FY20 net profit increased by 53.9% year-on-year
Jianqiao Education announced that FY20 revenue increased by 10.7% year-on-year to 560 million yuan (the same below). Driven by the increase in campus utilization, the gross profit margin during the company period rose to 60.4% from 55.8% last year, higher than expected. The utilization of the campus for building bridges has reached 90%. In 2019, the number of students enrolled in the 20 academic year was more than 19000, an increase of 11.5%. The company's FY20 net profit was 190 million, up 53.9% from the same period last year, involving listing fees of about 10 million and an adjusted net profit of 200 million. Performance growth is in line with market expectations.
The company pays a dividend of HK $0.18 for the whole year, with a dividend payout rate of about 33%.
Steadily increase the scale and create high-quality higher education in Shanghai
Shanghai's high-quality education resources are widely welcomed by students from other provinces, and the admission scores of Jianqiao College in recent years are higher than the provincial control line. To build the bridge, the tuition fees for five undergraduate majors and three majors will be increased by about 30% and 41% in the 21st academic year, respectively. According to the market demand, the tuition fees for health service and management majors and arts and technology majors will be increased to 3.8 yuan per year.
A total of 6300 new students were enrolled in 2020 in the 21st academic year, with an increase of 446 students. The campus expansion plan for the construction of the bridge is well under way. The third phase of the Lingang project includes two student dormitories and a teaching building, with a construction area of 61000 square meters and a capacity of 4000 additional beds. By the end of 2022, school capacity will increase by an additional 18% to 26,000 beds. By the end of December, the company had cash on its books of 720 million yuan, interest-bearing loans of 1.13 billion yuan and a net debt ratio of 24.7 percent. The company is in good financing condition, with an average loan interest rate of 4.6% Mel 4.9%. Jianqiao has signed an unused comprehensive credit and bank loan line of 4 billion yuan with the bank, providing strong support for the company's scale expansion.
Target price of HK $8.30 to maintain the rating
We believe that under the strategy of building bridges and actively expanding new campuses, the campus will have abundant capacity and will continue to grow at a relatively rapid rate in the next two years. FY21E/22E revenue is forecast to rise 18.9 per cent year-on-year by 16.8 per cent and net profit by 25.8 per cent year-on-year. On the basis of excluding the acquisition of new projects, maintain the company's annual capital expenditure of 20-300 million yuan, mainly for the construction of a new campus. We maintain a target price-to-earnings ratio of 11 times forward earnings with a target price of HK $8.30. The company is now valued at only 8.1 times FY21E's price-to-earnings ratio, which we find attractive.
Investment risk
1) the number of students enrolled in campus education is lower than expected; 2) policy risk.