Core Viewpoint - Shenwan Hongyuan maintains a target price of HKD 0.79 for Xijiao International Holdings (01765) and keeps a "Buy" rating, believing that the company's cost increases have peaked and profitability may rebound [1] Group 1: Financial Performance - Xijiao International Holdings reported a revenue of HKD 3.96 billion for the fiscal year 2025, representing a year-on-year growth of 6.1% [1] - The net profit for the year was HKD 390 million, with an adjusted net profit of HKD 740 million, reflecting a 6.5% increase year-on-year, aligning with expectations [1] Group 2: Cost Management and Operational Efficiency - The number of enrolled students for fiscal year 2025 was 291,000, a slight increase of 0.1% from fiscal year 2024, with a stable student structure [1] - The average tuition fee increased by 6% to HKD 13,600 per academic year, while the main operating cost was HKD 2.29 billion, resulting in a gross margin of 42.1% [1] - The company sold 8 low-efficiency educational assets during fiscal year 2025, which included 6 vocational colleges and 2 undergraduate institutions, aiming to enhance operational efficiency by reducing the number of institutions [1] Group 3: Future Outlook - The company expects the gross margin to start expanding again from fiscal year 2026, with the proportion of undergraduate students increasing by 3 percentage points to 51%, which is anticipated to further improve profitability due to higher tuition fees [1]

Core Insights - The company reported a revenue of 3.96 billion yuan for the fiscal year 2025, representing a year-on-year growth of 6.1%. However, net profit decreased by 36.9% to 390 million yuan. Adjusted net profit, excluding goodwill impairment and convertible bond disposal costs, was 740 million yuan, up 6.5% year-on-year, aligning with expectations [1][2]. Group 1 - The number of enrolled students for fiscal year 2025 was 291,000, a slight increase of 0.1% compared to fiscal year 2024. The student structure remained stable, with undergraduate students accounting for 48% (down 1.3 percentage points), vocational students at 49% (up 2.4 percentage points), and technical school students at 3% (down 1 percentage point) [1]. - Average tuition fees increased by 6% to 13,600 yuan per academic year. The main operating costs were 2.29 billion yuan, reflecting a year-on-year growth of 6.2%, slightly above the revenue growth rate [1]. - The gross profit margin was 42.1%, a slight decrease of 0.1 percentage points from fiscal year 2024 [1]. Group 2 - The company disposed of eight low-efficiency educational assets, including six vocational colleges and two undergraduate institutions, from fiscal year 2024 to 2025. This reduction in the number of institutions aims to enhance operational efficiency [2]. - Despite a 35.4% increase in enrollment expenses to 327 million yuan, the adjusted net profit margin remained stable at 18.6%, only down 0.1 percentage points from fiscal year 2024 [2]. - The proportion of undergraduate students is expected to increase by 3 percentage points to 51% in fiscal year 2026, while the proportion of vocational students is projected to decrease by 2 percentage points to 47% [2]. Group 3 - The company anticipates a rebound in profitability as the period of rapid cost growth has likely ended, with operational efficiency expected to improve. The student-to-teacher ratio reached approximately 17.5:1 in fiscal year 2025, meeting regulatory standards [3]. - The gross profit margin is projected to start expanding again from fiscal year 2026. Adjusted profit forecasts for fiscal year 2026 have been lowered to 760 million yuan from an earlier estimate of 1.27 billion yuan, with new projections for fiscal years 2027 and 2028 at 810 million yuan and 880 million yuan, respectively [3]. - The target price remains at 0.79 HKD, with a buy rating maintained [3].