The analysts covering Yankuang Energy Group Company Limited (HKG:1171) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Revenue estimates were cut sharply as the analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.
After the downgrade, the consensus from Yankuang Energy Group's eleven analysts is for revenues of CN¥134b in 2022, which would reflect a concerning 28% decline in sales compared to the last year of performance. Statutory earnings per share are presumed to rise 7.3% to CN¥6.13. Before this latest update, the analysts had been forecasting revenues of CN¥149b and earnings per share (EPS) of CN¥6.22 in 2022. So there's been a clear change in analyst sentiment in the recent update, with the analysts making a measurable cut to revenues and reconfirming their earnings per share estimates.
See our latest analysis for Yankuang Energy GroupSEHK:1171 Earnings and Revenue Growth September 16th 2022
the analysts have also increased their price target 6.3% to CN¥23.14, clearly signalling that lower revenue forecasts this year are not expected to have a material impact on Yankuang Energy Group's valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Yankuang Energy Group at CN¥49.02 per share, while the most bearish prices it at CN¥13.96. With such a wide range in price targets, the analysts are almost certainly betting on widely diverse outcomes for the underlying business. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that sales are expected to reverse, with a forecast 49% annualised revenue decline to the end of 2022. That is a notable change from historical growth of 3.5% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue decline 3.4% annually for the foreseeable future. The forecasts do look bearish for Yankuang Energy Group, since they're expecting it to shrink faster than the industry.
The Bottom Line
The most obvious conclusion from this consensus update is that there's been no major change in the business' prospects in recent times, with analysts holding earnings per share steady, in line with previous estimates. Unfortunately they also downgraded their revenue estimates, and our aggregation of analyst estimates suggests that Yankuang Energy Group revenue is expected to perform worse than the wider market. There was also a nice increase in the price target, with analysts apparently feeling that the intrinsic value of the business is improving. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Yankuang Energy Group going forwards.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Yankuang Energy Group going out to 2024, and you can see them free on our platform here.
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.