The company's 2020 performance exceeded expectations. As the impact of the 2021 epidemic gradually disappeared, combined with the transfer of two schools in Hongshan and the School of Clinical Medicine, future profit growth can be expected. Based on this, fine-tuned the company's EPS forecast for 2021, maintained 2022, and added 2023 to 0.24/0.27 yuan/0.31 yuan (the original 2021 EPS forecast was 0.23 yuan) to maintain the “buy” rating.
Performance exceeded expectations, net profit +20%. 1) Revenue and profit: In 2020, the company's revenue was 479 million yuan/ +9.4%, and full-caliber revenue (plus Hongshan and the School of Clinical Medicine) was 650 million yuan/ +26.5%, of which the accommodation fee was refunded 167.07 million yuan ($21.391 million under full caliber). Net profit/adjusted net profit was $325.00/321 million, compared to +20.2%/8.4%, respectively. If refunds were added, adjusted net profit was $342 million/+15.6%. 2) Costs and expenses: Cost control was good in 2020, and gross margin increased 5.3 pcts to 64.96%, mainly due to a decrease in employee remuneration (from 98 million yuan to 91 million yuan) and an increase in tuition fees under the pandemic.
Administrative expenses fell 29% to $67 million, while sales and administrative expenses fell 24% to $78 million.
Other revenue fell 7% to $107 million, mainly due to a decline in rental income and government subsidies. The trusteeship revenue of the School of Clinical Medicine and Hongshan College increased from $9.78 million to $25.31 million.
Optimize the student structure to drive higher tuition fees. In 2020, tuition revenue was 448 million yuan/ +14.4%, and accommodation fee revenue was 031 million yuan/ -33.3%. The increase in tuition fees was mainly due to an increase in the proportion of undergraduate students. As of December 31, 2020, the number of students enrolled in the company reached 46,415/ +2.6%, including 42541/ +6.8% of full-time students and 30,969 undergraduate students. By school, 1) The number of students enrolled at Xinhua University in 2020 was 27,629/ -4.3%, of which 20,340 undergraduate students/ +6%. The 2020/21 academic year achieved 6,042 new undergraduate students/ +21%; 2) The number of full-time students enrolled at Xinhua School in 2020 was 6,027/ +8.0%, and the general secondary school tuition fee increased from 9,000-11400 yuan/person to 9,000-16,000 yuan/person; 3) The number of students enrolled in the School of Clinical Medicine of Anhui Medical University reached 2,831 students/ +61.7% in 2020; 4) The number of students enrolled at Hongshan University in 2020 was 9,928/ +9.7%.
The transition progressed smoothly, speeding up the pace of consolidation. 1) Hongshan College is expected to complete the transfer in 3Q21-4Q21, and the School of Clinical Medicine is expected to complete the transfer in 3Q21. The company does not need to pay any transfer fees. Tuition and tuition fees are expected to increase significantly after the transfer is completed, and the two schools are expected to join forces. 2) The first phase of the new campus of the School of Clinical Medicine and the new campus of Hongshan University are expected to be put into use in the 2021/22 school year, with a capacity of 25,000 people at the new campus of Hongshan University. In the future, as the two schools are converted and merged and the new campus is put into use, it is expected to bring a large increase to the company.
Risk factors: the risk that the speed of outbound acquisitions falls short of expectations, the risk that the results of acquisition integration fall short of expectations, the risk of policy uncertainty in the “Regulations on the Implementation of the Law on Promotion of People's Rights”, the risk of uncertainty about capital upgrades and expansion quotas, and the risk of business division expansion falling short of expectations.
Investment advice: The company's 2020 performance exceeded expectations. As the impact of the 2021 epidemic gradually disappeared, combined with the transfer of two schools, Hongshan and the School of Clinical Medicine, future profit growth can be expected. Based on this, fine-tuned the company's EPS forecast for 2021, maintained 2022, and added 2023 to 0.24/0.27 yuan/0.31 yuan (the original 2021 EPS forecast was 0.23 yuan) to maintain the “buy” rating.