Edvantage Earnings: Strong Student Enrollment, but Capital Expenditure to Remain Elevated

Edvantage delivered another year of steady growth with adjusted net income up 15% year on year in fiscal 2023. We expect the trend to continue, underpinned by a 23% jump in new student registration for the 2023-24 school year. After factoring in higher student enrollment, we increase our net income estimates by 7% to CNY 710 million for fiscal 2024 and 9% to CNY 729 million for fiscal 2025. However, we keep our fair value estimate at HKD 6.10 after incorporating higher capital expenditures. The share price is only 39% of our fair value estimate as of Dec. 1. We think the shares looks attractive with nearly 9% projected dividend yield for fiscal 2024. However, we anticipate share price to remain subdued in the near term due to policy uncertainty surrounding for-profit classification.