China East Education: We Cut Student Enrollment Estimates on Competition and Macro Headwinds

We think China East Education‘s student enrollment will likely fall short of our original forecasts as its employment-oriented programs appear to be losing appeal among students who are increasingly willing to further their studies amid a sluggish job market. Therefore, we reduce our average student enrollment forecasts by 3%-12% for 2024-28, leading to a 4%-11% reduction in our revenue forecasts. We keep our net profit estimate largely unchanged at CNY 421 million for 2024 after factoring in cost-control efforts, but we lower our earnings estimates by 7%-10% for 2025-28. Consequently, we cut our fair value estimate by 5% to HKD 5.07 per share. We think the shares are attractive, trading at only 44% of our fair value estimate. China East is committed to keeping the dividend stable at least for 2024-25 and the current share price translates into nearly 9% annual dividend yield.