited (HKG:968), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business. The stock price has risen 8.5% to HK$3.20 over the past week. Investors could be forgiven for changing their mind on the business following the downgrade; but it's not clear if the revised forecasts will lead to selling activity.

Following the latest downgrade, the 21 analysts covering Xinyi Solar Holdings provided consensus estimates of HK$22b revenue in 2024, which would reflect a considerable 19% decline on its sales over the past 12 months. Statutory earnings per share are supposed to crater 77% to HK$0.12 in the same period. Prior to this update, the analysts had been forecasting revenues of HK$27b and earnings per share (EPS) of HK$0.36 in 2024. Indeed, we can see that the analysts are a lot more bearish about Xinyi Solar Holdings' prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.

See our latest analysis for Xinyi Solar Holdings

Despite the cuts to forecast earnings, there was no real change to the HK$4.38 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value.

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. We would highlight that sales are expected to reverse, with a forecast 35% annualised revenue decline to the end of 2024. That is a notable change from historical growth of 25% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 14% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Xinyi Solar Holdings is expected to lag 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 Xinyi Solar Holdings. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Xinyi Solar Holdings after the downgrade.

In light of the downgrade, our automated discounted cash flow valuation tool suggests that Xinyi Solar Holdings could now be moderately overvalued. You can learn more about our valuation methodology for free on our platform here.

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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.