Key points of investment:
The first coverage gives an “gain” rating. The company's FY2024-2026 profit is estimated to be 547/7.09/888 million yuan, corresponding to FY2024-2026, which is 16/12/10 times PE, increasing its holdings.
Leading private education group, transforming into a for-profit high school service provider. ① The company was once the leader of the well-known K12 integrated private school group in China. After the introduction of the “Public Promotion Law” in '21, the corresponding business was divested to external operations in response to policy requirements, and proposed a “one branch and multiple branches” strategy, that is, focusing on for-profit high schools, supplementing quality training, international studies, product sales, etc.; ② The results of the 24H1 transformation were highlighted, and FY24H1 achieved revenue of 1,645 million yuan/ +74%, with net profit of 286 million yuan/yoy +66%, adjusted net profit of 319 million yuan/yoy +70%, including as of fall 2023 At the beginning of the semester, the Tianli School Network had a total of 37,000/yoy +43.8%, and the number of new high school students enrolled reached 19,000/ +41.0%; ③ Stable management and concentration of shares are the cornerstone of transformation. In 24, the company has repurchased 13.32 million shares, amounting to over HK$39.07 million, showing confidence; ④ is expected to enter the Hong Kong Stock Exchange in September 2024, and liquidity is expected to improve significantly.
Industry: Demand is still rigid, policies are gradually being clarified, and the high school sector is expanding. ① The high school education industry still has a demographic dividend period of 8-9 years, and residents' demand for education is still strong; ② From the policy side, the focus is on the management regulations of the private education industry at the compulsory education stage, gradually clarifying standards and categories, and strictly regulating the capitalized operation of private education groups, but the high school sector policy requirements are more moderate than at the compulsory education stage; ③ High school education shows that the share of financial expenditure in different school segments in China is not too low; the size of students and schools is still growing; ④ The size of the private high school market is still growing; The size of the private high school market is estimated to be 1434 in 2024 100 million yuan, or 36.8 billion yuan in 2032, CAGR is 12.23%. At the same time, the company accounts for less than 1% of the national private high school market. The share in Sichuan Province is only 16%, and there is still plenty of room for growth.
Competitive advantage: Reputation, leading teachers, and asset-light models extend boundaries. ① The company's local reputation and resource advantages are reflected in a higher acceptance rate than the industry average, strong training ability, high-quality teacher resources, mature and complete education system, and diversified training paths, which are the key to attracting students at a high cost; ② The company currently has 50 schools, including more than 33 high school campuses. Considering that FY24H1 has a total of 36,700 high school students (both inside and outside the table), the corresponding capacity utilization rate is 29%, and there is still plenty of room for improvement; ③ The hosting project is progressing smoothly, and it is expected that more than 50 students will become students. Second growth curve thickens performance.
Risk warning: policy risk, risk of falling short of expectations in escrow, increased siphon effect in developed regions