Endogenous growth is steady, gross profit margin reaches a record high
The income of Jianqiao Education 1H22 reached 400 million yuan (RMB, the same below), an increase of 16.4% over the same period last year, of which tuition income increased by 22.0% over the same period last year. Because of the epidemic control measures in Shanghai, some students did not live on campus, so 1H22 accommodation fees fell 3.5% from the same period last year. Gross profit margin during the period rose 3.3 percentage points year-on-year to 68.1%, an all-time high. Operating expenses increased by 60% year-on-year, accounting for 21.1% of revenue, mainly due to the company's adjustment of administrative salaries to increase the competitiveness of similar personnel, and the school increased expenditure on protective testing equipment and related personnel during the epidemic in Shanghai. 1H22's net profit was 130 million, an increase of 19.0% over the same period last year, with a net profit margin of 32.9%. The company's financial structure continued to optimize, with interest-bearing liabilities falling from 1.31 billion yuan of 1H21 to 810 million yuan, so financial expenses fell 52.3 percent to 13 million yuan compared with the same period last year. The company pays an interim dividend of HK $0.1 per share, with a dividend payout rate of 25%.
The number of students continues to grow, and there is a lot of room for volume and price increase.
At present, the company has a total of 22000 students, with an average annual compound growth rate of 8% since 2018, with a significant endogenous growth rate. The total number of undergraduate and junior college enrollment programs in the 202222 23 academic year was 5700, the same as last year, and the number of students promoted to the program increased by 96% to 2800. The number of students in the new school year is expected to increase to 24000. The minimum tuition fees for undergraduates in the 2022apt 23 academic year were raised from 30000 to 32000, and the minimum tuition fees for colleges were raised from 15000 to 20000. After the increase, the tuition fees are still at the low and middle levels of private schools in Shanghai. The third phase of the school project is basically completed and will be put into use in September, increasing the school capacity to 26000 students. In order to improve the efficiency of the use of funds, the company announced that 35% of the funds raised at the time of listing would be used for acquisitions and mergers to be used for campus construction. The company has begun to plan the fourth phase of the campus expansion project, which will continue to lick the endogenous growth.
Target price raised to HK $5.60
We raised the company's FY22E/23E revenue by 2.9% plus 6.2%, the gross profit margin by 0.6% by 0.9% to 63.6% by 64.2%, the operating expense forecast by 6.7% by 18.0%, and the net profit forecast by 7.3% by 7.3% to 230 million / 270 million yuan. We believe that the company's business is sound and predictable. Jianqiao College has been converted into a for-profit private school, and 25% income tax has been deducted. Preferential tax policies will be introduced in the future, and it is expected to receive tax and fee refunds. The current dividend yield is 5.4%. Raise the target price to HK $5.60, corresponding to 8 times FY22E's price-to-earnings ratio.