Incident: The company released its 2021 interim results report, achieving total revenue of 634 million yuan in the first half of the year, an increase of 51.4% over the previous year; adjusted net profit of 4.2 billion yuan, an increase of 35% over the previous year.
Key points of investment
Outline+endogenous contribution to high overall revenue growth and stable profitability.
FY21H1 achieved revenue of 634 million yuan, a year-on-year increase of 51.4%. Among them, Harbin schools were fully consolidated in April, contributing about 69 million yuan in revenue. Excluding the consolidated income, an increase of 35% over the same period last year. In the revenue structure, tuition income of 588 million yuan increased 43.1% year-on-year, mainly due to the increase in the number of undergraduates and tuition fees and combined contributions; the cost of accommodation and other education services was 4,045 million yuan and 54,000 yuan respectively, up 683.5% and 101.2% year-on-year respectively, mainly due to the low base of 26 million yuan of accommodation fee refunds in the same period last year. The company's profitability was steady in the first half of the year, with a gross profit margin of 71.2% (-2.7pct) combined with Harbin School due to lower gross profit. The adjusted net profit was 4.2 billion yuan, an increase of 35% over the previous year, and the adjusted net interest rate fell to 66.3%. Excluding the impact of Harbin Petroleum's overall consolidation, the adjusted net interest rate for the same period last year was 66.6% the same as this year. In the first half of the year, the management fee rate was 10.8% (+0.68pct), the sales expense ratio was 0.48% (-0.04pct), and the cost rate level was relatively stable.
The number of students enrolled and tuition fees continue to grow, and endogenous growth continues to be strong.
In terms of the number of students, as of June 30, the company had a total of 3 undergraduate students (Huaibei Science and Technology has not yet been included), 1 middle school, and the number of students reached 104,700 (+28.8%). The number of middle vocational students enrolled in Guangdong Polytechnic Technology/Harbin Petroleum/Zhaoqing was 85,500, respectively, +33%/+14%/+12%, respectively. Among them, Guangdong Polytechnic undergraduate, college, adult education/in-school adult education/out-of-school adult education were 2,9047 students/6287 students/6794 students/43400 students, a year-on-year change of +22%/-8%/+42%/+50%. In terms of tuition fees, tuition fees in Guangdong, Heilongjiang and Anhui provinces can all be priced independently. In the 20/21 academic year and the 21/22 new school year, tuition fees for new undergraduate students increased by about 10% compared to the previous academic year, and middle vocational tuition fees are expected to increase by 5-10%.
Two undergraduate mergers and acquisitions have been implemented in Anhui Province, and the deepening of the Yangtze River Delta layout and growth is highly certain.
Anhui Province is a major college entrance examination province. It is located in the Yangtze River Delta with a developed economy and strong payment capacity. Private higher education resources are relatively scarce, and the company merges and acquires two Anhui undergraduate schools with plenty of room for growth. Company: 1) Completed the acquisition of the remaining 55% of Huaibei University of Technology's shares in March 21 to reach 100% ownership, the school completed the transfer in June, and the first enrollment contribution of the new semester in September contributed revenue and profits. Currently, the campus capacity is about 10,000 people, and it is estimated that a profit of 124 million will be achieved when the four-year enrollment climb is completed. 2) The merger and acquisition of 100% of Ma'anshan University's shares was announced in July 21, and an entrustment management agreement was signed in August to achieve profit consolidation. The school is expected to complete the full consolidation of organizer changes in Q1 '22. Currently, the school has about 9,100 students and a campus capacity of 13,000. Currently, the school's unified enrollment is below the provincial average of about 1,000, and there is plenty of room for future student growth. In terms of tuition fees, the two schools still have room to raise fees by 25% compared to the highest tuition fees in Anhui Province.
Profit forecasting and valuation
The company is a higher education group that mainly focuses on high-quality undergraduate schools. The average admission score line for its colleges and universities all exceeds the two-line by 15-20 points. The registration rate and employment rate are among the highest in all provinces, and they have all been converted. Net profit for 21-23 is expected to be 747 million/1,094 million/1,250 million yuan respectively, corresponding to PE 10X/7X/6X, respectively, maintaining the “buy” rating.
Risk warning
M&A integration fell short of expectations, enrollment fell short of expectations, tuition fee increases fell short of expectations, and policy risks.