According to a research report released by China Merchants International, Zhonghui Group (00382) currently trades at a price-to-earnings ratio of 6.7 times earnings for fiscal 22, PEG 0.2 times for fiscal 22, and a cash dividend yield of 4.5 per cent for fiscal 22, according to the APP of Zhitong Finance.
Event: 1)Zhonghui announced that it will acquire 100% equity in Guangdong Chinese Business Technical School, with a total consideration of 150 million yuan.2)New mergers and acquisitions will lead to increased profits and synergy with existing Guangdong schools.3)Although the deal is small, the bank believes the merger will help ease some of investors' policy concerns about mergers and acquisitions.
New merger and acquisition of Guangdong Chinese Business Technical School …
On December 14, Zhonghui announced that it would buy a 100% stake in Guangdong Chinese Business Technical School ("Chinese Business School") from related parties, with a total consideration of 150 million yuan, to be paid with its own funds. This is Zhonghui's second acquisition after the Sichuan school it acquired in December 2020. Chinese business school: the number of students in 2020 in the 21st academic year is 3200 (up 45% from the same period last year), the average tuition fee is 8300 yuan (up 8% from the same period last year), and the income in fiscal year 21 is 31 million yuan (up 74% from the same period last year). The net profit was 9.8 million yuan (up 114% from the same period last year), and the net interest rate was 31%. The management directs that the income of Chinese business schools in fiscal year 22 will increase by 90% to 60 million yuan compared with the same period last year. If the net profit margin is flat, the net profit will reach 18 million yuan. Mainly driven by supportive policies and capacity expansion using existing school resources, the corresponding price-to-earnings ratio for fiscal year 21 is 15.2x / 8x (compared with the group's current P / E ratio of 8.5x / 6.7x).
... It will bring about an increase in the performance of the group.
Zhonghui's revenue for fiscal year 21 (which ended in August) was 1.25 billion yuan (up 56 per cent from a year earlier), with reported core net profit of 460 million yuan (up 49 per cent from a year earlier) and 37 per cent core net profit. According to Zhonghui's previous guidelines, the total number of students in the 22nd academic year will reach 72000 (up 16% from the same period last year), and the income in fiscal year 22 will reach 1.65 billion yuan (up 32% from the same period last year).The driving factors are: 1)Policy support and endogenous growth driven by the expansion of two campuses2)The complete amalgamation of Sichuan schools3)Savings in management fees brought about by transfer4)The new Chinese business school, which will begin consolidation in January 2022, is expected to contribute about 2 per cent of revenue for fiscal year 22 (based on company guidelines) and 1.8 per cent of core net profit for fiscal year 22. In addition, the management stressed that the main synergy brought by Chinese business schools is the source of students for existing vocational colleges and universities. at present, the proportion of technical secondary schools rising to junior college is 10-20%, and 50-60% will be achieved in the medium term.