On Tuesday, Citi updated its outlook on Hannon Armstrong (NYSE:HASI), adjusting the stock's price target to $8.30, a slight decrease from the previous $8.50. Despite the price target adjustment, the firm maintains a Buy rating on the stock.
The revision follows a reassessment of the company's sales forecast for the years 2024 through 2026. The new estimates stand at 515k, 1.01mn, and 1.94mn units, down from the prior forecast of 582k, 959k, and 1.45mn units, respectively.
The analyst at Citi has also updated the gross profit margin (GPM) projections for the same period, citing a better-than-expected GPM trend. The revised GPM forecasts are now 34.9%, 35.2%, and 35.5% for the years 2024 to 2026, an increase from the former estimates of 32.3%, 33.3%, and 33.7%.
In light of these revisions, the net profit (NP) forecast for Hannon Armstrong has also been adjusted. The new projections show an expected NP of Rmb-283 million, Rmb124 million, and Rmb561 million for 2024, 2025, and 2026, respectively. This represents a change from the previous NP forecast of Rmb-256 million, Rmb60 million, and Rmb307 million.
The valuation method applied by Citi incorporates a 2025E 1.8x price-to-sales (P/S) ratio, which is consistent with the company's high growth trajectory. This valuation corresponds to a 0.5x PEG ratio based on the expected net profit compound annual growth rate (CAGR) of 132% from 2025 to 2027.
The slight reduction in the target price reflects these updated financial forecasts while continuing to signal confidence in the company's growth potential.
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