“The stock market is a voting machine in the short term, but it is a weighing machine in the long term.” In the investment market, stock prices may diverge from value in the short term due to market fluctuations, but in the long run they will definitely follow the law of value and return to a reasonable valuation level.

Over the past 3 years, the stock price of China Chunlai (01969.HK), a private higher education enterprise in China, has increased more than 3 times, making it a shining star in the Chinese education sector.

However, even so, China's price-earnings ratio in spring is less than 10 times, which is still far below the average valuation level of the market. What is behind this is a good reflection that its stock price has followed the law of value after its business and performance continued to experience significant growth over the past few years.

In view of this, at the recent Gelonghui “8th Global Investment Carnival” event, China Chunlai won two major awards, the “Outstanding Leader of the Year” and the “Annual Growth Value Award”, in recognition of the vigorous growth potential it has pioneered to show the market under the recovery of China's higher education and vocational education industry.

Looking back at the changes in the policy environment of the Chinese education industry in recent years and a series of business layouts in the Chinese spring, it is not hard to see that China still has great value potential to be unleashed in spring.

1. The motivation for 5 consecutive years of explosive growth in performance

In recent years, China's education industry has actively promoted reform and transformation. With the introduction and implementation of relevant policies to promote the development of higher education and vocational education in the field of education, higher education enterprises have also taken the lead in leading the industry to achieve a recovery in prosperity.

In fiscal year 2023, China achieved revenue of 1,498 billion yuan (same unit), an increase of 14.4% over the previous year; the adjusted net profit was 673 million yuan, a year-on-year growth rate of 25.2%.

Looking at the past five years, the compound annual growth rate of China's revenue in spring has reached 25.15%. At the same time, the company's adjusted net profit compound annual growth rate has reached 41.41%. At the same time, along with the continuous improvement of the company's operating efficiency, the company's net profit margin also soared from 24.39% in 2018 to 45.7% at present.

One of the most critical reasons why China's spring season has shown such a strong growth momentum in the past two years is that the company has continued to expand enrollment over the past few years.

As we all know, as the country vigorously promotes the development of the higher education and vocational education industry, the public's awareness of the importance attached to higher education continues to rise, bringing the higher education industry a massive demand for students unaffected by economic fluctuations.

However, China's Spring Festival business is mainly concentrated in central China, which has the highest number of college entrance examinees in the country. In 2023, Henan Province alone had 1.31 million college entrance examination candidates, surpassing nearly half of the number in Sichuan, which is the second-largest.

Therefore, in recent years, China has expanded almost at the rate of one school per year since spring, achieving a trend of rapid growth in the number of students. From the 2018/19 school year to the 2022/23 school year, the total number of students in the spring season in China increased from 49,900 to 103,000.

According to reports, the first phase of the Tianping University Nanjing campus project has been completed this year. According to the company's expansion plan, the school will also expand in the next few years through expansion or mergers and acquisitions. It is expected that the number of students will increase to 150,000 within the next three years. Compared with the current level, the annual growth rate is over 15%.

In other words, the number of students in Chunlai in China has grown from 50,000 in the past to the current 100,000+, to 150,000+ in the next three years. The rapid and steady expansion of the number of students will fundamentally establish the momentum for business growth in Chunlai in China.

2. Another driving factor recognized by the market

In recent years, there have also been quite a few private higher education peers in China, like Chunlai, who have expanded their schools, but the results are far from being as good as the Chinese spring, so they have never been recognized by the market in the capital market.

Therefore, in addition to school expansion, China will definitely have the motivation to be sought after by the market in spring.

The author believes that this motivation may stem from its convincing soft power in terms of teaching settings, teachers, and ESG.

China Chunlai Education adheres to the philosophy of “putting people first, putting moral education first, putting ability first, quality as the root, inheriting innovation, serving the community, and pursuing excellence”. Its school curriculum focuses on cultivating students' practical skills that meet the needs of China's economic development.

For example, at Shangqiu University, the school adheres to an applied talent training model and has built 236 internship training bases inside and outside the school. Through practical teaching, it not only improves the quality of education and teaching, but is also highly recognized by enterprises. In recent years, the school has successively won honors such as “China's Most Influential Private School”, “Henan Civilized School”, “Henan Safe Campus”, and “Advanced Private School Operating Unit in Henan Province”.

For example, at Anyang University, the school currently has more than 30,000 students. It has built 1 provincial key subject, 2 provincial first-class undergraduate major construction sites, provincial comprehensive reform pilot majors, provincial private college brand majors, and 14 provincial subject major construction funding projects. Anyang University has successively won honorary titles such as “Outstanding Private School in Henan Province”, “Advanced Research Unit for Private Education in Henan Province”, and “The First 'Golden Candle Award' Model University for High Quality Employment in Henan Province”.

Hubei Health Vocational College aims to become a higher vocational college with the goal of becoming a high level professional group of nursing+health intelligence, adhering to special models such as integration of industry and education, engineering integration, and in-depth school-enterprise and school-government cooperation. It has signed cooperation agreements with more than 60 institutions for off-campus internship training bases, and co-built a teaching hospital with Huazhong University of Science and Technology Xiehe Jiangbei Hospital, providing high opportunities for students to get professional counterpart jobs after graduation.

Jingzhou University closely follows the strategic development needs of the country's “aging career and industry”, focuses on cultivating the needs of high-quality talents in the health industry, and implements a new “tailor-made” training model with the position of “building on health and improving care”. It also continuously cultivates professional service talents for the country. The college has also received many important awards and honors from important departments and units at the national and provincial levels in the past two years.

According to the latest data, up to now, China has more than 1,500 “double teacher” teacher qualifications. More than 70% of them have graduate degrees or above, and have achieved 720 school-enterprise cooperative internship bases, directly providing more than 7,500 jobs. Cooperation models include internships and training, transformation of R&D results, joint training of order classes, and joint construction of majors and laboratories.

Thanks to a strong teaching background and integrated resources for obstetrics and education, China has achieved a high employment rate far exceeding the national average since spring.

In order to ensure high-quality teaching, China Chunlai also attaches great importance to caring for the faculty and staff. In addition to providing considerable benefits, it has also created a complete promotion system for faculty and staff, providing hierarchical training, enhancing teaching innovation and job adaptation, promoting teacher career planning, and ensuring that the entire group provides excellent teaching and staff training.

The high quality teaching staff and teaching standards have also been well received by students and parents. In the 2023 financial reporting period, China received 0 complaints in spring, and the average teaching praise rate was as high as 97.7%, clearly leading the industry.

This high praise rate from the consumer side also fundamentally verifies the great success of China's Chunlai school model, and China Chunlai is also continuously replicating these excellent models by expanding schools, so it is conceivable that the steady growth of its business and performance has been very sustainable.

epilogue

In recent years, the state has strongly supported the development of higher education and vocational education from top-level design, to regulatory documents, and the budget.

In the context of an industry where policies have been improving for a long time and business models are relatively mature, the valuation logic system of enterprises is very simple, clear and easy to convince.

Regardless of the extent of the previous increase in stock prices, if the company's performance data can still achieve steady growth, it will not prevent its stock price from continuing to grow strongly.

This is like the wave of the Internet era, where the stock prices of those tech giants have risen hundreds and thousands of times over the past 20 years, they can still continue to grow upward.

As far as the Chinese spring season is concerned, this logic is also the same. In the foreseeable future, there are still many areas of potential to be unleashed in China's spring season.