Performance overview: steady growth continuation, growth and certainty. In fy2021, the income and performance of six private higher education companies continued to grow. Yuhua education and Gaoxin Education Group achieved an endogenous growth of 11% – 16% in income and a 31-38% increase in profit; The other four companies achieved high-speed year-on-year growth of 38% – 56% on the revenue side and 32% – 57% on the profit side under the endogenous + extension logic. The CAGR at the profit end of private higher education companies in recent five years is 27% – 38%, and the roe has generally increased steadily in recent three fiscal years, and the growth and certainty have been fully reflected.
We will actively arrange vocational undergraduate courses, and classified registration is expected to be promoted. Under the vocational education incentive policy, vocational undergraduate can bring more than 500000 incremental places. At present, private higher education companies have begun to actively layout the business related to vocational undergraduate through upgrading existing / self built colleges to vocational undergraduate and opening vocational undergraduate majors in existing undergraduate schools. In terms of classified registration of for-profit / non-profit private schools, at present, Shanghai has completed the classified registration of private schools, and 17 regions across the country require it to be completed in 2022. The classified registration is expected to accelerate. After selecting for-profit schools, private higher education companies are expected to face policy risks and enjoy preferential tax rates according to policy requirements. Land transfer fees can be apportioned by 50 years, with limited impact on the profit side of the company.
The quantity and price of endogenous dimensions have increased, and the advantages of group school running are highlighted. In the past three academic years, the compound growth rate of the number of students in private higher education companies was 11.1% – 51.2%. In the new academic year 2021-22, six companies disclosed the latest number of students, with a growth rate of 14.4% – 40.3%. In terms of tuition fees, driven by market-oriented pricing, the average annual growth rate of tuition fees of private colleges and universities can be maintained at 5% – 8%, and the double rise of volume and price can bring 20% + income growth. The cost of running a school in a group has been strictly controlled, the transfer of independent colleges has been superimposed, and the profitability of private higher education companies has been steadily improved. In addition, through the layout of new generation information technology, new energy, great health and other emerging industries with strong employment demand, higher education group is conducive to better expand school enrollment and bring better brand reputation to schools and companies at the employment end.
The extension dimension M & a event slows down in the short term and remains an important way of expansion in the long term. The upside down of the primary and secondary market valuation led to the slowdown of epitaxial mergers and acquisitions in the private higher education industry in 2021, and there were only 6 epitaxial mergers and acquisitions of Chinese listed companies from January to November 2022. Under the relatively unfavorable market environment, some listed companies (such as Neusoft education and China Kepei) realize business expansion through asset light management output mode. In the long run, as of September 30, 2021, China has 758 private schools (346 junior colleges + 163 independent colleges + 249 majors). There is still enough room for extension M & A, which is still an important way to expand the scale of school running.
Investment suggestions: the policy trend is clear, private higher education companies basically have high growth + certainty, and grasp the investment opportunities of undervalued value. At present, the valuation sector of private higher education is in a historical position, but the industry policy and company fundamentals have become clear. The policy has clearly encouraged private higher education, and the classified registration is expected to accelerate in 2022, and the industry uncertainty is expected to be further lifted. In terms of fundamentals, the development logic of double increase in volume and price of private higher education companies in 2021-22 academic year continues. We recommend private higher education companies with excellent school running strength, large endogenous growth space and strong capital and financing strength, focusing on China Education Holdings, hope education, Yuhua education, Gaoxin education group, China Science and technology training, Neusoft education and Zhonghui group.
Risk tips: industry policy risks; The progress of M & A / self construction does not meet expectations; The company’s performance is lower than expected.
