One thing we could say about the analysts on Guanghui Energy Co., Ltd. (SHSE:600256) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.

Following the downgrade, the current consensus from Guanghui Energy's four analysts is for revenues of CN¥55b in 2024 which - if met - would reflect a substantial 26% increase on its sales over the past 12 months. Statutory earnings per share are presumed to jump 117% to CN¥0.84. Previously, the analysts had been modelling revenues of CN¥63b and earnings per share (EPS) of CN¥0.85 in 2024. So there's been a clear change in analyst sentiment in the recent update, with the analysts making a substantial drop in revenues and reconfirming their earnings per share estimates.

the analysts have also increased their price target 7.4% to CN¥9.02, clearly signalling that lower revenue forecasts this year are not expected to have a material impact on Guanghui Energy's valuation.

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. It's pretty clear that there is an expectation that Guanghui Energy's revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 26% growth on an annualised basis. This is compared to a historical growth rate of 36% 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 4.8% annually. Even after the forecast slowdown in growth, it seems obvious that Guanghui Energy is also expected to grow faster than the wider industry.

The Bottom Line

The most important thing to take away is that there's been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. There was also an increase in the price target, suggesting that there is more optimism baked into the forecasts than there was previously. Given the stark change in sentiment, we'd understand if investors became more cautious on Guanghui Energy after today.

After a downgrade like this, it's pretty clear that previous forecasts were too optimistic. What's more, we've spotted several possible issues with Guanghui Energy's business, like its declining profit margins. Learn more, and discover the 3 other warning signs we've identified, for free on our platform here.

Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.

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