Incident Overview
FY2024H1 Group's total revenue/main business revenue/net profit attributable to mother were 14.82/13.11/4.32/426 billion yuan respectively, up 12.2%/13.8%/10.6%/7.6% year-on-year. The growth rate of adjusted net profit was lower than net profit attributable to mother mainly due to the increase in US dollar syndicated loan exchange earnings to 5.9 million yuan (23 loss of 5.5 million yuan during the same period). Dividends are paid on an annual basis, and the dividend payout ratio is maintained at 50%.
Analytical judgment:
The increase in tuition revenue is due more to price increases brought about by high-quality development. 1) Main business revenue was 1,311 billion yuan, up 13.8% year on year: looking at tuition and accommodation fees, tuition fee/accommodation revenue in mid-2024 was 1,178/133 million yuan respectively, up 13.30%/18.13% year on year. In the 2023/2024 academic year, the total number of students enrolled was about 140,000. The number of new students increased by 2.7% over the same period last year. The student source structure was further optimized, and the proportion of undergraduate students increased by 3.4 PCT. 2) The company's other revenue was 172 million yuan, up 1.4% year on year. The increase was not significant due mainly to donation revenue. The company's revenue from providing vocational skills upgrading and training services increased 24.8% year over year, and rental income increased 13.1% year over year due to increased rental space for courses. 3) Judging from the teaching results, as of December 31, 23, the implementation rate of the final employment destination for graduates in '23 was 97.0%, maintaining a high level of employment for four consecutive years; the proportion of high-quality employees reached 27.8%, an increase of 5.8PCT over the previous year. Among them, the number of people employed by famous enterprises increased 88% year on year.
The decline in net interest rates is mainly due to an increase in sales and administrative expenses, a decrease in the share of other income, and an increase in income tax rates. FY24H1 gross margin was 39.8%, up 0.5 PCT year on year; net profit margin decreased by 0.9 PCT to 33.0%, mainly due to the increase in cost ratio: (1) sales expenses/revenue increased 0.2 PCT to 1.7%, mainly used for the group to strengthen brand building and enhance the school's brand image; (2) administrative expenses/revenue increased 0.2 PCT to 4.1%, mainly due to the increase in business expenses contracted by external agencies paid by the group to promote Guizhou school application work; 3) The financing cost/revenue decreased by 1.4PCT to 4.5%, Mainly due to a decrease in average loan interest rates; 4) the share of other expenses decreased by 0.4 PCT to 2.1%; 5) the share of other income decreased by 1.6 PCT; 6) income tax/revenue increased by 1.3 PCT to 7.5%.
Contract liabilities have increased, providing a guarantee for revenue growth in the second half of the year.
FY2024H1 contract liabilities were $1,094 million (tuition fees/accommodation fees were $961 million), up 12.9% year over year (tuition fees/accommodation fees increased by 12.0%/19.1%, respectively). CAPEXFY24H1 was 397 million yuan, up 13% year over year.
Investment advice
We expect: (1) in the context of restructuring, tuition revenue is expected to increase more from price. The diversified business is expected to maintain a slightly higher growth rate than tuition revenue, and the company's revenue growth is expected to maintain more than 10% in the future; (2) the company continues to increase investment, and the net profit growth rate is expected to be slightly lower than the revenue growth rate; (3) the company's Guizhou, Guangxi, Northeast and Yunnan schools are undergoing classification registration procedures in accordance with the guidelines of relevant provincial authorities.
Considering that the company pays more attention to high-quality development and continues to increase capital investment, the revenue forecast for the 24/25/26 fiscal year was lowered to 23.50/26.40/2,980 billion yuan; the net profit forecast for the 24/25/26 fiscal year was lowered to 772/8.46/923 million yuan to 738/794/867 million yuan, corresponding to EPS 0.47/0.51/0.56 yuan for the 24/25/26 fiscal year. The closing price of HK$2.29 on April 24, 2024 was 4.4/4.1/3.8X (1 HKD = RMB 0.92), respectively. We are optimistic about the company's long-term tuition growth space and the appeal of a high dividend rate, and maintain a “buy” rating.
Risk warning
Zhuo's enrollment situation is lower than expected, tuition fee increases are lower than expected risk, and systemic risk.