Event: the company's FY2022H1 revenue increased by 29.0%, while its adjusted net profit fell by 17.1%. The company's FY2022H1 revenue increased by 29.0% to 1.527 billion yuan, the mother's net profit decreased by 10.0% to 430 million yuan, and the adjusted net profit decreased by 17.1% to 453 million yuan. The company's FY2022H1 gross profit margin was reduced by 3.5PCTs to 50.7%, mainly due to increased investment in teachers and teaching facilities, the adoption of measures such as small class teaching, and the increase in the previous merger and acquisition of colleges and universities; the sales expense rate also increased by 1.7PCTs to 8.6%, mainly due to increased enrollment staff, advertising and marketing expenses; and the management expense rate also increased by 0.3PCTs to 12.8%. To sum up, the company's adjusted net interest rate also cut 16.5PCTs to 29.7%.

Extension + self-built to drive the continuous expansion of the school network, the number of students exceeded 230000. As of FY2022H1, the company operates a total of 19 domestic higher education schools, 2 technician colleges and 2 overseas colleges, and completed Shinawatra University in Thailand during the period. As of FY2022H1, the number of students enrolled in the company increased by 19% to 232100, and 82600 students were enrolled in the 2021-2022 academic year, an increase of 15% over the same period last year.

Strengthen connotative high-quality development and optimize the quality of its colleges and universities. The company's FY2022H1 focused on increasing investment in running schools, with expenditure on expansion rising 67 per cent year-on-year to 1.549 billion yuan, and teaching expenditure up 41 per cent to 585 million yuan, including 48 per cent to 388 million yuan on classroom salaries. In 2021, the company's colleges and universities introduced a total of 1532 teachers to strengthen the strength of the teaching staff. The company has built 39300 square meters of training ground and built 82 training centers in FY2022H1. In addition, the company's colleges and universities have completed the construction of five provincial first-class undergraduate professional construction sites, and the school-running quality of its colleges and universities has been further optimized.

There is plenty of room for endogenous growth in its colleges and universities, and the coordinated development of colleges and universities at home and abroad is expected to open up incremental space. At present, the average number of students in colleges and universities in the company is only 11000, and 55% of the land of each college is still available for development and utilization, providing sufficient space for endogenous development for the company. In addition, to promote the coordinated development of colleges and universities at home and abroad, the enrollment of Yindi International University in Malaysia and Shinawatra University in Thailand increased by 43% and 24% respectively. The company's two overseas colleges and universities have the right to grant undergraduate, master's and doctoral degrees, and are expected to form coordination with domestic colleges and universities to open up overseas study channels for students.

Investment advice. At present, the company is a listed private higher education group with the largest number of schools in China, with outstanding integration and management capabilities, rapid merger and acquisition of schools, and rapid all-round integration of enrollment, teaching and employment of the target schools after M & A. give full play to the coordination between colleges and universities. According to the FY2022 report, considering the company's increased investment in running a school, we adjust the company's home net profit forecast of FY2022-2024 to RMB 7.16, 8.01 and 913 million, with an increase of 18.2%, 11.9% and 14.0%, corresponding to EPS 0.09, 0.10 and 0.11 yuan, and the current price corresponds to the times of PE in 5-4-4, maintaining the "Buy" rating.

Risk hints: the detailed rules of the regulations on the implementation of the Civil Law have not yet been determined; the effect of acquisition integration is not good, and the enrollment situation is lower than expected; the company's operation and profitability are not up to expectations.