Huali reported 1H FY8/21 revenue of Rmb445m, up 13.1% yoy, and net profit of Rmb139.6m, up 1.1%yoy, below expectations, mainly because of weaker margins. For the 21/22 school year, Huali expects its new student intake quota to be over 5,000 for Huali College and 10,800 for Huali Vocational College. We expect the campus expansion to continue to put pressure on margins and expect a GM of 55%, 55.3% and 56% in FY8/21–23F, respectively. Reiterate Add with a new DCF-based TP of HK$2.90. Its forward P/E of 6.87x is lower than the sector average by >50%.