Analysts might have been a bit too bullish on China Gas Holdings Limited (HKG:384), given that the company fell short of expectations when it released its half-year results last week. It looks like a weak result overall, with both revenues and earnings falling well short of analyst predictions. Revenues of HK$28b missed by 14%, and statutory earnings per share of HK$0.94 fell short of forecasts by5.0%. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We've gathered the most recent statutory forecasts to see whether analysts have changed their earnings models, following these results.
Following the latest results, China Gas Holdings's 19 analysts are now forecasting revenues of HK$68.0b in 2020. This would be a meaningful 16% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to rise 9.7% to HK$1.89. Before this earnings report, analysts had been forecasting revenues of HK$67.9b and earnings per share (EPS) of HK$1.89 in 2020. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.
Analysts reconfirmed their price target of HK$35.74, showing that the business is executing well and in line with expectations. 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 Gas Holdings at HK$43.00 per share, while the most bearish prices it at HK$20.80. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
Zooming out to look at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up both against past performance, and against industry growth estimates. Next year brings more of the same, according to analysts, with revenue forecast to grow 16%, in line with its 18% annual growth over the past five years. Compare this with the wider market, which analyst estimates (in aggregate) suggest will see revenues grow 11% next year. So it's pretty clear that China Gas Holdings is forecast to grow substantially faster than its market.
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. Happily, there were no major changes to revenue forecasts, with analysts still expecting the business to grow faster than the wider market. The consensus price target held steady at HK$35.74, with the latest estimates not enough to have an impact on analysts' estimated valuations.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple China Gas Holdings analysts - going out to 2024, and you can see them free on our platform here.
It might also be worth considering whether China Gas Holdings's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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