Core Viewpoint - The report from Shenwan Hongyuan maintains a target price of HKD 0.79 for Xijiao International Holdings (01765) and a "Buy" rating, suggesting that the company's cost increases have peaked and profitability may rebound, with operational efficiency expected to improve after sustained investments in education [1] Group 1: Financial Performance - Xijiao International Holdings reported a revenue of CNY 3.96 billion for the fiscal year 2025, representing a year-on-year growth of 6.1% [2] - The net profit for the same period was CNY 390 million, while the adjusted net profit (excluding goodwill impairment and convertible bond disposal costs) was CNY 740 million, reflecting a year-on-year increase of 6.5% [2] Group 2: Cost Management and Operational Efficiency - The number of enrolled students in fiscal year 2025 was 291,000, a slight increase of 0.1% compared to fiscal year 2024, with a stable student structure where undergraduates accounted for 48% and vocational students for 49%, an increase of 2.4 percentage points year-on-year [3] - Average tuition fees increased by 6% to CNY 13,600 per academic year, while the main operating costs were controlled at CNY 2.29 billion, resulting in a gross margin of 42.1% [3] Group 3: Asset Management and Future Outlook - The company sold 8 low-efficiency educational assets, including 6 vocational colleges and 2 undergraduate colleges, to enhance operational efficiency by reducing the number of institutions and focusing on higher tuition fee-generating undergraduate programs [4] - In fiscal year 2025, despite a 35.4% increase in enrollment expenses to CNY 327 million, the adjusted net profit margin was maintained at 18.6%, with expectations for the proportion of undergraduate students to rise by 3 percentage points to 51% in fiscal year 2026, further improving profitability [4]