Guosheng Securities has released a research report estimating that China East Education (00667) will record net profit attributable to shareholders of RMB 910 million, RMB 1.04 billion, and RMB 1.19 billion for 2026-2028, representing year-on-year growth of +20.0%, +15.0%, and +14.1% respectively, corresponding to PE ratios of 7.8x, 6.8x, and 5.9x. The brokerage initiated coverage with a "Buy" rating, noting that as a leading player in vocational skills training, the company's optimized enrollment structure is driving a stabilization and recovery in its fundamentals, with profitability continuing to repair.

Key Views from Guosheng Securities

Company Overview: Over Three Decades in Vocational Education, Performance Stabilizing and Recovering

The company was founded in 1988 in Hefei, Anhui Province, and operates seven major brands including New Oriental Cooking, Xinhua Computer, and Wantong Automobile. As of 26H1, the company operates a total of 233 institutions. Revenue growth is accelerating while profitability continues to recover: 2025 revenue reached RMB 4.62 billion, up 12.1% year-on-year, with net profit attributable to shareholders of RMB 760 million, up 47.5% year-on-year; 26H1 revenue was RMB 2.42 billion, up 10.6% year-on-year, with net profit attributable to shareholders of RMB 460 million, up 13.0% year-on-year. The company maintains low leverage and strong cash flow, with attractive dividends. Excluding contract liabilities, the asset-liability ratio stood at 27.7% and 26.5% for 2025 and 26H1 respectively, while operating cash flow to revenue (TTM) was 33.7% and 32.1% respectively. Valuing shareholder returns, the dividend payout ratio has consistently remained above 50%, with a commitment to a payout ratio of no less than 60% for 2025-2027.

Industry: Driven by Both Policy and Demand, with Broad Market Space

1) China's skills training market has expanded from approximately RMB 200 billion in 2020 to RMB 850 billion in 2024, and is expected to exceed RMB 2 trillion by 2029. On the policy front, vocational education has been elevated to a strategic initiative for building an education powerhouse and a talent powerhouse. Against the backdrop of expanded enrollment in general high schools, industry supply is accelerating its consolidation, and quality leaders are expected to capture greater market space. 2) On the demand side, the population aged 15-17 remains at a peak; structural mismatches in the job market are significant, with growing demand for blue-collar and life services positions.

Competitive Advantages: Multi-Brand Positioning in High-Growth Tracks, Enrollment Structure Optimization Reshaping Growth Momentum

1) Diversified business coverage with recovering enrollment and improved program structure. The company's brands cover high-growth tracks including culinary, IT, auto repair, and beauty, while also expanding into new service consumption areas such as pet care and health and wellness. New training enrollments reached 151,000 and 89,000 for 2025 and 26H1 respectively, up 5.5% and 6.8% year-on-year, with new students enrolled in 1-2 year programs growing 66.2% and 48.6% year-on-year, reflecting continuous optimization of the program structure. 2) Culinary business stabilizing the base while beauty accelerates, with a second growth curve taking shape. The culinary business generated revenue of RMB 2.14 billion in 2025, up 11.6% year-on-year, with a gross margin of 59.0%, a new high since 2020; the fashion and beauty segment recorded revenue of RMB 180 million and RMB 120 million for 2025 and 26H1 respectively, up 71.7% and 50.7% year-on-year, with gross margins of 63.0% and 64.0%, the highest among all segments. 3) Strong teaching capabilities and deep industry-education integration resources. The company is among the first batch of third-party evaluation institutions for vocational skill level certification nationwide, with deep school-enterprise partnerships with leading companies such as BYD and Midea. In 26H1, employment rates across all brands reached above 92%, and the reputation for high employment rates supports annual tuition increases. 4) Vocational education industrial park strategy helps reduce costs and improve efficiency. Since 2023, the company has shut down, merged, or converted inefficient campuses and advanced the construction of vocational education industrial parks. Phase one industrial parks in Sichuan, Shandong, Guizhou, Henan, and Jiangsu have been successively put into operation, with resource reuse and improved per-capita efficiency driving continued profitability recovery, while actively exploring international cooperation and overseas expansion in vocational education.

Risk Factors

Risks include enrollment falling short of expectations, intensifying industry competition, changes in education policy, new business growth falling short of expectations, and changes in downstream industry conditions.