The analysts covering China Tourism Group Duty Free Corporation Limited (SHSE:601888) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative.

Following the downgrade, the most recent consensus for China Tourism Group Duty Free from its 27 analysts is for revenues of CN¥68b in 2022 which, if met, would be a satisfactory 2.1% increase on its sales over the past 12 months. Statutory earnings per share are expected to be CN¥4.86, roughly flat on the last 12 months. Prior to this update, the analysts had been forecasting revenues of CN¥78b and earnings per share (EPS) of CN¥5.27 in 2022. It looks like analyst sentiment has fallen somewhat in this update, with a measurable cut to revenue estimates and a minor downgrade to earnings per share numbers as well.

See our latest analysis for China Tourism Group Duty Free

Despite the cuts to forecast earnings, there was no real change to the CN¥251 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on China Tourism Group Duty Free, with the most bullish analyst valuing it at CN¥315 and the most bearish at CN¥186 per share. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's pretty clear that there is an expectation that China Tourism Group Duty Free's revenue growth will slow down substantially, with revenues to the end of 2022 expected to display 4.3% growth on an annualised basis. This is compared to a historical growth rate of 19% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 21% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than China Tourism Group Duty Free.

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, and industry data suggests that China Tourism Group Duty Free's revenues are expected to grow slower than the wider market. Given the stark change in sentiment, we'd understand if investors became more cautious on China Tourism Group Duty Free after today.

Uncomfortably, our automated valuation tool also suggests that China Tourism Group Duty Free stock could be overvalued following the downgrade. Shareholders could be left disappointed if these estimates play out. Find out why, and see how we estimate the valuation 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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