The leader of private higher education in central China, colleges and universities accelerate their expansion.

The company is the leader of private general higher education in Central China. According to Frost Sullivan, the company ranks first in Central China and fourth in the country in terms of the total number of students enrolled in the 2017-2018 academic year. Since listing, the group has accelerated its expansion. At present, there are six universities, including Shangqiu College, Anyang College, Shangqiu College of Applied Science and Technology, Health College, Jingzhou College, and Yuanyang Campus of Anyang College. the Group is acquiring the rights and interests of the organizers of the balance College of Suzhou University of Science and Technology, and according to the release of Gao Chun, the first phase of the construction of Nanjing Gaochun Campus of balance College has entered the final acceptance stage and is scheduled to be put into use this year.

The number of students continues to grow, and the profitability of revenue increases.

After a sharp increase of 88.8% in undergraduate places last year, the number of 2023 Universe 2024 places in the Group's colleges and universities continued to grow by about 9600 this year, an increase of 27.6% over the same period last year, of which undergraduate and post-secondary places increased by about 14.5%, and junior college places increased by about 61.9%. We believe that the company has a strong alpha property and a strong endogenous growth momentum. The group's rapid expansion showed the scale effect, with both gross profit margin and net profit margin greatly improved, with gross profit margin increasing from 58.10% of FY18 to 63.15% of FY22, and net profit margin from 24.39% of FY18 to 42.18% of FY22. We are optimistic that the company will achieve further breakthroughs in profitability under the continued expansion. The new policy of Jiangsu Province has greatly relaxed the tuition fees of private colleges and universities, and the first phase of enrollment of Tianping College in Nanjing is expected to increase the group's income and profit margins.

Policy support for the integration of industry and education, reducing financing costs

On June 13, the National Development and Reform Commission and other departments jointly issued the implementation Plan for the Enhancement Action of Industry-Education Integration of Vocational Education (2023, 2025). It said that industry-education integration enterprises with good credit evaluation results will be given priority or convenience in listing financing, government financial support, industrial support policies, excellence recognition, government affairs management and other aspects. According to the company announcement, China Chunlai has reached a strategic cooperation with Bank of China Ltd., and Bank of China Ltd. will provide it with 2 billion yuan of credit support and other financial services. Shangqiu College and Industrial and Commercial Bank of China reached a loan agreement of 60 million yuan, and Jingzhou College and Everbright Bank signed a credit line agreement of 40 million yuan. Under the promotion of industry-education integration policy, the company's financing costs may be further reduced.

Profit forecast

The implementation plan for the growth of school places and the integration of industry and education is expected to raise the expectations of the vocational education industry. We believe that the vocational education industry is about to usher in a policy dividend, and the company, as the leader of private higher education in central China, is expected to give priority to benefit.At the same time, the company is actively expanding colleges and universities. the financing difficulty is reduced under the superimposed industry-education integration policy, and the alpha attribute is gradually revealed. We expect the company's revenue for the fiscal year 2023-2025 to be 1.59 pesos 1.34 billion respectively, the net profit from its parent to be 6.2kg 7.8xb 1.01 billion, and the earnings per share 0.52 won 0.65kg 0.84, corresponding to the closing price of HK $5.26 (HK $0.9111 to RMB0.9111) on August 2, 2023, and PE of 9.26x7.37pm 5.69X respectively. According to our profit forecast, the company's PE in 23 years is 9.26 times, but considering that the current valuation of the education industry is still relatively low, China Chunlai Alpha has a strong property, and its performance growth rate is higher than that of the industry. The net profit CAGR for the fiscal year 2018-2022 reached 46.76%, covering it for the first time and giving it a "overweight" rating.

Risk hint

The speed of campus construction is not as fast as expected; the landing of the policy is not as expected; the risk of financial support implementation.