CCB International raised Zhonghui Group's (00382) profit expectations for the 2024/2025 fiscal year by 1%/2%, respectively, to take into account higher student growth and the bank's more conservative OPM (operating margin) assumptions.
The Zhitong Finance App learned that CCB International raised Zhonghui Group (00382)'s profit expectations for the 2024/2025 fiscal year by 1%/2%, respectively, to take into account higher student growth and the bank's more conservative OPM (operating margin) assumptions. Based on a price-earnings ratio of 5 times (unchanged), the bank raised the target price of Zhonghui Group from HK$3.40 to HK$4.00, maintaining the “outperform the market” rating.
According to CCB International Development Research Report, Zhonghui Group's core net profit for fiscal year 2023 increased 15.3% year-on-year to RMB 668 million, which is basically in line with the bank's expectations. Revenue increased 17.0% year over year to RMB 1,973 million, mainly due to an increase in the number of students by about 11% to 86,000 as of August 31, 2023, which means that the average tuition fee increased by about 6%. Due to economies of scale and cost control exceeding expectations, the company's gross margin increased to 51.6% year over year, slightly higher than the bank's expectations. It is worth mentioning that Zhonghui Group maintained an annual dividend payment ratio of 30%.
Furthermore, CCB International believes that the new strong growth will support growth over the next few years. According to information, Zhonghui Group's total student enrollment in the 2023/2024 academic year increased 15.9% year-on-year to about 95,000. Among them, total student enrolment in schools in Guangdong and Sichuan increased by 17.0% and 13.8%, respectively. CCB International attributed this increase to the company's expansion in previous years and brand recognition in the region. The number of new students enrolled in the 2023/2024 school year increased by 22.6% year-on-year, to about 38,000. Among them, schools in Guangdong increased by 26.3% and schools in Sichuan increased by 16.7%.
Overall, CCB International expects the compound annual revenue growth rate of Zhonghui Group from FY2023 to FY2025 to reach 12%, mainly due to the increase in the number of high single digit students and the increase in medium single digit tuition fees. Given the development of vocational education programs, the bank is positive about the company's long-term growth prospects.