Financial Services Association, Feb. 21 (Edited by Hu Jiarong) The Hong Kong stock education sector has been active recently, boosted by favorable market conditions. As of press release, China Education Holdings (00839.HK), China Oriental Education (00667.HK), Yuhua Education (06169.HK), and New Higher Education Group (02001.HK) rose 8.58%, 7.41%, 6.59%, and 4.55% respectively.

Education stocks continued to rebound, in connection with the Ministry of Education's draft of the “Regulations on the Administration of Out-of-School Training” issued on February 8 to solicit comments. It mentions various aspects, such as extracurricular training for students in compulsory education. Government-guided price management should be implemented in accordance with the law, and provincial people's governments should formulate fee management measures. Fees for other off-campus training shall be reported to the approval authority for the record.

In response, Minsheng Securities pointed out that this draft for solicitation of comments clarifies the scope of application of the regulations governing out-of-school training: out-of-school training for primary and secondary school students and preschoolers aged 3-6 is included in the scope of management, while the high school level is not within the scope of management. The publication of this opinion draft further boosts market confidence and will play an important role in stabilizing long-term expectations.

Dongwu Securities also pointed out that this shows that the regulatory authorities do not have a negative attitude towards the education and training industry, but rather require the industry to operate more standardized and operate, and education and training enterprises that meet the requirements of the regulations are also expected to continue to develop.

Yamato raised the Mainland Education Unit's evaluation to “positive”

Daiwa Securities raised the evaluation of mainland education stocks from “neutral” to “positive.” The bank also pointed out that investors seem to prefer the post-regulatory recovery of the industry and the improvement of the industry's growth prospects. However, this year's profit surprise, driven by rapid expansion of production capacity and operating leverage, will provide a major catalyst for sector stock prices.

At the same time, Anxin International pointed out that as we enter the fourth quarter of 2022, investors' views on vocational education have changed, and their doubts and fears have gradually been dispelled.

The operating side of Education and Training Company showed a recovery momentum

In addition to policy recovery, judging from the recently released operating data of some education and training industry companies, they all showed a strong recovery trend.

Take New Oriental as an example. According to the financial report for the second fiscal quarter of fiscal year 2024 (ending November 30, 2023), revenue of US$870 million was US$870 million, an increase of 36.3% over the previous year.

On the side of Good Future (TAL.N), according to the unaudited financial report for the third quarter of fiscal year 2024 ending November 30, 2023, the company's net revenue rose from US$233 million in the same period last year to US$374 million in the current quarter, an increase of 60.5% year over year; net loss was US$239.46 million, with a loss of 51.579 million US dollars for the same period last year, narrowing 53.6% year on year.

In response, Guoxin Securities pointed out that the latest financial reports and operating data from leading education and training companies continue to perform well, and the dividends of improving the competitive landscape of the industry brought about by the double reduction policy are still showing. The broker expects these companies to continue to benefit from this trend.