Intrinsic Value XJ International Holdings Co. Ltd. (1765.HK)

• Previous Close: HK$0.19
• Intrinsic Value: HK$0.67
• Upside potential: +262%

Stock Valuation Context

Business Model And Market Position

Hope Education Group is a prominent private higher education provider in China and Malaysia, operating a network of 22 schools as of its latest disclosure. Its core revenue model is tuition-driven, generated from its portfolio of nine colleges and universities, eleven junior colleges, and two technician colleges. The company serves the growing demand for vocational and technical education, a sector prioritized by Chinese policy to develop a skilled workforce. Its service offerings are comprehensive, extending beyond standard degree programs to include technician training, self-study examination support, adult education, and ancillary services like textbook and bedding sales. This integrated approach creates multiple revenue streams while deepening student engagement. Operating in the Consumer Defensive sector, the company benefits from the essential nature of education services. Its market position is strengthened by its scale and the strategic geographic concentration of its campuses, allowing it to capture student demand in key regions.

Revenue Profitability And Efficiency

The group reported robust revenue of HKD 3.73 billion, demonstrating strong top-line performance from its educational services. Profitability is solid, with net income reaching HKD 609.6 million, indicating effective cost management relative to its operational scale. The company also exhibits high cash conversion, generating HKD 1.49 billion in operating cash flow, which significantly exceeds its net income.

Earnings Power And Capital Efficiency

Diluted earnings per share stood at HKD 0.0454, reflecting the company's earnings power distributed across a large share base. Capital expenditure was substantial at HKD 1.15 billion, indicative of ongoing investments in campus infrastructure and expansion to support future enrollment growth and service enhancement.

Balance Sheet And Financial Health

The balance sheet shows a strong liquidity position with HKD 2.65 billion in cash and equivalents. However, this is offset by a significant total debt burden of HKD 5.56 billion, suggesting a leveraged capital structure often used to finance rapid expansion in the capital-intensive education sector.

Growth Trends And Dividend Policy

The company's growth is fueled by expansion of its school network and student enrollment. It has not adopted a dividend policy, as evidenced by a dividend per share of zero, choosing instead to reinvest all cash flows back into the business to fund its growth initiatives and strategic acquisitions.

Valuation And Market Expectations

With a market capitalization of approximately HKD 1.81 billion, the market valuation appears to be a fraction of the company's annual revenue. A beta of 1.27 indicates the stock has higher volatility than the broader market, reflecting investor perceptions of growth potential alongside regulatory and execution risks.

Strategic Advantages And Outlook

Key advantages include a scaled operational network and a focus on vocational education aligned with national economic goals. The outlook is tied to continued demand for skilled labor and the company's ability to successfully integrate new acquisitions while managing its substantial debt load in a dynamic regulatory environment.

Sources

Company Annual ReportHong Kong Stock Exchange Filings