Incident Overview
The company's revenue/net profit in 2023 was 930/283 million yuan respectively, up 17.7%/26.0% year-on-year, and the performance was in line with market expectations. The higher growth rate of net profit than revenue was mainly due to a decrease in the cost rate and an increase in government subsidies during the period (up 103% year on year to $0.23 million). After excluding government subsidies, net profit returned to mother was 260 million yuan, an increase of 21.8% year on year. The year-end dividend of 2023 was HK$0.1 per share, plus an interim dividend of HK$0.1. The dividend rate was 26.7% (33.5% in '22), and the dividend rate was 6.3%.
Analytical judgment:
The increase in the number of students is mainly due to the contribution of post-graduate studies, and there has been a marked increase in tuition fees for post-graduate studies. (1) By business, tuition revenue in 2023 was 781 million yuan, up 12.5% year on year, mainly due to higher tuition fees and an increase in the number of students; accommodation fees were 126 million yuan, an increase of 57.0% year on year, mainly due to refunds due to the 22 pandemic. (2) In terms of volume and price breakdown, the total number of students enrolled in the company in the 2023/24 school year was 2,5013, an increase of 2.2% over the previous year, mainly due to the contribution of undergraduate, junior college, and special education expenses (73%/10%/17%, respectively, the number of students increased by 0%/0%/13% over the previous academic year). The average tuition fee in 2023 was 31,242 yuan, an increase of 10.0% over the previous year, mainly due to the increase in college entrance fees from 23,000-38,000 yuan to 30,000 to 39,800 yuan, while undergraduate and junior college fees remained unchanged at 32000-39,800 yuan/20,000 yuan. At the same time, the company carried out intelligent building transformation in the two dormitories of the second phase of the school building construction plan, increasing the accommodation fee for new students from 5,800 yuan to 7,800 yuan.
(3) The contract debt was $510 million, of which tuition fees/accommodation income was $43/85 million yuan respectively, an increase of 7.7% over the previous year, providing a guarantee for 24-year income.
The change in depreciation period led to a decrease in gross margin, and the increase in net interest rate was mainly due to a decrease in the management expense ratio. (1) In 2023, gross margin was 61.8%, a year-on-year decrease of 2.1 PCT, mainly due to an increase in employee salaries and depreciation amortization (depreciation period for property, factory buildings, etc. changed from 50 years to 30 years). (2) Net interest rate to mother was 30.1%, up 1.6 PCT year on year. Net interest rate for the first and second half of the year was 36%/24%, respectively, up 4/-2PCT year on year. (3) In 2023, the sales expense rate/management fee rate/financial expense ratio decreased by 0.02/3.6/0.44PCT to 0.39%/21.2%/1.8%. The decline in the management expense ratio was mainly due to scale effects; the year-on-year increase in other revenue/revenue was 1.2PCT to 4.6% mainly due to increased government subsidies. The capital expenditure was 256 million yuan, an increase of 454% over the previous year. It was mainly used for the fourth phase of campus facility construction.
The employment rate remains high. As of August 31, 2023, the employment rate of the 2023 graduates of Shanghai Jianqiao University reached 99.1% (98.9% in '22), of which 58.9% of the graduates remained employed in Shanghai.
Investment advice
According to our analysis, future growth drivers: 1) In the short term, the company is a listed company that has completed a for-profit transformation, and there is still room for improvement in tuition fees; 2) In the medium to long term, the fourth phase of the school building construction plan began in December 2022, with a total construction area of about 86,400 square meters, including a teaching and training building, 3 talent apartment buildings, and a multi-functional R&D center, which is expected to be put into use in the 2024/25 school year. 3) Combined with the advantages of industrial clusters in the Lingang region and government support, the company's advantages in integrating industry and education are worth paying attention to. It is also expected to expand a new business model after the fourth phase of the school building is put into operation. Maintain the 24/25 revenue forecast of $1,069/1,208 million, and add a 26-year revenue forecast of $1,359 million; maintain the projected net profit forecast of $32/37 million and increase the 26-year net profit forecast of $433 million; corresponding to EPS of 24/25/26 of $0.76/0.90/1.04, the closing price of HK$3.18 on March 29, 2024 corresponds to a closing price of HK$3.18 on March 29, 2024, corresponding to a PE of 3.9/3.3/2.8 times (1 HKD=0.93) RMB), maintaining a “buy” rating.
Risk warning
Potential risks of policy changes, risk of enrollment falling short of expectations, intense market competition and threat of new entrants, systemic risks.