In recent years, the country has paid increasing attention to vocational education, and relevant policies have been introduced continuously to promote the development of vocational education and meet the needs of society for skilled technical personnel. Against this backdrop, the vocational education industry has ushered in unprecedented development opportunities.

As an important player in the field of vocational education, 21st Century Education Group is grasping the opportunities of this era with its deep business accumulation and forward-looking strategic layout. The author notes that the financial report recently released by 21st Century Education Group shows that the company has achieved significant performance growth.

I. The three major growth drivers resonate

According to the performance report, the company achieved revenue of 420 million yuan in 2023, a significant increase of 34.7% over the previous year. Meanwhile, profit during the year increased to 398.36 million yuan, an increase of 49.1% over the same period last year. This performance reflects the company's outstanding ability to grow and its strong competitive advantage.

It is worth noting that while the company's performance has increased, it has also effectively controlled the cost rate. The management fee rate in 2023 decreased by 3.0 percentage points from the previous year to 19.7%. Furthermore, the company's financial situation is stable, and the net cash flow from operating activities was 198 million yuan, an increase of 54.7% over the previous year, providing solid financial support for the company's future expansion and investment.

The past year's results are the result of the company's long-term strategic layout and business accumulation. With strong support from national policies, vocational education is ushering in unprecedented development opportunities. With core competitiveness, a balanced business structure, and a “endogenous+outreach” two-round strategy, 21st Century Education Group was able to seize the golden window period.

More specifically, talking about the main drivers of performance growth, there are three key dimensions worth analyzing:

First, the company achieved simultaneous growth in student size and tuition fees. In 2023, the total number of full-time students increased from 23,888 in 2022 to 27,662 in 2023, an increase of 15.8% over the previous year. The increase in the number of students directly contributed to the increase in tuition income. At the same time, the market-based adjustment of tuition fees has further raised the company's revenue level. In 2023, the average tuition income for students in the vocational education sector of the company reached 9,151 yuan, an increase of 9% over the previous year.

The second is the balanced development of vocational education and non-vocational education. In the vocational education sector, the company achieved revenue of 270 million yuan, an increase of 20.9% over the previous year; in the non-vocational education sector, through the new college entrance examination business and provision of diversified services such as high school education and preschool education, revenue also reached 150 million yuan, a significant increase of 69.6% over the previous year. This fully demonstrates the company's comprehensive service capabilities in the field of education.

Finally, the company continues to expand its educational service capabilities and scope of services through endogenous growth and epitaxial mergers and acquisitions. Endogenous growth is mainly reflected in expanding campus capacity and improving the educational quality and service level of existing schools, thereby attracting more students to enroll. An epitaxial merger and acquisition is the rapid integration of external education resources through acquisitions to promote comprehensive expansion and deepening of the business. Among them, through the acquisition of Shijiazhuang Yuying Experimental Middle School, 21st Century Education successfully introduced an ordinary high school license, which also marked the company's official entry into the high school education circuit. On this basis, the company further expanded its service boundaries and is committed to becoming a comprehensive high school education service provider. It can be seen from this that the endogenous+epitaxial two-wheel drive development model has injected strong impetus into the continued growth of education in the 21st century.

As can be seen,Over the past year, the company focused on new vocational education as the main line, and gradually improvedA gradient vocational education and training system with multi-form connections, multi-channel growth, and sustainable development, andpreliminaryThe potential for growth has been realized.

II. Deepening the new model of “coexistence between maternity and education”

In addition to expanding horizontally and improving the vocational education and training system; 21st century education continues to be deeply cultivated vertically, actively promotes the strategy of integrating obstetrics and education, and enhances the content of a “new vocational education service provider”. In 2023, the company will deepen the integration of obstetrics and education 5.0 -- the practice of the “coexistence of maternity and education” model. This model marks a new depth in the company's industry-education integration practices.

School-enterprise Cooperation: Deep Integration to Seek a Common Future

As of 2023, Shijiazhuang Polytechnic Vocational College has established close school-enterprise partnerships with many well-known enterprises. The college signed strategic cooperation agreements with leading companies such as JD and Tencent Cloud Computing to jointly build a demonstration base for the integration of industry and education and an industrial college. Currently, the school has 28 majors and 17 enterprises working together to develop special majors, set up 61 order classes, and pilot 16 apprenticeship majors. In addition, the college has also established 13 training bases for key professional groups, 61 on-campus experimental training centers, and 247 off-campus training bases to provide students with rich practical opportunities.

At the same time, the college maintains industry-university-research partnerships with more than 700 companies including Huawei, Haier, and Great Wall Motors, including more than 60 of the world's top 500 companies. This cooperation model not only ensures the close integration of educational content with industry needs, but also provides graduates with a high-quality employment platform.

Government and School Join Hands: Helping Regional Economic Development

Shijiazhuang Polytechnic Vocational College responded positively to the government's call and used its educational resource advantages to contribute to local economic development. The school cooperated closely with government departments to carry out vocational education and social training. The total number of trainees reached 13,739, sending nearly 1,000 outstanding talents to various enterprises in Luquan District of Shijiazhuang City. In addition, the college also cooperates with research institutes such as the Hebei Academy of Social Sciences to jointly conduct regional development research and provide intellectual support for local economic development.

School-Bank Cooperation: Expanding the Boundaries of Development

It is worth mentioning that Shijiazhuang Polytechnic Vocational College has been successfully selected into the Hebei Vocational Education Quality Improvement and Training Action Plan (2020-2023) “Double High School” construction list. In 2023, the college not only undertook the 25 important tasks in the plan, but also successfully established 16 apprenticeship pilot majors through the “Five Ones” and “Three Ones” construction projects, further deepening the practice of integrating maternity and education. By the end of 2023, the school had successfully completed the compilation of materials for the “Double High” construction and is awaiting final acceptance by the government.

In order to connect more closely with industry needs, Shijiazhuang Polytechnic Vocational College actively joined various industry associations such as the National Chemical and Pharmaceutical Vocational Education Group and the Hebei E-Government Society Smart Medical Professional Committee and became its governing unit. This initiative not only provides students with more internships and employment opportunities closely linked to industry needs, but also injected new vitality into the college's scientific research and technology development activities.

Thanks to the in-depth implementation of the new model of integration between obstetrics and education, Shijiazhuang Polytechnic Vocational College has achieved initial results. The employment rate of graduates in the 2021-2023 academic year reached 97.9% and maintained continuous growth for 5 years, directly proving that this model is extremely effective in cultivating talents. At the same time, the college's teaching quality and social reputation have also been improved, and a large number of high-quality talents have been sent to social development.

3. Start a new chapter of growth

As a key component of the Industry-Education Integration 5.0 model, the Gaoyi Campus of Shijiazhuang Polytechnic Vocational College was put into use in September 2023. This is an important milestone in the history of education development in the 21st century. It is also a key step in deepening the strategy of integrating obstetrics and education and achieving high-quality connotative development.

Since it was officially put into use, the new campus of Shijiazhuang Polytechnic Vocational College has attracted a large number of students, and the number of new students has reached more than 8,200; both tuition and accommodation fees have achieved market-based pricing and have shown a steady growth trend. Among them, the average tuition fee for students increased 9% year on year, fully demonstrating the competitiveness and pricing capabilities of the education brand.

In terms of development planning, the Gaoyi Campus has now begun construction of Phase 1 and Phase 2 projects, and has obtained Phase III planning permits. As of September 2023, the first phase of construction, including school buildings, dormitories, and cafeterias, was put into use, laying a solid foundation for the initial operation of the campus; the second phase of the project, which included both dormitory buildings, had already been put into use, further improving the carrying capacity of the school. It is expected that the third phase of the construction plan will further improve the campus infrastructure to meet the needs of more students. Looking forward to the future, the new Gaoyi campus has huge room for growth. With the completion of various construction projects and the continuous improvement of the quality of education, the scale of the school will be further expanded to accommodate more students and provide more space for the company's future revenue growth.

As the new campus of Shijiazhuang Polytechnic Vocational College gradually realizes its growth potential, 21st century education is entering a development dividend period. This gave rise to optimistic expectations for 21st-century education. Guosheng Securities Research Institute expects the company to achieve continuous growth in operating income and net profit to mother from 2024 to 2026. In particular, operating costs will rise in the short term due to the new campus being put into use in 2023, but as the new campus gradually fills up, gross margin is expected to pick up, leading to a considerable increase in net profit.

Guosheng predicts that the company's revenue will grow from 531 million yuan in 2024 to 656 million yuan in 2026; net profit to mother is expected to grow from 53 million yuan in 2024 to 97 million yuan in 2026, with a compound annual growth rate of 33.5%.This means that compared to 2023, the net profit margin for the next three years will increase by more than 143%!Meanwhile, EPS (earnings per share) is expected to increase from 0.05 yuan in 2024 to 0.08 yuan in 2026, and the increase in ROE (return on net assets) is also significant, which is expected to increase from 6.4% in 2024 to 9.5% in 2026.

For a long time, Education Group's advantage as a stock target was its strong predictability of performance. Its revenue stream is relatively stable, and is mainly dependent on tuition fees, accommodation fees, and related fees for educational services. These fees are usually collected at the beginning of each semester or school year. In addition, the construction and enrollment progress of the new campus is highly visible. The increase in the number of students and the expansion of education services can be expected, and there is a strong possibility of a steady increase in income. From this perspective, 21st-century education has a high degree of growth and certainty.

However, based on the closing price of 0.186 yuan on April 29, corresponding to EPS in 2024, PE is only 3.72x; from this perspective, the margin of safety is quite sufficient. In terms of cash, a similar conclusion would be reached. According to financial reports, as of December 31, 2023, 21st Century Education Group's cash and bank balance was RMB 270 million. When cash is significantly above market value, this may be a significant sign of undervaluation.

From an investment perspective, 21st Century Education Group not only showed steady profitability, but also revealed great potential for growth; in addition, its low PE value and sufficient cash reserves provided investors with a large margin of safety. With the further improvement in the quality of education and the full operation of the new campus in the future, 21st Century Education Group is expected to usher in a better future and bring long-term returns to investors.