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-- 16.0802 Is China East Education(00667.HK) Stock Undervalued?
$CHINA EAST EDU (00667.HK)$ is a leading provider of vocational skills training and education services in China, covering four major industry sectors, including culinary technology, information technology and Internet technology, automotive services, and fashion and beauty industry. China Eastern Education was not spared, and its share price fell from HK$16 to HK$3 today. However, as a vocational skills training company, the "double reduction" policy has had little impact on its business, so is the decline in its share price due to poor fundamentals or pessimistic market sentiment?
Fundamental analysis:
(1) The service industry represented by catering is ushering in a wave of chainization and standardization, and professional long training is expected to replace traditional apprenticeship.
Meituan Data 2022 shows that from 2019 to 2021, the process of chainization in China's restaurant market continues to accelerate, from 13% in 2019 to 18% in 2021. According to a study by PricewaterhouseCoopers, the U.S. The restaurant chain rate reached 59%, while the Chinese restaurant chain rate is only 1/3 of it. Chinese restaurant chain has great market development space.
(2) Some blue-collar wages are rising and job acceptance is increasing.
Rising blue-collar wages have become a major trend in recent years. A study by the Chinese Academy of Social Sciences shows that the Internet plays an obvious role in raising the income of low- and middle-income people. The Internet platform economy has given birth to a number of new blue-collar occupations. Compared with the typical blue-collar jobs in the past, such as corporate raw plant workers, security guards, construction workers and restaurant waiters, the new blue-collar workers in take-away and express delivery industries have more substantial incomes. With the gradual improvement of salary and treatment, the acceptance of blue-collar jobs will continue to increase in the future.
(3) The new vocational education law was voted and the policy boosted the development of vocational skills training market.
On April 20, 2022, the new vocational education law was passed, which clarifies that China's vocational education system includes vocational school education and vocational training, emphasizing that vocational education and general education have the same important status. China Eastern Education, as the leading vocational skills training company in China, is expected to benefit from the new vocational education law and usher in development opportunities.
(4) There are talent gaps in cooking, information and auto repair, and there is a huge demand for training.
According to the estimation of Huatai Securities, there is a talent supply and demand gap in the catering industry and automobile service skills market. There is a certain shortage of skilled workers in the coming years. According to Frost & Sullivan, the talent gap in the IT and Internet technology skills market is expected to further increase to 16.8 million in 2022.
CITIC Securities Valuation Forecast:
Considering the impact of the local epidemic on enrollment in 1H22, the company's core EPS forecast for 2022-23 is lowered to $0.23/0.30 (original forecast was $0.29/0.34), and the new core EPS forecast for 2024 is $0.37. Referring to the valuation level of comparable vocational education company Action Education (wind consensus expectation, 15 times PE in 2022), the company is given 15 times PE in 2022, corresponding to a target price of HK$4, maintaining a "buy" rating.
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