The company's revenue growth in 2022 was steady, with full-caliber growth of 11.1% year on year, and net profit/adjusted net profit decreased by 33.6%/3.1% year on year. The number of students enrolled in the company reached 60,510/+7%, of which 44,622 were enrolled full time/-1.1%. In the future, along with the construction and implementation of new campuses in Hongshan and the College of Clinical Medicine, the company is expected to maintain a steady growth trend. The company's current price corresponds to the 2023 valuation of only 3xPE (based on CITIC Securities Research Department's forecast), and the company's 2022 dividend rate is as high as 8.2%, maintaining a “buy” rating.
Revenue growth is steady, and the profit side is under pressure due to the impact of the pandemic. 1) Revenue and profit: In 2022, the company's revenue was 625 million yuan/ +10.6%, and full-caliber revenue (plus Hongshan and the College of Clinical Medicine) was 860 million yuan/ +11.1%. Net profit/adjusted net profit was 236.331 million yuan, -33.6%/-3.1% YoY. 2) Costs and expenses: The company's gross margin decreased by 6.5 pcts to 58.9% in 2022. Sales/management/finance expense ratios were 1.3%/25.3%/2.5%, respectively, -1.3/+14/ -0.6pcts year-on-year. Other revenue fell 36.5% to $53 million, mainly due to a decline in government subsidies and a decline in the operating performance of the College of Clinical Medicine and Hongshan University. The operating loss of the College of Clinical Medicine and Hongshan University reached $16 million in 2022. 3) Dividends: The company plans to distribute a final dividend of HK6.56 cents per share, with a corresponding dividend payment rate of 40%. Based on the closing price on March 29, the dividend rate is 8.2%.
The enrollment situation is good, and the number of students enrolled continues to grow. Tuition revenue in 2022 was 571 million yuan/ +11.1%. The increase was mainly due to an increase in the number of students enrolled and average tuition fees, and accommodation income of 54 million yuan/ +6%. As of December 31, 2022, the number of students enrolled in the company reached 60,510/+7%, of which 44,622 were full-time students/-1.1%, and the number of continuing education students reached 15,888/-28.2%. Looking at schools, 1) The number of students enrolled in Xinhua University in 2022 was 3,9983 students/ +11.5%, of which 2,4095 were full-time students/ +1.50%. 2) The number of full-time students enrolled in Xinhua School in 2022 was 4708/+23.8%; 3) The number of students enrolled in the School of Clinical Medicine of Anhui Medical University reached 5993/+40.65% in 2021, adding 3 undergraduate majors in preventive medicine, intelligent medical engineering, and biomedical data science in 2022; 4) The number of students enrolled in Hongshan University in 2022 was 9826/ -3.85%. The first phase of the new campus construction project has been completed, and enrollment will begin in September 2023.
The quality of teaching has been steadily improving, and campus construction is progressing steadily. 1) The course construction has achieved remarkable results: The company's colleges and universities have added undergraduate majors such as fintech, artificial intelligence, preventive medicine, intelligent medical engineering, and biomedical data science this year, with a total of 4 first-class undergraduate majors at the national level and 14 first-class undergraduate majors at the provincial level. Among them, the School of Clinical Medicine has further enriched the variety of majors, and a five-year undergraduate major in preventive medicine has been added. 2) Steady improvement in teaching quality: In 2022, 11 courses at Xinhua University were selected for the “National Higher Education Smart Education” platform, and 1 course at the School of Clinical Medicine was approved by the Ministry of Education's 2022 Hongzhi Travel Assistance Program. 3) Increased investment in campus construction: In 2022, the company built and renovated 80 experimental training centers and 3 academic reporting centers, and upgraded the data center server at the same time to share data on multiple platforms such as teaching systems, academic engineering systems, and financial systems, laying the foundation for promoting the digital construction of education. In addition, the School of Clinical Medicine built a new experimental training room for medical testing, rehabilitation, etc., and a student apartment building were put into use.
Risk factors: Risks such as changes in industry policies, progress in transition falling short of expectations, and falling short of expectations in school enrolment growth.
Investment advice: Considering that the company's enrollment fell short of expectations, the company's 2023/24 core EPS forecast was lowered to 0.22/0.24 yuan (the original forecast was 0.24/0.28 yuan), and the 2025 core EPS forecast was added to 0.26 yuan.
Referring to the 2023 valuation of comparable companies (Neusoft Education 4 times PE, China Science and Technology Training 5.5 times PE, Wind agreed), and combined with the company's historical valuation level (3.5 x PE/ below 25% fraction), the company was given 4 times PE in 2023, corresponding to a target price of 1 HKD, to maintain a “buy” rating.