The analysts covering Shede Spirits Co., Ltd. (SHSE:600702) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for next year. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the downgrade, the current consensus from Shede Spirits' ten analysts is for revenues of CN¥6.9b in 2025 which - if met - would reflect a notable 9.1% increase on its sales over the past 12 months. Statutory earnings per share are presumed to ascend 19% to CN¥4.13. Previously, the analysts had been modelling revenues of CN¥7.7b and earnings per share (EPS) of CN¥5.05 in 2025. Indeed, we can see that the analysts are a lot more bearish about Shede Spirits' prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.

Despite the cuts to forecast earnings, there was no real change to the CN¥78.69 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value.

Of course, another way to look at these forecasts is to place them into context against the industry itself. It's pretty clear that there is an expectation that Shede Spirits' revenue growth will slow down substantially, with revenues to the end of 2025 expected to display 7.2% growth on an annualised basis. This is compared to a historical growth rate of 23% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 12% annually. Factoring in the forecast slowdown in growth, it seems obvious that Shede Spirits is also expected to grow slower than other industry participants.

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 Shede Spirits' revenues are expected to grow 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 next year, we wouldn't be surprised if investors were a bit wary of Shede Spirits.

So things certainly aren't looking great, and you should also know that we've spotted some potential warning signs with Shede Spirits, including concerns around earnings quality. For more information, you can click here to discover this and the 2 other warning signs we've identified.

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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.