The company's 2022 revenue/net profit/adjusted net profit was $23.5/513/622 million, respectively, -1.7%/-15.5%/-22.5% year-on-year. Revenue from the company's campus sector has maintained steady growth, and the online education business layout is getting better. It is expected that in 2023, along with the relaxation of epidemic control, performance is expected to resume growth. The company's current price corresponds to only 2 times PE in 2023, with a dividend rate of 10.7%, which is significantly undervalued and maintains its “buy” rating.

The profit side was affected by the epidemic and was under short-term pressure, and the overall financial and capital structure was stable. 1) Revenue and profit: In 2022, the company achieved revenue of 2.35 billion yuan/ -1.7%, net profit of 513 million yuan/ -15.5%, and adjusted net profit of 622 million yuan/ -22.5%. 2) Costs and expenses: The company's gross margin in 2022 was 54.2% /-2.5pcts, sales/management/finance expenses were $2.73/501/164 million, and the expense ratio was 11.6%/21.3%/7.0%. The year-on-year change was +1.5/+1.6/+1.5pcts. Sales expenses were mainly marketing and distribution expenses related to the online education business. Management expenses were mainly due to employee remuneration, administration-related depreciation and amortization expenses, and the increase in sales and management expenses was mainly due to the consolidation of new online education projects during the period. 3) Cash and liabilities: As of December 31, 2022, the company's cash and equivalents on its books amounted to $3.48 billion, an increase of about 18.4% over the previous year, mainly due to additional tuition and accommodation fees. At the same time, short-term and long-term loans amounted to $2.36 billion, with plenty of cash. 4) Dividends:

The dividend amount for the full year of 2022 was RMB 4.29 HKD/share. The dividend rate (based on the closing price on March 28, 2023) reached 10.7%, and the distribution ratio reached 30%.

Revenue from the campus sector continued to grow steadily. The company's campus business revenue in 2022 reached 1.31 billion yuan/ +4.8%, accounting for 55.7% of total revenue, and EBIT was 521 million yuan. Among them, tuition/accommodation fees were 1.20 billion yuan/110 million yuan, +4.3%/+11.4% year on year. Currently, the company's domestic campus education sector has a total of 10 schools (7 institutions of higher learning, 2 middle schools, 1 high school) and 3 overseas schools (Singapore Bacon International College, Australian National School of Management and Commerce, and Hong Kong Neng Yan College of Higher Education). In terms of campus construction, the company has increased investment in running schools: 1) the company has increased investment in teaching staff: the company continues to expand the teaching team and optimize their treatment. In 2022, teacher costs were about 360 million yuan/ +10.5%; 2) Hardware upgrade: The company completed the construction of nearly 110,000 square meters of school buildings in 2022, including teaching laboratory buildings, student activity centers, student dormitories, student cafeterias, etc., and the related capital expenditure in 2022 was about 3.1 billion yuan. Looking ahead to 2023, we expect the campus business to maintain steady growth.

The layout of online education is becoming more and more perfect, and the eight major platforms aggregate leading resources in segmented fields. The company's online education sector revenue in 2022 reached 1,042 million yuan/ -8.8%, accounting for 44.3% of total revenue, and EBIT was 203 million yuan. Among them, revenue from distance education/teacher training/online courses/commissions/examinations and evaluation/book sales/other education businesses was 7.53/0.85/0.39/0.28/0.09/0.27/101 million yuan respectively. At present, the company has formed eight major platforms in the online field: 1) Aopeng Education (distance education service): the country's first public service system for distance education. By the end of 2022, the country had 1,900 learning centers, 930,000 students with academic qualifications, and a cumulative total of 8 million teacher trainers. 2) HSK&CCAA (Chinese Proficiency Test): Professional online Chinese proficiency test service provider. By the end of 2022, it had more than 80 test sites worldwide, covering 26 provinces in China and 5 overseas countries. 3) MOOC Network (IT Training): Programmer Dreamworks, an Internet IT skills learning website with 23 million+ cumulative users and 700+ first-line lecturers from Internet companies by the end of 2022. 4) Dutuo Classroom (Management Joint Examination Platform): By the end of 2022, it had 190+ domestic and foreign business schools and 3.1 million+ cumulative users. 5) MOOC (Education Information Platform): It mainly provides informatization support to colleges and universities and helps them reform their teaching. By the end of 2022, 400+ partner institutions had 13 million learning users. 6) Xiaoai Technology (HR SaaS): Flexible employment platform, HRO SaaS integrated supplier. By the end of 2022, there were 850+ HR companies, 30,000 employers and 2.7 million+ employment pools. 7) Minsheng Online (Online Education and Training): By the end of 2022, there were 300+ educational institutions, 170+ vocational schools, and 120,000 students enrolled in academic education. 8) Minsheng Zhiyun (Learning Public Service Platform): As of the end of '22, it had 100,000+ learning users. Looking ahead, the company will further promote “online-digital-intelligent” development, accelerate cooperation with world-renowned universities and scientific research institutions, build a high-level scientific research system, and rely on platforms to facilitate the transformation of scientific research achievements. The company's online education business is expected to accelerate development.

Risk factors: Transfer progress falls short of expectations; campus expansion progress and new enrollment fall short of expectations; industry policy changes; online business development falls short of expectations.

Investment advice: Considering that the company's campus education credits are growing more slowly than expected, the 2023/24 core net profit forecast was lowered to 69/760 million yuan (the original forecast was 848/920 million yuan), and the new 2025 core net profit forecast was 846 million yuan. Currently, the layout of the company's campus+online dual-drive business model is perfect. Referring to the industry's 2023 valuation (hope education is 6 times PE, China's science and technology training is 5.5 times PE, wind is consistent with expectations), and with reference to the company's own historical valuation center, the company is given 4 times PE, corresponding to the target price of HK$0.6, maintaining the “buy” rating.