Items:
The number of places in the company's higher vocational education section has been approved one after another: 1) on June 6, 2022, the company announced that 24555 students had been approved for the 2022 Universe 2023 academic year, an increase of 70.1% over the same period last year. Among them, the number of upgraded undergraduate places in all higher education institutions has increased significantly, with an increase of 19-108%. 2) on June 28, 2022, the company announced that the total number of enrollment places (including undergraduate, junior college and junior college) in 2022 was approved by 78157, an increase of 31.9% over the same period last year, of which 36523 were approved for undergraduate (excluding junior college), an increase of 45.8% over the same period last year; 24555 were approved for junior college places, an increase of 70.1% over the same period last year; but college places were approved for 17079, down 13.6% from the same period last year.
Guoxin social service point of view: 1) the enrollment of the company increased by 32% this time, and the growth rate of students in the higher education section is expected to increase to 10% + (excluding Jincheng in the 2022 academic year and about 6% in the 2022 academic year). Among them, the growth rate of general undergraduate places is higher than expected (+ 46%), and the core is driven by the advantageous areas of card layout of the company's schools, excellent historical achievements and the continuous expansion of the existing campus. College promotion is higher than the same period last year (+ 70%). In the short term, college promotion is expected to play the role of employment reservoir. In the long run, this policy maintains continuity and can raise the upper limit of academic qualifications of students in higher vocational colleges. It is the key point to promote the construction of a national vocational and general integration system; the number of junior college students is-14% compared with the same period last year, which is due to the continuous growth of junior college places in the past years and the limited increase in the actual enrollment rate. In addition, as the epidemic stabilizes, enrollment in the international education-secondary vocational sector is expected to pick up steadily. 2) risk hints: stricter policies, slow extension expansion, lower-than-expected enrollment, impairment of goodwill, etc. 3) the announcement of the pre-increase of student places is of great significance, which directly responds to the concerns of the early market about the endogenous growth of higher education companies; at the same time, with the further clarification of the policy guidance, the sentiment in the education sector is expected to bottom out and pick up. High-quality leaders with strong certainty of performance growth and stable cash flow are expected to be recognized by mainstream funds. The future plate looks at the further approval of student places to strengthen confidence in endogenous growth; second, to track the progress of for-profit conversion, and further recognition of the dominant position of private higher education companies in the market economy; and third, after the valuation has warmed up, the upside-down situation in the primary and secondary market has changed the extension M & A restart, further ushering in the plate Davis double-click. Zhongjiao Holdings's existing schools have obvious geographical advantages, guaranteed endogenous growth and expectations for extension expansion. We estimate that the company's EPS for 2022-24 will be 0.77max 0.89C1.02 yuan, maintaining the company's target price of HK $9.55-10.66 (corresponding to the 22-year PE of 10.75-12.00x), and there is still 23% room for the latest closing price to maintain the "buy" rating.
Comments:
The number of students enrolled in higher vocational colleges has increased by 32% as a whole, and the growth rate of general undergraduate places has exceeded expectations. The number of places in the company's higher vocational education schools has been approved one after another, and the growth rate of internal students has increased month-on-month: 1) on June 6, 2022, the company announced that 24555 students were approved for the 2022max 2023 academic year, an increase of 70.1% over the same period last year, including a substantial increase in the number of upgraded undergraduate places in all higher education institutions. The proportion of growth is between 19-108%. 2) on June 28, 2022, the company announced that the total number of enrollment places (including undergraduate, junior college and junior college) in 2022 was approved by 78157, an increase of 31.9% over the same period last year, of which 36523 were approved for undergraduate (excluding junior college), an increase of 45.8% over the same period last year; 24555 were approved for junior college places, an increase of 70.1% over the same period last year; but college places were approved for 17079, down 13.6% from the same period last year.
Excluding the impact of Chengdu Jincheng in September 2021, the number of students in the school year 2021 will increase by about 6% (considering that Jincheng is 17.3%). After this place is approved, it is estimated that the growth rate of students in the higher education sector in 2022 will increase to 10% + in 2023.
1. The growth rate of undergraduate places exceeds expectations: the approval of ordinary undergraduate places exceeds expectations, and the core is driven by the company's school card layout, location with relatively strong economic foundation, excellent historical achievements and continuous expansion of the campus. In addition to the influence of the background of "stable employment", the promotion of undergraduate places depends on the school's location advantages, historical achievements and the student capacity of its own campus. In the past, the employment rate of its schools remained stable and high, and the company expanded the existing campus (building the third-phase campus of Guangzhou Institute of Applied Science and Technology) to expand the scale of the school, the above comprehensive efforts, resulting in the result that the number of undergraduate students in 2022 in 2023 is higher than expected (+ 46%).
2. The growth rate of junior college promotion continues to increase: the core of the expansion significance of junior college promotion is to raise the upper limit of higher vocational college students' academic qualifications (higher vocational education (3 years) can continue to pursue undergraduate studies (2 years). In the short term, it can act as a reservoir in the context of "stable employment". From a longer-term point of view, our company aims to build a two-track education system with the integration of vocational and general education, ensure the continuity of this policy, and continuously raise the upper limit of students' academic qualifications in higher vocational colleges, which is the key point to promote the landing of the vocational education system.
3. The number of junior college places has dropped by 14% compared with the same period last year, which is expected to be due to the continuous growth of junior college places in the past years and the limited increase in the actual enrollment rate, so the growth rate of short-term student approval has slowed down.
The policy guides the market-oriented regulation of tuition fees, the independent pricing logic of private schools is smooth as a whole, the tuition fees of undergraduate courses in member colleges are rising steadily, and the tuition fees of junior college courses are relatively stable. Calculate the median tuition fees of undergraduate courses / specialist courses in colleges and universities of the higher Vocational Education Division. According to historical traceable data, the average annual compound growth rate of undergraduate course tuition fees of Jiangxi Institute of Science and Technology, Guangdong Baiyun University, Chongqing Institute of Foreign Affairs, Guangzhou Institute of Applied Science and Technology and Yantai Institute of Science and Technology is 12.0%, 3.6%, 1.7%, 14.8, 5.8%, respectively, and the tuition continues to rise. In terms of junior college courses, the tuition fees of Guangdong Baiyun College and Matsuda Vocational School have remained stable in recent years, and the upper and lower limits of tuition fees of Jiangxi Institute of Science and Technology have been raised, with an average annual compound growth rate of 9.8%. The median tuition fee for the 2020 academic year of Yantai Institute of Science and Technology increased by 25% compared with the same period last year, and the increase came from the increase in the upper limit of tuition fees.
The policy guides the market-oriented regulation of tuition fees, and the independent pricing of private schools is logical and smooth. In January 2017, the State Council issued some opinions on encouraging social forces to set up education to promote the healthy development of private education, proposing that the fees of for-profit private schools should be regulated by the market. The fees of non-profit private schools will gradually implement market-regulated prices through market-oriented reform. In August 2020, the opinions on further strengthening and standardizing the Management of Educational fees once again made it clear that the charging standards of for-profit private schools should be regulated by the market, and the specific measures for charging for non-profit private schools shall be formulated by the people's governments at the provincial level. The regulations on the implementation of the people's Promotion Law promulgated in May 2021 only states that "for non-profit private schools where public schools participate in organizing, using state-owned assets or receiving subsidies from the government, the people's governments of provinces, autonomous regions and municipalities directly under the Central Government may set maximum prices for their fees", but there are no restrictions on the charging standards of for-profit private schools and non-public schools, state-owned assets and government subsidies.
It can be seen that for-profit private schools and some non-profit private schools are relatively market-oriented in terms of independent pricing.
With the exception of Chongqing, restrictions on maximum tuition fees have been lifted in the regions where its higher education institutions are located. The Group's higher education division has a total of 8 colleges and universities, including 6 provinces / municipalities / autonomous regions, including Guangdong, Jiangxi, Chongqing, Shandong, Hainan and Sichuan. Up to now, Jiangxi, Guangdong, Hainan, Sichuan and Shandong have all implemented market-regulated prices for for-profit / non-profit diploma education in private colleges and universities, and the charging standards are determined by the schools themselves. Chongqing only realizes independent pricing for for-profit private schools, and the charging standards for academic education of non-profit private schools still need to be guided by the government. however, with the promotion of non-profit choice, after the for-profit conversion of Chongqing Foreign Affairs University, the restriction on the maximum tuition fee will also be abolished.
Investment advice: the fundamentals of endogenous growth are sound, the sentiment of the plate may have bottomed out and rebound, and it is of great significance to maintain the advance announcement of "buy" rated places, which directly responds to the concerns of the early market about the endogenous growth of higher education companies. at the same time, with the further clarification of the industry policy guidance, the sentiment of the education sector is expected to bottom out, and the high-quality leaders with strong certainty of performance growth and stable cash flow are expected to be recognized by mainstream funds. The future plate looks at the further approval of student places to strengthen confidence in endogenous growth; second, the progress of for-profit conversion, and further recognition of the dominant position of private higher education companies in the market economy; and third, after the valuation has warmed up, the upside-down situation of the primary and secondary market has changed the extension M & A restart, further ushering in the plate Davis double-click. At present, the valuation of China Education Holdings is low, the location of the existing school is superior and strong, the endogenous growth is guaranteed, and the extension expansion is expected. We estimate that the company's EPS for 2022-24 is 0.77x0.89x1.02, maintaining the company's target price of HK $9.55-10.66 (corresponding to the 22-year PE of 10.75-12.00x), and there is still 23% room for 37% of the latest closing price to maintain the "buy" rating.
Risk hint
The policy is stricter, the extension expansion is slow, the enrollment is less than expected, the goodwill impairment and so on.