As you might know, The Hong Kong and China Gas Company Limited (HKG:3) last week released its latest annual, and things did not turn out so great for shareholders.      Hong Kong and China Gas missed analyst forecasts, with revenues of HK$57b and statutory earnings per share (EPS) of HK$0.32, falling short by 8.2% and 3.6% respectively.     This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business.  We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.  

SEHK:3 Earnings and Revenue Growth March 23rd 2024

Taking into account the latest results, the consensus forecast from Hong Kong and China Gas' seven analysts is for revenues of HK$59.3b in 2024. This reflects a credible 4.1% improvement in revenue compared to the last 12 months.       Per-share earnings are expected to increase 5.3% to HK$0.34.        Yet prior to the latest earnings, the analysts had been anticipated revenues of HK$64.2b and earnings per share (EPS) of HK$0.32 in 2024.        So it's pretty clear that while sentiment around revenues has declined following the latest results, the analysts are now more bullish on the company's earnings power.    

The average price target increased 5.6% to HK$6.30, with the analysts signalling that the improved earnings outlook is more important to the company's valuation than its revenue.        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 Hong Kong and China Gas at HK$7.00 per share, while the most bearish prices it at HK$5.60.   The narrow spread of estimates could suggest that the business' future is relatively easy to value, or thatthe analysts have a strong view on its prospects.    

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 Hong Kong and China Gas' revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 4.1% 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 5.7% per year.  Factoring in the forecast slowdown in growth, it seems obvious that Hong Kong and China Gas is also expected to grow slower than other industry participants.    

The Bottom Line

The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Hong Kong and China Gas following these results.        On the negative side, they also downgraded their revenue estimates, and forecasts imply they will perform worse than the wider industry.       Even so, earnings are more important to the intrinsic value of the business.    We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.  

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 Hong Kong and China Gas going out to 2026, and you can see them free on our platform here.

You still need to take note of risks, for example - Hong Kong and China Gas has   2 warning signs  we think you should be aware of.  

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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.