Core points:
South China's leading private education group operates three schools with more than 40,000 students. The company currently operates Huali College (undergraduate independent college), Huali Vocational College (junior college) and Huali technician College (Senior technician). The total number of students is more than 40,000. In 2018, the number of students and private vocational education service institutions in South China ranked second, and private diploma higher education service institutions ranked fourth. At present, the group offers 90 undergraduate, junior college and vocational training majors, which are guided by the practicality of the workplace to ensure that the employment rate of group students is about 95%. The group adopts centralized management to ensure the stability of multi-campus operation and the feasibility of subsequent expansion.
The endogenous expansion is stable and the visibility is high, and the flexibility of the expected contribution of conversion + capital upgrading + M & An is expected. In terms of endogenous expansion, the long-term planning of the group's three campuses has a total student capacity of 80,000. At present, only 40,000 students still have a lot of room for improvement. ① Huali College: the medium-term campus capacity is expected to reach 25000, with 17000 students currently enrolled. It is expected to maintain an average growth of 200-3000 in the coming year, and tuition fees for freshmen will increase by 10% every two years. In addition, it will pay 17% brand management fee every year. Considering the policy that drives independent colleges to accelerate decoupling, it is expected to contribute to performance flexibility. ② Huali Vocational College: currently there are 14000 students in Zengcheng Campus, benefiting from the completion of the construction of Yunfu Campus and the landing of Jiangmen Campus in the next two years, the number of new students is expected to be about 1000 and 3000 next year and the year after next; in addition, the company has completed some majors (about 1400), which is expected to achieve more majors and students in the long term, and extend the study time to ensure performance growth. ③ Huali technician College: it currently has 8600 students. After landing in Yunfu and Jiangmen campuses, it is expected that 2000 new students will be added next year, and Jiangmen Campus will begin to apply for college licenses. In terms of extension, considering the accelerated decoupling of independent colleges is expected to thicken the pool of potential M & A targets, and the epitaxial layout is worth looking forward to.
At the right time and in the right place: the gross enrollment rate of higher education in Guangdong Province has entered the fast lane, and there is a sufficient demand for talents in the Dawan area.
In 2018, the gross enrollment rate of higher education in Guangdong Province was 42.4%, which was lower than the national average of 48.1%. The development of higher education industry was accelerated in 2019, and the gross enrollment rate increased by 4% in 2020.
In addition, with the industrial agglomeration in the Greater Bay area, colleges and universities are expected to provide targeted and practical professional settings to ensure the quality of students' employment. The improvement of the enrollment rate of regional higher education lays the foundation for the growth of enrollment scale, expands the entrance of students, and the industrial agglomeration in the Bay area establishes the advantage of the combination of production and finance, and solves the problem of student export.
Profit forecast and valuation: we expect the company's return net profit from 2020 to 2022 to be RMB 383,000,000 yuan, corresponding to PE 12.3pm 9.6pm 7.6 times. Combined with the industry average valuation and considering the company's growth expectations, the company will be given 20 times PE in 2020, corresponding to 62% share price space, covering for the first time and highly recommended rating.
Risk hint: policy risk, the number of enrollment is not up to expectations, the expansion of the campus is not up to expectations, and the progress of upgrading is slow.