China Kepei (1890 HK) 20/21 number of students enrolled up by 58% yoy, Harbin College expected to be fully consolidated in early 2021 December 9, 2020 137

PSR Recommendation: BUY Status: Maintained
Target Price: HKDHKD7.50

Investment Summary
20/21 new student enrollment up by 73% yoy, number of students enrolled up by 58% yoy
The new student enrollment of the company’s school in 20/21 academic year was up by 73%, and reached 39 thousand. Within it, the new student enrollment of Guangdong Polytechnic College was 33 thousand (+72.8% yoy), the new student enrollment of Zhaoqing School was 4 thousand (+5.3% yoy). The new student enrollment of Harbin College (Non-consolidated school operated under the Entrustment Agreement), which the company acquired in early 2020, was 2.5 thousand. The students enrolled of Harbin College will be consolidated into the company’s overall students enrolled from 2020 onward.
The company has a total of 92 thousand students enrolled in 20/21 academic year, compared with the 50 thousand in 19/20, it was up by 46% yoy. Within it, Guangdong Polytechnic College Undergraduate program has a total of 29.3 thousand students enrolled (+22.8% yoy), Junior college program has a total of 6.3 thousand students enrolled (-7.4% yoy), On-campus adult college program has a total of 7.3 thousand students enrolled, (+52.8% yoy), Off-campus adult college program has a total of 30.6 thousand students enrolled (+105.6% yoy). On the other hand, Zhaoqing School Secondary vocational program has a total of 8.5 thousand of students enrolled (+11.3% yoy). In terms of Harbin College undergraduate program, it has roughly 10 thousand students enrolled. We believe the growth in number of student enrolled was mainly attributed by 1) the increase in enrollment quota of the schools of the Group for the 2020/2021 school year (including the expansion policy in “junior college graduate into undergraduate program”) 2) the increase in student registration rate of Guangdong Polytechnic College and Harbin College and 3) the expansion of the number of student enrollment contributed by Harbin College. Overall, the number of number of student enrollment in 20/21 is in line with our expectation, with just the number of students enrolled for Junior college program slightly below of what we previous expected.
The Harbin College is expected to be fully consolidated onto the company’s financial statement in early 2021
The “change in organizer” was approved by the Ministry of Education recently and it is expected that the company will begin to process the “change in organizer” before the year end. According to the management, the Harbin College is expected to be fully consolidated onto the company’s financial statement in early 2021. Nonetheless, it is slower than our previous expectation, we expected that the full consolidation will take place before the year end. We have adjusted our models according to this. We have taken out the 2020E revenue of the Harbin College from the company’s total revenue, and added the 2020E net profit of the Harbin College into other income of the company.

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