Core views

24H1 revenue and adjusted net profit were +58.8% and +101.1% year-on-year. The profit growth rate was faster than the increase in the utilization rate of teachers in the main departments of revenue, which led to an improvement in gross margin and a decrease in cost ratio due to scale effects. 24H1 non-subject quality courses and subject training were +57.8% and +70.6% year-on-year, thanks to the increase in the number of students. By the end of June 2024, the number of company outlets was 145, a net increase of 35 over the end of last year, and the contract debt was 0.249 billion yuan/ +93.2%.

Looking ahead to 24H2, ① In the short term, the expansion of teaching outlets and teacher team reserves are poised for subsequent growth; ② the overall slight increase in customer unit prices for 24H1 quality education and subject guidance courses reflects that low-cost classes and promotional activities have not affected customer unit prices, and short-term concerns about the competitive landscape can be mitigated; ③ Cost rates are expected to decline due to the expansion of standardized outlets and increased teacher utilization, and profit margins are expected to continue to rise; ④ In the medium to long term, the company's offsite expansion strategy will blossom from full bloom before the double reduction to a key breakthrough in individual major cities. city.

occurrences

The company announced 24H1 results: 24H1 revenue 0.399 billion yuan/ +58.8%, operating profit 0.114 billion yuan/ +129.2%, net profit to mother 0.083 billion yuan/ +92.5%, adjusted net profit of 0.094 billion yuan/ +101.1%.

Brief review

24H1 saw a high increase in revenue and performance, in line with previous performance forecasts. 24H1's revenue was 0.399 billion yuan/ +58.8%, and adjusted net profit was 0.094 billion yuan/ +101.1% (the adjustments were mainly employee equity incentive expenses of 0.011 billion yuan), in line with the guidelines given in the previous performance forecast.

Profit is growing faster than revenue, mainly due to improved gross margin driven by higher teacher utilization rates and lower cost ratios due to scale effects.

By business, the high number of 24H1 students has driven the volume of non-subject quality courses and subject training, and learning outlets continue to expand. 1) Non-academic quality business: 24H1 revenue 0.367 billion yuan/ +57.8%, revenue accounting for 91.8%, number of students 0.1697 million/ +57%, number of lessons 4.2029 million hours/ +57%, customer unit price for non-academic quality courses is 87.2 yuan/class hour, same ratio +0.5%; 2) 24H1 subject tutoring course revenue 0.033 billions/ +70.6%, revenue share 8.2%, number of students 0.0147 Million students/ +70.1%, 0.3614 million class hours/ +70.2%, tutoring course customer unit price was 90.2 yuan/class hour, +0.2% year over year. By the end of June 2024, the number of company outlets was 145, a net increase of 35 over the end of last year, and the contract debt was 0.249 billion yuan/ +93.2%. The company has rich reserves of principals and teachers, and the 24H1 staff is 2603 persons/ +48.2%.

Due to increased teacher utilization and scale effects, the cost rate decreased, and 24H1 profitability continued to increase. 24H1 gross margin is 44% /+3pct, which is estimated to benefit from increased teacher capacity utilization; 24H1 sales, management, and R&D expenses ratio is 1.6% /-0.41pct, 14.1% /-5.98pct, 2.6% /-0.82pct, 24H1 net profit margin and adjusted net profit margin to mother is 20.71% /+3.62pct, 23.44% /+4.93pct.

Looking ahead to 24H2, 1) In the short term, the expansion of teaching outlets and teacher team reserves are poised for subsequent growth; 2) the overall slight increase in customer unit prices for 24H1 quality education and subject guidance courses did not affect the customer unit price, and short-term concerns about the competitive landscape can be mitigated; 3) Along with the expansion of standardized outlets and the increase in teacher utilization, the cost rate is expected to decline under the scale effect. 4) In the medium to long term, the company's offsite expansion strategy is expected to continue to rise; 4) In the medium to long term, the company's offsite expansion strategy is expected to fully blossom from single to full bloom before both declines. Major cities have made major breakthroughs, and Guangzhou will take over Next, it is the core city that the company is focusing on developing.

Profit forecast: The company's revenue for 2024-2026 is expected to be 0.828, 1.14, 1.53 billion yuan, +45.1%, +37.5% year over year; adjusted net profit to mother is 0.169, 0.238, 0.327 billion yuan, +56.7%, +40.8%, and 37.2% year over year, corresponding PE is 17.4X, 12.4X, 9.0X, maintaining a “buy” rating.

Risk warning:

1) Policy supervision risks: In the context of strict K12 education and training policies, the company strictly complies with existing education regulations and policies, implements the national “double reduction policy”, and closely monitors changes in the industry situation. If the policy changes in the future, it will have an impact on the company's operations.

2) Risk of new business development falling short of expectations: The company is expanding non-disciplinary training business and the new business is in a rapid expansion stage. If subsequent new business expansion falls short of expectations, it may affect the company's overall performance.

3) Risk of rising operating costs: Affected by national macroeconomic policy factors, the company will adjust its business operation strategy according to the actual situation. It may face problems such as brand reconstruction, curriculum refinement, re-recruitment and training of teachers and staff, market re-investment, site renovation, license renewal, etc., which may increase the company's operating costs and cause the company's profit level to decline.