China Education Group Earnings: Cut Fair Value by 8% on Higher Capital Expenditure Outlook

Narrow-moat China Education Group’s share price tumbled 18.5% on disappointing fiscal 2023 (ended August) results amid asset impairments, higher capital expenditures, and lower gross margin. We believe investors are probably worried about further write-downs of its schools. We think this is possible, as CEG stopped breaking down student enrollment by school three years ago. While total student enrollment growth remains robust, some schools may be not faring as well. CEG also merged higher and secondary vocational education into one segment and stopped breaking down revenue this year. The lowered transparency is disappointing.