The adjusted net profit of 1H22 is 420 million, but the profit of online education is lower than the expected revenue of 1.27 billion yuan (RMB, the same below) in the first half of the year, an increase of 2.9% over the same period last year, of which the campus education / online education sector accounted for 56.6% and 43.4% respectively. During the period, campus education developed steadily, with 101000 students, an increase of 10.0% in income over the same period last year, and tuition and accommodation fees of 670 million and 55 million respectively. On the other hand, online education was affected by the epidemic control measures, the enrollment of stores was lower than expected, and online education revenue fell 5.1 per cent to 550 million yuan compared with the same period last year. The company's overall gross profit margin is 57.6%. With the expansion of the proportion of online education, the corresponding expenses such as publicity, sales and enrollment also increase. We expect the operating expenses related to online education to account for more than 70% of the total expenditure in the first half of the year, and the conversion rate of online education business during the period is lower than expected. The company's overall first-half net profit was 340 million, with an adjusted net profit of 420 million, down 4.0% from the same period last year.
It is expected that expenditure on online education will continue to increase in the future.
The total income of online education sector is 550 million, of which the income of distance education service / teacher training service / online course service is 440 million / 31 million / 19 million yuan respectively. Among them, distance education services and online course services were the most affected by the epidemic, with business revenue falling 5.1% and 46.1% respectively compared with the same period last year. The epidemic is under control in the second half of the year, and the ground push for publicity and enrollment is expected to resume. But at the same time, we expect that the operating expenses caused by online education will also increase, and the proportion of overall operating expenses for the whole year will increase from 26.9% of 1H22 to 28.5%. The gross profit margin of online education will fall month-on-month. In the long run, the company layout closely meets the needs of the country and society, integrates into and serves the construction of the national modern vocational education system, and promotes the deep integration of the Internet and vocational education with the empowerment of science and technology. The company builds a full-chain "Internet +" vocational education service platform, opens up a new space for the development of vocational education, and highlights the competitive advantage of coordination in all aspects. In terms of campus education, it is estimated that there will be 108000 students in the new school year, and the number of students and tuition fees will continue to grow steadily.
Lower the profit forecast to HK $1.30
Due to the interference of the epidemic on the company's revenue in the first half of the year, and the uncertainty of the expected future online education enrollment, the FY22E/FY23E revenue was reduced by 10.6% and 15.2% respectively; due to the expected increase in enrollment costs and operating expenses of online education, the gross profit margin of FY22E/FY23E was reduced by 4.5% and 8.0%; as a result, the net profit was reduced by 7.6% by 19.5% to 690 million / 720 million yuan. The new target is adjusted to HK $1.30, corresponding to a forward price-to-earnings ratio of 8 times to 6 times FY23E year.
Investment risk
1. Online / campus vocational education policy risk; 2. Online / campus education enrollment falls short of expectations.