Core point of view: the valuation of the vocational education sector has been significantly suppressed due to the unified pessimism of the market on the policy issues of the education sector. The actual situation is significantly better than the market perception, when the specific school selection and landing, the company valuation is expected to usher in a significant revaluation.

Cover for the first time, giving a "buy" rating. From the perspective of the industry, we believe that there is a systematic undervaluation of the vocational education sector; from the perspective of individual stocks, we believe that the new higher education group has excellent governance, a higher dividend ratio, and a reasonable positioning-- "excellent public utility stock attributes". In line with the stock selection criteria of reverse investors. We estimate that the revenue of New higher Education Group in 23-25 will be RMB 2.667, 2.978 billion yuan, a growth rate of 10%, a net profit of RMB 690 / 759, a growth rate of RMB 835 million, a growth rate of 11%, and a dividend rate of 9.9%, 10.9%, 12.0% and a "Buy" rating for the first time, corresponding to the dividend payment rate of PE 5.1, 4.6x4.2, and 10.9%.

At present, the core variable affecting valuation is policy, the direction is clear, and it will take time to land. Although the K12 education policy has undergone great changes before, the direction of the national vocational education policy is relatively clear and positive-private colleges and universities can independently choose profit and obtain investment income. Since 2019, the measures for the implementation of classified registration of private schools in various provinces have been gradually introduced, and there are no obstacles at the current policy level. It is only necessary to select and land each school according to specific provincial regulations. We believe that the uncertainty facing the current sector is not a matter of "0" and "1", but only a matter of the accuracy of time and performance expectations.

The company is an excellent management company in the private vocational education group, with sound historical operation and excellent financial indicators. The New higher Education Group has set up eight private higher education schools in seven provinces across the country. The company's income from 2014 to 2022 was CAGR 32.08%, and its net profit was CAGR 28.91%. Except for 2020, the company's net interest rate is more than 28%, and ROE has been between 12% and 19% in recent years. Since listing, the dividend payout rate has not been less than 27%, and has risen to about 50% in the past two years. We believe that the company's better corporate governance and higher dividend rate are the favorable basis for reverse layout.

Under the current valuation, growth is an additional item, the company still has growth, the source of students is stable, and there is still room for improvement in tuition fees. The high growth of the company's past performance is mainly due to the increase in the number of students brought about by mergers and acquisitions and the increase in tuition and accommodation fees. In the next 10 years, the source of students mainly comes from the 05-15 age group, and the enrollment rate has room for continuous improvement, and the enrollment can maintain a proper growth. In terms of average student fees, there is still room for a significant increase in tuition and accommodation fees compared with other private colleges and universities. we expect that in the next few years, the growth rate of average student fees will exceed the growth rate of the number of students.

Risk hints: (1) the risk of changes in policy and legal supervision; (2) the risk of the progress and results of the selection and landing; (3) the risk that the dividend payment rate can not be maintained; (4) the risk of fluctuation in teaching quality; (5) the risk of lagging behind or not updating the use of information.