Incident Overview
In fiscal year 2023, the Group's total revenue/main business revenue/net profit from the mother/adjusted net profit was 25.27/21.19/7.03/728 billion yuan, up 11.7%/10.3%/13.4%/10.1% year on year, respectively. The adjusted net profit growth rate was lower than that of the adjusted net profit, mainly due to the adjusted project, the exchange loss of US dollar syndicated loans fell 41% year on year. The year-end dividend of $0.096, combined with the interim dividend of $0.119, remained at 50%, and the dividend rate was 11.4% (RMB 1 = HK$1.09420). The company had $850 million in cash at the end of fiscal year 2023.
Analytical judgment:
Tuition revenue increased by 9%, and the share of diversified income increased further as a result of price increases under restructuring. In fiscal year 2023, the company's other revenue was 408 million yuan, up 19.7% year on year, accounting for 16%, and 1PCT year on year. The main reasons for the increase were: (1) after the pandemic, institutions used their professional advantages to strengthen school-enterprise cooperation, and school-enterprise cooperation donation revenue increased 246.6% year over year; (2) leveraging the advantages of group operation and actively expanding leasable area, rental revenue increased 24.7% year over year; (3) the Group integrated training resources accumulated over the years, exploited best practices, and actively provided vocational skills upgrading training services to the community and students, and service revenue compared to the same An increase of 15.1%. Tuition/accommodation revenue for the 2023 fiscal year was 1,88/222 million yuan, up 9%/23% year on year, accounting for 90%/10% respectively; the company continued to restructure, that is, increasing the proportion of undergraduate and senior positions, reducing the share of middle level positions, and the increase contributed more to cost increases.
The continued increase in investment led to a decline in gross margin, and the increase in net interest rate benefited from a reduction in other expenses. The gross margin for fiscal year 2023 was 38.0%, down 1PCT year on year, mainly due to a 10.9%/19.3%/9.5% increase in teacher costs/depreciation and amortization/teaching costs; net interest rate/ adjusted net interest rate was 33.2%/34.3%, respectively, an increase of 0.9/-0.6PCT over the previous year. The increase in net profit margin was mainly due to a decrease in other expenses. (1) Other expenses/revenue decreased by 1.5PCT to 4.4% year on year, mainly due to 1) the company's repayment of the syndicated loan of 16 million US dollars as scheduled, while the appreciation of the US dollar at the end of the fiscal year was less than in the same period last year. As a result, the exchange losses to be accounted for by the Group fell from RMB 41.0 million to RMB 24.2 million, a year-on-year decrease of 41.0%. Excluding the impact of the exchange losses mentioned above, other expenses were RMB 68.6 million, a decrease of 4.1% compared to the same period last year; 2) The Northeast school cafeteria operating model changed from self-operation to leasing to rent, so there were no more cafeteria costs. (2) Administrative expenditure/revenue was 4.5%, the same year on year; sales expenditure/revenue was 1.7%, up 0.2 PCT year on year, mainly because the company continued to strengthen brand building and enhance the school's brand image. This expenditure accounted for about 1.4%; financing costs/revenue increased by 0.8 PCT to 6.8%, and financing costs fell 19% year on year to 115 million yuan, mainly because the company's US dollar syndicated loans were floating interest rates, affected by the Fed's interest rate hike. Loan interest rates rose, leading to an increase in financing costs for US dollar syndicated loans in the current period. (3) Income tax/revenue increased by 0.6PCT year-on-year to 6.7%.
Students maintain a high employment rate, and the proportion of undergraduate students continues to rise. As of August 31, '23, the initial employment rate of the Group reached 90.65%, an increase of 1.24PCT over the same period last year. Among them, the number of people employed in famous companies such as the world's top 500, the country's top 100, and A-share listed companies increased 67% compared to the same period last year.
Investment advice
We expect: (1) In the context of structural adjustment, tuition revenue is expected to come from price increases: the number of students enrolled in the 23/24 school year was about 140,000, up 2.7% year on year, but tuition revenue increased 9%; after diversified business has passed the high growth stage, the company's revenue growth rate is expected to remain slightly above 10%; (2) the company continues to increase investment, and the net profit growth rate is expected to be slightly lower than the revenue growth rate; (3) the year of CAPEX23 is 750 million yuan, and we expect it to fall to 4-5 billion yuan in the future; (4) if the US dollar falls in the future The interest-stage exchange contribution is expected to be positive. Furthermore, the company's schools in Guizhou, Guangxi, Northeast China, and Yunnan are going through classification registration procedures in accordance with the guidelines of relevant provincial authorities.
Considering the impact of caliber, the revenue forecast for fiscal year 24/25 was changed from total revenue to main business revenue, adjusted the revenue forecast for fiscal year 24/25 to 24.59/2,773 billion yuan, adding $3,085 billion to the revenue forecast for fiscal year 26; lowered the net profit forecast for fiscal year 24/25 to $763/996 million to 7.72/846 billion yuan, and increased the net profit forecast for fiscal year 26 by $923 million, corresponding to a reduction of FY24 EPS 0.55/0.64 yuan to 0.50/0.54 yuan, new The EPS corresponding to FY26 is 0.59 yuan. On November 29, 2023, the closing price of HK$2.13 corresponding to PE was 4/3/3X (HK$1 = RMB 0.91), respectively. They are optimistic about the company's long-term tuition fee growth space and the attractiveness of high dividend rates, and maintain the “buy” rating.
Risk warning
The enrollment situation is lower than expected, tuition fee increases are lower than expected risks, and systemic risks.