The number of places enrolled in the new academic year is growing steadily: The number of places enrolled in the 2023/2024 academic year of various colleges and universities under the company continues to grow, with an increase of about 13,000 over the previous year, an increase of more than 16% over the previous year. Among them, undergraduate students increased by about 10% and college places increased by about 56%. The main reasons for the continued increase in the number of students include the country's continued expansion of the scale of higher and vocational education, the high quality of education in the company's schools, and the newly built campus to accommodate more students. The increase in the number of enrolled students is a prerequisite for the increase in the number of students enrolled in the company.

Mainly private undergraduate schools, the number of students is leading in the industry: the company's listing is based on Jiangxi University of Science and Technology and Guangdong Baiyun University, and later expanded the school layout through mergers and acquisitions. Currently, there are 8 higher vocational colleges, 4 secondary vocational colleges, and 2 international education institutions. At the same time, the company is also increasing the expansion of existing schools to increase the school's capacity to accommodate students. As of FY2022, the number of students enrolled in the company reached 304,000, leading the industry in student scale. Among them, 246,000 were higher vocational education students, accounting for 80.8%.

The transformation of schools into “for-profit” is progressing smoothly: According to the relevant provisions and implementing regulations of the “Private Education Promotion Law”, private colleges and universities can apply for conversion to for-profit private schools. Up to now, the company has submitted an application to choose to convert affiliated schools into for-profit businesses. Currently, schools in Jiangxi are progressing smoothly. Recently, six departments including the Sichuan Provincial Department of Education jointly issued the “Notice Concerning the Selection and Registration of Existing Private Colleges and Universities as For-Profit Private Schools”; eight departments including the Department of Education of the Inner Mongolia Autonomous Region issued a notice on issuing the “Administrative Measures for the Classification and Registration of Private Schools in the Inner Mongolia Autonomous Region (Revision)”; and made specific arrangements for private colleges and universities in their respective regions to choose to register as for-profit private schools. We expect more provinces to follow up and introduce relevant process guidelines.

Maintaining the “increase in holdings” rating, the target price is HK$9.50: As the number of new students enrolled by the company continues to grow, the number of students has increased to ensure steady growth in the company's performance. We expect the company's revenue for the 2023/2024 fiscal year to be 57.2/6.6 billion yuan, up 20.2% and 15.4% year on year, respectively, and core net profit of 20.3/2.34 billion yuan, respectively, up 13.0% and 15.2% year on year, respectively. We maintain the company's “increase in holdings” rating, with a target price of HK$9.50, corresponding to 10/9 times PE for fiscal year 2023/2024. The company maintains a dividend rate of about 40%, and the current stock price corresponds to a dividend yield of about 5% +.

Risk warning: Private education policy changes, new school year enrollment falls short of expectations, tuition fee increases fall short of expectations