Introduction: following the simultaneous growth of 2022H1's revenue and net profit, China has welcomed the good news that the number of students has increased by 89%. Clear policy support, robust growth expectations, and significantly lower valuations in the sector's upward channel seem to hint at the possibility of alpha gains.
Since the end of May, the Hong Kong private higher education sector has rebounded by nearly 29%, showing a significant rebound.
There are no more than three reasons behind the plate repair: first, the transformation effect of the head teaching and training company is beginning to show, and the short-term stock price changes drive the attention of the whole sector to increase; under this background, the good long-term policy expectations and sound business fundamentals of the higher education sector have been re-recognized by the market, and then ushered in the opportunity of correction. Third, since the "double reduction" policy, education stocks have suffered a sharp decline, the higher education sector has been killed by mistake, and the market capitalization of many companies has been lower than their cash value, which has a strong valuation attraction.
Picture: Hong Kong stock private higher education plate
Although the valuation of the private higher education sector has been repaired to a certain extent, it is undoubtedly still at an absolute historical low. Recently, institutions concerned with this point have reminded investors to pay attention to the growth and certainty of higher education and seize the opportunity for sustainable repair of the plate. As a result, the author also pays attention to China's private higher education leader, China Chunlai (1969.HK), as a typical representative of the growth and certainty of private higher education in China. Its long-term growth is driven by multiple internal and external factors.
First, policy escort, the number of places promoted to colleges has greatly increased by 89%.
As far as the external environment is concerned, on the one hand, the structural adjustment of talent demand brought about by the transformation and upgrading of the domestic economy, the training of applied talents needs to be strengthened. Private colleges and universities are the backbone of cultivating applied talents, and their importance in China's talent training system will be enhanced under the new development situation. China Chunlai, as an established leader in higher education, has strong brand potential and abundant comprehensive resources. it will not only take advantage of the opportunity to consolidate the leading position in the industry, but also have the opportunity to explore new development opportunities.
On the other hand, under the influence of the ups and downs of the epidemic, the economic cycle and the new high scale of college graduates, domestic employment is under pressure, and students are more willing to extend their teaching years and obtain higher academic qualifications. Higher education industry can effectively prolong the number of years and level of education of the working population, and become an important buffer for all parties to seek to alleviate the pressure of employment. As far as the policy trend is concerned, the momentum of supporting the continuous expansion of higher education and vocational education is obvious, and Chunlai, which has outstanding school-running characteristics, is an important source of students to undertake, so as to obtain more high-quality students and achieve high-quality endogenous growth.
The above view has also been verified by the latest student places released by the company. According to the announcement, the number of undergraduate enrollment in China's colleges and universities (excluding balance College) has increased by 89% to 9534 in the 2022 academic year. In addition, the amount of general undergraduate expertise of the company is also under examination and approval one after another and is expected to increase.
The substantial increase in student places has laid a good foundation for the steady growth of the number of students in Chunlai's colleges and universities, and will also make the company's revenue in fiscal year 2023 with higher growth visibility, further boosting the company's continued upward growth.
Second, the soft and hard power of running a school is grasped by both sides, and the average first-time employment rate of graduates is 94%.
In addition to external dividends, China Chunlai insists on keeping pace with economic development and the demand of the job market, and constantly sharpens its internal skills during the downturn of the industry as a whole, improving the quality of teaching and the capacity of institutions, which provides a strong support for seizing market opportunities.
Picture: an overview of Chunlai's universities in China.
After more than a decade of development, China has operated six colleges and universities in Henan, Hubei and Jiangsu, covering undergraduate, junior college, junior college, vocational education, etc., with a total of 381 majors, forming a professional setting pattern dominated by undergraduate education and supplemented by vocational education, and introduced examination courses for graduate students and civil servants, showing a clear-cut pragmatic style of running a school guided by market demand. Thanks to the company's high-quality curriculum allocation, in the past three years, the average first-time employment rate of higher education graduates in China has reached 85.1%, 93.3% and 94.4% respectively, showing a trend of increasing year by year, which is also much higher than the average level of the higher education industry. to create better conditions for the company's follow-up enrollment scale and tuition fee increase.
If the bright employment rate performance is the result of the company's long-term attention to soft power construction, then its investment in campus expansion, expansion and other hardware should not be underestimated, and the predictable expansion of colleges and universities provides a guarantee for the growth of enrollment scale.
Specifically, in Henan, the new Yuanyang campus of Anyang College was established in April 2021 and began recruiting students with classmates, with an enrollment of 4060 students. In Hubei, Jingzhou College, which has been completed and listed by the company, is expanding, and the new campus will expand by more than 1.5 times on the basis of about 248000 square meters of the original main campus. at that time, the total student capacity of the new campus will be increased to about 12000. In Suzhou area, the first phase of the new campus of Tianping College operated by the company is expected to be completed in the fourth quarter of 2022, and the second phase is expected to be completed in September 2023. The new campus can accommodate at least 16000 students when completed. In addition, China Chunlai has acquired the 50-year right to use the relevant plots in Nanjing higher Vocational Park for 50 years at a price of 180 million yuan in the area through Tianping College to prepare for the construction of new colleges and universities.
With the expansion of the campus and the construction of the new campus, the enrollment scale of China's spring has increased. As of the first half of 2022, the total number of students in the company's colleges and universities has exceeded the 100000 mark, ranking among the top 5 in the industry.
It is expected that the gradual landing of the campus expansion plan will further improve the higher education network in Central China and consolidate its dominant position in Central China and the Yangtze River Delta. With the help of the potential synergy of its colleges and universities, the company will also attract more high-quality students. to form a virtuous circle of "quality students and a good learning environment-strengthening employment competitiveness-attracting quality students-promoting the growth of the company's size and performance-improving the comprehensive ability of running a school", to promote the sustainable development of the company.
Summary
In a more complex environment, private colleges and universities are self-sufficient and flexible in running schools. Frost Sullivan predicts that the market size of China's private higher education industry will reach 217.4 billion yuan in 2025, with a five-year compound growth rate of about 9.0%, which will accelerate compared with the previous five years.
On the other hand, the teaching quality of Chunlai in China is stable and the brand recognition is high. whether it is the substantial increase in the number of school places, the expanding school capacity, or the sufficient financial reserves and strong integrated operation capacity of colleges and universities, it all means that the company's future performance is expected to continue to be sound, and is one of the strongest competitors in the hundreds of billions of markets.
Since high-quality growth has become a clear card, there is a big gap between PE, which is only about 3 times of China Spring, and 12 times PE of Hong Kong stock higher education plate. The author thinks that China Spring may have Alpha earnings opportunities that surprise investors. In fact, the "Davis double-click" of company performance and valuation has been staged.