In recent years, under the guidance of national policies, 21st century education has continued to be education-based and has accelerated transformation and upgrading around the main line of “new vocational education.” Now, judging from the 2023 financial report, it has been very effective, and the operation is gradually improving.
In 2024, education stocks, which have fully bottomed out after continuous adjustments, will gradually have an obvious valuation advantage in industry comparisons. The market's focus is gradually once again on this sector, which is underestimated and still has high potential for growth. Among them, the “double high growth” 2023 financial report will be the most basic basis for judgment.
In the past year, in the face of a challenging economic environment, 21st Century Education (01598), the “leader” in vocational education in the Beijing-Tianjin-Hebei region, achieved impressive performance in a headwind external environment: a sharp increase in annual revenue and profit, steady progress in core business, consolidation of the growth foundation, etc., and withstood cyclical fluctuations with strong growth, showing business resilience and growth vitality under the industry's recovery trend.
On the other hand, in recent years, under the guidance of national policies, 21st century education has continued to be education-based and has accelerated transformation and upgrading around the main line of “new vocational education.” Now, judging from the 2023 financial report, it has been very effective, and the operation is gradually improving.
Both revenue and profit have increased dramatically, and core business operations are progressing steadily
More than 20 years have passed. As an established private higher education leading enterprise in vocational education in North China, the pace of growth of 21st century education has become more steady. Since the first school was established in 2003, 21st Century Education has gone through many years of fruitful development. It has become a comprehensive education group with new vocational education as the main line and actively practices the integrated development direction of obstetrics and education. It has diverse revenue sources and a broad customer base.
Currently, the Group has set up a total of 11 physical schools to provide educational services for 27,662 full-time students. In addition, as part of the vocational education business, the company also hosts the West Campus of Sifang College of Shijiazhuang Railway University and also provides services to 3,906 students. On the other hand, the Group is committed to enriching educational content, building an advanced applied education system, and becoming a leading full-cycle professional talent service provider covering the entire cycle from “study” to “employment”.
Performance has always been the best “litmus test” for the secondary market. 21st Century Education released its annual results for the year ended December 31, 2023. The Group's revenue was RMB 420 million (same unit), up 34.7% year on year; gross profit continued to rise to 165 million yuan, and net profit of 398.36 million yuan, an increase of 49.1% year on year, once again achieving high double-digit growth.
Specifically, during the year, the vocational education sector achieved revenue of 270 million yuan, an increase of 20.9% over the previous year, and the non-vocational education sector achieved revenue of 150 million yuan, a sharp increase of 69.6% over the previous year. Looking at further breakdowns, whether it is vocational education, the new college entrance examination business, or preschool education business, all sectors achieved positive high double-digit growth.
Behind “paper data,” what is even more rare is that 21st Century Education's existing core businesses all continue to operate steadily, continuously consolidating the company's brand influence in the market. In this process, its “long board” advantage is clearly visible.
The new campus opens up incremental space, and Yuying Middle School complements the puzzle
As the Group's most important business segment, the steady growth of vocational education has undoubtedly laid the foundation for a new round of high-quality development of education in the 21st century. In close inspection, it is easy to find that the revenue growth of the Vocational Education Division has mainly benefited from two aspects. First, with the successful completion and opening of the Gaoyi Campus of Shijiazhuang Polytechnic Vocational College, the scale of operation and number of students ushered in an extremely significant increase in overall tuition revenue compared to the same period last year; second, accommodation income increased due to improvements in the school accommodation environment.
Financial reports show that in September 2023, the Gaoyi campus of Shijiazhuang Polytechnic Vocational College was put into use. The new campus added more than 8,200 students, and the number of students during the year reached 23,494, an increase of 18.6%; the average student income was market-based, reaching 9,151 yuan, an increase of 9.0% year on year. The landing of the new campus led to the optimization of the accommodation environment, and the average student accommodation fee reached 1,240 yuan, an increase of 17.4% year on year.
At the same time, with the successful completion and opening of the Gaoyi New Area, the college continues to expand the operating space, improve the operating conditions, enrich the content of running schools, and advance further development towards the frontier of vocational education. By promoting the high-quality development of one school and two campuses, it has further enhanced brand influence and built a “endogenous growth” of core competitiveness.
This has been clearly reflected in the operation of the vocational education sector in 21st century education: Shijiazhuang Polytechnic Vocational College has built a modern vocational education system, adopted a “TOP” talent training model, and continuously cultivated and delivered applied talents to society through a system of vocational skills+professionality+personality quality.
On the basis that the Group's vocational education sector has formed an integrated development pattern of obstetrics and education, Shijiazhuang Polytechnic Vocational College of Technology has begun exploring the 5.0 version of the integration of obstetrics and education, or “symbiosis between maternity and education”. Based on serving local regional economic and industrial development, industry and education jointly cultivate talents, participate in industry-side business, achieve symbiosis between industry and education, and have achieved excellent results in multiple dimensions.
In terms of school-enterprise cooperation, by the end of 2023, Shijiazhuang Polytechnic Vocational College of Technology had carried out joint construction of special majors with 28 majors and 17 enterprises, with 61 order classes and 16 apprenticeship pilot majors; 13 training bases for key professional groups, 61 in-school experimental training centers, and 247 off-campus training bases.
In March 2023, the Group signed a strategic agreement with JD to jointly build the “Shijiazhuang Polytechnic Vocational College • Jingdong E-commerce Industry-Education Integration Demonstration Base”. In May 2023, it and Tencent Cloud Computing (Beijing) Co., Ltd. jointly established the Tencent Cloud Artificial Intelligence Industry Institute. The two sides integrated high-quality resources to bring talent support resources to the rapid development of cutting-edge information industries such as cloud computing and big data data.
Moreover, in 2023, Shijiazhuang Polytechnic Vocational College established a total of 13 industrial colleges related to emerging industries such as intelligent manufacturing, Internet+, and digital economy. Based on new engineering, we are committed to the integration of industry and education, rational integration, technology and culture integration, and integration of modern information technology and teaching. Currently, we maintain various forms of industry-university-research partnerships with more than 700 famous companies such as Huawei, Haier, Great Wall Motors, Sany Heavy Industries, Shiyao, and SF Express, including more than 60 well-known enterprises such as the world's top 500. Every year, nearly 1,000 people are collaboratively nurtured through order classes, etc., to help graduates achieve high-quality employment. In 2023, the employment rate in the company's vocational education sector reached 97.9%, up 0.8 percentage points from the previous year, and continued to grow for 5 consecutive years, far higher than the provincial and industry average.
Furthermore, benefiting from a leading education system, the Group has achieved fruitful results in running schools. During the year, Shijiazhuang Polytechnic Vocational College, its teachers and students received 188 awards at the ministerial, provincial and municipal levels, including the Belt and Road and BRICS Skills Development and Technological Innovation Competition, the 2023 National University Digital Art Design Competition, the “National Art Soul • Building the Chinese Dream Together, the Chinese Soul” 2nd Art Achievement Exhibition, the 2023 National College Student Business Data Analysis Skills Competition, and the 9th China “Mid-size Cup” National College Student Environmental Design Competition, the National College Student E-Commerce Skills Competition, and the “Xuechuang Cup” National College Student Entrepreneurship Comprehensive Simulation Competition.
Against the backdrop of a shortage of skilled talents and industrial structural transformation in China, Shijiazhuang Polytechnic Vocational College is expected to continue to draw on leading international experience, do a good job in vocational education classification management, strengthen the link between vocational education qualifications and courses, innovate vocational education talent training and evaluation models, and build a vocational education system with Chinese characteristics in the new era.
According to information, the company has now obtained the Gaoyi Campus Phase III project planning license. In the future, the company will continue to promote the construction of the new campus, bringing further revenue growth to the group. At the same time, Shijiazhuang Polytechnic Vocational College will also continue to contribute to local economic development, tailor the local industry, train and deliver talents according to local conditions, improve the quality of employment for graduates, achieve synergy and complementarity between vocational education and the regional economy, and jointly create a new pattern of deep integration of obstetrics and education.
In terms of epitaxial mergers and acquisitions, the company will not only continue to pay attention to and expand investment and acquisition opportunities in the field of vocational education and industry-education integration to obtain better development space and quality in the field of vocational education. In addition, the company will continue to expand service boundaries, explore a comprehensive vocational education model, build diversified education channels and systems based on the achievements of existing school management experience, and deeply integrate and develop collaboratively with the company's existing business.
In the field of non-vocational education, 21st century education is also continuously exploring incremental space for diverse businesses such as general high schools, new college entrance examination institutions, and the new Skyrim kindergarten. It also achieved outstanding growth in 2023.
In the preschool education sector, the company has a history of 11 years and has won the first class garden in Shijiazhuang City. With its high-quality brand strength and teachers, it has established a good reputation and brand image in Shijiazhuang, and maintained a high school attendance rate in 2023, achieving a revenue of 31.57 million yuan, an increase of 21.1% over the previous year.
In terms of high school education, 21st Century Education acquired Shijiazhuang Yuying Experimental Middle School in September 2022 and successfully entered the high school education circuit. Yuying Experimental Middle School is a general boarding high school. It has a history of nearly 30 years since its establishment. Currently, enrollment at Shijiazhuang Yuying Experimental Middle School is going well. As of the 2023-2024 new school year, there are 2,549 full-time students. The school's promotion rate and the joint examination rate for special students are higher than the provincial average.
Since fiscal year 2023, 21st Century Education merged Shijiazhuang Yuying Experimental Middle School's complete 12-month financial statements. The merger of Yuying Middle School had a significant effect on the Group's performance. Revenue was 61.65 million yuan during the year, a sharp increase of 186.3% over the previous year, injecting new momentum into the Group's development.
In the future, the group will use Shijiazhuang Yuying Experimental Middle School as a starting point to introduce a vocational high school license. At the same time, we actively seek mergers and acquisitions opportunities for other vocational high schools and general high schools, continue to develop the high school business sector, and further expand brand influence in the field of employment integration.
Underestimation is worth paying attention to, and multiple factors drive the return of valuation
From an industry perspective, in recent years, the education and training sector has steadily returned to standardized development. With the gradual introduction of rules at the executive level, punishment rules and supervisors have gradually entered normalized classification and supervision; the education industry is stabilizing and trending, and currently has strong and scarce operating resilience. Sector valuations are expected to be boosted, and investors also urgently need to find high-quality targets with both steady and far-reaching growth and certainty in the gradually recovering underrated industry.
The GF Securities Research Report simultaneously pointed out that the trend of double recovery in the education sector's performance and valuation can continue. Since the beginning of the year, the education industry's immediate needs have been highlighted. Business development has resumed rapidly after external influencing factors have been lifted, and at the same time, steady improvement in policy sentiment has supported the restoration of valuations to a reasonable center.
In recent years, under multiple influences such as the macro environment, markets, and sectors, the stock price of 21st Century Education has been hovering near historical lows for a long time, and the company proved its growth with high-quality assets and steady fundamentals. The stock price fell into the “golden pit”, and now it has great allocation value.
It is worth noting that 21st Century Education has been recognized by major investment banks for its outstanding performance. China Sheng Securities believes that the company takes new vocational education as the main line of development, diversifies comprehensive services, and places equal emphasis on endogenous extension. The Gaoyi campus was put into use in September 2023, and is expected to continue to increase performance as the new campus gradually fills up. The company is expected to achieve operating income of 5.31, 6.04, and 656 million yuan in 24-26, net profit to mother of 0.53, 0.79, and 97 million yuan, respectively, and EPS of 0.05, 0.07, and 0.08 yuan/share, respectively, maintaining an “increase in holdings” rating.
However, in a relatively weak and volatile market, it is difficult for the company's stock price of HK$0.186 to reflect its core value at this stage. From a valuation perspective, the market value of 21st Century Education is about HK$216 million (equivalent to about RMB 200 million), while the company's cash and bank balance is about $270 million, which is significantly higher than the market value. The dividend ratio TTM has reached 4.3%, which is currently very attractive. Currently, the company's PE (TTM) is 4.89 times and PB is about 0.25 times, all far lower than 17.31 times and 1.5 times that of the education sector. They are clearly underestimated, and difficult to match its high growth potential.
Overall, education performance was steady in the 21st century, the vocational education business maintained a rapid growth trend, and high gross profit brought abundant cash flow. The non-vocational education business is expected to become the second growth curve, continuing to accelerate performance growth. The company has long-term value, an undervalued market value, a good dividend rate, and a high value ratio.