Brief performance review
The company plans to acquire Olympic Academy for 450 million yuan, and a full-time undergraduate program in arts and sports will be established. On June 22, the company announced that it plans to acquire 100% of the Olympic College's interests from Jiangsu Huahong Science and Education Investment Group with 450 million dollars in cash. The Olympic Academy is located in Jiangning District, Nanjing. It is a second-level college of the Nanjing Institute of Physical Education. It is currently the only higher education carrier named “Olympic” in China, providing undergraduate education featuring sports. The company expects to complete settlement by September 2021. The acquisition will further enrich the company's in-depth layout on the arts and sports circuit.
There is still a lot of room for improvement in tuition fees and tuition, and the Group's performance is expected to increase further in the future: 1) Number of students: As of May 2021, the number of students enrolled in the school is about 3,000, and the company plans to plan about 500 acres of land. It is expected that the number of students enrolled in the next 4 years will reach about 11,000 students, with a cumulative increase of 80,000 new places; 2) The average tuition fee for Olympic College in the past academic year is about 15,000 yuan/year, while Jiangsu Province has published documents indicating that tuition fees for the Olympic Academy will be fully opened up in the future. In 2020, Olympic Academy earned 47.1 million yuan and net profit of 3.74 million yuan. In the future, as tuition fees and tuition quotas increase, the Group's overall performance is expected to increase further.
The Olympic Academy has a high degree of compatibility with the company's existing Nanchuan majors, which can form effective collaboration and cultivate complex talents. The Olympic Academy is still a second-level college at this stage. After the merger and acquisition, it will be transferred to the Nanjing University of Communication. As a second-level college of the Nanjing University of Communication, the culture and sports themselves are not separated. The professional compatibility between Nanchuan and the Olympic College is high. Among the 8 majors of the Olympic Academy itself, in addition to 3 sports majors, there are also 5 media majors. It is expected that the two schools will effectively collaborate in the fields of sports+film and television art, sports+news, communication and marketing in the future.
There is still a big gap in the supply of sports talents in China compared to the industry's growing demand, and there is room for growth in sports higher education. According to State Council documents, it is hoped that by 2025, the total scale of the sports industry will exceed 5 trillion yuan, and according to the company's forecast, in 2020, the total size of China's sports industry will be about 3 trillion yuan, with about 6 million employees, and about 120,000 national sports graduates each year. Compared with the rapid development of the industry, China still has a large gap in the supply of sports talents. The Olympic Academy is expected to usher in more room for development in the future and cultivate higher-quality industry-university-research integrated talents.
Profit forecasting and investment ratings: The company mainly lays out art tracks, and there is a certain scarcity of targets. On the endogenous side, there is still a lot of room for improvement in future tuition fees and student numbers of Nanjing University of Communication. In terms of outreach mergers and acquisitions, the merger and acquisition of Shuimuyuan and Olympic College has further expanded business and enhanced performance.
Since the Olympic Academy has not yet been fully settled, we keep the company's 21-23 net profit forecast of 440 million yuan/580 million yuan/720 million yuan unchanged. The latest closing price corresponds to PE 18/14/11 times that of the 21-23 fiscal year, respectively, maintaining the “buy” rating.
Risk warning: enrollment falls short of expectations, mergers and acquisitions project integration falls short of expectations, etc.