The performance forecast sends a positive signal to focus on the implementation of the training business
The company issued a performance forecast, with a loss of 0.58 to 100 million yuan for the full year, revenue of 2-290 million yuan, and revenue of 13—180 million yuan after deduction. (The company's revenue consists of architectural design business+non-academic training business, and the deducted project is revenue from non-academic business revenue for the delivery of existing courses commissioned by related parties).
The company's non-academic training business losses for November-December 2023 are:
1. Since November 23, non-academic training and enrollment of students have been carried out one after another. Due to the seasonal nature of recruitment examinations, November-December is usually not the peak of recruitment announcements, nor is it a peak season for recruiting new students.
2. In the main revenue, tuition fees for regular classes and miscellaneous fees for agreement classes are recognized according to the teaching stage. Advance tuition fees for agreement classes are confirmed as revenue is confirmed after the agreed conditions are met, but delivery costs are confirmed according to actual occurrence, and the time of cost confirmation is generally earlier than the time of revenue recognition.
In addition, the recruitment examination and training course cycle is long. Currently, the delivery of some of the company's order courses has not been completed or the revenue confirmation requirements have not been met. The advance payment corresponding to this part of the order will be reflected in the year-end contract debt balance.
As of December 31, 2023, the company's contract debt balance exceeded 200 million. It is expected that in the future, as courses are delivered, meeting revenue recognition conditions will gradually be converted into revenue.
3. Since Huatu Education Technology started its business, it has completely built up all the necessary resources for business development, such as personnel, teaching staff, and training delivery sites.
Expenses such as site costs, personnel costs, teacher costs, management expenses, rent property, and depreciation and amortization expenses in the training business are highly rigid, and the company also has expenses such as necessary marketing expenses in the early stages of business, so there is a situation where short-term revenue cannot cover costs and expenses.
We believe that this performance forecast sends a positive signal: on the one hand, Huatu's education business is progressing smoothly, benefiting from brand, teaching and research advantages, competitive landscape optimization, etc., and the core education business is progressing steadily, and future performance is expected to be released at an accelerated pace; on the other hand, the training business is being implemented or leading to a revaluation of market value.
Currently, market supply has gradually returned to rationality, and the pattern may change; public service recruitment and training is still the core track for the (vocational) education sector, with flexible demand and market potential.
A contract delivery agreement was signed to resolve competition risks in the industry. Since November 2023, the company has carried out non-academic training through its wholly-owned subsidiary Huatu Education Technology, mainly including national and provincial examination training, public institution training, medical training, and corresponding qualification training. The company's non-academic training business is developing smoothly. As of December 31, 2023, it has set up more than 300 branches nationwide and has conducted training, with a total of more than 50,000 trainees.
On January 31, '24, the company announced that it signed an agreement with Huatu Hongyang on matters relating to the commissioning and delivery of existing courses. For Huatu Hongyang's existing courses in the field of adult non-academic training that have not yet been delivered, Huatu Hongyang will entrust Huatu Education Technology to complete the delivery; moreover, in order to avoid competition in the industry, Huatu Hongyang will no longer engage in business in related fields.
The agreement was signed to further verify the implementation of the company's non-academic education and training business. As of December 31, 2023, the total number of related transactions between the company and Huatu Hongyang was 120 million yuan. Of these, receiving Huatu Hongyang's commissioned delivery course generated a related transaction amount of 95.68 million yuan, and a related transaction amount of 2015 million yuan for the procurement of equipment, facilities, business sites, etc.
Adjust profit forecasts to maintain “buy” ratings
The company is expanding its education business, and Huatu's advantages as a leading organization are gradually showing, and the scale of the related training business is expected to continue to grow in the next few years. At the same time, we believe that the current market supply may be clear to some extent, and the pattern has changed, and we are optimistic about the flexibility and growth potential of the public service recruitment and training market.
According to the company's performance forecast, we adjusted 23 million revenue to 240 million (previous value: 86 million), and net profit to mother was a loss of 79 million yuan (profit of 2.44 million in the previous value); in addition, considering that the pace of implementation of the company's follow-up training business is still uncertain, we still only forecast the original business in 24-25. We expect revenue of 0.97 million and 110 million for 24-25, respectively, and net profit of 0.07 million and 0.13 billion yuan to mother.
Risk warning: the pro bono license agreement failed to be fulfilled as scheduled; education and training business development fell short of expectations; new related transactions; industry policy risks, etc. The performance forecast is a preliminary calculation only. For details, please refer to the annual report.