Net profit of 100 million yuan increased by 84% after the 2023 earnings adjustment
The company issued a profit forecast. Yingxi's net profit for 2023 was 8,000w+, an increase of 47% +; adjusted net profit of 100 million +, an increase of 84%; the adjustments were mainly live e-commerce losses of 112 million plus share option fees of 800w.
Performance growth is due to (i) an increase in the total number of tutoring hours (ii) improved operating efficiency, and (iii) an increase in fair value returns on financial assets.
Thinking has been actively transforming its business in recent years. Since the fall of 2021, it has launched a variety of non-subject literacy courses, and achieved encouraging results. In addition, explore new opportunities and launch study tours and international courses. The company believes that the new business measures will broaden the revenue base and contribute to long-term development.
From US stocks New Oriental and Gaotu, to A-share academic education, to Hong Kong stock thinking, several representative companies have confirmed each other's high performance growth; we believe that it is not only recent policy catalysis or profound changes in the industry; institutions that have experienced double reductions and post-pandemic retention institutions that cooperate with local supervision to carry out business as a useful complement to school education, face up to parents' reasonable training needs, and speed up the pace of operation in compliance and legality.
Issuing equity incentives to reflect confidence in development
The company announced a share option plan; it plans to sell 16.67 million shares at an exercise price of HK$4.48. The Board believes that the granting of share options is in the overall interests of the company and shareholders, and will (i) motivate, retain and reward the grantor and (ii) provide additional impetus for the grantor to achieve the goal of further enhancing the company's value.
We believe that at present, the industry may still be in the bottom range, focusing on the development cycle in the context of supply contraction and supply restrictions. The company issued equity incentives after the recent sharp rise, which fully reflects strong confidence in future development, and is also a full reflection of how the listed platform can better achieve employee incentives.
Talent is a core element in education and training development. In the previous two years, institutions faced the loss of a large number of teachers; we expect most teachers to return to work in institutions with stable compliance; the reason is not only higher personal compliance costs, but also the maximization of industrial division of labor and utility.
Adjust profit forecasts to maintain “buy” ratings
Based on the company's recent earnings results in 2023, we raised our 23-year profit forecast. We expect the company's 23-25 revenue to be 6.71/9.51/1,293 billion yuan, adjusted net profit of 1.04/1.35/175 million yuan respectively (previous net profit was 0.91/1.35/179 million yuan, respectively), EPS was 0.16/0.24/0.32 yuan/share, and the corresponding PE was 27/18/14X, respectively.
Risk warning: policy risk; new business risk; management risk; risk of rising operating costs; risk of the company's low market value in circulation; profit forecasts are only preliminary estimates. The specific financial data is subject to the 2023 annual report issued by the company.