It is estimated that FY23's revenue of 2.3 billion dollars will increase by 160%, and net profit after adjustment of 360 million yuan will increase by 260%
The company issued a positive performance announcement. It is estimated that FY23 (2022/9/1-2023/8/31) revenue of about 2.3 billion yuan will increase 160%; net profit of 330 million yuan, a 240% increase; and net profit of 360 million yuan after adjustment, an increase of 260%.
The increase in performance is mainly due to ① the sharp increase in the number of high schools; ② the company adjusted its business to provide comprehensive education services to tens of thousands of school-age students, including Guoxue/technology/sports/art, etc.; ③ the company operated an online campus shopping mall and integrated supply chain resources, and the sales revenue of related products increased dramatically.
We are optimistic that the company will quickly optimize its organizational structure and enrich revenue types after the policy; previously, the company announced that it would provide comprehensive education services for 100,000 students in 50 schools in the 23/24 school year, and the number of students enrolled increased by 21.6%; the number of new high school students enrolled in the new school year increased by 41% by 19,000, and the number of high school students enrolled by 37,000 increased by 44%.
Continue to promote repurchase plans, demonstrating confidence in development
On July 20, '23, the company announced that it would use up to HK$200 million to repurchase shares on the open market from time to time. As of the end of September, it had repurchased about 17.64 million shares and spent a total of about HK$45.74 million. In addition, Mr. Luo, the executive director, chairman and CEO of the company, increased his holdings by 679,000 shares in early July. After increasing his holdings, he owned a total of 41.8% of the company's issued shares. The repurchase plan and the increase in executive holdings fully reflect the company's directors' and management's confidence in the company's long-term growth. Subsequent repurchases are expected to further boost market performance.
Independent for-profit high schools are gradually returning to the list. In addition to the layout in the core region of Sichuan, the company's schools covered 33 cities in Inner Mongolia, Shandong, Henan, Guizhou, Jiangxi, Zhejiang, Yunnan, Anhui, Guangxi, Guangdong, Chongqing and Hubei, and provided comprehensive education services; at the end of FY23H1, the company also provided extracurricular courses such as music, art, sports and language to training centers.
In the future, the company plans to focus on for-profit high school business and provide comprehensive operating services, including an online campus mall, integrated logistics services, arts and sports guidance, international education, study abroad consulting, and study tours, etc.; since the company's transformation, it has accelerated business adjustments and high school development, continuously optimized the operating structure, independent high schools with independent operating licenses from integrated schools, and by the end of FY23H1, it has successfully released 4 profitable middle schools with independent operating licenses, and all have been consolidated; at the same time, the enrollment scale of the affected elementary school businesses has been gradually reduced. The utilization rate of schools may continue to increase in the next few years, and the scale of business and performance is expected to grow rapidly.
Adjust profit forecasts and maintain a “buy” rating.
The company is a leading comprehensive education service operator in western China. With its solid layout in Sichuan Province, it has steadily expanded to 33 cities across the country; with the restructuring of its operations and the continued development of comprehensive operating services such as quality education, revenue and performance are expected to expand rapidly. According to the company's performance forecast, we slightly adjusted our profit forecast. We expect the company's FY23-25 revenue to be 23, 32, and 4.5 billion yuan (previous values were 21, 29, and 4.5 billion yuan respectively), and net profit after adjustment was 360, 550 million, and 850 million yuan (previous values were 3.3, 5.6, and 870 million yuan respectively), corresponding to EPS of 0.17, 0.26, and 0.39 yuan/share (previous values were 0.15, 0.26, and 0.40 yuan/share, respectively), and PE was 12, 800, and 5 times respectively.
Risk warning: Risks such as falling short of expectations in enrollment, loss of core executives, intense market competition, and policy changes.