Analysts Are Updating Their CGN Power Co., Ltd. (HKG:1816) Estimates After Its Yearly Results

CGN Power Co., Ltd. (HKG:1816) missed earnings with its latest yearly results, disappointing overly-optimistic forecasters. CGN Power missed analyst forecasts, with revenues of CN¥83b and statutory earnings per share (EPS) of CN¥0.21, falling short by 4.9% and 5.1% respectively. 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 thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

View our latest analysis for CGN Power

Taking into account the latest results, the current consensus from CGN Power's eleven analysts is for revenues of CN¥86.0b in 2024. This would reflect an okay 4.2% increase on its revenue over the past 12 months. Statutory earnings per share are predicted to grow 12% to CN¥0.24. In the lead-up to this report, the analysts had been modelling revenues of CN¥91.0b and earnings per share (EPS) of CN¥0.23 in 2024. The consensus seems maybe a little more pessimistic, trimming their revenue forecasts after the latest results even though there was no change to its EPS estimates.

The consensus has reconfirmed its price target of HK$2.43, showing that the analysts don't expect weaker revenue expectations next year to have a material impact on CGN Power'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. The most optimistic CGN Power analyst has a price target of HK$3.07 per share, while the most pessimistic values it at HK$1.82. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. It's pretty clear that there is an expectation that CGN Power's revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 4.2% growth on an annualised basis. This is compared to a historical growth rate of 10.0% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 5.8% annually. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than CGN Power.

The Bottom Line

The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. 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. 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.

With that in mind, we wouldn't be too quick to come to a conclusion on CGN Power. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple CGN Power analysts - going out to 2026, and you can see them free on our platform here.

You should always think about risks though. Case in point, we've spotted 2 warning signs for CGN Power you should be aware of, and 1 of them can't be ignored.

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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.