China Merchants Securities released a research report stating that it maintained the “gain” rating of China Education Holdings (00839) and lowered its core net profit forecast for the 2025-2026 fiscal year by 7 to 8% to reflect the company's slowing growth rate, deleveraging, and higher taxes. The target price was reduced from HK$7.8 to HK$4.9.
The company's core business remained steady, with revenue of 6.6 billion yuan (same below) for the 2024 fiscal year, up 17% year over year, in line with expectations. Gross margin was 55%, and adjusted net profit was 2 billion yuan, up 3% year over year, in line with expectations. The adjusted net profit margin narrowed from 34% last year to 30% this year. The reported net profit was RMB 0.418 billion, down 70% year on year, mainly due to the company accruing goodwill and intangible asset impairment of about 1.9 billion yuan. This impairment stemmed from a reduction in growth expectations for the three merger and acquisition schools.
