Main points of investment
Dashan Education Group, a leading primary and secondary school after-school education service provider in Henan Province, is mainly engaged in providing after-school education services in Zhengzhou, with a history dating back to 1998. The company mainly provides OMO after-school education services for primary and secondary schools to supplement the school's regular English, Chinese, math and other courses. By the end of 2019, the company operated 80 education centers with a total of 1012 teachers and 63000 students this year. In terms of enrollment in 2019, Dashan Education is the largest provider of after-school education services in primary and secondary schools in Henan Province. In terms of revenue in 2019, Dashan Education Group is the second largest provider of after-school education services in primary and secondary schools in Henan. The market share of all this type of service providers in Henan is about 2.5%.
Investors are advised to "apply cautiously": as of December 31, 2019, the company's operating income was 384 million yuan and net profit was 48.97 million yuan. Based on the offering price of HK $1.25,1.75 and the median CNYHKD exchange rate on July 1, 2020, the total share capital of the company after issuing new shares will be 800 million shares, with a total market capitalization of HK $10,14 and HK $1.2 billion, respectively, with a corresponding PE of 18.6,26.0 and 22.3 times for 2019. Compared with similar companies, the valuation of the company is in the middle level, the business scale is small, but there is a broad space for development in Henan, and the company has a leading position and brand advantage in the training market in Henan. Investors are advised to "apply carefully".
Risk hints: 1) the competition in China's education industry is fierce, and the company may not be able to maintain the steady increase in tuition fees and the supply of students; 2) the company's expansion process is not up to expectations; 3) the number of qualified teachers hired and retained may fall short of expectations; 4) changes in education policy; 5) risks in the structure of VIE.
