Description of the event
Jiafa Education released its annual report for the first quarter of 2024. In Q1 of 2024, the company achieved revenue of 114 million yuan, an increase of 68.47%; realized net profit of 6.554 million yuan, an increase of 87.31% year on year; realized net profit withheld from non-return mother of 6.2059 million yuan, an increase of 79.24% year on year. The company is a leader in standardized test site construction, focusing on the two major business directions of smart testing and smart education. AI helped generate a new round of growth curve.
Incident comments
Revenue exceeded expectations, and the high growth cycle of smart test site construction continued. The standardized test room business is an important part of the company's smart testing business. In May 2023, the Ministry of Education, together with relevant departments, held a video conference on the safety work of the 2023 National General College Admissions Examination, making preventing mobile phone fraud a top priority. In this context, demand for products such as fraud prevention and control systems and smart security gates accelerated, and the company's smart testing business returned to a high growth cycle. This trend continued in Q1 2024, and the increase in the construction of new security gates combined with online inspections, fraud prevention and control, and alternative updates supported a high increase in revenue. At the same time, starting in 2023, all provinces will further promote the application of artificial intelligence analysis in test scenarios. “Deepening the integrated application of the National Education Examination Group Examination Service and intelligent video behavior recognition, and continuing to further develop behavioral recognition of candidates or invigilators in the examination room” has become the goal of the next phase of work. This has led to a full upgrade of the company's test behavior analysis AI solution, which is expected to contribute more in 2024.
Performance remained high, but the absolute value was affected by amortizing employee shareholding plan expenses. The company achieved net profit of 6.5254 million yuan to mother in 2024Q1, an increase of 87.81% over the previous year. Compared with traditional net interest rates, it was mainly affected by amortization of employees' shareholding plan expenses. The company's 2024Q1 management expenses were 21.545 million yuan, an increase of 92.94% over the previous year, reflecting the amortization impact of employee stock ownership plans. According to the capital reserve account, the amortization expenses amount to more than 8 million yuan, and after addition, the profit can reach more than 14 million yuan, which is a significant increase over the net profit of 3.49 million yuan returned to mother in Q1 in 2023.
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 26/19/15 times, respectively. Give it a “buy” rating.
Risk warning
1. Policy implementation falls short of expectations;
2. Product progress falls short of expectations.