Today is shaping up negative for Kyland Technology Co., Ltd. (SZSE:300353) shareholders, with the covering analyst delivering a substantial negative revision to this year's forecasts. 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 Kyland Technology's solitary analyst is for revenues of CN¥1.2b in 2024 which - if met - would reflect a modest 7.6% increase on its sales over the past 12 months. Statutory earnings per share are anticipated to tumble 41% to CN¥0.26 in the same period. Previously, the analyst had been modelling revenues of CN¥1.3b and earnings per share (EPS) of CN¥0.27 in 2024. It looks like analyst sentiment has fallen somewhat in this update, with a measurable cut to revenue estimates and a small dip in earnings per share numbers as well.

The average price target climbed 20% to CN¥14.67 despite the reduced earnings forecasts, suggesting that this earnings impact could be a positive for the stock, once it passes.

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. We would highlight that Kyland Technology's revenue growth is expected to slow, with the forecast 7.6% annualised growth rate until the end of 2024 being well below the historical 12% p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 22% 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 Kyland Technology.

The Bottom Line

The most important thing to take away is that the analyst cut their earnings per share estimates, expecting a clear decline in business conditions. Unfortunately the analyst also downgraded their revenue estimates, and industry data suggests that Kyland Technology's revenues are expected to grow slower 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 Kyland Technology after today.

That said, the analyst might have good reason to be negative on Kyland Technology, given concerns around earnings quality. For more information, you can click here to discover this and the 1 other risk we've identified.

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