China East Education's Profit Squeezed By Low Tuition Gains

By Teri Yu 

Vocational educator China East Education Holdings Ltd. (0667.HK) last year enrolled legions of Chinese looking to boost their skills in a slowing domestic economy, even as that same economic slowdown pressured its own tuition income.  

The company’s 2023 annual results filed last week show its new student enrollments grew 13.8% last year to over 152,000. But its tuition revenue rose just 4.2% to 3.98 billion yuan ($551 million), as its average tuition per student grew just 1.3%. Still, the growth marked an improvement from the 6.5% decline in its average tuition fee per student in 2022.

Headquartered in Hefei, China East Education operates a network of 245 schools across China and Hong Kong covering vocational training in culinary arts, data and information technology, fashion and beauty, and auto repair. 

Its Chinese culinary education programs continued to be its biggest revenue contributor last year, accounting for over 46% of its total, though the segment’s revenue shrank slightly from a year earlier. 

The company’s gross margin fell to 48.0% last year from 49.5% a year earlier, as it cited higher costs for teaching salaries and benefits. Its net profit declined 25.8% from 368 million yuan in 2022 to 273 million yuan last year, also reflecting higher expenses and margin contraction across its different types of vocational programs. 

Vocational training has traditionally been perceived as inferior to university education in China, leading many to pursue the latter when the economy was booming. But the government has been trying to change that perception as the nation suffers from an imbalance with too many college graduates who have relatively little skills. At the same time, there are not enough skilled workers in areas like auto repair and computer maintenance.

Last July, China’s Ministry of Education issued a statement announcing a nationwide revamp of its occupational training system to help supply more skilled engineers and blue-collar workers to fill a need in its manufacturing and technology sectors. 

China East Education said it will further increase the proportion of students studying in three-year long-term courses by establishing vocational education industrial parks with better teaching and training facilities. 

Its plans to expand and diversify its course offerings may lower its reliance on culinary arts by providing more high-tech related training programs to meet growing demand from China’s advanced manufacturing and hi-tech sectors. As China’s youth unemployment rate continues to rise, companies like China East Education are expected to benefit by attracting people looking to improve their skill sets to make themselves more employable. 

China East Education’s stock fell slightly last Thursday after the results came out, but then bounced back and were up nearly 3% late on Tuesday, the first day of trade after Hong Kong’s long Easter holiday. 

This article is from an unpaid external contributor. It does not represent Benzinga's reporting and has not been edited for content or accuracy.