Edited by Dongxing Securities: "Policy catch up, STEAM Education New Blue Ocean"

Editor's note: STEAM is the combined name of Science, Technology, Engineering, Arts and Mathematics. At present, the main types of STEAM education courses are robot education, children's programming education and 3D printing education, among which robot education is the fastest developing.

1. Policy support, STEAM education ushered in the tuyere

STEAM education is an industry that relies heavily on policies. In 2015, STEAM was first introduced by the Ministry of Education in the Education Tenth five-year Plan. In recent years, the central government and local governments have issued a series of policies to support the development of STEAM education and ushered in a new wind.

STEAM education is relatively mature in European and American markets, and is in a leading position in countries such as Japan and South Korea in Asia. The government is one of the main promoters. China is currently in the stage of catching up. The leading enterprises in the American STEAM education market are: Lego Education and Sylvan Learning center.

2. Five factors promote the development of STEAM education industry.

Government input, consumer dividend, technical support, capital empowerment and enterprise investment promote the development of China's STEAM education industry.

• The compound annual growth rate of education informatization investment is 8.7%, and it is expected to exceed 320 billion yuan in 2020.

• Parents are younger and pay more attention to quality science education
  

• Technology is becoming more and more mature, and STEAM educational products are diversified.

  One of the characteristics that distinguishes STEAM education from traditional education is the application of high and new technology. With the continuous maturity of open source technology, 3D printing, AR technology, artificial intelligence and other technologies, STEAM education products show a diversified trend.

• Capital empowerment education, vigorously support the development of the industry

• The rapid layout of enterprises to actively expand the field of STEAM education

  New Oriental Education & Technology Group, the two leaders of the industry, will continue to make peace in the future. New Oriental Education & Technology Group strategically invested in Lok Wan and Le Bo respectively in 2015, and TAL Education Group invested in Shark Park, Deraa College, Fantasy Workshop and a large number of domestic and foreign quality education enterprises, laying out STEAM education.

3, the new blue ocean of education, the domestic STEAM industry is expected to reach hundreds of billions of yuan.

The STEAM education industry chain includes three links: equipment suppliers, course suppliers and users.

STEAM market is divided into B-end and C-side.

End B market (intra-school education market): there are 250000 schools across the country, assuming that each school is equipped with an average of one innovation laboratory with an investment of 500,000 yuan /
The overall size of the B-end market is expected to reach 120 billion yuan, with a compound growth rate of 102.24% in the next three years.

The C-end market is mainly off-campus education, market-oriented. Assuming that the penetration rate in 2018 is 0.5%, the market size is expected to be 7.7 billion yuan. With the upgrading of consumption and the middle class's attention to the quality of education, the penetration rate is expected to further increase in the future.

4. Investment logic: B end emphasizes channel, C end emphasizes brand.

• B side pays attention to channels and resources, and enterprises with government and university resources will win.

  The existing education system determines the development of domestic STEAM education. First of all, it is necessary to start with public schools. With the increase of popular schools, public schools

The school market will still have a compound growth rate of more than 100% in the next three years, and institutions with early layout and many channels will have more advantages. In addition, the talent team and financial strength are also important factors in the development of B-end institutions.

• C side pays more attention to brand and word-of-mouth, and companies with curriculum innovation ability have more advantages.

  Due to the low threshold of C-end and serious homogenization of products, the profit space of companies that simply provide standardized products is very low. Only institutions with strong innovation ability and strong technology research and development ability can launch differentiated products and occupy the market faster. In addition, enterprises with strong brand promotion ability can accumulate word-of-mouth, which is the core ability of C-end organizations to get customers.

• Summary

  In view of the trend that the B-end market and the C-end market are merging, we believe that in the short term, companies with unique products and good reputation will receive capital attention, similar to Xueyesi and New Oriental Education & Technology Group at that time; in the long run, there will be two most promising companies in the market, one kind of hardware and one kind of software. A good capital environment and competitive environment may create giants like Lego.

Risk hint

The competition in the industry is fierce and the policy is not up to expectations.

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