On December 19th, education stocks once led the rise in Hong Kong and A cities, Onli Education once had two consecutive boards, and New higher Education Group, New Oriental Education & Technology Group, Hope Education and so on rose one after another.

It is worth mentioning that since the bottom of this wave in April, education ETF has unwittingly grown by more than 80 per cent.

Recently, the CPC Central Committee and the State Council issued the outline of the Strategic Plan for expanding domestic demand (2022-2035), proposing to actively develop the consumption of educational services; in addition, PCAOB recently announced the completion of the review of the draft of the China General Education Company, which temporarily relieved the risk of delisting.

The strategy of expanding domestic demand, referring to the active development of consumption of educational services

Recently, the CPC Central Committee and the State Council issued the outline of the Strategic Plan for expanding domestic demand (2022-2035), which proposedActively develop the consumption of educational servicesEncourage social forces to provide diversified educational services,Support and standardize the development of non-governmental education,We will promote the reform of classified management of private education, expand the market in the field of education, and increase the income of workers through vocational education.

Huatai believes that the outline further clarifies the attitude of supporting non-governmental education.It will help to ease the market's worries about the decapitalization of education and the difficulty of for-profit registration in the private higher education sector.

In addition to the direct mention of education, the promotion of live broadcasting by "expanding domestic demand" is also a booster for the industry. The outline mentions that it supports diversified business models such as social e-commerce and webcast, and encourages the development of innovative platforms based on knowledge dissemination and experience sharing.

After the double reduction, New Oriental Education & Technology Group took the lead in exploring the way of live e-commerce in K12, incubating Douyin studio "Oriental selection" offline in subsidiary New Oriental Education & Technology Group. Thanks to its unique bilingual live content, it became popular on Douyin platform in June 2022, and continued to expand the studio matrix. By November, the number of Oriental selection rooms had expanded to 6, with a total number of 36.41 million followers. The average daily GMV has also stabilized at more than 30 million since September.

As a matter of fact, led by Oriental selection, K12 teaching and training leaders have successively stepped down from live e-commerce to set up a goods-carrying business. TAL Education Group applied for registration, including "Learning thought selection", "Xiao Si Yan selection", "Learning thought Optimization", and so on. And online "scholar excellent" live broadcast room. Gaotu Techedu Inc. Group has also launched "Gaotu Techedu Inc. good things" online on Douyin to try to live broadcast the field of bringing goods.

Temporary solution to the risk of delisting of Zhonggu Education Co., Ltd.

In addition, the Accounting Supervisory Board of Public companies (PCAOB) issued an announcement on its website on December 15, local time, announcing that for the first time in history, it had completed a comprehensive inspection and investigation of the draft of US-listed stocks, and decided to revoke the confirmation made by the relevant firms in 2021.

Huatai believes thatThe risk of delisting of previously suppressed Chinese stocks has been temporarily lifted, while the transformation path of the head General Education Company is relatively clear, and new businesses such as literacy education, smart hardware, content solutions and other new businesses are growing rapidly and have great potential for development. the sector is expected to usher in a revaluation.

Which education segments have more room to boost in the future?

In addition to the power live e-commerce mentioned above, Shen Wanhongyuan pointed out that the following subdivisions are worth paying attention to:

1. Quality education market.

Shen Wanhongyuan pointed out that due to the implementation of the double reduction policy, some students' training needs have moved to the field of quality education, and the penetration rate has increased to 18% in 2021, with a market size of 382 billion yuan. Due to the total suspension of subject training, it is expected that more students will turn to quality training to further increase their penetration. It is expected that the market size of quality education will increase to 626.8 billion yuan in 2024, with a compound growth rate of 18% in three years.

2. Adult education and training and the high prosperity of the overseas market continue.

According to the Shen Wanhongyuan research report, the number of college students continues to improve and the number of graduates continues to expand. It is estimated that the number of graduates will reach 11.9 million by 2025 and continue to exceed 10 million in the next four years.

At the same time, according to recruitment data in 2022, 32% of enterprises said they would reduce the establishment of campus recruitment, while the proportion that chose to be flat was 18%, indicating that they would increase the campus establishment by about 27%, and the employment pressure of fresh graduates increased sharply.

Shen Wanhongyuan said that employment pressure has boosted the demand for higher academic qualifications, and the market for going abroad and adult education continues to thrive.

3. Vocational training.

Shen Wanhongyuan pointed out that after the optimization of epidemic control, offline enrollment in the vocational training section will resume with the relaxation of campus management and the restart of personnel mobility, and the offline conversion rate will be higher than that of online enrollment, which will effectively reduce the marketing pressure of vocational training institutions and boost profit margins.The reversal of vocational training performance in 2023 is expected.

China Merchants Bank report also pointed out that social development and industrial upgrading led to demand growth, technical and skilled personnel in short supply, superimposed vocational education dividends and policy support, vocational education development ushered in the strongest wind.

4. Private higher education.

Shen Wanhongyuan pointed out that the non-profit results of the for-profit election in the private higher education industry in 2023 will be greatly repaired after the provincial election and election policies are gradually implemented. At the same time, the demand for new higher education is determined to be very high by private education, and the boom of demand will lead to a sustained increase in the performance of private colleges and universities.

With regard to related companies, Huaxi Securities said that it can pay attention to:

1) Chinese Education Holdings and New higher Education Group in the higher education sector

2) K12 discipline training and learning university education: the company is a rare company that successfully completed the fixed increase before the double subtraction, and it is rich in cash on hand. The one-to-one training part of senior high school is not affected by the policy, and the company has recently been transformed and expanded to the field of vocational education.

3) quality Education Shengtong shares: Lebo is expected to recover after the epidemic, and the advance payment of the superimposed industry will be changed from annual to quarterly, which will improve the concentration of the industry.

4) Wisdom transfer education in vocational training (the impact of the epidemic has been significantly reduced this year, and the performance in the third quarter exceeded expectations), action education (elimination of classes affected by the epidemic in the first half of the year, and repair in the second half of the year), and pay attention to the progress of the refund of the agreed classes in secondary and public education. if it is successfully completed, it is expected to usher in valuation repair.