CHINA CHUNLAI (01969): Reduce leverage, increase cash, support "strategic investment" long-termism with financial prudence.

On November 28, CHINA CHUNLAI (01969) released its annual performance report for the year ending August 31, 2025. Looking at this fresh "report card", against the backdrop of macroeconomic challenges and structural adjustments in the education industry, CHINA CHUNLAI delivered a performance with steady growth in both revenue and profit, demonstrating strong internal growth momentum and excellent operational efficiency. During the period, the company achieved revenue of 1.791 billion yuan (RMB, the same below), an increase of 9.8% year-on-year; net profit was 836 million yuan, an increase of 7.4% year-on-year. The company's earnings per share for the 2025 fiscal year were 0.7 yuan, an increase of 0.05 yuan year-on-year, representing the most direct reflection of the company's value enhancement. In short, CHINA CHUNLAI's 2025 fiscal year financial report demonstrates how the company expanded its revenue scale while improving profit efficiency through refined management, ultimately transforming growth dividends into tangible shareholder value. Steady growth in revenue and profit Profit quality highlights moat protection During the reporting period, CHINA CHUNLAI's revenue growth rate was 9.8%. From the perspective of growth rate, this performance falls into the category of steady growth within the Hong Kong education sector. However, what truly showcases its core competitiveness is its astounding profit conversion efficiency. In the current fiscal year, CHINA CHUNLAI's net profit margin reached 46.7%. This indicator ranks at the forefront of the entire private higher education industry. Compared to many peer companies in the industry that rely on continuous capital expenditures for external growth through mergers and acquisitions, CHINA CHUNLAI demonstrates a strong internal profit-generating ability and cost control capability. This provides the company with substantial internal cash flow to support future development, hedge against potential risks, and provide a solid guarantee for shareholder returns. Behind the impressive overall revenue growth of CHINA CHUNLAI, the detailed breakdown of its revenue composition reveals the true essence of high-quality, sustainable growth. During the period, the company's tuition revenue increased from 1.486 billion yuan to 1.636 billion yuan, a year-on-year growth of 10.1%; accommodation fee revenue increased from 145 million yuan to 154 million yuan, a year-on-year growth of 6.3%. Tuition revenue accounted for 91.4% of total revenue. This structure highlights the pureness and stability of CHINA CHUNLAI's profit model - its growth fundamentally depends on the market competitiveness and rigid demand of education services. The synchronous growth in accommodation fee revenue further confirms the solid expansion of the student base, with significant business synergies. In-depth analysis of the 10.1% tuition growth reveals the dual engines of "student scale" and "per capita tuition". On one hand, the scale barrier continues to strengthen. During the reporting period, the company's number of students reached nearly 110,000, a year-on-year growth of 6.4%. This volume places the company among the top tier of private higher education groups in China. The vast student base provides a solid foundation for the business, not only offering stable and predictable cash flow but also creating strong economies of scale in procurement, management, and faculty allocation, directly contributing to its high profit margin. This allows the company to have stronger risk resilience when facing policy or market fluctuations. On the other hand, through calculation, CHINA CHUNLAI's per capita tuition for the current fiscal year is approximately 16,000 yuan/year, achieving a natural growth of about 3.7%. Compared with the industry, this showcases its strategic cleverness. Its advantages in cost-effectiveness are significant. Compared to some private colleges located in high-end positions in core first-tier cities (such as Beijing, Shanghai) with per capita tuition often exceeding 30,000 yuan/year, CHINA CHUNLAI's tuition level is more inclusive. This gives it a stronger penetration and a broader student base in the vast central regions and second and third-tier cities, avoiding head-on competition in narrow high-end markets. Its pricing potential is enormous. The current per capita tuition of 16,000 yuan/year is far from reaching its ceiling. With the continuous improvement of its teaching quality, brand reputation, and employment outcomes, as well as future strategic deployment in regions with economic advantages, there is a clear and sustainable room for increasing per capita tuition. This steady pricing ability based on cost-effectiveness is an important guarantee for future income growth. While achieving "increasing quantity and price", CHINA CHUNLAI demonstrates excellent operational capabilities in its financial report. Despite the continuous expansion of student scale, the growth rates of administrative expenses and marketing expenses are effectively controlled. This indicates that the company's economies of scale and operational leverage are continuously and actively being leveraged. Expanding scale without significantly increasing marginal costs is the core for optimizing profit margin on the basis of revenue growth. This refined operational management capability is the inherent driving force for maintaining and consolidating its high net profit margin. Strategic investments drive high-quality growth Optimized financial structure highlights long-term value It is evident that CHINA CHUNLAI's latest financial report demonstrates a clear high-quality development strategy. The company, driven by "internal growth and strategic investments", actively optimizes its financial structure while expanding its business scale, showcasing outstanding long-term value creation capabilities. In addition to strong internal revenue growth and the foundation laid by the "increasing quantity and price" strategy, the company strategically invests to solidify long-term competitive advantages. In the current fiscal year, the year-on-year increase in revenue costs reached 21.3%, significantly higher than the 9.8% revenue growth rate, leading to a temporary narrowing of gross profit margin. This is not a decline in operational efficiency but a precise strategic decision. Among them, the significantly higher than revenue growth rate in compensation investment is particularly crucial. In the education industry, faculty is a core asset. The significant increase in compensation levels aims to: Firstly, build a talent barrier: By providing industry-leading compensation, attracting and retaining top teaching and management talents, it directly enhances education quality and academic reputation. Secondly, support business expansion: Preemptively strengthen human resource allocation to match student scale growth and new campus operations. Thirdly, enhance organizational efficiency: An optimized incentive system helps stimulate employee initiative and enhance overall operational efficiency. While these investments may pressure profit margins in the short term, they represent strategic investments in the company's core capabilities (educational capabilities) and intangible assets (brand value). Their returns will be reflected in the future with stronger student appeal, better employment reputation, and sustainable pricing capabilities. Although profit margins are under short-term pressure, the company's financial condition remains healthy, highlighted by: Firstly, strong operating cash flow. While maintaining a large-scale strategic investment, cash and cash equivalents increased against the trend, from 791 million yuan to 832 million yuan. This indicates that the company's main business has strong "hematopoietic" capabilities, completely covering strategic expenses and operational capital needs. Secondly, the continuous optimization of the capital structure. The capital-to-liabilities ratio significantly decreased from 57.9% to 42.5%, achieving a healthy financial structure of "increasing equity and decreasing debt". This is partly due to the accumulation of profits leading to increased equity and active debt management. The decrease in the debt ratio led to a substantial 34.2% decrease in financing costs year-on-year to 63 million yuan, not only directly reducing interest expenses and increasing profits but also enhancing financial stability, providing stronger resilience against interest rate fluctuations. Thirdly, a significant improvement in liquidity. Net current assets changed from -844 million yuan to a positive 164 million yuan, mainly benefiting from healthy growth in accounts receivable and accumulation of cash reserves, while current liabilities were slightly reduced. This reflects the enhancement of the company's working capital management efficiency, reducing reliance on short-term debt. CHINA CHUNLAI's current "strategic growth" model - exchanging short-term profits for market share, talent barriers, and brand value - is rational and sustainable on the basis of abundant cash flow and decreasing debt. The company demonstrates an upgrade from "expansion in scale" to "quality and value-driven" development model. Ample cash reserves provide the company with flexibility to cope with market changes and seize strategic opportunities, while an optimized capital structure sets a solid foundation for its long-term sustainable development. In summary, CHINA CHUNLAI's financial report showcases the strategic capabilities of an education company entering a high-quality development stage. By strengthening long-term competitive advantages through "strategic investments" and maintaining exceptional profitability through "ultimate operations", while building financial moats with "abundant cash flow" and "optimized capital structure", the company has established a virtuous cycle of offense and defense. With the successful start of operations at the Tianping College Nanjing campus in September this year, under the dual-track strategy of deepening core territories and exploring high-quality markets, the company has successfully broken through the market's inherent ceiling on its growth. Looking ahead, with forward-looking investments in faculty, technology (strategic deployment of DeepSeek R1 model), and regional expansion entering a harvest period, CHINA CHUNLAI is poised to further expand its leading advantage in the differentiation and integration of the private higher education industry. Its clear growth path and robust financial foundation outline a value blueprint that combines certainty, profitability, and growth potential for investors.