FY1H21's revenue and profit exceeded our expectations.
Minsheng Education announced that in the first half of 2021, the revenue was 1.24 billion yuan, an increase of 128.1% over the same period last year, exceeding our expectation of 8%. With the improvement of operating efficiency and the pull of online business, the company's gross profit increased by 2.2% year-on-year to 58.706. After adjustment, the net profit was 440 million yuan, 17% higher than we expected, mainly due to the higher-than-expected income and profits of online platforms such as Aopeng Education and the Capital Learning Network.
Development trend
Campus education develops steadily. In the first half of 2021, the company's campus education income was 660 million yuan, an increase of 20.9% over the same period last year As of June 30, 2021, the number of students in the school increased by 14.3% compared with the same period last year, of which undergraduate, higher vocational, secondary / high school and adult higher education increased by 6.9%, 19.5%, 82.4% and 33%, respectively. According to the enrollment prospectus of Mochi College of Yunnan University, the tuition fee for students in 2021 has increased from 1.6-24500 yuan per person to 200-29000 yuan per year. We believe that this will balance the impact of undergraduate evaluation on the growth of corporate places, and campus business is expected to develop steadily in 2021. The online business is performing strongly. In the first half of 2021, the combined income of the company's online platform reached 580 million yuan, of which: 1) distance education services and online course services achieved income of 460 million yuan and 34.813 million yuan respectively. Aopeng Education provides online education and other support services for 1.04 million students. The management said that the annual enrollment of Aopeng Education is nearly 300000, and the enrollment is divided into spring and autumn, and the enrollment situation in autumn is expected to be the same as that in spring. We believe that Aopeng Education will still be able to contribute more stable performance to the company in the second half of the year. 2) the income from teacher training business is 26.019 million yuan, thanks to the launch of platforms such as "Aopeng teacher Education Network", "teacher training Bao", "teacher Secretary" and mobile learning application tools. to provide distance training support services for education departments, 1 school and other educational institutions, and trained 678000 teachers in the first half of the year. 3) the MBA training business continues to develop at a high speed, with 174000 new users and a total of 2.25 million users in the current period, and the company's other education services have achieved income of 51.327 million yuan.
The establishment of an integrated vocational education system. The company has initially established an integrated Internet vocational education system of campus education + online education, academic qualifications + non-academic qualifications, post-graduate education from secondary vocational schools to professional degrees, and "recruitment and training". The company said that it will firmly choose the vocational education track, clarify the "Internet +" vocational education system, and continue to create a virtuous circle of "high-quality service user growth-performance growth".
Profit forecast and valuation
Considering the good development of the company's online business, we raised the company's revenue forecasts for 2021 and 2022 by 4.7% and 5.1% to 2.2 billion yuan and 2.49 billion yuan respectively, and increased the adjusted net profit forecasts for 2021 and 2022 by 6.8% and 6.5% to 650 million yuan and 770 million yuan, respectively. Considering the establishment of the company's vocational education system, online and offline synergies are expected to be strengthened, and we maintain an outperform industry rating and a target price of HK $2.40 (corresponding to a 7.2x adjusted EV/EBITDA in 2021), with 73.9% upside compared to the current stock price. The current stock price corresponds to the adjusted EV/EBITDA of 3.8x in 2021.
Risk
The growth of offline enrollment is weak; online platform enrollment is not as expected.