Investment Rating - The investment rating for the company is "Buy" with a target price set at 2.79 HKD, maintaining the rating for the next six months [3]. Core Insights - The company reported a significant increase in revenue and net profit for the first half of 2024, with revenue reaching 320 million RMB, a year-on-year increase of 68.1%, and net profit of 50 million RMB, up 160.7% [3]. - The growth in performance is attributed to a low base from the previous year and successful product transformation that has been well-received by parents and students [3][4]. - The company has been proactive in complying with educational policies, achieving zero penalties during inspections and actively pursuing licenses for non-academic programs, which enhances its sustainable development [4][6]. Financial Performance - For the first half of 2024, the company reported a gross margin of 45.0%, an increase of 8.0 percentage points, and a net margin of 16.5%, up 6.0 percentage points [3]. - The company’s contract liabilities reached 460 million RMB, reflecting a year-on-year increase of 116.5% [3]. Business Segmentation - In terms of business segments, the full-time review income was 120 million RMB, up 19.7%, while tutoring projects generated 80 million RMB, a 31.9% increase. The quality education segment saw remarkable growth, with revenue of 120 million RMB, up 320.9% [3]. Future Outlook - The company has revised its earnings forecast upwards, projecting revenues of 880 million RMB, 1.53 billion RMB, and 1.83 billion RMB for 2024-2026, respectively [6]. - The adjusted net profits for the same period are expected to be 180 million RMB, 280 million RMB, and 340 million RMB [6].

Introduction - **Industry/Company**: Not specified - **Key Points**: - Welcome message from the host, Huang Kaolin, Investor Relations Deputy Director - Introduction of the management guest: Tang Junjun, Chairman and Group President - **Document ID**: [1]

Summary of Conference Call Company and Industry Involved - The conference call involves a company represented by its Chairman and Group President, Mr. Tang Junxing, and is hosted by the Vice President of Investor Relations, Huang Kailin [1]. Core Points and Arguments - The meeting welcomes both in-person and online attendees, indicating a broad interest in the company's performance and future outlook [1]. Other Important but Possibly Overlooked Content - The presence of familiar attendees suggests a strong relationship with investors and stakeholders, which may indicate confidence in the company's communication strategy [1].

香港交易及結算所有限公司及香港聯合交易所有限公司對本公告的內容概不負責，對其準確 性或完整性亦不發表任何聲明，並明確表示，概不對因本公告全部或任何部分內容而產生或 因倚賴該等內容而引致的任何損失承擔任何責任。 China Beststudy Education Group 卓 越 教 育 集 團 * （於 開 曼 群 島 註 冊 成 立 的 有 限 公 司） （股 份 代 號：3978） 截至2024年6月30日止六個月 中期業績公告 | --- | --- | --- | --- | |------------|---------------------------|---------------------------|--------| | | | | | | | | | | | | 截至 | 6 月 30 日止六個月 | | | | 2024 年 | 2023 年 | 變動 | | | 人民幣千元 （未經審核） | 人民幣千元 （未經審核） | % | | 收益 | 317,444 | 188,860 | 68.1% | | 毛利 | 142,723 | 69,780 | 104.5% | | 純利 ...

Investment Rating - The report gives a **Buy** rating for the company, with a target price of **6.18 HKD** for 2025, based on a 25X PE valuation [75] Core Views - The company is a leading K12 education provider in Guangdong, with strong growth potential in the post-"Double Reduction" policy environment [75] - The company has successfully transitioned to a focus on **quality education**, **high school tutoring**, and **full-time exam preparation**, achieving balanced development across these three segments [75] - The company's market share in Guangzhou is less than 2%, indicating significant room for growth [48] - The company's revenue is expected to grow at a CAGR of **8.7%** in Guangzhou and **13.6%** in Shenzhen from 2023 to 2028, with the combined K12 tutoring market size projected to exceed **130 billion RMB** by 2028 [48][19] Market and Industry Analysis - The "Double Reduction" policy has led to a significant reduction in the number of offline and online subject-based tutoring institutions, with a **96% reduction** in offline institutions and an **87.1% reduction** in online institutions [51] - The policy has also mandated that all subject-based tutoring institutions for compulsory education must register as **non-profit entities** [1][51] - The company has leveraged its strong reputation and low marketing costs to rapidly expand in the quality education sector, with a **5.16% sales expense ratio** in 2023, one of the lowest in the industry [43] Company Strategy and Competitive Advantages - The company has capitalized on its **strong Chinese language teaching advantage**, transitioning its popular Chinese language courses into non-subject-based quality education products such as "Fun Little Journalist," "Dida Literature," and "Literary Aesthetic Education" [15] - The company has developed a comprehensive teacher training system, including the "Fuguang Plan" and "Xingyao Plan," to enhance teacher skills and retention [29][30] - The company is actively embracing **AI technology** to improve teaching efficiency, with R&D expenses growing at a CAGR of **14.2%** from 2015 to 2021 [63] Financial Performance and Projections - The company's revenue in 2023 was **506 million RMB**, with a net profit of **90 million RMB**, representing a **66.2% YoY growth** [80] - Revenue is expected to grow to **663 million RMB** in 2024, **860 million RMB** in 2025, and **1.109 billion RMB** in 2026, with net profit growing to **122 million RMB**, **167 million RMB**, and **226 million RMB** respectively [75] - The company's **quality education segment** is expected to grow at a CAGR of **49%** from 2024 to 2026, contributing **45 million RMB**, **69 million RMB**, and **101 million RMB** to net profit respectively [110] Regional Market Potential - Guangzhou and Shenzhen are experiencing **increasing demand** for K12 tutoring, driven by rising middle and high school enrollment numbers [107] - The company is well-positioned to benefit from the **unified provincial high school entrance exam** in Guangdong, which will allow for standardized teaching materials and easier expansion into other cities [50] Risks and Challenges - The company faces risks related to **market competition**, **expansion delays**, and **potential tuition fee increases** that may not meet expectations [119] - There is also a risk of **management and teacher turnover**, which could impact the company's growth and operational efficiency [119]

Investment Rating - The report assigns an "Accumulate" rating for the company for the first time [2] Core Viewpoints - The company is a leading education service provider in South China, focusing on compliance transformation post "Double Reduction" policy, and aims to build a business system of "Quality Education + Full-time Review + Vocational Education" [5][13] - The K12 student population in Guangdong continues to rise, with strong demand for non-subject training and high school repeaters, indicating potential for accelerated expansion in quality education services [5][37] Summary by Sections Company Overview - Established in October 1997, the company has developed a strong reputation in South China, achieving a revenue of 506 million yuan in 2023 [4][52] - The company has been recognized as a leading education service provider in the region, focusing on diverse educational products and services [4][52] Business Transformation - Following the "Double Reduction" policy, the company has shifted its focus to compliance and quality education, establishing a strategic framework that includes full-time review and vocational education [5][13][56] - The company has successfully launched nine quality education products that have passed non-subject product certification by educational authorities [13][75] Market Potential - The K12 education market in Guangdong is expected to benefit from a growing student population, with the number of K12 students reaching 17.49 million in 2022, a year-on-year increase of 2.37% [37][40] - The "Double Reduction" policy has led to a significant reduction in the number of training institutions, creating opportunities for compliant and established providers like the company [40][72] Financial Projections - The company forecasts net profits of 122 million yuan, 161 million yuan, and 200 million yuan for 2024, 2025, and 2026 respectively, with corresponding PE ratios of 22x, 17x, and 14x [5][85] - Revenue is projected to grow from 489 million yuan in 2023 to 627 million yuan in 2024, reflecting a growth rate of 28.17% [14][129] Competitive Landscape - The company is positioned as the largest K12 extracurricular education service provider in South China, with a market share of approximately 7% in the full-time review business [68][71] - The competitive environment is expected to intensify as more institutions transition to non-subject training, which may impact the company's performance [114][133]

Shareholder and Equity Interests - The board members and CEO held significant equity interests, with Mr. Tang Junjing owning 1,532,000 shares (20.38%) and Mr. Tang Junying owning 50,000 shares (16.94%) of the company[4]. - Major shareholders included JTC Trustees (BVI) Limited, holding 456,934,231 shares, representing 53.93% of the issued shares[7]. - The equity interests of major shareholders included significant holdings by spouses, such as Ms. Huang Yanjun with 172,697,101 shares (20.38%)[8]. - The company had no unexercised stock options as of the report date, indicating a potential focus on other compensation strategies[1]. - The company did not establish any arrangements for directors to benefit from purchasing shares or debt securities during the reporting period[14]. - The company has not made any loans or provided guarantees to directors, senior management, or their associates during the reporting period[150]. - The company has no controlling shareholders as of November 9, 2023, following the termination of a joint action agreement[195]. Financial Performance - For the fiscal year ending December 31, 2023, the company reported total revenue of RMB 489.314 million, a slight decrease of 0.4% compared to RMB 491.134 million in 2022[33]. - Gross profit for the same period was RMB 229.858 million, representing a significant increase of 32.8% from RMB 173.061 million in the previous year[33]. - Net profit surged to RMB 89.880 million, marking a 66.2% increase from RMB 54.073 million in 2022[33]. - Adjusted net profit was RMB 89.225 million, up 62.8% from RMB 54.799 million in the prior year[33]. - Total revenue for the full-time review segment increased by 25.2% to RMB 204.8 million, while the tutoring segment decreased by 40.9% to RMB 144.9 million[73]. - The group recorded a profit of approximately RMB 89.9 million, representing a 66.2% increase compared to RMB 54.1 million in 2022[78]. - The adjusted net profit increased by 62.8% from RMB 54.8 million in 2022 to RMB 89.2 million during the reporting period[79]. - The unadjusted net profit for 2023 was RMB 89.88 million, a 66.2% increase from RMB 54.07 million in 2022[80]. - Other income decreased by 47.5% to RMB 29.4 million, primarily due to lower service fee income and investment income[49]. - Administrative expenses decreased by 34.7% to approximately RMB 57.9 million, down from RMB 88.7 million in 2022[50]. - Other operating expenses decreased by 56.3% to RMB 30.7 million during the reporting period[76]. Employee and Operational Changes - The company has reduced its workforce to 846 employees as of December 31, 2023, down from 1,022 employees a year earlier, primarily due to the impact of the "double reduction" policy[18]. - The company continues to invest in employee training to improve skills and knowledge, ensuring alignment with market and student needs[18]. - The company has no mandatory participation in the Hong Kong Mandatory Provident Fund, as employees in its Chinese subsidiaries contribute to a state-managed retirement benefit plan[19]. Strategic Initiatives and Partnerships - The company is actively responding to national policies by establishing comprehensive strategic partnerships with vocational colleges, focusing on tailored educational programs[37]. - The introduction of the "Excellence 3+ Certificate Vocational College Entrance Exam Class" aims to enhance learning efficiency for vocational students through small class teaching and multimedia interactive tools[37]. - The group aims to enhance its core competitiveness through the continuous upgrade of its "Excellence Learning System" and "Life Growth System"[42]. Risk Management and Compliance - The company has implemented various measures to mitigate risks and uncertainties[113]. - The group faces risks related to natural disasters, pandemics, and other situations in China, which may significantly impact operations[113]. - The company relies on a dedicated and qualified teaching staff; failure to hire, train, and retain qualified teachers may adversely affect teaching quality and overall business performance[112]. - The company is monitoring the regulatory environment and will adjust its business plans accordingly[161]. - The company has not engaged in any significant legal disputes during the reporting period[178]. - There were no significant contingent liabilities, guarantees, or lawsuits against the company as of December 31, 2023[89]. Investment and Financial Assets - The company adopted a prudent investment strategy, focusing on low-risk short-term financial products to ensure stable investment income[84]. - The company held financial assets totaling RMB 102.3 million as of December 31, 2023, which includes debt investments of RMB 71.9 million and equity investments of RMB 30.4 million[57]. - As of December 31, 2023, the company reported a fair value loss of RMB 28.68 million on listed equity investments[87]. - The company recorded a fair value loss of approximately RMB 84.9 million related to a financial asset due to overdue payments from a trust plan[197]. - The company recognized a net impairment loss of approximately RMB 35.6 million based on expected credit loss models for certain financing plans[197]. Dividend Policy - The group plans to pay a final dividend of HKD 0.035 per share, amounting to approximately RMB 26.9 million, which is 30% of the total profit for the year[65]. - The board will continuously review the dividend policy but does not guarantee any specific period for recommending or declaring dividends[143]. Corporate Governance - The board consists of nine directors, with independent non-executive directors providing oversight and recommendations on compensation[159][157]. - The board of directors' service contracts for executive directors appointed before the listing date will be renewed for three years starting April 1, 2024[187]. - The company has not entered into any significant transactions with related parties during the reporting period[189].

智通财经APP获悉，卓越教育集团(03978)盘中涨超6%，截至发稿，涨5.02%，报2.93港元，成交额530.75万港元。 方正证券指出，政策影响下K12行业有多个变化。校外培训合规化趋势不变，K9学科培训监管稳步收紧，高中/非学科业务政策有所放宽，管理界限更加清晰；中高考改革如火如荼，选科成为关注重点。K12教培市场规模在政策冲击下大幅下降，学科/兴趣培训的需求仍然强劲，非学科类市场的潜力逐渐显现。学科教培供给出清，机构业务转型，线下网点缩减，区域性机构在本土市场份额可观。 该行指出，公司在华南地区声誉良好，品牌、教研、渠道优势积累，近年来转移业务重心至“全日制复习＋素质教育+职业教育”，推进全日制学校快速发展，全方位布局素质教育，积极开展与职业院校合作。公司人才培养体系完善，教师留任率远超行业平均；疫情期间迅速转至线上教学，展现高效运营能力。目前公司加速推进全日制、素质教育板块，在广东省内开拓新校区，看好未来发展潜力。 ...

| --- | --- | --- | |----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------|----------------------------------------------------| | 卓越教育集团（ 03978 ） | | 证券研究报告 \n2024 年 04 月 01 日 | | | 投资评级 | | | 业绩高增，启动成长 | 行业 非必需性消费 | / 支援服 务 | | 发布 23 年财报，业绩高增 | 6 | 个月评级 买入（维持评级） | | | 当前价格 | 3.01 港元 | | 公司 2023 年收入 4.8 ...

Financial Performance - Total revenue for the year ended December 31, 2023, was RMB 489,314 thousand, a slight decrease of 0.4% compared to RMB 491,134 thousand in 2022[7] - Gross profit increased by 32.8% to RMB 229,858 thousand from RMB 173,061 thousand year-over-year[7] - Net profit for the year rose significantly by 66.2% to RMB 89,880 thousand, compared to RMB 54,073 thousand in the previous year[7] - Adjusted net profit was RMB 89,225 thousand, reflecting a 62.8% increase from RMB 54,799 thousand in 2022[7] - The company reported a basic and diluted earnings per share of RMB 12.12, up from RMB 7.48 in the prior year[3] - The net profit for the year ended December 31, 2023, was RMB 89,880,000, representing a 66.2% increase from RMB 54,073,000 in 2022[59] - Adjusted net profit for the same period was RMB 89,225,000, up 62.8% from RMB 54,799,000 in 2022[59] - The company reported a profit of RMB 91,246,000 for the year ended December 31, 2023, compared to RMB 56,287,000 in 2022, marking an increase of 62.1%[190] - Basic earnings per share for 2023 were RMB 12.12, up from RMB 7.48 in 2022, reflecting a growth of 62.1%[190] Assets and Liabilities - Non-current assets totaled RMB 534,264 thousand, an increase from RMB 455,119 thousand in 2022[4] - Cash and cash equivalents increased to RMB 281,928 thousand from RMB 195,084 thousand year-over-year[4] - For the year ended December 31, 2023, the group reported total liabilities of RMB 410,948,000, an increase of 28.9% from RMB 318,866,000 in 2022[22] - The net assets of the group as of December 31, 2023, were RMB 496,435,000, reflecting a growth of 22.3% compared to RMB 405,890,000 in 2022[22] - The company's total assets as of December 31, 2023, were RMB 68,977,000, down from RMB 117,942,000 in 2022, indicating a decrease of 41.5%[54] - The company's liabilities decreased to RMB 33,315,000 in 2023 from RMB 46,058,000 in 2022, a reduction of 27.7%[58] - The company's total liabilities include overdue debt instruments valued at RMB 68,059,000 as of December 31, 2023[79] Income and Expenses - The company experienced a decrease in other income, which fell to RMB 29,390 thousand from RMB 55,970 thousand in the previous year[3] - Administrative expenses decreased to RMB 57,886 thousand from RMB 88,694 thousand, indicating improved cost management[3] - Employee costs for the year were RMB 132,005,000, down from RMB 191,586,000 in 2022, indicating a reduction of 30.9%[47] - Depreciation and amortization expenses were RMB 74,246,000, compared to RMB 82,833,000 in 2022, representing a decrease of 10.4%[47] - Other operating expenses decreased by 56.3% to RMB 30.7 million during the reporting period[111] - The company recorded financing costs of approximately RMB 9.0 million, primarily due to interest on lease liabilities[113] Revenue Breakdown - The total revenue from full-time review programs, quality education, and tutoring projects is not detailed but is a significant part of the group's operations in mainland China[40] - The total revenue for the full-time review business reached RMB 204.76 million, an increase of 25.2% compared to RMB 163.52 million in 2022[96] - Quality education revenue surged by 71.1% to RMB 139.41 million from RMB 81.50 million in the previous year[96] - The tutoring project revenue decreased by 40.9% to RMB 144.92 million from RMB 245.36 million in 2022[96] - The overall sales cost decreased by 18.4% to RMB 259.5 million from RMB 318.1 million in 2022, attributed to improved personnel and operational efficiency[97] Corporate Governance and Compliance - The company has no controlling shareholder or ultimate controller as of December 31, 2023, due to the absence of shareholders with majority voting rights[11] - The group has adopted the corporate governance code as per the listing rules, emphasizing the importance of good corporate governance for improving management and protecting shareholder interests[148] - The audit committee has reviewed the group's accounting principles and practices, ensuring compliance with applicable accounting standards and sufficient disclosure[170] Strategic Initiatives - The company has established an "Innovation Division" to enhance organizational agility and promote the incubation and development of innovative businesses[72] - The company aims to reduce the urban-rural education gap by donating educational materials and upgrading hardware facilities to remote schools[72] - The company has actively participated in community service activities, including the "Future Youth" summer public welfare series, to foster cultural confidence among children[73] - The company is actively responding to national policies by accelerating the acquisition of "non-subject profit licenses" to adapt to the "double reduction policy" in the education sector[84] - The company has developed nine quality education products, which have been recognized by the Guangdong provincial education authorities, enhancing its brand image in quality education[85] - The company is focusing on digital transformation by utilizing cloud computing, big data, and artificial intelligence to improve teaching quality and student learning experiences[84] - The company aims to expand its presence in the Guangdong-Hong Kong-Macao Greater Bay Area, particularly in economically active cities like Shenzhen and Foshan[76] - The company is innovating its after-school service model through pilot programs to meet the diverse needs of users in the Greater Bay Area[76] - The company is committed to developing vocational education programs tailored to the needs of students, with a focus on high-quality learning outcomes[87] - The group is committed to developing vocational education products and establishing strategic partnerships with various educational institutions[105] Future Outlook - The group plans to leverage AI technology to create a precise teaching system that integrates AI with holistic education[92] - The company aims to enhance its quality education product ecosystem and explore innovative learning models to support sustainable growth[91] - The group anticipates that the application of all other revised international financial reporting standards will not have a significant impact on the consolidated financial statements in the foreseeable future[28] Taxation - The company has no taxable profits in Hong Kong for the year ended December 31, 2023, and thus no tax provisions were made[50] - The company confirmed a tax rate of 25% for its subsidiaries in China for both 2023 and 2022[188] Shareholder Information - The annual general meeting for shareholders is scheduled for May 16, 2024[164] - The company will suspend share transfer registration from May 11 to May 16, 2024, to determine eligibility for attending the annual general meeting[165] - The company will also suspend share transfer registration from May 22 to May 27, 2024, to determine eligibility for the proposed final dividend[171]