Introduction to this report:
The company is actively applying for senior jobs and expanding the campus. The policy trend is expected to bring about an increase in undergraduate careers. K9 reports calculate one-time impairment losses to eliminate uncertainty. Long-term growth is worth looking forward to.
Summary:
The performance was in line with expectations, and holdings increased. As a high quality target for private higher education, the company's endogenous and robust merger and acquisition integration capabilities are leading the way. The estimated revenue for the 2022-2024 fiscal year is 2,451/2701/3009 billion, respectively, and the net profit of the mother to the mother is 1,538/17.56/1,936 billion yuan respectively. The target price is HK$5.10, covering the “increase in holdings” rating for the first time.
Performance summary: In fiscal year 20/21, excluding the discontinued K9 business, achieved revenue of 2.26 billion yuan/ +11.2%, including the adjusted revenue of the K9 business of 2.64 billion yuan/ +9.7%, and adjusted net profit of 1.44 billion yuan/ +37.9%. Among them, based on an estimate of 9.4% of the unadjusted profit margin of K9 business in the 20/21 fiscal year, the higher education business contributed 1.30 billion yuan in the adjusted net profit of the 20/21 fiscal year. On the cost side, the gross profit margin of the higher education business in fiscal year 20/21 was 67.24% /+5.52pct, the sales expenses ratio was 1.82% /-0.48pct, and the management expenses ratio was 8.63% /-1.22pct. Continuous optimization was mainly due to the scale effect brought about by cost control, the number of students enrolled and the increase in tuition fees.
The K9 business was announced, and uncertainty was eliminated. The implementing regulations of the Public Promotion Law were officially implemented on September 1, 2021. Since the K9 business in the 21/22 fiscal year was affected by this regulation and could not be consolidated, the company accrued a one-time impairment loss of 1,042 million yuan in the 20/21 fiscal year. Looking at the business split for the 20/21 fiscal year: ① revenue perspective, higher education business was 2.26 billion yuan/ +11.2%, corresponding share was 85.4%, K9 business was 380 million yuan/ +1.86%, corresponding to 14.6%; ② unadjusted profit perspective, higher education business was 1.72 billion yuan/+1001.3%, corresponding share of 90.6%, K9 business 180 million yuan/ +7.52%, corresponding share of 9.4%. The profit side of the higher education business increased significantly, mainly due to the merger of a few remaining shares in Shandong Talents and Hunan Foreign-related companies; the profit side of the K9 business in the 20/21 fiscal year accounted for less than 10%. The overall business impact was limited. Impairment losses were calculated all at once, eliminating uncertainty about long-term development.
Actively promote higher employment applications and campus expansion to promote endogenous development, and it is best to look at the long term. Internally, the company is actively promoting the transformation of K9 colleges to higher careers. It is preparing to build three colleges and universities in Xingyang, Jiaozuo and Luohe within the period. It is expected that the number of students enrolled will reach 12,000/school after the campus matures. At the same time, it is preparing to expand the new campus of the Hunan University of Foreign Economics. At present, the risk of uncertainty about private higher education policies has basically been released. In the future, as the vocational education system progresses, undergraduate vocational courses are expected to bring incremental credits, and the company's long-term development is worth looking forward to.
Risk warning: Higher vocational and new campus expansion falls short of expectations, risk of policy and supervision fluctuations, etc.