Earnings Update: Dongfang Electric Corporation Limited (HKG:1072) Just Reported Its Annual Results And Analysts Are Updating Their Forecasts

Dongfang Electric Corporation Limited (HKG:1072) shareholders are probably feeling a little disappointed, since its shares fell 6.7% to HK$8.18 in the week after its latest annual results. Revenues were CN¥60b, with Dongfang Electric reporting some 8.1% below analyst expectations. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

View our latest analysis for Dongfang Electric

Taking into account the latest results, the most recent consensus for Dongfang Electric from six analysts is for revenues of CN¥71.4b in 2024. If met, it would imply a decent 20% increase on its revenue over the past 12 months. Per-share earnings are expected to jump 24% to CN¥1.41. Yet prior to the latest earnings, the analysts had been anticipated revenues of CN¥76.2b and earnings per share (EPS) of CN¥1.41 in 2024. So it looks like the analysts have become a bit less optimistic after the latest results announcement, with revenues expected to fall even as the company is supposed to maintain EPS.

The consensus has reconfirmed its price target of HK$10.46, showing that the analysts don't expect weaker revenue expectations next year to have a material impact on Dongfang Electric's market value. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on Dongfang Electric, with the most bullish analyst valuing it at HK$12.41 and the most bearish at HK$9.00 per share. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

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 clear from the latest estimates that Dongfang Electric's rate of growth is expected to accelerate meaningfully, with the forecast 20% annualised revenue growth to the end of 2024 noticeably faster than its historical growth of 16% p.a. over the past five years. Other similar companies in the industry (with analyst coverage) are also forecast to grow their revenue at 17% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Dongfang Electric is expected to grow at about the same rate as the wider industry.

The Bottom Line

The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. They also downgraded their revenue estimates, although as we saw earlier, forecast growth is only expected to be about the same as the wider industry. Even so, long term profitability is more important for the value creation process. The consensus price target held steady at HK$10.46, with the latest estimates not enough to have an impact on their price targets.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Dongfang Electric going out to 2026, and you can see them free on our platform here..

We don't want to rain on the parade too much, but we did also find 2 warning signs for Dongfang Electric (1 can't be ignored!) that you need to be mindful of.

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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.