Chengshi wai Education Group has been operating private education in Sichuan Province for more than 18 years. Since the first high school graduates in 1999, it has trained 7 top students in Sichuan Province and 3 top students in Chengdu. The Group began to expand to areas other than Chengdu in Sichuan Province in 2017 and tried to expand in the light asset model. As of December 2018, the Group had a total of 16 operating schools.
Ploughing Sichuan based on Chengdu and entering a period of rapid expansion of the school network
Chengshi Foreign language Group entered the education industry with internal capital investment in 2000, established Chengdu Foreign language School as a joint school investor in 2000, and established Chengdu Experimental Foreign language School as the sole school investor in 2002. it landed on the Hong Kong stock main board in 2016 and listed on the main board of Hong Kong stocks. At that time, the group had six operating schools. In September 2017, eight new schools were put into operation, expanding the school network to cities other than Chengdu in Sichuan Province-Panzhihua and Zigong. In September 2018, 2 schools in qu County, Sichuan Province were put into operation. As of December 6, 2018, the Group had a total of 16 operating schools. Before the expansion of the school network in 2017, the utilization rate of the six schools under the group was close to 100%. After the eight new schools were put into operation in 2017, the overall utilization rate of the group dropped to 65% because only the first-year students of each school segment were enrolled in the first year of operation. The utilization rate will gradually increase in the future.
The cradle of the champion
Since having high school graduates, the group's schools have trained seven provincial top students in the college entrance examination and three in Chengdu. Every year, more than 100 high school graduates are guaranteed to famous Chinese universities such as Peking University, Tsinghua University, Beijing Foreign Studies University and Shanghai Foreign Studies University. in the past five years, more than 200 high school graduates have been admitted by the world's top universities, including Harvard, Stanford, Brown University, the University of California, Berkeley and so on. In the 2018 college entrance examination, 37 of the group's high school graduates (there were 6151 high school students as of June 30, 2017, and it is estimated that there were about 2000 high school graduates in 2018) were admitted to Peking University and Tsinghua University.
The enrollment of the new semester in September 2018 is good.
As of September 1, 2018, the number of students in schools owned by Chengshi Group was 45779, an increase of 18.3% over the same period last year. Among them, the number of senior high school students increased by 30.5% to 10292 compared with the same period last year, and the number of students in light-asset schools increased by 49.5% to 11140. As of September 1, the group has operated a total of 11 light asset schools in cooperation with third-party business partners, such as local governments, well-known real estate listed companies in China and well-known private enterprises in local cities, including the high-tech West Campus. The school investors are 20% owned by the Group. The schools opened by the group in partnership with local governments and real estate companies from 2019 to 2020 will provide a capacity of more than 27000 students, which supports the group's high growth in the number of students in the coming years.
Profit forecast and valuation
We expect the number of students enrolled in Chengshi Foreign Group to grow by 14.2% and 14.8% in the 2021 academic year. We expect the group's 2018, 2019 and 2020CY revenue to grow by 32.7%, 30.5% and 26.5% respectively, and net profit to increase by 28.9%, 17.1% and 31.3% respectively to RMB 0.128, 0.150 and 0.197 yuan According to the expansion expectation of Chengshi Foreign Education Group in the next few years, we give the company a price-to-earnings ratio of 25 times 2019CY and a corresponding share price of HK $4.26. (converted according to HK $1 = 0.88 RMB)
Risk hint
Policy risk
The enrollment of the new school fell short of expectations.
The equity of the group is relatively concentrated, and the transaction is not active.