Market NewsSpring in China: the industry welcomes valuation repair, and it is expected to grow significantly under the dividend of increasing enrollment and enrollmentEducation stocks in Hong Kong have ushered in the spring. Since June 7, the education sector has risen by more than 20% against the market, and the strong rebound stems from the announcement of the substantial increase in the number of upgraded undergraduate places in the 2022 University23 academic year from the leader of higher education.
The increase in the number of places has strengthened the market's confidence in the sustained endogenous growth of private higher education. Institutions call the inflection point of industry valuation repair come ahead of schedule, and suggest to pay attention to the higher education sector with high performance certainty and low valuation. The author is concerned that China Spring, the leading private higher education institution in China, is such a noteworthy target of Hong Kong stocks.
The enrollment of junior college students has increased significantly, and the stable employment policy is expected to promote the growth of students.
On June 6th, China Education Holdings announced that the number of students promoted to this school in the 2022 Summer 23 academic year had increased by 70 per cent to 25000 compared with the same period last year, directly triggering a rebound in education stocks. In the 2022At 23 academic year, the number of students promoted by China Chunlai Group increased by 4484 to 9534, a sharp increase of 89% over the previous year, of which four schools increased by 34% by 170%. The main reasons for the growth are: (1) the government has implemented the policy of expanding the scale of higher education; (2) the group's record and industry reputation in providing high-quality private higher education help it to apply for higher places.
The employment situation in China is facing severe challenges this year. In April, the unemployment rate of people aged 16-24 reached 18.2%. In May, the General Office of the State Council issued a document to guarantee employment and further expand the number of undergraduate places to ease the pressure on employment.
The increase in the number of junior college places will bring direct benefits to vocational colleges with academic qualifications. On the one hand, the total number of students will grow steadily. Shen Wanhongyuan predicts that the growth of students in higher education companies this year (plus enrollment last year and the number of graduates) will be maintained at about 10-15%. On the other hand, the fee standard after the promotion of this college and the expansion of enrollment is the same as that of undergraduate students. With the rise in quantity and price, the performance of higher education institutions will be improved.
Core indicators have risen steadily for seven consecutive years.
On May 26, China Chunlai released the 2022 interim report. In the six months ended Feb. 28, China's Chunlai revenue rose 30.8% year-on-year to 656 million yuan, while net profit rose 52.4% to 251 million yuan. The core indicators have risen steadily for seven consecutive years, with revenue growing at a compound annual rate of more than 20%.
The Group continued its high double-digit income growth in the mid-2022, thanks to a steady increase in the number of students and an increase in average tuition fees. According to the financial report, as of February 28, China Chunlai's colleges and universities had a total of 98400 students, ranking among the top 5 in the same industry and the first in central China, an increase of 7.4% over the same period last year. The total number of students enrolled in the middle of 2020 was 61600, with a compound annual growth rate of 26.4% in the past three years, ranking among the leading level in the industry.
Self-built + acquisition business model will continue to release student dividends
In addition to the above policy support, a series of dividend releases will also lead to an increase in the number of students, supporting the high degree of certainty that China's spring will continue its performance.
In 2019, China spent 800 million yuan on the acquisition of Tianping College, becoming its new school organizer. According to the acquisition agreement, China Chunlai has the right and obligation to transform Tianping College into an independent private university, and the conversion work is being vigorously promoted, which is expected to be completed around 2023. At that time, the merger table after the completion of the acquisition will help the Group's performance to a new level.
In terms of endogenous growth, on December 15 last year, Tianping College signed a transfer agreement with Nanjing City, Jiangsu Province to acquire a 50-year right to the use of a piece of land located in Nanjing higher Vocational Park for 180 million yuan. The Group plans to build a new university, Nanjing School, with a planned capacity of not less than 16000 people, and the completion of the construction of the new campus will also enable the rapid expansion of the number of students.
Summary
The overall valuation of the education sector has fallen sharply after the double reduction policy, although recently, under the catalysis of various factors, market worries about the policy have been gradually dispelled, and education stocks have risen sharply in the past week, but the sector valuation is still at an all-time low, with most companies'PE in the range of 4-6 times. The dynamic PE of Chunlai in China is only 3.1times and the price-to-book ratio is 0.9times, which is lower than the average valuation level of the higher education industry and has great investment potential.
Vocational education policies have been favorable since 2021, and the number of college entrance exams in 2022 has reached a record 11.93 million. Thanks to this, the scale of higher education is expected to continue to expand. As a leading private higher education institution, China Chunlai has a steady performance growth. with the continuous improvement of school quality and the continuous expansion of campus capacity, China will obtain more high-quality students to promote future performance growth.
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