China YuHua Education Earnings: Lifting Fair Value Estimate by 17% on Lowered Capital Expenditure

China YuHua's fiscal 2024 (ended August) net profit of CNY 399 million fell short of our forecast of CNY 534 million due to a goodwill impairment of CNY 181 million. However, the capital expenditure was significantly lower than anticipated. We keep our forecasts largely unchanged, but have increased our fair value estimate to HKD 1.04 per share from HKD 0.89, accounting for the reduced capital expenditure in fiscal 2024. Currently, YuHua is trading at just 40% of our valuation and at a 2 times fiscal 2025 price/adjusted earnings multiple. With capex declining from its peak and the balance of its convertible bond to be settled in shares in March, we believe the worst is over for YuHua and consider the shares to be a good buy.