Overview of events
The company announced that on January 28, 2021, Guangdong University of Technology, Huali Investment and Huali College signed the "transition Cooperation Agreement for the transfer of Huali College of Guangdong University of Technology". Huali Investment and Huali College agreed to pay a total of RMB 160 million in three instalments to Guangdong University of Technology, which will be paid before October 31, 2022 and October 31, 2023, respectively. After the transition period, Huali College will no longer continue to pay 17% of the management fee to Guangdong University of Technology.
Analysis and judgment:
According to our analysis, the subsequent conversion still needs the review and formula of the Ministry of Education, and the compensation fee is about 2 times the management fee, which is fair and reasonable among the peers, and its financial impact is an one-time expenditure. After the completion of the conversion, the advantages are as follows: (1) the newly established independent private undergraduate colleges and universities will no longer pay management fees to Guangdong University of Technology, which is expected to improve profitability. FY22-25 is expected to save management fees of 3400lash, 8000lash, 12300lash, 16400,000 yuan. (2) the student growth potential of the newly established independent private undergraduate colleges and universities will be further released, leading to an increase in income. It is expected that the number of students in this year's special enrollment / general enrollment will be about 2000 million; (3) it will help to add high-end high-quality higher vocational education that the market urgently needs, and build its own core competitiveness and high-quality school-running brand. Huali University has obvious advantages in engineering majors, focusing on cultivating civil engineering, mechanical design and manufacturing, and automation majors. The admission score exceeds the provincial control line by 27 points, which is 68 points higher this year, and the quality of freshmen has steadily improved. In addition, the company's enrollment rate is 94.5%, a further increase of 3.5 pct. In the context of the epidemic, it still achieved an employment rate of 93.1%, exceeding the provincial average of 10 pct. The employment salary reached 4498 yuan, and the professional counterpart rate was 83.8%.
Investment suggestion
To maintain the estimated FY2021/22/23E income of 1.16 billion yuan, considering the effect of compensation expenditure, it is estimated that the FY2021/22/23E EPS will be adjusted from 0.32, 0.39 and 0.45 to 0.26, 0.36, 0.41, corresponding to FY2021/22/23PE in 9-7-6. The main points of the company are as follows: (1) considering that the gross enrollment rate in Guangdong Province has more room for improvement, so it is accompanied by the expansion of Zengcheng and Yunfu campus. And Jiangmen Campus plans to apply for a new college license, and Huali technician College will usher in an increase in enrollment after changing its academic system. (2) the tuition fee will be increased by 10% every two years, and it is expected that the vocational college will be upgraded to an undergraduate course; (3) the performance of the independent college will be thickened after the conversion of the independent college; (4) there is plenty of cash on hand, and there are expectations of mergers and acquisitions in the future; (5) the net interest rate is likely to improve. We believe that the long-term enrollment of the company is expected to reach more than 100000, comprehensive company low valuation and high growth space, maintain the "buy" rating.
Risk hint: the enrollment situation is not up to the expected risk, policy risk, initial release risk, systemic risk.