Jinwu Financial News | Guosen Securities issued a Research Report indicating that CHINA EDU GROUP (00839) achieved a revenue of 6.579 billion yuan in the 2024 fiscal year, increasing by +17.2%, close to the bank's previous expected revenue of 6.604 billion yuan; net income attributable to shareholders was 0.418 billion yuan, a decrease of -69.7%, while adjusted net income attributable to shareholders was 1.971 billion yuan, an increase of +3.3%. The difference mainly stems from the impairment of goodwill and intangible assets in three of the group's schools this fiscal year. By market segment, the company achieved a revenue of 6.335 billion yuan in the domestic market this fiscal year, an increase of +17.4%. As of August 2024, the group had approximately 0.27 million full-time enrolled students, an increase of +9%, with 0.224 million students in higher education, an increase of +12.5%, and 0.046 million in vocational education, a decrease of -6.1%. The revenue in the international market segment was 0.244 billion yuan, an increase of +10.9%.
The bank stated that the three schools respectively recorded a provision of 1.16/0.56/0.19 billion yuan, resulting in a total impairment loss of 1.72 billion yuan after deducting deferred income tax. The tuition fees for the SiChuan school did not rise as expected, and the Xi'an and Australia campuses had lower-than-expected enrollment. Currently, the intangible assets of the SiChuan and Shaanxi schools are relatively low, making further impairment unlikely. At the end of the period, the company had goodwill of 2.49 billion yuan and other intangible assets of 4.08 billion yuan on its books.
The bank comprehensively considered the impact of increased investments under the guidance of high-quality education on profits, lowering the adjusted net profit forecasts for 2025/26 to 2.161/2.345 billion yuan (adjustment range -11%/-14%) and adding a forecast for 2027 of 2.515 billion yuan, corresponding to PE ratios of 4.3/4.0/3.7x. Overall, higher education enrollment remains steadily advancing during the period, with the company's revenue maintaining steady growth. Looking ahead, with the expansion projects in Guangdong and ShanDong progressing, organic growth is expected to continue. Moreover, with the peak period of capital expenditure passing and financial costs gradually improving, profit margins are also expected to improve, maintaining an "outperform the market" rating, and recommending attention to the rhythm of margin improvement as well as progress in selection and operation.
