1HFY24 revenue and adjusted net profit to mother are generally in line with the market's agreed expectations
The company announced 1HFY24 results: total revenue of 1.31 billion yuan, an increase of 13.8% year on year; adjusted net profit of 426 million yuan, up 7.6% year on year, all of which are basically in line with the agreed market expectations. The company announced that it will not pay a dividend for half a year. It plans to pay a one-time dividend on an annual basis, and maintain a dividend ratio of 50%.
Development trends
Revenue has grown resiliently, and high-quality development has been very effective. 1HFY24, the company's main business revenue was 1.31 billion yuan, an increase of 13.8% over the previous year. Among them, tuition revenue was 1.18 billion yuan, up 13.3% year on year; accommodation fee income was 133 million yuan, up 18.1% year on year; other income and gain was 172 million yuan, up 1.4% year on year. The Group's high-quality development strategy has further achieved outstanding results: in terms of employment, the final employment rate of 2023 graduates reached 97%, accounting for 28% of high-quality employment, an increase of 5.8ppt over the same period last year; in terms of student structure, the number of undergraduate students enrolled increased by 3.4 ppt in the total number of enrolled students, which is the main driving force for the Group's double-digit average tuition fee, highlighting the results of the Group's student hierarchy optimization.
High-quality investment continues to grow, expenses are properly controlled, and the debt structure continues to improve. 1HFY24, the company recorded a gross margin of 39.8%, a slight improvement of 0.5ppt over the previous year, mainly due to improved operating efficiency and other optimization of personnel expenses, partially offset by an increase in depreciation and amortization costs (upgrading of the campus environment and upgrading of experimental training equipment), teaching costs and teacher costs (increased remuneration for core positions and introduction of high-level external talents). In terms of financial expenses, 1HFY24, the share of the company's financing costs fell from 7.9% to 6.2%, and the average loan interest rate continued to decline. The weighted average interest rate for new loans during the period was 3.5%, a record low. At the level of debt structure, 1HFY24, the company's balance ratio fell from 61.8% at the end of last year to 58.8%, the leverage ratio fell from 76.9% to 72.7%, the interest coverage ratio increased significantly, and the solvency was further enhanced.
The asset turnover ratio increased significantly, and the dividend payout ratio remained at around 50%. The 1HFY24 company's asset turnover ratio recorded 16%, up 8.1ppt year on year, and the company's ROE further increased, reaching the highest level of 11.8% in history. 1HFY24's capital expenditure was 397 million yuan. Considering the early capital upgrade of Guizhou Vocational College of Business and Commerce, we raised FY24's annual capital expenditure forecast from 600 million yuan to 900 million yuan, or contributed to an increase in depreciation and amortization costs for the whole year. As a result, FY24's adjusted net profit declined slightly year-on-year. The company announced that the dividend policy was adjusted to pay annual dividends once every September, and the dividend ratio remains at 50%.
Profit forecasting and valuation
The revenue forecast remained unchanged; considering that the pace of investment in Guizhou schools was faster than expected, FY24/FY25 adjusted net profit to mother was lowered by 8%/5% to 722/809 million yuan. Taking into account the company's steady endogenous growth, maintaining an industry rating and target price of HK$3.2 (corresponding to 6.1/5.2 times FY24/FY25 price-earnings ratio), the current price was trading at 4.5/3.8 times FY24/FY25 price-earnings ratio, corresponding to 36% upward space.
risks
Tuition fees have fallen short of expectations; higher education policies have exceeded expectations.