Income growth is steady, and net profit is temporarily affected by income tax.
FY2021H1 realized revenue of 348 million yuan (+ 24.6%). The gross profit margin continued to grow to 64.8 per cent (+ 0.4 per cent) and the net profit was 112 million yuan (+ 7.6 per cent). The company has completed the for-profit conversion, while the preferential tax policy on for-profit private schools has not been implemented yet, and the company conservatively calculates according to the income tax rate of 25.0%, so the income tax has increased sharply, resulting in a slowdown in the growth of net profit. The dividend policy remains stable, paying dividends twice a year and HK10.00 cents per share in the interim.
During the period of endogenous extension, after the for-profit conversion, the planned enrollment of 7195 students (+ 6.5%) for the 2021 academic year, the tuition fees of 8 majors will be increased by 30.0% and 40.0%, and the average tuition fees will increase by 5.6%. The third phase of the project, which began in September 2020, is expected to be put into use in September 2022, and the campus capacity will be increased by 4000 to 26000.
In terms of extension mergers and acquisitions, the company will continue to pay attention to the complementary or high-quality targets of undergraduate universities in East China, especially in the Yangtze River Delta. At the same time, the company will expand new growth areas including academic education and vocational education, such as minor bachelor's degree, master's training program, second bachelor's degree, adult continuing education, vocational qualification training and so on. With the completion of the for-profit conversion, on the one hand, the organizers can obtain the income of running a school, on the other hand, there will be more room for improvement in tuition fees.
The quality of running a school is high, and the regional advantage is obvious.
The professional quality of Jianqiao education is leading in the industry, with six first-class majors in the province; the faculty is strong and stable, with a student-teacher ratio of 17.3 to 1, which is lower in the industry; 25.5% of the full-time teachers have doctoral degrees; located in the new Lingang district of Shanghai, they enjoy regional advantages. The regional advantages are specifically reflected in: 1) Shanghai is naturally attractive to non-local students, with 53.0% of freshmen coming from outside Shanghai in 2020 / 2021; 2) enjoying resources and policy dividends to realize the integration of industry and education city; 3) talent policies such as limited-price commercial housing and talent apartments are conducive to attracting and retaining talents and further improving the quality of running a school.
Revenue of FY2021-2023 is expected to be 7.20,8.34 and 973 million yuan, respectively, while adjusted net profit is 2.77,3.52 and 435 million yuan, respectively. The forecast PE for 2021-2023 corresponding to the company's closing price of HK $5.26 on August 31 is 4.17 times that of 6.56qqqqpxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx. We maintain our "buy" rating and reasonable valuation range of HK $6.72 to HK $9.41.
Risk hint
The progress and quality of expansion fell short of expectations; there were negative events in school operation and management.