The higher education group, which runs high-quality schools, has recently been disturbed by the fact that four universities under the group have contributed 3% of revenue and 4 major achievements, and the group has been adjusted to return to the mother of 50% + and ROE close to 30%, all leading the industry, mainly due to the vigorous development of higher education business and adhere to the high-quality school-running strategy. Recently, under the influence of double reduction documents, the company's stock price has been mistakenly killed, and the 21-year PE is less than 10 times, which is significantly lower than the historical average of 15-20 times.
Company advantages: high-quality M & An integration ability, brand and employment advantage 1, high-quality M & An integration ability: in terms of mergers and acquisitions, the acquired schools in Hunan and Shandong are all high-quality large-scale undergraduate schools. they all rank among the top 10 private universities, with an income of more than 500 million yuan and more than 30,000 students. In terms of integration, the tuition fees, the number of students, the enrollment rate, the net interest rate and even the comprehensive ranking of the target school have been significantly improved.
2. Brand and employment advantage: in terms of brand, its schools are all local famous schools with strong profitability. Zhengzhou / Hunan / Shandong schools are all ranked as the TOP1 of private universities in the province, and the net interest rate is expected to be close to 60% more than 50% / close to 50%. In terms of employment, the employment rate of college students in its domestic colleges and universities reached more than 90 per cent in 2017-19 and was affected by the epidemic in 20 years, of which the employment rate of graduates of Zhengzhou school in 2016-19 increased from 83 per cent to 95 per cent.
Future growth point: endogenous growth + epitaxial mergers and acquisitions
1. In terms of endogenous growth, 1) quantity increase: the estimated number of students enrolled in FY21-23 Zhengzhou / Hunan / Shandong / Stanford School CAGR10%/10%/6%/7% to 4.31 to 3.95 Plus 0.52 million, driven by the expansion of the campus, the increase in school places and the increase in enrollment rate. 2) Price increase: the per capita tuition and miscellaneous fees of FY21-23 Zhengzhou / Hunan / Shandong / Stanford school is expected to CAGR4%/7%/8%/5% to 1.47, 2.45, 20.9, 3.80 million yuan, driven by the increase in tuition fees and structural growth of freshmen; 3) profitability improvement: the average net interest rate of FY2021-23 Zhengzhou / Hunan / Shandong / Stanford school is expected to be 61%, 54%, 49%, 39%, which is 2-9pct higher than that of FY2020. 4) turn some K12 schools into self-built colleges.
2. In the aspect of extension M & A, the integration strategy of high-quality M & A will continue in the future.
Profit Forecast and Investment suggestion
Change the revenue of FY21-23 from 2.78 billion to 2.704, 29.73 and 3.265 billion (considering the latter is the total revenue), with a year-on-year growth rate of 12.2%, 9.9% and 9.8% over the same period of last year. The adjusted net profit was changed from 1.81 billion yuan to 1.604 billion yuan (taking into account the change in profitability), with a year-on-year growth rate of 34.5%, 14.6%, 11.1%, from 1.84 billion yuan to 1.604 billion yuan, with a year-on-year growth rate of 34.5% and 14.6%. Give FY2022 15 times PE, corresponding to FY2022's reasonable market capitalization of 24.1 billion yuan, the target price of HK $8.63 (HK $1 = HK $0.83), upgraded to the "buy" rating.
Risk hints: the risk of adjustment of national regulations and policies, the risk of aggravating market competition, the risk that the progress of acquisition and expansion is not as expected, and systemic risk.