Shareholders in Guangdong Investment Limited (HKG:270) had a terrible week, as shares crashed 27% to HK$3.50 in the week since its latest yearly results. Statutory earnings per share of HK$0.48 unfortunately missed expectations by 13%, although it was encouraging to see revenues of HK$24b exceed expectations by 5.6%. 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. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, the most recent consensus for Guangdong Investment from six analysts is for revenues of HK$25.1b in 2024. If met, it would imply a credible 3.5% increase on its revenue over the past 12 months. Per-share earnings are expected to bounce 25% to HK$0.60. In the lead-up to this report, the analysts had been modelling revenues of HK$26.4b and earnings per share (EPS) of HK$0.64 in 2024. The analysts are less bullish than they were before these results, given the reduced revenue forecasts and the minor downgrade to earnings per share expectations.
It'll come as no surprise then, to learn that the analysts have cut their price target 38% to HK$4.63. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Guangdong Investment at HK$8.18 per share, while the most bearish prices it at HK$4.00. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
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 Guangdong Investment's revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 3.5% growth on an annualised basis. This is compared to a historical growth rate of 11% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 8.0% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Guangdong Investment.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Guangdong Investment. On the negative side, they also downgraded their revenue estimates, and forecasts imply they will perform worse than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Guangdong Investment's future valuation.
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 estimates - from multiple Guangdong Investment analysts - going out to 2026, and you can see them free on our platform here.
You still need to take note of risks, for example - Guangdong Investment has 3 warning signs (and 1 which can't be ignored) we think you should know about.
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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.