Stock Analysis

News Flash: 4 Analysts Think Shenzhen Expressway Corporation Limited (HKG:548) Earnings Are Under Threat

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Market forces rained on the parade of Shenzhen Expressway Corporation Limited (HKG:548) shareholders today, when the analysts downgraded their forecasts for this year. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

After this downgrade, Shenzhen Expressway's four analysts are now forecasting revenues of CN¥9.6b in 2024. This would be an okay 3.3% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to be CN¥1.06, roughly flat on the last 12 months. Prior to this update, the analysts had been forecasting revenues of CN¥11b and earnings per share (EPS) of CN¥1.20 in 2024. Indeed, we can see that the analysts are a lot more bearish about Shenzhen Expressway's prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.

See our latest analysis for Shenzhen Expressway

SEHK:548 Earnings and Revenue Growth March 30th 2024

Analysts made no major changes to their price target of CN¥7.89, suggesting the downgrades are not expected to have a long-term impact on Shenzhen Expressway's 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 Shenzhen Expressway analyst has a price target of CN¥8.34 per share, while the most pessimistic values it at CN¥7.30. With such a narrow range of valuations, analysts apparently share similar views on what they think the business is worth.

Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that Shenzhen Expressway's revenue growth is expected to slow, with the forecast 3.3% annualised growth rate until the end of 2024 being well below the historical 13% p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 4.9% annually. Factoring in the forecast slowdown in growth, it seems obvious that Shenzhen Expressway is also expected to grow slower than other industry participants.

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, and industry data suggests that Shenzhen Expressway's revenues are expected to grow 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 Shenzhen Expressway after the downgrade.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Shenzhen Expressway going out to 2026, and you can see them free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

Valuation is complex, but we're helping make it simple.

Find out whether Shenzhen Expressway is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.