The company's 3Q20 realized a net profit of 51.91 million yuan, an increase of 78%, mainly due to the gradual release of Ovia's profits. In addition, the company plans to acquire 27% of the shares of Hua Sheng Jingshi, the leader of school-enterprise cooperation in the field of ICT, to enter the field of vocational education and further expand the educational territory. Taking into account the broad prospects of the company's main business, at the same time, the new business is expected to form a certain degree of coordination with Ovia, and future performance can be expected. Maintain the company's 2020-22 EPS forecast of 0.52, 0.72, and 0.83 yuan, maintaining the "buy" rating.
The performance picked up in the third quarter, focusing on the profitability of the education business has improved significantly. 1) Revenue and profit: company 1-3Q realized revenue of 421 million yuan /-51.8%, net profit of 8424 million yuan / + 583%, deducting non-net profit of 5397 million yuan / + 33.56%. The non-recurrent profit and loss is mainly the gain of 25.1 million yuan from the sale of chemical assets. Of this total, 3Q20's revenue reached 219 million yuan /-31.1%, and the net profit was 5191 yuan / + 78.2%. The sharp increase in third-quarter results was mainly due to the release of Ovia profits. 2) profitability: in the first three quarters, the gross profit margin reached 47.3%. The gross profit margin of 3Q20 reached 55.9%/+25.5pcts. The sharp increase in gross profit margin is mainly due to the gradual divestiture of the chemical business with low gross margin. At the same time, the net profit margin in the first three quarters also increased 18.6pcts to 20.0%.
Ovia's performance was released quickly, and it is expected that the performance will remain bright in the fourth quarter. 1-3Q20 Ovia has an income of 219 million yuan / + 5.2%, a net profit of 8369 million yuan / + 144.4%, and a net profit margin of 38.3%/+21.8pcts. Among them, 3Q20 realized income of 131 million yuan / + 23.6%, net profit of 5959 million yuan / + 667.3%, and net profit margin of 45.5%/+38.1pcts. The sharp increase in Ovia profits is mainly due to the gradual release of demand affected by the epidemic in the first half of the year.
From the perspective of orders, Ovia signed a total of 1793 sales contracts in the first three quarters, with a total value of 262 million yuan.
Ovia is expected to continue to perform brightly in the fourth quarter.
It is proposed to acquire 27% stake in Huasheng Jingshi for 292 million yuan. The company announced that it plans to buy 27% of Huasheng Jingshi for 292 million yuan in cash, corresponding to a company valuation of 1.08 billion yuan, corresponding to a 19-year PE of 24.6 times. The transferor undertakes that Huasheng's net profit after tax in 2020, 2021, 2022 shall not be less than 7000,000,000,000 in 2022. After the completion of the equity transfer, Guoxin Culture will become the second largest shareholder of Huasheng Jingshi, with the largest shareholder Zhang Yong holding 35%.
Hua Sheng Jingshi is the leader of school-enterprise cooperation in subdivided fields. Huasheng Jingshi is an one-stop industry-education integration platform, specializing in ICT and intelligent manufacturing, providing universities with practical teaching solutions, educational technology products, teaching resources development and other products and enterprise engineers resident, international engineering education professional certification consulting, international education and other services, and is one of the leaders of school-enterprise cooperation in the field of ICT. At present, there are 500 cooperative colleges and 170 deep cooperative colleges (153 at home and 17 abroad), serving more than 55000 students. Huasheng Jingshi shareholders include Dachen Venture Capital, New Dragon vein Holdings and other well-known investment institutions. In 2019, Huasheng realized an income of 354 million yuan and a net profit of 43.97 million yuan.
In the long run, the main business of educational informatization has a broad prospect, marching into vocational education to deepen the layout of the field of education. 2) if the acquisition of Huasheng Jingshi is completed, it will help the company to enter the vocational education track with a wide market, expand the layout of the education sector, and give full play to its role as the only listed education company under the central enterprise Guoxin Group.
Risk factors: acquisition progress is not as expected, retained fluorine chemical assets performance downside risks, education recording industry competition leads to downward profit margins, rising human resources costs and other risks.