Neusoft Education announced its 2023 interim results, with revenue of 918 million yuan, an increase of 23.5% over the previous year, and adjusted net profit of 272 million yuan, an increase of 17.4% over the previous year. Revenue and profit growth are in line with our expectations. We believe that the sharp increase in the company's profit is mainly due to a sharp increase in the volume and price of students and tuition fees in the higher education sector. The education resource export business has experienced a sharp increase in orders due to an explosion in downstream demand, thus driving a high increase in revenue and profit.
Higher education business is growing steadily. In the first half of '23, Neusoft Education's higher education sector revenue reached 750 million yuan (up 29.1% year on year), accounting for 81.5% of total revenue. The increase in revenue from the higher education business stemmed from the continuous increase in the number of students enrolled and the average tuition fee level driven by the policy of running high-quality schools. In the 23rd academic year, the number of students enrolled in the company's three undergraduate colleges increased by 16.1% year-on-year to 53,000. In addition, various colleges and universities have expanded college enrollment to reduce the number of college students enrolled, while undergraduate tuition fees are higher, thus driving the Group's average student fee to increase by 11.1% year-on-year to 14,200 yuan in the first half of '23. By the first half of '23, the overall utilization rate of the Group had reached 91%, and construction of new campuses for colleges and universities in Chengdu had begun.
The project will provide a capacity of approximately 3,200 people in the 24th academic year to meet the continued expansion of the number of students enrolled in the future.
Downstream demand has exploded, and the scale of education resource export business continues to rise. Neusoft Education's education resource export business revenue reached 102 million yuan in the first half of '23, an increase of 48.7% over the previous year. Among them, the digital platform for smart education, teaching resources and content, and the smart training room achieved revenue of 55 million yuan, an increase of 75% over the previous year. The College of Industry and Professional Development achieved revenue of 44 million yuan, an increase of 24% over the previous year. We believe that with the policy support of the State Council's “Overall Layout Plan for the Construction of a Digital China” and the Ministry of Education's “Notice on Matters Relating to Expanding Investment in the Field of Education”, colleges and universities will increase their investment in the upgrading of teaching and research conditions, instruments and equipment, and the digital construction of schools. Neusoft Education, on the other hand, relies on IT solutions and service provider Neusoft Group. It exports teaching resources while deepening the integration of industry and education, fits the development direction of digital China, and helps the Group's education resource export business to be promoted rapidly.
Maintain buy ratings. We believe that with excellent school quality and reputation, Neusoft's higher education business will continue to grow steadily. The education resource export business will benefit from policy promotion and rapidly expand the scale of cooperative schools. We maintain our 23/24/25 net profit forecast of $457/531/587 million. Maintain the target price of HK$5.17 and maintain the buying rating.
Risk warning: Higher education sector enrollment and tuition fee increases fell short of expectations; asset light business expansion fell short of expectations.