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中国新华教育(02779.HK):内生增长稳健 扩建及转设加速业绩成长

China Xinhua Education (02779.HK): endogenous growth, steady expansion and relocation to accelerate performance growth

中信證券 ·  Aug 31, 2020 00:00  · Researches

The company's income and profits grew steadily in the first half of the year, and with the gradual landing of various favorable policies, such as upgrading the capital and expanding enrollment, as the largest private higher education group in the Yangtze River Delta, and there is still plenty of room for endogenous growth, the company is expected to fully enjoy the policy dividend. Maintain the company's 2020-22 EPS forecast of 0.20, 0.23, 0.27, and maintain the "buy" rating.

Income growth in the first half of the year was solid, with adjusted net profit of + 17%. The total income of 1H20 Company is 293 million yuan / + 8.8%; of which, the income is 245 million yuan / + 7.6%, excluding the effect of refund of accommodation fees, the income increases by 13.9% compared with the same period last year; the net profit is 152 million yuan / + 0.24%, and the adjusted net profit is 180 million yuan / + 16.9% (adjusting exchange profit and loss and equity amortization expenses). The gross profit margin is 71.0% (+ 6.7pcts), which is higher than the industry average, mainly due to a 15.4% drop in personnel salary; the sales expense rate is 1.0% (- 0.61pct), the management cost is 62 million yuan (+ 98%), and the expense rate is 25.5% (+ 11.7pcts). Excluding equity incentive amortization and exchange profit and loss expenses, the management expense rate is 15.2% (+ 1.3pcts).

The endogenous growth was steady, and the tuition income increased by 15.3%. The 1H20 tuition income is 235 million yuan / + 15.3%, and the average tuition fee per student increases by 17.3%. This is mainly due to the structural changes brought about by the decrease in the number of continuing students with lower tuition fees. The accommodation fee income is 10 million yuan /-58.3%, mainly due to the refund of accommodation fee under the epidemic situation. As of June 30, 2020, the total number of students in school was 43923 /-1.7%, of which 39879 were full-time students / + 6.4%. According to the school, 1) Xinhua College: income + 5.3%, of which tuition income is + 13.8%. The number of students is 27486 /-8.6%, including 19398 undergraduate students (+ 23.8%) and 4044 continuing education students (- 43.9%). The tuition fees for technical secondary schools and undergraduate freshmen in the 21st academic year are 10700-12000 yuan per person and 19800-23800 yuan per person respectively. 2) Xinhua School: income + 26.7%, of which tuition income is 28.3%. There are 5632 students (+ 7.2%). The tuition fee of ordinary technical secondary school has increased to 9000-16000 yuan per person (9000-11400 yuan per person in 1920), and the upper limit of accommodation fee has been raised from 1500 yuan to 2000 yuan. 3) Clinical Medical College of Anhui Medical University: income + 187.6%, of which tuition income is + 201.2%. 1751 students / + 204.5%, tuition and accommodation fees are maintained at 13200-15900 yuan per person. 4) Hongshan College: 9054 students (+ 2.9%). The average tuition fee is maintained at 1, 000 yuan per year.

The growth of school places, the expansion of campus and the promotion of conversion will continue to promote endogenous growth, and the new Department of Teaching and Auxiliary Services will provide diversified services. 1) Anhui Xinhua College: 6400 undergraduate places / + 19% of the undergraduate places in the 21st academic year, of which the number of undergraduate places is 1100 / + 45%. The number of second bachelor's degree places increased by 200 in four majors such as electronic information. It is expected that the expansion of dormitories and laboratories will be completed in September 2020, with an additional 4000 beds. 2) Clinical Medical College: three majors of medical laboratory technology, optometry, health service and management were added in the 21st academic year, and two provinces in Jiangsu and Sichuan were added to enroll students and expand the number of students. The first phase of the new campus project is expected to be put into use in September 2021, with a capacity of 12000 +, and the conversion work is also expected to be completed in 2021. 3) Hongshan College: there are 3259 undergraduate places / + 34% undergraduate places in the 21st academic year, of which the number of post-secondary places has increased from 0 to 830. The first phase of the new campus project will start in May 2020 and is expected to be put into use in September 2021. It is expected to accommodate 10000 people, and the conversion work is also expected to be completed in 2021. 4) A new education support service department will be added to respond positively to the "1x" training mode to provide diversified educational services for students. At present, Hefei and Bengbu teaching sites are set up in the province, and Nanjing teaching sites are opened outside the province. It is planned to cover all the cities where colleges and universities are located in Anhui within 3-5 years, and open up markets in other provinces.

Risk factors: the risk that the speed of extension acquisition is not as fast as expected, the risk that the effect of acquisition integration is not as expected, the policy uncertainty risk of the regulations on the implementation of the people's Promotion Law, the uncertainty risk of increasing the enrollment quota, and the risk that the expansion of the business department falls short of the expected risk.

Investment suggestion: in recent years, various favorable policies such as upgrading cost and expanding enrollment have gradually landed, as the largest private higher education group in the Yangtze River Delta, and there is still plenty of room for endogenous growth, it is expected that the company will fully enjoy the policy dividend. Maintain the company's 2020-22 EPS forecast of 0.20, 0.23, 0.27, and maintain the "buy" rating.

The translation is provided by third-party software.


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