Several education stocks posted collective gains. As of press time, CHINA EDU GROUP (00839) rose 3.43% to HK$3.62; GENCH EDU (01525) gained 1.91% to HK$3.2; CHINA EAST EDU (00667) climbed 1.89% to HK$7.53; and XJ INTL HLDGS (01765) increased 0.92% to HK$0.22.

On the news front, Hunan International Economics University, under Yuhua Education, received approval for its for-profit conversion application. Cinda Securities noted that the previous peak period for such conversion approvals was in October 2022, when private universities in Heilongjiang completed their conversion processes. Harbin Huade University under China New Higher Education Group and Harbin Petroleum Institute under China Technology Education successfully converted to for-profit private schools.

The approval of Hunan International Economics University's conversion may serve as a reference model for other provinces, potentially accelerating the progress of private higher education conversions nationwide. The firm indicated that the higher education sector is poised for valuation recovery.

The stagnation of conversion approvals has been one of the factors suppressing valuations in the private higher education sector. While the approval for Hunan International Economics University represents a phased progress in for-profit conversions, it marks a bright spot after three years of stagnation. Against the backdrop of generally low PE ratios of 3-6x, the private higher education sector is expected to experience significant valuation recovery.

The firm recommends focusing on investment opportunities arising from valuation recovery in the private higher education sector, particularly CHINA EDU GROUP.