Event
The company released financial results for the third quarter of fiscal year 2021: as of February 28, 2021, FY21Q3 realized revenue of US $1.19 billion, an increase of 29.0%, a net profit of US $151 million, and a 9.9% increase of 9.9%. The number of students in after-school tutoring courses and exam preparation courses reached 2.297 million, an increase of 43%.
Brief comment
K12 business has fully recovered, and overseas business has gradually picked up. FY21Q3's K12 business grew 37% year-on-year, which is the main driver of revenue growth, of which the income of Youneng Middle School increased by 35% year-on-year FY21Q2, FY21Q1 and FY20Q4 were 27%, 9% and 1% respectively, which continued to accelerate; the income of bubble children increased by 40% compared with the same period last year, and the growth rates of FY21Q1, FY21Q1 and FY20Q4 were 24%, 4% and 10%, respectively. With the promotion of overseas COVID-19 vaccine, families' confidence in studying abroad has gradually recovered. Overseas exam preparation business dropped 12% year-on-year this quarter compared with the same period last year, while overseas consulting and study trips grew by 11% year-on-year and 6% year-on-year.
In terms of student attendance, the number of FY21Q3 academic subjects, tutoring and exam preparation students reached 2.3 million, an increase of 43% over the same period last year (FY21Q1 and Q2 were 13.5% and 10.4%, respectively).
Among them, the number of students in Youneng Middle School reached 1.359 million, an increase of 56 percent over the same period last year, and the number of bubble children reached 869000, an increase of 61 percent over the same period last year.
Offline expansion has accelerated, and the number of learning centers has reached 1507. By the end of February 2021, the number of learning centers in the company had reached 1507, an increase of 189 (+ 14.3%) and 108 (+ 7.6%) compared with the same period last year. During this period, the company added one new school in Hengshui. By the end of February 2021, the number of schools had reached 118, the classroom area increased by about 17% year on year, and the month-on-month increase of 7%, in preparation for expansion in the post-epidemic era. The dual-division model has been introduced into 58 bubble children's programs that have covered cities and 27 excellent middle school programs that have covered cities.
The OMO provincial model is further popularized. The company's provincial OMO model was first piloted and promoted in Zhejiang last year, and achieved remarkable results. FY21Q3 invested $59 million to expand its OMO layout, and during the winter semester, the company launched OMO online courses in most existing cities and 25 new surrounding satellite cities. The low cost of getting customers is the core competitiveness of the OMO model, which helps the company accelerate the sinking of third-tier cities.
Profit forecast: the company's FY21-FY23 revenue is expected to be US $41.52,55.02 and US $7.315 billion, respectively, with an increase of 16.0%, 32.5% and 33.0% respectively. The homing net profit of non GAAP is US $5.18,7.49 and 928 million respectively, and the corresponding PE is 55,38 and 31 times. Maintain a "buy" rating with a target price of HK $166.2.
Risk hint: the supervision of education and training policy is strengthened, and the effect of OMO is not as good as expected.