Online education and thickening net profit
People's livelihood Education announced its results in the first half of 2021. Affected by the consolidation of the online education sector, the company's revenue for the period was 1.24 billion yuan (the same below), up 128.1% from the same period last year, and its net profit was 380 million, up 62.4% from the same period last year. Performance compound expectations.
Online education accounted for 47% of the total revenue in the first half of the year.
In December 2020 and January 2021, Aopeng Education and Metro classes were incorporated into the group statement. The online education sector recorded 580 million yuan in income in the first half of the year, up about 30 per cent from the same period last year. During the period, online education revenue accounted for 47% of the group's total revenue. The Group has successfully built a "Internet +" vocational education service platform with six online platforms, including online higher diploma education, IT skills learning, postgraduate exam preparation and enrollment, Chinese online examination and other diversified adult academic qualifications and continuing education services. The gross profit margin of the online education sector in the first half of the year was about 60%. In July 2021, the group acquired a 51% stake in Beijing Xiaoai Science and Technology, and added the human resources SaaS service platform to the online platform to provide a tripartite online human resources service platform for human resources service companies, employers and individuals. It is expected that Xiaoai Technology will merge in August. In the next 2-3 years, the company will devote itself to improving the infrastructure and construction of the online sector and opening up the coordination between various business sectors. Management expects sustainable revenue growth in the online education sector to be 20% to 30% a year in the future.
Steady growth of campus education
In the first half of the year, campus education income totaled 660 million yuan, an increase of 20.9 percent over the same period last year, with 97000 students in the period. It is expected that the number of students in the 2021UX 22 academic year will increase by 10% compared with the same period last year, and the tuition fees of Dianchi College will be raised by nearly 20% this year. Revenue from FY22E campus education is expected to grow by 15 per cent year-on-year. The change of the sponsor of Nanchang College is in progress and is expected to be completed within this year.
We believe that the annual income of Nanchang School is over 200 million yuan.
Maintain the target price of HK $2.10
We kept our previous financial forecast unchanged, with FY21E's total revenue of 2.27 billion yuan and net profit of 600 million yuan, while operating expenses increased by 27% year-on-year. We have raised the effective tax rate to 7.5% to reflect the corporate income tax rate for online education. The company is currently valued at 8.4 times FY21E's price-to-earnings ratio, with a target of 13 times forward-looking earnings and maintaining the target price of HK $2.10. Reiterate the "buy" rating.
Investment risk
1) the growth of online education income is lower than expected and the operating expenditure is higher than expected; 2) the enrollment of campus education is lower than expected; 3) Policy risk