Incidents:
On January 5, 2024, the company issued an announcement: 1) On December 28, 2023, the Beijing No. 1 Intermediate People's Court ruled to confirm the completion of the restructuring plan of Doushen Education Technology (Beijing) Co., Ltd. and terminate the company's restructuring procedures. The delisting risk warning situation that the company was affected by the court ruling to accept the restructuring has been removed. On January 5, 2024, the Shenzhen Stock Exchange reviewed and approved the company's application to withdraw the regulatory delisting risk warning and cancel the combined implementation of the delisting risk warning. 2) Implementation progress of the restructuring plan: As of the date of disclosure of the announcement, 902 million shares of the company's capital reserve had been transferred to the name of the restructuring investor; shares to be transferred to the creditor's name can only be transferred after the bond verification period has passed and no objection claims have been determined.
Investment highlights:
Judicial restructuring has been completed, and the equity structure has been optimized.
① In 2018, the company transformed the K12 education and training business through the acquisition of 100% of the shares in Chinese Future, a leading company on the language training circuit, mainly for K9 level students. Chinese Future entered a period of rapid growth after being acquired. By the end of 2020, there were 474 direct-operated+franchise learning centers. In the context of the 2020-2022 pandemic+ “double reduction” policy, losses were calculated due to large goodwill impairment, and the main interest-bearing liabilities became overdue. On April 27, 2023, the company's stock abbreviation became *ST Doushen due to the company triggering “the lower net profit before and after deducting non-recurring profit and loss in the last three fiscal years was negative”, “the net assets at the end of the audited fiscal year were negative values in the most recent fiscal year, or the net assets at the end of the most recent fiscal year were negative values after retrospection”.
② In 2023, the company began judicial restructuring and implemented capital reserve shares at the rate of 13.8 shares added to every 10 shares. A total of 1,198 million shares were transferred. The restructuring investors paid a total consideration of about 1,097 billion yuan and transferred about 902 million shares of Doushen Education. The remaining additional shares are used to settle the debt, and the repayment price is 6 yuan/share. Chairman and industry investor Dou Xin issued a promise: net profit to the mother for 2024-2026 will not be less than 0.4/0.8/160 million yuan, respectively, or not less than 280 million yuan in total for three years.
③ After the restructuring was completed, Dou Xin, the future founder of Chinese and chairman of the company, became the largest shareholder and actual controller of the company, with a total shareholding ratio of about 21% with Zhang Guoqing, the concerted actor.
Live streaming drives business growth. The company's 2022 revenue is 1 billion yuan, including future Chinese revenue of 435 million yuan, YOY +30%, Kangbang Technology's revenue of 420 million yuan, and YOY -26%. After the restructuring is completed, the company will use Chinese Future and Kangbang Technology as the main business entities to carry out live streaming and smart education businesses. After the implementation of the double reduction policy in July 2021, the company began a live streaming business transformation in October 2021. In 2022, the company's live streaming e-commerce business achieved revenue of 319 million yuan and 284 million yuan in the first half of 2023. Revenue growth was significant, making it one of the company's main businesses.
Risk warning: risks related to restructuring, risks related to management teams and actual controllers, industry regulatory risks, debt-related risks, risks related to live e-commerce industry, risks associated with new business development falling short of expectations, risk of brand reputation risk, risk of shifting the industry valuation center down, etc.