Market forces rained on the parade of Shanghai Industrial Holdings Limited (HKG:363) shareholders today, when the covering analyst downgraded their forecasts for this year. Revenue estimates were cut sharply as the analyst signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.
Following the latest downgrade, the current consensus, from the single analyst covering Shanghai Industrial Holdings, is for revenues of HK$26b in 2024, which would reflect a chunky 13% reduction in Shanghai Industrial Holdings' sales over the past 12 months. Statutory earnings per share are forecast to be HK$2.96, approximately in line with the last 12 months. Prior to this update, the analyst had been forecasting revenues of HK$33b and earnings per share (EPS) of HK$3.23 in 2024. It looks like analyst sentiment has fallen somewhat in this update, with a pretty serious reduction to revenue estimates and a minor downgrade to earnings per share numbers as well.
See our latest analysis for Shanghai Industrial Holdings
The analyst made no major changes to their price target of HK$12.40, suggesting the downgrades are not expected to have a long-term impact on Shanghai Industrial Holdings' valuation.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that sales are expected to reverse, with a forecast 13% annualised revenue decline to the end of 2024. That is a notable change from historical growth of 0.8% 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 1.5% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Shanghai Industrial Holdings is expected to lag the wider industry.
The Bottom Line
The biggest issue in the new estimates is that the analyst has reduced their earnings per share estimates, suggesting business headwinds lay ahead for Shanghai Industrial Holdings. Unfortunately the analyst also downgraded their revenue estimates, and industry data suggests that Shanghai Industrial Holdings' revenues are expected to grow 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 Shanghai Industrial Holdings after today.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have analyst estimates for Shanghai Industrial Holdings going out as far as 2026, and you can see them 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.