Research on Tech Companies

Evelyn Zhang

Thematic (Sector/Industry)

<p>A series of recent Chinese policies promoting vocational schools instead of traditional secondary education, and efforts to eliminate after-class cramming makes me to recommend short K12 education related stocks and long vocational training related stocks.</p>

A series of recent Chinese policies promoting vocational schools instead of traditional secondary education, and efforts to eliminate after-class cramming makes me to recommend short K12 education related stocks and long vocational training related stocks.

A Twist of Fate – China’s Suppression of Secondary Education in Favor of Vocational Education

HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/china-east-education-holdings" target="_blank" data-smartkarma-citation="entities:27843:1" rel="noopener">China East Education (667 HK)</a>'s solid margin expansion across all business segments demonstrated its ability to generate further growth in the next two years. </li>
<li>It is well placed to benefit from the demand for skilled workers. There is an impressive increase in enrollment in long-term courses, suggesting that revenue is more secure.</li>
<li>While the 11.4x FY26 PER is the highest in the sector, it has the best EPS CAGR and the highest ROE of over 18% for FY26-28F.</li>
</ul>



China East Education (667 HK)'s solid margin expansion across all business segments demonstrated its ability to generate further growth in the next two years. 
It is well placed to benefit from the demand for skilled workers. There is an impressive increase in enrollment in long-term courses, suggesting that revenue is more secure.
While the 11.4x FY26 PER is the highest in the sector, it has the best EPS CAGR and the highest ROE of over 18% for FY26-28F.


China East Education (667 HK): Well Placed

<ul>
<li>
<a href="https://www.smartkarma.com/entities/china-east-education-holdings" target="_blank" data-smartkarma-citation="entities:27843:1" rel="noopener">China East Education (667 HK)</a> remains well-positioned in the government's support of vocational education, despite its YTD outperformance.</li>
<li>Higher average tuition per student, better cost control, accelerating growth in the "Fashion and Beauty" segment,  and new course introduction are the main profit drivers.</li>
<li>Net cash equals 17.2% of the share price, while other peers are struggling with debt repayment. Coupled with stronger earnings CAGR, its premium PERs are justified.</li>
</ul>



China East Education (667 HK) remains well-positioned in the government's support of vocational education, despite its YTD outperformance.
Higher average tuition per student, better cost control, accelerating growth in the "Fashion and Beauty" segment,  and new course introduction are the main profit drivers.
Net cash equals 17.2% of the share price, while other peers are struggling with debt repayment. Coupled with stronger earnings CAGR, its premium PERs are justified.


China East Education (667 HK): In an Excellent Position

<ul>
<li>
<a href="https://www.smartkarma.com/entities/china-east-education-holdings" target="_blank" data-smartkarma-citation="entities:27843:1" rel="noopener">China East Education (667 HK)</a>'s 1H24 result is impressive with a 58% YoY increase in adjusted net profit. Good cost control is a key contributing factor. </li>
<li>Profitability has improved in all business segments. Its strategy to focus on higher-value courses has led to further improvement in annualised tuition per student. </li>
<li>The 1H24 result equals 68% of the full-year consensus, implying an upside in market expectations. Its net cash, at 35% of market capitalisation, is unmatched by peers.</li>
</ul>



China East Education (667 HK)'s 1H24 result is impressive with a 58% YoY increase in adjusted net profit. Good cost control is a key contributing factor. 
Profitability has improved in all business segments. Its strategy to focus on higher-value courses has led to further improvement in annualised tuition per student. 
The 1H24 result equals 68% of the full-year consensus, implying an upside in market expectations. Its net cash, at 35% of market capitalisation, is unmatched by peers.


China East Education (667 HK): Rock Solid Improvements

<ul>
<li>
<a href="https://www.smartkarma.com/entities/china-education-group-holdin" target="_blank" data-smartkarma-citation="entities:18218:1" rel="noopener">China Education Group (839 HK)</a>'s plunge in share price is due to management's guidance for a 10-15% drop in adjusted net profit, significantly lower than the current consensus.</li>
<li>Its decision to pause dividends for the foreseeable future on debt repayment burden and tight offshore refinancing environment for the sector has further disappointed the market.</li>
<li>Based on guidance, its PER of 3.7x and nil dividend yield for FY25 make it unattractive relative to peers (1.7-2.9x PER). We shy away until things improve.</li>
</ul>



China Education Group (839 HK)'s plunge in share price is due to management's guidance for a 10-15% drop in adjusted net profit, significantly lower than the current consensus.
Its decision to pause dividends for the foreseeable future on debt repayment burden and tight offshore refinancing environment for the sector has further disappointed the market.
Based on guidance, its PER of 3.7x and nil dividend yield for FY25 make it unattractive relative to peers (1.7-2.9x PER). We shy away until things improve.


China Education Group (839 HK): A Large Disappointment

China

Edvantage Group operates private higher and vocational education institutions in the People's Republic of China, Australia, and Singapore. The company offers vocational skill certificate programs, education consulting, IT consultation, and language training. It was founded in 2003 and is headquartered in Guangzhou, People's Republic of China.

Price Gauge
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Edvantage Group (382 HK)

A Twist of Fate – China’s Suppression of Secondary Education in Favor of Vocational Education

Change is afoot in one of China's main social mobility mechanism, the education system. The country is promoting vocational education in an effort...

Evelyn Zhang

China East Education (667 HK): Well Placed

CEE shows strong margin expansion and growth potential, benefiting from demand for skilled workers and more secure revenue. Despite a high PER, it...

Osbert Tang, CFA

China East Education (667 HK): In an Excellent Position

China East Education issued a positive profit alert, pointing to a 45-50% YoY increase in earnings for 1H25, citing a 10% increase in revenue and...

Osbert Tang, CFA

China East Education (667 HK): Rock Solid Improvements

China East Education’s FY24 earnings of Rmb512.6m (+88%) beat the consensus forecast (Rmb419.5m) by a significant margin. Its 2H24 adjusted net...

Osbert Tang, CFA

China Education Group (839 HK): A Large Disappointment

CEG's share price plunged on the back of lower profit and a decision to pause dividends due to high debt repayment and tight refinancing. Its...

Osbert Tang, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

A Twist of Fate – China’s Suppression of Secondary Education in Favor of Vocational Education

Change is afoot in one of China's main social mobility mechanism, the education system. The country is promoting vocational education in an effort...

Evelyn Zhang

China East Education (667 HK): Well Placed

​CEE shows strong margin expansion and growth potential, benefiting from demand for skilled workers and more secure revenue. Despite a high PER, it...

Osbert Tang, CFA

China East Education (667 HK): In an Excellent Position

China East Education issued a positive profit alert, pointing to a 45-50% YoY increase in earnings for 1H25, citing a 10% increase in revenue and...

Osbert Tang, CFA

China East Education (667 HK): Rock Solid Improvements

China East Education’s FY24 earnings of Rmb512.6m (+88%) beat the consensus forecast (Rmb419.5m) by a significant margin. Its 2H24 adjusted net...

Osbert Tang, CFA

China Education Group (839 HK): A Large Disappointment

​CEG's share price plunged on the back of lower profit and a decision to pause dividends due to high debt repayment and tight refinancing. Its...

Osbert Tang, CFA

CEE shows strong margin expansion and growth potential, benefiting from demand for skilled workers and more secure revenue. Despite a high PER, it...

CEG's share price plunged on the back of lower profit and a decision to pause dividends due to high debt repayment and tight refinancing. Its...