Events:
Kaiyuan shares announced "2019 semi-annual report": income 811 million yuan (+ 35.64%), return to the mother net profit of 37.62 million yuan (- 42.44%).
Comments:
Revenue is growing rapidly, with Heng enterprises growing by 46% and CUHK by 44%.
Kaiyuan 2019H1 realized income of 811 million yuan (+ 35.64%), net profit of 37.62 million yuan (- 42.44%), and comprehensive gross profit margin of 76.69% (+ 5.48pcts), in line with market expectations.
The sales cost is 283 million yuan (+ 77.88%), mainly due to the increase of sales staff of Heng Enterprise Education and CUHK talents, the increase of online promotion investment and sales commission, etc., and the management fee of 200 million yuan (+ 37.85%). This is mainly due to the fact that Heng Enterprise and CUHK have further strengthened the research and development of products and made efforts to improve the informationization of products and increase the impact of corresponding investment.
Vocational education and training business 752 million yuan (+ 48%), return to the mother net profit of 62.32 million yuan, gross profit margin of 79.42%, an increase of 5.37pcts over the same period last year. Among them, the education income of Heng enterprise is 701 million yuan (+ 46.05%), the net profit of return to mother is 53.32 million yuan (- 15.77%), the income of outstanding talents of CUHK is 51.08 million yuan (+ 44.3%), and the net profit of return to mother is 8.99 million yuan (- 11.48%).
19Q1~Q3 performance guidelines 470 million to 54 million yuan.
The 19Q1-Q3 performance guideline is 470 million yuan to 54 million yuan (- 53.88% PUMI 47.01%), and the profit decline is mainly due to (1) the profit affected by the acquisition account fees and management expenses caused by the divestiture of the manufacturing industry decreased by 290,031 million yuan; (2) the net profit of the education business decreased by 2480,29.8 million yuan (- 22.08%) compared with the same period last year. The net profit of 2019Q3 is estimated to be 9.38 million yuan (- 55.20% Malaysia 74.34%).
Heng Enterprise Education: the main business is financial accounting training, which will be laid out in depth in the fields of finance and economics and design in the future. Heng Enterprise is an accounting training giant covering the whole country, with products covering financial accounting skills training, financial accounting research training, diploma education intermediary services, as well as subsidiary traction IT training, Tianyu education design training and so on. By the end of 2018, Heng enterprises had 397 terminal campus outlets in 24 provinces and cities and more than 170 cities across the country, an increase of 49 over the same period last year, including 338 Heng enterprises, 51 Tianli and 8 traction. In 2018, Heng Enterprises enrolled 170800 students (+ 24%), the order rebate was 1.263 billion yuan (+ 38%), and the guest price was 7394 yuan per person (+ 12%).
CUHK talents will realize 100% equity consolidation. The main business of CUHK talents is Internet online vocational examination education, with courses covering 10 areas such as construction engineering, finance and finance, and professional qualifications, including 134kinds of subdivided courses and 8450 online school courses. In 2018, Mid-British talents added 2.73 million registered members (+ 76%), order rebate of 99.63 million yuan (+ 60%), and guest unit price of 250 yuan per person (+ 27%).
CUHK's talented talents achieved an income of 94.11 million yuan (+ 48%) and a net profit of 27.48 million yuan (+ 18%) in 2018.
The deduction of non-net profit from 2016 to 2018 was 1603 yuan, 2306 yuan and 27.07 million yuan respectively, with a total deduction of 66.16 million yuan and 102 per cent of the performance commitment.
The increase of Kaiyuan shares by the talented founders of CUHK is an important symbol of the improvement of corporate governance structure. In 2018, the net profit loss of manufacturing business was 41.59 million yuan, and that of vocational education business was 140 million yuan. The manufacturing business of Kaiyuan shares was spun off in the second quarter and will focus on the main business of vocational education in the future. As of May 10, 2019, the Roche family, the founder of Kaiyuan shares, held about 29.12% of the shares. From the perspective of corporate governance structure, the education business founding team as the core contributor to the performance of listed companies, the shareholding ratio is only 18.25%. Zhao Jun, the talented founder of CUHK, increased his holdings of Kaiyuan shares with no less than 115 million yuan, which means that substantial steps have been taken to improve the corporate governance structure. With the education business executives gradually bound to the interests of listed companies, we believe that the income scale of Kaiyuan shares in the education industry is expected to return to the trend of rapid growth.
Investment suggestion: the reconstruction of valuation system brought about by the improvement of corporate governance structure. (1) on the one hand, the impact of expenses: after the divestiture of the manufacturing industry in 2019, taking into account the collection fees caused by the limited collection of its original accounts receivable, and the impact of the increase in the number of employees in 2019 (2) on the other hand, the net interest rate will return to the normal level of the industry after 2020. The net interest rate of the vocational education industry in 2017 and 2018 is about 22% and 12%, respectively. In 2019, the net interest rate is expected to be about 6%. With the rapid expansion of Heng enterprise education returning to normal, the rate of sales management expenses will gradually decline, and we expect to return to the net interest rate of more than 10% after 2020. Based on the influence of 19-year fees, we downgrade the 19-year net profit forecast of 80 million yuan, slightly lower the 20-year profit forecast of 248 million yuan, maintain the 21-year profit forecast of 353 million yuan, long-term optimistic about the investment value of Kaiyuan shares, maintain the "buy" rating.
Risk factors. Operation and management risks, the new campus is not as expected, and so on.
