Author | Shou Gui

Data Support | Pythagoras Big Data

1

company profile

Tian Li Education was founded in 2002. In the same year, the first school, Luzhou Tian Li School, was established and enrolled students. Since 2009, the company has started its expansion strategy. In 2009 and 20 10, Tian Li Primary School in Longmatan District of Luzhou City and Tian Li Culture and Art Training School, the first training school in Longmatan District of Luzhou City, were established in 20 13, marking the expansion of the company's business.

2065438+ was listed on the main board of Hong Kong Stock Exchange in July 2008. As of February 20 19, the company official website shows that there are 17 K 12 schools (7 senior high schools,1/junior high schools, 12 primary schools and 6 kindergartens) and160.

As can be seen from the above figure, most of the company's main locations are in second-and third-tier cities in the central and western regions, and then expand to surrounding cities after being influential. As for why Tian Li is expanding in second-and third-tier cities, my opinion is that the competition of high-quality schools in first-tier cities is too fierce, while the competition in second-and third-tier cities is not as fierce as that in Guangzhou, Guangzhou and Shenzhen, but the resources of high-quality schools are relatively small, and parents of students have the financial ability to pay higher tuition fees and receive better education for their children, that is, the supply of good schools is less and the demand for students is greater. However, the dislocation competition in Tian Li just meets their needs and opens the market of the second and third line education industries.

2

Industry analysis and industry comparison

Buffett said a long time ago that he likes companies with good prospects. From top to bottom, the direct factor that determines the development speed of the company you invest in must be the development speed of the industry.

Judging from the income structure of the Group, the proportion of self-owned schools in the income continues to increase, and the income of 20 18 self-owned schools has accounted for 95%. Therefore, as long as we analyze the future development potential of K 12 industry (specifically, people's demand for quality education), we can conservatively estimate the future growth of education in Tian Li.

According to the data of the Ministry of Education, in 20 18, the number of students in the K 12 stage in China reached 654.38+74 million, which maintained a relatively stable growth in the past five years. Benefiting from the "two children alone" policy of 20 14, a large number of newborns will enter primary schools in 2020, and children who meet the school age under the two-child policy will be welcomed in the next 2-3 years. With the gradual liberalization of the birth policy, it is not excluded to continue to encourage childbearing in the future, so parents' demand for quality education will remain at a high level.

From the policy point of view, the development goal of "13th Five-Year Plan" education is "significant progress has been made in educational modernization, and the overall strength and international influence of education have been significantly enhanced, pushing China into the ranks of powerful countries in human resources and talents, laying a solid foundation for realizing the long-term goal of China's educational modernization in 2030", and at the same time, clear goals have been put forward for all educational stages.

The targets include: in 2020, there will be 45 million kindergarten children, 654.38+0.5 billion students in nine-year compulsory education, 46.5438+0.3 million students in high school, and the target gross enrollment rate will reach 95%. However, as can be seen from the above figure, there is a big gap between the actual situation in 20 19 and the current situation, so it is not excluded that the policy is based on the strong expansion ability of private capital, so that private schools can be used to achieve the planned goals.

In fact, in recent years, the state has dealt with many illegal K 12 and preschool education companies, such as red, blue and green. Therefore, it has a great impact on the competitive pattern of the industry in the short term.

As can be seen from the above figure, of the 40 10000 training institutions nationwide last year, 273000 violated the rules. By March 8, 2065, 438+09, about 200,000 illegal institutions had been rectified, and the whole industry pattern changed after the illegal treatment. How to treat this problem in the future? In my opinion, although the government is rectifying the education industry, which has led to an increase in the management costs of related companies, in the long run, it will make its brand influence stronger, and education leaders will certainly benefit from it, thus speeding up the concentration of industry leaders.

From the demand side, education, as a rigid demand, is expected to increase students' extracurricular training expenditure. Parents pay more and more attention to their children's education. Under the catalysis of the existing college entrance examination system, extra-curricular tutoring has become a necessary option for parents. According to the forecast of China Industrial Information Network, the per capita expenditure of K 12 extracurricular tutoring market will reach 65.3584 yuan and 6862.63 yuan respectively from 2065.438 to 2020, and the market scale in the same period will be 43.53438+0.2 million yuan and 538.227 billion yuan respectively. Therefore, it can be concluded from the data of extracurricular counseling scale that parents' demand for quality education will continue to increase in the future.

From the perspective of industry comparison, the adult education running in Sichuan is more comparable. In 20 18, the average tuition and accommodation fee of ordinary high school students in Tian Li was 16030 yuan, an increase of 9.6% over the previous year; However, the average tuition fee of domestic high school students after graduation is 35,463 yuan/year, up by 15.7% over the previous year. In 20 18, the average tuition and accommodation fee for junior high school students in Tian Li was 2 1670 yuan/year, and the average tuition fee for junior high school students outside the city was 3460 1 yuan/year. Considering the high admission rate of 94.7% (20 18 data), the tuition fees other than Shicheng belong to the first echelon level in the local area, but it also reflects that the average tuition fees of Tian Li education schools still have a lot of room for improvement compared with the tuition fees that local people are willing to pay for quality education.

three

financial analysis

Education is a particularly good industry. Why do you say that? It is considered that its cash flow situation is particularly good, which can be explained by the ratio of net cash flow generated by operating activities to net profit.

Tian Li Education has kept this index above 200% in recent years, which shows that the company's operation has super ability to create cash flow, that is, it has the characteristics of collecting money first and then delivering it. Among A-shares, Kweichow Moutai, a long bull stock, has this feature. At least from this index, we can know that the company's business model is still good. The reason is that the tuition fee is paid in advance, so the net operating cash flow will be higher than the company's net profit.

From the perspective of profitability, the gross profit rate and net profit rate of education in Tian Li have been rising steadily in recent years. The net profit rate of more than 30% also shows that the company has strong profitability, and these profits can better support the company's continued expansion in the future.

In recent years, the company's asset-liability ratio has gradually decreased, so it can be said that the operating risk has gradually decreased, which is due to the strong cash flow brought by its tuition pre-sale system and the continuous improvement of monetary funds/current liabilities, so there is no need to worry about debt risk.

As can be seen from various expense rates, its strong cash flow makes the company not need to borrow too much debt, and the company's financial expense rate gradually decreases. However, the reduction of management costs means that the scale of the company becomes larger and the marginal management costs are reduced, which is the performance of a good company.

As for the rising management cost, I think so. The company will add several school districts outside the province in 19 this year. It is estimated that the new schools that will be put into operation in 20 19 and 2020, together with the schools that have already been put into operation, will have a total student capacity of 93,000, which is certain. However, the expansion of the school needs to recruit excellent teachers from other schools (Hengshui, etc.). ) and pay higher wages and benefits, resulting in higher management costs, so it is understandable.

four

core competitiveness

Every excellent industry and even every excellent company has its unique core competitiveness, which can make the company have the right to speak and competitiveness in the industry, thus increasing the company's profits. As far as educational companies are concerned, the result of long-term competition is excellent enrollment rate and teaching results.

According to the prospectus, in the primary school stage, in 20 16, students won 490 national, 350 provincial and 380 municipal awards in art, language ability and scientific and technological innovation competitions respectively;

20 16 junior high school students in Luzhou and Yibin are from the company's schools. In senior high school, 88.2%, 95.2%, 95.6% and 94.4% of the students from 20 15 to 20 18 were admitted to the university respectively. In the same period, the admission rates for the first time were 565,438+0.4%, 62.9%, 765,438+0.6% and 63.6%, respectively, which greatly exceeded the provincial average. This is also the reason why Tian Li can continuously attract outstanding students.

As for the core competitiveness that causes the high enrollment rate, I think there are the following points:

1. Excellent education quality supports brand expansion. As can be seen from the above, its educational achievement in enrollment rate is particularly good, so if the company wants to expand in the future, it is also an advantage to rely on the influence of Tian Li brand.

2. Standardized expansion mode. At present, the company has gone through the development stage from 0 to 1, from 1 to 3, and entered the stage from 1 to n, including curriculum system, training system and talent management replication ability. Only in this way can we ensure that the quality of teaching will not decline because more schools are opened.

From the level of Tian Li Group to the level of various schools, a capillary organizational structure has been formed, which realizes the innovation of core management and enhances the reproducibility of management. The design institutes, teaching and research institutes and other functional departments at the group level of the company have relevant business guidance for all its schools; At the school level, each K 12 school district is not only supervised by the principal in charge, but also assisted by several principals in charge of each school section.

3. Cooperation with the government requires less capital. Relying on the reputation of running a school for many years, Tian Li has expanded mainly through cooperation with local governments. Basically, all schools have government subsidies. Under normal circumstances, government subsidies can cover about 50% of the cost of school construction, and the specific proportion depends on consultation with local governments. Generally speaking, if you borrow 30% of the loan, you only need to pay back 20%, which can free up more cash flow to prepare for future expansion.

five

Two questions

1, policy risk

To tell the truth, it is not objective and comprehensive to say that companies in the education industry have no policy risks.

2065 438+08 08 10 The Ministry of Justice of China issued the Regulations on the Implementation of the Education Law of the People's Republic of China (Revised Draft), which imposed strict supervision on non-profit schools, resulting in a sharp drop in the whole education sector that day, which was nothing more than that investors thought its long-term logic had changed, as shown in the following figure.

1) tax policy. Non-profit private schools have enjoyed preferential tax rates and have certain advantages in land use. Under the new policy, the specific tax rate of for-profit private schools is still unclear. Tian Li's own K 12 school is mainly non-profit and will not be affected in terms of taxation.

2) The ownership of assets and the legitimacy of M&A ... As an education group with its own assets, it will have no influence. The assets of Tian Li's own school belong to the company's light assets, and the related facilities are funded by Tian Li himself, so the ownership of the assets has little influence. So as far as the first two points are concerned, it has little impact on Tian Li.

3) 3) Legitimacy of VIE architecture. According to the regulations, the balance of non-profit private schools should be used for education and teaching rather than shareholder distribution, but companies listed under VIE framework can collect fees through WFOE to realize income. What investors are most uncertain about today is this point, because there is no clear definition at present, but we should also be careful about this point and be psychologically prepared to prevent excessive changes.

2. The risk of losing high-quality teachers.

As mentioned above, the company is currently in a period of rapid expansion, and it should aim to build 65,438+00 new schools every year in the next few years. Therefore, in order to maintain the high enrollment rate in the past, more excellent teachers must join.

At present, many teachers working in Tian Li agree with Tian Li's educational philosophy. In terms of salary, it will not be much higher than other schools, which is about 10%-20%. So will other schools poach excellent teachers at higher prices? Can excellent teachers stay? I think we should walk and watch.

six

Business prospects and valuation

In 20 18, Tian Li's education income increased by 36.9% to 640 million yuan, gross profit increased by 35.9% to 269 million yuan, and net profit increased by 47.7% to 200 million yuan. Tian Li gave a satisfactory answer to the capital market in the first year of listing.

However, the company's return on equity is not good. The reason is that several new schools were not put into operation last year, and the assets increased substantially, but the liabilities did not increase so fast (as mentioned above, the company has strong cash flow manufacturing ability), which led to a substantial increase in the owners' equity of the company. But looking ahead, as long as parents' demand for quality education is still there, Tian Li's ROE will return to 15% or even 18%.

When it comes to valuation, we can't ignore the profit growth of the company.

Historically, Tian Li's profit growth has been maintained at a high level. Looking forward to the future, Tian Li has signed up for the development planning project 13, of which 12 is owned by itself and 1 is entrusted by the government, which will be put into operation in the next two years. It is estimated that these new schools can provide a total of 47,655 places, and the capacity of existing schools will reach 93,000 students. Tian Li's expansion model will continue, and new projects will continue to be signed. Therefore, it is certain that the number of students in Tian Li will increase rapidly in the future.

As far as valuation is concerned, the company's current pe is about 27 times. Because the company's history is short, the history is not comparable. From the above analysis, I think Tian Li's education should be able to achieve 40% compound growth in the next three years, so the current market value corresponds to 19 years' performance, which is about 19 times pe. Tian Li's strong competitiveness brings high growth with certainty, while its valuation is reasonably low, so the investment value is self-evident.