One thing we could say about the covering analyst on Asia Cement (China) Holdings Corporation (HKG:743) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analyst has soured majorly on the business. Shares are up 5.5% to HK$2.67 in 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 current consensus, from the one analyst covering Asia Cement (China) Holdings, is for revenues of CN¥8.2b in 2023, which would reflect a measurable 6.8% reduction in Asia Cement (China) Holdings' sales over the past 12 months. Per-share earnings are expected to step up 16% to CN¥0.23. Previously, the analyst had been modelling revenues of CN¥9.5b and earnings per share (EPS) of CN¥0.42 in 2023. Indeed, we can see that the analyst is a lot more bearish about Asia Cement (China) Holdings' prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.
Check out our latest analysis for Asia Cement (China) Holdings
The consensus price target fell 35% to CN¥2.80, with the weaker earnings outlook clearly leading analyst valuation estimates.
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. Over the past five years, revenues have declined around 2.3% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for an annualised 6.8% decline in revenue until the end of 2023. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 2.6% annually. So it's pretty clear that, while it does have declining revenues, the analyst also expect Asia Cement (China) Holdings to suffer worse than 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. Unfortunately the analyst also downgraded their revenue estimates, and industry data suggests that Asia Cement (China) Holdings' revenues are expected to grow slower than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Asia Cement (China) Holdings.
After a downgrade like this, it's pretty clear that previous forecasts were too optimistic. What's more, we've spotted several possible issues with Asia Cement (China) Holdings' business, like its declining profit margins. For more information, you can click here to discover this and the 2 other warning signs we've identified.
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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.