Adj. NP +61％ to RMB576mn, in line with our estimates, within guidance of RMB550-600mn and 5% below consensus. The 39% total student enrollment growth and strong enrollments for overseas programs in FY21E again showed the Company’s strong execution skills in improving performance of acquisition targets. We forecast the Company to deliver 25.4% EPS CAGR in FY21-23E, above peers’ average of 22%. We estimate conversion of four independent colleges could further lift FY23E NP by 19%. Maintain Buy and lifted TP to HK3.41.
- Results in line. Revenue jumped 45% to RMB1,568mn, led by 63% growth of student enrollment to 140,125, in line with our estimates and 5% below consensus. Adj. GPM widened 5.4ppt to 52.4% thanks to better scale and cost control. SG&A expenses ratio reduced by 3.3ppt to 16.4%. The Company declared a RMB0.8 cents dividend for the 8M20 period. Payout ratio will be kept at 30% in future.
- Strong overseas study demand to drive Inti Education’s growth. The Company saw enrollments for its overseas programs (including Intl. Education and other programs) soared from 1,964 in FY19 to 17,315 in FY20. These enrollments will gradually become overseas students in 2-3 years. Management targets to achieve 40% net profit CAGR from 2018 to 2024E for Intl. Education.
- Conversion of four independent colleges to lift earnings. In FY20, total management fees paid by the independent colleges was RMB170m, representing 29% of adj. NP in FY20. Management expects to convert two independent colleges by end of 2021 and another two by end of 2022. We estimate these conversion could further lift FY23E NP by 19%.
- Strong organic and M&A growth drivers. Total student enrollment jumped 39% to 194,554 in FY21E. The Company acquired a vocational college in Nanchang (2,753 students) in Oct and plans to open two vocational colleges each in FY22E and FY23E. On organic basis, management targets to achieve 15-20% revenue CAGR and a faster NP CAGR, in 3-5 years. The Company had RMB3.1bn cash as at 31 Aug and will seek acquisitions.
- Maintain Buy. We raised FY21/22E adj. NP by 2/4% mainly to reflect strong student enrollment but partly offset by higher finance cost and effective tax rate. Our TP is lifted from HK$3.05 to HK$3.41, at 25.4x FY21E P/E, as we rolled forward our valuation basis which is still at 1x PEG. Catalysts: (1) M&A; (2) policy overhang removed; (3) unpeg of independent colleges. Risk: surge of teachers’ costs.
