Earnings Release: Here's Why Analysts Cut Their Guangshen Railway Company Limited (HKG:525) Price Target To HK$2.33

Guangshen Railway Company Limited (HKG:525) shareholders are probably feeling a little disappointed, since its shares fell 3.1% to HK$1.86 in the week after its latest full-year results. It was an okay result overall, with revenues coming in at CN¥27b, roughly what the analysts had been expecting. 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. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

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Following the recent earnings report, the consensus from four analysts covering Guangshen Railway is for revenues of CN¥26.5b in 2025. This implies a discernible 2.3% decline in revenue compared to the last 12 months. Statutory earnings per share are forecast to descend 13% to CN¥0.13 in the same period. Before this earnings report, the analysts had been forecasting revenues of CN¥27.8b and earnings per share (EPS) of CN¥0.12 in 2025. Although the analysts have lowered their revenue forecasts, they've also made a substantial gain in their earnings per share estimates, which implies there's been something of an uptick in sentiment following the latest results.

See our latest analysis for Guangshen Railway

The consensus price target fell 9.9% to HK$2.33, with the analysts signalling that the weaker revenue outlook was a more powerful indicator than the upgraded EPS forecasts. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Guangshen Railway, with the most bullish analyst valuing it at HK$2.86 and the most bearish at HK$1.80 per share. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Guangshen Railway's past performance and to peers in the same industry. We would highlight that revenue is expected to reverse, with a forecast 2.3% annualised decline to the end of 2025. That is a notable change from historical growth of 9.0% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 3.8% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Guangshen Railway is expected to lag the wider industry.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Guangshen Railway's earnings potential next year. On the negative side, they also downgraded their revenue estimates, and forecasts imply they will perform worse than the wider industry. Yet - earnings are more important to the intrinsic value of the business. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Guangshen Railway's future valuation.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Guangshen Railway analysts - going out to 2027, and you can see them free on our platform here.

That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Guangshen Railway , and understanding it should be part of your investment process.

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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.