Today is shaping up negative for China Reinsurance (Group) Corporation (HKG:1508) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business. Bidders are definitely seeing a different story, with the stock price of HK$0.59 reflecting a 11% rise in the past week. With such a sharp increase, it seems brokers may have seen something that is not yet being priced in by the wider market.

Following the downgrade, the latest consensus from China Reinsurance (Group)'s three analysts is for revenues of CN¥124b in 2024, which would reflect a substantial 31% improvement in sales compared to the last 12 months. Statutory earnings per share are anticipated to dive 26% to CN¥0.098 in the same period. Previously, the analysts had been modelling revenues of CN¥156b and earnings per share (EPS) of CN¥0.13 in 2024. Indeed, we can see that the analysts are a lot more bearish about China Reinsurance (Group)'s prospects, administering a pretty serious reduction to revenue estimates and slashing their EPS estimates to boot.

Analysts made no major changes to their price target of CN¥0.62, suggesting the downgrades are not expected to have a long-term impact on China Reinsurance (Group)'s valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values China Reinsurance (Group) at CN¥0.78 per share, while the most bearish prices it at CN¥0.48. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. One thing stands out from these estimates, which is that China Reinsurance (Group) is forecast to grow faster in the future than it has in the past, with revenues expected to display 31% annualised growth until the end of 2024. If achieved, this would be a much better result than the 3.2% annual decline over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 4.3% annually. Not only are China Reinsurance (Group)'s revenues expected to improve, it seems that the analysts are also expecting it to grow faster than the wider 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 China Reinsurance (Group). While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better 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 China Reinsurance (Group).

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple China Reinsurance (Group) analysts - going out to 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.

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