The income tax rate is increased; the net profit is 110 million yuan.
The income of Jianqiao education in the first half of the year was 350 million yuan (the same as below), an increase of 24.5% over the same period last year, of which tuition and accommodation fees were 290 million yuan and 47 million yuan respectively. There are 21000 students in the 2020x21 academic year, an increase of 1480 students over the previous academic year.
The company's gross profit margin remained excellent at 64.8% in the first half of the year, similar to that of the same period last year. The operating profit margin was 50.6%, an expansion of 2.6 percentage points over the same period last year. This year, Jianqiao College became the first listed company to be successfully converted into for-profit private higher education. As Shanghai has not yet promulgated the specific conditions and requirements on the tax benefits available to for-profit schools, according to the consultation with the accountant, the company decided to adopt the most conservative approach, the corporate income tax is calculated at the rate of 25% of the income from academic education services. Under the influence of the increase in corporate income tax expenses to 38 million yuan, net profit increased by 7.4% to 110 million yuan compared with the same period last year. The income tax expenditure in the first half of the year was higher than we expected, and the company did not formally pay the tax, and then paid in accordance with the formal for-profit school tax policy. In addition, a subsidiary of the company (Gench WFOE) was appraised as a high-tech enterprise in Shanghai. If Shanghai introduces for-profit private schools to enjoy the same tax policy as high-tech enterprises, we believe that the corporate tax rate is expected to be reduced to 15%.
The geographical location is superior, and the utilization rate of the campus remains high.
The geographical location of bridge-building education is superior, and the new area near Hong Kong has incomparable advantages in terms of economy, resources and policies. The 14th five-year Plan of the new Lingang area in Shanghai is that by 2025, the GDP of the region will quadruple from 2018, with an average annual growth rate of about 25%. With the promotion of favorable policies, Jianqiao College will continue to attract high-quality students, and the utilization rate of the campus will remain high. We expect that the number of students in the new school year will exceed 22000, and the utilization rate will be close to saturation. The company's third phase of the campus project is under way and is expected to be put into use in September 2022, when it will add an additional 4000 beds with a total capacity of 26000 people. We expect school utilization to be about 90% by 2022.
A higher utilization rate is beneficial for the company to achieve a higher cost effect. We expect the company's operating margin for the full year to be 47.8%, an increase of 2.1 percentage points over last year.
Affected by the rise in tax rates, the forecast of full-year net profit has been lowered.
We maintain our forecast of 660 million yuan in FY21E revenue. As the company levies income tax at a higher tax rate, we lower our FY21E and future net profit forecasts accordingly. However, we believe that conservative tax planning will not affect the growth of the company's core business. The adjusted net profit of FY21E / FY22E was 200 million / 250 million yuan, an increase of 4% / 25.8% over the same period last year. We maintain a valuation of 11 times forward earnings, with an adjusted target price of HK $8.00, corresponding to 11 times FY22E. We believe that the tax increase is an one-off event, and the tax rate will be lowered after the policy is clear.
