Shareholders might have noticed that China Reinsurance (Group) Corporation (HKG:1508) filed its full-year result this time last week. The early response was not positive, with shares down 3.3% to HK$0.88 in the past week. Results look mixed - while revenue fell marginally short of analyst estimates at CN¥143b, statutory earnings were in line with expectations, at CN¥0.14 per share. 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.
Taking into account the latest results, the current consensus from China Reinsurance (Group)'s five analysts is for revenues of CN¥158.4b in 2020, which would reflect a solid 11% increase on its sales over the past 12 months. Statutory earnings per share are forecast to decrease 5.5% to CN¥0.13 in the same period. Before this earnings report, the analysts had been forecasting revenues of CN¥164.9b and earnings per share (EPS) of CN¥0.14 in 2020. The analysts are less bullish than they were before these results, given the reduced revenue forecasts and the small dip in earnings per share expectations.
The analysts made no major changes to their price target of CN¥1.11, suggesting the downgrades are not expected to have a long-term impact on China Reinsurance (Group)'svaluation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on China Reinsurance (Group), with the most bullish analyst valuing it at CN¥1.43 and the most bearish at CN¥0.93 per share. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the China Reinsurance (Group)'s past performance and to peers in the same industry. Next year brings more of the same, according to the analysts, with revenue forecast to grow 11%, in line with its 11% annual growth over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue shrink 2.1% next year. So it's clear that not only is revenue growth expected to be maintained, but China Reinsurance (Group) is expected to grow meaningfully faster than the wider industry.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Unfortunately, they also downgraded their revenue estimates, and our data indicates sales are expected to perform better than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. 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.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for China Reinsurance (Group) going out to 2021, and you can see them free on our platform here..
It is also worth noting that we have found 2 warning signs for China Reinsurance (Group) that you need to take into consideration.
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