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卓越教育集团(3978.HK):立足广州 剑指广东省外市场

Excellent Education Group (3978.HK): Based in Guangzhou, pointing to markets outside Guangdong Province

華西證券 ·  Jul 18

Recommended logic: Industry demand is rigid. The company actively transformed and returned to the expansion period as a leading K12 education leader in South China. After implementing the “double reduction” policy, it actively transformed quality education to achieve balanced business development in the three parts of quality education, high school and vocational education counseling, and full-day preparation for examinations. We believe that its performance is quite flexible under marginal policy improvements. In addition to Guangzhou, Shenzhen and Foshan still have a lot of room. The company's revenue for 24-26 is 0.646/0.842/1.09 billion yuan, corresponding growth rate is 32%/30%/29%; net profit to mother is expected to be 0.116/0.161/0.22 billion yuan for 24-26, corresponding growth rate is 27%/39%/37%, corresponding EPS for 24-26 is 0.14/0.19/0.26 yuan, 2024/7/ The closing price of HK$2.85 on the 17th corresponds to the 24-26 PE of 18.7/13.5/9.9X. It was covered for the first time. The purchase rating was given, and the company was given a valuation of 25X in 2025, corresponding to the target price of HK$6.18.

Company Overview: Based in Guangzhou, expanding to Shenzhen and Foshan

Comparing before and after the double reduction, we analyzed the company's changes: 1) revenue has not yet returned to the highest level before the double reduction; 2) but both gross profit margin and net interest rate have reached record highs, thanks to increased teacher capacity utilization; 3) Operating indicators: the number of people has not recovered to before the double reduction, and prices have returned to before the double reduction.

Industry analysis: Guangzhou has obtained certificates in the region, which is more conducive to expansion

After the reduction of excellence, only the Guangzhou region remained, but expansion was resumed last year, opening high schools and quality education and training centers. According to our estimates, the Guangzhou/Shenzhen K12 education and training market is expected to reach 41.1/45.4 billion yuan in 2024. In the long run, it is expected to reach 56.4/75.3 billion yuan in 2028, corresponding to a CAGR of 8.7% 13.6% in 23-28, which is expected to exceed 130 billion yuan in total.

After the double reduction, Guangzhou held several special meetings to standardize the management of non-subject out-of-school training institutions. Each district began issuing for-profit non-subject school licenses. Educational institutions that have obtained this certificate within the region can conduct quality education without restrictions on the area or number of outlets. Compared with Shenzhen, which needs to apply for a license to operate schools according to outlets, Guangzhou's quality education and training leader can expand more rapidly.

Competitive advantages: strong language+strong teacher stability+strong reputation

1) Quality education continues to have strong language advantages, and there is plenty of momentum for long-term growth; 2) A complete teacher team training system, AI empowers the teaching environment; 3) High class retention rates, low refund rates, and good reputation create barriers to competition.

Growth Drivers: Expanding Area+Expanding Outside the Province

1) Currently, in addition to its Guangzhou headquarters, the company has set up learning centers in Shenzhen and Foshan to actively expand quality education in the Greater Bay Area. 2) According to our estimates, after the double reduction, the company's learning center was slightly profitable in the first year, benefiting from demand greater than supply after the double reduction. The full class rate, renewal rate, number of students per class, etc. all increased, and sales expenses, R&D expenses, etc. all declined. According to our estimates, the company is expected to achieve a 22% net profit margin after the 1,200-square-meter store matures.

Risk warning

Market competition risk; risk of network expansion falling short of expectations; risk of tuition fee increases and student enrollment falling short of expectations; risk of loss of management team and teaching staff; systemic risk.

The translation is provided by third-party software.


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