Strong endogenous growth in the company's performance, with FY2024H1 revenue +18.3% year over year: The company disclosed the 2024 semi-annual report on April 26, 2024. FY2024H1 achieved revenue of 3.284 billion yuan, +18.3% year over year, adjusted EBITDA of 1,956 billion yuan, +16.7% year over year, and adjusted net profit of 1,092 million yuan, +4.5% year over year. The company plans to pay an interim dividend of RMB 18.77 per share. The dividend amount accounts for about 45% of the company's adjusted net profit to mother.
Strong endogenous growth in the domestic market. The main revenue of the FY2024H1 domestic market segment was +19.2%: In the subregion, the main revenue of the domestic market segment of FY2024H1 was 3.18 billion yuan, +19.2% year over year, mainly due to the increase in the number of students enrolled in the domestic market and the average income per student. The main revenue of the international market segment was 105 million yuan, -1.87% year over year.
The company's gross margin declined slightly, mainly due to the increase in the number of students and the increase in teaching investment:
FY2024H1's overall gross profit margin was 56%, down 1.41pct year on year, mainly due to an increase in the number of students. At the same time, investment in teachers and teaching increased as the campus expanded and courses increased.
The company is the leading domestic higher education group, and has strong mergers and acquisitions integration capabilities and management and operation capabilities: since the company went public in 2017, the company has successfully expanded its business scale through many mergers and acquisitions. The number of schools in China has increased markedly, and it has higher education school layouts in Australia and the UK. By the end of February 2024, the total number of full-time students enrolled in the company was 2.71 million, +8.5%. In the 2023/24 academic year, the number of new students enrolled in the company's higher education reached about 84,000, +18% over the same period last year. Since its listing, the company's ability to integrate mergers and acquisitions and manage operations has been verified.
The company continues to build new campuses to expand student capacity. In FY2023-FY2025, the company invested a large amount of capital in the construction of the new campus. The new campus is expected to increase the student capacity by 52,000, of which the number of new students in FY2024 Zhaoqing School will increase to 12,800, and the number of new students in Yantai will increase to 8,154. The company expects the next two schools to further increase as more space is put into use.
Profit forecast and investment rating: China Education Holdings is a leading enterprise in private universities in China. It has obvious scale advantages and strong mergers and acquisitions integration capabilities. Vocational education is the direction encouraged by China's policies, and sector valuations are expected to continue to be repaired. Considering that the company's Hainan schools will not be fully consolidated starting FY2024, we lowered the company's net profit from 22/24.5/2.73 billion yuan to 21/23.8/27.10 billion yuan. The latest closing price corresponding to FY2024-FY2026 PE is 5/5/ 4.3/3.8 times, maintaining a “buy” rating.
Risk warning: risk of enrollment falling short of expectations, risk of policy changes, etc.