China Everbright Greentech Limited Just Reported, And Analysts Assigned A HK$6.19 Price Target

It's been a sad week for China Everbright Greentech Limited (HKG:1257), who've watched their investment drop 13% to HK$3.77 in the week since the company reported its full-year result. It was a workmanlike result, with revenues of HK$9.3b coming in 2.0% ahead of expectations, and statutory earnings per share of HK$0.78, in line with analyst appraisals. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We thought readers would find it interesting to see analysts' latest (statutory) post-earnings forecasts for next year.

View our latest analysis for China Everbright Greentech

Taking into account the latest results, the current consensus from China Everbright Greentech's nine analysts is for revenues of HK$10.9b in 2020, which would reflect a meaningful 17% increase on its sales over the past 12 months. Statutory earnings per share are expected to expand 16% to HK$0.91. In the lead-up to this report, analysts had been modelling revenues of HK$11.0b and earnings per share (EPS) of HK$0.94 in 2020. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but analysts did make a minor downgrade to their earnings per share forecasts.

It might be a surprise to learn that the consensus price target fell 13% to HK$6.19, with analysts clearly linking lower forecast earnings to the performance of the stock price. 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 China Everbright Greentech analyst has a price target of HK$8.30 per share, while the most pessimistic values it at HK$3.50. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.

It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the China Everbright Greentech's past performance and to peers in the same market. It's pretty clear that analysts expect China Everbright Greentech's revenue growth will slow down substantially, with revenues next year expected to grow 17%, compared to a historical growth rate of 35% over the past five years. Juxtapose this against the other companies in the market with analyst coverage, which are forecast to grow their revenues (in aggregate) 3.3% next year. Even after the forecast slowdown in growth, it seems obvious that analysts still thinkChina Everbright Greentech will grow faster than the wider market.

The Bottom Line

The most important thing to take away is that analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Happily, there were no major changes to revenue forecasts, with analysts still expecting the business to grow faster than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by the latest results, leading to a lower estimate of China Everbright Greentech'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 forecasts for China Everbright Greentech going out to 2022, and you can see them free on our platform here.

You can also view our analysis of China Everbright Greentech's balance sheet, and whether we think China Everbright Greentech is carrying too much debt, for free on our platform here.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

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