Today is shaping up negative for Hangzhou Sunrise Technology Co.,Ltd. (SZSE:300360) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon. Shares are up 9.9% to CN¥14.73 in the past week. It will be interesting to see if this downgrade motivates investors to start selling their holdings.
After this downgrade, Hangzhou Sunrise TechnologyLtd's five analysts are now forecasting revenues of CN¥2.2b in 2024. This would be a sizeable 23% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to accumulate 2.3% to CN¥1.22. Prior to this update, the analysts had been forecasting revenues of CN¥2.6b and earnings per share (EPS) of CN¥1.41 in 2024. Indeed, we can see that the analysts are a lot more bearish about Hangzhou Sunrise TechnologyLtd's prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.
Despite the cuts to forecast earnings, there was no real change to the CN¥18.70 price target, showing that the analysts 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. It's clear from the latest estimates that Hangzhou Sunrise TechnologyLtd's rate of growth is expected to accelerate meaningfully, with the forecast 23% annualised revenue growth to the end of 2024 noticeably faster than its historical growth of 17% 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 18% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Hangzhou Sunrise TechnologyLtd 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. 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 Hangzhou Sunrise TechnologyLtd after the downgrade.
In light of the downgrade, our automated discounted cash flow valuation tool suggests that Hangzhou Sunrise TechnologyLtd could now be moderately overvalued. You can learn more about our valuation methodology for free on our platform here.
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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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.