share_log

希望教育(01765.HK):自建并购双足并行 高教整合步履不停

Hope Education (01765.HK): Self-construction, mergers and acquisitions go hand in hand with the integration of higher education

東北證券 ·  Jun 30, 2021 00:00

  Report summary:

The country's leading private higher education group has rapidly expanded its school network. The company was founded in 2007 and has continuously expanded colleges through self-construction and acquisition. The school network gradually expanded from western Sichuan and Guizhou to various provinces such as Jiangsu and Henan, and extended overseas. As of June 2021, the company has hosted 20 institutions, including 18 in China and 2 overseas institutions; the number of students enrolled in the 2020/2021 academic year reached 196,700, an increase of 40.41% over the previous year. Since the 2016/2017 academic year, the CAGR has reached 32.35%. The company's FY21H1 achieved revenue of 1,183 million yuan, an increase of 35.93% over the previous year, and adjusted net profit of 547 million yuan, an increase of 42.77% over the previous year.

The Civil Promotion Law was implemented to eliminate sector risks, and the industry ushered in development dividends. On May 14, 2021, the “Regulations for the Implementation of the Private Education Promotion Law” finally came into effect after several revisions, and will be implemented on September 1, 2021. The “Implementation Regulations” do not restrict private higher education in mergers and acquisitions, agreement control, and related transactions, etc., and the risk of mergers and acquisitions has been implemented; the withdrawal ratio of for-profit private school development funds has been reduced from 25% to 10%, and profit distribution flexibility has increased.

The gross enrolment ratio in higher education will increase further, and demand for private higher education will continue to increase. In 2019, China's gross enrolment ratio in higher education reached 51.6%, but there is still a big gap compared to the gross enrolment ratio of 60%-95% in developed countries. According to the requirements of the 14th Five-Year Plan, China aims to increase the gross enrolment ratio in higher education to 60% in 2025. Furthermore, the penetration rate of private colleges and universities continues to increase. Their enrollment ratio increased from 13.96% in 2004 to 24.01% in 2019, and demand for private higher education has a lot of room for growth.

Endogenous extension growth is strong, and the transfer of independent colleges is accelerating, which is expected to usher in a sharp rise in volume and price. 1) Volume: The company has strong post-acquisition integration capabilities. After joining the group, the number of students enrolled in the new mergers and acquisitions increased rapidly, and the registration rate also increased. The company acquired 4 institutions in 2021 and is building 4 new institutions. 2 of these will start in September 2021, compounded by the liberalization of student quotas after the transfer of independent colleges. I am optimistic that the number of students enrolled in the company will grow in the future. 2) Price: Policies in Sichuan, Guizhou and other places promote market-based pricing for private higher education, and there is room for tuition fees to rise; after the relocation of the company's four independent colleges is completed, they can set their own prices and save expenses related to payments to universities, and long-term profit margins are expected to increase.

Investment advice: The company is expected to achieve net profit of 807/998/1,226 million yuan in FY21-23, an increase of 40.24%/23.57%/22.87% over the previous year, and EPS of 0.10/0.13/0.15 yuan. The corresponding PE is 16/13/10 times. According to the relative valuation method, the company's target price was HK$2.92, which covered the “buy” rating for the first time.

Risk warning: The results of acquisition integration fell short of expectations, enrollment fell short of expectations, and industry competition intensified.

The translation is provided by third-party software.


The above content is for informational or educational purposes only and does not constitute any investment advice related to Futu. Although we strive to ensure the truthfulness, accuracy, and originality of all such content, we cannot guarantee it.
    Write a comment