Revenue Miss: China Aoyuan Group Limited Fell 7.4% Short Of Analyst Revenue Estimates And Analysts Have Been Revising Their Models

It's been a pretty great week for China Aoyuan Group Limited (HKG:3883) shareholders, with its shares surging 15% to HK$8.35 in the week since its latest full-year results. Revenues came in 7.4% below expectations, at CN¥68b. Statutory earnings per share were relatively better off, with a per-share profit of CN¥2.19 being roughly in line with analyst estimates. The 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. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

Check out our latest analysis for China Aoyuan Group

Taking into account the latest results, the consensus forecast from China Aoyuan Group's twelve analysts is for revenues of CN¥87.4b in 2021, which would reflect a sizeable 29% improvement in sales compared to the last 12 months. Statutory earnings per share are forecast to dip 2.7% to CN¥2.13 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of CN¥93.2b and earnings per share (EPS) of CN¥2.67 in 2021. The analysts seem less optimistic after the recent results, reducing their sales forecasts and making a large cut to earnings per share numbers.

The analysts made no major changes to their price target of CN¥9.67, suggesting the downgrades are not expected to have a long-term impact on China Aoyuan Group'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 China Aoyuan Group at CN¥15.43 per share, while the most bearish prices it at CN¥7.95. 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.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the China Aoyuan Group's past performance and to peers in the same industry. It's pretty clear that there is an expectation that China Aoyuan Group's revenue growth will slow down substantially, with revenues to the end of 2021 expected to display 29% growth on an annualised basis. This is compared to a historical growth rate of 39% over the past five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 15% per year. Even after the forecast slowdown in growth, it seems obvious that China Aoyuan Group is also expected to grow faster than the wider industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for China Aoyuan Group. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

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. We have forecasts for China Aoyuan Group going out to 2023, 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 1 warning sign for China Aoyuan Group that you need to be mindful of.

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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. 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.
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