Investment Rating - The report maintains an "Accumulate" rating for the company [2][9]. Core Views - The company's performance in H1 2024 met prior forecasts, with core results exceeding expectations driven by operational improvements, including increased store count, higher average transaction value, and enhanced employee productivity [2]. - The non-academic quality business segment significantly contributed to revenue growth, accounting for 92% of total revenue, with a 58% year-on-year increase [2]. - The company is projected to achieve adjusted net profits of 178 million, 249 million, and 330 million yuan for 2024, 2025, and 2026 respectively, with EPS estimates of 0.32, 0.44, and 0.58 yuan [2]. Financial Summary - For H1 2024, the company reported revenue of 399 million yuan, a 59% increase year-on-year, and a gross profit of 177 million yuan, reflecting a 70% increase [2]. - The gross margin improved to 44%, up 3 percentage points, while the adjusted net profit margin reached 23.44%, an increase of 4.93 percentage points [2]. - The number of students served increased by 57% to 169,700, with total class hours rising by 57% to 4.2029 million [2]. - The company’s employee count grew by 48% to 2,603, with revenue per employee increasing by 7% to 150,000 yuan [2][5].

Summary [Financial Summary](index=1&type=section&id=%E8%B4%A2%E5%8A%A1%E6%91%98%E8%A6%81) Sikale Education Group's unaudited interim results for the six months ended June 30, 2024, show significant growth in revenue, operating profit, profit attributable to owners, and earnings per share 2024 H1 Key Financial Data (Unaudited) | Metric | 2024 (RMB thousands) | 2023 (RMB thousands) | Change (RMB thousands) | Percentage Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | 399,113 | 251,323 | 147,790 | 58.8% | | Operating Profit | 113,819 | 49,656 | 64,163 | 129.2% | | Profit for the period attributable to owners | 82,652 | 42,938 | 39,714 | 92.5% | | Adjusted profit for the period attributable to owners | 93,542 | 46,511 | 47,031 | 101.1% | | Basic EPS (RMB cents) | 15.21 | 7.73 | 7.48 | 96.8% | | Diluted EPS (RMB cents) | 14.76 | 7.66 | 7.10 | 92.7% | | Adjusted Basic EPS (RMB cents) | 17.21 | 8.37 | 8.84 | 105.6% | | Adjusted Diluted EPS (RMB cents) | 16.71 | 8.29 | 8.42 | 101.6% | Non-IFRS Measures [Adjusted Profit for the Period Attributable to Owners](index=2&type=section&id=%E6%8B%A5%E6%9C%89%E4%BA%BA%E5%BA%94%E5%8D%A0%E6%9C%9F%E5%86%85%E7%BB%8F%E8%B0%83%E6%95%B4%E6%BA%A2%E5%88%A9) The company defines adjusted profit attributable to owners as profit for the period excluding non-operating performance items like share option benefit expenses, to accurately assess the Group's financial performance - Share option benefit expenses increased by **204.8%** from **RMB 3.6 million** in 2023 to **RMB 10.9 million** in 2024[2](index=2&type=chunk) - Adjusted profit for the period attributable to owners increased by **101.1%** year-on-year to **RMB 93.542 million**[2](index=2&type=chunk) [Adjusted Earnings Per Share](index=3&type=section&id=%E7%BB%8F%E8%B0%83%E6%95%B4%E6%AF%8F%E8%82%A1%E7%9B%88%E5%88%A9) Adjusted earnings per share provides investors with a clearer measure of operating performance by excluding non-cash expenses such as share option benefit expenses - Adjusted basic earnings per share increased by **105.6%** from **RMB 8.37 cents** in 2023 to **RMB 17.21 cents** in 2024[4](index=4&type=chunk) - Adjusted diluted earnings per share increased by **101.6%** from **RMB 8.29 cents** in 2023 to **RMB 16.71 cents** in 2024[6](index=6&type=chunk) - The weighted average number of shares used to calculate adjusted diluted earnings per share slightly decreased from **560,864,000 shares** in 2023 to **559,942,000 shares** in 2024 due to share option adjustments[6](index=6&type=chunk) Management Discussion and Analysis [Performance Overview](index=5&type=section&id=%E4%B8%9A%E7%BB%A9%E6%A6%82%E8%A7%88) The Group's core business remains profitable, with significant growth in revenue and net profit driven by business transformation and the vigorous development of non-academic quality courses - Operating profit reached **RMB 113.8 million**[7](index=7&type=chunk) - Revenue from quality-oriented courses increased from **RMB 232.2 million** in the prior period to **RMB 366.5 million**, with related tutoring class hours increasing from **2,675,300** to **4,202,896**[7](index=7&type=chunk) - Total revenue increased by **58.8%** year-on-year to **RMB 399.1 million**[7](index=7&type=chunk) - Net profit attributable to owners increased by **92.5%** year-on-year to **RMB 82.7 million**, primarily due to increased tutoring class hours and improved operating efficiency[7](index=7&type=chunk) [Future Prospects and Development Strategies](index=5&type=section&id=%E6%9C%AA%E6%9D%A5%E5%89%8D%E6%99%AF%E5%8F%8A%E5%8F%91%E5%B1%95%E7%AD%96%E7%95%A5) The Group will expand education tourism and international courses, strengthen 'Lexue' brand quality education, and actively seek new business opportunities for diversified development, while strictly controlling costs and enhancing service quality and operational efficiency - Education tourism business and international courses were launched since July 2023 to broaden the revenue base[8](index=8&type=chunk) - The Group will further strengthen quality education under the 'Lexue' brand, including art, sports, painting, performing arts, calligraphy, scientific literacy, traditional Chinese studies, logical thinking training, and international literacy[8](index=8&type=chunk) - Looking ahead, the Group will pursue comprehensive diversified development, leverage brand influence to seek new business opportunities, and continue to strictly control costs, maintain stable cash flow, and enhance service quality and operational efficiency[8](index=8&type=chunk) Financial Review [Revenue](index=6&type=section&id=%E6%94%B6%E7%9B%8A) The Group's revenue increased by **58.8%** year-on-year, primarily driven by a significant increase in total student enrollments and tutoring class hours, with non-academic quality courses contributing the most Revenue by Education Service Category | Revenue Category | 2024 (RMB thousands) | 2023 (RMB thousands) | Change | | :--- | :--- | :--- | :--- | | Non-academic quality courses and other tutoring courses | 366,525 | 232,216 | 57.8% | | Tutoring courses | 32,588 | 19,107 | 70.6% | | **Total** | **399,113** | **251,323** | **58.8%** | Student Enrollments and Completed Tutoring Class Hours by Education Service Category | Metric | 2024 | 2023 | Change | | :--- | :--- | :--- | :--- | | Non-academic quality courses student enrollments | 169,739 | 107,908 | 57.3% | | Non-academic quality courses tutoring class hours | 4,202,896 | 2,675,300 | 57.1% | | Tutoring courses student enrollments | 14,666 | 8,622 | 70.1% | | Tutoring courses tutoring class hours | 361,356 | 212,300 | 70.2% | | **Total student enrollments** | **184,405** | **116,530** | **58.2%** | | **Total tutoring class hours** | **4,564,252** | **2,887,600** | **58.1%** | [Cost of Sales](index=7&type=section&id=%E9%94%80%E5%94%AE%E6%88%90%E6%9C%AC) Cost of sales increased by **50.7%** to **RMB 222.0 million**, primarily due to higher teacher salaries and right-of-use asset amortization, but the increase was lower than revenue growth, indicating improved operating efficiency - Cost of sales increased by **50.7%** to **RMB 222.0 million**[11](index=11&type=chunk) - Primarily due to increased teacher salaries and amortization of right-of-use assets, driven by learning center network expansion and business growth[11](index=11&type=chunk) - The increase in cost of sales was lower than the increase in revenue, reflecting improved operating efficiency[11](index=11&type=chunk) [Gross Profit and Gross Margin](index=7&type=section&id=%E6%AF%9B%E5%88%A9%E5%8F%8A%E6%AF%9B%E5%88%A9%E7%8E%87) Gross profit increased by **70.2%** to **RMB 177.1 million**, with gross margin improving from **41.4%** to **44.4%**, reflecting enhanced profitability - Gross profit increased by **70.2%** to **RMB 177.1 million**[12](index=12&type=chunk) - Gross margin improved from **41.4%** to **44.4%**[12](index=12&type=chunk) [Selling Expenses](index=7&type=section&id=%E9%94%80%E5%94%AE%E5%BC%80%E6%94%AF) Selling expenses increased by **26.6%** to **RMB 6.5 million**, primarily due to higher student activity expenses - Selling expenses increased by **26.6%** to **RMB 6.5 million**[13](index=13&type=chunk) - Primarily due to increased student activity expenses[13](index=13&type=chunk) [Administrative Expenses](index=7&type=section&id=%E8%A1%8C%E6%94%BF%E5%BC%80%E6%94%AF) Administrative expenses increased by **11.5%** to **RMB 56.2 million**, mainly due to higher administrative staff expenses, partially offset by a decrease in impairment provisions - Administrative expenses increased by **11.5%** to **RMB 56.2 million**[14](index=14&type=chunk) - Primarily due to increased administrative staff expenses, partially offset by a decrease in impairment provisions[14](index=14&type=chunk) [Research and Development Expenses](index=7&type=section&id=%E7%A0%94%E5%8F%91%E5%BC%80%E6%94%AF) Research and development expenses increased by **21.3%** to **RMB 10.6 million**, primarily due to higher R&D personnel expenses - Research and development expenses increased by **21.3%** to **RMB 10.6 million**[15](index=15&type=chunk) - Primarily due to increased R&D personnel expenses[15](index=15&type=chunk) [Other Income](index=8&type=section&id=%E5%85%B6%E4%BB%96%E6%94%B6%E5%85%A5) Net other income increased by **56.2%** to **RMB 6.5 million**, primarily driven by higher finance income, but partially offset by a decrease in government grants - Net other income increased by **56.2%** to **RMB 6.5 million**[16](index=16&type=chunk) - Primarily due to an increase in finance income of **RMB 3.9 million**, partially offset by a decrease in government grants of **RMB 1.1 million**[16](index=16&type=chunk) [Other Gains—Net](index=8&type=section&id=%E5%85%B6%E4%BB%96%E6%94%B6%E7%9B%8A%E2%80%94%E5%87%80%E9%A2%9D) Net other gains decreased by **38.9%** to **RMB 3.5 million**, mainly due to net foreign exchange losses, partially offset by an increase in lease modifications - Net other gains decreased by **38.9%** to **RMB 3.5 million**[17](index=17&type=chunk) - Primarily due to a net foreign exchange loss of **RMB 0.5 million** (compared to a gain of **RMB 1.0 million** in the prior period), partially offset by an increase in lease modifications of **RMB 1.3 million**[17](index=17&type=chunk) [Finance Costs](index=8&type=section&id=%E8%B4%A2%E5%8A%A1%E6%88%90%E6%9C%AC) Finance costs increased by **73.6%** to **RMB 4.8 million**, primarily due to higher interest expenses on lease liabilities and borrowings - Finance costs increased by **73.6%** to **RMB 4.8 million**[18](index=18&type=chunk) - Primarily due to increased interest expenses on lease liabilities and borrowings[18](index=18&type=chunk) [Profit Before Income Tax](index=8&type=section&id=%E9%99%A4%E6%89%80%E5%BE%97%E7%A8%8E%E5%89%8D%E6%BA%A2%E5%88%A9) Profit before income tax increased by **132.5%** to **RMB 109.0 million**, indicating a significant improvement in the Group's overall profitability - Profit before income tax increased by **132.5%** to **RMB 109.0 million**[19](index=19&type=chunk) [Income Tax Expense](index=8&type=section&id=%E6%89%80%E5%BE%97%E7%A8%8E%E5%BC%80%E6%94%AF) Income tax expense increased by **506.8%** to **RMB 26.8 million**, primarily due to a substantial increase in taxable profit - Income tax expense increased by **506.8%** to **RMB 26.8 million**[20](index=20&type=chunk) - Primarily due to increased taxable profit[20](index=20&type=chunk) [Profit for the Period Attributable to Owners](index=8&type=section&id=%E6%8B%A5%E6%9C%89%E4%BA%BA%E5%BA%94%E5%8D%A0%E6%9C%9F%E5%86%85%E6%BA%A2%E5%88%A9) Profit for the period attributable to owners increased by **92.5%** to **RMB 82.7 million**, reflecting a significant increase in value created for shareholders - Profit for the period attributable to owners increased by **92.5%** to **RMB 82.7 million**[21](index=21&type=chunk) Liquidity, Financial Resources and Capital Structure [Overview](index=9&type=section&id=%E6%A6%82%E8%A7%88) The Group's total equity and cash and cash equivalents increased, but net current assets decreased, while new bank borrowings led to an increase in the gearing ratio - Total equity increased from **RMB 453.4 million** as of December 31, 2023, to **RMB 532.1 million** as of June 30, 2024[22](index=22&type=chunk) - Cash and cash equivalents increased by **7.7%** to **RMB 276.2 million**[22](index=22&type=chunk) - Total current assets decreased from **RMB 497.1 million** to **RMB 470.0 million**, while total current liabilities increased from **RMB 450.8 million** to **RMB 459.3 million**[22](index=22&type=chunk) - New bank borrowings of **RMB 30.0 million** led to an increase in the gearing ratio from **0%** to **5.6%**[22](index=22&type=chunk) - Net current assets decreased from **RMB 46.4 million** to **RMB 10.8 million**[22](index=22&type=chunk) [Treasury Management Policy](index=9&type=section&id=%E5%BA%93%E5%8A%A1%E7%AE%A1%E7%90%86%E6%94%BF%E7%AD%96) The Group utilizes surplus cash reserves by investing in low-risk, short-term wealth management products, with strict approval and monitoring mechanisms to manage risks and optimize investment performance - Surplus cash reserves are utilized to invest in low-risk wealth management products to generate income, with investment horizons typically not exceeding one year[23](index=23&type=chunk) - Investment scope includes low-risk, capital-guaranteed unit trusts, structured deposits, money market instruments, debt instruments, and listed/unlisted securities issued by trust companies and commercial banks[23](index=23&type=chunk) - The treasury department is responsible for executing, tracking, and analyzing investment decisions, reviewing cash positions, operating cash needs, and potential investment opportunities monthly, with all investment decisions requiring approval from the Chairman of the Board[24](index=24&type=chunk) [Foreign Exchange Risk](index=10&type=section&id=%E5%A4%96%E6%B1%87%E9%A3%8E%E9%99%A9) Most of the Group's revenue, expenses, cash, and bank deposits are denominated in RMB and HKD, with no foreign currency hedging policy currently in place, but management will continue to monitor foreign exchange risk - Most of the Group's revenue and expenses are denominated in RMB, and most cash and bank deposits are denominated in RMB and HKD[25](index=25&type=chunk) - The Group currently has no foreign currency hedging policy, and management will continue to monitor foreign exchange risk and consider prudent measures when appropriate[25](index=25&type=chunk) [Significant Acquisitions and Disposals and Significant Investments](index=10&type=section&id=%E9%87%8D%E5%A4%A7%E6%94%B6%E8%B4%AD%E5%8F%8A%E5%87%BA%E5%94%AE%E4%BB%A5%E5%8F%8A%E9%87%8D%E5%A4%A7%E6%8A%95%E8%B5%84) During the reporting period, the Group did not undertake any significant investments, acquisitions, or disposals, but will actively seek future investment opportunities to broaden its revenue base and enhance profitability - For the six months ended June 30, 2024, the company did not undertake any significant investments, acquisitions, or disposals of subsidiaries, associates, or joint ventures[26](index=26&type=chunk) - The Group will strive to adapt to changing market conditions and actively seek investment opportunities to broaden its revenue base and enhance its future financial performance and profitability[26](index=26&type=chunk) Other Information [Dividends](index=11&type=section&id=%E8%82%A1%E6%81%AF) The Board does not recommend the payment of an interim dividend for the six months ended June 30, 2024 - The Board does not recommend the payment of an interim dividend for the six months ended June 30, 2024 (for the six months ended June 30, 2023: nil)[27](index=27&type=chunk) [Contingent Liabilities](index=11&type=section&id=%E6%88%96%E7%84%B6%E8%B4%9F%E5%80%BA) At the end of the reporting period, the Group had no significant contingent liabilities, guarantees, or pending litigations - As of June 30, 2024, the Group had no significant contingent liabilities, guarantees, or any significant pending or threatened litigations or claims against any member of the Group[28](index=28&type=chunk) [Pledge of Assets](index=11&type=section&id=%E8%B5%84%E4%BA%A7%E8%B4%A8%E6%8A%BC) At the end of the reporting period, the Group had no significant pledge of assets - As of June 30, 2024, and December 31, 2023, the Group had no significant pledge of assets[29](index=29&type=chunk) [Employees and Remuneration Policy](index=11&type=section&id=%E9%9B%87%E5%91%98%E5%8F%8A%E8%96%AA%E9%85%AC%E6%94%BF%E7%AD%96) The Group considers employees a valuable asset, with the number of employees increasing to **2,603** as of June 30, 2024, and remuneration policies are consistent with market practices and continuously reviewed for competitiveness - As of June 30, 2024, the Group employed a total of **2,603** employees (December 31, 2023: **2,319** employees)[30](index=30&type=chunk) - Remuneration policies are consistent with prevailing market practices and determined based on individual employee performance and experience, with continuous review to ensure market competitiveness[30](index=30&type=chunk) [Post-Balance Sheet Events](index=11&type=section&id=%E6%9C%9F%E5%90%8E%E4%BA%8B%E9%A1%B9) Subsequent to the reporting period, the trustee of the company's share award scheme acquired **1,540,000** shares, and **9,169,050** share options were exercised, resulting in new share issuance - Between July 3 and July 15, 2024, the trustee of the company's share award scheme acquired a total of **1,540,000** ordinary shares of the company from the market for a total consideration of **HKD 6,977,000** (equivalent to **RMB 6,370,000**)[31](index=31&type=chunk) - On July 10, 2024, **9,169,050** share options granted and vested under the share option scheme were exercised at an exercise price of **HKD 1.62** per share, resulting in the issuance and allotment of **9,169,050** new shares[31](index=31&type=chunk) Interim Condensed Consolidated Financial Statements [Interim Condensed Consolidated Statement of Comprehensive Income](index=12&type=section&id=%E4%B8%AD%E6%9C%9F%E7%AE%80%E6%98%8E%E7%BB%BC%E5%90%88%E5%85%A8%E9%9D%A2%E6%94%B6%E7%9B%8A%E8%A1%A8) The Group achieved strong financial growth during the reporting period, with significant increases in revenue and operating profit, and profit attributable to owners growing by **92.5%** year-on-year Summary of Interim Condensed Consolidated Statement of Comprehensive Income | Metric | 2024 (RMB thousands) | 2023 (RMB thousands) | | :--- | :--- | :--- | | Revenue | 399,113 | 251,323 | | Cost of Sales | (221,975) | (147,265) | | Gross Profit | 177,138 | 104,058 | | Operating Profit | 113,819 | 49,656 | | Profit Before Income Tax | 109,003 | 46,882 | | Income Tax Expense | (26,748) | (4,408) | | Profit for the period | 82,255 | 42,474 | | Profit attributable to owners | 82,652 | 42,938 | | Basic EPS (RMB cents) | 15.21 | 7.73 | | Diluted EPS (RMB cents) | 14.76 | 7.66 | [Interim Condensed Consolidated Statement of Financial Position](index=13&type=section&id=%E4%B8%AD%E6%9C%9F%E7%AE%80%E6%98%8E%E7%BB%BC%E5%90%88%E8%B5%84%E4%BA%A7%E8%B4%9F%E5%80%BA%E8%A1%A8) As of June 30, 2024, the Group's total assets and total equity both increased, with a significant rise in non-current assets, particularly right-of-use assets, while current liabilities slightly increased Summary of Interim Condensed Consolidated Statement of Financial Position | Metric | June 30, 2024 (RMB thousands) | December 31, 2023 (RMB thousands) | | :--- | :--- | :--- | | **Assets** | | | | Total non-current assets | 694,466 | 536,110 | | Total current assets | 470,023 | 497,105 | | **Total Assets** | **1,164,489** | **1,033,215** | | **Equity** | | | | Capital and reserves attributable to owners of the Company | 532,662 | 454,825 | | Non-controlling interests | (595) | (1,475) | | **Total Equity** | **532,067** | **453,350** | | **Liabilities** | | | | Total non-current liabilities | 173,163 | 129,112 | | Total current liabilities | 459,259 | 450,753 | | **Total Liabilities** | **632,422** | **579,865** | | **Total Equity and Liabilities** | **1,164,489** | **1,033,215** | - Right-of-use assets increased from **RMB 200,586 thousand** as of December 31, 2023, to **RMB 305,437 thousand** as of June 30, 2024[33](index=33&type=chunk) - Bank balances and cash decreased from **RMB 364,900 thousand** to **RMB 278,400 thousand**, while other current financial assets measured at amortized cost increased from **RMB 10,000 thousand** to **RMB 65,615 thousand**[22](index=22&type=chunk)[33](index=33&type=chunk) Notes to the Interim Condensed Consolidated Financial Information [General Information](index=15&type=section&id=%E4%B8%80%E8%88%AC%E8%B5%84%E6%96%99) Sikale Education Group was incorporated in the Cayman Islands, primarily engaged in providing private education services in China, with its ordinary shares listed on the Hong Kong Stock Exchange - The Company was incorporated in the Cayman Islands on February 7, 2018, primarily engaged in providing private education services in China[35](index=35&type=chunk) - The Company's ordinary shares were listed on The Stock Exchange of Hong Kong Limited on June 21, 2019[35](index=35&type=chunk) [Basis of Preparation](index=15&type=section&id=%E7%BC%96%E5%88%B6%E5%9F%BA%E5%87%86) The interim financial information is prepared in accordance with IAS 34 and should be read in conjunction with the annual financial statements, with the Group continuing to adopt the going concern basis - The interim condensed consolidated financial information has been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting' issued by the International Accounting Standards Board[36](index=36&type=chunk) - This interim condensed consolidated financial information should be read in conjunction with the annual consolidated financial statements for the year ended December 31, 2023, prepared in accordance with IFRS[36](index=36&type=chunk) - The Directors believe that the Group's existing funding sources are sufficient to meet its financial obligations for the next 12 months, thus continuing to adopt the going concern basis[36](index=36&type=chunk) [Accounting Policies](index=16&type=section&id=%E4%BC%9A%E8%AE%A1%E6%94%BF%E7%AD%96) The financial information for this period applies the same accounting policies as the 2023 annual financial statements, with the adoption of new and revised IFRS standards not expected to have a significant impact - The accounting policies applied in this financial information are consistent with those applied in the 2023 financial statements, except for the adoption of new and revised standards[38](index=38&type=chunk) - New and revised standards adopted include amendments to IAS 1 and IFRS 16, among others[39](index=39&type=chunk) - The adoption of new and revised standards and interpretations is not expected to have a significant impact on the interim condensed consolidated financial information[41](index=41&type=chunk) [Financial Risk Management](index=17&type=section&id=%E8%B4%A2%E5%8A%A1%E9%A3%8E%E9%99%A9%E7%AE%A1%E7%90%86) The Group faces market, credit, and liquidity risks, managed through sufficient cash, bank financing, and low-risk investments, with fair values regularly assessed [Financial Risk Factors](index=17&type=section&id=%E8%B4%A2%E5%8A%A1%E9%A3%8E%E9%99%A9%E5%9B%A0%E7%B4%A0) The Group's activities are exposed to market risks (including foreign exchange and interest rate risks), credit risk, and liquidity risk, with an overall risk management plan aiming to minimize financial market unpredictability - The Group's activities are exposed to various financial risks: market risk (including foreign exchange risk and cash flow and fair value interest rate risk), credit risk, and liquidity risk[43](index=43&type=chunk) - There have been no significant changes in risk management functions or any risk management policies since December 31, 2023[43](index=43&type=chunk) [Liquidity Risk](index=17&type=section&id=%E6%B5%81%E5%8A%A8%E8%B5%84%E9%87%91%E9%A3%8E%E9%99%A9) The Group manages liquidity risk by holding sufficient cash and bank balances and utilizing bank financing, with Directors believing there is no significant liquidity risk - The Group manages liquidity risk by holding sufficient cash and bank balances, further mitigating it by maintaining cash reserves and utilizing bank financing[44](index=44&type=chunk) Maturity Analysis of Financial Liabilities | Liability Category | Within one year (RMB thousands) | One to two years (RMB thousands) | Two to five years (RMB thousands) | Over five years (RMB thousands) | Total (RMB thousands) | | :--- | :--- | :--- | :--- | :--- | :--- | | **June 30, 2024** | | | | | | | Trade payables | 3,204 | — | — | — | 3,204 | | Other payables | 13,876 | — | — | — | 13,876 | | Borrowings | 30,769 | — | — | — | 30,769 | | Lease liabilities | 79,307 | 67,505 | 104,282 | 43,333 | 294,427 | | **Total** | **127,156** | **67,505** | **104,282** | **43,333** | **342,276** | | **December 31, 2023** | | | | | | | Trade payables | 2,967 | — | — | — | 2,967 | | Other payables | 14,195 | — | — | — | 14,195 | | Lease liabilities | 58,478 | 49,960 | 83,099 | 137,617 | 329,154 | | **Total** | **75,640** | **49,960** | **83,099** | **137,617** | **346,316** | [Fair Value Estimation](index=18&type=section&id=%E5%85%AC%E5%85%81%E4%BB%B7%E5%80%BC%E4%BC%B0%E8%AE%A1) The Group's financial instruments measured at fair value are categorized into three levels based on valuation technique inputs, with regular valuation management and external expert assistance when necessary - Financial instruments measured at fair value are categorized into three levels based on valuation technique inputs: Level 1 (quoted prices in active markets), Level 2 (observable inputs), and Level 3 (unobservable inputs)[46](index=46&type=chunk) Fair Value Hierarchy Analysis of Financial Instruments | Financial Instruments | Level 1 (RMB thousands) | Level 2 (RMB thousands) | Level 3 (RMB thousands) | Total (RMB thousands) | | :--- | :--- | :--- | :--- | :--- | | **June 30, 2024** | | | | | | Wealth management products | — | — | 75,092 | 75,092 | | Listed equity investments in Mainland China | 2,345 | — | — | 2,345 | | Unlisted equity investments in Mainland China | — | — | 47,319 | 47,319 | | **Total** | **2,345** | **—** | **122,411** | **124,756** | | **December 31, 2023** | | | | | | Wealth management products | — | — | 98,672 | 98,672 | | Listed equity investments in Mainland China | 2,979 | — | — | 2,979 | | Unlisted equity investments in Mainland China | — | — | 47,769 | 47,769 | | **Total** | **2,979** | **—** | **146,441** | **149,420** | - Fair value estimation for Level 3 instruments is primarily based on quotes from financial institutions and market approaches, using various applicable valuation methods, including discounted cash flow[48](index=48&type=chunk) [Revenue and Segment Information](index=19&type=section&id=%E6%94%B6%E7%9B%8A%E5%8F%8A%E5%88%86%E9%83%A8%E8%B5%84%E6%96%99) The Group primarily operates private education services in Guangdong Province, China, treating it as a single operating segment, with revenue mainly derived from private education services during the reporting period - The Group's primary operating decision-maker (the Board) reviews consolidated results and considers the Group to operate and be managed as a single operating segment for private education services for the six months ended June 30, 2024[49](index=49&type=chunk) - The Group's main market is Guangdong Province, China, with most revenue and operating profit derived from Guangdong Province[49](index=49&type=chunk) - Revenue from private education services and other income amounted to **RMB 399,113 thousand** (2023: **RMB 251,323 thousand**)[50](index=50&type=chunk) [Other Income](index=20&type=section&id=%E5%85%B6%E4%BB%96%E6%94%B6%E5%85%A5) Other income primarily consists of finance income, operating lease rental income, and government grants, with finance income significantly increasing in the current period Details of Other Income | Category | 2024 (RMB thousands) | 2023 (RMB thousands) | | :--- | :--- | :--- | | Net sub-lease income | 166 | 354 | | Rental income from operating leases | 1,226 | 1,467 | | Finance income | 4,645 | 792 | | Government grants | 419 | 1,521 | | **Total** | **6,456** | **4,134** | [Other Gains—Net](index=20&type=section&id=%E5%85%B6%E4%BB%96%E6%94%B6%E7%9B%8A%E2%80%94%E5%87%80%E9%A2%9D) Net other gains primarily include fair value gains on financial assets at fair value through profit or loss, lease modifications, and foreign exchange gains/losses, with foreign exchange shifting from a gain to a loss in the current period Details of Other Gains—Net | Category | 2024 (RMB thousands) | 2023 (RMB thousands) | | :--- | :--- | :--- | | Fair value gains on financial assets at fair value through profit or loss | 3,491 | 3,669 | | Lease modifications | 1,601 | 279 | | Net gains/(losses) on disposal of property, plant and equipment | 41 | (20) | | Deposit losses | (361) | (226) | | Compensation expenses | (444) | (115) | | Fair value losses on investment properties | (620) | (400) | | Net foreign exchange (losses)/gains | (501) | 980 | | Others | 286 | 1,551 | | **Total** | **3,493** | **5,718** | [Expenses by Nature](index=21&type=section&id=%E6%8C%89%E6%80%A7%E8%B4%A8%E5%88%92%E5%88%86%E4%B9%8B%E5%BC%80%E6%94%AF) The Group's main expenses are employee benefit expenses, depreciation, and amortization, with employee benefit expenses significantly increasing in the current period Details of Expenses by Nature | Category | 2024 (RMB thousands) | 2023 (RMB thousands) | | :--- | :--- | :--- | | Employee benefit expenses | 219,650 | 147,712 | | Depreciation and amortization | 36,153 | 28,441 | | Property management expenses | 6,372 | 3,081 | | Teaching materials | 5,346 | 3,689 | | Advertising and exhibition expenses | 4,247 | 4,247 | | Maintenance costs | 2,870 | 1,569 | | Professional service fees | 2,393 | 3,336 | | Office expenses | 2,321 | 2,827 | | Utilities | 2,028 | 1,370 | | Other taxes | 1,721 | 1,192 | | Auditor's remuneration | 650 | 650 | | Impairment provisions | 398 | 3,794 | | Others | 11,094 | 8,235 | | **Total** | **295,243** | **211,519** | [Finance Costs](index=21&type=section&id=%E8%B4%A2%E5%8A%A1%E6%88%90%E6%9C%AC) Finance costs primarily consist of interest expenses on lease liabilities, significantly increasing in the current period due to higher interest expenses on borrowings Details of Finance Costs | Category | 2024 (RMB thousands) | 2023 (RMB thousands) | | :--- | :--- | :--- | | Interest expense on borrowings | 350 | — | | Interest expense on lease liabilities | 4,466 | 2,774 | | **Total** | **4,816** | **2,774** | [Income Tax Expense](index=21&type=section&id=%E6%89%80%E5%BE%97%E7%A8%8E%E5%BC%80%E6%94%AF) Income tax expense significantly increased, primarily due to a substantial rise in current tax on profit for the period Details of Income Tax Expense | Category | 2024 (RMB thousands) | 2023 (RMB thousands) | | :--- | :--- | :--- | | Current tax—current tax on profit for the period | 28,961 | 3,830 | | Deferred income tax—deferred income tax (decrease)/increase | (2,213) | 578 | | **Income Tax Expense** | **26,748** | **4,408** | [Earnings Per Share](index=22&type=section&id=%E6%AF%8F%E8%82%A1%E7%9B%88%E5%88%A9) Both basic and diluted earnings per share achieved substantial growth, reflecting the Group's enhanced profitability [Basic Earnings Per Share](index=22&type=section&id=%E6%AF%8F%E8%82%A1%E5%9F%BA%E6%9C%AC%E7%9B%88%E5%88%A9) Basic earnings per share is calculated by dividing profit attributable to owners by the weighted average number of ordinary shares outstanding, showing significant growth in the current period Basic Earnings Per Share Calculation | Metric | 2024 (RMB thousands) | 2023 (RMB thousands) | | :--- | :--- | :--- | | Profit attributable to owners of the Company | 82,652 | 42,938 | | Weighted average number of ordinary shares in issue (thousands) | 543,391 | 555,515 | | **Basic EPS (RMB cents per share)** | **15.21** | **7.73** | [Diluted Earnings Per Share](index=22&type=section&id=%E6%AF%8F%E8%82%A1%E6%91%8A%E8%96%84%E7%9B%88%E5%88%A9) Diluted earnings per share considers the dilutive effect of potential ordinary shares, such as share options, also achieving substantial growth in the current period Diluted Earnings Per Share Calculation | Metric | 2024 (RMB thousands) | 2023 (RMB thousands) | | :--- | :--- | :--- | | **Diluted EPS (RMB cents per share)** | **14.76** | **7.66** | | Weighted average number of ordinary shares used as denominator for basic EPS | 543,391,000 | 555,515,000 | | Adjustments for diluted EPS: share options | 16,551,000 | 5,349,000 | | Weighted average number of ordinary shares and potential ordinary shares used as denominator for diluted EPS | 559,942,000 | 560,864,000 | [Right-of-Use Assets and Leases](index=23&type=section&id=%E4%BD%BF%E7%94%A8%E6%9D%83%E8%B5%84%E4%BA%A7%E5%8F%8A%E7%A7%9F%E8%B5%81) The Group's right-of-use assets and lease liabilities both increased, reflecting expanded leasing activities, with corresponding rises in depreciation expenses and lease finance costs Right-of-Use Assets and Lease Liabilities | Category | June 30, 2024 (RMB thousands) | December 31, 2023 (RMB thousands) | | :--- | :--- | :--- | | **Right-of-use assets** | | | | Land use rights | 74,067 | 43,594 | | Properties | 231,370 | 156,992 | | **Total** | **305,437** | **200,586** | | **Lease liabilities** | | | | Current | 70,405 | 50,899 | | Non-current | 165,117 | 124,186 | | **Total** | **235,522** | **175,085** | - Depreciation expense for right-of-use assets increased from **RMB 22,241 thousand** in 2023 to **RMB 27,874 thousand** in 2024[61](index=61&type=chunk) - Lease finance costs increased from **RMB 2,774 thousand** in 2023 to **RMB 4,466 thousand** in 2024[61](index=61&type=chunk) - Cash outflow from lease financing activities increased from **RMB 21,504 thousand** in 2023 to **RMB 31,962 thousand** in 2024[62](index=62&type=chunk) [Share Capital](index=24&type=section&id=%E8%82%A1%E6%9C%AC) As of the end of the reporting period, the company's authorized and issued ordinary share capital and par value remained unchanged - As of June 30, 2024, authorized ordinary shares were **1,000,000,000** with a par value of **USD 1,000,000** (**RMB 6,860,633**); issued ordinary shares were **555,700,000** with a par value of **USD 555,700** (**RMB 3,774,897**)[63](index=63&type=chunk) [Dividends](index=24&type=section&id=%E8%82%A1%E6%81%AF) The Board does not recommend the payment of an interim dividend for the six months ended June 30, 2024 - The Board does not recommend the payment of an interim dividend for the six months ended June 30, 2024 (for the six months ended June 30, 2023: nil)[64](index=64&type=chunk) [Trade and Other Payables](index=24&type=section&id=%E8%B4%B8%E6%98%93%E5%8F%8A%E5%85%B6%E4%BB%96%E5%BA%94%E4%BB%98%E6%AC%BE%E9%A1%B9) Trade payables are primarily related to the purchase of educational books and teaching aids, with a typical credit period of three months, and slightly increased in the current period - Trade payables are primarily related to the purchase of educational books and other teaching aids, with a typical credit period of three months granted to the Group[65](index=65&type=chunk) Details of Trade and Other Payables | Category | June 30, 2024 (RMB thousands) | December 31, 2023 (RMB thousands) | | :--- | :--- | :--- | | Trade payables | 3,204 | 2,967 | | Employee benefit payables | 33,674 | 61,236 | | Other tax payables | 14,904 | 15,794 | | Payables for leasehold improvements | 4,213 | 2,250 | | Interest payables | 99 | — | | Other payables | 9,564 | 11,945 | | **Total** | **65,658** | **94,192** | [Post-Balance Sheet Events](index=25&type=section&id=%E6%9C%9F%E5%90%8E%E4%BA%8B%E9%A1%B9) Subsequent to the reporting period, the trustee of the company's share award scheme acquired **1,540,000** shares, and **9,169,050** share options were exercised, resulting in new share issuance - Between July 3 and July 15, 2024, the trustee of the company's share award scheme acquired a total of **1,540,000** ordinary shares of the company from the market for a total consideration of **HKD 6,977,000** (equivalent to **RMB 6,370,000**)[31](index=31&type=chunk) - On July 10, 2024, **9,169,050** share options granted and vested under the share option scheme were exercised at an exercise price of **HKD 1.62** per share, resulting in the issuance and allotment of **9,169,050** new shares[31](index=31&type=chunk) Corporate Governance and Other Information [Compliance with the Corporate Governance Code on Corporate Governance Practices](index=26&type=section&id=%E9%81%B5%E5%AE%88%E6%9C%89%E5%85%B3%E4%BC%81%E4%B8%9A%E7%AE%A1%E6%B2%BB%E5%B8%B8%E8%A7%84%E7%9A%84%E4%BC%81%E7%AE%A1%E5%AE%88%E5%88%99) For the six months ended June 30, 2024, the company complied with all applicable code provisions of the Corporate Governance Code set out in Appendix C1 of the Listing Rules - For the six months ended June 30, 2024, the company complied with all applicable code provisions of the Corporate Governance Code and Corporate Governance Report set out in Appendix C1 of the Listing Rules[68](index=68&type=chunk) [Compliance with the Model Code for Securities Transactions by Directors](index=26&type=section&id=%E9%81%B5%E5%AE%88%E8%91%A3%E4%BA%8B%E8%BF%9B%E8%A1%8C%E8%AF%81%E5%88%B8%E4%BA%A4%E6%98%93%E7%9A%84%E6%A0%87%E5%87%86%E5%AE%88%E5%88%99) The company adopted the Model Code for Securities Transactions by Directors as its securities dealing code and confirmed that directors and relevant employees complied with it during the reporting period - The company adopted the Model Code for Securities Transactions by Directors set out in Appendix C3 of the Listing Rules as its securities dealing code to regulate all securities transactions by the company's directors and relevant employees[69](index=69&type=chunk) - Following specific enquiries with all directors and relevant employees, they confirmed compliance with the Model Code for the six months ended June 30, 2024[69](index=69&type=chunk) [Audit Committee](index=26&type=section&id=%E5%AE%A1%E6%A0%B8%E5%A7%94%E5%91%98%E4%BC%9A) The Audit Committee, comprising three independent non-executive directors, reviews and oversees the Group's financial reporting, risk management, and internal control systems, and has reviewed the interim financial statements for this period - The Audit Committee comprises three independent non-executive directors: Mr Wong Wai Tak (Chairman), Mr Yang Xuezhi, and Ms Yan Jiamin[70](index=70&type=chunk) - The Audit Committee's primary responsibilities include reviewing and overseeing the Group's financial reporting, risk management, and internal control systems, and it has reviewed the Group's unaudited interim condensed consolidated financial statements and this interim results announcement for the six months ended June 30, 2024[70](index=70&type=chunk) - The Audit Committee also met with the independent auditor, PricewaterhouseCoopers, to discuss matters concerning the company's accounting policies, practices, and internal controls[70](index=70&type=chunk) [Purchase, Sale or Redemption of the Company's Listed Securities](index=27&type=section&id=%E8%B4%AD%E4%B9%B0%E3%80%81%E5%87%BA%E5%94%AE%E6%88%96%E8%B5%8E%E5%9B%9E%E6%9C%AC%E5%85%AC%E5%8F%B8%E4%B8%8A%E5%B8%82%E8%AF%81%E5%88%B8) During the reporting period, the company repurchased **758,000** shares on the Stock Exchange, which the Directors believe will enhance earnings per share and net asset value per share - For the six months ended June 30, 2024, the company repurchased a total of **758,000** shares on the Stock Exchange for a total consideration of **HKD 2,312,730**[71](index=71&type=chunk) - The highest price paid for repurchased shares was **HKD 4.34** per share, and the lowest price was **HKD 2.17** per share[71](index=71&type=chunk) - The Directors believe that such repurchases will enhance earnings per share and increase net asset value per share attributable to shareholders[71](index=71&type=chunk) [Publication of this Interim Results Announcement and Interim Report](index=27&type=section&id=%E5%88%8A%E5%8F%91%E6%9C%AC%E4%B8%AD%E6%9C%9F%E4%B8%9A%E7%BB%A9%E5%85%AC%E5%91%8A%E5%8F%8A%E4%B8%AD%E6%9C%9F%E6%8A%A5%E5%91%8A) This announcement has been published on the Stock Exchange and the company's website, and the interim report will be published and dispatched to shareholders in due course - This announcement is published on the Stock Exchange website www.hkexnews.hk and the company's website http://www.skledu.com[72](index=72&type=chunk) - The Group's interim report for the six months ended June 30, 2024, will be published on the aforementioned websites and dispatched to the company's shareholders in due course[72](index=72&type=chunk) [Definitions](index=27&type=section&id=%E9%87%8A%E4%B9%89) This section provides definitions for key terms used in the report, including Board, Corporate Governance Code, Company, Directors, Group, IFRS, Listing Rules, Model Code, Share Award Scheme, Shares, Shareholders, Share Option Scheme, Stock Exchange, and Trustee - This section provides definitions for key terms used in the report, such as 'Board', 'Corporate Governance Code', 'Company', 'Group', 'IFRS', 'Listing Rules', 'Model Code', 'Share Award Scheme', and 'Share Option Scheme'[73](index=73&type=chunk)[74](index=74&type=chunk)[75](index=75&type=chunk) [Board of Directors](index=28&type=section&id=%E8%91%A3%E4%BA%8B%E4%BC%9A%E6%88%90%E5%91%98) This section lists the company's Board of Directors, including executive and independent non-executive directors - Board members include executive directors Mr Chen Qiyuan (Chairman), Mr Qi Mingzhi (Chief Executive Officer), Ms Li Ailing, and Ms Leng Xinlan[75](index=75&type=chunk) - Independent non-executive directors include Mr Wong Wai Tak, Mr Yang Xuezhi, and Ms Yan Jiamin[74](index=74&type=chunk)

港股公司报告 | 公司点评 思考乐教育 ( 01769 ) 证券研究报告 | --- | --- | --- | |----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------|---------------------------------------------------------------------------------------------------------------| | | | 2024 年 08 月 08 日 | | | 投资评级 | | | 超预期,重启高增 | 行业 | 非必需性消费/支援服 چ | | 公司发布 24H1 正面盈利公告 | 6 个月评级 | 买入（ 维持评级 ） | | | 当 ...

Investment Rating - The report assigns an "Accumulate" rating to the company [3][9]. Core Views - Revenue growth is in line with expectations, while profit margins have exceeded expectations, indicating potential for further upward adjustments in profit margins as the company accelerates its store expansion in advantageous locations [2][3]. - The company has released a positive earnings forecast, projecting a significant increase in revenue and adjusted net profit for 2024 and 2025, with adjusted net profit estimates of 1.78 billion (+19%) for 2024 and 2.49 billion (+13%) for 2025 [3]. - The company achieved a revenue of 3.8 billion in 2024H1, representing a 51.2% increase year-on-year, and a net profit of 0.8 billion, up 86.31%, with a profit margin of 21.05%, which is an increase of 3.97 percentage points [3]. Financial Summary - The company’s financial projections for 2024E, 2025E, and 2026E include revenues of 8.32 billion, 11.32 billion, and 14.99 billion respectively, with year-on-year growth rates of 44%, 38%, and 32% [6]. - The adjusted net profit for 2024E is projected at 1.78 billion, with a year-on-year growth of 65%, and for 2025E and 2026E, the adjusted net profits are expected to be 2.49 billion and 3.30 billion, reflecting growth rates of 40% and 32% respectively [6]. - The company’s price-to-earnings (PE) ratio is projected to decrease from 93 in 2024E to 7 in 2026E, indicating an improving valuation over time [6].

Stock Option Plan - The number of shares that can be issued under the stock option plan as of December 31, 2023, is 0.05% of the weighted average number of shares issued during the year[1] - The stock option plan does not apply to the share reward plan, as rewards granted under that plan do not involve new shares[1] Board of Directors - The announcement is made by the board of directors, including independent non-executive directors[4]

这期的培训啊 包括其他的一些相关的活动呢也会逐渐的开展那我们也是看到公司作为这个华南的领先教培品牌呢一直也都有比较好的一个需求的增长包括扩张这块呢也在稳步的进行中那所以近期呢我们也是请到再次请到苏总来为大家做一个更新那首先呢我就先把时间交给苏总呢请苏总再为我们简单的 更新一下情况然后后续呢我们会在开放这个问答环节也欢迎大家提问苏总好的好的大家早上好我是许家集团的CFO苏伟恒非常感谢大家今天参加这个教育会也感谢天峰把我们主题一个很好的一个跟大家博众这个教育的一个机会 首先我跟大家简单介绍一下我们公司的一些最新情况第一就是我们公司今年有35家的经销区可以在深圳成立就是开业了我们去年年底在深圳里面有110家的学校今年15家已经增加到145家 所以现在我们基本上所有的一些区里面都可以找到我们的分项包括一些较偏的一些专卖地区包括一些新区等等基本上我们可以说是全覆盖第一第二就是我们今年也会开始收费有些提加的情况因为我们目前的收费基本上是跟21年是一样的就是21年 包括2023年24年上半年基本上也是没有改变的今年暑假开始我们的那个K九包括高中我们的一些政策课程都可以提五个点这样子然后我们之后吧也是按大概每年提早五个点的节 ...

这期的培训啊 包括其他的一些相关的活动呢也会逐渐的开展那我们也是看到公司作为这个华南的领先教培品牌呢一直也都有比较好的一个需求的增长包括扩张这块呢也在稳步的进行中那所以近期呢我们也是请到再次请到苏总来为大家做一个更新那首先呢我就先把时间交给苏总呢请苏总再为我们简单的 更新一下情况然后后续呢我们会在开放这个问答环节也欢迎大家提问苏总好的好的大家早上好我是许家集团的CFO苏伟恒非常感谢大家今天参加这个教育会也感谢天峰把我们主题一个很好的一个跟大家博众这个教育的一个机会 首先我跟大家简单介绍一下我们公司的一些最新情况第一就是我们公司今年有35家的经销区可以在深圳成立就是开业了我们去年年底在深圳里面有110家的学校今年15家已经增加到145家 所以现在我们基本上所有的一些区里面都可以找到我们的分项包括一些较偏的一些专卖地区包括一些新区等等基本上我们可以说是全覆盖第一第二就是我们今年也会开始收费有些提加的情况因为我们目前的收费基本上是跟21年是一样的就是21年 包括2023年24年上半年基本上也是没有改变的今年暑假开始我们的那个K九包括高中我们的一些政策课程都可以提五个点这样子然后我们之后吧也是按大概每年提早五个点的节 ...

各位投资人早上好我是天风清访教育团队的子君欢迎大家参加我们今天 长沙特别会思考的教育的小组会最近也是临近上半年逐渐结束马上暑期的培训包括暑假的一些相关的活动也会逐渐的开展我们也是看到公司作为华南的领先教培品牌一直也都有比较好的需求的增长包括扩张这块也在稳步的进行中所以近期我们也是再次请到苏总来为大家做一个 首先我就先把时间交给苏总请苏总再为我们简单的更新一下情况然后后续我们会再开放问答环节欢迎大家提问苏总好的好的大家早上好我是西瓜大集团的CFO苏伟腾 非常感谢大家今天参加这个教育会也感谢天峰把我们组织一个很好的一个跟大家有活动的一个教育的机会首先我跟大家简单介绍一下我们公司的一些最新情况吧第一就是我们公司今年有35家的经销区可以在深圳成立就是开业了 我们去年年底在深圳里面有110家学校今年暑假已经增加到145家所以现在我们基本上所有的一些区里面都可以找到我们的分校包括一些较偏的一些专卖地区包括一些新区等等基本上我们可以说是全覆盖第一 第二就是我们今年也会开始收费有些提高的情况因为我们目前的收费基本上是跟二一年是一样的就是二一年包括二二年二三年二四年三八年基本上也是没有改变的今年暑假开始我们的黑酒包括高中我们的 ...

Revenue and Profit Growth - Revenue increased by 41.9% from RMB 402.1 million in 2022 to RMB 570.6 million in 2023, driven by an increase in student enrollments and tutoring hours due to the expansion of learning centers[14] - Gross profit rose by 72.0% from RMB 138.7 million in 2022 to RMB 238.6 million in 2023, with gross margin improving significantly[32] - Adjusted net profit attributable to equity holders surged by 98.5% from RMB 54.4 million in 2022 to RMB 108.0 million in 2023, excluding non-operational items such as share-based compensation and losses from the live e-commerce business[32] - The company's pre-tax profit increased by 175.9% from RMB 42.3 million in 2022 to RMB 116.7 million in 2023[19] - The company's adjusted basic earnings per share increased from RMB 0.0979 in 2022 to RMB 0.1956 in 2023[23] Business Expansion and Strategy - The company plans to expand its "LeXue" brand, focusing on quality education in areas such as art, sports, painting, and international literacy, to meet diverse student needs and promote holistic development[36] - The company is exploring new opportunities, including educational tourism and international courses, to diversify its revenue base and contribute to long-term growth[32] - The number of learning centers increased during 2023, contributing to the growth in student enrollments and tutoring hours[14] - The company's future prospects and development strategies are outlined in the Chairman's Report on pages 6-7 of the annual report[105] Expenses and Cost Management - Sales expenses increased by 144.2% from RMB 4.7 million in 2022 to RMB 11.4 million in 2023, primarily due to advertising and exhibition expenses, as well as customer service costs related to the live e-commerce business, which was terminated at the end of 2023[17] - The live e-commerce business, which incurred a net loss of RMB 13.9 million in 2023, was terminated, and no significant related expenses are expected in 2024[7] Share Repurchase and Capital Management - The company repurchased a total of 10,397,000 shares on the Hong Kong Stock Exchange during the year ended December 31, 2023[43] - The company repurchased 438,000 shares from the market between January 1, 2024, and January 19, 2024, for a total consideration of HKD 997,000 (approximately RMB 906,000), to be held for cancellation[63] - The company repurchased a total of 330,000 shares on the Hong Kong Stock Exchange at a total cost of HKD 289,360, with the highest price per share at HKD 0.93 and the lowest at HKD 0.86[84] - The company's repurchased shares have not been canceled, and the board believes this will increase earnings per share and net asset value per share[84] Corporate Governance and Board Structure - The company has appointed three independent non-executive directors, constituting more than one-third of the board, to balance the interests of shareholders and enhance overall corporate governance[81] - The company's board decision-making mechanisms include provisions to avoid conflicts of interest, requiring directors to declare any significant interests in contracts or arrangements[81] - The company's board of directors includes four executive directors, one non-executive director, and three independent non-executive directors as of the annual report date[117] - The company has established four board committees: Audit Committee, Remuneration Committee, Nomination Committee, and Strategic Development Committee to oversee specific areas of corporate governance[192] Employee and Compensation Management - The company employed a total of 2,319 employees as of December 31, 2023, compared to 1,350 employees in 2022, representing a significant increase[54] - The company's compensation policy is aligned with market practices and is determined based on individual employee performance and experience[54] - The company's retirement and employee benefit plan details are provided in Note 39.17 of the consolidated financial statements[52] - The company's directors and top five highest-paid individuals' remuneration details are disclosed in the consolidated financial statements[115] - The company has adopted a share incentive plan and a share plan to provide rewards to eligible employees[116] - The company's share incentive plan aims to retain and attract talent by providing direct economic benefits to eligible participants, without diluting existing shareholders[198][199] - The board of directors has the authority to determine the number of incentive shares awarded to selected participants based on the company's financial condition and the participants' performance and rank[200] Legal and Compliance - The company has not issued any debentures during the year ended December 31, 2023[46] - The company has not been involved in any significant litigation or arbitration during the year ended December 31, 2023[47] - The company has arranged appropriate insurance for legal proceedings against directors and senior management[49] - The company's structural contracts remain legally enforceable as of December 31, 2023, with no violations of current Chinese laws and regulations[82] - The company has implemented measures to enhance control over its Chinese operating entities prior to the termination of structural contracts[82] - The company is committed to disclosing any significant adverse impacts from changes in foreign investment laws and ensuring compliance with these laws[78] - The company is not aware of any unfulfilled structural contracts or non-compliance with the measures as of the annual report date[82] - The company has maintained its structural contracts without significant changes as of the annual report date[83] - The company's legal advisor confirmed that the structural contracts are enforceable and compliant with Chinese laws as of December 31, 2023[82] Shareholder and Equity Management - The company's share premium available for distribution to shareholders was approximately RMB 79.8 million as of December 31, 2023[132] - The company's major shareholder, Tiansheng, held a 39.48% beneficial ownership interest in the company as of December 31, 2023[146] - Chen Qiyuan, the controlling shareholder, holds 219,395,000 shares, representing approximately 39.48% of the company's equity[164] - The company maintains a public float of at least 25% of its total issued shares, as required by the Hong Kong Stock Exchange listing rules[187] Share Option and Incentive Plans - The company's share option plan allows the board to grant options to eligible participants within 10 years from the adoption date, with an exercise price determined by the board[148] - The company's share option plan aims to retain, incentivize, and reward selected participants, with a nominal acceptance fee of HKD 1.00[150] - The company's board has the authority to determine the exercise price of share options, which must not be lower than the highest of the closing price, the average closing price of the preceding five trading days, or the par value of the shares[151] - The company granted 27,785,000 share options under the share option plan on February 6, 2023, with an exercise price of HKD 1.62 per share[152] - The fair value of each share option granted was estimated to be between HKD 0.81 and HKD 1.01 using a trinomial valuation model, with key inputs including a stock price of HKD 1.53, expected volatility of 86.32%, and a risk-free interest rate of 3.29% to 3.57%[154] - The maximum number of shares that can be granted under the share award plan is limited to 1% of the company's issued share capital as of the adoption date[157] - The total number of shares that may be issued upon the exercise of all share options granted under the share option plan is capped at 55,570,000 shares, representing 10% of the issued shares as of the annual report date[174] - The company granted a total of 27,785,000 share options to grantees under the share option plan on February 6, 2023, with vesting conditions tied to performance standards and employment duration[178] - The share options will vest in three tranches: 33% after the 2023 annual results announcement, 33% after the 2024 annual results announcement, and the remaining 34% after the 2025 annual results announcement[178] - The share option plan was terminated on February 27, 2024, and no further share options will be granted under this plan, although previously granted options remain exercisable[197] Financial and Operational Details - The company's top five suppliers accounted for less than 30% of the cost of revenue for the year ended December 31, 2023[107] - The company had no bank borrowings as of December 31, 2023, and December 31, 2022[111] - The company's property, plant, and equipment details are included in the consolidated financial statements[110] - The company's top five customers contributed less than 30% of the total revenue for the year ended December 31, 2023[127] - The company implemented environmental protection measures and encouraged employees to save energy and reduce waste, with no environmental violations reported for the year[128] - The company's environmental, social, and governance (ESG) performance and policies are detailed in the annual report[109] Dividend and Shareholder Returns - The company does not recommend paying a final dividend for the year ended December 31, 2023 (year ended December 31, 2022: none)[90] - The total number of shares available for future grants under the share plan is 38,899,000, with a service provider sub-limit of 5,557,000 shares[91] Auditors and Financial Reporting - PricewaterhouseCoopers was appointed as the auditor for the fiscal year ending December 31, 2023, and audited the financial statements prepared under International Financial Reporting Standards[189] Leadership and Management - The company's founder, Mr. Chen Qiyuan, is responsible for the overall formulation and guidance of the company's business strategy and development[65] - The company's CFO, Mr. Hua Ribao, is responsible for the financial management of the group[74] - The company's independent non-executive directors have service contracts with an initial fixed term of one year, terminable with at least three months' written notice[136] - The company's board has established a remuneration committee to review the company's remuneration policies and structures for directors and senior management based on performance and market practices[137]

Investment Rating - The report maintains a "Buy" rating for the company with a target price set at HKD 4.2, expecting a relative return of over 20% within the next six months [3][17]. Core Insights - The company reported a revenue of HKD 570 million for 2023, representing a year-on-year increase of 41.9%. Gross profit reached HKD 240 million, up 72%, while net profit attributable to shareholders was HKD 86 million, an increase of 58%. Adjusted net profit was HKD 108 million, reflecting a significant growth of 98.5% [3][4]. - The company has seen a substantial increase in cash and cash equivalents, totaling HKD 362 million, which is a 21.2% increase, primarily due to growth in net cash inflow from operating activities. Contract liabilities, mainly from advance tuition fees, rose by 52% to HKD 276 million [4][15]. - The company is focusing on enhancing its "LeXue" brand, which includes various non-academic courses such as art, sports, and logic thinking, aiming to promote balanced development in students across multiple dimensions [5][15]. - The total number of students enrolled in non-academic courses reached 239,000, marking a 38% increase, while the total tutoring hours increased by 39.5% to 5.97 million hours [7][15]. - The growth in performance is attributed to an increase in total tutoring hours, improved operational efficiency, and gains from the fair value of financial assets [8][15]. - The company plans to diversify its business further, leveraging its brand influence and management experience to explore new opportunities and expand its revenue base while maintaining cost control and enhancing service quality [9][15]. - The earnings forecast for 2024-2026 has been revised upwards, with expected revenues of RMB 970 million, RMB 1.35 billion, and RMB 1.83 billion respectively. Adjusted net profits for the same period are projected to be RMB 141 million, RMB 191 million, and RMB 232 million [9][15].