Steady growth in revenue and continued improvement in profitability
FY2020 realized revenue of 555 million yuan (+ 10.7%) and refunded 34 million yuan of accommodation fees affected by the epidemic. Based on the effective control of costs and expenses, profit margins have increased significantly. The gross profit margin is 60.4% (+ 4.6%) and the net profit is 193 million yuan (+ 53.9%). After adding back the listing fee, the adjusted net profit is 203 million yuan (+ 34.3%), and the adjusted net profit rate is 36.6% (+ 6.5%). There is still plenty of room for improvement in the future. Earnings per share were 0.47 yuan, with an interim dividend of HK10.00 cents per share and a final dividend of HK8 cents per share. The full-year dividend payout rate was 33.6%.
Both volume and price have risen, and the third phase of the project has been carried out as scheduled.
The total number of students in FY2020 is 21300 (+ 7.5%), representing a compound growth of 9.0% over the past four years. The third phase of the project, which began in September 2020, is expected to be put into use in September 2022, and the campus capacity will be increased by 4000 to 26000. The total investment is expected to be about 340 million yuan, and 41 million yuan has been invested by the end of 2020. In terms of extension mergers and acquisitions, the company will continue to pay attention to complementary or high-quality targets dominated by undergraduate universities in East China. In terms of tuition adjustment, the tuition fees for some freshmen majors increased by 30.0% to 40.0%, and the average annual chemistry fee for students was + 6.9% compared with the same period last year. Undergraduate tuition is still at a low level in private colleges and universities in Shanghai. With the completion of for-profit conversion, there will be more room for improvement in tuition fees.
The quality of running a school is high, and the regional advantage is obvious.
Jianqiao College ranks fourth in the 2020 ranking of private universities of the Alumni Association; among undergraduate majors, it ranks among the top 10 private universities in the rank of 2 to 3, and 5 to 6 in the top 20. The employment rate of graduates and the rate of going abroad are high, with 79 overseas cooperative colleges and universities. The company is located in the new Lingang area of Shanghai, and its regional advantages are as follows:
1) Shanghai is naturally attractive to non-local students; 2) enjoy resources and policy dividends to realize the integration of industry and education city; 3) talent policies such as limited-price commercial housing and talent apartments are conducive to attracting and retaining talents and further improving the quality of running a school.
By raising its profit forecast, maintaining a reasonable valuation range and a "buy" rating, the company is expected to generate revenue of 7.20,8.34 and 973 million yuan for FY2021-2023, respectively, with adjusted net profit of 2.77,3.52 and 435 million yuan, respectively. The forecast PE for 2021-2023 corresponding to the company's closing price of HK $6.08 on March 26 is 4.88 times that of 7.66 pound. We maintain our "buy" rating and reasonable valuation range of HK $6.72 to HK $9.41.
Risk hint
The progress and quality of expansion are not as expected, and the progress of the conversion of for-profit colleges and universities is not as expected.