Core views:
The company released unaudited interim results for 2021:21H1 achieved main business revenue of 231 million yuan, a year-on-year decrease of 39.9%, mainly due to fluctuations in film and television projects; realized net profit of 83 million yuan, a year-on-year decrease of 29.6%; and achieved adjusted net profit of 99 million yuan, a year-on-year decrease of 30.8%. The Board of Directors has decided to pay an interim dividend of HK$0.06/share, with a dividend rate of 112%.
The quality of teaching is outstanding, and mergers and acquisitions promote business and campus capacity expansion. (1) 21H1 Higher education and vocational education achieved revenue of 212 million yuan, an increase of 13.4% over the previous year. At the end of the reporting period, there were about 17,664 students enrolled, an increase of about 19.2% over the previous year. Nanjing University of Communication completed the construction of a new dormitory building. The company plans to buy 100% of the shares of Olympic College at a price of 450 million yuan. Assuming all conditions are met, the company expects the total number of students enrolled in the 2021/2022 academic year to increase by at least 30% over the same period last year. (2) Film and television production and investment achieved revenue of 104 million yuan, a year-on-year decrease of 97.9%. The company did not deliver new film and television projects in the first half of this year. “Kunlun Silk Road Treasures,” “Unparalleled Beauty,” “Don't Call Me Bacchus 2,” and “The Ideal House” are expected to be delivered in the second half of this year. (3) Media, arts and vocational training achieved revenue of $115 million. On April 6, 2021, the company merged with Shuimuyuan. As of the end of the reporting period, Shuimuyuan had about 3,100 students and confirmed contract liabilities of about 110 million yuan. It is expected that most of them will be recognized as training revenue in the second half of the year.
Investment suggestions: The company's net profit for 2021-2023 is estimated to be 411/5.22/659 million yuan, and the corresponding EPS is 0.25/0.31/0.40 yuan. At the closing price of September 6, 2021, the corresponding PE is 10.71X, 8.44X, and 6.69X. The Nanjing University of Communication has room for growth to expand recruitment and raise prices. The acquisition of Shuimuyuan and Olympic College will further expand the company's business scope and campus capacity. Referring to industry valuations, we gave the company 20 times the PE valuation in 2021. The corresponding reasonable value per share was HK$5.97 per share, maintaining the “buy” rating.
Risk warning: policy changes in the education industry; enrollment falls short of expectations; uncertainty about acquisitions; fluctuations in film and television projects; regulatory risks in the film and television industry.