Edvantage Group(Edvantage)has announced its FY25 results:the company reported revenue of RMB2,489mn(+7.7%yoy)and an attributable net profit of RMB514mn(-28.1%yoy),exceeding our previous forecast of RMB406mn,in our view mainly owing to aGPM recovery in 2H25 as spending on teacher training and overseas exchange programs decreased.The company maintained acash dividend-payout ratio of around 30%,underscoring its commitment to shareholder returns.We believe that while continued investment in internal development may weigh on its GPMs in the short term,this should help lay asolid foundation for sustainable long-term growth.Given the company’s stable cash dividend profile,maintain BUY.
GPM declined yoy amid high-quality educational investment
In FY25,total student enrollment rose by about 4.4%yoy to 99,800,driven mainly by Huashang Vocational College and Urban Vocational College of Sichuan.The company also strengthened its international presence and plans to enroll 1,000 overseas students annually over the next five years,which should contribute incremental revenue,in our view.Edvantage continued to advance integration between industry and education,restructure disciplines,and expand in new engineering and healthcare fields.Supported by facilities such as the AI training center and the new-energy vehicle laboratory,the company is building frontier professional clusters aligned with regional industrial needs,accelerating the digital and intelligent transformation of its business and liberal-arts programs.Owing to higher spending on faculty and campus construction,the company’s FY25 GPM declined by around 8pp yoy to 40.6%(vs 38.70%in 1H25).
Capex likely to decline gradually
For FY25,capex reached RMB865mn,exceeding our previous forecast of RMB600mn.This included RMB143mn for land acquisition in Jiangmen’s Xinhui District for Huashang Vocational College,RMB344mn for the construction of the Xinhui campus and new teaching facilities,and RMB237mn for land-use rights and new facility construction at the Zengcheng and Sihui campuses.The company expects capex to decline to RMB600-700mn per year over the next two years,as land purchases taper off and basic infrastructure projects are completed.Future capex is to mainly focus on upgrading programs in new engineering and healthcare disciplines.
Stable dividend payout;maintain BUY
Given the better-than-expected FY25 GPM and likely gradual reduction in capex,we forecast attributable net profit of RMB625/678/694mn for FY26/27/28(+34%/+52%/-vs our previous estimates).Assuming astable 30%cash payout ratio and applying aDDM valuation,with aWACC of 9.64%and perpetual growth of 1%,our target price is HKD1.96.Maintain BUY.
Risks:tightened regulation on tuition fees;slower growth in enrolled students than we expect;slow progress of for-profit registration;changes in cash-dividend policy.