Blue Whale News October 12th (Reporter Chi Lei) Recently, Microsoft Education official account published an article entitled 'Microsoft GraphRAG Empowers Bean God AI | Leading the Transformation and Quality Improvement of Education ', announcing cooperation with Bean God Education.

The announcement shows that this cooperation will provide strong support for the future development of Bean God Education, specifically, 'Bean God AI, with the help of Microsoft GraphRAG capabilities, creates AI tutors with the teaching level of famous teachers'; 'With the support of Microsoft GraphRAG technology, Bean God AI's teaching content production has undergone revolutionary changes'; 'With the support of Microsoft GraphRAG, the teaching and research team of Bean God AI has significantly improved work efficiency, generating over 20 high-quality content pieces per person per day, a efficiency improvement of over 10 times'; 'After eight months of hard work, the Bean God AI team has built a cutting-edge Chinese knowledge map based on Microsoft GraphRAG' and so on.

All the statements seem to emphasize that Bean God Education will soar with the 'east wind' of this cooperation.

Often relying on the 'east wind,' always standing at the forefront of public opinion.

The intriguing point is that this is not the first time Bean God Education has 'borrowed the east wind.'

Blue Whale News sorts out the hot events Bean God Education has been involved in recent years and, looking at its development trajectory, it has always had continuous connections with major companies. As a result, Bean God Education has always attracted high attention in the industry. Whether this attention is good or bad, it is hard to comment on.

The most recent one was the 'ByteDance Education Industry Alliance' event in the middle of last year.

On April 26, 2023, Bean God Education disclosed in the 2022 annual report, 'The company plans to jointly launch the 'ByteDance Education Industry Alliance' with ByteDance... to serve and empower entrepreneurs in the ByteDance education ecosystem.' On May 24, Bean God Education again disclosed the above matter in response to the 2022 annual report inquiry letter.

However, the turnaround came quickly. At noon on May 31st, ByteDance officially announced on Weibo that a certain listed company, in response to the Shenzhen Stock Exchange's annual report inquiry letter, stated that they planned to jointly launch the 'ByteDance Education Industry Alliance.' Upon confirmation, this information is not true. ByteDance, Douyin, and all its business sectors do not have any plans to establish a so-called 'ByteDance Education Alliance' with any third-party companies. Therefore, this statement is made to alert investors to investment risks.

Although the statement did not explicitly mention Dou Shen Education, the underlying message is clear.

On the same evening, Dou Shen Education issued a statement, 'Based on the company's future strategic considerations, the company is planning to jointly launch the 'ByteDance Education Industry Alliance' with a related branch of this short video platform to strengthen its advantages in the new retail field. After verification, the aforementioned related work is still in the design and planning phase, and no formal written proposals or detailed plans have been submitted to the target cooperation party. Up to now, the company has not signed any agreements with related parties, nor obtained written consent or feedback from the target cooperation party. There are significant uncertainties regarding these matters.

With this, the dust settles, and Dou Shen Education's attempt to ride on the coattails of 'Universe Factory' comes to naught.

A typical earlier case is the surge of Dong Fang Zhen Xuan in 2022, during which Dou Shen Education made a 'lightning-fast entry'.

In mid-2022, 'Dong Fang Zhen Xuan' under New Oriental successfully broke out in the e-commerce live streaming field. At that time, bilingual live streaming was booming, and the A-share education sector was highly anticipated. Dou Shen Education also announced at the time that its created 'Dou Shen Zhen Xuan' and other live streams entered platforms like Douyin. Upon this news, within 6 trading days from June 13th to 20th, it hit 4 daily limit up prices and the stock price doubled. On June 18th, Dou Shen founder Dou Xin announced the establishment of the 'Dou Shen Zhen Xuan' platform. That same day, in CEO Dou Xin's personal Douyin live stream, the first short video of 'Dou Shen Zhen Xuan' was released, starting the journey of selling agricultural products like 'Tianshui Big Cherries.'

'Dou Shen Zhen Xuan' and 'Dong Fang Zhen Xuan' have similar names and product categories. Questions about 'copying New Oriental' and 'riding on the traffic' emerged. Dou Shen Education promptly responded, stating that the company was not riding on hot topics. However, to this day, Dong Fang Zhen Xuan has grown stronger, despite unpleasant incidents like the departure of top anchor Dong Yuhui. The company's daily operations have returned to normal. Nonetheless, 'Dou Shen Zhen Xuan' has long stopped promoting products, faded from the public eye, and the last video update on its account dates back to July 7, 2022.

Looking further back, the earliest case of Dou Shen Education 'borrowing the east wind' but ending up counterproductive should be a tale of entanglement with TAL Education.

On September 14, 2020, New Oriental - Xueersi's official WeChat account pushed an article titled "Contempt: Shameless '豆窦dou神.'" The article accuses Dou Shen Education of using Xueersi's brand and a similar logo for malicious marketing.

New Oriental officials pointed out that "Dou Shen Dachinese" is using "Xueersi's welcoming class" and "XES exclusive benefits" for enrollment promotion of the Dachinese course. According to Dou Shen Education staff, the so-called "XES exclusive benefits" refer to this course being a high-end Chinese class jointly run by Xueersi (referred to as XES) and Dou Shen Dachinese, offering discounts to students who have taken courses on Xueersi. This explanation is quite intriguing.

In response to Xueersi's accusations, Dou Shen Education replied with a "keep a distance, I was wrong" statement. However, underneath the apology statement, they prominently featured the registration link for their own courses.

This operation has caused a huge reaction in the industry, emphasizing that "black and red are also red."

Significant performance fluctuations, involving as many as 220 lawsuits and arbitration cases.

According to Dou Shen Education's recent performance announcement, compared to the previously frequent losses of tens of millions of yuan, it seems to have improved slightly, albeit with significant fluctuations.

In late March this year, Dou Shen Education issued a revised performance forecast for 2023. The announcement showed that in the previously disclosed "2023 performance forecast," the company had expected a net loss attributable to shareholders of the listed company for 2023 to be 0.32-0.38 billion yuan, with a net loss after deducting non-recurring gains and losses of 0.308-0.368 billion yuan. However, the revised announcement indicates that the expected net profit attributable to shareholders of the listed company after the revision is 28.7-34.3 million yuan, turning the loss of 0.687 billion yuan from the same period last year into a profit; however, it is still expected to have a huge net loss after deducting non-recurring gains and losses, estimated to be 0.407-0.487 billion yuan.

However, the revised announcement shows that the expected net profit attributable to shareholders of the listed company after the revision is 28.7-34.3 million yuan, turning the loss of 0.687 billion yuan from the same period last year into a profit; however, it is still expected to have a huge net loss after deducting non-recurring gains and losses, estimated to be 0.407-0.487 billion yuan.

The performance revision this time, Dou Shen Education stated that it was mainly due to differences in the interpretation of legal procedures, accounting standards related to bankruptcy reorganization, debt restructuring, calculation of bankruptcy reorganization income, and requirements and conditions for recognizing reorganization income.

By the end of August, Dou Shen Education made certain progress in its performance in the first half of 2024. The report shows that in the first half of 2024, Dou Shen Education's net profit attributable to shareholders of listed companies was approximately 69.09 million yuan, turning losses into profits year-on-year, an increase of 224.41%. However, there was a decline in revenue during this period, with Dou Shen Education's revenue in the first half of 2024 at around 0.33 billion yuan, a decrease of 28.82% year-on-year. Dou Shen Education stated that the main reason for the revenue decline was the successful implementation of a new sales model in the same period last year, with this model gradually stabilizing during the reporting period.

Either facing significant non-recurring net losses or a clear decline in revenue. Although it has overcome the dilemma of a significant drop in both revenue and profit, its business situation is still far from clear.

At the same time, Dou Shen Education is deeply embroiled in a substantial number of litigation and arbitration cases, even requiring the issuance of specific announcements for disclosure as a listed company. This situation is not common in the entire A-share market.

On August 15, Dou Shen Education released an "Announcement Regarding the Cumulative Litigation and Arbitration Situations of the Company." The announcement revealed that as of the disclosure date, Dou Shen Education and its subsidiaries had a total of 220 undisclosed litigation and arbitration cases, including 70 cases as the plaintiff and 150 cases as the defendant.

The amounts involved are quite substantial, with the combined total amount of cases involving Dou Shen Education and its subsidiary as the plaintiff being 0.334 billion yuan, representing 34.79% of the net assets attributable to shareholders of the listed company as audited in 2023; as the defendant, the total amount is 0.12 billion yuan, accounting for 12.50% of the net assets attributable to shareholders of the listed company as audited in 2023. The cumulative total of both amounts involved is 0.455 billion yuan, representing 47.28% of the net assets attributable to shareholders of the listed company as audited in 2023. As some litigation cases have not yet been heard or are still under review, and some cases are still in the mediation period, it is currently impossible to predict their impact on the company's profit.

It is important to note that as of June 30, 2024, Dou Shen Education held cash and cash equivalents amounting to 73.0244 million yuan. In other words, the total amount of cases involving Dou Shen Education and its subsidiary as the plaintiff is already 4.6 times its cash and cash equivalents balance, while as the defendant, it is 1.6 times. Regardless of the outcomes of these cases, they will greatly impact Dou Shen Education's future performance.

Despite frequently borrowing the 'east wind,' Dou Shen Education's own operations have always been fraught with significant uncertainties. Public opinion is a double-edged sword – if used effectively, it can promote business expansion, but if used poorly, it can have serious repercussions. To achieve lasting development, Dou Shen Education still needs to focus on improving and innovating its own operations. Perhaps the collaboration with Microsoft this time marks a new starting point for Dou Shen Education's sustained performance improvement. However, the actual situation will depend on time and user feedback to provide an answer.