Jointly develop K12 market with Gehua Cable and Xinhuanet; take Beijing as a pilot project and push it to the whole country in the future
Help Chuanglian to build a multi-dimensional lifelong education system to obtain more comprehensive data coverage for K12 users.
Reiterate the buy rating and maintain the target price of HK$0.74
Cooperate with Gehua Cable and Xinhuanet to develop K12 education market.
Today, Chuanglian Education announced that it signed a cooperation agreement with Gehua Cable and Xinhuanet to establish an intelligent education public service cloud platform ("platform"). The platform will provide online education services to primary and secondary schools, students and parents through the cable television network and the Internet. Gehua Cable is mainly responsible for the broadcasting, management and maintenance of educational content on CATV networks; Xinhuanet will be mainly responsible for the dissemination of educational content on the Internet and cooperation and docking across provinces and cities; Chuanglian Education is mainly responsible for 1) the technical support of three-screen integration and cross-screen interaction, and the seamless connection of educational content and related systems on TV, computer and mobile; 2) the editing and integration of educational content. The ultimate purpose of the platform is to provide students with a seamless learning experience at school, at home and on all kinds of terminal devices, as well as a platform for parents and teachers to interact with students. The platform will be launched on a pilot basis in Beijing and will be extended to the national cable television network in the future.
Clear profit model, long-term good for the strategic development of the company
The content level will be composed of two aspects: on the one hand, it will be provided by the Beijing Digital School sponsored by the Beijing Municipal Education Commission. Beijing Digital School focuses on Beijing's high-quality educational resources, covering all courses from the first grade of primary school to the third grade of senior high school. This part of the content will be open to users for free. On the other hand, the platform will access high-quality third-party K12 educational content in the form of public bidding. Third-party content will be partially charged. Although the platform cannot make a significant contribution to the company's revenue in the short term, entering the K12 market will help Chuanglian achieve its long-term goal of building a multi-dimensional lifelong education system and help the company obtain more comprehensive coverage of K12 user data.
Valuation and rating
This cooperation is in line with our judgment on the long-term prospects of Chuanglian Education. This cooperation is an important step for Chuanglian Education to fill the gap in K12 business, and it also helps Chuanglian Education to further consolidate its identity as a national team. We continue to be optimistic about the prospects of Chuanglian Education. The company's share price currently corresponds to 15.7x2016E Pmax E, while A-share education concept shares currently have an average 2016E Pmax E of 57.9x, while overseas-listed Chinese education companies currently have an average 2016E Pmax E of 14.4x. We maintain our current profit forecast and target price and reaffirm our buy rating.