The training track continues to expand, and the leaders in vocational skills training have remained fresh for a long time. Established in 1988, China Oriental Education is the first Hong Kong-listed education company in China. It mainly provides innovative vocational skills education for students. After more than 30 years of development, the company's business areas cover the four major sectors of cooking, computers, auto repair and beauty, and its subsidiaries include 7 major brands including New Oriental, Omeki, Delicious Academy, and Wantong Auto Repair. As of 23H1, the company's cooking business accounted for more than 50% of revenue. Auto repair services still showed a relatively rapid growth rate during the pandemic, accounting for 20% of revenue. The company's overall enrollment recovered in the first half of this year. The number of new students enrolled and the number of new customer registrations increased 20% year over year, and net interest rates showed a rising trend.
The vocational education market space is vast, and each segmented training track has growth momentum. According to Frost & Sullivan's report, the vocational education industry is expected to exceed trillion yuan in 2025. There are frequent favorable policies for vocational education to encourage the development of private vocational education. The “Implementation Plan for the Integration of Obstetrics and Education”, recently released in 2023, once again emphasizes that the integration of obstetrics and education focuses on the practicality of talents and skills. The segmented training track currently being carried out by the company has sufficient growth momentum: 1) On the cooking side, the downstream sector is gradually emerging from the impact of the epidemic, and the development of diversified catering business formats boosts training demand; 2) the automobile service side, the number of cars on the stock end corresponds to the large supporting auto repair service space, and the gradual transformation of the new energy vehicle industry has spawned new demand for auto repair talents; 3) IT training side, the industry pattern is scattered, and the digital transformation of the industry has become a long-term driving line; 4) The beauty industry training side. Currently, lifestyle and beauty services are in a period of rapid development, and the recovery rate is remarkable for technical talents after the epidemic. The demand is high.
Research and practical training+employment support+first-mover advantage+management barriers to create a high employment rate and strong brand power.
(1) The company goes hand in hand in course research and development, practical training and teaching. The company's curriculum development system is iterated frequently, and majors and course categories closely follow market demand. At the same time, famous industry teachers, professional sites and equipment are introduced in practical training courses to protect students in mastering technology. (2) Strong employment support. The company has established school-enterprise cooperative relationships with more than 10,000 enterprises, and has also set up a career consulting service network to provide strong support for student employment. (3) First-mover advantage creates high management barriers. The company is one of the first enterprises to enter the domestic vocational education circuit. It is the choice of many middle and high school graduates. Its remarkable first-mover advantage prompted the company to strengthen management mechanisms and establish stable management barriers.
Actively promote the construction of regional centers, help optimize the revenue and cost structure, raise the level of running schools, and strengthen the scale effect. Currently, the company has invested in the construction of regional centers in the five major admissions provinces of Anhui, Shandong, Sichuan, Guizhou, and Henan, and will also be deployed in Jiangxi and Jiangsu in the future. Regional centers are shifting from leasing and expansion to construction using their own land, and adopting a multi-campus cluster approach. The comprehensive school model helps radiate students from surrounding regions to increase large-scale effects and save the cost of running schools. At the same time, it also helps the company raise the level of running schools and upgrade to a technician college.
Investment advice: The company is gradually emerging from the impact of the epidemic, and enrollment is gradually recovering. In the future, as the company accelerates the construction of regional centers, it will help to increase the scale of management and achieve intensive development and scale effects; on the enrollment side, there is still a lot of room for improvement in the proportion of long-term students in the company; furthermore, the company's art college, Aumanshandi, is being incubated, and there is plenty of room to expand stores. Finally, in the face of competition from public schools, the company enhances the appeal of running schools by iterating majors, strengthening practical training, and employment support. We estimate that the net profit of the company from 23-25 will be 4.16/6.26/847 million yuan respectively, and the corresponding PE will be 11x/8x/6x respectively, covering the first time and giving it a “recommended” rating.
Risk warning: industry competition intensifies, enrollment falls short of expectations, regional center construction falls short of expectations, policy risks