China East Education Falls on Near-Term Uncertainties; Long-Term Outlook Remains Positive

We transfer coverage and take a fresh look at China East Education, leading to a cut in our fair value estimate to HKD 7.10 from HKD 21.00 per share. The cut is attributable to lower revenue and margin assumptions over the next five years as we factor in the impact of intensifying competition and ongoing pandemic restrictions. Despite the challenges, we think China East’s long-term outlook remains positive. It is worth noting that China East had a net cash and investment position of CNY 5 billion as of December 2021. In addition, we forecast CNY 560 million to CNY 1.3 billion free cash flow over the next five years.