Product: research Institute of Sina Finance listed Company
Author: new consumption Proposition / cici
On July 24, 2021, the General Office of the CPC Central Committee and the General Office of the State Council issued a document entitled "opinions on further reducing the burden of students' homework and out-of-school training in compulsory Education". The content of the document has an unprecedented degree of supervision over the subject training industry and has a great impact on all training institutions in the industry.
In 2021, the annual reports of the education and training industry have revealed that each education company has handed over the first answer paper after double reduction, and the performance of the subdivided industry is even more happy and sad according to the different areas of their expertise. Among all the listed companies, the K12/K9 business accounts for a relatively high proportion of revenue, the secondary market performance and profitability are significantly weaker, and actively seek transformation in the second half of 2021.
Companies with a high percentage of K9/K12 suffer the most.
Before the policy was issued in 2021, a considerable number of listed companies in the education and training industry accounted for 80 per cent or more of their K12 business, such as New Oriental Education & Technology Group, TAL Education Group, Gaotu Techedu Inc. and other education industry leaders. In 2020, the proportion of K12/K9 revenue was more than 85 per cent, 92.06 per cent, 100 per cent and 87.55 per cent respectively.
The core content provisions of the double reduction policy, such as "adhere to strict examination and approval institutions, all localities will no longer approve new out-of-school discipline training institutions for students in the stage of compulsory education, and existing discipline training institutions are uniformly registered as non-profit organizations. All discipline training institutions shall not be listed for financing, and capitalization operation is strictly prohibited; listed companies shall not invest in discipline training institutions through stock market financing, and may not purchase the assets of discipline training institutions by issuing shares or paying cash. Foreign investors shall not control or participate in discipline training institutions by means of mergers and acquisitions, entrusted operation, joining chains, or using variable interest entities. If they have violated the rules, they shall carry out clean-up and rectification, which will deal a serious blow to discipline training institutions.
K12 training institutions (both offline and online) have no possibility of capitalization, and listed institutions need to divest related assets or transform other businesses. As a result, listed companies have announced the divestiture of K12 discipline-related business, and almost all of them can see such a keyword "stripped K12 business" in the annual report of the education and training industry.
After the landing of the policy, the education and training industry and individual stocks have been hit hard, with stock prices plummeting, profits retreating sharply, from profit to loss, and financing recession has become the key words.
(source: research Institute of Sina Finance listed companies)
Key word one: stock price plummets
During the period from July 23 to December 31, 2021, the share prices of most listed companies in the education and training industry halved, and the share prices of industry leaders New Oriental Education & Technology Group, TAL Education Group and Gaotu Techedu Inc. fell 67.19%, 80.85% and 79.75%, respectively. OneSmart International Education Group Ltd and LAIX Inc., which are listed in the United States, received delisting warnings in August and September 2021 respectively because their share prices fell to $1 per share.
Key word 2: a sharp reversal of profits
After the report in 2021 was disclosed one after another, the net profit of most education and training companies withdrew sharply. New Oriental Education & Technology Group's operating income and net profit dropped by 48.45% and 239.1% respectively. TAL Education Group's revenue and net profit decreased by 2.33% and 879.49% respectively. Gaotu Techedu Inc. 's educational operating income decreased by 7.9% and net profit decreased by 122.8%.
Of course, there are also enterprises with double increase in revenue and net profit, such as LAIX Inc., Doushen Education, Education together, etc., but when we take a closer look at their operations over the years, we will find that these enterprises were loss-making enterprises before the double reduction policy was announced. and the divestiture of K12 discipline business has reduced the loss of enterprises to a certain extent.
Key word 3: capital ebb
In 2021, the financing scale and quantity of education industry decreased significantly, which is closely related to the financing limitation of K12 industry and the sharp decline of financing scale. In 2021, the number of K12 financing is 47, 26 fewer than in 2020; the single financing scale is 368 million yuan, and the single financing scale in 2020 is 869 million yuan, which is 501 million yuan less than that in 2020.
(source: research Institute of Sina Finance listed companies)
The overall financing size of K12 in 2021 was 172.85, compared with 63.408 billion yuan in the same period last year, a sharp drop of 72.74 per cent compared with the same period last year.
(source: research Institute of Sina Finance listed companies)
With the sharp decline in share prices, the sharp decline in the scale of financing and the divestiture of the core business of K12/K9 in the past, the existing resources in the education and training industry are bound to tilt towards compliance business, and transformation has also become a key.
The transformation of different styles
At present, in the business transformation of listed companies in the education and training industry, quality education, vocational education, education hardware, 03:30 after class is the main direction of transformation, at the same time, there will be diversified expansion to e-commerce, hotels and other businesses. Here, we take New Oriental Education & Technology Group, TAL Education Group and Gaotu Techedu Inc. of the three giants of education and training as an example to analyze that the core business is the transformation of K9/K12 listed companies.
New Oriental Education & Technology Group's transformation focuses on live broadcast business, intelligent hardware and institutional business. On the one hand, New Oriental Education & Technology Group launched the live broadcast of agricultural products with goods platform "Oriental selection", which is used to sell agricultural products and other products; on the one hand, New Oriental Education & Technology Group online and Tmall elf announced a cooperation to expand intelligent education hardware-related business. At present, "New Oriental Education & Technology Group online Dictionary Pen T1" has been successfully launched; on the other hand, the company is also laying out around vocational education, online quality education platform, hotel business and other related areas.
TAL Education Group's transformation focuses on quality education, toB business upgrading, international business, and adult education. On the one hand, the company has carried out the exploration of quality education from many aspects, transforming Libu English into a growth center for children, thinking about excellence while learning and online schools to transform quality education; on the other hand, the company's toB business has been comprehensively upgraded to provide complete live broadcast, scientific research and AI system solutions for the education industry. In addition, the company has also set up branches overseas, opened up overseas markets, integrated adult education products such as postgraduate entrance examination and language training, and set up trusteeship centers.
Gaotu Techedu Inc. 's educational transformation focuses on four areas: adult education, quality education, digital products and vocational education. In adult education, the company renamed "Gaotu Techedu Inc. College" to "Gaotu Techedu Inc. online". The courses cover many fields, such as postgraduate entrance examination, adult English, accounting, public examination, teaching funds, studying abroad, small languages and so on. At the same time, Gaotu Techedu Inc. junior high school launched quality courses, including STEAM science class, programming class, go class, science brainpower class and so on.
At present, the listed companies are still in the early stage of transformation, often take the way of multi-business layout at the same time, the follow-up may focus on one or two key points, whether the company has adequate financial support has become the key to a successful transformation.
Financial position:
Youdao, Inc, Doushen Education, Zhangmen Education and other capital chains are under heavy pressure or difficult to support business transformation.
The overall financing scale of the industry has plummeted, and whether the company itself can provide sufficient support for the transformation has become one of the important indicators to test the listed companies. Below, we will focus on the capital structure and cash flow of the relevant listed companies to make a brief analysis of the capital situation of the company.
Here, we focus on intercepting listed companies that used to account for a relatively high proportion of K9/K12 business, and these companies often urgently need transformation, so for their own financial situation, however, through the annual report data of various companies, we can see that in addition to New Oriental Education & Technology Group, TAL Education Group, Gaotu Techedu Inc. Education and other leading companies, there are a considerable number of listed companies whose capital chains are under pressure. Asset-liability ratio beyond the warning line, business activities do not make blood, debt service pressure has become key words, in this case, the transformation is difficult.
(source: research Institute of Sina Finance listed companies)
Key word one: no hematopoiesis in business activities
As can be seen from the above table, the net operating cash flow of a considerable number of listed companies is negative, such as New Oriental Education & Technology Group, Gaotu Techedu Inc. Education, Zhangmen Education, 17 Education & Technology Group, Onli Education, Dashan Education, youdao, etc., which has something to do with the sharp decline in revenue scale and profitability of the company. Only a few enterprises, such as TAL Education Group, Sixue Education, Doushen Education and University Education, have achieved net operating cash flow, but it is still difficult to support other cash outflows and high debt burdens.
Key words 2: heavy debt burden, heavy pressure on capital chain
When assessing the debt burden of the company, we simply adopt two indicators: cash flow ratio and asset-liability ratio. Companies whose asset-liability ratios exceed the warning line are Zhangmen Education, youdao, Doushen Education, University Education, OnlyEducation, and Excellence Education Group, with asset-liability ratios of 133.52%, 127.72%, 98.45%, 87.96%, 85.56% and 73.41%, respectively. Among them, the cash proportion of Doushen Education, youdao and Excellence Education Group is less than 20%, which is 4.38,12.25% and 16.01% respectively.
In this case, it remains to be seen whether the listed companies with relatively high K9/K12 business in the past can successfully transform or where they will turn.