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国盛证券:前期估值错杀与政策担忧提供高安全边际 重视民办高教估值修复机会

Guosheng Securities: Early Valuation Mistakes and Policy Concerns Provide High Safety Margins, Focus on Private Higher Education Valuation Repair Opportunities

Zhitong Finance ·  07/28/2023 14:44

The Zhitong Finance App learned that Guosheng Securities released a research report saying that early private higher education sector valuation errors and policy concerns provided a high margin of safety. Currently, the sector's content and high-quality development tone have been basically determined. Under the endogenous model, industry leaders have gradually verified the steadiness and sustainability of performance growth. As the policy orientation gradually becomes clear, undergraduate valuations and sentiment are expected to improve steadily. It is recommended to focus on sector layout opportunities and select industry leaders with leading growth potential and outstanding geographical advantages of their institutions. Follow: China Education Holdings (00839), New Higher Education Group (02001), Hope Education (01765), Neusoft Education (09616), Zhonghui Group (00382), Yuhua Education (06169).

Guosheng Securities's main views are as follows:

Deterministic asset attributes, sector valuations have been mistaken since 2021, and are generally in the underestimation range of PEG far less than 1.

School assets have characteristics such as stable endogenous growth and high certainty. Among them, private colleges and universities are an important part of applied and vocational skills colleges and universities. In recent years, through endogenous+outreach development, they have formed several industry leaders with high-quality applied and specialized colleges. The private higher education sector also experienced a “double decline” in 2021 to suppress overall policy sentiment in the education sector. Combined with the effects of the general environment and Hong Kong stock market factors in the past two years, sector valuations continued to decline from 2021 to 2022. The individual stock PEG, which is still at a historically low level, is generally far less than 1.

Private higher education is an important part of general higher education. It falls under the category of academic vocational education and acts as an “employment reservoir.”

In 2022, there were 3013 colleges and universities in China, including 1,239 undergraduate colleges and 1,489 higher vocational (junior) colleges, including a total of 764 private colleges and universities, accounting for 25.36% of the country's colleges and universities. The direction of private colleges and universities is mainly applied and employment-oriented, which is an important part of academic vocational education. In a context where financial resources are limited, mainly public institutions are preferred, and the state is actively guiding higher education gross enrolment ratio, private colleges and universities have become an important vehicle for sharing the costs of running schools and providing incremental supply to the industry. At the same time, the gradual improvement of further education paths has made higher education an important “employment reservoir”. The expansion of college enrollment since 2019 and the expansion of general enrollment and the expansion of the cost of enrolment in general enrolment that began in 2020 have highlighted the value of “stable employment” in colleges and universities.

Endogenous development is progressing steadily, there has generally been a considerable increase in the number of places in the new school year, and the robustness and sustainability of performance have been verified.

Recently, college student quotas for the 2023/2024 academic year have been determined one after another. Taking China Education Holdings as an example, the number of places enrolled in Chinese colleges and universities in 2023/2024 increased 16% + over the same period last year, corresponding increases of about 13,000. Of these, undergraduate credits increased by about 10%, and college places increased by about 56%. The enrollment rate for higher education, especially at the undergraduate level, is generally high, so FY2024 performance growth has basically been locked in. It is expected that endogenous industry leaders will generally maintain continuous double-digit performance growth under a sharp rise in volume and price, verifying robustness and sustainability.

The friendly orientation of vocational education is clear, and the industry's supporting incentive policies are gradually being improved, awaiting valuation restoration.

The “Regulations on the Implementation of the Private Education Promotion Law” were officially implemented in May 2021. Compared with the 2018 version that was submitted for review, there are significant differences with the management methods of private schools at the compulsory education stage. The classification registration process in all provinces of the country is still progressing steadily, and the opportunities for leading market-based development are still broad; in October 2021, the two offices issued “Opinions on Promoting the High-Quality Development of Modern Vocational Education”, which puts forward many incentives, and is committed to further streamlining the path of academic vocational education and expanding undergraduate enrollment; the new version of the Vocational Education Law in May 2022 ” The implementation further affirms the same status between vocational undergraduate and general undergraduate studies; in December 2022, the two offices issued “Opinions on Deepening the Construction and Reform of the Modern Vocational Education System”, and in June 2023, eight departments jointly issued the “Implementation Plan for Enhancing the Integration and Empowerment of Vocational Education (2023-2025)”. Overall, the academic vocational education system is gradually coherent and improved, supporting incentive policies continue to be introduced and refined, sector performance growth is sustainable, and valuation and sentiment are expected to recover steadily.

Risk warning:The risk of fluctuations in industry policies; the new population continues to decline or has an impact on the total demand of the industry.

Disclaimer: This content is for informational and educational purposes only and does not constitute a recommendation or endorsement of any specific investment or investment strategy. Read more
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