The results for the third quarter of 2022 are in line with our expectations
The company announced its results for the third quarter of 2022: revenue was 1.67 billion yuan, an increase of 15.4% over the same period last year; its net profit reached 68.24 million yuan from loss to profit in the third quarter, and the performance was basically in line with our expectations.
Trend of development
The enrollment examination is resumed and the income is repaired. In the third quarter of 2022, the company achieved operating income of 1.67 billion yuan, an increase of 15.4% over the same period last year, of which online training income was 642 million yuan, an increase of 29.36% over the same period last year. The increase in income was mainly due to the overall return to normal of enrollment and teaching, and the backlog of outstanding income due to the postponement of examinations in the first half of the year was partially released in the third quarter. By the end of the third quarter, the company's contract liabilities reached 4.7 billion yuan, an increase of 1.7 billion yuan over 3 billion yuan at the beginning of 2022 and 47.16 million yuan more than at the end of the second quarter. The application for the 2023 civil service enrollment will begin on October 25, 2022, and the written examination on public subjects will be held on December 4, with results expected in January 2023. The enrollment plan is to enroll 37100 people, an increase of 19% over the same period last year. We believe that the peak of the company's business collection is before the start of the enrollment examination, and it is expected that some contract liabilities may be concentrated in the fourth quarter and the first quarter of next year when the enrollment examination resumes.
The initial appearance of reducing cost and increasing efficiency. The company's gross profit margin in the third quarter of 2022 was 51%, an increase of 14ppt over the same period last year, mainly due to the reduction of teaching classes affected by the epidemic in many provinces and cities, and the optimization of teachers and staff. In the third quarter, the company realized a net profit of 68 million yuan belonging to the parent company, turning losses into profits compared with the previous quarter, mainly due to the continuous strengthening of lean management and the reduction of the number of direct branches, management and R & D staff. In the third quarter, the company's sales expenses decreased by 25.45% compared with the same period last year, and management expenses decreased by 49.75% compared with the same period last year. We believe that if the cost is well controlled, the full-year loss is expected to narrow. The overall net loss of homing in the first three quarters was 820 million yuan, and we expect a net loss of 328 million yuan for the whole year.
Operating cash improvement, pay attention to cash support. In the third quarter, the company had a net cash flow of 560 million yuan from operating activities, of which 1.67 billion yuan was received from sales of goods, and a net outflow of 2.7 billion yuan from operating activities in the same period last year, mainly due to the reduction of face-to-face classes and staff salaries. By the end of the third quarter, the company's cash of 457 million yuan was 668 million yuan lower than that of 1.13 billion yuan at the end of the second quarter, and the short-term borrowing on the debt side was 200 million yuan, which was 1.05 billion yuan lower than the quarter-on-quarter comparison at the end of the second quarter. We believe that the company's current debt pressure has eased. The company's cash position is expected to improve when the operating cash flow is stable.
Profit forecast and valuation
Considering that part of the company's examination income in the second half of the year may be confirmed in 2023Q1, part of the cost is rigid, we reduce the 22-year / 23-year income by 10%, the 22-year net loss from 24.71 million yuan to 328 million yuan, and the 23-year net profit by 11%. The current share price corresponds to a price-to-earnings ratio of 43 times 2023. Considering the resumption of enrollment programs and the fact that the company is still the leader in the vocational examination, it maintains a neutral rating and a list price of 5.00 yuan, corresponding to 50 times 2023 price-to-earnings ratio, which has 17.6% upside space compared with the current stock price.
Risk
The impact of the epidemic exceeded expectations, and the cost control was not as expected.