Bright Scholar Education Reports Healthy Growth

Despite healthy top- and bottom-line growth, Bright Scholar disappointed slightly and its stock fell 3.7 percent on Wednesday.

Author: Lucas Hahn   

Bright Scholar Education Holdings Ltd. (NYSE: BEDU), the largest operator of international and bilingual K-12 schools in China, reported healthy top- and bottom-line growth for its first fiscal quarter today, though earnings barely missed most analyst expectations.

The Foshan-based company announced net income rose 42 percent year-over-year to 119.1 million yuan ($18.7 million), or 1.02 yuan per share (16 cents), in the three months ended Nov. 30. Revenue increased 23 percent to 465.2 million yuan ($73 million).  

"We are pleased to report our first fiscal quarter for 2018 fiscal year with robust, academic, financial and operating results," said Bright Scholar CEO Jerry He."We are delighted that student enrollment has gone up 17% year–on-year with approximately 34,163 students enrolled at our schools as of November 30, 2017."

The company, which operates 60 international schools, bilingual schools, and kindergartens in seven Chinese provinces, also offers related services such as summer camps, test prep, and college counseling.

According to a recent Frost & Sullivan report, Bright Scholar is the Number One operator of bilingual and international schools in China in terms of student enrollment.

Although Bright Scholar posted strong growth in the period, it fell short on earnings, missing by just one cent. Analysts had expected earnings of 17 cents per share. The company's stock closed at $20.05 on Wednesday, down 3.7 percent. 


Bright Future for Bright Scholar?

Looking ahead, management expects revenue of between 1.63 billion yuan and 1.66 billion yuan for the 2018 fiscal year.

Analyst price targets for Bright Scholar stock range from $21.80 to $32 per share, with an average target of $24.95, representing an increase of 24.4 percent above Wednesday's closing price.

China Renaissance analyst Nicky Ge reiterated his "buy" rating on the stock, with a price target of $23 per share. Ge is slightly more cautious than the average analyst, though, writing, "Despite our belief that M&A remains BEDU's major revenue and profit accretion for the company, we are conservative due to the timeline uncertainty."

Ge noted that "valuation may be diluted with new M&A accretion," and listed risks to the stock, including weaker demand for private education and potential changes in Chinese laws and regulations.

Bright Scholar went public on the New York Stock Exchange in May 2017 at $10.50 a share. The stock is 28.9 percent off its 52-week high of $28.18, which it reached in October.