Steady endogenous growth and considerable enrollment in the new academic year; optimize the professional layout to keep pace with the needs of industrial upgrading
Zhonghui Group FY23 achieved a cumulative income of 1.46 billion yuan (yoy+16.1%) in the first three quarters, which is 75% of our FY23 forecast for the whole year, which is in line with expectations. The total number of students in school increased by 11.6% year on year to 87068, a record high. Thanks to years of good accumulation in running a school and a high level of employment, the company's FY24 enrollment increased by 19.4% compared with the same period last year, with a steady endogenous growth rate. The company actively responds to the policy of industry-education integration, cooperates with a number of leading enterprises to build industrial colleges, and closely follows the industrial demand to increase the professional layout of new engineering and health medicine. We maintain the FY23/FY24/FY25 homing net profit forecast of RMB 6981,755 million respectively, lowering WACC from 16.39% to 15.80% according to market changes, with a target price of HK $6.31 based on DCF (sustainable growth rate of 1%, Hong Kong dollar to RMB 0.92). Maintain "buy".
The number of enrollment in the new school year will increase by 19.4%, and high-quality schools will lead to a high employment rate.
According to the announcement, as of 3QFY23 (May 23), the number of full-time students in Zhonghui Group increased by 11.6% to 87068 compared with the same period last year, while the number of students enrolled in the 2023 Universe 2024 school year increased by 19.4%, an all-time high. We believe that the steady growth of student size is mainly due to the company's high-quality reputation for running a school and a good level of employment: the company's Chinese Business College was ranked 10th in the ranking of soft Chinese universities in 23 years; the employment rate of graduates from the class of 22 of the Chinese Business Vocational College reached 97.8%, and the admission rate reached 61.5%. Sichuan City Vocational College has ranked first in Sichuan Province in terms of competitiveness of China's higher vocational colleges for three consecutive years, with the first employment rate of graduates of the class of 22 reaching 88.8%.
Take advantage of the east wind of vocational education policy to continuously deepen the integration of industry and education, and optimize the layout of new engineering, health medicine and other specialties.
On June 8, the National Development and Reform Commission and other departments issued the implementation Plan for the Enhancement of the Integration of Industry and Education in Vocational Education (2023 in 2025), calling for deepening the integration of industry and education and school-enterprise cooperation. Following the guidelines of national policy, the company has cooperated with a number of leading enterprises to build industrial colleges such as medical beauty, cross-border e-commerce, animation games, intelligent health and pension. In terms of professional layout, around the new engineering and health medicine, the company continues to set up specialties that meet the needs of policy guidance and industrial upgrading, and has trained about 19400 students in artificial intelligence, information technology, intelligent manufacturing and other related majors. nursing, health care, home economics, nurturing and other related majors reached about 11800 students.
Target price of HK $6.31 to maintain "buy"
We maintain the FY23/FY24/FY25 homing net profit forecast of 6.32 RMB 6981,755 million respectively, lowering WACC from 16.39% to 15.80% according to market changes, with a target price of HK $6.31 based on DCF (sustainable growth rate of 1%, HK $0.92 to RMB; previous value: HK $6.40).
Maintain "buy".
Risk tips: the growth of the size of students is not as expected, the control of tuition fees by the competent authorities, and the slow progress of for-profit registration.