Incident: The company's revenue increased by 23.49% in 2023H1, and adjusted net profit increased by 17.4%. The company's 2023H1 revenue increased by 23.49% to 918 million yuan, net profit attributable to income was 274 million yuan, and adjusted net profit increased 17.4% to 272 million yuan (adjusted for equity incentive expenses, listing expenses, and exchange profit and loss). The company's gross margin increased by 3 PCts to 50.00% in 2023H1; the sales expenses ratio decreased by 0.25 PCts to 2.26%; and the management expenses ratio increased by 1.89 PCTs to 10.37%, mainly due to an increase in employee compensation and depreciation expenses for office buildings.
Full-time higher education: There is still room for endogenous value and price, and the standard of running schools is outstanding. 2023H1's full-time higher education business revenue increased by 29.1% to 749 million yuan. In terms of numbers, the number of full-time students enrolled in the company's three schools increased by 16% to 52,800; in terms of price, the company's tuition fees have remained stable since the epidemic in 2021. The average tuition fee for students enrolled in the 2022/2023 school year was 23,900 yuan. It is expected that tuition fees will increase after completing the transfer of for-profit schools. The company's academic quality is excellent. The admission scores of all schools in the 2023/2024 academic year were significantly higher than the provincial undergraduate control line. Among them: the highest application score for the physics group of Dalian University was 108 points higher than the undergraduate control line of Liaoning Province; the highest application score for science at Chengdu University was 96 points higher than the Sichuan undergraduate control line; the highest application score for the physics group of Guangdong University was 77 points higher than the undergraduate control line of Guangdong Province. The company's colleges have been approved for a total of 8 national/17 provincial first-class undergraduate construction sites, with excellent academic standards.
Two-wing business: 2023H1 continues to grow, and the output of educational resources opens up room for growth. The company's two-wing business includes 1) continuing education services, 2) education resources and digital workshops. The company's 2023H1 continuing education service revenue also fell 1.9% to 65 million yuan, mainly due to the transformation of the 2C business from offline to online. Business performance is still at a good level. During the reporting period, the company implemented more than 60 2B trainings, covering nearly 9,000 students, 13,000 students, and a recommended employment rate of 80%. The education resources business continued to grow rapidly. In 2023, revenue increased by 48.7% to 102 million yuan. The number of 2023H1 colleges cooperating with the College of Professional Construction and Industry reached 60, of which 37 were undergraduate colleges, serving 20,529 students. On the other hand, the company's 2023H1 digital factory business revenue was about 2.1 million yuan, down 92.6% from the same period last year. Mainly due to the digital factory model transformation, self-developed online training project resources replaced project training with self-developed online training project resources, while digital factory revenue mainly comes from engineer services, and the reduction in the number of engineers has led to a decline in revenue.
Integrated two-wing development, digitalization empowers business upgrading. In terms of the full-time higher education business, the company has optimized and adjusted its professional layout, strengthened its professional leadership, and ensured continuous development. At the end of February 2023, the main student apartment project of the Chengdu University Phase 8 Project was capped and is scheduled to be put into use in the 2023/2024 academic year. It is expected to increase the number of beds by about 3,200. In terms of the two-wing business, the company combines more than 20 years of experience in running schools in the IT field and practical experience in the IT industry to create a comprehensive digital education product matrix based on the 4S service model.
In the first half of 2023, a number of smart training rooms were launched and upgraded, driverless driving training rooms, e-commerce big data training rooms were released, and comprehensive software development training rooms were launched.
Investment advice. According to the company's 2023 interim report, we adjusted the company's net profit forecast for 2023-2025 to 4.4/5.2/580 million yuan, an increase of 13.2%/18.8%/10.9%, corresponding to EPS 0.68/0.80/0.89 yuan, corresponding to EPS of 0.68/0.80/0.89 yuan, and the current price corresponds to 3/3/3 times PE, maintaining the “buy” rating.
Risk warning: Profitability falls short of expectations during business development; enrollment quota growth falls short of expectations, etc.