Strong endogenous growth + high-quality post-investment management + policy risk is limited, maintain the "buy" rating: FY20 outstanding performance, completed in March 2020 Harbin school take over and realize the profit statement, with the successful change of the organizers, 21Q2 Harbin school income will be realized and table; Huaibei School has also landed, will gradually begin to climb the slope in FY21.
We are optimistic about the rapid growth of the management ability and endogenesis of the group after investment. In addition, the policy risk of the higher education section is relatively small. It is estimated that the company's income from 2021 to 2023 will reach 1.845 billion yuan, and the net profit will reach 1.14 billion yuan.
Maintain the "buy" rating and maintain the target price of HK $6.80, corresponding to the 2022 PE, which is 10 times that of the 12max in 2023.
FY20 income + 21.4% the number of undergraduates in the 2020 academic year + 63.7% the company recorded an income of 867 million yuan in 2020, which was + 21.4% compared with the same period last year. Tuition fees are still the company's main source of income, accounting for 95% of the company's total income, reaching 824 million yuan, + 25.7% compared with the same period last year. During the period, the undergraduate tuition fee of the company was + 28.4% compared with the same period last year, mainly driven by the increase of 22.8% of science undergraduates in Guangdong; if you add the contribution of Harbin school, the number of undergraduate students of the company increased by 63.7% to 39000 compared with the same period last year. In addition, the tuition fees for adult education and secondary vocational education increased by 48.8% and 53.6% respectively over the same period last year, mainly due to the increase in the number of people.
The gross profit margin is robust, and the sales expense rate goes down: 2020 of the company recorded a gross profit of 606 million yuan. Benefiting from the optimization of student structure and the increase in average tuition fees, the company's gross profit margin reached 69.9%, year-on-year + 2.4pct. The company has made a relatively significant improvement in the sales expense rate, although the return of accommodation fee of 6 million yuan during the epidemic period and the delay of the start of the school year caused 9 million of the income to be delayed, the sales expense rate decreased by 0.8pct to 2.6% compared with the same period last year, the management expense rate increased by 12.9%, up 2.1 pct year-on-year, and the financial expense rate reached 1.0% year-on-year increase of 0.7 pct, due to the increase in share incentive fees and M & A-related expenses.
Strong ability of acquisition and integration, has completed the acquisition of 100% of the rights and interests of the organizers of Harbin College, and the income of FY21 is consolidated.
In March 2020, the company has completed the trusteeship transfer of Harbin College, and 20Q2 has realized net profit and statement. Under the management of the company, FY20 Harbin College has achieved obvious results, with + 14% of students, + 11% of revenue, + 33% of net profit and + 900 BPs of net interest rate, which has contributed 91 million yuan of service management income to the company, reflecting the strong integration ability of the company. The company completed the change of the sponsor of the school on March 31, 2021, after which Harbin College's income will be consolidated, which is expected to bring flexibility to the group's FY21 income.
With plenty of cash and equivalents, the capacity continued to expand to support endogenous growth, and Huaibei School landed. 2020 cash and equivalents reached 1.294 billion yuan, the financial position is good. The construction of the third phase of the Xindinghu campus of Guangdong Institute of Technology was completed in the first half of 2020, which can accommodate an additional 2800 people. The Gaoyao campus dormitory can accommodate about 2400 more students and is expected to be completed in the second half of 2021. In addition, the company achieved 100% holding of Huaibei Institute of Technology in March 2021, and the school is expected to complete the transfer and enroll the first class of students by September 2021. The number of FY21 students is expected to reach 2300, contributing more than 20 million of the company's income.
Risk tips: 1), the process of school acquisition and integration is not as expected; 2), the number of qualified teachers hired and retained is not as expected; 3) the number of students enrolled is less than expected; 4), changes in China's education policy.