Guosen Securities released a research report stating that it maintains a 'outperform' rating on tianli int hldg (01773) for 2024, with revenue performance exceeding the bank's previous expectations, once again proving its excellent educational capabilities. Considering the positive attitudes expressed in many regions' recently enacted private education policies, from a regulatory standpoint, the industry has passed its most difficult period, and the company's educational capabilities continue to be validated (in 2024, the undergraduate rate of maturity in Sichuan maintained above 90%, far exceeding the provincial average). In addition, the company has expanded multiple business lines to external schools within the group, with future potential to bring more revenue and performance flexibility.

Guosen Securities' main points are as follows:

The company's net income grew by 56% for the 2024 fiscal year, exceeding expectations.

In the 2024 fiscal year, the company achieved revenue of 3.321 billion yuan, up by 44.2%, achieved net income of 0.556 billion yuan, up by 66.3%, adjusted net income of 0.577 billion yuan, up by 56.4%, in line with the previously disclosed revenue growth of +43% and adjusted net income of +56%. It also exceeded the bank's previous expectations (adjusted net income of 0.56 billion yuan), reflecting the company's outstanding operational capabilities.

Looking at different business segments, for the 2024 fiscal year, the company's comprehensive education business revenue increased by 43%, product sales business revenue increased by 66%, comprehensive logistics +23%, custodial business +53%, with each business segment accounting for 53% (steady)/28% (+4%)/18% (-4%)/2% (steady). The comprehensive education business continues to achieve high growth, benefiting from a continuous increase in high school enrollment (1.037 million students in the 2024 academic year, +45%, and the preliminary enrollment of 1.054 million students in the 2025 academic year, +47%), as well as the rapid growth of post-epidemic study tour business. The product sales business has a fast growth rate, benefiting from expanded sales channel layouts in many regions, with the supply chain business growing by 97%. The custodial business benefited from an increase in custodial projects and achieved rapid growth, with the company adding 14 custodial segments in this fiscal year.

Under the effect of scale, the operating expense ratio continued to decline.

The company's adjusted net margin for the 2024 fiscal year was 17.4% (+1.4%), with a gross margin of 33.7%. However, the operating expense ratio decreased by -2.2% to 12.5%, with the sales expense ratio increasing by +0.6% to 2.1%, mainly due to the growth in business sales personnel and advertising spending; the management expense ratio decreased by -2.7% to 7.8% (if excluding stock-based incentive expenses, the management expense on the same basis only increased by +1.8% year-on-year, reflecting the company's strong cost control capabilities), additionally, the financial expense ratio benefited from the domestic interest rate decline at 2.6% (-0.1%).

The combination of light and heavy assets transformation drives ROE to a record high, utilizing ample cash flow to actively reward shareholders.

The company maintains a cautious attitude, only considering heavy asset self-built schools in core areas, while the external expansion of schools will be mainly achieved through leasing. Under the combination of light and heavy assets transformation, this fiscal year's capital expenditure decreased by 32.2% to 0.407 billion yuan, with ROE further increasing by 8.5 percentage points to a new high of 24.3%. In addition, the company will also use more abundant cash flow to actively return value to shareholders. Since July 2023, the company has spent approximately 0.14 billion Hong Kong dollars to repurchase 46.32 million shares, and maintains a stable dividend policy (2024 fiscal year dividend payout ratio is 30%, and is expected to maintain this ratio in the future).