With revenue of 284 million yuan in 2021, two Kevin schools were spun off to start business transformation.
Kevin Education released the 21 Annual report on April 19. In 2021, the company achieved operating income of 284 million yuan, down 11.44% from the same period last year, mainly because the two schools no longer merged since September 21. In 21 years, the company reduced the cost of capital by reducing the scale of financing, the number of superimposed students continued to increase, and the net profit and loss narrowed to-121 million yuan (+ 6.92% yoy). As the school income was no longer consolidated after September, the actual value of net profit was lower than the predicted value of 1.88 million yuan. After the transformation, the company will be mainly engaged in school operation, quality education, vocational education, real estate leasing and other business. We believe that in the initial stage of the transformation, the profitability of each business is still uncertain, so it is no longer suitable to use PE valuation, but the value of the assets held by the company, such as school buildings and office buildings, is relatively stable and can continue to produce income, so it is adjusted to PB valuation. The company's 22-24 BPS is expected to be 3.93 BPS 3.99 PB 4.15 yuan, comparable to the company Wind consensus expected 22e PB average of 1.16. With reference to this PB level, the target price was lowered to 4.56 yuan, giving a "hold" rating.
The main business will be transferred to school operation and continue to promote quality education.
Affected by the regulations on the implementation of the Law of the people's Republic of China on the Promotion of civilian-run Education, the two schools are no longer included in the company's consolidated statements since September 21, so the company's revenue in the fourth quarter fell 81.75% year-on-year to 17.91 million yuan. The two schools completed the change of sponsors in March 22, and the company will continue to provide school venues and operational support services for the two schools. In the future, the company plans to provide operation management services for other similar schools to achieve light asset management output. At the same time, the company not only meets the needs of school quality education courses, but also promotes sports, art, science and technology training and camp education with "Kevin characteristics". We estimate that the revenue of the above two businesses is expected to reach about 200 million yuan in 2022.
Make use of high-quality production and education resources to explore vocational education with the mode of light assets
Relying on its state-owned background, the company actively integrates Haidian educational resources and industrial resources, and arranges the vocational education track in response to the national policy. On the educational side, the company explores to build a secondary industrial college with vocational colleges to introduce production into the school, and to explore and cooperate with enterprises to build an internship and training base at the industrial end. We believe that the above business model of industry-education integration has the characteristics of replicable expansion, and the company is expected to achieve business expansion through light-asset models such as industry-education integration, discipline co-construction and school-enterprise cooperation, so as to form a new main revenue.
Using the relative valuation method, the target price is lowered to 4.56 yuan, and the rating is downgraded to "hold".
We expect the company's school operation service income to reach 200 million yuan in 22 years, and with a slight increase in the number of students, the income from quality education is expected to increase slightly to about 30 million yuan. In terms of vocational education, we expect that the company will gradually expand school-enterprise cooperation based on the resources of relevant industries in Haidian District, and the income will be reflected in 22 years. In addition, we expect that after the company pays attention to the rental of commercial buildings and increases the occupancy rate, the rental income is expected to exceed 50 million yuan. As the company is in a period of transformation and adjustment, we use the PB valuation and estimate that the BPS for 22-24 is 3.93 BPS 3.99 plus 4.15 yuan, which is comparable to the company's Wind consensus expectation that the average 22e PB is 1.16, lowering the target price to 4.56 yuan (the previous value is 7.00 yuan) and giving a "hold" rating.
Risk tips: vocational education enrollment is less than expected; lack of teachers and core management personnel or loss of risk; real estate rental rate is lower than expected.
