Core viewpoints
The growth rate of this specialty recovers and the growth path is clear. The company's revenue and person-to-person growth reached an inflection point, with 19/20H1 revenue reaching 394 million, a year-on-year growth of 15.9% (higher than the 11% increase in the 19th academic year). The number of students in school was 36,686, 37220, 4034 (original). Among them: undergraduate growth is steady, 19/20H1 income yoy+28.7%, person-time yoy+17.4%, after the landing enrollment plan is expected to open. College under the promotion of higher vocational enrollment expansion policy growth recovery, 1920-year income yoy+9.7% (previous value-0.18%), person-time yoy+8.8% (previous value-2.2%). Growth path is clear, continue to break through the ceiling, short-and medium-term: Zengcheng campus (utilization rate 93.1%) expansion plan and Yunfu campus capacity improvement (utilization rate of 25%-over 50% of the new school year). Long-term: Jiangmen new campus breaks the undergraduate ceiling.
The industry has continuous positive policies and excellent medium-and short-term growth. The conversion of independent colleges has been accelerated, and the Ministry of Education requires all independent colleges to work out the conversion work plan by the end of 2020. Huali College paid a management fee of 0.42 trillion yuan for the management of its alma mater in the 17-18 academic year, which will greatly increase the gross profit of the group. The expansion of higher vocational education continues to benefit. In 19 years, the enrollment of higher vocational education increased by 1 million, and Huali Vocational College expanded its enrollment by 1100 students. Huali is expected to continue to benefit from the expansion of enrollment by 2 million this year and next.
The new campus is the deterministic growth point in the future. Jiangmen has the advantages of location and industry of Guangdong, Hong Kong and Macao. There are only 5 colleges and universities in the city (1 private). In May 2020, Huali cooperated with Jiangmen local government to set up a new undergraduate campus, forming an admission score gradient with local colleges and universities. attract students with different scores to apply for the examination. The degree is sufficient, and the major meets the local demand. The new campus is expected to provide more than 30,000 undergraduate degrees (including Zengcheng). The professional direction is set to match the "marine power" and other strategies, so as to seize the dividend period of industrial transformation.
Financial forecasts and investment suggestions
Industry policy dividends, medium-and short-term existing junior college enough space, long-term junior college to undergraduate and Jiangmen new campus development potential is expected. We forecast that the annual operating income from 2020 to 2022E will be 783 million, 892 million, respectively. Using the comparable company valuation method, we select the higher education company New higher Education, China Science and Technology, and Zhonghui Group as comparable companies. The average PE of 2020E is 17x, and we forecast that the net profit of Huali University in fiscal year 2020 is 256 million yuan, corresponding to 4.366 billion yuan, corresponding to 3.64 yuan per share (RMB), that is, HK $4.07, giving a "buy" rating.
Risk hint
The risk of the transfer of independent colleges and the poor enrollment of Yunfu and Jiangmen campuses