Q1 is picking up, the leading logic of the racetrack remains unchanged
Doushen Education released its 2020 annual report and 2021 quarterly report. Revenue for 2020 was 1,386 billion yuan, YoY -30.0%; net profit for return was 2,567 billion yuan (impairment of goodwill of 2,099 billion yuan), which was 102 million yuan in 2019. Annual performance was lower than anticipated (-2,466 million yuan to -1,980 million yuan). 2021Q1's revenue was 239 million yuan, YoY +81.1%; net profit from the parent company was 45 million yuan, and 20Q1 was -140 million yuan. Q1 The turnaround in performance was mainly due to the rapid recovery of major language services after the pandemic and the rapid development of online business. We believe that the company enjoys the dividends of language curriculum reform and examination reform. With its unique innate resources and “online+offline” complex operation model, it is expected to develop rapidly. The company's EPS for 2021-23 is expected to be 0.28/0.40/0.59 yuan, maintaining the “increase in holdings” rating.
The growth of the big language business is picking up in Q1, and we look forward to further financing
In terms of major language business, Chinese will receive 524 million yuan in cash in 2020, YoY -4.74%; revenue of 565 million yuan, YoY +25.91%; net profit of 156 million yuan, YoY +12.23%, and net interest rate of 27.61%. 2021Q1 cash receipts were 90 million yuan, YoY +86.77%; revenue was 128 million yuan, YoY +42.53%. As of March 31, 2021, the number of directly managed learning centers was 98, and the number of affiliated learning centers was 384. The number of applicants for branch school business (corresponding to the original offline business) Q1 was 25548, YoY -3.78%. Due to the rectification of the education and training industry, the resumption of major language services and offline training services in Beijing has been affected to a certain extent. On March 31, the company's refinancing was approved by the Shenzhen Stock Exchange. It is proposed to raise no more than 2 billion yuan for the development of major language business.
Other businesses have been affected by the epidemic and performance has been dragged down, and goodwill risk has been reduced. Other businesses other than the company's main languages have been greatly affected by the pandemic. In 2020, the company's further education service business (100 Years of Talent and Study Abroad 360) achieved revenue of 31 million yuan, YoY -87.35%, and net profit of 93 million yuan; smart education business achieved revenue of 689 million yuan, YoY -33.46%, of which Kangbang Technology had revenue of 455 million yuan and net profit of 506 million yuan; and information security business revenue of 86 million yuan, YoY -58.69%.
Losses in some subsidiaries caused the company to lose 2,099 billion yuan in goodwill in 2020. Currently, the company's goodwill book balance is 602 million yuan, mainly due to future acquisitions of Chinese.
The logic of the leader in the Big Language Circuit remains unchanged, maintaining the “increase in holdings” rating
According to the annual report and quarterly report, we adjusted the company's profit forecast. The company's net profit for 2021-23 was estimated to be 239/348/509 million yuan (the value before 21-22 was 277/502 million yuan), and the corresponding EPS was 0.28/0.40/0.59 yuan. The 21-year average PEG for comparable companies was 1.00. Considering that the company has many other assets that have not yet been divested, and given a certain valuation discount, we lowered the company's target price to 11 yuan (previous value: 20 yuan), corresponding to PEG in '21 to 0.87 (the average growth rate of EPS in 22-23 was 45.88%), maintaining the “increase in holdings” rating.
Risk warning: education policy risk, risk of performance falling short of expectations, risk of brain drain, risk of failure to effectively implement listed companies' strategies, risk of the pandemic affecting offline teaching.