Under the “double reduction” policy, how will the original intention of education be placed?

Editor's note: Never forget your original intention, you will always win, and so will your original intention. It is always difficult to hold on to it. The original intention of education is to teach and educate people; it is necessary not only to teach but also to educate people. Education and training institutions have turned education into standardized products one by one in pursuit of profit from capital, and have lost their original intention of educating people. Now that the double reduction policy has been introduced, the education industry is expected to usher in new changes.

On July 24, the long-rumored “double reduction” policy finally made substantial progress. The General Office of the CPC Central Committee and the General Office of the State Council issued “Opinions on Further Reducing the Work Burden and Out-of-School Training Burden of Students in Compulsory Education”. Although the market has already anticipated the introduction of this policy, the severity of the policy still exceeds the market's previous expectations.

Among them, the biggest impact on the capital market was the following three points:

1. No subject training institutions are allowed to go public for financing, and capitalized operations are strictly prohibited.

2. Listed companies shall not finance and invest in academic training institutions through the stock market, and shall not purchase the assets of academic training institutions by issuing shares or paying cash.

3. Foreign investors shall not hold or participate in academic training institutions through mergers and acquisitions, fiduciary management, franchise chains, or the use of variable interest entities. If the regulations have been violated, they must be cleaned up and rectified.

The above three points have completely blocked the listing and financing channels of subject training institutions, and it is no longer possible for subject training institutions to obtain capital from domestic and foreign capital. At the same time, those that are already listed must be rectified; if the business model of the listed company is rectified, new changes will inevitably occur.

1. Under “double reduction”, scorched earth is a piece of scorched earth

After the relevant policies were introduced, individual stocks related to K12 education and training in the Hong Kong stock market were scorched. Thinking Le Education fell by 42.29%, New Oriental-S and New Oriental Online both fell by more than 30%, and the entire K12 education and training sector fell by nearly half of its market value.

Currently, in addition to regulatory risks, K12 education and training institutions are also facing the problem of early losses that make it difficult to profit. Currently, many K12 education and training institutions are still losing money.

The net loss attributable to Good Future for FY2021 was US$116 million.

Zhangmen Education lost a total of 2,516 billion yuan in the two years from 2019 to 2020.

Gaotu released its 2021 quarterly report, with a net loss of 1,426 billion yuan, the highest loss in a single quarter.

New Oriental Online's net loss in 2020 reached 674 million yuan。

Looking at it this way,K12Education and training institutions are truly unbearable. They have entered into the double kill effect of Davis, where both performance and valuation have declined.In this horrible situation, market risk has increased rapidly, and brokerage firms have also begun to drastically lower their ratings and target prices:

Ping An Securities downgraded the rating of the entire K12 education and training industry, believing that the risk of the entire K12 education and training industry is huge. Attention and participation is not recommended for the time being. It downgraded the industry rating from “neutral” to “weaker than the market.”

CICC lowered the target price of New Oriental by 53% to $9.2, lowered its future target price by 67% to $29, and lowered the target price of New Oriental Online by 70% to HK$12.2.

J.P. Morgan is even more exaggerated. It will lower the target price of New Oriental from 19 US dollars to 3.5 US dollars; reduce the high distance rating from neutral to reduced holdings, and the target price from 37 US dollars to 3.5 US dollars; reduce the target price for the good future from 70 US dollars to 7.6 US dollars, and the rating from neutral to reduced holdings.

Such a drastic reduction in target prices is rare. According to the target prices of various brokerage firms, the market value of the entire K12 education and training sector will drop by more than 80%. , the entire industry will return to poverty overnight, or even disappear...

Faced with the current horrendous situation in the K12 education and training industry, we can't help but ask what is causing the country to become a killer of K12 training?

II. K12Training is an “plug-in” to the education industry

As we all know, the state has always promoted quality education. At the National Education Work Conference held in 1994, the state proposed: “Basic education must shift from 'exam-taking education' to the track of quality education, comprehensively implement the education policy, and improve the quality of education in an all-round way. Now that 27 years have passed since the introduction of quality education, the state has carried out various efforts and reforms in quality education. At the K12 stage, students' learning burden has been greatly reduced, and their overall quality has improved.

1. Promoting social anxiety

After the K12 education and training industry was founded, it completely disrupted the overall process of quality education. At the same time, anxious advertisements such as “Don't Let Your Kids Lose to the Starting Line” made parents blindly follow them, and eventually turned education into a competition for nurturing young people. In 2020, due to the pandemic, online education and training was booming. In major and medium-sized cities across the country, a dazzling array of education and training advertisements spread all over schools and communities, and advertising investment in the entire education and training industry reached a peak.

The advertising investment in the education and training industry has completely aroused the anxiety of the whole society. Some education and training institutions have even launched the marketing slogan “You come to raise your children, you don't come to raise your children, you don't come, I will raise your children's competitors”. This behavior has once again made education an investment product with rapid success and immediate profit. Standardized exam-taking education has become mainstream, seriously affecting the country's education order.

2. Promote exam-taking education and endanger educational fairness

In addition to the anxiety caused by the advertisement, K12The capitalization of education and training harms the fairness of education.Some education and training institutions and public school leaders have reached a tacit agreement, formed a benefit-sharing relationship, and used the authority of public schools to promote extracurricular education and increase the cost of education for parents.

At the same time, the profit-seeking nature of capital causes education and training institutions to continuously carry out exam-taking education, falsifying and blindly driving up fees, causing K12 education and training to deviate from the right track, eventually leading to bad money driving out good money, which in turn affects the fairness of education as a whole.It can be said that education and training outside of school is a “plug-in aid” for the campus education ecosystem, seriously affecting the quality education ecology in our country.

Driven by interests, a large number of education and training institutions have become listed companies, and capital continues to promote K12 exam education. According to statistics, after New Oriental, the first listed education company, went public in the US in 2006, education-related companies began to go public one after another. As of December 31, 2020, the cumulative number of domestic education companies listed overseas reached 63, with a total market value of nearly 1 trillion yuan.

3. What is real education?

On the issue of education, two thousand years ago, Confucius proposed the education policy of “have education, no categories, teaching according to ability”. Education is not a mass-produced standardized product; education is a social activity unique to humans, and teaching should be tailored according to the habits of different people. Richard Levin, who has been president of Yale University for 20 years, once said, “Real education does not impart any knowledge or skills, but makes people competent in any subject or career. This is real education.”

Therefore, real education inspires and ignites; it is not full. What is most needed to ignite and inspire education is patience over time and environmental inspiration, and this is exactly what capital lacks. At the beginning of its establishment, K12 Education and Training Company had a good positive value orientation. However, under the profit-seeking of capital, it was bound to lose its original intention, thus slowly deviating from its original path. As Pengpai.com said, “Ten years are a tree, a hundred years are building people.” When “slow” education, which has worked for a long time, is shrouded in “fast” capital that is short-sighted and utilitarian, it brings only anxiety that cannot be resolved and an insider “arms race” that cannot be escaped.

Under the double reduction policy, enterprises in the online education industry are being tested like never before. The entire industry will face a new reshuffle. We don't know where the K12 Education and Training Conference will go in the future. What we understand, however, is that a brand-new educational environment is gradually being created.

This content is the author's independent opinion and does not represent Kim Shih's financial position. The content of this article is for reference only and is not intended as any investment advice. The market is risky, so investment should be prudent.
$New Oriental (EDU.US)$ $TAL Education (TAL.US)$ $17 Education & Technology (YQ.US)$ $K12 Education (LIST1320.HK)$ $ZHANGMEN EDUCATION INC (ZMENY.US)$ $CHINA EAST EDU (00667.HK)$ $Xueda(Xiamen)Education Technology Group (000526.SZ)$ $Offcn Education Technology (002607.SZ)$ @富途研选 @富途

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