EPS of $0.06 decreased by 57.4% from previous year
Gross margin of 48.1%
Net income of 21.88M
"N/A" -
Shanghai Gench Education Group Limited (1525.HK) QQ3 2024 Results — Revenue Flat YoY with Margin Resilience Amid Enrollment Headwinds and Strong Free Cash Flow
Executive Summary
Shanghai Gench Education Group Limited reported QQ3 2024 revenue of CNY 217.21 million, down marginally year-over-year by 0.3% but down meaningfully on a quarterly basis by approximately 18.9% to the prior quarter. The quarterly gross margin was resilient at 48.1% (gross profit of CNY 104.53 million), with operating income of CNY 23.81 million and net income of CNY 21.88 million, translating to a net margin of ~10.1% and an EPS of CNY 0.0554. EBITDA stood at CNY 49.27 million, implying an EBITDA margin of roughly 22.7%.
A standout feature of the quarter was robust operating cash flow of CNY 275.61 million and free cash flow of CNY 239.72 million, driven by strong operating activity and one-off non-cash items totaling ~CNY 255.60 million that augmented reported cash flow. Capex was modest at around CNY 35.89 million, supporting a cash-generative profile despite a subdued top line. The balance sheet shows total assets of about CNY 3.98 billion, with cash and short-term investments of ~CNY 803.57 million against total debt of ~CNY 832.56 million, implying a net-debt position that warrants reconciliation against the reported figure (approx. ~CNY 29 million using a standard cash-minus-debt approach, versus the stated net debt of ~CNY 502.16 million in the data). Equity stood at ~CNY 2.317 billion.
Looking ahead, management commentary for QQ3 2024 was not included in the provided dataset, so explicit forward-looking guidance and quotes are unavailable. Investors should monitor enrollment dynamics, regulatory developments in China’s private education sector, and capacity expansion opportunities. The company has demonstrated substantial FCF generation and a strong liquidity runway, which provides optionality for deleveraging, strategic investments, or balance-sheet strengthening should operating conditions improve.
Operating Income: CNY 23.81 million; Operating Margin: 10.96% (YoY change not provided; QoQ change -80.09% in absolute terms from the prior quarter data).
Net Income: CNY 21.88 million; Net Margin: 10.07% (YoY -56.20%; QoQ -75.67%).
EBITDA: CNY 49.27 million; EBITDARatio: 22.68%.
Financial Highlights
Revenue and profitability:
- Revenue: CNY 217.21 million (Q3 2024). YoY change: -0.28%; QoQ change: -18.87%.
- Gross Profit: CNY 104.53 million; Gross Margin: 48.12% (YoY -11.32%; QoQ -36.81%).
- Operating Income: CNY 23.81 million; Operating Margin: 10.96% (YoY change not provided; QoQ change -80.09% in absolute terms from the prior quarter data).
- Net Income: CNY 21.88 million; Net Margin: 10.07% (YoY -56.20%; QoQ -75.67%).
- EBITDA: CNY 49.27 million; EBITDARatio: 22.68%.
- EPS: CNY 0.0554; Diluted EPS: CNY 0.0554.
- Weighted average shares: 395.23 million (approx.).
Cash flow and liquidity:
- Net cash provided by operating activities: CNY 275.61 million.
- Capital expenditures: CNY -35.89 million.
- Free cash flow: CNY 239.72 million.
- Dividends paid: CNY -18.07 million.
- Key asset/liability snapshot: Cash and cash equivalents 330.40 million; Short-term investments 473.17 million; Total cash and short-term investments 803.57 million; Total debt 832.56 million; Net debt (standard calculation) ~CNY 28.99 million (1) vs the reported net debt figure of CNY 502.16 million in the dataset; note potential data inconsistency requiring clarification.
- Liquidity and leverage: Current ratio 0.848x; Cash ratio 0.337x; Debt to capitalisation 0.264x; Debt to equity 0.359x; Cash to debt dynamics indicate a modest debt burden relative to cash buffers, but the current ratio below 1x implies near-term liquidity sensitivity.
Valuation and capitalization:
- Price-to-Book: ~0.454x; Price-to-Sales: ~4.84x; Price-to-Earnings: ~12.02x; Enterprise value multiple: ~31.54x. Enterprise value metrics imply a premium vs. book value but modest earnings multiples given earnings volatility and sector risk.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
217.21M
-0.28%
-18.87%
Gross Profit
104.53M
-11.32%
-36.81%
Operating Income
23.81M
-60.02%
-80.09%
Net Income
21.88M
-56.20%
-75.67%
EPS
0.06
-57.38%
-75.91%
Key Financial Ratios
currentRatio
0.85
grossProfitMargin
48.1%
operatingProfitMargin
11%
netProfitMargin
10.1%
returnOnAssets
0.55%
returnOnEquity
0.94%
debtEquityRatio
0.36
priceToBookRatio
0.45
priceEarningsRatio
12.02
Net Income vs. Revenue
Expense Breakdown
Management Commentary
No earnings call transcript or management commentary is provided in the current data set. Consequently, no themed highlights or quotes from management can be extracted. Investors should refer to the official HKEX filings and company press releases for management color on enrollment trends, program mix, and strategic priorities.
N/A
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N/A
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Forward Guidance
Forward guidance is not available from the provided materials. Given the revenue decline QoQ and the concentration risk in a single regional market (Shanghai) within China's education sector, the near-term path will hinge on:
- Enrollment dynamics and student demand across the programs offered;
- Regulatory developments affecting private education and tuition pricing flexibility;
- Ability to scale online or blended programs and broaden regional footprint;
- Operational efficiency and cost control to sustain margins.
A baseline scenario would assume stabilized or modestly improving enrollment in the next two quarters with margin discipline maintaining EBITDA in the 20-25% range, subject to any non-cash items that may have supported the QQ3 cash flow. Investors should monitor guidance on enrollment targets, tuition rate changes, and any capital expenditure plans that could affect FCF generation.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
1525.HK Focus
48.12%
11.00%
0.94%
12.02%
1563.HK
1.00%
88.30%
2.59%
9.30%
1442.HK
16.80%
6.25%
0.23%
455.65%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
The QQ3 2024 results depict a mature, cash-generative education platform with a modest top-line decline and resilient margins. The company demonstrates meaningful free cash flow generation and a stable asset base, enabling optionality for deleveraging, strategic investments, or balance-sheet optimization. Key near-term catalysts include stabilization or growth in enrollment, effective cost management, and clarity on regulatory trajectory impacting private education. Valuation metrics imply a modestly priced equity relative to earnings (P/E around 12x) but sector uncertainty and earnings volatility warrant a cautious stance. If enrollment resilience and program diversification materialize, the stock could re-rate on improved visibility into profitability and cash generation. If regulatory headwinds intensify or enrollment weakens further, downside risk remains, particularly given the sub-1x current ratio and exposure to Shanghai’s local market conditions.
Key Investment Factors
Growth Potential
Targeted expansion of programs and geographic footprint in China, potential online/blended offerings to broaden addressable market, and opportunities to improve operating leverage as fixed costs are spread over a larger student base. Strong FCF generation provides optionality for deleveraging or strategic investments.
Profitability Risk
Regulatory risk in China’s private education sector, cyclical enrollment demand tied to economic conditions, competition from other private and public institutions, and near-term liquidity pressures indicated by a sub-1x current ratio. Data inconsistencies on net debt warrant reconciliation. Revenue concentration in Shanghai may expose the company to local market headwinds.
Financial Position
Solid liquidity with ~CNY 803.6 million in cash and near-term investments against ~CNY 832.6 million of debt; net debt appears modest under standard accounting (~CNY 29 million) though one data source shows a higher figure, requiring verification. Positive operating cash flow and substantial free cash flow support balance-sheet resilience and optionality.
SWOT Analysis
Strengths
Strategic Shanghai campus location with established private university operations.
Healthy gross margin around 48% supports ongoing profitability.
Strong operating cash flow generation and robust free cash flow generation for QQ3 2024.
Waste-free capital allocation with limited capex and meaningful cash returns (dividends paid in prior periods).
Substantial liquidity buffer from cash and short-term investments.
Weaknesses
QoQ revenue decline and a notable drop in net income; potential enrollment disruption or seasonality effects.
Current ratio below 1x, signaling near-term liquidity sensitivity.
Reliance on a single regional market (Shanghai) may heighten regulatory and market concentration risk.
Discrepancies in cash/debt reporting (net debt figure inconsistency) requiring data reconciliation.
Opportunities
Program diversification and regional expansion to de-risk geography concentration.
Digital/online education initiatives to broaden the addressable student base and improve accessibility.
Cost optimization and scaling effects to enhance operating leverage as enrollment stabilizes.
Possible partnerships or collaborations to broaden program offerings and attract new students.
Threats
Regulatory risk surrounding private education sector in China, including subsidies, pricing, and accreditation regimes.
Macro headwinds affecting student enrollment and discretionary education spending.
Competitive landscape with other private and public higher education providers.