Jinwu Financial News | According to the Sino-Thai International Development Research Report, Jianqiao Education (01525) achieved revenue of 930 million yuan (RMB, same below) in 2013, with tuition and accommodation revenue growth rates of 12.5% and 57.0% respectively. Due to FY22's containment due to the pandemic, schools refunded part of the accommodation fees, so the FY22 base is low. Starting in the second half of the year, the company adjusted the depreciation period for building facilities from 50 years to 30 years, resulting in additional depreciation expenses of 16 million yuan. As a result, FY23 gross margin fell 2.1 percent year over year to 61.8%. The company's net profit was 280 million, up 26.0% year on year. The performance was in line with expectations, and the company's profitability was steady. The company also announced a year-end dividend of HK$0.1 per share, with a dividend payout ratio of 26.1% for the whole year, which is slightly lower than market expectations.
According to the bank, Jianqiao Education enrolled 25,000 students in the 23/24 school year, and the usage rate of school beds was over 90%. In order to improve operating conditions and enrich curriculum resources, and establish more applied majors according to the talent demand structure, the fourth phase of the school's project is already under construction. The construction area of the project is 86,000 square meters, including a teaching and training building, three talent apartment buildings, and a multi-functional R&D center. It is expected to be put into use in June 2024. The total investment for the fourth phase of the project is about 350 million yuan, of which capital expenditure has already been incurred in FY23 is about 260 million. The remaining portion will be included in the capital expenditure for the FY24E fiscal year. The bank expects FY24E capital expenditure to drop to $170 million.
The bank further stated that in 2020-2022, policies for college upgrades and college enrollment expansion will be implemented, and this group of students will gradually enter the graduation season. If the enrollment expansion policy is not continued, the number of new students enrolled and the growth in the number of students enrolled will slow down. The bank predicted FY24E's revenue of 1.03 billion yuan, a decrease of 4.0%; affected by the adjustment of the building depreciation period, the bank lowered the FY24E gross margin forecast by 1.7 percentage points to 62.4%. However, at the same time, the bank lowered operating expenses by 5.2%; maintaining FY24E's net profit forecast of 320 million, an increase of 12.9% over the previous year. The FY26E forecast was introduced, and due to reduced liquidity, the valuation target was adjusted to 5 times the FY24E price-earnings ratio, and the target price was lowered to HK$4.45 to maintain the purchase rating.