China YuHua Education Earnings: Bond Repayment Risk and Large Capital Expenditure Disappoint

China YuHua Education’s share price plunged after the firm indicated it would need an extension to its convertible bond repayment. The huge capital expenditure in fiscal 2023 (ending August) was also disappointing. We keep our earnings forecasts largely unchanged, but cut our fair value estimate by 27% to HKD 1.50 on higher capital expenditure in fiscal 2023 and beyond. While shares are significantly undervalued, we think the share price will remain depressed due to uncertainty about its convertible bond.