The analyst covering China ZhengTong Auto Services Holdings Limited (HKG:1728) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) estimates were cut sharply as the analyst factored in the latest outlook for the business, concluding that they were too optimistic previously.
After the downgrade, the consensus from China ZhengTong Auto Services Holdings' one analyst is for revenues of CN¥20b in 2024, which would reflect an uncomfortable 9.8% decline in sales compared to the last year of performance. Losses are supposed to balloon 29% to CN¥0.46 per share. Yet before this consensus update, the analyst had been forecasting revenues of CN¥27b and losses of CN¥0.20 per share in 2024. Ergo, there's been a clear change in sentiment, with the analyst administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.
Check out our latest analysis for China ZhengTong Auto Services Holdings
The consensus price target fell 69% to CN¥0.064, implicitly signalling that lower earnings per share are a leading indicator for China ZhengTong Auto Services Holdings' valuation.
Of course, another way to look at these forecasts is to place them into context against the industry itself. Over the past five years, revenues have declined around 7.7% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for an annualised 9.8% decline in revenue until the end of 2024. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 10% annually. So while a broad number of companies are forecast to grow, unfortunately China ZhengTong Auto Services Holdings is expected to see its sales affected worse than other companies in the industry.
The Bottom Line
The most important thing to take away is that the analyst increased their loss per share estimates for this year. Unfortunately the analyst also downgraded their revenue estimates, and industry data suggests that China ZhengTong Auto Services Holdings' revenues are expected to grow slower than the wider market. After such a stark change in sentiment from the analyst, we'd understand if readers now felt a bit wary of China ZhengTong Auto Services Holdings.
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 China ZhengTong Auto Services Holdings going out as far as 2026, and you can see them free on our platform here.
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