China Gas Holdings Limited Just Missed Earnings And Its Revenue Numbers Were Weaker Than Expected

The half-yearly results for China Gas Holdings Limited (HKG:384) were released last week, making it a good time to revisit its performance. Revenues came in 6.4% below expectations, at HK$27b. Statutory earnings per share were relatively better off, with a per-share profit of HK$0.98 being roughly in line with analyst estimates. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on China Gas Holdings after the latest results.

View our latest analysis for China Gas Holdings

Taking into account the latest results, the most recent consensus for China Gas Holdings from 21 analysts is for revenues of HK$65.4b in 2021 which, if met, would be a solid 11% increase on its sales over the past 12 months. Statutory earnings per share are predicted to climb 16% to HK$2.08. In the lead-up to this report, the analysts had been modelling revenues of HK$66.8b and earnings per share (EPS) of HK$2.07 in 2021. 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 average price target was steady at HK$32.89even though revenue estimates declined; likely suggesting the analysts place a higher value on earnings. 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 China Gas Holdings, with the most bullish analyst valuing it at HK$39.00 and the most bearish at HK$18.80 per share. 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.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's pretty clear that there is an expectation that China Gas Holdings' revenue growth will slow down substantially, with revenues next year expected to grow 11%, compared to a historical growth rate of 17% 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) 11% next year. So it's pretty clear that, while China Gas Holdings' revenue growth is expected to slow, it's expected to grow roughly in line with the industry.

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. 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. 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.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for China Gas Holdings going out to 2025, and you can see them free on our platform here.

However, before you get too enthused, we've discovered 2 warning signs for China Gas Holdings (1 is potentially serious!) that you should be aware of.

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