On September 9, the company announced that as the 2019 disclosure framework agreement for new school construction will expire at the end of 2021, Tianli has concluded a 2021 school construction framework agreement, which is expected to open 5-10 new schools each year in 2022-24, of which about 5 self-built schools will be opened each year. The company intends to gradually increase the percentage of self-owned schools built by independent third parties in order to control the size of the transaction with Nanyuan Construction, thus ensuring a higher degree of independence of the company. The Group needs a transitional period to find and negotiate suitable independent third-party contractors. As a result, it is expected that about 20% of the company's own schools will be built by independent third parties by August 2022, and about 40% of the company's own schools will be built by independent third parties by August 2023 and August 2024.
According to the company's expansion plan, 10 self-owned schools operated by the group will be completed in FY23. FY22-24 plans to build 4, 3 and 3 respectively, corresponding to Nanyuan construction service fees of 780 million, 590 million and 590 million yuan.
Since 2015, Nanyuan Construction has completed 23 school construction projects for the Group on time, without significant delay in providing construction services, including Chengdu Longquan, Chengdu Pidu, Henan Zhoukou, Shandong Rizhao, Jiangxi Yichun, Guizhou Zunyi and Yunnan Baoshan Tianli School.
Tianli's continuous layout of the national third-and fourth-tier cities has a clear expansion model, quickly supply high-quality teaching service resources, provide a beautiful campus environment, and export advanced school-running ideas and excellent teaching achievements. the centralized and standardized management system developed will rapidly expand the school network to the new geographical location, at the same time, it can implement quality standards in the school network, copy successful experience, and promote the development of education in more remote areas. Tianli adheres to the educational concept of "six lifts and one attainment" and constantly improves the curriculum system of 'national compulsory courses, Tianli specialized courses, elective courses and excellent intensive courses', so as to provide a higher platform for students' personalized, diversified and high-level development. send real quality resources to the third and fourth line areas.
Since its establishment, students of the company have often achieved excellent results in various academic examinations and competitions as well as extracurricular activities. Among the candidates for the college entrance examination in Tianli in 2021, 93.2% exceeded the undergraduate admission line of Chinese universities, and about 67.1% exceeded the admission line of one Chinese university, of which 10 were admitted to Tsinghua University and 3 to Peking University. In addition, four high school graduates entered the top 50 universities in the world, including two at the University of Sydney, one at the University of Manchester and one at the University of Michigan.
Maintain earnings forecasts and give buy ratings
Tianli effectively enriches the local education supply by virtue of its own school-running experience, and improves the operational efficiency with the help of the unique flexible advantages of the private sector; on the other hand, it will effectively reduce the pressure on local finance, and most local governments across the country adopt a positive and welcoming attitude towards private education. We are always optimistic about the Tianli model and recognize its remote output and replication of high-quality educational resources.
Founded in 2002, Tianli is a leading operator of integrated education services in western China, dedicated to providing comprehensive education management and diversified services to customers. Business is distributed in 27 cities, including Sichuan Province, Yunnan Province, Guizhou Province, Shandong Province, Henan Province, Jiangxi Province and so on. We estimate that the income in FY21-22 is 1.8 billion yuan and 2.4 billion yuan respectively, the net profit is 530 million yuan and 720 million yuan respectively, the EPS is 0.24 yuan and 0.33 yuan respectively, and the corresponding PE is 8xPE and 6xPE respectively.
Risk tips: lower than expected enrollment, loss of core executives, fierce market competition, risk of policy change