Recently, global capital has refocused on Chinese assets, and “nothing but China” is not an empty phrase.

The direct reason for all of this naturally stems from the heavy policy stimulus on September 24. Foreign investment banks such as Goldman Sachs, UBS, and Morgan Stanley have expressed their optimism about Chinese assets. Among them, Goldman Sachs, known as the “standard-bearer of the foreign bull market,” also raised the Chinese stock market to “overcapitalization” in a recent research report, and raised MSCI China's target price from 66 to 84, and raised the target price from 4,000 points to 4,600 points.

The sharp rise in a short period of time spawned a large number of profit markets, and some funds cashed out profits, causing the market to retreat. Market volatility has also increased, but this is often also the brewing of greater opportunities. The key is how to find targets with greater certainty. The author believes that there are two critical points. One is whether it can continue to create value for shareholders, and the other is whether it has long-term growth potential.

Following this logic, QuantaSing Group, a Chinese securities company focused on the silver economy, came into the author's perspective.

On October 1 of this year, QuantaSing Group announced that it will pay its first special cash dividend since its listing. It is estimated that the total dividend to be distributed this time is about 11 million US dollars, which will be paid in US dollars in cash. After the dividend information was released, the company's stock price rose rapidly, reaching a high of more than 160% this month, and has now doubled from the previous low.

1. Continuously create value for shareholders

Generally speaking, dividends can show the company's confidence in its own financial situation and help raise the market's expectations for the company's future growth potential and profitability.

Especially in the context of the complex and changing shape of the global economy in recent years, companies that can provide stable dividend returns to shareholders are relatively easy to attract investors' attention. On the one hand, such enterprises can provide shareholders with stable dividend income; on the other hand, enterprises that can provide stable and high dividends often have good financial conditions.

All of these can easily have a positive impact on the company's stock price, and are also the reasons why high dividend strategies have repeatedly won in the capital market in recent years.

However, the isolated dividend event itself only has a short-term stimulus effect. What can really attract the capital market over a longer period of time is whether the company has the ability and will to create value for shareholders over a long period of time.

Judging from the past actions of QuantaSing Group, it has exactly these two characteristics.

In August of this year, the company's board of directors approved a new share repurchase plan to repurchase up to 20 million US dollars worth of shares within 12 months starting June 11, 2024, demonstrating the company's management's confidence in future development.

In fact, as early as 2023, QuantaSing Group announced a similar stock repurchase plan, and the repurchase amount is also 20 million US dollars, and the validity period is 12 months.

Seen from this perspective, the stock repurchase of QuantaSing Group is a rhythmic and continuous strategic arrangement, which also reflects the importance that the company attaches to increasing shareholder value. Naturally, a good level of financial support is required to achieve all of this.

In fiscal year 2024, the company achieved revenue of 3.8 billion yuan, an increase of 23.2% over the previous year. Among them, revenue for the fourth quarter reached 1 billion yuan, up 20.7% year on year; adjusted net profit for the current period was 0.197 billion yuan, up 114.1% year on year, achieving profit for 7 consecutive quarters.

Of course, this is also inseparable from QuantaSing Group's scientific and efficient cash flow management. In fiscal year 2024, the company's net cash flow from operating activities was 0.283 billion yuan, an increase of 20% over the previous year. By the end of the fiscal year, the company's cash and its equivalents and other short-term investments totaled $1.026 billion, up 10.27% year over year.

The steady financial situation lays a good foundation for QuantaSing Group to continue to return shareholders, and is also an externalization performance of the company's continued improvement in fundamentals.

2. Continue to lead the way in high-growth tracks

As a leading online learning service provider in China, QuantaSing Group is a practitioner of the lifelong learning concept, providing quality education and opportunities to improve personal abilities for people of all ages.

However, unlike most online education companies in the market, QuantaSing Group does not focus on K12 and vocational education, but rather focuses on the interests and learning interests of middle-aged and elderly people. Although this may seem a bit “niche,” it is actually a 100 billion blue ocean market.

As the aging of our population continues to deepen, the “silver hair economy” has become an important driving force for future macroeconomic growth.

Hu Zuquan, director and researcher of the Population Development Research Office of the Economic Forecasting Department of the National Information Center, said earlier that the current size of China's banking economy is about 7 trillion yuan, accounting for about 6% of GDP during the same period. It is estimated that by 2035, China's banking economy will reach about 30 trillion yuan, accounting for about 10% of GDP during the same period.

Looking closely, the industrial chain of the Yinfa economy is quite extensive, including many segments such as medical care, pension, tourism, and entertainment. Education, as a key nutrient for the spiritual needs of middle-aged and elderly people, is also an important part of the Yinfa economy.

According to the “2024-2029 Market Research Report on China's Geriatric Education Industry Market Research and Development Trend Forecast” published by the China Research Institute of Research and Development, China's middle and elderly education market size is about 243 billion yuan in 2023.

QuantaSing Group began to be laid out here as early as 2019, and in August of this year, a new mission (help live better, live longer - Live Better, Live Longer) and vision (become a long-term partner loved and trusted by adult users) were released, further clarifying its strategic focus in the field of the silver hair economy.

In this 100-billion-level blue ocean market, no giant with absolute dominance has been born in the country, and QuantaSing Group, as a pioneer, is more likely to reap the dividends of industrial growth.

To meet the differentiated learning needs of hundreds of millions of middle-aged and elderly people, QuantaSing Group has developed a series of interest learning courses, including but not limited to calligraphy, Chinese painting, piano, and Baduanjin. As of June 30, 2024, the total number of registered users of QuantaSing Group was 0.1276 billion.

In addition, QuantaSing Group has also innovatively launched a study tour program for the elderly. Through the “cultural tourism+research” approach, the teaching scene is extended to a wider natural environment to enhance the fun of learning, which can not only meet the needs of middle-aged and elderly people, but also meet their social needs, making learning a way of life.

While border expansion brings more possibilities for QuantaSing Group to grow, it also inevitably faces more challenges. Although QuantaSing Group is a veteran in education, it is definitely a latecomer in the field of cultural tourism.

The elderly may not be sufficiently receptive to new technologies and services. QuantaSing Group requires effective market education and user guidance to increase their acceptance and participation in new businesses. At the same time, how to ensure the quality of study tour programs and meet the learning needs of the elderly at different levels also requires painstaking research under the QuantaSing Group.

From the perspective of end-of-life thinking, QuantaSing Group will not be a simple learning platform. As Li Peng, founder and chairman QuantaSing Group Group, said, QuantaSing Group will continue to develop and promote diverse consumer products created for middle-aged and elderly users. This process won't happen overnight, but the room for imagination is conducive to enhancing the company's long-term valuation center.

Facing the future, QuantaSing Group has also received recognition from professional institutions.

Zacks Investment Research conducted an in-depth analysis of QuantaSing Group in its first coverage report on October 2.

As a financial database specializing in stock research and market data, Zacks Investment Research is known for its extensive array of earnings per share (EPS) estimates. Zacks Investment Research's model predicts that QuantaSing Group adjusted earnings per share (EPS) for fiscal year 2025 and fiscal year 2026 will be $0.88 and $0.83, respectively. At the same time, it believes that during the transformation period, QuantaSing Group is expected to maintain stable revenue and optimize the fee structure to achieve higher profit margins.

Zacks Investment Research believes that as the market's understanding QuantaSing Group business model transformation, long-term growth prospects, competitive position, and valuation differences deepens, stock prices are expected to rise somewhat. Since its listing, the company's sharp discount in stock prices has brought about a huge margin of safety. It has set a target price of $6.00 within 12 months for QuantaSing Group, which has room for a 50% increase compared to the closing price on October 8.

3. Conclusion

In the wave of globalization, the appeal of Chinese assets is becoming more and more prominent, becoming the focus of global investors' attention. With a series of policy incentives and continuous improvement in the market environment, compounded by the Federal Reserve's interest rate cuts, the positive attitude of foreign investors towards Chinese assets has been transformed into actual action.

Although short-term profit market understanding has delayed this trend, the reality of macroeconomic policy adjustments, improvements in the market environment, and increased investor confidence has not changed. As a value depression in the global capital market, China Securities is still a sector that cannot be ignored in long-term capital allocation.

With its deep cultivation in the silver economy, QuantaSing Group has demonstrated its ability to create value for shareholders and long-term growth. Despite facing market fluctuations and challenges in new business fields, QuantaSing Group's steady financial level and diversification strategy gradually implemented have added a sense of certainty to itself.