Historical review: Education business accounts for about 70% of revenue, cooperation with HUAWEI CLOUD
Topway Information began to transition from school communication to the education sector in 2009 after listing, and the education service business accounted for about 70% of revenue and gross profit in 2018. The company is positioned as an integrated solution provider for the industry and a manufacturer and seller of Huawei smart hardware. The company is HUAWEI CLOUD's fourth largest strategic partner. Huawei mainly values the company's experience in the field of education, as well as the education system and school resources. The company's cooperation with Huawei mainly focuses on 3 aspects: (1) informatization of education: smart campuses, smart education, etc.; (2) HUAWEI CLOUD (solutions for other industries such as transportation); and (3) Kunpeng all-in-one (the company is Kunpeng's only “soft+hard” partner).
Advantages in the field of education: educational resources+Huawei technology+team experience+content
According to our analysis, the company's advantages in the education informatization business are mainly: (1) advantages within the system. The company's procurement volume from the Department of Education and other agencies was the largest, and during the epidemic, the system platform was promoted by the Education Commission and penetrated faster than school procurement; (2) he has 12 years of experience in school service teams and has cooperated with educational institutions in 18 provinces and cities; (3) in terms of technology, there are technical support from HUAWEI CLOUD and Welink, which are developed by teams from Youku. Welink is more stable than WeChat and is more suitable for enterprise and school scenarios; (4) In terms of content, it is possible not only to complete the “opening of the course”, but also to open up the entire chain from teaching, testing, practice, to evaluation and feedback, and finally to introduce precise teaching and customized learning through intelligence.
Online education: During the pandemic, the Education Bureau accelerated the promotion of regional learning centres
At the beginning of 2018, Topway Information and the Changsha Municipal Education Bureau launched an online learning platform for primary and secondary school students in Changsha. Currently, the platform has covered 10,000 schools and 2 million users. During the pandemic, demand for online education surged in Hunan, Guangdong, Sichuan, Hubei, Northeast, Gansu and other regions. We expect the number of users to grow rapidly and is expected to reach the level of 10 million, and will grow further after the start of school; after the pandemic, we believe that the company's high-quality teaching resources (such as cooperation with Good Future and Changgun Middle School) are expected to increase the platform's retention rate. At present, the company has been shortlisted for the online learning list for the current epidemic in Hubei Province and has been fully promoted in the two regions of Changsha and Yiyang; it will also be fully promoted after the first year of senior year in Guangdong Experimental Middle School begins on February 9, while focusing on promotion in Sichuan, Zhejiang, Guizhou, Shandong, Yunnan, etc.
Profit forecasts and investment advice
Expected in 2020 and 2021: (1) The pandemic prompted education bureaus in various regions to accelerate the promotion of online education platforms, and the company's regional teaching centers led the rapid growth of education informatization business, which was first reflected in 2G and 2B revenue, then relied on high-quality content to increase retention rates and meet the individualized needs of students, and 2C is expected to start contributing revenue; (2) With the opening up of cooperation between the company and Huawei in the field of smart education, it is expected that software cloud services will continue to grow rapidly; (3) the game business will remain basically flat. It is estimated that the 2019/2020/2021 EPS will be 0.02/0.09/0.12 yuan respectively, covered for the first time and given a “increase in holdings” rating.
Risk warning
Haiyuntian's business expansion fell short of expectations, retention rates after the pandemic were lower than expected risks, and systemic risks.