Performance review
The results for fiscal year 2022 are in line with our expectations.
The company's revenue in fiscal year 2022 was 1.92 billion yuan, an increase of 28% over the same period last year; the adjusted net profit was 660 million yuan, an increase of 16% over the same period last year, and the adjusted net profit margin was 34%, which was basically in line with our expectations.
Trend of development
The income increases steadily and the structure of students is optimized. In fiscal year 2022, the company's main business income increased 28% to 1.92 billion yuan over the same period last year, including tuition fees of 1.74 billion yuan, an increase of 29% over the same period last year, and accommodation income of 180 million yuan, up 18.6% from the same period last year. According to our estimates, excluding Gansu schools and Zhengzhou schools, the growth rate of the company's internal income is about 9%, which is mainly driven by the increase in tuition fees. The performance of the management will reveal that the number of students enrolled in the company in the 23rd academic year has reached 140000, the structure of new students has been optimized, and the proportion of undergraduate and junior college students has increased, of which the proportion of undergraduate students in the total number of students has increased by 5ppt, while the average tuition fees of new students have increased by 13.2%. We expect the company's revenue in fiscal year 2023 to be about 2.12 billion yuan, an increase of 11% over the same period last year, and the average tuition fee per student is expected to increase by 11% over the same period last year.
Increase investment in running a school and effectively control the cost. The company's gross profit margin was 39%, a year-on-year decline in 5.5ppt, mainly due to the company's increased investment in teaching: 1) introducing high-quality teachers, the cost of teachers increased by 41% year-on-year, and the number of teachers with highly educated and professional titles increased by 31% compared with the same period last year. 2) upgrade campus hardware facilities, increase teaching space investment by 235 million yuan during the performance period, to build a production capacity teaching integration training room. In fiscal year 2022, the company's adjusted return profit margin was 34.4%, a decrease of 4ppt over the same period last year, in which the company effectively controlled the expense rate, with the sales expense rate of 1.3% basically the same as that of last year, and the management expense rate of 4.6%, down 1.1ppt from the same period last year. The company's capital and debt structure has been continuously optimized, and the financial cost has been saved by replacing low-interest liabilities through negotiations. the new loan financing interest rate during the performance period is basically 4.5% and 4.8%. We believe that while increasing investment in teaching, the company will be able to effectively control the growth of costs and promote the steady development of performance. We expect the company to make an adjusted profit of 750 million yuan in fiscal year 2023, an increase of 13% over the same period last year.
The dividend distribution rate reached 50%, and actively promoted the profit registration of its private colleges and universities. In fiscal year 2022, the company paid a cash dividend of 0.199 yuan per share, with a dividend payout rate of 50%, which was higher than the industry average. In the aspect of for-profit registration of private colleges and universities, its northeast schools have been granted a transitional school license for the selection of camps, and have gradually promoted the follow-up procedures. At the same time, the management performance will disclose that the application for upgrading professional undergraduate courses of its Guizhou schools has been included in the 14th five-year Plan of Guizhou Province and submitted to the Ministry of Education for approval. We believe that the upgrading of the school will help to improve the influence of the company's brand and drive the growth of enrollment for a long time.
Profit forecast and valuation
The profit forecast for fiscal year 2023 and fiscal year 2024 will remain basically unchanged. Maintain an outperform industry rating and a target price of HK $3.20, corresponding to 7.6 times the price-to-earnings ratio for the 2023 fiscal year and 6.7 times the price-to-earnings ratio for the 2024 fiscal year, which is 28% upside from the current share price. The company currently trades on a price-to-earnings ratio of 4.5 times fiscal year 2023 and 4.0 times fiscal year 2024.
Risk.
The increase of tuition fees is lower than expected; the policy of higher education is higher than expected.