The number of students enrolled in the 24th academic year increased year-on-year, the professional layout continued to be optimized, and the brand power continued to improve
Zhonghui Group's 1HFY24 achieved revenue of 1,160 million yuan (yoy +19.3%) and net profit of 338 million yuan (yoy +13.2%). The revenue/profit was 51%/46% of our annual forecast, respectively. We think it is basically in line with expectations. The company announced an interim dividend of 9.60 HK cents per share, and maintained a cash dividend ratio of 30%. The number of students enrolled in the company continues to grow, the subject layout is gradually improving, and endogenous growth is steady. We maintain FY24/FY25/FY26 net profit forecasts of $735/709/778 million, respectively, based on DCF target price of HK$6.37 (WACC is 15.93%, sustainable growth rate of 1%, HKD/RMB 0.90). Maintain “buy-in.”
The higher education revenue growth rate was higher than the group average, and the number of students enrolled rose steadily across the board. Among them, the higher education vocational education/secondary vocational education/non-academic vocational education business increased by 21.7%/7.7%/4.9% year on year, respectively, and the higher education business increased by about 2 pct to 85% year on year, further consolidating its pillar position. As of 1HFY24 Group, the number of students enrolled in the HFY24 Group reached 96,000 (yoy +12.3%), reaching a new high. The increase mainly comes from City Vocational College, China Business School, and Huashang Vocational College.
Optimizing the professional layout in close line with market needs, opening up a school-enterprise connection channel, the company continues to improve the subject and professional layout, and actively opens new majors such as artificial intelligence, new energy vehicles, stomatology, and industrial robot applications around market demand. In addition, the company has established a new School of Digital Economy, Trade and Industry, the School of Animation and Game Industry, and the Guangdong Provincial School of Rural Leisure Industry, and has established school-enterprise partnerships with more than 1,000 leading enterprises such as Huawei and China Mobile Games.
Campus construction progresses steadily, maintaining annual capital expenditure forecasts
The 1HFY24 company's capital expenditure was 268 million yuan, accounting for 53.60% of our full-year forecast (about 500 million yuan), and we think it is basically in line with expectations. Capital expenditure is mainly used for the construction and upgrading of teaching facilities such as the Sihui Campus of China Business School, the Xinhui New Campus of Huashang Vocational College, and the Meishan Campus of City Vocational College.
Risk warning: The number of students enrolled has fallen short of expectations, the competent authorities are controlling tuition fees, and the progress of for-profit registration is slow.