CICC released a research report stating that considering CHINA EAST EDU's (00667) enrollment recovery exceeded expectations, the firm raised its 2025/2026 revenue forecasts by 2.4%/6.4% to RMB 4.5 billion/RMB 5.0 billion. Given the company's cost and expense control results outperformed expectations, CICC increased its adjusted net profit attributable to shareholders forecasts by 16.8%/28.0% to RMB 756 million/RMB 974 million. The firm maintains its outperform industry rating and, considering the company's advantageous position in the vocational education market and better-than-expected enrollment recovery, raised the target price by 58% to HK$9.5 (based on 9.8x 2025e adjusted EV/EBITDA). The company currently trades at 7.5x 2025e adjusted EV/EBITDA, corresponding to 18% upside potential.

CICC's main viewpoints are as follows:

**H1 2025 Adjusted Net Profit Slightly Exceeds Market Expectations**

CHINA EAST EDU announced H1 2025 results: revenue of RMB 2.19 billion, up 10.2% year-over-year, in line with market expectations; adjusted net profit attributable to shareholders increased 49.5% year-over-year to RMB 416 million, slightly above market expectations, mainly benefiting from proper cost and expense control.

**New Enrollment Numbers Gradually Return to Normal Pace**

In H1 2025, the group's new enrollment increased 7.1% year-over-year, with average training sessions up 5.5% year-over-year, mainly driven by outstanding performance in 6-12 month premium short-term programs and 15-month high-value programs, contributing significantly to overall session growth. As of June 30, 2025, the number of schools increased by 1 compared to year-end. By segment: 1) Culinary arts segment revenue/new enrollment up 11.4%/5.2% year-over-year; 2) Pastry and western cuisine segment revenue/new enrollment up 14.3%/0.7% year-over-year; 3) Information technology and internet technology segment revenue/new enrollment -3.0%/+6.4% year-over-year; 4) Automotive services segment revenue/new enrollment up 9.6%/9.3% year-over-year; 5) Fashion and beauty segment revenue/new enrollment up 90.2%/34.1% year-over-year.

To capitalize on the rapid development opportunities in the beauty industry, the company plans to increase operating beauty schools to 13 by the end of 2026, achieving revenue growth of over 50% year-over-year. Looking ahead to 2026, management guided during the earnings call that company revenue is expected to achieve 10% year-over-year growth, with net profit growing over 20% year-over-year.

**Continuous Improvement in Profitability**

In H1 2025, the group's overall gross margin was 57.3%, up 4.3 percentage points year-over-year. By segment, all five major segments achieved year-over-year gross margin improvements, with culinary arts, pastry and western cuisine, information technology, automotive services, and fashion and beauty improving by 5.1ppt/6.5ppt/3.4ppt/0.6ppt/8.8ppt respectively compared to the same period last year, mainly benefiting from effective cost control. The adjusted net margin reached 19.0% for the period, up 5.0 percentage points year-over-year, mainly due to proper cost control and expense management.

**Continuous Optimization of Long-Term Program Structure, Accelerating Academic Advancement Construction**

The 15-month high-skill premium programs precisely meet students' needs for skill enhancement and rapid employment. Management indicated during the earnings call that new enrollment for such programs is expected to grow 50%+ year-over-year in 2026. Meanwhile, the company is accelerating the construction of academic advancement-oriented professional systems, deepening vocational education integration strategies. Additionally, the company is accelerating the upgrade of technician colleges, planning to gradually upgrade the current 27 technical schools to technician colleges over the next three to five years. Management indicated during the earnings call that new enrollment for programs of three years or longer is expected to maintain approximately 5% growth in 2026.

**Risk Warnings:** Intensified competition; enrollment numbers below expectations.