New Forecasts: Here's What Analysts Think The Future Holds For Yankuang Energy Group Company Limited (HKG:1171)

Yankuang Energy Group Company Limited (HKG:1171) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's forecasts. Consensus estimates suggest investors could expect greatly increased statutory revenues and earnings per share, with the analysts modelling a real improvement in business performance.

Following the upgrade, the consensus from twelve analysts covering Yankuang Energy Group is for revenues of CN¥156b in 2022, implying a stressful 21% decline in sales compared to the last 12 months. Statutory earnings per share are presumed to expand 11% to CN¥7.16. Previously, the analysts had been modelling revenues of CN¥142b and earnings per share (EPS) of CN¥6.45 in 2022. There has definitely been an improvement in perception recently, with the analysts substantially increasing both their earnings and revenue estimates.

Our analysis indicates that 1171 is potentially undervalued!

Although the analysts have upgraded their earnings estimates, there was no change to the consensus price target of CN¥27.82, suggesting that the forecast performance does not have a long term impact on the company's valuation. 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 Yankuang Energy Group at CN¥49.51 per share, while the most bearish prices it at CN¥13.46. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely differing views on what kind of performance this business can generate. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.

Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that sales are expected to reverse, with a forecast 38% annualised revenue decline to the end of 2022. That is a notable change from historical growth of 3.4% over the last five years. Yet aggregate analyst estimates for other companies in the industry suggest that industry revenues are forecast to decline 3.9% per year. So it's pretty clear that Yankuang Energy Group's revenues are expected to shrink faster than the wider industry.

The Bottom Line

The most important thing to take away from this upgrade is that analysts upgraded their earnings per share estimates for this year, expecting improving business conditions. Notably, analysts also upgraded their revenue estimates, with sales performing well although Yankuang Energy Group's revenue growth is expected to trail that of the wider market. Some investors might be disappointed to see that the price target is unchanged, but we feel that improving fundamentals are usually a positive - assuming these forecasts are met! So Yankuang Energy Group could be a good candidate for more research.

Using these estimates as a starting point, we've run a discounted cash flow calculation (DCF) on Yankuang Energy Group that suggests the company could be somewhat undervalued. For more information, you can click through to our platform to learn more about our valuation approach.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

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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.