The analysts covering Jinyu Bio-technology Co., Ltd. (SHSE:600201) 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) forecasts went under the knife, suggesting analysts have soured majorly on the business.
Following the downgrade, the latest consensus from Jinyu Bio-technology's ten analysts is for revenues of CN¥1.8b in 2024, which would reflect a decent 11% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to climb 19% to CN¥0.32. Previously, the analysts had been modelling revenues of CN¥2.1b and earnings per share (EPS) of CN¥0.36 in 2024. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a considerable drop in earnings per share numbers as well.
Despite the cuts to forecast earnings, there was no real change to the CN¥9.38 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value.
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. For example, we noticed that Jinyu Bio-technology's rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 16% growth to the end of 2024 on an annualised basis. That is well above its historical decline of 0.1% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 24% per year. Although Jinyu Bio-technology's revenues are expected to improve, it seems that the analysts are still bearish on the business, forecasting it to grow slower than the broader industry.
The Bottom Line
The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Jinyu Bio-technology. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of Jinyu Bio-technology.
In light of the downgrade, our automated discounted cash flow valuation tool suggests that Jinyu Bio-technology could now be moderately overvalued. Find out why, and see how we estimate the valuation for 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.
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