Main points of investment
The company's internal growth in 21 years is in line with expectations, and plans to acquire land for the expansion of Guangdong Institute of Technology in the future:
In fiscal year 2020, the company's revenue from + 21.4% to 867 million yuan, gross profit from + 25% to 606 million yuan, gross profit margin of 69.9%; net profit from + 23.8% to 564 million yuan, net profit rate of 65.1%; excluding exchange earnings and equity payments, the core net profit is 608 million yuan, + 35.3%. Harbin School and Huaibei Institute of Technology have sufficient capacity, of which Huaibei School can accommodate 10,000 students, and Harbin School has a maximum capacity of 20,000 students.
Harbin School is expected to merge in April, and the conversion and comprehensive consolidation of Huaibei Institute of Technology are progressing smoothly:
On March 29, the company announced that it would buy 55% of Huaibei Institute of Technology at a price of 197 million. Prior to this, in September 2019, Kopei and the Joint Venture Company (Huaibei Kepei) invested 140 million yuan and took a 45% stake, and construction of a new campus began in March 2020. The capital expenditure of the school has invested a total of 900 million yuan. In terms of funding sources, scientific training has invested 500 million yuan through initial equity investment and current loans, and the remaining 400 million has been invested through JV Huaibei scientific training loans. At present, the Education Department of Anhui Province has approved the transfer of Huaibei Institute of Technology and is waiting for the final approval of supervision. Kopei spent a total of about 340 million yuan on the acquisition of equity in Huaibei Institute of Technology, which means a high sex-price ratio from the perspective of equity acquisition consideration. 2021 is the first year of enrollment, with a quota of 1500 students, ranking first in private schools in Anhui Province, reflecting the strength of science and technology education. After the completion of the acquisition, Huaibei School will be fully integrated with the science training, and the income and profits generated by the freshmen after September 2021 will belong to the science training.
Maintain the buy rating and maintain the target price of HK $7.0:
We believe that the higher education industry will continue to benefit from the increase in gross enrollment rate in the next five years, and the proportion of junior college students in Guangdong has increased from 15% to 25% in 21 years. It also confirms that the reform of the college entrance examination of vocational education in the 14th five-year Plan proposed in our annual strategy will bring high magnanimity to private higher education. We expect that the company's three undergraduates will maintain a strong endogenous growth force in the future, and without considering new extension mergers and acquisitions, the net profit CAGR in the next three years is expected to reach 20% 25%. The company has sufficient credit space and its capital expenditure can be controlled this year and next. The merger table of the Huaibei project as scheduled reflects the company's M & An ability and execution, and the extension M & An is worth looking forward to. Combined with the valuation of the industry, we give the company 16 times its target PE in 2021, with a target price of HK $7.00, which is 30.8% higher than the current price and maintain its "buy" rating.