Main points of investment
The flagship of private education in southwest China, which has a large number of elites, opened a new era of growth in 2017: Chengshi Foreign Education, founded in 2000, has been famous in Bashu and the whole country over the past 18 years. Its three high schools have trained 15 top students in Sichuan Province and 25 top students in Chengdu. The overall undergraduate rate of the 17-year college entrance examination is 94.6%, of which more than 60% of graduates attend 985 and 211 engineering schools, and another 49 graduates are admitted by Peking University and Tsinghua University, sending more than 100 students every year, and hundreds of candidates are admitted to overseas famous universities. College entrance examination & going abroad has an excellent reputation. Nine schools were operated by the company in 2017 and before, and the overall management pace is steady. 12 new schools opened in September 2017. at present, there are 2, 5, 6, 7 and 1 universities in kindergartens, primary schools, junior middle schools and senior high schools, respectively. a large number of new schools launched a new era of rapid growth. The company's total revenue in fiscal year 2016 was 953 million yuan, an increase of 15.18%. The core business has a net profit of 340 million yuan, an increase of 31%, a corresponding net profit margin of 36%, and excellent profitability.
The excellent word-of-mouth moat comes from the multi-factor drivers of teachers, curriculum, students and management: in terms of the enrollment rate of the college entrance examination, first, nearly 30% of the teachers in the school have a master's degree, 14 special-level teachers, and the whole teaching staff is a gathering of famous teachers. at the same time, the school's talent training system is perfect, and we continue to cultivate excellent new-generation teachers. Second, the group's ability to coordinate teaching and research in running a school is outstanding, the results of teaching and research are shared, and the curriculum system grasps the direction of the proposition of the college entrance examination; third, the lowest score of admission more than 50 points above the local key line strictly controls the quality of students, word-of-mouth and students form a virtuous circle; fourth, the group has strong management output ability and staff incentive mechanism, and excellent internal operation ability. In terms of the enrollment rate of international education, first, the school provides AP, China-Canada and Fujita classes with significant license advantages, and students have a rich choice of courses; second, there are strong teachers, with 36% of master's degrees and 20% of doctoral degrees among foreign teachers in the AP center; third, to establish a good cooperative relationship with international famous universities, and recently launched an Australian program in cooperation with Monash University to ensure the quality of students' further studies.
The income end of the light asset model has entered a period of rapid expansion, and profit elasticity has gradually emerged: in K12 field, primary and secondary schools accounted for 75% of income in 2017. Wenjiang Campus (Shiwai Middle School and affiliated Primary School New Campus), Panzhihua Campus, Wulongshan Campus, Zigong Campus and Meinian Campus landed + 18 years qu County Campus opening + 20 years Longhu Project driven nearly 20% compound growth of primary and secondary school students in the past three years. Fees we expect to start a new round of fee increases for freshmen in 19 years, and the contribution of per capita income can be flexible. University income accounts for about 20% in 2017, and the future endogenous growth of the university is expected to be about 8%. The focus will shift from expanding scale and raising revenue to controlling costs and giving play to scale effects so as to improve profitability. In terms of gross profit, under the light asset expansion mode, depreciation amortization expenses are relatively fixed and rigid, teacher costs can be controlled, economies of scale are significant, and gross profit elasticity continues to show; under expense word-of-mouth marketing, the rate of sales expenses is very low, and the rate of management expenses in the expansion period is expected to increase slightly, generally speaking, the growth rate of the profit end is expected to be faster than that of income.
Profit forecast and investment rating: the total revenue of the company's 2018-2020FY is expected to be 11.47,14.51 and 1.854 billion yuan, up 20.38%, 26.49% and 27.80% over the same period last year, and the net profit of its home is 4.00,5.39,7.34 yuan, up 30.52%, 34.9% and 36.01% over the same period last year. The current market capitalization corresponds to PE34X, 25x and 19x. In the middle reaches of comparable company valuation, considering the company's first-class school strength and light asset project expansion, the future growth flexibility is high, and the current time point is given a "buy" rating.
Risk hints: school expansion is not as expected, teaching quality is not as expected, and Hong Kong stocks are more volatile.