China New Higher Education Earnings: Higher Revenue Growth Offset by Slowdown in Noncore Income

We maintain our fair value estimate at HKD 5.30 following China New Higher Education's, or CNHE's, largely in-line first-half fiscal 2024 results. Our profit forecast is little changed, as our 4%-7% increase in fiscal 2024-28 revenue projections, to reflect higher revenue per student, is offset by lower other income from noncore businesses such as vocational training and property leasing. The shares are trading at 4.3 times 2024 price/earnings and a 12% dividend yield due to uncertainty surrounding for-profit classification. While the process has stalled for more than a year, our base case remains that for-profit higher education will be allowed. We see significant upside with any positive development in the classification process.