Investment Rating - The report maintains a positive outlook on the higher education sector, indicating a "Buy" recommendation for specific companies such as New Higher Education, Neusoft Ruixin, Xijiao International Holdings, and Zhonghui Group [30]. Core Insights - The report anticipates a turning point in educational investment, with improved operational efficiency expected in the higher education sector. It notes that while revenue growth for higher education companies is generally slowing due to a deceleration in student enrollment, tuition fee increases are becoming the primary driver of revenue growth [3][12]. - The report predicts that the average revenue growth rate for six higher education companies in FY25 will be 8.8%, a decline of 2.8 percentage points from the previous year and a drop of 11.8 percentage points from the five-year average [4][13]. - The report highlights that the average tuition fee growth for FY25 is expected to remain stable at 9.3%, which is an increase of 1.2 percentage points compared to the five-year average [4][12]. Summary by Sections Market Review - The education index increased by 2.9% during the week, outperforming the Hang Seng Index by 0.4 percentage points. Year-to-date, the education index has risen by 14.21%, lagging behind the Hang Seng Index by 7.23 percentage points [11]. Financial Projections - The report forecasts that the average gross profit growth for the six higher education companies in FY25 will be 3.7%, a decrease of 1.1 percentage points from the previous year and a drop of 14.4 percentage points from the five-year average. The average gross profit margin is expected to be 43.6%, down 2.9 percentage points from the previous year [5][18]. - The average number of teachers is projected to grow by 2.9% in FY25, continuing to outpace student enrollment growth. Teacher salaries are expected to increase by an average of 14.7%, indicating a trend towards hiring higher-caliber talent [5][18]. Cost Management - The average sales expense ratio for FY25 is projected to be 2.5%, remaining stable compared to the previous year. The average management expense ratio is expected to rise to 11.8%, while the average financial expense ratio is anticipated to decrease to 3.7% [6][22]. Operational Efficiency - The report suggests that the operational efficiency of higher education companies is expected to bottom out, with quality improvements in education becoming the main theme of the industry. It predicts that the cost growth for higher education companies will align with student enrollment growth in the coming year [8][27]. - The report also indicates that as educational investment peaks, the resumption of dividends from higher education companies is anticipated [29].

Group 1 - The Hong Kong education stocks experienced an increase, with 嘉宏教育 (01935.HK) rising by 6.4% [1] - 中教控股 (00839.HK) saw a nearly 5% increase in its stock price [1] - 天立国际控股 (01773.HK) rose by 3% [1] - 新东方 (09901.HK) increased by 2.5% [1]

Financial Performance - Revenue for the six months ended February 28, 2025, was RMB 3,673 million, an increase of 11.8% compared to RMB 3,284 million for the same period in 2024[21]. - Gross profit for the same period was RMB 1,978 million, reflecting a growth of 7.6% from RMB 1,839 million in 2024[21]. - Operating profit increased by 3.3% to RMB 1,524 million, up from RMB 1,475 million in the previous year[21]. - Net profit decreased by 8.2% to RMB 1,091 million, down from RMB 1,188 million in 2024[21]. - Adjusted net profit was RMB 1,182 million, a decline of 2.9% compared to RMB 1,217 million in the prior year[21]. - Administrative expenses increased by 18.9% to RMB 566 million, compared to RMB 476 million in the previous year[21]. - Adjusted EBITDA for the six months ended February 28, 2025, was RMB 2,100 million, up from RMB 1,956 million for the six months ended February 29, 2024, indicating an increase of 7.4%[27]. - EBITDA for the six months ended February 28, 2025, was RMB 2,009 million, an increase of 4.3% from RMB 1,927 million for the six months ended February 29, 2024[42]. - The group reported a total comprehensive income of RMB 1,094 million, slightly lower than RMB 1,186 million from the previous year[122]. - Basic and diluted earnings per share were both RMB 35.63, a decrease from RMB 41.97 in the prior year[122]. Market Segments - The domestic market segment's revenue increased from RMB 3,179 million for the six months ended February 29, 2024, to RMB 3,544 million for the six months ended February 28, 2025, representing an increase of 11.5%[29]. - The international market segment's revenue rose by 22.9%, from RMB 105 million for the six months ended February 29, 2024, to RMB 129 million for the six months ended February 28, 2025[30]. - Customer revenue from mainland China reached RMB 3,544 million, up 11.5% from RMB 3,179 million in 2024, while revenue from Australia increased to RMB 129 million from RMB 105 million[142]. Expenses and Costs - The cost of revenue increased by 17.3%, from RMB 1,445 million for the six months ended February 29, 2024, to RMB 1,695 million for the six months ended February 28, 2025[32]. - Financing costs increased by 5.3%, from RMB 225 million for the six months ended February 29, 2024, to RMB 237 million for the six months ended February 28, 2025[39]. - Employee costs rose to RMB 1,193 million, up 16.9% from RMB 1,020 million in 2024, primarily due to increased salaries and benefits[146]. Loans and Financing - The company has secured loans from the Asian Development Bank totaling up to RMB 284.9 million with a maximum term of 60 months[19]. - Additionally, a loan agreement with the Asian Infrastructure Investment Bank was signed for up to RMB 574.7 million, with a maximum term of 84 months[19]. - The company entered into a loan agreement with the International Finance Corporation (IFC) for a maximum amount of $200,000,000 with a term of up to seven years[100]. - The company has a loan agreement with banks for $189,500,000 with a maximum term of seven years, requiring the controlling shareholders to remain the single largest direct or indirect shareholders[105]. Corporate Governance - The company has complied with the corporate governance code, except for the deviation regarding the roles of the chairman and CEO, which are held by the same individual[67]. - The company is committed to enhancing corporate governance practices to build confidence among shareholders and potential investors[68]. - The company has adopted a standard code for regulating directors' securities trading, and all directors confirmed compliance during the reporting period[70]. Shareholder Information - As of February 28, 2025, the total number of shares held by the director Yu Kai is 848,270,608, representing approximately 31.26% of the total issued shares[76]. - Major shareholders hold a total of 1,696,541,216 shares, representing 62.52% of the total issued shares as of February 28, 2025[80]. - The company has a total of 2,713,791,221 issued shares as of February 28, 2025[83]. Compliance and Regulations - The company is committed to ensuring compliance with the new qualification requirements for foreign investors in educational institutions[96]. - The new regulations from the Chinese government restrict foreign investment in higher education, requiring foreign partners to have a minority stake[93]. Capital Expenditures and Assets - Capital expenditures for the six months ended February 28, 2025, were RMB 1,207 million, down from RMB 2,032 million in the previous year[45]. - The group's property, plant, and equipment increased by 3.3% to RMB 22,425 million as of February 28, 2025, from RMB 21,706 million as of August 31, 2024[44]. - Non-current assets increased to RMB 31,758 million from RMB 31,059 million, primarily due to investments in property and equipment[124]. Cash Flow and Liquidity - For the six months ended February 28, 2025, the net cash from operating activities was RMB 663 million, a decrease of 39.5% compared to RMB 1,097 million for the same period in 2024[132]. - The company reported a net decrease in cash and cash equivalents of RMB 2,424 million for the six months ended February 28, 2025, compared to RMB 1,129 million for the same period in 2024[132]. - The total cash and cash equivalents at the end of the period were RMB 3,814 million, down from RMB 4,048 million at the end of February 29, 2024[132]. Future Outlook - The company is optimistic about the long-term development prospects of the education industry, aligning with national development strategies and individual career needs[18]. - The company plans to continue focusing on expanding its vocational education services in both domestic and international markets[135]. - The company has a strong expectation of sufficient resources to continue operations for at least the next twelve months[133].

Financial Performance - For the six months ended February 28, 2025, the group's revenue reached RMB 3,673 million, an increase of 11.8% compared to RMB 3,284 million for the six months ended February 29, 2024[15]. - Gross profit for the same period was RMB 1,978 million, reflecting a growth of 7.6% from RMB 1,839 million[3]. - Operating profit increased by 3.3% to RMB 1,524 million, up from RMB 1,475 million[4]. - Net profit decreased by 8.2% to RMB 1,091 million, down from RMB 1,188 million[4]. - Adjusted net profit was RMB 1,182 million, a decline of 2.9% from RMB 1,217 million[4]. - Adjusted EBITDA for the period was RMB 2,100 million, representing a 7.4% increase from RMB 1,956 million[14]. - Revenue for the six months ended February 28, 2025, was RMB 3,673 million, an increase of 11.85% compared to RMB 3,284 million for the same period in 2024[63]. - Gross profit for the same period was RMB 1,978 million, representing a gross margin of 53.8%, up from RMB 1,839 million and a gross margin of 56.0% in 2024[63]. - Net profit for the six months ended February 28, 2025, was RMB 1,091 million, a decrease of 8.16% from RMB 1,188 million in the previous year[63]. - Basic and diluted earnings per share for the period were RMB 35.63, down from RMB 41.97 in 2024, reflecting a decline of 15.06%[63]. Revenue Breakdown - Domestic market revenue increased from RMB 3,179 million for the six months ended February 29, 2024, to RMB 3,544 million for the six months ended February 28, 2025, representing an increase of 11.5% driven by student enrollment and per-student income growth[17]. - International market revenue rose by 22.9%, from RMB 105 million for the six months ended February 29, 2024, to RMB 129 million for the six months ended February 28, 2025, primarily due to an increase in enrolled students[18]. - Revenue from education services recognized over time was RMB 3,646 million for the six months ended February 28, 2025, up from RMB 3,263 million in the prior year, reflecting a growth of approximately 11.7%[72]. Expenses and Costs - The cost of revenue increased by 17.3% to RMB 1,695 million, compared to RMB 1,445 million in the previous period[4]. - Administrative expenses rose by 18.9% to RMB 566 million, up from RMB 476 million[4]. - The company reported a significant increase in other losses, which rose by 338.1% to RMB 92 million from RMB 21 million[4]. - The total employee costs for the six months ended February 28, 2025, were RMB 1,193 million, an increase of 16.9% from RMB 1,020 million in the same period of 2024[77]. - The company incurred a tax expense of RMB 157 million for the six months ended February 28, 2025, compared to RMB 95 million for the same period in 2024, representing a significant increase of 65.3%[76]. Cash and Liquidity - As of February 28, 2025, cash reserves amounted to RMB 5,092 million[3]. - Cash reserves as of February 28, 2025, amounted to RMB 5,092 million, down from RMB 6,626 million as of August 31, 2024[32]. - The group has assessed its liquidity position, noting current liabilities exceed current assets by RMB 2,651 million, but expects to have sufficient resources to continue operations for at least the next twelve months[66]. Debt and Financing - As of February 28, 2025, the net debt-to-equity ratio was 24.6%, up from 19.5% on August 31, 2024[34]. - The interest-bearing asset liability ratio was 25.9% as of February 28, 2025, compared to 26.4% on August 31, 2024[34]. - The group held bank and other borrowings amounting to RMB 7,152 million as of February 28, 2025, down from RMB 7,440 million on August 31, 2024[38]. - The group has secured loans from the Asian Development Bank and the Asian Infrastructure Investment Bank, with amounts up to RMB 284.9 million and RMB 569.8 million respectively, with terms up to 84 months[43]. Corporate Governance and Compliance - The company has adhered to corporate governance rules, except for the separation of the roles of Chairman and CEO, which are currently held by the same individual[53]. - The board will continue to review the separation of the roles of Chairman and CEO, considering the overall situation of the company[55]. - The audit committee, composed of three independent non-executive directors, has reviewed the unaudited consolidated financial statements for the six months ending February 28, 2025[57]. - The company has adopted a standard code of conduct for directors regarding securities trading, confirming compliance for the six months ending February 28, 2025[56]. Employee and Social Responsibility - The company emphasizes a diverse and respectful employment policy, ensuring equal opportunities regardless of age, gender, race, or other factors[49]. - The company provides various benefits and retirement plans for its employees, aligning compensation with market levels and individual performance[48]. - The group has been recognized for its commitment to social equity and has received the "Inclusive Enterprise" certification from the World Bank Group[40]. Future Outlook and Strategic Initiatives - The group aims to enhance its core educational capabilities through various initiatives, including strengthening the dual-teacher model and modernizing the curriculum system[41]. - The group continues to see a positive long-term outlook for the education industry, driven by increasing demand for high-quality education and vocational training[42]. - The company is exploring potential acquisitions to enhance its service offerings, with a budget of 500 million HKD allocated for this purpose[92]. - The company provided an optimistic outlook, projecting a revenue growth of 15% for the next quarter, aiming for 1.725 billion HKD[92]. - A new strategic partnership was announced, expected to generate an additional 50 million HKD in revenue within the next six months[92]. Capital Expenditure and Investments - Capital expenditure for the six months ended February 28, 2025, was RMB 1,207 million, compared to RMB 2,032 million for the same period in 2024, primarily related to the construction of new buildings in existing campuses[31]. - The company has capital commitments of RMB 814 million related to the acquisition of properties and equipment as of February 28, 2025, down from RMB 1,044 million as of August 31, 2024[88]. - Research and development investments increased by 25%, totaling 100 million HKD, focusing on innovative educational technologies[92].

Core Viewpoint - The company is actively pursuing strategic transformation across four key areas to seize growth opportunities and respond to industry dynamics Group 1: Strategic Transformation Areas - Optimization of undergraduate education platform through increased investment in high-quality faculty recruitment, research capability enhancement, and modernization of curriculum systems. Some institutions are actively applying for master's degree granting rights to enhance academic reputation and attractiveness [1] - Adjustment of vocational education sector by upgrading certain vocational projects towards higher vocational or academic pathways, while optimizing course offerings and improving operational efficiency to enhance overall competitiveness [2] Group 2: Project Management and Financial Strategy - Strengthening of project execution discipline by strictly controlling capital project investments to ensure efficiency, significant impact, and timely delivery. Improved project management processes guarantee project quality, budget control, and timely delivery, laying a foundation for long-term growth and academic excellence [3] - Expansion of financial strength and financing channels by actively seeking cost-effective funding support from international financial institutions, prioritizing the use of RMB financing to enhance financial resilience and mitigate foreign exchange risks [4] Group 3: Financial Stability and Shareholder Value - The company aims to achieve higher academic achievements, operational excellence, and sustainable financial growth. Maintaining financial stability remains a top priority, with a cautious approach to cash flow management to ensure a solid financial foundation for debt repayment and future investments [5] - The company is reviewing capital management strategies, focusing on evaluating the relative advantages of dividend distribution versus share buybacks. In the current market environment, the company prioritizes debt repayment and maintaining liquidity stability to address tightening financial conditions and upcoming debt arrangements, thereby avoiding cross-default risks and ensuring operational stability [5] - The board will continue to adopt a prudent and comprehensive approach in considering dividend declarations, assessing the company's financial condition, strategic capital needs, and external market changes to ensure a balanced and forward-looking capital allocation strategy that enhances financial resilience and supports long-term shareholder returns [6]

Group 1 - The education sector in Hong Kong and A-shares experienced significant gains, with notable increases in stocks such as Xijiang International Holdings (up 12.59%) and China Tongcai Education (up 9.27%) [1] - The Ministry of Education and nine other departments issued a document to accelerate the digitalization of education, emphasizing the role of artificial intelligence in educational transformation [1][2] - The Ministry of Education plans to develop a national smart education platform 2.0, incorporating advanced technologies like AI and knowledge graphs to enhance educational resources and assessment [2] Group 2 - The global AI education market is projected to grow to $26.2 billion by 2025, while the domestic AI+ education B-end market is expected to reach 47.7 billion yuan and the C-end market 28.2 billion yuan by 2027 [3] - Investment firms are optimistic about the potential of AI in education, recommending attention to companies leading in AI integration within the education sector and related IT industries [3][4]

Environmental Impact - Total greenhouse gas emissions for the year ending August 31, 2024, increased to 8,952 tons from 8,333 tons in the previous year, representing a growth of 7.4%[2] - Direct emissions from stationary sources rose to 8,721 tons, up from 8,193 tons, indicating a 6.4% increase[2] - Energy-related greenhouse gas emissions reached 192,056 tons, a significant rise from 147,096 tons, marking a 30.5% increase[2] - The total greenhouse gas emissions per capita for energy-related sources increased to 0.7122 tons from 0.5941 tons, a rise of 19.9%[3] - The total liquid waste discharge from dormitories was 5,562,079 liters, an increase of 21.8% from 4,568,993 liters in the previous year[100] - The total solid waste generated was 29,338 kg, up from 23,382 kg in the previous year, reflecting an increase of 25.5%[100] - The company planted 17,334 trees and over 1.02 million shrubs during the reporting period, achieving a greenhouse gas offset of 786 tons, effectively offsetting 0.39% of its greenhouse gas emissions[149] - The company aims to reduce per capita wastewater emissions by 1-2% compared to the fiscal year 2022/23[144] - The company has implemented a management system to enhance energy-saving practices and reduce electricity waste[150] - The company is committed to promoting environmental protection and social responsibility in its daily operations[143] - The company has established a comprehensive energy-saving management system and conducts regular assessments of energy-saving targets[150] - Total energy consumption increased to 249,427,216 kWh for the year ending August 31, 2024, up from 188,766,210 kWh in the previous year, representing a growth of approximately 32%[152] - Water consumption reached 10,157,502 cubic meters for the year ending August 31, 2024, compared to 9,429,892 cubic meters in the previous year, indicating an increase of about 7.7%[152] - The group has implemented measures to enhance water and electricity management, including the establishment of a smart monitoring system for water and electricity usage[166] - The group aims to reduce harmful waste emissions by 1-2% compared to the 2022/23 fiscal year, focusing on better management and recycling practices[173] - A total of 564 tons of solid waste were recycled during the reporting period, reflecting the group's commitment to sustainability[173] - The group has been recognized for its water-saving initiatives, with schools receiving accolades for their efforts in water conservation[156] - The group encourages a paperless office environment and has implemented measures to reduce the use of plastic bags and disposable utensils in cafeterias[173] - The energy consumption per student has improved, with a reduction in electricity usage to 924.9 kWh for the year ending August 31, 2024, down from 762.4 kWh[152] - The group is actively promoting the creation of "water-saving universities" in accordance with provincial standards[162] - The group has adopted energy-efficient practices, including the replacement of old equipment with green products to minimize energy consumption[162] - The average energy consumption per student increased due to the construction of new campuses and the rise in full-time student enrollment[178] - The company aims to reduce average electricity usage by 1-2% compared to the 2022/23 fiscal year through various energy-saving measures[182] - The company has implemented water-saving projects, including the use of treated wastewater for irrigation, effectively reducing total water consumption[182] - The company has installed a distributed photovoltaic power generation project with an area of approximately 4,500 square meters and a capacity of about 930KW[191] - The company adheres to national and provincial policies aimed at reducing environmental impact, including energy conservation laws and water-saving management guidelines[184] - The company has received recognition for its green initiatives, including being named a "Green Low-Carbon Public Institution" in 2024[188] - The company is actively promoting energy-saving awareness among staff and students through training and campaigns[182] - The company has established strict management systems for energy usage and conservation, including regular inspections to prevent resource wastage[182] - The company is gradually replacing traditional lighting with LED energy-saving lights across its campuses[182] - The company has set a policy to maintain air conditioning temperatures at 26°C or above during summer[182] Financial Performance - The net profit attributable to the company's owners increased by 3.3% to RMB 1,971 million[46] - Revenue for the period was RMB 6,579 million, with a gross profit of RMB 3,644 million[55] - Operating profit reached RMB 2,846 million, compared to RMB 2,493 million in the previous period[55] - The group reported an adjusted net profit of RMB 1,971 million, up from RMB 1,908 million[55] - The group's revenue for the year ended August 31, 2024, reached RMB 6,579 million, an increase of 17.1% compared to RMB 5,616 million for the year ended August 31, 2023[65] - Domestic market revenue increased from RMB 5,396 million for the year ended August 31, 2023, to RMB 6,335 million for the year ended August 31, 2024, representing a growth of 17.4%[65] - International market revenue rose to RMB 244 million for the year ended August 31, 2024, up 10.9% from RMB 220 million for the year ended August 31, 2023[65] - Operating profit for the year ended August 31, 2024, was RMB 2,846 million, an increase of 14.2% from RMB 2,493 million for the year ended August 31, 2023[65] - Gross profit for the year ended August 31, 2024, was RMB 3,644 million, with a gross margin reflecting the impact of increased student enrollment and teaching investments[65] - The group recorded a net loss of RMB 1,975 million due to impairment losses on goodwill and intangible assets totaling RMB 1,911 million[65] - Other income from management and services provided to on-campus merchants was RMB 132 million, compared to RMB 100 million for the year ended August 31, 2023[65] - The group has achieved over 300% revenue growth since issuing convertible bonds in 2019, facilitating rapid business expansion[73] - The management team noted a compound annual growth rate of 4.6% for future revenue projections over the next five years[67] - The net profit for the year ended August 31, 2024, was RMB 502 million, a decrease of 67.4% compared to RMB 1,541 million for the year ended August 31, 2023[79] - Adjusted net profit increased to RMB 2,242 million, up 7.9% from RMB 2,077 million in the previous year[79] - EBITDA for the year was RMB 1,841 million, down 33.3% from RMB 2,762 million in the previous year[105] - Adjusted EBITDA rose to RMB 3,774 million, an increase of 12.3% compared to RMB 3,361 million for the previous year[105] - The company reported a financing cost of RMB 472 million, slightly up from RMB 469 million in the previous year[105] - The depreciation of property, plant, and equipment was RMB 793 million, an increase of 19.8% from RMB 662 million in the previous year[105] - The company anticipates challenges in new student enrollment due to increased competition among schools in the same region[110] - The company has converted all independent colleges into private schools, impacting the financials during the reporting period[83] - The compound annual growth rate (CAGR) of revenue for the next five years is projected to be 3.8%, down from 16.4% in the previous year due to potential changes in immigration policies[118] - Capital expenditure for the year ending August 31, 2024, was RMB 4,857 million, significantly up from RMB 2,637 million in the previous year, primarily related to the construction of new buildings in existing campuses[122] - Cash reserves as of August 31, 2024, amounted to RMB 6,626 million, an increase from RMB 5,802 million in the previous year[122] - The group’s financing costs slightly increased to RMB 472 million for the year ending August 31, 2024, from RMB 469 million in the previous year[118] - The group’s property, plant, and equipment grew by 22.9% to RMB 21,706 million as of August 31, 2024, compared to RMB 17,668 million in the previous year[122] - The average equity balance attributable to owners was calculated at 12.5%, indicating a reasonable level[115] - The group anticipates a decline in new student enrollment numbers for the fall of 2024, which will negatively impact revenue forecasts[117] - The discount rate used as of August 31, 2024, was 22.7%, up from 20.5% in the previous year[118] - The adjusted net asset return for the year ending August 31, 2024, is expected to increase by 3.3% to RMB 1,971 million[119] - The adjusted net asset return for the fiscal year ending August 31, 2024, is 12.5%, which is considered reasonable[136] - The debt-to-equity ratio as of August 31, 2024, is 19.5%, up from 15.3% in 2023[139] - The interest-bearing asset liability ratio is 26.4% as of August 31, 2024, compared to 24.1% in 2023[139] - The total bank and other borrowings amount to RMB 7,440 million as of August 31, 2024, an increase from RMB 6,138 million in 2023[142] Educational Initiatives - The group operates 15 major consolidated subsidiaries, including 12 schools in China and one in Australia, as of August 31, 2023[8] - The company emphasizes its commitment to providing affordable and quality education, aligning with the United Nations Sustainable Development Goals[14] - The group has established an ESG working group to oversee the preparation of ESG reports and assess performance across various areas[9] - The company aims to comply with IFC performance standards and local regulations, ensuring adherence to environmental and social policies[15] - The group opened 384 applied undergraduate programs in higher vocational education, an increase of 12 programs year-on-year[27] - The total number of campuses increased from 22 to 23, serving nearly 40,000 students in key economic regions[44] - The group initiated a "Smart Campus" project to enhance digital integration in teaching and management[29] - The group actively responded to national calls for educational digitalization, improving campus management efficiency[29] - The group plans to expand international education investments to enhance global competitiveness[45] - The group aims to cultivate skilled talents to meet the demands of new industries and business formats[27] - The group emphasizes that teaching quality largely depends on the quality of teachers, with most schools implementing performance reward and management systems to link teaching outcomes with teacher compensation[197] - No stock options were granted to any employees for the fiscal year ending August 31, 2024, consistent with the previous year where no options were granted as well[198] - The report pertains to China Education Group Holdings Limited for the fiscal year 2023/2024[199]

Investment Rating - The investment rating for the company is "Outperform the Market" [3][4][17]. Core Views - The company's net profit attributable to shareholders is expected to decline by 70% in the fiscal year 2024 due to goodwill impairment [3][6]. - The company achieved revenue of 6.579 billion yuan in fiscal year 2024, representing a year-on-year increase of 17.2%, closely aligning with the previous forecast of 6.604 billion yuan [3][6]. - Adjusted net profit for fiscal year 2024 is projected at 1.971 billion yuan, reflecting a 3.3% increase [3][6]. - The company plans to maintain a cash dividend payout ratio of approximately 40% for fiscal year 2024 [3][16]. Financial Forecasts and Key Indicators - Revenue projections for the company from 2019 to 2027 are as follows: - 2019: 5.616 billion yuan - 2024: 6.579 billion yuan (+17.1%) - 2025E: 7.283 billion yuan (+10.7%) - 2026E: 7.997 billion yuan (+9.8%) - 2027E: 8.692 billion yuan (+8.7%) [1][21]. - Net profit attributable to shareholders is forecasted as: - 2019: 1.380 billion yuan - 2024: 0.418 billion yuan (-69.7%) - 2025E: 2.161 billion yuan (+417.0%) - 2026E: 2.345 billion yuan (+8.5%) - 2027E: 2.515 billion yuan (+7.2%) [1][21]. - Earnings per share (EPS) are projected to be: - 2019: 0.51 yuan - 2024: 0.15 yuan - 2025E: 0.80 yuan - 2026E: 0.86 yuan - 2027E: 0.93 yuan [1][21]. - The company's price-to-earnings (P/E) ratio is expected to be: - 2025E: 4.3 - 2026E: 4.0 - 2027E: 3.7 [1][21]. - The company’s cash and cash equivalents are projected to increase to 10.789 billion yuan by 2025E, with a significant capital expenditure of 48.57 billion yuan in fiscal year 2024, marking an 84.2% increase [1][16][21].

Investment Rating - The investment rating for the company is "Hold" with a target price of 3.48 HKD, maintaining the current rating [1]. Core Views - The company aims to cultivate high-quality skilled talents and has reported a revenue of 6.58 billion RMB for FY24, representing a year-on-year increase of 17.1%, with adjusted net profit of 1.97 billion RMB, up 3.3% [1]. - The company maintains a stable dividend payout ratio, distributing a final dividend of 0.1028 RMB per share, which is approximately 40% of the adjusted net profit [1]. - The domestic revenue reached 6.34 billion RMB, growing by 17.4%, driven by an increase in the number of enrolled students and per-student income [1]. - The total number of full-time enrolled students reached approximately 270,000, a year-on-year increase of about 9%, with vocational education students numbering around 224,000, up 12.5% [1]. - The company has expanded its partnerships with enterprises to 3,980 and has established 61 industry colleges, enhancing the quality of employment for graduates [1]. Summary by Sections Financial Performance - For FY25, the revenue is projected to be 6.78 billion RMB (down from the previous estimate of 7.5 billion RMB), with adjusted net profit expected at 2.05 billion RMB (previously 2.42 billion RMB) [2]. - FY26 and FY27 revenues are forecasted at 6.99 billion RMB and 7.21 billion RMB, with adjusted net profits of 2.16 billion RMB and 2.29 billion RMB, respectively [2]. Market Expansion and Development - The company is deepening its focus on key regions and international development, with successful expansions in Shandong and Guangdong, increasing student capacity by nearly 40,000 [1]. - The international education program has seen new student enrollment increase by over 100%, with collaborations with more than 200 renowned global institutions [1]. - The launch of the "Smart Campus" project aims to integrate digital technology into teaching, research, and management, enhancing educational efficiency and student experience [1].

Summary of Conference Call Company and Industry - The conference call pertains to the higher education sector, specifically focusing on a group of schools operated by the company, which provides educational services and has a significant presence in the local market. Key Points and Arguments 1. **Increase in Value-Added Services**: The company is expanding the range of value-added services provided to schools, which is expected to increase profits and consequently the tax impact will also rise. The company maintains a high dividend payout ratio of 40% and plans to sustain this level in the future [1][12][22]. 2. **Revenue Growth**: Since its listing, the company has experienced a consistent revenue growth rate of 30%. The higher education sector is projected to continue growing until 2034, which will benefit the company’s core business [2][8]. 3. **Revenue Sources**: Currently, 87% of the company's revenue comes from local growth in the higher education sector, contributing 91% to the profit. The contribution from vocational education is minimal at 7%, and overseas schools contribute only 2% [2]. 4. **Impairment Losses**: The company has recognized impairment losses on certain schools due to discrepancies between acquisition valuations and current operational performance. For instance, a school in Sichuan triggered a 1.04 billion RMB impairment despite showing a 30% increase in student enrollment since acquisition [3][4]. 5. **Tuition Fee Growth**: The Sichuan school’s tuition fee growth has been limited to 6% due to government regulations, which is significantly lower than the expected increase of 20% to 50%. This has impacted the revenue expectations from this institution [15][16]. 6. **Future Enrollment Trends**: The company anticipates a decline in enrollment for certain vocational schools due to competition from high schools. This has led to further impairment losses being recognized [5][6]. 7. **Capital Expenditures**: The company’s capital expenditures reached a peak of 4.8 billion RMB, which is aimed at future growth and maintaining competitive advantages. A decline in capital expenditures is expected in the coming years, which may positively impact the dividend payout [7][20]. 8. **Tax Rate and Profitability**: The effective tax rate is projected to increase as the company expands its service offerings. The current tax rate is estimated to be around 10% to 15%, depending on tax refunds [21][22]. 9. **Debt Structure**: The company’s debt structure is stable, with a significant portion of its debt in RMB at low-interest rates. The impact of fluctuating interest rates on the overall debt service is minimal [27]. 10. **Future Profit Expectations**: The company expects 11% revenue growth for the current year, with a potential dip in profits in fiscal year 2025 due to rising costs and other factors. However, profits are expected to rebound in subsequent years [25][26]. Other Important but Overlooked Content - The company is actively managing its impairment risks and has strategies in place to mitigate potential declines in student numbers by adjusting tuition fees and reducing recruitment costs [11][19]. - The company has a cautious approach to future tuition fee increases, reflecting a conservative growth outlook in its financial projections [26][32]. - The overall utilization rate of the campuses is currently at 72%, with higher education institutions performing better than vocational schools in terms of enrollment [29][30]. This summary encapsulates the key insights from the conference call, highlighting the company's strategic direction, financial performance, and market outlook.