Since the Q1 quarter of this year, the performance of the US stock IPO market has been impressive, with an average increase of 23% in overall IPOs.

Entering May, China Securities IPOs continued their previous popularity. In the case of Citiao Technology, which was listed recently, on May 16, the second day after its listing, the intraday stock price of Kesiao Technology surged. The highest increase reached 183.05%, and finally closed up 104.42%.

According to the Zhitong Finance App, the listed entity of Curriculum Technology is JIADE Limited, an offshore holding parent company, registered and established in the Cayman Islands, which conducts business through subsidiaries operating in China. As its subsidiary in China, Curriculum Standard Technology, founded in 2020, mainly provides one-stop education support services including teaching support services for the entire teaching cycle and related examination management services for adult education institutions in China.

The reason why Jiubiao Technology was able to double its valuation by going public in an IPO is also related to its business, in addition to the Chinese securities IPO boom from the beginning of the year to the present. On the business side, Curriculum Technology is more like an education technology company than an educational institution. In particular, it mentioned in its prospectus that it can use technologies such as big data, cloud computing, and artificial intelligence to provide comprehensive education support services, in line with the current AI boom in the US stock market. This is probably one of the reasons why it is popular. However, Curriculum Technology is not a perfect investment target. It still has many business and financial flaws, or has become a stumbling block for its subsequent high valuation.

Take advantage of the Chinese securities IPO boom

In fact, the overseas IPO market was once a popular exit channel for US dollar funds in the domestic primary market, but in recent years, due to various factors, overseas listings of Chinese companies were once cold. However, since the end of last year, the supervisory authorities have continuously encouraged mainland companies to go public overseas and supported eligible companies to go public overseas on the policy side.

The Zhitong Finance App learned that in November of last year, various domestic departments jointly issued the “Notice on Strengthening Financial Support Measures to Help Private Economic Development Grow”, which specifically mentions “supporting eligible private enterprises to go public overseas and make good use of two markets and two resources”; on April 12 of this year, the “National Nine Rules” once again mentioned “broadening financing channels for overseas listings and improving the quality and efficiency of overseas listing filing management. Strengthen regulatory capacity building under open conditions. Deepen international securities regulatory cooperation.”

In addition to the frequent issuance of policy support documents, in terms of policy implementation, the efficiency of filing and review by the Domestic Securities Regulatory Commission has also improved markedly in recent years. According to the data, out of 362 US stock companies currently awaiting listing, 84 have been approved for overseas listing, accounting for 23%. This is a significant increase compared to the number of 80 approved companies in 2023, and this is one of the main reasons why China Securities and US IPOs have continued to heat up since this year.

According to statistics from the Zhitong Finance App, in the first quarter of this year, a total of 23 Chinese securities companies were listed on the US stock market, raising a total of about 2,344 billion US dollars. Among them, 1 company was transferred to OTC, 2 SPAC were listed, and the remaining 20 were listed on the NASDAQ main board through IPOs. As of May 14 this year, there are also 3 Chinese securities companies that have successfully listed on the NASDAQ. Curriculum Technology is one of them.

There are also many “hidden worries” behind high growth

As mentioned above, Curriculum Technology is not simply an educational institution, but rather a technology platform that favors educational services. This can be seen from its business and financial structure.

From a business perspective, since its establishment, Curriculum Technology has attached great importance to technology research and development. The company has successively developed and upgraded various software systems or platforms, including KB platforms, automated registration information management systems, academic administration back-end management systems, and education service management systems. Up to now, the company has obtained 31 software copyrights, with a total investment of 3.483 million yuan. In 2022, the company was recognized as a high-tech enterprise.

Benefiting from the continuous deepening of technical capabilities, the company's revenue performance is also improving. According to the prospectus, in 2021 and 2022, the revenue of Curriculum Technology was 5,026,300 and 10.238,900, respectively. By the first nine months of 2023, this figure had further increased to 11.6.785 million yuan, surpassing the annual revenue of 2022, and the company's revenue for the full year of 2023 reached 15.571 million yuan; during the reporting period, 395,000 yuan, 5.36 million yuan, and 9.562 million yuan. In response, the company explained that the rapid increase in revenue mainly benefited from the lifting of COVID-related restrictions, and the increase in revenue also led to an increase in the company's net profit.

Additionally, it is worth mentioning that during the reporting period, the net interest rate of Curriculum Technology reached more than 60%, which is far higher than the average in the same industry. The reason for this is that as a technology-oriented enterprise, the company does not need to carry out C-side marketing like other online education institutions. From the cost side, sales expenses in 2023 accounted for only 11.3% of the company's total current costs and expenses, far lower than revenue costs and management expenses, and lower than R&D expenses for the same period, indicating that the company invested more on the technology side.

However, there are also many hidden concerns behind the high growth performance of Curriculum Technology. On the revenue side, divided by type, the company's revenue mainly comes from four major categories: the National Adult University Admissions Unified Examination, China Open University, the Self-Study Higher Education Examination, and Online Education. Among them, revenue from the National Adult University Admissions Examination and the Open University of China is the company's core business, contributing more than 80% of the company's revenue.

In recent years, Curriculum Technology's revenue from the Open University of China has shown an upward trend. During the reporting period, the revenue contributed by the business reached 1,5257 million yuan, 4.751 million yuan and 9.446 million yuan respectively, accounting for 30%, 46% and 61% of revenue respectively. It can be seen that the revenue share of this business is also rising. In response, the company said that this is mainly due to the strengthening of business relationships between the company and adult education institutions and the increase in enrollment numbers.

However, behind the change in revenue structure, it is actually too dependent on big customers. The risk factors in the company's prospectus confess that most of the company's revenue during the reporting period came from a small number of adult education institution customers. During the reporting period, the company's revenue from the three major customers accounted for 89%, 77% and 87% of the current revenue, respectively. Among them, revenue from the company's largest customers reached 59%, 50%, and 40%, respectively.

In addition, the company also has regional revenue unification issues. In 2022 and 2023, 91.7% and 100.0% of Curriculum Technology's revenue came from Sichuan Province, and judging from the breakdown, Chengdu also had the highest share. The share of revenue from Chengdu during the reporting period was 90.7% and 98.1%, respectively. Among risk factors, the company expects Sichuan Province to continue to be an important source of revenue for it.

However, the growth rate of the adult education support service market in Sichuan Province is slowing down. The Zhitong Finance App notes that Sichuan Province is one of the most populous provinces in China, and the level of education is relatively low. As a result, job seekers and employees face fierce competition in the job market, and demand for adult education to obtain new skills and improve academic qualifications is higher.

Based on sales revenue, the market size of the adult education support service industry in Sichuan Province grew from 1.8 billion yuan in 2017 to 3.6 billion yuan in 2022, with a compound annual growth rate of 14.7%. Sales revenue in Sichuan Province is expected to reach 5.8 billion yuan in 2027, but the compound annual growth rate will decline to 10%. Among them, Curriculum Technology only accounts for 0.29% of the market share.

Under multiple risks, Curriculum Technology stabilizes its market competitiveness by granting discounts, which has affected the customer unit price of the company's business. Among them, the average service price per student from the China Open University business has dropped from 358 yuan in 2022 to 323 yuan in 2023; the average service price per student from the adult college entrance examination business has also dropped from 334 yuan in 2021 to only 294 yuan in the first nine months of 2023.

In summary, the reason why Cubiao Technology was able to rapidly double its market value after listing was more of a ride on the recent boom in Chinese securities and the “ride” of US technology stocks, but for itself, it still has certain concerns at the management level, and this may make it difficult for it to find support points to stabilize subsequent valuation growth after this wave of market hype.