Guosen Securities has published a research report indicating that China East Education (00667) demonstrates strong certainty in the continued recovery of student enrollment and profitability for its established programs. Concurrently, the company is steadily expanding its portfolio of emerging programs, which is expected to replicate its successful model and create new growth drivers. The firm forecasts the company's net profit attributable to shareholders for 2025-2027 to be RMB 790 million / RMB 1.10 billion / RMB 1.38 billion (previous forecasts were RMB 860 million / RMB 1.09 billion / RMB 1.34 billion; this adjustment is primarily based on the later 2026 Spring Festival causing spring enrollment activities for 2026 to be brought forward into 2025), representing growth rates of 53%/39%/26%. After comprehensive consideration, the firm assigns a reasonable valuation range of HKD 6.89 - 7.95 per share and maintains an "Outperform" rating. The main viewpoints of Guosen Securities are as follows:

With nearly four decades of deep involvement in vocational education, China East Education has built a multi-brand skills training network. It is a leading vocational skills education group in China, operating well-known brands such as New East Cooking, Xinhua Computer, and Wantong Auto Repair. The company was listed on the Hong Kong Stock Exchange in 2019. Its coverage includes four established program areas: culinary arts, Western pastries and cuisine, information and internet technology, and automotive services. It is also actively developing emerging programs in beauty, pet care, and wellness.

The skills training industry is in a golden period of expansion within the trillion-yuan vocational education sector, driven by continuous policy support and industrial demand. The industry is projected to maintain a compound annual growth rate of 17% from 2025 to 2029, with the market size expected to exceed RMB 2 trillion by 2029. The secondary vocational education track underwent several years of adjustment, with its share of high school enrollment declining from 51% in 2010 to 34% in 2024. However, considering the persistent industrial demand for mid-level skilled personnel and the potential return of some students less suited for general high schools, the ratio between general and vocational high school enrollment is expected to find a new equilibrium.

For its established programs, the company's profitability recovered swiftly post-pandemic, with revenue growth acceleration subsequently creating further room for profit expansion. Since 2024, the company has actively restructured by closing or consolidating inefficient campuses, promoting the construction of vocational education industrial parks in five provinces, and upgrading its curriculum. These efforts led to an adjusted net profit margin of 19.0% in H1 2025, an increase of 5.0 percentage points. It is anticipated that as more vocational education parks become operational and the proportion of 15-month courses increases, the profit margin could approach the 2016 high of 24%. Furthermore, benefiting from enrollment recovery in mature programs, the number of new trainees group-wide increased by 7% year-on-year in H1 2025. Given a trend of some students returning to vocational education, the firm analyzes that new student intake could maintain a growth rate of 7-8% in 2026-2027.

Regarding emerging programs, the company is cultivating a pipeline of potential high-growth areas in service consumption, such as beauty aesthetics, pet care, and wellness. In the beauty sector, data from iiMedia Research suggests China's lifestyle beauty market is projected to reach RMB 380 billion in 2025. Similar to the catering industry, entry-level positions in beauty are characterized by a young workforce, emphasis on practical skills, and strong technical requirements. Coupled with accelerating consolidation in downstream formats—for instance, the chain hair salon UJIAN expanded to over 1,590 outlets by 2024—this sector presents an opportunity to replicate the success seen in culinary training. The company's beauty brand averaged 6,000 trainee人次 in H1 2025, exceeding the total for the full year 2024. With ongoing campus expansion and increased enrollment, revenue from the beauty sector is expected to grow to approximately RMB 700 million by 2027. Additionally, the downstream sectors for both pet care and wellness programs are high-growth areas with long-term potential; the pet care program has already begun pilot enrollment. These programs related to the "self-pleasure" economy and silver economy are poised to become new growth engines.

Risk factors include share sales by major shareholders, policy changes, enrollment falling short of expectations, and teacher attrition.