CICC has released a research report adjusting its forecasts for China Edu Group (00839). Based on more conservative assumptions regarding student enrollment growth and average tuition fees, the firm has revised down its FY2026 revenue estimate by 4% to RMB7.77 billion and adjusted EBITDA forecast by 1% to RMB4.19 billion. It also introduced FY2027 projections of RMB8.16 billion in revenue and RMB4.42 billion in adjusted EBITDA.

While maintaining an Outperform rating, CICC reduced the target price by 30% to HK$3.5 (implying 3.4x FY2026e adjusted EV/EBITDA), citing downward valuation trends. The stock currently trades at 2.8x FY2026e adjusted EV/EBITDA, representing 22% upside potential.

Key observations from CICC: - FY2025 revenue of RMB7.36 billion (+11.9% YoY) met expectations - Adjusted EBITDA of RMB4.17 billion (+10.5% YoY) exceeded expectations due to better-than-expected cost control - No dividend was declared for the fiscal year

Operational highlights: - Student enrollment growth moderated, with full-time students reaching 282,000 as of August 31, 2025 (+5% YoY) - As of October 2025, full-time student count grew merely 0.2% YoY for 2025/26 academic year, though higher education segment saw 2.8% growth - Gross margin declined 2.1pp to 53.3%, while adjusted EBITDA margin dipped 0.7pp to 56.6% - RMB1.706 billion goodwill impairment was recorded for three affiliated schools

Financial position: - Capital expenditure decreased 45.2% YoY to RMB2.66 billion - Interest-bearing debt ratio remained healthy at 26.0% (vs 26.4% prior year) - Management indicated uncertainty regarding future dividend policy

Risk factors include potential changes in higher education policies, underperformance in student recruitment/tuition fees, and further goodwill impairment risks.