Introduction to this report:
The leaders who were the first to complete compliance due to a sharp supply clearance are expected to benefit. They are rooted in the Guangshen region, and are expected to achieve rapid recovery through non-subject quality education and training and high school business.
Summary:
Covered for the first time, a “gain” rating was given. Considering the gradual clarification of policies and slow supply recovery, compliance leaders are expected to continue to benefit. The company's net profit for 2023-2025 is expected to be 1.02/1.5/218 million yuan, and EPS is 0.18/0.27/0.39 yuan, respectively, increasing its holdings.
Supply was greatly cleared, and leaders in the education industry were the first to benefit. ① After the “double reduction”, the reduction rate of subject training institutions has reached 90%. It is difficult for small to medium players to transform. Currently, supply is still recovering very slowly; ② leading businesses that have completed compliance, benefiting from the improved pattern, the market share is expected to increase dramatically; ③ The education industry will show more remarkable resilience in a time window where the economic impact is obvious. It is expected that the education demand of domestic residents will continue to boom ④ The number of elementary, middle and high school students in Shenzhen is gradually expanding. Currently, the proportion of non-subject training institutions in compulsory education in Guangdong Province accounts for only 5% of the country, and there is still room for growth.
Quality education is encouraged by policies, and high school business is being carried out normally. ① In February 2024, the “Regulations on the Administration of Out-of-School Training (Draft for Comments)” were further clarified, defining out-of-school training as targeting primary and secondary school students and preschoolers aged 3 to 6, and was not clearly stipulated at the high school level; ② Considering the gradual clarification of policies and limited short-term supply recovery, the company is rooted in the vast region and has rich management experience in the region, which is expected to rapidly increase its market share.
The company has completed compliance transformation, based on non-subject quality education and rapid development of high school business.
① The company made strategic adjustments after the “double reduction” and launched the K9 level quality education course in the fall of 2021. After two years of refinement, the quality education business now accounts for 80% of the group's revenue, the high school business accounts for about 15% of the group, and international courses and research projects are in the non-subject quality course business category; ② Build non-subject quality training in multiple dimensions. The company covers more than 288 products and 1,012 scientific experiments, and trains students' abilities through 5 major systems and 3 levels, spanning more than 15 subjects to fully satisfy preschool and elementary school users Demand; ③ Benefit from a slow recovery in supply. The number of high school institutions remained unchanged at 2,477 in February-March 2024, and the company's high school business is expected to continue to grow rapidly.
Risk warning: policy risks, increased industry competition, slow recovery in teacher supply.