Relying on Haidian's educational and technological resources to seek diversified development, Kevin Education significantly reduced losses in 23 years and achieved revenue of 255 million yuan (yoy +47.78%) in 2023, and net profit to mother of 49.72 million yuan, a year-on-year decrease of 48.48%. 24Q1 achieved revenue of 77 million yuan (yoy +12.93%) and net profit to mother of 3.54 million yuan, a year-on-year decrease of 66.66%. The new chairman of the company has experience working for the controlling shareholder Haiguo Investment. The company is expected to continue to integrate high-quality education and technology industry resources with the support of major shareholders to promote the stable development of various businesses. We expect the company's net profit to return to mother in '24, and net profit to mother in 25/26 to reach RMB 0.24/032 million. Considering that the company's main revenue currently comes from rent and management fees charged to provide operating services for the two Kevin schools, and has the ability to generate stable cash flow in the medium to long term, we used DCF valuation. WACC was 7.66%, a sustainable growth rate of 2%, and obtained a target price of 5.16 yuan based on DCF, which was raised to an “increase in wealth” rating.

K12 combines the dual tracks of international+domestic education to meet the diverse needs of students. The company provides high-quality operation and management services for the two Kevin schools in Beijing. The company implemented a two-track development strategy of K12 international+domestic education. In the fall of 2024, Chaoyang Kevin School opened a high-quality domestic high school, and in the fall of 2024, Haidian Kevin School's elementary school will open a special mathematics class “Jingrun Math Class” with a domestic path in addition to the original international special classes. In the future, the company is expected to continue to increase investment in domestic education tracks to provide more students with high-quality educational resources and further education opportunities.

Relying on the advantages of Haidian's state-owned assets background to integrate resources, the vocational education circuit company continues to develop vocational education circuit company as the only educational listed company under the Haidian District State-owned Assets Administration Commission, making full use and integration of Haidian's high-quality education and industrial resources. It has now signed contracts with leading industry companies including Baidu, Tencent, Longxin Zhongke, Qiming Chen, Phoenix Mathematics, etc., and has cooperated with various institutions to establish industrial colleges. The level of operation covers undergraduate, senior and middle positions. By the fall of 2023, the total number of students enrolled was over 4,000, and the company expects a significant increase in the number of students enrolled in the vocational education business in 2024.

The new chairman took office, demonstrating confidence in long-term development

Wang Teng, the new chairman of the company, took office in March '24. Mr. Wang Teng was the deputy manager and manager of the strategic investment department of Beijing Haidian District State-owned Assets Investment and Management Co., Ltd., the majority shareholder of the company. He is currently the assistant general manager and secretary of the board of directors of Beijing Haidian District State-owned Assets Investment and Management Co., Ltd. In the future, the company is expected to further expand its business with the support of the majority shareholder, Haiguo Investment.

Risk warning: The number of students enrolled in vocational education falls short of expectations; there is a risk of shortage or loss of teachers and core management personnel; real estate rental rates fall short of expectations.