Core ideas:

Domestic vocational education leader, across cooking, information technology, auto repair, beauty industry four major fields. Founded in 1988, the company has been ploughing the vocational education industry for more than 30 years, with 7 school brands in cooking, information technology, auto repair and beauty industry. by the middle of 23 years, the number of schools and centers in operation has reached 244. The company has a centralized ownership structure and rich management experience.

The demand of vocational education industry is strong, and the industry concentration is low. The company is located in a large space for non-academic vocational education industry. According to Frost Sullivan data, the scale of domestic non-academic vocational education reached 221.5 billion yuan in 2021, and the CAGR is expected to reach 8.4% in 21-26 years. The domestic vocational skills training market is highly dispersed, and the number of training institutions shows a trend of continuous clearance, and the industry pattern continues to improve.

China Oriental Education: enrollment, teaching, employment three virtuous circle, the new track expansion is expected to open up the incremental market. (1) enrollment: brand word-of-mouth and media advertising marketing, the number of students is rising steadily; (2) teaching: the combination of high-quality courses and senior teachers to create solid teaching hardware; (3) students' employment: the combination of schools and enterprises + employment entrepreneurship training activities to provide multiple support for students' employment. In addition, the company is actively exploring cross-track replication, vocational skills training tracks can be replicated strongly, the future growth can be expected.

Under the impact of the epidemic, the performance fluctuated greatly, and 23H1 income returned to growth. After 2019, due to the difficulties in offline enrollment and teaching caused by the outbreak, as well as the diversion policy of public schools, the company's performance declined significantly. 23H1's revenue returned to positive growth, with + 20.0% of new training compared with the same period last year, but due to higher marketing expenses incurred in the year of freshman enrollment, net profit is still in a state of decline and is expected to show a significant improvement in the following year.

Profit forecast and investment advice. It is estimated that the EPS of the company in 23-25 is 0.20 per share, 0.27 per share, respectively. The company is the leader of domestic vocational training, provides rich and close to the market demand of courses, the strength of running a school. Through the new campus and the layout of new training majors, the company will continue to contribute to future growth. Refer to the comparable company, give the company FY2023 20 times PE, fair value of HK $4.21 per share, cover for the first time and give a "buy" rating. (this article uses the real-time exchange rate:

1 HKD = 0.9352 RMB, unless otherwise specified, the reporting currency is RMB. )? Risk hint. The growth of the number of students is not as expected, the progress of the construction of the regional center is slow or the benefit is not as expected, the expansion of new categories of races is not as expected, and the risk of changes in industry policies and regulations.