Focus on the main business of education and look forward to further development
On April 26, the company released its 2020 annual report and 2021 quarterly report. Revenue of 2020 was 699 million yuan, YoY -43.97%; net profit of the mother was 156 million yuan (our previous forecast was 263 million yuan), YoY +30.24%; net profit of the mother after deduction was 130 million yuan, YoY -8.45%. The company plans to pay a cash dividend of 1.1 yuan (tax included) for every 10 shares. Q1 revenue of 2021 was 47 million yuan, YoY -45.00%; net profit of the mother was 4.05 million yuan, YoY -76.91%; net profit of the parent after deduction was 3.27 million yuan, compared to -5.57 million yuan for the same period last year. The company has achieved a 100% focus on the main education business, education informatization and vocational education layout have been initially completed, and plans to further strengthen investment, mergers and acquisitions to optimize the industrial layout in the future. The company's EPS for 2021-23 is expected to be 0.59/0.78/1.03 yuan, and the target price is 14.75 yuan, maintaining the “increase in holdings” rating.
100% focus on the main education industry, demand picked up in Q1 2021
The year-on-year decline in revenue in 2020 was mainly due to divestments of chemical assets. By the end of 2020, the company had completed the divestment of three chemical subsidiaries, achieving a 100% focus on education. In 2020, Oveia, the main entity in the education sector, had revenue of 461 million yuan, YoY -2.96%; net profit returned to the mother after deduction was 173 million yuan, YoY -12.61%, which contributed to the company's performance. In October 2020, the company acquired 27% of Huasheng Jingshi's shares in vocational education company Huasheng Jingshi for 290 million yuan. In 2020, Huasheng Jingshi achieved revenue of 338 million yuan, YoY +4.72%; achieved net profit of 79.7 million yuan, YoY +81.27%. The decline in Q1 2021 revenue was mainly due to divestments of chemical assets. Q1. The total number of contracts signed by Oveia was 49 million yuan, a significant increase of 102 million yuan over the same period last year.
The gross profit margin and period expense ratio for 2020 and Q1 increased by 54.43% year-on-year, YOY+20.57pct; among them, the gross profit margin of the education sector was 72.29%, YOY-4.4pct; the period fee ratio was 39.39%, YOY+17.17pct. Q1 2021 gross profit margin 68.86%, YOY+14.43pct; period fee rate 92.42%, YOY+40.28pct. The increase in gross margin and period expenses is mainly due to the divestment of chemical assets and the increase in the share of revenue from the education business. In 2020, the company increased investment in R&D, with R&D expenses of 99.51 million yuan, YoY +34.31%.
Benefiting from the dividends of education informatization and vocational education policies and maintaining the “increase in holdings” rating, taking into account the divestment of chemical assets, taking into account the divestment of chemical assets, we expect net profit attributable to the mother in 2021-23 to be 265/3.47/458 million (the original value was 324/391 million yuan in 21/22); EPS was 0.59/0.78/1.03 yuan. Comparable companies had an average PE of 23 times in 21 years. Considering that the “three classrooms” policy for education informatization will make recording and broadcasting more popular in the next three years than other segments, the company was given 25 times PE in 21 years, with a corresponding target price of 14.75 yuan (the original target price was 19.19 yuan). The company's education informatization and vocational education circuit benefits from national policy dividends. As a central enterprise, the company has resource advantages and maintains an “increase in holdings” rating.
Risk warning: Risk of uncertain implementation of education informatization policies, risk of rising raw material prices, risk of market competition risk, risk of impairment of goodwill, risk of mergers and acquisitions integration, and risk of the epidemic.