Understanding the Market | Education stocks lead the gains, profitability options expected to restart, institutions say the profitability of higher education companies is promising

Education stocks are among the top gainers. As of the time of publication, China East Education rose 5.2% to HKD 6.88; China Edu Group increased by 4.39% to HKD 3.09; Yuhua Edu climbed 3.7% to HKD 0.56; and New Higher Edu Group gained 2.46% to HKD 1.25. Recently, the news that Hunan International Economics University, a subsidiary of Yuhua Edu, is transitioning to a for-profit model has attracted significant attention in the education sector. Shenwan Hongyuan released a research report suggesting to pay attention to Hong Kong-listed higher education companies. The for-profit model is expected to restart, with increased certainty in the distribution of operating income for private colleges, and a recovery in expansion momentum is anticipated. At the same time, a slowdown in educational investment combined with peak capital expenditures is expected to enhance the profitability of higher education companies. Guoyuan International previously published a research report stating that for-profit schools benefit listed companies' dividends, and the distribution of profits alleviates debt. Although the registration for profit-making requires the completion of asset transfers such as land and real estate and the payment of back taxes, which increases short-term costs, it will achieve a long-term market revaluation of assets. Currently, only Yuhua has been approved among listed companies, which will help with sentiment and valuation recovery in the short term. If other listed companies advance in the future, it may lead to a long-term revaluation of the sector