HK Stock Market Move | China Edu Group (00839) opened over 8% lower after issuing a profit warning, with expected annual net profit to decrease by about 420-590 million yuan year-on-year.

After the profit warning, CHINA EDU GROUP (00839) opened more than 8% lower. As of the time of writing, it has dropped 8.42% to 4.35 Hong Kong dollars, with a trading volume of 4.4544 million Hong Kong dollars. On the news front, CHINA EDU GROUP announced that the group is expected to achieve a net profit of approximately 420 million yuan to 590 million yuan for the fiscal year ending August 31, 2024, compared to a net profit of approximately 1.541 billion yuan for the fiscal year ending August 31, 2023 (2023 fiscal year). The expected decrease in net profit is mainly attributable to the impairment loss of goodwill and intangible assets related to certain Cash Generating Units (CGUs) in Sichuan and Shaanxi provinces of the People's Republic of China. This adjustment is based on the downward revision of expected cash flows of these CGUs to reflect the current market conditions locally. In addition, potential policy changes in Australia regarding international students have also affected the business prospects of one CGU in Australia, leading to a possible impairment of goodwill. Preliminary assessment shows that a one-time, non-cash impairment loss (net of deferred tax) of approximately 1.68 billion yuan to 1.75 billion yuan is required for the 2024 fiscal year. This impairment loss (net of deferred tax) does not exceed 5% of the group's total assets. As this impairment loss is non-cash in nature, it will not affect the group's operating profit or cash flow.