China Education Group Continues to Strive for Better as a Market Leader

China Education Group, one of the ultra-large-scale private higher education providers in China is currently trading below our fair value estimate of HKD 14.92 with an attractive valuation. Our fair value estimate implies a 27.6 times 2021E price/earnings multiple. We expect China Education Group’s 2020 net profit to grow at 39.5%, mostly driven by new school consolidations, student enrollment, ASP, and also blended mixed between programs offered by the school. We expect its five-year net profit CAGR to grow at 20.2%. While CEG continues to expand on its schools both organically and through M&A, we expect its operational efficiency in both existing and newly established schools should also improve.