Zhonghui Group (00382.HK) announced on July 26 the first three quarters of fiscal year 2023 (The nine months ended May 31, 2023) Business progress report. Revenue increased 16.1% year on year to about 1.46 billion yuan (RMB, same below), and gross profit increased 16.3% year on year to about 740 million yuan. Among them, higher vocational education grew steadily, with a year-on-year increase of 15.3% to about 1.23 billion yuan. Secondary vocational education increased by 29.6% year on year to about 180 million yuan. Management maintained the revenue guideline for the full year of fiscal year 2023 at around 1.9 billion yuan.

After the release of the business progress report, Huatai Securities is currently divided by Huatai Securities,Sino-Thai International, Dongying Securities, CCB InternationalwithXinhua Huifu gave the latest rating to Zhonghui Group. Among them:

Huatai Securities: Maintains Zhonghui Group's “buy” rating, with a target price of HK$6.31.

Zhongtai International: Maintaining the “buy” rating of Zhonghui Group, with a target price of HK$5.44.

Dongying Securities: Maintaining Zhonghui Group's “buy” rating, with a target price of HK$3.80.

CCB International: Maintains CIC Group's “outperform the market” rating, with a target price of HK$3.40.

Xinhua Huifu: Updating Zhonghui Group indicates that it has potential for future growth.

Huatai Securities: Maintaining Zhonghui Group's “buy” rating, the company's endogenous growth rate is steady

l The vocational education policy of Dongfeng continues to deepen the integration of industry and education

l Income accounts for three-fourths of the target number of students reaching a record high

l A high level of employment promotes steady growth in enrollment quotas

(1) Maintaining Zhonghui Group's “buy” rating, with a target price of HK$6.31.

(2) The first three quarters of fiscal year 2023 achieved cumulative revenue of 1.46 billion yuan, an increase of 16.1% over the previous year, in line with expectations.

(3) The total number of students enrolled increased 11.6% year on year to 87,068, reaching a new high.

(4) Thanks to years of good schooling and a high level of employment, the company's enrollment quota for the new school year increased 19.4% year-on-year, and the endogenous growth rate was steady.

(5) The company responded positively to the maternity and education integration policy, cooperated with many leading enterprises to build industrial colleges, and closely followed industry demand to increase the layout of new engineering and health medicine majors.

(6) Maintain the FY23/FY24/FY25 net profit forecast at 632/698/755 million yuan respectively. WACC was lowered from 16.39% to 15.80% according to market changes, and the target price based on DCF was HK$6.31 (previous value: HK$6.40). Maintain a “buy” rating.

Sino-Thai International: Maintaining Zhonghui Group”buy”Rating, raising target price to HK$5.44

l The number of students exceeded expectations and raised the target price

l The number of students enrolled and income are rising steadily

l Continue to promote the employment rate of industrial colleges

(1) Zhonghui Group's revenue for the first three quarters of FY23 increased 16.1% year-on-year to 1.46 billion yuan. Revenue for the first three quarters accounted for 76.1% of the bank's projected annual revenue, in line with expectations.

(2) The gross margin was 50.4%, thanks to increased campus utilization and cost control measures.

(3) The total number of students enrolled was 87,000, an increase of 11.6% over the previous year.

(4) The enrollment quotas for Huashang University and Huashang Vocational College for the 2023/24 academic year were 12,000 and 11,000 respectively, while the enrollment quota for Sichuan City Vocational College was 12,000. The overall number of places was higher than expected.

(5) According to market orientation and market demand, the company and leading industry companies set up school-enterprise cooperation projects and industrial colleges to cultivate applied talents for the community.

(6) As the number of students by the end of May exceeded expectations, the FY23E/FY24E income forecast was increased by 1.9%/2.3% respectively; the target price valuation was rolled to FY24E, maintaining a forward-looking price-earnings ratio of 7 times, and the target price was raised to HK$5.44.

Dongying Securities updates research report to maintain Zhonghui Group”buy”Rating, target price HK$3.80

l Achieved steady growth in the first three quarters of fiscal year 2023

l The employment rate of graduates from our schools is very strong

l Promote an increase in the number of students and tuition fees in the future

(1) Achieve steady growth without new mergers and acquisitions

Dongying believes that this increase is mainly driven by an organic increase in enrollment and a gradual increase in tuition fees at existing schools. More students are expected to enroll in the next school year. The bank said that Zhonghui is building more teaching and accommodation facilities to meet the latest enrollment plans.

(2) The strong graduate employment rate of Zhonghui schools lays a solid foundation for future student enrollment and tuition fee growth.

Among them, the employment rates of 2022 graduates from Huashang Vocational College and Sichuan City Vocational College are at a very high level, at 97.8% and 88.8%, respectively. Zhonghui is deeply involved in the integration of industry and education, cultivating high-quality talents who keep pace with the times in the fields of artificial intelligence, information technology, intelligent manufacturing, and healthcare.

(3) Maintain the “buy” rating and target price of HK$3.80 unchanged.

According to the bank, the new target price represents 5.5 times the price-earnings ratio of FY23/24E. The bank reduced CIC FY23/24E's earnings per share (in HKD) by 4.1%, mainly to reflect the dilution effect of stock dividends and the impact of the recent devaluation of RMB. Meanwhile, FY23/24E's net profit forecast was slightly raised, as the bank expects Zhonghui to report higher new growth in the next school year.

CCB International: Maintaining Zhonghui Group”Outperform the market”Rating, target price of HK$3.40, optimistic about long-term growth prospects 

(1) Business growth in the first three quarters of FY23 is roughly in line with expectations

Zhonghui's revenue for the first three quarters of FY23 (September 2022 to May 2023) increased 16.1% year-on-year to RMB 1.46 billion, in line with CCB's expectations. Considering Zhonghui's financial situation, this means that the group was able to achieve an average increase in tuition fees of about 4%. The bank believes this is due to the growth of Zhonghui students and the strengthening of the professional curriculum portfolio.

(2) A steady increase in the number of students is expected in the 23/24 school year

The enrollment quota for undergraduate and higher vocational colleges in the Zhonghui 23/24 academic year increased by 19.4% year-on-year, reaching the highest level in history. The bank believes that the increase in enrollment is proof of Zhonghui's strong brand recognition, shows that its expansion in previous years is paying off, and lays the foundation for a steady increase in the number of students in the future. In addition to the increase in enrollment quotas, the bank expects CITIC to invest more in enrollment, talent recruitment, and professional curriculum development. Meanwhile, it is anticipated that Zhonghui may increase capital expenditure to expand beds and upgrade facilities to accommodate more students. As a result, the bank expects Zhonghui FY24's revenue to grow by 12%, and gross margin and EBIT profit margins to remain stable.

(3) Maintain a “outperform the market” rating

After considering the increase in the number of students but more careful profit margin assumptions, the bank fine-tuned the profit forecast for FY23/24 by -1%/0%. CCB maintained a positive attitude on the long-term growth prospects of Zhonghui because the vocational education sector, which continues to develop, is strongly supported by the government.

Xinhua Huifu Express updates Zhonghui Group, operating data for the first three quarters meet expectations

Xinhua Huifu says Zhonghui Group (0382.HK) has future growth potential: based on

(1) Higher tuition potential;

(2) Providing more majors and having the ability to accept more students;

(3) Steady organic growth.

The current price-earnings ratio of Zhonghui Group's FY23 is 3.91 times, and the net cash share capital ratio is 16.48%. The dividend rate is expected to remain at the current level of around 30%. Investors are advised to keep an eye on its development.