The current situation of the company
Under the strategy of improving quality and cultivating quality, the teaching achievements of the group are highlighted, and the campus expansion plan is carried out in an orderly manner. According to the company announcement, by the end of June 2023, the company's Dalian College / Chengdu College / Guangdong College had been approved as national or provincial first-class undergraduate professional construction sites in 15-7-3, respectively; at present, the eighth phase of the expansion project of the company's Chengdu College has been capped and is scheduled to be put into use in the 24th academic year. We expect that this year, the campus capacity of the company will be expanded to 58000 beds, corresponding to a utilization rate of 91%, and the higher education business is expected to continue to grow steadily.
Comment
Core business: education and higher education business growth is steady. 1H23, the company achieved income of 918 million yuan, + 23.5% compared with the same period last year, mainly due to the high increase in higher education business and the export of educational resources. Among them, the income of higher education with academic qualifications was 749 million yuan, + 29% compared with the same period last year (thanks to the increase in the number of students and the average tuition fees per student), accounting for 82% of the income. By the end of June 2023, the number of students in the three schools of the group was 52800, compared with the same period last year. + 16%, + 16%, 23%, 24 school years, 19500 places in the three schools, + 14% compared with the same period last year. We expect higher education business to continue to grow steadily in the second half of 2023.
Two-wing business: the output of educational resources is growing brightly. 1H23Co1) Educational resources export business income from + 48.7% to 205 million yuan compared with the same period last year, mainly due to intelligent education platform, teaching content and experimental training room product income from + 74.6% to 51 million yuan year-on-year. During the period, the company iterated with meta-cosmic wisdom to maintain the future education platform, application software system development and other new wisdom education software products, actively empowering customer colleges and universities. At the same time, during the reporting period, the company upgraded a number of wisdom training rooms, such as self-driving, e-commerce big data and C language, and built 13 standardized professional courses and 218 level 1-5 systematic projects for 7 popular majors. 2) the income of the digital workshop is-93 to 2.1 million yuan compared with the same period last year, mainly due to a significant reduction in the number of offline engineers in the training base model built with the government instead of the group self-construction mode. 3) the income from continuing education business was-2% to 649 million yuan compared with the same period last year, and there were 0.913 million 2B/2C students during the reporting period.
The rise in profits was partly offset by higher tax rates. 1H23, the company recorded a gross profit margin of 50%, year-on-year + 3ppt, mainly due to economies of scale; the adjusted net profit was + 17% year-on-year to 272 million yuan, corresponding to the adjusted net profit rate of 30%. Taking into account that the company's effective tax rate may face an increase in tax relief, we expect the company's adjusted homing net profit to slow year-on-year growth in 2023.
Profit forecast and valuation
Taking into account that the impact of the transformation of the digital factory model remains to be digested, the 24-year revenue forecast for 23max is reduced by 4% to 1.77 billion yuan, and the 24-year adjusted return net profit forecast for 23 picks is reduced by 3% to 432 million yuan. Maintain an outperform industry rating; cut the target price by 17% to HK $4 (reducing the 2023 adjusted price-to-earnings ratio from 6 times to 5 times, taking into account the downside of the industry valuation hub). The current share price trades at 4 times 2023's adjusted price-to-earnings ratio, corresponding to 43% upside.
Risk
Enrollment falls short of expectations; market competition intensifies; policy changes in the education industry.