Performance review
1H22 performance is basically in line with our expectations.
The company announced 1H22 results: revenue of 378 million yuan, an increase of 63.5% over the same period last year, continuing business income of 75.0%, adjusted net profit of 135 million yuan, an increase of 50.3% over the same period last year, and an interim dividend of HK $0.06 per share. 1H22 performance is basically in line with our expectations.
Trend of development
The steady development of higher education and the improvement of film and television business. The income from continuing business in the first half of the year was 378 million yuan, an increase of 75.0% over the same period last year. Among them, the revenue of higher education business was 282 million yuan, an increase of 33.1% over the same period last year, mainly due to the increase in the number of students. as of June 30, 2022, the number of students in the company had reached 24508, including 2143 full-time undergraduates in the Olympic College. excluding the number of undergraduates in the Olympic College, the number of students in the company increased by 26.6% over the same period last year. Film and television production and investment income improved significantly, contributing 95.84 million yuan in the first half of the year, mainly due to revenue from the first round of the release of "New Home" (formerly known as "ideal House"), compared with 4.16 million yuan in the same period last year.
The cost is reduced after the divestiture of the art training business. 1) 1H22, the company's gross profit margin is 48.2%, the gross profit margin of the higher education business is 61.9%, and the gross profit margin of the film and television production and investment business is 7.8%. The decline in the overall gross profit margin is mainly due to the substantial increase in the contribution income of the film and television business with low gross profit margin compared with the same period last year. 2) in April 22, the company completed the transfer of Shuimuyuan equity to the founder of Shuimuyuan and its associates. The corresponding sales expenses and management expenses of the company's 1H22 continuing business were 4.174 million yuan and 48.653 million yuan respectively, down 59.6% and 19.2% respectively compared with the same period last year, mainly due to the impact of business divestiture. If corresponding to the same caliber last year, the sales expenses and management expenses of continuing business increased by 23.7% and 3.3% respectively compared with the same period last year.
3) 1H22, the revenue generated by the termination of Shuimuyuan business was 38.649 million yuan, and the impairment loss of film and television copyright was 22.012 million yuan. 4) 1H22, the adjusted net profit was 135 million yuan, an increase of 50.3% over the same period last year.
The second half of the year will focus on the development of new business, the delivery of films and TV dramas, and the classified registration of higher education. In terms of new business, the company announced that since March 2022, it has developed live e-commerce business with the advantages of teachers and students in the field of media art and resources in the media and film and television industries, and set up new companies and live studios in Beijing and Nanjing with the brand "Huaxia Best selection". In terms of media business, by the end of the first half of the year, the company had invested in "Breaking the Sky", "Lady's character", "Bai Yu Pop" and "Pentium Age Ⅱ", of which "Bai Yu Pop" has been licensed. In terms of higher education business, Nanjing private schools should complete classified registration by the end of 2022. According to the company announcement in 2021, Nanjing Media College has submitted its decision to register as a for-profit private school to the Education Department of Jiangsu Province in June 2021.
Profit forecast and valuation
Keep the profit forecast for 2022amp 2023 unchanged. The current share price corresponds to a price-to-earnings ratio of 6.7 times 2023 / 7.2 times earnings. The neutral rating was maintained, but as the company's sale of Shuimuyuan went ahead as planned, market concerns were repaired, and we raised our target price by 15% to HK $1.50 corresponding to 7.4 times 2022 price-to-earnings ratio and 7.8 times 2023 price-to-earnings ratio, which has 10.3% upside from the current share price.
Risk.
Higher education policy risk; acquisition progress is not as expected; live e-commerce business risk.