[Forecast] Education stocks surged against the market! Is the industry at an inflection point or imminent?

On May 18, the education sector bucked the trend and surged, showing outstanding performance. By the close, the overall sector had risen by more than 2%.$Offcn Education Technology (002607.SZ)$、$Guomai Technologies,Inc. (002093.SZ)$Rise and stop, ST open yuan (300089.SZ) increased by nearly 7%,$Xueda(Xiamen)Education Technology Group (000526.SZ)$, Qinshang Co., Ltd. (002638.SZ), the dark horse of entrepreneurship (300688.SZ), etc., followed suit one after another.

After-hours data showed that the main players in the sector had a net inflow of 65.61 million yuan throughout the day. Among them, China Public Education and Guomai Technology all received net inflows of over 10 million yuan.

On May 16, the official website of the Shenzhen Municipal Education Bureau announced the “Shenzhen Public Primary and Secondary School Group Implementation Plan” (hereinafter referred to as the “Implementation Plan”). It is clear that by 2025, Shenzhen will cultivate 80 high-quality public primary and secondary education groups, covering all newly built compulsory education schools in the city.

According to the industry, this “Implementation Plan” has clearly improved the efforts of group schools compared to the previous one, and is expected to effectively promote the balance of compulsory education in Shenzhen.

The education industry is “welcoming the spring breeze”

In this era of “century-old plans, education-based”, our country is vigorously promoting the balanced development of basic education, and educational fairness has become a value pursued at the basic education stage.

Currently, our country has 9 years of compulsory education, so that more students can receive education and grow better and more comprehensively. At the same time, in order to ensure the fairness of education, the country also made adjustments at one point to maximize the “sharing of quality resources.”

With “sharing quality resources” as the starting point, the trend of the group's school model has become more and more obvious in recent years, and has already been implemented in Beijing, Shanghai, Guangzhou, Shenzhen, Hangzhou, Wuhan, Nanjing, etc.

This time, Shenzhen once again released the “Shenzhen Public Primary and Secondary School Group Implementation Plan”. This is also a further implementation of the University District Consultation Draft document issued in August 2021, which means that Shenzhen has taken another important step in promoting the balanced development of compulsory education.

Among them, the “Implementation Plan” clearly regulates the practice of running schools in groups, and requires standardizing group site selection and naming. When selecting sites for schools directly under each city, priority shall be given to guaranteed housing and street university districts after approval by the competent education administration department. They cannot be tied to any residential area, and must not be linked to any real estate.

It can be seen that after breaking away from the speculation of the interests of developers, owners, etc., education will actually return to education itself, and the era of hyping up degrees from prestigious schools will be over.

At the same time, in order to speed up the pace of education groupings, the “Implementation Plan” also proposes the goal of selecting “80 high-quality office primary and secondary education groups” for the period from 2022 to 2025, which requires the education group to go from “full area coverage” to “all street coverage” to “coverage of all weak schools”, and finally to cover all newly built compulsory education schools in the city to achieve “famous schools” at the doorstep.

It is worth mentioning that previously, in order to accelerate the high-quality and balanced development of compulsory education and the integration of urban and rural areas, the Ministry of Finance issued an additional transfer fund of 212.5 billion yuan (excluding teachers' wages) related to compulsory education to guide and support local authorities in implementing a “double reduction” policy to improve the quality of education.

Under the strong spring breeze in the education industry, the secondary market began to pick up.

According to Flush data, there have been frequent changes in the education sector, which has been falling too much recently. The Concept Index began to rebound at a low point on April 28, and has now accumulated a 4.24% increase. Among individual stocks, over 80% of individual stocks showed impressive gains. Onli Education surged 19%, and Code Education, Guomai Technology, and CCP Education all rose more than 10%.

Individual stock performance is gradually picking up

Looking back on 2021, under the pressure of the “double reduction” policy, the entire education industry went through a major reshuffle, and education and training enterprises were hit harder than ever before. Phenomena such as “layoffs, thunderstorms, shutdowns, transformation, and crossing borders” gradually spread, and survival of the fittest became the only rule of survival.

According to Tonghuashun data, a total of 21 concept stocks on the A-share market are engaged in the education industry. In terms of performance, education stocks experienced a “major avalanche” in 2021. 12 education companies experienced losses of varying degrees, accounting for nearly 60%.

Among them, “the first share of the public examination”Chinese public educationDue to the impact of rising refund rates, performance fell into a vortex of losses. According to financial reports, China Public Education's revenue in 2021 was 6.912 billion yuan, a year-on-year decrease of 38.3%, but the net loss reached 2.37 billion yuan.

Moreover, the company's stock price was also sluggish. From the beginning of 2021 to February 2, China Public Education's stock price hit a high of 43 yuan per share. Since then, it has been falling all the way down, falling by more than 70% throughout 2021.

Qinshang Co., Ltd.The education and training business also had a major impact on the company's overall operation, and the goodwill assets formed as a result of the merger and acquisition of Longwen Education were drastically reduced by 0.443 billion yuan. During the reporting period, the company changed net profit to mother from profit to loss, with a net loss of 0.862 billion yuan.

However, with the implementation of the “double reduction policy,” the internal growth logic of K12 education and training and private K12 education was completely broken. After experiencing a dark time of shutting down the subject training business, the education industry, which has overcome the storm, seems to have ushered in the dawn of hope.

Looking at the performance of the first quarter of 2022, net profit loss companies have been reduced to 9 out of 21 education companies, and their share has dropped to 40%. Some companies, including Onli Education, University Education, Code & D Education, and Guoxin Culture, all showed signs of improving performance.

Specifically, those that specialize in education and trainingOnli EducationAfter the “double reduction policy” was introduced, the original K12 subject education and K12 quality education were abandoned, and the business strategy was adjusted to vocational education, college student education, youth education, international and basic education, etc.

As a result of this rectification, the company's profit returned to a positive value in the first quarter of 2022, reaching 0.073 billion yuan, an increase of 41.52% over the previous year.

In addition,Cod educationIt also divested K12 related businesses and completely switched to vocational education. In March 2022, the reform company signed a “Strategic Cooperation Agreement” with Aerospace Cloud Network Technology. The two sides plan to jointly develop and operate business modules such as “Talent Empowerment Center, Modern Industrial College, Professional Qualification Certification, and Digital Twin Online Training Platform” to continue exporting education, teaching and training services to the government, universities, and enterprises.

Of particular concern is that as an important complement to general education, the importance of vocational education is becoming more and more prominent.University educationandGuoxin cultureMake every effort in this direction to find new performance growth points.

Text: Rainbow adzuki beans

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