The company's 1H23 achieved revenue/adjusted net profit of 918/272 million yuan, +23.5%/+17.4% year-on-year. The “one, two wings” business continued its steady growth trend. Among them, the company's higher education business maintained rapid growth of 29.1%, and the asset-light education resource export business increased by 48.7% year-on-year. Considering that the company's “integrated” business campus capacity still has room to grow in the future, asset-light business cooperation projects are progressing steadily, and the education resource export business product matrix continues to be enriched, driving business growth. Maintain a “buy” rating.
The business continued its steady growth trend, with revenue increasing 23.5% year over year. 1) Revenue and profit: 1H23 achieved revenue of 918 million yuan/ +23.5%, net profit of 274 million yuan/ +17.6%, adjusted net profit of 272 million yuan/ +17.4%. The adjusted net profit margin decreased by 1.6 pcts to 29.6%. 2) Costs and expenses:
The company's gross margin increased by 3.0 pcts to 50.0% year on year. The sales/management/R&D expense ratio was slightly optimized on the basis of maintaining a high increase in revenue. They were 2.3%/8.2%/2.2%, respectively, and -0.2/-1.4/-0.9 pcts year on year. 3) Cash and liabilities: 1H23 Due to investment in campus expansion, capital expenditure was $286 million. As a result, cash and cash equivalents at the end of the period decreased by $328 million to $856 million compared to the beginning of the year. As of 1H23, the company's short-term loans were 460 million yuan, long-term loans were 2.03 billion yuan, and the average loan interest rate was 4.61% /-0.29pct.
Higher education: The number of students continues to grow, and future campus expansion supports room for growth. 1H23's higher education business revenue reached 749 million yuan/ +29.1%, of which tuition fees/accommodation/telecommunication equipment rental revenue was 69/0.58/01 million yuan, respectively, +30.2%/+20.2%/-60.0%. The number of students enrolled in the first half of the year increased 16.1% year on year to 52,819. By school, as of 1H23, the number of students enrolled in schools in Dalian/Chengdu/Guangdong was 18598/20687/13534, respectively, +8.6%/+28.0%/+10.3% over the same period. Looking forward to the future: The total enrollment quota for the 2023/24 academic year was 19493/ +13.8%. Looking at academic qualifications, the number of undergraduate/college/college graduate students was 12220/1351/5922, respectively, +3.4%/+59.7%/+32.8% over the same period. There was a significant increase in the number of undergraduate and junior college students. On the tuition fee side, the tuition fees for colleges around the world for the 2023/24 academic year remained at the 2022/23 level. Tuition fees for undergraduate, college, and junior college students in Dalian were 2.8-3.4/28,000 yuan, respectively, and 1.8-2/1.8-1.9/1.8-19,000 yuan for undergraduate, junior college students in Chengdu, respectively. Tuition fees for undergraduate and junior college students at Guangdong University are 28-32,000 yuan. In terms of capacity, the number of beds in the three schools in 1H23 is the same as at the beginning of the year, but the main project to expand student housing in the 8th phase of Chengdu University has already been capped. It is expected that 3,200 to 2,088 beds will be provided in the 2023/24 academic year to solve the problem that the campus utilization rate exceeds 100% due to the increase in the number of places in Chengdu University. As of 1H23, the campus utilization rate of Guangdong College/Dalian University of the company was 86.5%/75.8% respectively. Campus expansion provides strong support and good space for future quota growth.
Asset light: Continuing education business has been transformed online, and education resource export business has increased rapidly. 1) Continuing education and training business: 1H23's continuing education service business achieved revenue of 65 million yuan/ -1.9%. Among them, income from continuing education with academic qualifications was 34 million yuan/ -10.5%, and the number of enrolled students was -47.5% year-on-year to 5293.
2C short-term training revenue fell 18.2% year on year to 118 million yuan, enrolling 13,000 students/ +71.7%. The increase in the number of students enrolled but the decline in revenue was mainly due to the company's transformation of the C-side training business from offline to online, driving revenue growth through scale. 2B training business revenue was +140% year-on-year to 112 million yuan. A total of 60 projects/+21 projects were carried out in the first half of the year, covering 9,000 students; 2) Education resource export business: 1H23's education resources business achieved revenue of 102 million yuan/ +48.7%. Among them, professional co-construction business revenue reached 44 million yuan/ +24%, 60 cooperative institutions, 174 projects, covering 20,529 students/ +14%.
Revenue from smart education platforms and experimental training room solutions reached 51 million, +75% over the same period last year. In terms of digital platforms for smart education, the company launched the Metaverse Smart Rehabilitation Future Education Platform and Neusoft Smart Training System series software in the first half of the year; in terms of teaching resources and content, the company updated 28 original standardized professional courses and created 13 new standardized professional courses; in terms of training rooms, the company developed three new laboratory products (driverless driving training room, e-commerce big data training room, software development comprehensive training room), further enriching the company's education resource output business product matrix.
Risk factors: risks such as industry policy changes; company tuition fee increases falling short of expectations; company enrollment falling short of expectations; asset-light business development falling short of expectations; and progress in building new campuses falling short of expectations.