Description of the event
Jia Fa Education released its 2023 annual report. In 2023, the company achieved operating income of 604 million yuan, an increase of 46.47%; achieved net profit due to mother of 131 million yuan, an increase of 90.05% year on year; realized net profit withheld from mother of 127 million yuan, an increase of 81.15% year on year; and achieved net operating cash flow of 180 million yuan, an increase of 72.35% year on year.
Incident comments
Standardized examination room construction returned to a high growth cycle and achieved high performance growth in 2023. The company achieved operating income of 604 million yuan in 2023, an increase of 46.47% over the previous year, and realized net profit of 131 million yuan to mother, an increase of 90.05% over the previous year. By business, standardized test site products and overall solutions for educational examinations achieved revenue of 421 million yuan, an increase of 69.58% over the previous year. As a new volume added in 2023, security gates are driving a high increase in standardized test site business for educational examinations. In 2023, the Ministry of Education held a video conference on the safety of entrance examinations for general colleges and universities. It was proposed that preventing mobile phone fraud is a top priority in the safety of this year's college entrance examination, so that mobile phones “cannot be brought in,” “cannot be used,” and “cannot be transmitted,” further maintaining the “main position” of examination room safety. The “2+1” entrance security model has become a new model for college entrance examinations. On the basis of upgrading and supplementing the original product, the company launched an orderly smart security gate solution, which was deployed and implemented in college entrance examinations and university postgraduate examinations in various provinces and cities, and the business returned to a high growth cycle.
The smart education business has low penetration into the large market, and AI empowerment has brought a new round of growth curve. The company's smart education products and overall solutions achieved revenue of 117 million yuan in 2023, an increase of 19.29% over the previous year. In 2023, the company upgraded smart education products and launched new products such as “Physical and Chemical Experimental AI Solution”, “Physical Education AI Solution”, and “English Machine Test AI Solution”. The company fully embraces AI and simultaneously completed the release of the Linggu Education Big Model and AI series products.
Currently, Linggu has parameters at the level of 10 billion, and through special data in the field of education, it has completed the second pre-training of the 10 billion token training data and fine-tuning the special scenario for the 10 million token instruction data. Driven by the “AI+” education strategy, the company has comprehensively upgraded its own product matrix. It is expected to further penetrate new scenarios and bring about greater spatial growth in the future.
As a pioneer in education informatization in China, the company has won unanimous praise from customers in the industry for its high-quality and stable product delivery all year round. The company is the earliest enterprise engaged in smart testing business in China, and has formed an independent brand advantage within the industry.
In 2023, the company ushered in an inflection point in performance. AI helped new businesses and products to drive the company's transformation. The company's revenue for 2024-2026 is estimated to be 795/10.74/1,368 million yuan, and net profit to mother is 180/2.44/314 million yuan, respectively, corresponding PE 27/20/15 times, respectively. Give it a “buy” rating.
Risk warning
1. Policy implementation falls short of expectations;
2. Product progress falls short of expectations.