Investment proposal: Taking into account the impact of short-term Oriental selection discounts and increased compensation, the company's FY2024-2026 non-GAAP net profit was reduced to 4.15 (-20%) /5.91 (-15%)/783 million (-8%), respectively, and EPS was 0.19/0.29/0.4 US dollars, increasing its holdings.
Performance summary: The company's FY24Q3 achieved revenue of 1,207 million US dollars/ +60%, higher than the agreed forecast of 1,098 million US dollars, gross profit margin of 563 million US dollars/ +46%, gross profit of 46.59%, year-on-year -4 pct, net profit to mother 87 million US dollars/ +7%, non-GAAP net profit of 105 million US dollars/ +10%, lower than the agreed forecast of 132 million US dollars.
The revenue side exceeded expectations mainly due to the accelerated expansion of education outlets and the contribution of “Walking with Hui”. ① The FY24Q3 revenue side significantly exceeded expectations. Among them, the overseas examination and consulting business achieved high growth of 52.6%/25.7% year on year, domestic exam preparation business +53.2%, new business revenue +72.7% year over year, non-subject business covered more than 60 cities, more than 355,000 registrants, used learning machines and equipment in more than 60 cities, and more than 188,000 active paying users; ② The year-on-year growth rate increased from 19% to 28%, and the main education industry further accelerated its expansion. Pace; ③ The launch of the “Walk with Hui” platform brought about a significant increase in the size of GMV, which also contributed to the revenue side.
Profit margins falling short of expectations are mainly a drag on selection, and the profitability of the main education industry is still increasing. ① Gross profit of 563 million yuan/ +46%, gross profit margin of 46.59% /-4pct, marketing/management expense ratios were 13/ 24%, compared to -0.25/ -4.73pct. The improvement in operating efficiency brought by the improvement in supply and demand continues. The brand influence brought by the leader is reflected in savings in customer acquisition costs; ② The overall profit margin fell short of expectations, and the increase in discounts and subsidies. In addition, the increase in taxes and fees due to the acquisition of Dongfang Selection, as well as the reduction in interest income and equity investment losses, had an impact. Decreased earnings It is mainly a treatment of the impact of the double reduction in depreciation, but the profit margin of the main education business was +3 pct year on year after excluding profits selected by Dongfang. It is not easy to increase profit margins while accelerating network expansion; ③ It is expected that the profitability of non-disciplinary businesses will gradually become apparent, and the climbing period will be reduced from 12 months to 6 months, which is expected to exceed the level before the “double reduction”.
Risk warning: policy risk, accelerated supply recovery, anchor regulation risk.