Shanghai General K12 training leader, industrial capital continues to be blessed. The company is a large-scale general K12 off-campus training company with Shanghai as the center, key cities as the fulcrum and the whole country as the target market. it originated from the work-study center of Shanghai Jiaotong University and has a famous education brand-"Onli Only". Through backdoor, it has become the first out-of-school training listed company in A stock market. After the educational assets were injected into the listed companies, the company was recognized and blessed by industrial capital, "Zhongjin system" and "Changjia system".
With the continuous increase of holdings, the Department of Jiaotong University gradually withdrew under the influence of university policies, and the company's ownership structure showed a "tripod" situation among CICC, Changjia and Jiaotong University. The change of ownership structure has brought about the adjustment of the company's development strategy, and the company has formulated the development strategy of "one body and two wings" and the implementation steps of "3x3" strategy, focusing on K12 out-of-school training, strengthening science and technology empowerment and national market development, and raising the off-campus training business to a new height. The company's education business has grown rapidly, with an operating income of 1.521 billion yuan in 2020, accounting for 84.11%. In the future, the company will increase the divestiture of long tail loss education business and non-education business, and focus more on K12 out-of-school training. The growth of education business is worth looking forward to.
The demand for extracurricular training in Shanghai is strong, and policies and norms help lead the development: since 2010, the overall population of freshmen in Shanghai has shown an upward trend, leading to the sustained growth of the scale of K12 students. In 2019, the number of students in primary, junior and senior high schools in Shanghai was 826300, 451000 and 159400 respectively, an increase of 27700, 38600 and 1200 respectively over 2015.
At the same time, the income level of Shanghai residents is relatively high, with a per capita disposable income of 72232 yuan in 2020, ranking first in the country. The superposition of population dividend and high income accelerates the release of education demand, subject training is rigid, quality training rises strongly, and family education consumption expenditure continues to grow.
At the same time, there is sufficient competition in Shanghai's off-campus training market, with industry leaders such as New Oriental Education & Technology Group and TAL Education Group, well-known educational brands in Shanghai, such as Onli Education, OneSmart International Education Group Ltd, and a large number of small and medium-sized institutions relying on famous schools and teachers, with a very significant echelon level. At present, the state standardizes and rectifies off-campus training institutions, and standardizes such training institutions as "without a license", "with a license", and "with different licenses" in accordance with the law. Those that fail to meet the requirements for running a school should be resolutely banned, which is conducive to the growth of leading out-of-school training institutions.
The deep ploughing in the region has achieved remarkable results, and the prospect of one body and two wings is promising. The company takes Shanghai as the center, key cities as the fulcrum, the country as the target market, adopts the business strategy of direct marketing + joining, vigorously develops the TOB and TOC business of K12 out-of-school training, has 214direct teaching centers and more than 1400 cooperative schools, serves the learning and growth of children aged 3-18, and is committed to becoming a respected and reliable first-class education service enterprise in China. The company adopts regional ploughing strategy to vigorously develop education and training business in Shanghai. The company has 174 directly operated teaching centers in Shanghai, accounting for 81.31%. In 2020, the Shanghai market contributed 84.36%, making it the main source of revenue and profit for the company. The company has formulated the development strategy of "one body and two wings" and the implementation steps of "334" strategy, focused on the core business of K12 training through the integration of the business department, and achieved the second growth curve through national expansion and science and technology endowment. Strive to build a professional, temperature, reliable education brand.
At the same time, the company will promote the strategic planning in two stages, that is, the implementation steps of the "3x3" strategy, and strive to basically achieve the development goal of "one body and two wings" by 2026. The company's development prospect is worth looking forward to.
The asset-liability ratio is relatively low, and profitability needs to be improved. By the end of 2020, the company's asset-liability ratio was 73.86%, and the asset-liability ratio excluding advance collection was 25.48%. The company's advance collection was mainly prepaid tuition fees, accounting for 65.47% of the total liabilities in 2020. On the whole, the company has less interest-bearing liabilities and a lower asset-liability ratio excluding pre-sale, which provides a larger leverage space for the growth of the company. The company's gross profit margin is relatively high, and the expense rate during the period is a drag on the company's performance.
The gross profit margin of the company's education business in 2020 is 32.71%, which is significantly higher than that of Ziguang University and ST, but the expense rate during the company period is higher, resulting in a lower net profit rate. In 2020, the company's sales expense rate and management expense rate were 27.07% and 20.37% respectively, which was significantly higher than that of Cod Education, Ziguang University and ST. As a result, the company's net interest rate in 2020 was-15.74%, resulting in a large loss. The company's cash-to-cash ratio is relatively high, but the cash flow as a whole is general. In 2020, the company's income-to-cash ratio was 98.57%, but the net operating cash flow was-74 million yuan, with a net operating cash outflow for two consecutive years.
Investment advice: strategic reshaping starts again, performance release will sometimes. From 2021 to 2023, we expect the company's operating income to grow by 8.23%, 25.26% and 20.16% respectively compared with the same period last year, and the growth rate of net profit from home is-148.0%, 28.6% and 32.9% respectively. The dynamic PE is 0.42,0.54 and 0.71 yuan, respectively, and the dynamic PB is 3.5,3.1 and 2.70 times respectively. The company is the leading enterprise of general practice training in Shanghai and the first listed company of out-of-school training in A stock market. Strategic reshaping helps to focus the company's main business, strengthen the core competence of K12 education and training, establish a product-driven business model with customer value as the core, contribute to scientific and technological empowerment, accelerate the layout of OMO products, and improve learning and teaching efficiency. It helps to build a "one Onstand" national expansion system, focus on key cities and establish a national business network. At present, the company's "one body and two wings" strategy is well implemented, the main business is more focused, the OMO model is rapidly promoted, direct outlets and the national network continue to be optimized, a large number of buybacks will increase employee incentives, and the company is expected to regain growth. Maintain the company's "buy-A" rating, with a target price of 16.8 yuan for the next 6 months, corresponding to 40 times the dynamic PE in 2021.
Risk tips: online education impact, education policy changes, the loss of students, cost control is not as expected, equity competition and so on.