Report introduction: The company released the interim results report for FY2021. FY21H1 achieved operating income of 231 million yuan, a year-on-year decrease of 39.9%; achieved net profit of 92 million yuan, a year-on-year decrease of 28.1%, a phased reduction.
Key points of investment
Overlapping training for film and television did not reach peak season performance, and growth in the higher education sector was steady.
FY21H1 achieved revenue of 231 million yuan, a year-on-year decrease of 39.9%. Among them, higher education/media, arts and vocational training/TV series and film production and investment achieved revenue of 212 million yuan/15 million yuan/0.04 million yuan respectively, +13.44% /-/ -97.90% year-on-year, respectively. 1) Higher education sector: Relying on the steady growth of students and tuition fees from the Nanjing University of Communication Studies, the number of students enrolled in the school reached 17,664 as of June 30, an increase of about 19% over the previous year. Among them, full-time undergraduate, international preparatory, and vocational education were 15266/441/1957 respectively. At present, the second phase of the company's dormitory building has been completed and put into use in the 20/21 school year, increasing the capacity by 4,000 people; the new phase of expansion has been completed and put into use in the 21/22 academic year, which can accommodate an additional 5,000 students. The total capacity of the campus is expected to reach 24,000, and the total construction capacity will continue to expand to 30,000 people in the future. 2) Training section: The company completed the acquisition of the Mizumuyuan art exam training institution in early April 21. The number of trainees was about 3,100 people. The low revenue in the first half of the year was mainly due to business consolidation for only 3 months. The peak art exam training season was from July to February of the following year. The current Mizumuyuan contract debt of about 110 million yuan is expected to be confirmed in the second half of the year. 3) Film and television sector: The sharp decline in film and television revenue in the first half of the year was mainly due to the fact that many of the Group's productions were not delivered without revenue confirmation. It is expected that many productions will be distributed centrally in the second half of the year.
Profit margins fluctuated greatly seasonally with the sector, with an interim dividend of HK$0.06 per share.
The overall gross margin of FY21H1 company was 60.57%, +14.3pct over the previous year. Among them, the higher education/media, arts and vocational training/TV series and film production and investment sectors achieved gross profit margins of 63.9%/5.68%/93.46% respectively, +1.7pct/-/+62.2pct, respectively. The slight increase in gross margin in the higher education sector was mainly due to improved management and the gradual release of campus size effects; the consolidation schedule for the first half of the year in the training sector was off-season, which did not reflect the actual gross margin situation; and the sharp increase in gross margin in the film and television sector was mainly due to no delivery of works in the first half of the year and unconfirmed amortization costs. In terms of expenses, the sales expenses ratio was 4.47% -1.20 pct compared to the previous year, mainly due to a decrease in sales expenses in the film and television production and investment business; the management expenses ratio of 26.06% was +16.06 pct compared to +16.06 pct, mainly due to the increase in executive remuneration and office expenses in the training sector after the merger and acquisition of Mizumuyuan. FY21H1 achieved net profit of 92 million yuan, or -28.1% year on year, with a net interest rate of 40%. Additionally, the company paid an interim dividend of HK$0.06 per share, totaling approximately HK$100 million.
The volume and price of the higher education sector can be expected to rise sharply. The number of students enrolled in the training sector for children+art exams opens up space for growth Higher education sector: 1) The company announced the acquisition of the Olympic School of Sport in June. The college was originally a second-level college of the Nanjing Institute of Sport, which will later be merged into the Nanjing University of Communication as a second-level college in its Binjiang campus. It is expected that the number of students enrolled in the new Nanjing campus will increase by at least 30% year-on-year in the 21/22 new school year, mainly due to the number of students enrolled in the new campus of Nan Media, which is expected to increase by at least 30% year-on-year in the 21/22 new school year, mainly due to the number of students enrolled in college upgrades and international vocational education courses and vocational education Rapid growth.
3) The tuition fee for Southern Media students in the 21/22 academic year is 16500-18,000 yuan. There is still a big gap from the reasonable 25,000-29800 yuan level. As a high-quality media university, the admission rate of Southern Media for the 20/21 academic year was only 5.7%. Currently, Jiangsu Province has liberalized independent pricing, and there is plenty of room to raise fees in the future. Training sector: 1) Mizumuyuan provides training services to high school art candidates. Currently, it has direct-run campuses in 7 major cities across the country. The brand has ranked first in art exam certificates for 10 consecutive years, has an outstanding reputation in the industry, and is expected to continue to expand across the country in the future. 2) In the 21/22 school year, the company opened a new Huaxia Audiovisual Art Development Center in Beijing, providing drama, music, dance and art courses for children aged 3-12, entering the high growth track of quality education for children.
Profit forecasting and valuation
The company's short-term performance in the first half of the year was under pressure due to seasonal factors in the film and television and training sector, and revenue in the second half of the year will be gradually confirmed along with the delivery of movies and TV dramas and the peak training season. Net profit for 2021-2023 is expected to be 413/551/670 million yuan, an increase of 31%/33%/21% over the previous year, corresponding to PE12X/9X/7X, maintaining the “buy” rating.
Risk warning: Higher education and training enrollment falls short of expectations, campus expansion falls short of expectations, and extended mergers and acquisitions fall short of expectations.