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China Education Group Holdings Ltd 00839

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Stock XHKG Rating as of
HKD 4.46 −0.01 (0.22%)
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Company Report

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China Education Group Earnings: Cutting Valuation on Higher Capital Expenditure; Uncertainty Weighs

Cheng Wang

We cut our fair value estimate for China Education Group to HKD 11.50 from HKD 12.10 as the planned capital expenditure exceeds our expectations. CEG’s shares are trading at less than five times forward 2024 price/earnings and at an over 9% dividend yield, but we think its share price will remain subdued before uncertainty surrounding its for-profit classification is resolved. CEG’s schools made no progress in for-profit classification in the first half of fiscal 2024.

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Price vs Fair Value

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00839 is trading at a 62% discount.
Price
HKD 4.42
Fair Value
HKD 76.30
Uncertainty
Very High
1-Star Price
HKD 67.15
5-Star Price
HKD 8.94
Economic Moat
Yrytb
Capital Allocation
Sxzrmckdb

Bulls Say, Bears Say

Bulls

Negative sentiment toward the education sector could ease, with no additional regulatory headwinds.

Bears

Large capital expenditure will weigh on cash flow and margins

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Trading Information

Previous Close Price
HKD 4.47
Day Range
HKD 4.40–4.54
52-Week Range
HKD 3.51–8.50
Bid/Ask
HKD 4.44 / HKD 4.46
Market Cap
HKD 11.68 Bil
Volume/Avg
316,516 / 6.0 Mil

Key Statistics

Price/Earnings (Normalized)
5.37
Price/Sales
1.70
Dividend Yield (Trailing)
7.47%
Dividend Yield (Forward)
9.25%
Total Yield
7.47%

Company Profile

China Education Group is a leading ultra-large-scale private education group in China with 30 years of experience in higher education operations. CEG's schools offer both higher vocational education and secondary vocational education. The school network spans domestic China and overseas. CEG also offers continuing education to full-time working adults. The group's total enrolled full-time students in China expanded more than 3 times over the last six years to about 248,000 as of August 2023. The rapid growth is primarily attributable to school acquisitions. CEG currently operates 14 schools, up from only 3 in 2017.
Sector
Consumer Defensive
Industry
Education & Training Services
Stock Style Box
Mid Value
Total Number of Employees
16,468
Website
http://www.chinaeducation.hk

Competitors

Valuation

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Metric
00839
06169
00667
Price/Earnings (Normalized)
 5.372.9917.97
Price/Book Value
 0.680.330.84
Price/Sales
 1.701.001.19
Price/Cash Flow
 3.821.826.33
Price/Earnings
00839
06169
00667

Financial Strength

Metric
00839
06169
00667
Quick Ratio
 0.760.771.57
Current Ratio
 0.850.771.70
Interest Coverage
 4.1631.573.47
Quick Ratio
00839
06169
00667

Profitability

Metric
00839
06169
00667
Return on Assets (Normalized)
 5.49%8.51%3.01%
Return on Equity (Normalized)
 12.83%15.38%5.02%
Return on Invested Capital (Normalized)
 8.69%11.37%4.25%
Return on Assets
00839
06169
00667
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Education & Training Services Industry Comparables

Screen in Investor
Ticker
Name
Morningstar Rating for Stocks
Capital Allocation
Economic Moat
Market Cap
NWOEF
New Oriental Education & Technology Group Inc Ordinary Shares—Mdmw$13.2 Bil
EDU
New Oriental Education & Technology Group Inc ADRTttcwhtqdFsp$13.2 Bil
TAL
TAL Education Group ADRQsstBdwnq$7.6 Bil
LOPE
Grand Canyon Education Inc—Wxhwlk$3.9 Bil
GHC
Graham Holdings CoRlhfkvxJcv$3.2 Bil
LRN
Stride Inc—Vwbz$2.9 Bil
STRA
Strategic Education IncMgwlsypcyJcsz$2.8 Bil
LAUR
Laureate Education Inc Shs—Kgyb$2.3 Bil
ATGE
Adtalem Global Education IncFchjddhmSzchq$2.0 Bil
GOTU
Gaotu Techedu Inc ADR—Cfwhf$1.7 Bil

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