GF Securities: Maintaining China Oriental Education (00667)'s “Buy” Rating at a reasonable value of HK$10.16

The Zhitong Finance App learned that Guangfa Securities released a research report saying that China Oriental Education (00667) is expected to have adjusted net profit of 8.0/10.2/1.26 billion yuan in 25-27, considering that the company is a high-quality leader in the industry and is on a growth and profit recovery path. Referring to comparable company valuations, the company will be given 20x PE in 2026, with a corresponding reasonable value of HK$10.16 per share (HK$0.90 against HKD) to maintain the “buy” rating.

The main views of GF Securities are as follows:

Leading vocational education leaders have been deeply involved in the industry for more than 30 years and are now at an inflection point in profit in 2024

The company was founded in 1988 as a cooking training business and has been deeply involved in the vocational education industry for more than 30 years. Currently, it has 7 major brands of vocational skills training tracks in the cooking technology, information technology, automobile service, and beauty industries. Performance was pressured by internal and external factors during the pandemic. Starting in '24, we gradually entered the stage of operating and profit improvement. 2024/25H1 achieved revenue of 41.2/2.19 billion yuan, +3.5%/+10.2% year over year, and adjusted net profit of 53/40 million yuan, +86.6%/+48.4% year over year.

Vocational skills training industry: employment-oriented, sustainable demand growth

Vocational skills training is an important segment of non-academic vocational education. The demand logic is strong employment oriented, and the potential student base is huge; the company layout direction is mainly the training of blue-collar talents in the service industry, and employment prospects remain high; the competitive landscape of the industry is scattered, and the competitive advantages of leading players in various segments are obvious.

Competitive advantage: teaching and research+employment services+operational enrollment forms a positive cycle

The company creates high-quality products through continuous iteration of teaching and research, strong practice-oriented teaching, and diverse professional systems. At the same time, it has accumulated a solid reputation in the industry through in-depth integration of obstetrics and education, and the recommended employment rate for various majors remains above 90%.

Future highlights: All brands are developing better+waiting for regional centers to gain strength

After 24 years of operational optimization and adjustment, New Oriental and Xinhua have entered a stage of bottom-up improvement and professional structure optimization, while the Aumantian beauty industry is in a phase of expansion and rapid climbing with a single school. Looking at the student source structure, the group of high school graduates is expected to be an important increase. The number of new 1-2 year trainees at 25H1 Company is 11,000, which supports the optimization of the enrollment structure compared to the same period +85.4% over the same period. Furthermore, the company's regional centers have been built and operated one after another since '22, which is expected to further improve the company's overall ability to run schools and profitability.

Risk warning: Risks such as weak service consumer markets, falling short of expectations in enrollment, and industry policy fluctuations.