Main points of investment
Event: 18H1's income of 590 million yuan increased by 23.1%, the number of students increased by 12.3%, the profit of 219 million yuan increased by 24.5%, and the corresponding net interest rate increased by 37.2%. The net profit of 213 million was increased by 20.5%, and the net interest rate was 36.1%, which was in line with our expectations.
On the income side: the logic of the simultaneous increase in volume and price is clear, and the tuition income of senior high school and domestic courses has increased by 35.6%, strongly leading the growth of all academic sections: the increase in 18H1 volume and price has driven the company's income to increase by 23% to 590 million, and the number of students in eight schools has increased by 12%. The increase in the number of high schools with the highest per capita tuition is significantly higher than that of the overall number of students, and structural optimization has led to a 10% increase in per capita tuition fees. From the point of view of the sub-section, 1) the income of the university division increased by 7.39% to 112 million yuan, and the income of the kindergarten increased by 34.92% to 5.54 million. The growth rate is fast, but the volume is still small, and the university-kindergarten accounts for about 20% of the total tuition income. 2) High school, junior high school and primary school all achieved a rapid growth of nearly 30%. Among them, the tuition income of senior high school-domestic curriculum 18H1 increased by 35.58% with 137 million yuan, leading the way in all academic sections. the number of 6942 18H1 students in this division increased by 21.19%, and the per capita tuition increased by 11.87% with 19786 yuan. Both volume and price increased rapidly. We believe that this is closely related to the excellent teaching quality, high-quality teaching resources are in short supply and have sufficient head bargaining power. Junior high school and primary school branch added 4 new schools respectively in 17 years, leading to an increase of 16.69% to 15502 students and 28.29% year-on-year increase in income to 291 million yuan, accounting for more than half of the total tuition income.
Profit side: the new school lowers the overall gross profit margin, and light assets can help improve profitability in the future. The eight new schools opened in the past 17 years are all in the climbing period with low utilization rate and low gross profit margin, so the overall gross profit margin of 18H1 company is lowered to 48.53%. In terms of expense rate, the overall expense rate is stable over the period. 18H1 achieved an annual profit of 219 million yuan, an increase of 24.50% over the same period last year, corresponding to a net interest rate of 37.17%, with excellent profitability. Benefiting from the gradual increase in the utilization rate of new schools during the climbing period and the stable and controllable amortization expenses under the light asset model, we expect the company's profitability to be further improved in the future.
Operating cash inflows of 312 million significantly increased capital reserves, light assets model fixed assets-land did not increase significantly. 18H1 recorded an operating cash inflow of 312 million, with a net cash flow of 134 million yuan after deducting 106 million investment and 72 million financing to significantly enrich the company's capital reserves. Under the light asset model, the combination of fixed assets and prepaid land leases has increased from 3.632 billion of 17FY to 3.674 billion of 18H1, with no significant growth, and it is expected that the amortization expenses can be controlled in the future.
In the next three years, six new campuses will gradually fall to the ground, with 27000 new places, and the volume and price will rise in the future. In terms of the number of students, the company has set up five new campuses in Wulongshan, Zigong Purun, Panzhihua, Mainian and Wenjiang in the past 17 years, with 23300 new degrees. In 18-19-20, the new campus is expected to open on 1-2-3, with 27050 new degrees. The number of new school enrollment in the next three years can achieve rapid growth. In terms of price, Chengshi has been ploughing the education industry since its establishment for 18 years. The 18-year college entrance examination rate of its schools has reached a new high of 95.3%. The brand moat enables the company to have full bargaining power, and both volume and price are expected to grow in the future. In addition, the light asset expansion strategy adopted by the company can effectively reduce operating costs, and the company's profitability can be further improved in the future with the improvement of utilization during the climbing period of the new school.
Profit forecast and investment rating: we expect the company's total revenue from 2018-2020FY to be 11.52,14.92 and 1.946 billion yuan, an increase of 20.90%, 29.54% and 34.41% over the same period last year. The return net profit is 3.65,4.94,7.21 yuan, up 19.08%, 35.32% and 46.12% over the same period last year. The current market capitalization corresponds to PE34X, 25X and 17X. Considering the company's first-class school strength and light asset project expansion, the future growth flexibility is high, and the current time point maintains the "buy" rating.
Risk hint: school expansion is not as expected, teaching quality is not as expected, and Hong Kong stocks are highly volatile.